UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14A
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Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only [as permitted by Rule
14a-6(e)(2)]
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ResMed Inc.
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of ResMed
Inc., at 2:00 p.m. local time, on Monday, November 11, 2002, at the Exchange
Square Auditorium, Ground Floor, 18 Bridge Street, Sydney, NSW 2000, Australia.
Information about the business of the meeting and the nominees for election as
directors is set forth in the Notice of Meeting and the Proxy Statement, which
are attached. This year you are asked to elect three Directors of the Company
and to ratify the selection of our independent auditors for fiscal year 2003.
Very truly yours,
/S/ PETER C. FARRELL
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Peter C. Farrell
Chairman and Chief Executive Officer
RESMED INC.
___________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 11, 2002
____________________________________________________
The 2002 Annual Meeting of Shareholders of ResMed Inc. will be held at the
Exchange Square Auditorium, Ground Floor, 18 Bridge Street, Sydney, NSW 2000
Australia, on November 11, 2002, at 2:00 p.m. local time for the following
purposes:
1. To elect three directors, each to serve for a three-year term;
2. To ratify the selection of KPMG LLP as our independent auditors to examine
our consolidated financial statements for the fiscal year ending June 30,
2003; and
3. To transact such other business as may properly come before the meeting.
Please refer to the accompanying proxy statement for a more complete description
of the matters to be considered at the meeting. Only shareholders of record at
the close of business on September 13, 2002, will be entitled to notice of, and
to vote at, the 2002 Annual Meeting and any adjournment thereof.
It is important that your shares be represented at the annual meeting. Even if
you plan to attend the annual meeting in person, please sign, date and return
your proxy form in the enclosed envelope as promptly as possible. This will not
prevent you from voting your shares in person if you attend, but will make sure
that your shares are represented in the event that you cannot attend.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO UNITED STATES POSTAGE.
By Order of the Board of Directors,
Walter Flicker
Secretary
Dated: September 23, 2002
RESMED INC.
_________________________
PROXY STATEMENT
_________________________
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 11, 2002
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of ResMed
Inc. for use at the 2002 Annual Meeting of Shareholders to be held at 2:00 p.m.
on Monday, November 11, 2002, at the Exchange Square Auditorium, Ground Floor,
18 Bridge Street, Sydney, NSW 2000 Australia, and at any and all adjournments
and postponements thereof for the following purposes:
1. To elect three directors, each to serve for a three-year term;
2. To ratify the selection of KPMG LLP as our independent auditors to examine
our consolidated financial statements for the fiscal year ending June 30,
2003; and
3. To transact such other business as may properly come before the meeting.
The enclosed proxy may be revoked at any time before its exercise by giving
written notice of revocation to our Secretary at our principal executive offices
located at 14040 Danielson Street, Poway, CA 92064, U.S.A. The shares
represented by proxies in the form solicited by the Board of Directors received
by us prior to or at the meeting will be voted at the meeting. If a choice is
specified on the proxy with respect to a matter to be voted upon, the shares
represented by the proxy will be voted in accordance with that specification.
If no choice is specified, the shares will be voted as stated below in this
proxy statement.
It is expected that this proxy statement and the accompanying form of proxy will
first be mailed to our shareholders on or about September 30, 2002. Our Annual
Report to Shareholders for Fiscal 2002 is enclosed with this proxy statement
along with a copy of our Annual Report to the Securities and Exchange Commission
on Form 10-K, but they do not form a part of the proxy soliciting material. The
cost of soliciting proxies will be borne by us. Following the original mailing
of the proxy soliciting material, further solicitation of proxies may be made by
mail, telephone, facsimile and personal interview by our regular employees, who
will not receive additional compensation for such solicitation. We will also
request that brokerage firms and other nominees or fiduciaries forward copies of
the proxy soliciting material and the 2002 Annual Report to beneficial owners of
the stock held in their names, and we will reimburse them for reasonable
out-of-pocket expenses incurred in doing so.
VOTING SECURITIES AND VOTING RIGHTS
Only recordholders of our common stock as of the close of business on September
13, 2002 (the "record date") are entitled to receive notice of and to vote at
the meeting. At the record date, we had 32,926,109 outstanding shares of common
stock, the holders of which are entitled to one vote per share. Accordingly, an
aggregate of 32,926,109 votes may be cast on each matter to be considered at the
meeting. Holders of our CUFS vote by directing the CHESS nominee how to vote
the shares of our common stock underlying their CUFS holdings using the Form of
Proxy provided to them by the CHESS nominee.
In order to constitute a quorum for the conduct of business at the meeting, a
majority of the outstanding shares entitled to vote at the meeting must be
represented at the meeting. Shares represented by proxies that reflect
abstentions or "broker non-votes" (i.e., shares held by a broker or nominee
which are represented at the meeting, but with respect to which such broker or
nominee is not empowered to vote on a particular proposal) will be counted as
shares represented at the meeting for purposes of determining a quorum.
Assuming a quorum is present, directors will be elected by a favorable vote of a
plurality of the aggregate votes cast, in person or by proxy, at the meeting.
The proposal to ratify the selection of our independent auditors requires the
affirmative vote of a majority of the aggregate votes cast, in person or by
proxy, at the meeting. Accordingly, abstentions and broker non-votes will have
no effect on the outcome of the election of candidates for director or the
outcome of the ratification of KPMG LLP as our independent auditors.
-2-
COMMON STOCK OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table shows the number of shares of common stock which, according
to information supplied to us, are beneficially owned as of the record date by
(i) each person who, to our knowledge based on Schedules 13G filed with the
Securities and Exchange Commission and Substantial Shareholder Notices filed
with the Australian Stock Exchange, is the beneficial owner of more than five
percent of our outstanding common stock, (ii) each person who is currently a
director, three of whom are also nominees for election as directors, (iii) each
of the Named Officers as defined on page 5 hereof, and (iv) all current
directors and executive officers as a group. As used herein, "beneficial
ownership" means the sole or shared power to vote, or to direct the voting of, a
security, or the sole or shared investment power with respect to a security
(i.e., the power to dispose of, or to direct the disposition of, a security). A
person is deemed, as of any date, to have "beneficial ownership" of any security
that the person has the right to acquire within 60 days after that date.
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PERCENT OF
AMOUNT AND NATURE OF OUTSTANDING
NAME OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) COMMON STOCK
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Commonwealth Bank of Australia 3,713,150(3) 11.3
Level 2, 48 Martin Place
Sydney NSW 2000 Australia
Deutsche Bank AG 2,031,440(4) 6.2
Taunusanlage 12, D-60325
Frankfurt am Main
Germany
Peter C. Farrell 1,360,492(5) 4.1
Christopher G. Roberts 415,001(6) 1.3
Gary W. Pace 161,667(7) 0.5
Michael A. Quinn 142,501(8) 0.4
Donagh McCarthy 124,001(9) 0.4
Christopher Bartlett 12,334(10) 0.0
Louis A. Simpson 47,200(11) 0.1
Curt Kenyon 34,709(12) 0.1
Deirdre Stewart (ex-executive officer) 28,263(13) 0.1
Norman W. DeWitt (ex-executive officer) 170,933(14) 0.5
All current executive officers and directors (13 persons) 2,612,756(15) 7.9
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(1) The address of the directors, officers and ex-officers listed in this table
is 14040 Danielson Street, Poway, California, 92064-6857.
(2) Except for the information based on Schedules 13F or 13G as indicated in
the footnotes hereto, beneficial ownership is stated as of September 13,
2002 and includes shares subject to options exercisable within 60 days
after September 13, 2002.
(3) Based on information provided by Commonwealth Bank of Australia, CBA has
shared dispositive power and shared voting power and beneficial ownership
over these shares.
(4) Based on information provided by Deutsche Asset Management, Australia, on
the record date and the Form 13F filed by Deutsche Bank AG on August 29,
2002, Deutsche Bank has shared dispositive power and shared voting power
and beneficial ownership over these shares.
(5) Includes 212,634 shares of common stock which may be acquired upon the
exercise of options exercisable within 60 days after September 13, 2002.
(6) Includes 5,800 shares held by his wife, 275,200 shares held of record by
Cabbit Pty Ltd and 34,000 shares held by Acemed Pty Ltd, two Australian
corporations controlled by Dr. Roberts and his wife. Includes 100,001
shares of common stock which may be acquired upon the exercise of options
exercisable within 60 days after September 13, 2002.
(7) Includes 21,334 shares of common stock which may be acquired upon the
exercise of options exercisable within 60 days after September 13, 2002.
(8) Includes 33,701 shares of common stock which may be acquired upon the
exercise of options exercisable within 60 days after September 13, 2002.
(9) Includes 106,001 shares of common stock which may be acquired upon the
exercise of options exercisable within 60 days after September 13, 2002.
(10) Includes 12,334 shares of common stock which may be acquired upon the
exercise of options exercisable within 60 days after September 13, 2002.
(11) Includes 25,000 shares held in a trust and 4,000 shares owned by his wife.
(12) Includes 16,101 shares of common stock which may be acquired upon the
exercise of options exercisable within 60 days after September 13, 2002.
(13) Includes 20,019 shares of common stock which may be acquired upon the
exercise of options exercisable within 60 days after September 13, 2002.
(14) Includes 83,332 shares held by his wife and 27,601 shares of common stock
which may be acquired upon the exercise of options exercisable within 60
days after September 13, 2002.
(15) Includes, in addition to the shares described in notes 6 through 15 above,
176,750 outright shares and 138,101 shares of common stock which may be
acquired upon the exercise of options by the executive officers not named
in the table.
The information presented is based upon the knowledge of management and, in the
case of the named individuals, upon information furnished by them.
EXECUTIVE OFFICERS
Our executive officers, as of September 13, 2002 were:
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Name Age Position
Peter C. Farrell 60 Chief Executive Officer and Chairman of Board of Directors
Christopher G. Roberts 48 Executive Vice President; Director
Walter Flicker 47 Vice President, Corporate Secretary
Adrian M. Smith 38 Vice President, Finance and Chief Financial Officer
Curt Kenyon 39 Senior Vice President, Telemedicine and Informatics
Klaus Schindhelm 49 Senior Vice President, Operations
Dana Voien 45 Senior Vice President, Marketing and Business Development
David Pendarvis 43 Vice President, Global General Counsel
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For a description of the business background of Drs. Farrell and Roberts, see
"Matters to be Acted Upon/Election of Directors."
WALTER FLICKER has been Corporate Secretary since December 1989. Mr. Flicker was
Vice President, U.S. Operations from August 1997 to June 1999, Vice President,
Corporate Development from February 1995 to August 1997 and, from December 1989
until February 1995, he served as our Vice President, Finance. Before that he
was an engineering consultant with Bio-Agrix Pty Ltd., a biomedical engineering
consulting company and a Business Development Manager at Baxter Center for
Medical Research Pty Ltd., a subsidiary of Baxter International, Inc. Mr.
Flicker holds a B.E. with honors in mechanical engineering and a Master's in
Biomedical Engineering from the University of New South Wales.
-3-
ADRIAN SMITH has been Chief Financial Officer since February 1995. From January
1986 through January 1995, Mr. Smith was employed by Price Waterhouse,
specializing in the auditing of listed public companies in the medical and
scientific field. Mr. Smith holds a B.Ec. from Macquarie University and is a
Certified Chartered Accountant.
CURT KENYON has been Senior Vice President, Telemedicine and Informatics
Services since August 2002. From 1999 to 2002 he was Senior Vice President,
Sales and Marketing for the United States, Canada and Latin America. From 1997
to 1999, he held the position of Vice President, U.S. Sales. Between 1995 and
1997, he was the Director of U.S. Sales and between 1994 and 1995, he held the
position of Eastern Region Sales Manager. Before his employment with us, Mr.
Kenyon was a Regional Sales Manager for EMPI Inc. and Medtronic, both of
Minneapolis, MN. Mr. Kenyon holds a B.A. in Design and Planning with a
concentration in Business Administration from State University of New York at
Buffalo, where he was a cum laude graduate.
KLAUS SCHINDHELM, PH.D., has been Senior Vice President of Operations since
October 2001. From January 2000 to October 2001, Dr. Schindhelm was our Vice
President, Operations. Dr. Schindhelm was Vice President, Product Development,
from July 1998 to December 1999. From January 1995 to June 1998 Dr. Schindhelm
was Professor and Head, Graduate School of Biomedical Engineering, University of
New South Wales and from January 1990 to August 1994, Director, Centre for
Biomedical Engineering, University of New South Wales. Before that Dr.
Schindhelm held various academic positions in Biomedical Engineering at the
University of New South Wales. Dr. Schindhelm received a B.E. and a Ph.D. in
Chemical Engineering from the University of New South Wales.
DANA VOIEN has been Senior Vice President, New Business, Marketing and Clinical
Affairs since August 2002. From January 2002 to August 2002 Mr. Voien was our
Vice President/General Manager of Diagnostics. Before joining ResMed Mr. Voien
held numerous sales and marketing executive management positions with Baxter
International and Edwards Lifesciences, including Vice President/ General
Manager for Baxter's Anesthesia/IV business based in Tokyo, and Vice President
of Surgical Group Sales for Edwards Lifesciences. Mr. Voien holds a B.A. in
Marketing Management from California State University at Fullerton.
DAVID PENDARVIS joined us as Vice President, Global General Counsel in September
2002. From September 2000 until September 2002, Mr. Pendarvis was a partner in
the law firm of Gray Cary Ware & Freidenrich LLP where he specialized in
intellectual property and general business litigation. Until September 2000, he
was a partner with Gibson, Dunn & Crutcher LLP, where he began working in 1986.
From 1984 until 1986, he was a law clerk to the Hon. J. Lawrence Irving, U.S.
District Judge, Southern District of California. Mr. Pendarvis holds a B.A.
from Rice University, and a J.D., cum laude, from the University of Texas School
of Law.
Dr. Deirdre Stewart and Norman DeWitt, named in the table below, ceased being
executive officers of the company on August 21 and September 1, 2002
respectively, and were replaced on these respective dates by Dana Voien and
David Pendarvis. Mr. DeWitt will be working with Mr. Pendarvis prior to leaving
full-time employment with the Company on December 31, 2002.
DEIRDRE STEWART, PH.D., has been Vice President, Strategic Clinical Initiatives,
since August 2002. From 2000 through August 2002, Dr. Stewart was Vice
President of Clinical Education and New Business. From 1999 to 2000, Dr.
Stewart held the position of Vice President of Marketing and Education, and from
1997 to 1999 she was the Vice President of Education and Training. Before
joining ResMed in 1993, Dr. Stewart was a clinical researcher at Sydney
University where she completed her Ph.D. in Physiology in sleep-disordered
breathing. Dr. Stewart is a registered nurse and holds a B.A. from the
University of New South Wales.
-4-
NORMAN DEWITT is currently a Vice President of the Company. Mr. DeWitt was
previously General Counsel from June 1999 to September 2002 and Corporate
Counsel (U.S.) from October 1998 to June 1999; Vice President, U.S. Marketing
from August 1997 to September 1998; and Vice President, U.S. Operations, from
October 1994 to August 1997. Before joining ResMed, Mr. DeWitt held various
positions both as an attorney and executive for companies based in Minneapolis,
MN, and provided consulting services to ResMed beginning in 1990. Mr. DeWitt
holds a B.A. from Amherst College, a J.D. from the University of Minnesota Law
School and a L.L.M. from William Mitchell College of Law.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the annual and
long-term compensation paid for services rendered to us in all capacities for
the fiscal years ended June 30, 2002, 2001 and 2000 of those persons who were at
June 30, 2002 (i) the chief executive officer, (ii) one of the four other most
highly compensated executive officers whose annual salary and bonuses exceeded
$100,000 or (iii) any other executive officer who would have qualified under
sections (i) or (ii) of this paragraph but for the fact that the individual was
not serving as an executive officer of the registrant at the end of the 2002
fiscal year (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
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Annual Compensation Long Term Compensation Awards
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Securities
Fiscal Salary Bonus Other Annual Underlying All Other
Name and Principal Position Year ($) ($) Compensation(1) Options Compensation ($)(2)
--------------------------------- ------------------------------------------- ---------- --------------------
Peter C. Farrell 2002 365,000 213,399 --- 80,000 11,000
President and 2001 330,000 228,055 18,375 80,000 5,100
Chief Executive Officer 2000 300,000 201,938 36,750 80,000 4,800
Christopher G. Roberts 2002 172,800 75,882 ---- 20,000 13,824
Executive Vice President 2001 129,092 69,819 ---- 20,000 9,651
2000 138,644 85,674 ---- 20,000 22,949
Curt Kenyon 2002 165,000 83,217 7,200 12,000 10,390
Sr. VP, Telemedicine and Informatics 2001 150,000 78,083 7,200 13,500 5,100
2000 132,000 57,501 7,200 12,000 4,800
Deirdre Stewart 2002 150,000 62,449 ---- 10,000 11,000
Vice President, Strategic 2001 139,082 58,045 ---- 12,000 5,100
Clinical Initiatives 2000 122,000 44,742 ---- 12,000 4,800
Norman W. DeWitt 2002 140,000 49,319 ---- 10,000 11,000
Vice President and General Counsel 2001 120,000 38,844 ---- 10,000 4,943
2000 107,021 38,577 ---- 8,000 4,492
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(1) Represents cash value of company provided vehicle
(2) Represents contributions to defined contribution plans
-5-
STOCK OPTIONS
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OPTION GRANTS IN LAST FISCAL YEAR
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Individual Grants
Number of % of Total Potential Realizable Value at
Securities Options Assumed Annual Rates of Stock
Underlying Granted to Exercise or Price Appreciation for
Options Employees in Base Price Option Term (2)
Name Granted (1) Fiscal Year ($/Sh) Expiration Date 5% 10%
Peter C. Farrell 80,000 6.0% $ 50.55 July 1, 2011 $2,229,571 $5,491,540
Christopher G. Roberts 20,000 1.5% $ 50.55 July 1, 2011 $ 557,393 $1,372,885
Curt Kenyon 12,000 0.9% $ 50.55 July 1, 2011 $ 334,436 $ 823,731
Deirdre Stewart 10,000 0.8% $ 50.55 July 1, 2011 $ 278,696 $ 686,443
Norman DeWitt 10,000 0.8% $ 50.55 July 1, 2011 $ 278,696 $ 686,443
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(1) Represents options granted under our 1997 Equity Participation Plan, which
are exercisable starting 12 months after the grant date, with 33% of the
shares covered thereby becoming exercisable at that time and an additional
33% of the option shares becoming exercisable on each successive
anniversary date, with all option shares exercisable beginning on the third
anniversary date. Under the terms of the 1997 Plan, this exercise schedule
may be accelerated in certain specific situations. In addition, we have the
right to require the surrender of outstanding options upon the grant of
lower priced options to the same individual.
(2) Assumed annual rates of stock appreciation for illustrative purposes only.
Actual stock prices will vary from time to time based upon market factors
and our financial performance. No assurance can be given that such rates
will be achieved.
The following table sets forth information concerning the stock option exercises
by our Named Officers during the fiscal year ended June 30, 2002 and the
unexercised stock options held at June 30, 2002 by the Named Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
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Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options at FY- End Money Options at FY- End(1)
Shares Acquired Value ------------- --------------- ------------- ---------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
--------------------- --------------- -------- ------------- --------------- ------------- ---------------
Peter C. Farrell 38,530 $1,641,444 132,632 160,002 $ 2,304,526 $ 682,858
Christopher G. Roberts 0 N/A 80,001 39,999 $ 1,634,569 $ 170,696
Curt Kenyon 18,608 $ 626,710 7,226 21,000 $ 65,257 $ 107,200
Deirdre Stewart 0 N/A 8,685 22,000 $ 236,703 $ 102,425
Norman DeWitt 20,000 $ 756,000 42,267 19,333 $ 863,598 $ 74,652
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(1) Represents the amount by which the closing sales price of our common stock
on the New York Stock Exchange on June 28, 2002 ($29.40 per share)
multiplied by the number of shares to which the options apply exceeded the
aggregate exercise price of such options.
The total number of shares of Common Stock under the 1997 Equity Participation
Plan authorized for issuance upon exercise of options and other awards, or upon
vesting of restricted or deferred stock awards was initially established at
1,000,000 and increases at the beginning of each fiscal year, commencing on July
1, 1998, by an amount equal to 4% of the outstanding Common Stock on the last
day of the preceding fiscal year. The maximum number of shares of Common Stock
issuable upon exercise of incentive stock options granted under the 1997 Plan,
however, cannot exceed 8,000,000. Furthermore, the maximum number of shares
which may be subject to options, rights or other awards granted under the 1997
Plan to any individual in any calendar year cannot exceed 300,000.
-6-
The following table summarizes information about stock options outstanding at
June 30, 2002. All of our equity compensation plans have been approved by our
shareholders.
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Number Outstanding at Weighted Average Number Exercisable
Exercise Prices June 30, 2002 Remaining Contractual Years June 30, 2002
0 - $10 508,810 4.01 508,810
11 - $20 1,107,355 6.75 747,166
21 - $30 973,803 8.43 267,121
31 - $40 357,330 8.88 104,446
41 - $50 50,300 9.37 3,501
51 - $60 1,203,400 9.09 0
4,200,998 7.69 1,631,044
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The following table summarizes outstanding stock option plan balances as at June
30, 2002
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Number of securities
Plan Category to be issued upon Number of securities
exercise of Weighted-average remaining available for
outstanding exercise price of future issuance under
options outstanding options equity compensation plans
Equity compensation
plans approved by
security holders 4,200,998 $27.94 763,491
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Total 4,200,998 $27.94 763,491
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REPORT OF THE COMPENSATION COMMITTEE
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INTRODUCTION
Decisions regarding compensation of the Company's officers are made based on
recommendations by the Compensation Committee, which is composed of three
independent Directors. The Compensation Committee decisions on compensation of
the Company's executive officers are reviewed and approved by the full Board.
Set forth below is a report submitted by Donagh McCarthy, Gary Pace and
Christopher Bartlett in their capacity as members of the Board's
Compensation Committee addressing the Company's compensation policies for fiscal
year 2002 as they affected executive officers of the Company, including the
Chief Executive Officer and the other Named Officers.
GENERAL PHILOSOPHY
The Compensation Committee reviews and determines salaries, bonuses and all
other elements of the compensation packages offered to the executive officers of
the Company, including its Chief Executive Officer, and establishes the general
compensation policies of the Company.
The Company desires to attract, motivate and retain high quality employees who
will enable the Company to achieve its short and long term strategic goals and
values. The Company participates in a high-growth environment where substantial
competition exists for skilled employees. The ability of the Company to
attract, motivate and retain high caliber individuals is dependent in large part
upon the compensation packages it offers.
The Company believes that its executive compensation programs should reflect the
Company's financial and operating performance. In addition, individual
contribution to the Company's success should be supported and rewarded.
-7-
The 1993 Omnibus Budget Reconciliation Act ("OBRA") became law in August 1993.
Under the law, income tax deductions of publicly-traded companies in tax years
beginning on or after January 1 1994 may be limited to the extent total
compensation (including base salary, annual bonus, stock option exercises, and
non-qualified benefits) for certain executive officers exceeds $1 million (less
the amount of any "excess parachute-payments" as defined in Section 280G of the
Code) in any one year. Under OBRA, the deduction limit does not apply to
payments which qualify as "performance-based". To qualify as
"performance-based," compensation payments must be based solely upon the
achievement of objective performance goals and made under a plan that is
administered by a committee of outside directors. In addition, the material
terms of the plan must be disclosed to and approved by shareholders, and the
Compensation Committee must certify that the performance goals were achieved
before payments can be made. We do not have any cash payment plans that qualify
as "performance-based"; however, option grants made under our 1997 Equity
Participation Plan may qualify as "performance-based" compensation in part, so
long as grants are made by the Committee at exercise prices that are equal to or
greater than the fair market value of our common stock on the date of grant.
The Committee intends to design the Company's compensation programs to conform
with the OBRA legislation and related regulations so that total compensation
paid to any employee will not exceed $1 million in any one year, except for
compensation payments which qualify as "performance-based." The Company may,
however, pay compensation which is not deductible in limited circumstances when
sound management of the Company so requires.
The Company's executive and key employee compensation program consists of a base
salary component, a component providing the potential for an annual bonus based
on relevant Company performance and a component providing the opportunity to
earn stock options linking the employee's long-term financial success to that of
the shareholders.
COMPENSATION
Base Salary
Officers are compensated with salary ranges that are generally based on similar
positions in companies of comparable size and complexity to the Company. In
addition, the Company uses industry compensation surveys, such as Radford and
PriceWaterhouseCoopers, in determining compensation. The primary level of
compensation is based on a combination of years of experience and performance.
The salary of all officers is reviewed annually with the amount of the increases
based on factors such as Company performance, general economic conditions,
marketplace compensation trends and individual performance.
In fiscal year 2002, the Board approved salary increases for the Named Officers
as follows:
Peter C. Farrell 11%
Christopher G. Roberts* 33%
Norman W. DeWitt 17%
Curt Kenyon 10%
Deirdre Stewart 9%
* A survey of Christopher Roberts' position was conducted by
PriceWaterhouseCoopers. The survey provided benchmarking data which indicated a
need for a market adjustment of the base pay for Christopher Roberts.
Bonus
The second compensation component is a bonus program under the Company's Bonus
Plan. Bonuses are primarily based on the Company's annual financial performance
and secondarily on the performance of the individual. Target bonuses generally
range from 40% to 60% of base salary. The measures of annual financial
performance used in determining the amount of bonuses include sales, expenses,
and profitability. The bonus plan allows for over-achievement of the target
bonus based on a formula approved in advance by the Committee. The formula is
similar to that described below for the CEO, but with target criteria specific
to the officer's role.
-8-
Stock Options
The third major component of the officer's compensation consists of stock
options. The primary purpose of granting stock options is to link the officers'
financial success to that of the shareholders of the Company. The exercise
price of stock options is determined by the Compensation Committee at the time
the option is granted, but generally may not be less than the prevailing market
price of the Company's common stock as of the date of grant. Options become
exercisable commencing a minimum of twelve months from the date of grant and are
exercisable for a maximum period of 10 years from the date of grant, as
determined by the Compensation Committee.
Stock options were issued to Officers of the Company during fiscal year 2002 in
accordance with the provisions of the Company's 1997 Equity Participation Plan.
CEO COMPENSATION
The compensation of our CEO is based upon the performance of the Company and the
important role Dr. Farrell plays within the Company as its founder, President
and Chief Executive Officer, as a member of the boards of the Company's
principal subsidiaries and as an active participant in new product and corporate
development.
The CEO's target bonus is 60% of his base salary. Fifty percent of the CEO's
target bonus is based on achieving budgeted revenue targets and 50% is based on
achieving budgeted group profitability, excluding non-recurring items such as
gains from debt repurchases. Budget targets are determined by the Board of
Directors at the beginning of each fiscal year. The linear bonus formula allows
for receiving 50% of the target bonus at 75% of the budget target, 100% of the
target bonus at 100% of budget, 150% of the target bonus at 125% of budget, and
so on. There is no bonus paid for achievement of less than 75% of budget.
Compensation Committee of the Company's Board of Directors:
Christopher Bartlett (Chairman)
Donagh McCarthy
Gary Pace
Dated: September 23, 2002
The above report of the Compensation Committee will not be deemed to be
incorporated by reference to any filing by the Company under the Securities Act
of 1933 or the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates the same by reference.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is responsible for
executive compensation decisions as described below under "Committees of the
Board of Directors." During fiscal year 2002, the committee consisted of Dr.
Christopher Bartlett (Chairman), Mr. Donagh McCarthy and Dr. Gary Pace.
-9-
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative shareholder return on
our common stock against the cumulative total return of the S&P 500 Index and
the S&P Healthcare Equipment and Supplies Index for the period commencing June
30, 1997, assuming an investment of $100 on June 30, 1997.
[GRAPH]
June 30, June 30, June 30, June 30, June 30, June 30,
1997 1998 1999 2000 2001 2002
--------- --------- --------- --------- --------- ---------
ResMed Inc. . . . . . . . . . . . . . $ 100.00 $ 185.97 $ 270.92 $ 436.73 $ 825.31 $ 480.00
S&P 500 . . . . . . . . . . . . . . . $ 100.00 $ 128.10 $ 155.08 $ 164.34 $ 138.33 $ 111.83
S&P Healthcare Equipment and Supplies $ 100.00 $ 131.09 $ 159.83 $ 174.58 $ 167.92 $ 163.25
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and
officers, and persons who own more than ten percent of a registered class of our
equity securities, to file with the Securities and Exchange Commission, or the
Commission, initial reports of ownership and reports of change in ownership of
our common stock and other equity securities. Officers, directors and greater
than ten-percent shareholders who are affiliates of the Company are required by
Commission regulation to furnish us with copies of all Section 16(a) forms they
file.
Based solely on our review of copies of such forms received by the Company with
respect to Fiscal 2002, or written representations from certain reporting
persons, we believe that during Fiscal 2002 all of our directors and executive
officers and persons who own more than 10% of our common stock have complied
with the reporting requirements of Section 16(a).
-10-
AUDIT COMMITTEE REPORT
----------------------
The Audit Committee of the Company's Board of Directors is comprised of
independent directors as required by the listing standards of the New York Stock
Exchange. The members of the Audit Committee are Michael A. Quinn, Donagh
McCarthy and Gary Pace. The Audit Committee operates pursuant to a written
charter adopted by the Board of Directors, which is included as Appendix "A" to
this proxy statement.
The role of the Audit Committee is to oversee the Company's financial reporting
process on behalf of the Board of Directors. Management of the Company has the
primary responsibility for the Company's financial statements as well as the
Company's financial reporting process, principles and internal controls. The
independent auditors are responsible for performing an audit of the Company's
financial statements and expressing an opinion as to the conformity of such
financial statements with generally accepted accounting principles.
In this context, the Audit Committee has reviewed and discussed the audited
financial statements of the Company as of and for the year ended June 30, 2002
with management and the independent auditors. The Audit Committee has discussed
with the independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61 (Communication with Audit Committees), as currently
in effect. In addition, the Audit Committee has received the written
disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), as currently in effect, and it has discussed with the auditors
their independence from the Company.
The members of the Audit Committee are not engaged in the accounting or auditing
profession and are not involved in day-to-day operations of the Company. In the
performance of their oversight function, the members of the Audit Committee
necessarily relied upon the information, opinion, reports and statements
presented to them by management of the Company and by the independent auditors.
As a result, the Audit Committee's oversight and the review and discussions
referred to above do not assure that management has maintained adequate
financial reporting processes, principles and internal controls, that the
Company's financial statements are accurate, that the audit of such financial
statements has been conducted in accordance with generally accepted auditing
standards or that the Company's auditors meet the applicable standards for
auditor independence.
Based on the reports and discussions described above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended June 30,
2002, for filing with the Securities and Exchange Commission.
Michael A. Quinn (Chairman)
Donagh McCarthy
Gary Pace
SEPTEMBER 23, 2002
The above report of the Audit Committee will not be deemed to be incorporated by
reference to any filing by the Company under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates the same by reference.
MATTERS TO BE ACTED UPON
------------------------
PROPOSAL 1. ELECTION OF DIRECTORS
Our bylaws authorize a Board of Directors with between 1 and 13 members, with
the exact number to be specified by the Board of Directors from time to time.
The Board of Directors determined that the number of directors constituting the
full Board of Directors should increase from six to seven and appointed Louis A.
Simpson on May 2, 2002, to fill the resulting vacancy.
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The Board is divided into three classes. One such class is elected every year at
the Annual Meeting of Shareholders for a term of three years. The class of
directors whose term expires in 2002 has three members, Christopher G. Roberts,
Donagh McCarthy and Louis A. Simpson. Accordingly, three directors are to be
elected at the 2002 Annual Meeting of Shareholders, who will hold office until
the 2005 Annual Meeting of Shareholders or until the director's prior death,
disability, resignation or removal.
The Board of Directors has nominated Christopher G. Roberts, Donagh McCarthy and
Louis A. Simpson for re-election as directors. Proxies are solicited in favor of
these nominees and will be voted for them unless otherwise specified. If
Christopher G. Roberts, Donagh McCarthy or Louis A. Simpson become unable or
unwilling to serve as directors, it is intended that the proxies will be voted
for the election of such other person, if any, as shall be designated by the
Board of Directors.
Information concerning the nominees for director and the other directors who
will continue in office after the meeting is set forth below:
-----------------------------------------------------------------------------------------------------------
Name Age Position with the Company
-----------------------------------------------------------------------------------------------------------
Peter C. Farrell(2) 60 President, Chief Executive Officer and Chairman of the Board of Directors
Christopher G. Roberts (1) 48 Executive Vice President and Director
Donagh McCarthy (1) (4) (5) 55 Director
Gary W. Pace (2)(4)(5) 54 Director
Michael A. Quinn (3)(4) 54 Director
Christopher Bartlett(3)(5) 58 Director
Louis A. Simpson(1) 65 Director
-----------------------------------------------------------------------------------------------------------
(1) Term expires 2002
(2) Term expires 2003
(3) Term expires 2004
(4) Member of Audit Committee
(5) Member of Compensation/Nominating/Governance Committee
PETER C. FARRELL, PH.D., has been President and a director since ResMed's
inception in June 1989 and Chief Executive Officer since July 1990. From July
1984 to June 1989, Dr. Farrell served as Vice President, Research and
Development at various subsidiaries of Baxter International, Inc. ("Baxter") and
from August 1985 to June 1989, he also served as Managing Director of the Baxter
Center for Medical Research Pty Ltd., a subsidiary of Baxter. From January 1978
to December 1989, he was Foundation Director of the Center for Biomedical
Engineering at the University of New South Wales where he currently serves as a
Visiting Professor. He holds a B.E. in chemical engineering with honors from the
University of Sydney, an S.M. in chemical engineering from the Massachusetts
Institute of Technology, a Ph.D. in chemical engineering and bioengineering from
the University of Washington, Seattle and a D.Sc. from the University of New
South Wales. Dr. Farrell was named 1998 San Diego Entrepreneur of the Year for
Health Sciences and Australian Entrepreneur of the Year in 2001. In August 2000,
he was named Vice Chairman of the Executive Council of the Harvard Medical
School Division of Sleep Medicine. In addition to his responsibilities with
ResMed, Dr. Farrell is a Director of Cardiodynamics Inc. (NASDAQ ticker: CDIC)
CHRISTOPHER G. ROBERTS, PH.D., joined ResMed in August 1992 as Executive
Vice President. He has been a director since September 1992. He also served as a
director from August 1989 to November 1990. In addition to his responsibilities
with ResMed, Dr. Roberts is Chairman of Sirtex Medical Limited (ASX ticker:
SRX), a medical device company commercializing innovative technology for the
treatment of liver cancer. From February 1989 to June 1992, Dr. Roberts served
in various positions, most recently as Vice President-Clinical and Regulatory
Affairs, with medical device subsidiaries of Pacific Dunlop Limited, a large
multinational manufacturing company. From January 1984 to December 1988, he
served as President of BGS Medical Corporation, a medical device company that
was acquired in September 1987 by Electro Biology Inc. ("EBI"), at which time he
became Vice President-Clinical and Regulatory Affairs of EBI. Dr. Roberts holds
a B.E. in chemical engineering with honors from the University of New South
Wales, a M.B.A. from Macquarie University and a Ph.D. in biomedical engineering
from the University of New South Wales.
-12-
DONAGH MCCARTHY has served as a director since November 1994. Mr. McCarthy
is currently the President and CEO of Protiveris Inc., a Maryland based
biotechnical startup Company. From September 1996 to January 2000, he was
President of RMS Inc., an affiliate of Baxter Healthcare. From June 1993 until
September 1996, he was the President of the North America Renal Division of
Baxter. Prior to that, Mr. McCarthy was General Manager and Director of Baxter
Japan KK from March 1988. Mr. McCarthy held various positions at Baxter since
1982, including that of Vice President-Global Marketing, Strategy and Product
Development. Mr. McCarthy received a bachelor's degree in engineering from the
National University of Ireland and a M.B.A. from the Wharton School, University
of Pennsylvania.
GARY W. PACE, PH.D., has served as a director since July 1994. Dr. Pace is
currently a Visiting Scientist at the Massachusetts Institute of Technology
(MIT) and a Director of Transition Therapeutics, Protiveris Inc., and CTour A/S.
From 1995 to 2001 Dr. Pace was President and CEO of RTP Pharma. From 2000 to
2002 Dr. Pace was Chairman and CEO of Waratah Pharmaceuticals Inc., a spin-off
company from RTP Pharma. From 1993 to 1994, he was the founding President and
Chief Executive Officer of Transcend Therapeutics Inc. (formerly Free Radical
Sciences Inc.), a biopharmaceutical company. From 1989 to 1993, he was Senior
Vice President of Clintec International, Inc., a Baxter/Nestle joint venture and
manufacturer of clinical nutritional products. Dr. Pace holds a B.Sc. with
honors from the University of New South Wales and a Ph.D. from MIT.
MICHAEL A. QUINN has served as a director since September 1992. Since April
1999, Mr. Quinn has been the Chief Executive Officer of Innovation Capital, an
Australian/U.S. venture capital fund. From February 1992 to April 1999, he was a
management and financial consultant. From July 1988 to January 1992, he served
as Executive Chairman of Phoenix Scientific Industries Limited, a manufacturer
of health care and scientific products. Mr. Quinn holds a B.Sc. in physics and
applied mathematics and a B.Ec. from the University of Western Australia and a
M.B.A. from Harvard University.
CHRISTOPHER BARTLETT, PH.D., has served as a director since October 2000,
and holds the Thomas D. Casserly Chair of Business Administration at Harvard
Business School where he currently teaches courses in global strategy,
organization and management. Professor Bartlett has both masters and doctorate
degrees in business administration from Harvard University. Before joining the
faculty of Harvard Business School, Dr. Bartlett was a marketing manager with
Alcoa in Australia, a management consultant in McKinsey's London office, and
general manager at Baxter Laboratories' subsidiary company in France. He is also
a graduate of the University of Queensland.
LOUIS A. SIMPSON has served as a director since May 2002. Since May 1993
Mr. Simpson has been President and Chief Executive Officer, Capital Operations
of GEICO Corporation. From 1985 to 1993 he served as Vice Chairman of the Board
of GEICO Corporation. Mr. Simpson joined GEICO Corporation and Government
Employees Insurance Company (GEICO) in September 1979 as Senior Vice President
and Chief Investment Officer. Prior to joining GEICO, Mr. Simpson was President
and Chief Executive Officer of Western Asset Management, a subsidiary of the Los
Angeles-based Western Bancorporation. Previously he was a partner at Stein Roe
and Farnham, a Chicago investment firm, and an instructor of economics at
Princeton University. A graduate of Ohio Wesleyan University, Mr. Simpson
subsequently received a master's degree in economics from Princeton University.
He is a director of AT&T, Western Asset Funds, Inc., Pacific American Income
Shares Inc., and a trustee of Western Asset Premier Bond Fund. Mr. Simpson is
presently a member of the endowment committee of Ohio Wesleyan University. He
also serves as a trustee for the Cate School, the University of California San
Diego Foundation, the Urban Institute and the Woodrow Wilson National Fellowship
Foundation. He is also chair of the Scripps Institution of Oceanography Council.
-13-
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has two committees to assist in the management of our
affairs: the Compensation/Nominating/Governance Committee and the Audit
Committee.
Compensation/Nominating/Governance Committee; Audit Committee
The Compensation Committee currently consists of Dr. Christopher Bartlett
(Chairman) and Mr. Donagh McCarthy. The Committee administers our 1995 Option
Plan and 1997 Equity Participation Plan and has the authority to grant options
under the latter plan. The Committee also makes recommendations regarding the
compensation payable, including compensation under the Company's bonus plan, to
our senior executive officers. In June 2002 the Committee's responsibilities
were expanded to include selection and nomination of new ResMed Inc. directors
and corporate governance issues.
The Audit Committee currently consists of Messrs. Michael A. Quinn (Chairman),
Donagh McCarthy and Dr. Gary Pace. This committee assists the Board in
fulfilling its functions relating to corporate accounting and reporting
practices and financial and accounting controls. Mr. Louis Simpson will be
replacing Dr. Pace on this Committee beginning September 30, 2002.
The Compensation Committee met twice and the Audit Committee met four times
during fiscal year 2002. These committees also met informally by telephone
during the fiscal year as the need arose.
Board Meetings and Compensation
The Board of Directors held five meetings during fiscal year 2002. Each
director attended 100% of the aggregate of the total number of meetings of the
Board of Directors held during such period and the total number of meetings held
during such period by the committees of the Board of Directors on which that
director served, except that Mr. Simpson was unable to attend the June Board
meeting following his appointment to the Board in May.
Each director who is not an employee of ResMed received an annual fee of $10,000
for his service as a director during fiscal 2002. In addition, each director is
reimbursed for his travel expenses for attendance at all such meetings.
Directors who are not employees also hold and receive stock options under our
1995 Option Plan and 1997 Equity Participation Plan. During fiscal year 2002,
the directors received 16,000 stock options each at an exercise price of $52.20,
except for Mr. Simpson who received 9,000 stock options at an exercise price of
$33.15 upon his appointment to the Board of Directors. These levels of stock
option award are below the automatic grant levels in the 1997 Equity
Participation Plan approved by shareholders, as the directors waived their
entitlement to the full automatic grant of 20,000 shares. The options vest one
third at a time annually after grant.
-14-
Medical Advisory Committee
In addition to the committees of the Board of Directors, we have an independent
Medical Advisory Committee. The Medical Advisory Committee comprises leading
physicians in sleep medicine who advise the board with respect to reviewing our
current and proposed product lines from a medical perspective.
Required Vote
Assuming a quorum is present, directors will be elected by a favorable vote of a
plurality of the aggregate votes cast, in person or by proxy, at the meeting.
Accordingly, abstentions and broker non-votes will have no effect on the outcome
of the election of candidates for director. In addition, a simple majority of
the shares voting may elect all of the directors.
Unless instructed to the contrary, the shares represented by the proxies will be
voted FOR the election of the three nominees named above as directors. Although
it is anticipated that the nominees will be able to serve as directors, should a
nominee become unavailable to serve, the proxies will be voted for such other
person or persons as may be designated by our Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH
NOMINEE TO THE BOARD OF DIRECTORS.
PROPOSAL 2. RATIFICATION OF SELECTION OF AUDITORS
-----------------------------------------
The firm of KPMG LLP, our independent auditors for the fiscal year ended June
30, 2002, was selected by the Board of Directors, upon recommendation of the
Audit Committee, to act in the same capacity for the fiscal year ending June 30,
2003. Neither the firm nor any of its members has any relationship with us nor
any of our affiliates except in the firm's capacity as our auditor.
Representatives of KPMG LLP are expected to be present at the meeting and will
have the opportunity to make statements if they so desire and respond to
appropriate questions from the shareholders.
Required Vote
The proposal to ratify the selection of our independent auditors requires the
affirmative vote of a majority of the aggregate votes cast, in person or by
proxy, at the meeting. Accordingly, abstentions and broker non-votes will have
no effect on the outcome of the ratification of KPMG LLP as our independent
auditors.
Unless instructed to the contrary, properly executed proxies will be voted FOR
ratification of the selection of KPMG LLP as our independent auditors.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE RATIFICATION OF
THE SELECTION OF KPMG LLP AS OUR INDEPENDENT AUDITORS.
-15-
AUDIT FEES
The aggregate fees billed for professional services rendered by KPMG LLP for the
audit of our annual financial statements for the 2002 fiscal year and the
reviews of the financial statements included in our Quarterly Reports on Form
10-Q for the 2002 fiscal year were $204,961.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
KPMG LLP did not render any professional services to us of the type described in
Rule 2-01(c)(4)(ii) of Regulation S-X during the 2002 fiscal year.
ALL OTHER FEES
The aggregate fees billed for services rendered by KPMG LLP, other than fees for
the services referenced under the captions "Audit Fees" and "Financial
Information Systems Design and Implementation Fees," during the 2002 fiscal year
were $10,000 which related to non-audit services.
PROPOSAL 3. OTHER BUSINESS
---------------
The Board of Directors does not know of any other business to be presented to
the Annual Meeting of Shareholders. If any other matters properly come before
the meeting, however, the persons named in the enclosed form of proxy will vote
the proxy in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
We expect to hold our 2003 Annual Meeting of Shareholders on November 10, 2003.
In order for shareholder proposals otherwise satisfying the eligibility
requirements of Rule 14a-8 under the Exchange Act to be considered for inclusion
in our Proxy Statement for our 2003 Annual Meeting, they must be received by us
at our principal office in Poway, California, on or before June 2, 2003.
In addition, if a shareholder desires to bring business (including director
nominations) before our 2003 Annual Meeting of Shareholders that is not the
subject of a proposal timely submitted for inclusion in our Proxy Statement as
described above, written notice of such business must be received by our
Secretary at our principal office in Poway, California, on or before August 16,
2003. If such notice is not received by August 16, 2003, such notice will be
considered untimely under Rule 14a-4(c)(1) of the Commission's proxy rules, and
we will have discretionary voting authority under proxies solicited for the 2003
Annual Meeting of Shareholders with respect to such proposal, if presented at
the meeting.
By Order of the Board of Directors
Walter Flicker
Secretary
Dated: September 23, 2002
-16-
APPENDIX A
RESMED INC.
AUDIT COMMITTEE CHARTER, MAY, 2000
ROLE
----
The primary purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities for management's conduct of the
Company's financial reporting processes.
MEMBERSHIP AND MEETINGS
-------------------------
The Audit Committee shall be comprised of not less than three members of the
Board of Directors. The Committee's composition will meet the requirements of
the New York Stock Exchange. Accordingly, the members of the Audit Committee
will be directors:
None of whom has any relationship to the Company that may interfere with the
exercise of independence from management and the Company; and
All of whom, as determined by the Board of Directors in its business judgment,
are financially literate or will become financially literate within a reasonable
period of time after appointment to the Committee and at least one of whom, as
so determined by the Board of Directors, has accounting or related financial
management expertise.
The Audit Committee will establish its meeting schedule, including executive
sessions with management, internal audit staff and the outside auditors.
RESPONSIBILITIES
----------------
The Company's management is responsible for preparing the Company's financial
statements and the outside auditors are responsible for auditing the financial
statements. Additionally, the Company's financial management including the
internal audit staff, as well as the outside auditors, have more time, knowledge
and more detailed information of the Company than does the Audit Committee.
Consequently, the Audit Committee's role is one of oversight and it does not
provide any expert assurance or certification as to the Company's financial
statements or the work of the outside auditors or that of the internal audit
staff. However, the outside auditor and the internal audit staff are ultimately
accountable to the Board of Directors and the Audit Committee.
The following functions are the common recurring activities of the Audit
Committee in carrying out its oversight function:
The Audit Committee will review and discuss with management the audited
financial statements.
The Audit Committee will discuss with the outside auditors the matters required
to be discussed by Statement of Auditing Standards No. 61.
The Audit Committee will:
-17-
Annually request from the outside auditors, a formal written statement
delineating all relationships between the auditor and the Company consistent
with Independence Standards Board No. 1;
Discuss with the outside auditors any such disclosed relationships and their
impact on the outside auditors' independence; and
Recommend that the Board of Directors take appropriate action in response to the
outside auditors' report to satisfy itself of the auditors' independence.
The Audit Committee will discuss with management, the internal audit staff and
the outside auditors the adequacy of the Company's internal controls.
The Audit Committee, based on the above review and discussions, will make a
recommendation to the Board of Directors as to the inclusion of the Company's
audited financial statements in the Company's Annual Report to the Securities
and Exchange Commission on Form 10-K.
The Audit Committee has the responsibility to evaluate the outside auditor and
to recommend to the Board of Directors the retention of and, where appropriate,
replacement of the outside auditors.
The Audit Committee will review the adequacy of this Charter on an annual basis
and recommend any changes believed to be appropriate to the Board of Directors.
As adopted on May 10, 2000
-18-