SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [ x ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement [ ] Confidential, for Use of the
Commission Only
(as Permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
RESMED INC.
(Name of Registrant as Specified In Its Charter)
_________________________
(Name of person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
ResMed Inc., at 3.00p.m., local time, on Tuesday, November 10, 1997 at the
KPMG Peat Marwick LLP Board Room, 750 B Street, Suite 3000, 30th Floor, San
Diego, California.
Information about the business of the meeting and the nominees for election as
directors of the Company are set forth in the Notice of Meeting and the Proxy
Statement, which are attached. This year you are asked to elect two Directors
of the Company, to approve the proposed 1997 Equity Participation Plan and to
ratify the selection of independent auditors for fiscal year 1998.
Very truly yours,
Peter C. Farrell
President
<PAGE>
RESMED INC.
_____________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 10, 1997
_____________________
The Annual Meeting of Stockholders of ResMed Inc. will be held at the KPMG
Peat Marwick LLP Board Room, 750 B Street, Suite 3000, 30th Floor, San Diego,
California on Tuesday, November 10, 1997, at 3.00p.m. local time for the
following purposes:
1. To elect two directors, each to serve for a three year term;
2. To approve the proposed 1997 Equity Participation Plan;
3. To ratify the selection of auditors to examine the consolidated
financial statements of the Company for the fiscal year ending June 30, 1998;
and
4. 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 stockholders
on record at the close of business on September 22, 1997 will be entitled to
notice of, and to vote at, the 1997 Annual Meeting and any adjournment
thereof.
It is important that your shares be represented at the meeting. Even if you
plan to attend the 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: October 6, 1997
<PAGE>
RESMED INC.
_____________________
PROXY STATEMENT
_____________________
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 10, 1997
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of ResMed
Inc. (the "Company") for use at the 1997 Annual Meeting of Stockholders to be
held at 3.00p.m. on Tuesday, November 10, 1997 at the KPMG Peat Marwick LLP
Board Room, 750 B Street, Suite 3000, 30th Floor, San Diego, California (the
"meeting") for the following purposes:
1. To elect two directors, each to serve for a three year term;
2. To approve the proposed 1997 Equity Participation Plan;
3. To ratify the selection of auditors to examine the consolidated
financial statements of the Company for the fiscal year ending June 30, 1998;
and
4. 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 the Secretary of the Company. The shares
represented by proxies in the form solicited by the Board of Directors
received by the Company prior to or at the Annual Meeting will be voted at the
Annual 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 stockholders of the Company on or about October 16,
1997. The Company's Annual Report to Stockholders for 1997 is enclosed with
this Proxy Statement but does not form a part of the proxy soliciting
material. In addition, the Company's Annual Report to the Securities and
Exchange Commission on Form 10K is available from the Secretary of the
Company. The cost of soliciting proxies will be borne by the Company.
Following the original mailing of the proxy soliciting material, regular
employees of the Company may solicit proxies by mail, telephone, telecopy and
personal interview. The Company may also request brokerage firms and other
nominees or fiduciaries to forward copies of the proxy soliciting material and
the 1997 Annual Report to beneficial owners of the stock held in their names,
and the Company will reimburse them for reasonable out-of-pocket expenses
incurred in doing so.
VOTING SECURITIES AND VOTING RIGHTS
Holders of the Company's Common Stock of record as of the close of business on
September 22, 1997 (the "record date") are entitled to receive notice of and
to vote at the meeting. At the record date, the Company had outstanding
7,226,713 shares of Common Stock, the holders of which are entitled to one
vote per share.
<PAGE>
In order to constitute a quorum for the conduct of business at the Meeting, a
majority of the outstanding shares of the Company 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.
<TABLE>
<CAPTION>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the number of shares of Common Stock which, according to information supplied to the Company, are
beneficially owned as of the record date by (i) each director of the Company (and director nominees), (ii) the Chief
Executive Officer, (iii) each of the Named Officers as defined on page 6, (iv) each beneficial holder of more than five
percent of the outstanding common stock and (v) by all directors, nominees and executive officers of the Company 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.
<S> <C> <C>
Amount and Nature of
Beneficial Ownership Percent of Class
Name of Beneficial Owner
William Blair & Company L.L.C 836,000(1) 11.6%
222 West Adams Street
Chicago IL 60606
Columbia Special Fund Inc 605,000(2) 8.4%
1301 SW Fifth Avenue
PO Box 1350
Portland OR 97207
Peter C. Farrell 515,440(3) 7.1%
c/o ResMed Inc
5744 Pacific Center Boulevard
Suite 311
San Diego CA 92121
Invesco Funds Group, Inc 495,000(4) 6.8%
7800 East Union Avenue
Denver CO 80237
Christopher G. Roberts 118,333(5) 1.6%
Michael A. Quinn 20,000(6) 0.3%
Gary W. Pace 52,333(7) 0.7%
Donagh McCarthy 9,167(8) 0.1%
Victor Yerbury 9,333(9) 0.1%
All executive officers and directors as a group (15 persons) 914,506(10) 12.7%
<FN>
(1) Based on CDA Spectrum Report 6/30/97 and a Schedule 13G filed by William Blair & Company L.L.C, William Blair has
sole dispositive power and beneficial ownership over these shares.
- -2-
<PAGE>
(2) Based on CDA Spectrum Report 6/30/97 and a Schedule 13G filed by Columbia Funds Management Company (CFMC), CFMC has
shared dispositive power over these shares but disclaims beneficial ownership.
(3) Includes 5,500 shares of Common Stock which may be acquired upon the exercise of options granted under the 1995
Option Plan which are exercisable within 60 days of September 23, 1997.
(4) Based on CDA Spectrum Report 6/30/97 and Schedule 13G filed by INVESCO PLC, INVESCO North American Group, Ltd,
INVESCO North American Holdings, Inc, INVESCO, Inc and INVESCO Financial Group, Inc have shared voting and dispositive
power over these shares.
(5) Includes 1,450 shares held by his wife, 105,050 shares held of record by Cabbit Pty Ltd and 8,500 shares held by
Acemed Pty Ltd, two Australian corporations controlled by Dr Roberts and his wife. Includes 3,333 shares of common stock
which may be acquired upon the exercise of options granted under the 1995 option plan which are exercisable within 60 days
of September 23, 1997.
(6) Includes 4,500 shares of common stock which may be acquired upon the exercise of options granted under the 1995
Option Plan which are exercisable within 60 days of September 23, 1997.
(7) Includes 4,500 shares of common stock which may be acquired upon the exercise of options granted under the 1995
Option Plan which are exercisable within 60 days of September 23, 1997.
(8) Includes 6,167 shares of common stock which may be acquired upon the exercise of options granted under the 1995
Option Plan which are exercisable within 60 days of September 23, 1997.
(9) Includes 9,333 shares of common stock which may be acquired upon the exercise of options granted under the 1995
Option Plan which are exercisable within 60 days of September 23, 1997.
(10) Includes, in addition to the shares described in notes 1 through 10 above, 64,800 shares which may be acquired
upon the exercise by executive officers not named in the table of options granted under the 1995 Option Plan which are
exercisable within 60 days of September 23, 1997.
</TABLE>
The information presented is based upon the knowledge of management and, in
the case of the named individuals, upon information furnished by them.
- -3-
<PAGE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
The executive officers of the Company, as at September 22, 1997, are:
<S> <C> <C>
Name Age Position
Peter C Farrell 55 President and Chief Executive Officer
Christopher G Roberts 43 Executive Vice President
Walter Flicker 42 Vice President, US Operations and Secretary
Michael Berthon-Jones 45 Vice President, Clinical Research
Michael D Hallett 39 Vice President, Advanced Products
William A Nicklin 45 Vice President, Manufacturing
Adrian M Smith 33 Vice President, Finance
David D'Cruz 39 Vice President, Quality Assurance and Regulatory Affairs
Norman W DeWitt 47 Vice President, U.S Marketing
Jonathan C Wright 47 Vice President, Corporate Marketing
Victor Yerbury 57 Vice President, Operations ResMed Limited
Mark Abourizk 40 General Counsel
</TABLE>
For a description of the business background of Messrs Farrell and Roberts,
see "Matters to be Acted Upon/Election of Directors".
Mr Flicker was appointed Vice President, US Operations in August 1997, prior
to his appointment Mr Flicker was Vice President Corporate Development since
February 1995. From December 1989 until February 1995 he served as Vice
President, Finance of the Company and has served as Secretary of the Company
since August 1990. From July 1989 to November 1989, he was an engineering
consultant with Bio-Agrix Pty Ltd., a biomedical engineering consulting
company. From July 1988 to June 1989, Mr Flicker served as Business
Development Manager at Baxter Center for Medical Research Pty Ltd, a
subsidiary of Baxter International, Inc. From July 1984 to July 1988, Mr
Flicker served as Executive Director of the Medical Engineering Research
Association, an Australian biomedical industry association. Mr Flicker holds
a B.E. with Honors in mechanical engineering and a M.E. in biomedical
engineering from the University of New South Wales.
Dr Berthon-Jones has been Vice President, Clinical Research of the Company
since July 1994. From July 1988 to June 1994, he was a research scientist at
the David Read Laboratory at the University of Sydney. During 1988, Dr
Berthon-Jones was a self-employed software consultant. From July 1985 until
June 1988, he was a senior research officer at the University of Sydney
Department of Physiology. Dr Berthon-Jones holds a M.D. and Ph.D from the
University of Sydney.
Dr Hallett has been Vice President, Advanced Product Development from August
1997. From January 1996 to July 1997 Dr Hallett was Vice President, Technology
and New Business and from January 1993 to December 1995 was Vice President
European Operations. From July 1989 to December 1992, he was a Baxter
Visiting Research Fellow-Biomedical Engineering at the University of New South
Wales. From October 1986 to June 1989, Dr Hallett was a research engineer at
the Baxter Center for Medical Research, Sydney, Australia. From March 1985 to
October 1986, he was a technical support marketing executive at Terumo
Corporation, a manufacturer of medical electronics and cardiopulmonary bypass
equipment. Dr Hallett received a B.E. in Chemical and Materials Engineering
from the University of Auckland, and a Masters and Ph.D. in Biomedical
Engineering from the University of New South Wales.
Mr Nicklin has been Vice President, Manufacturing of the Company since January
1990. From October 1987 to November 1989, he served as the Manufacturing
Director of Valuca Pty Ltd, a manufacturer of small electrical appliances.
From November 1989 to January 1990, Mr Nicklin was a consultant to Hanimex, a
manufacturer of photographic products. From November 1978 to October 1986, Mr
Nicklin held various positions, including General Manager, Manufacturing, at
Hanimex. Mr Nicklin holds a certificate in mechanical engineering.
- -4-
<PAGE>
Mr Smith has been Vice President, Finance 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.
Mr D'Cruz has been Vice President, Quality Assurance from September 1996.
From May 1994 until September 1996, he served as Director of Quality Assurance
of the Company. From March 1990 to April 1994, he worked in the Company's
Electronic Product Development department. From January 1989 to February
1990, he was employed at Royal Prince Alfred Hospital to research the effects
of surgery on the Vestibular Occular Reflex. From April 1979 to February 1988
he was employed at Digital Equipment Corporation as a hardware/software
engineer. Mr D'Cruz holds a B.E.(Electronics) from Curtin University, Western
Australia and a Master of Biomedical Engineering from the University of New
South Wales.
Mr DeWitt has been Vice President, US Marketing from August 1997 and was
previously Vice President US Operations form October 1994. From November 1990
to September 1994, he was an attorney in private practice in Minneapolis,
Minnesota, most recently affiliated with the financial management advisory
firm of Steven, Foster & Co., Inc. and as a consultant to the Company. Prior
thereto, Mr DeWitt held positions both as an attorney and senior manager with
Westlun Companies, Inc., a real estate construction firm, from March 1988 to
October 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.
Dr Wright has been Vice President, Marketing of the Company since June 1994.
From October 1991 to May 1994, he was New Business Development Manager at
Johnson and Johnson Medical Pty Ltd, a subsidiary of Johnson and Johnson, Inc.
From September 1988 to September 1991, Dr Wright was a Project Manager at
Sirotech Ltd, a technology transfer company. From May 1987, Dr Wright was a
Senior Project Leader at Vaso Products, a subsidiary of Bellara Medical
Products Ltd, Australia, a manufacturer of vascular devices. Dr Wright
received a B.Sc. degree from the University of NSW, a Ph.D. from the
University of Sydney, and a Graduate Diploma (Marketing) from the University
of Technology, Sydney.
Mr Yerbury joined the Company as Vice President, Operations ResMed Limited in
July 1995. From July 1994, he was employed as a management consultant
specializing in technology development. Since May 1991, Mr Yerbury served as
Divisional General Manager of British Aerospace Australia in charge of
contract management and radio tracking systems. From February 1988 to April
1991 Mr Yerbury was the General Manager of Lend Lease Technology, part of the
Australian Lend Lease Corporation, responsible for development and
commercialization of remote radio based tracking systems and radio data
networks. Mr Yerbury received a degree in Chemical Engineering from the
University College London.
Mr Abourizk joined the Company as General Counsel in July 1995. From June
1993 to June 1995, Mr Abourizk managed the Sydney office of Francis Abourizk
Lightowlers a legal partnership specializing in intellectual property matters.
From March 1989 to May 1993 Mr Abourizk was Deputy Manager of Sirotech Legal
Group, a technology transfer company. During the period from March 1986 to
February 1989, Mr Abourizk became a Senior Associate in the Intellectual
Property Group of an Australian national law firm, Corrs Pavey Whiting &
Byrne. Mr Abourizk received B.Sc. (Hons) and LL.B. degree from Monash
University and Graduate Diploma in Intellectual Property from University of
Melbourne. Mr Abourizk is admitted to practice before the High Court of
Australia, the Supreme Court of Victoria (Barrister and Solicitor) and the
Supreme Court of New South Wales (Solicitor).
- -5-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended June 30, 1997, 1996 and 1995 of those persons who were at
June 30, 1997 (i) the chief executive officer of the Company, (ii) one of the
other most highly compensated executive officers of the Company 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 1997 fiscal year (collectively, the "Named
Officers").
The following table sets forth information concerning compensation paid to the
Chief Executive Officer of the Company and the other executive officers of the
Company whose annual salary and bonus exceeded $100,000 (the "Named Officers")
for services rendered in all capacities to the Company and its subsidiaries
during the fiscal years ending June 30, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
Awards Payouts
Annual Compensation
<S> <C> <C> <C> <C> <C>
Securities All Other
Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) Options (#) ($) (1)
Peter C Farrell 1997 197,004 42,959 - 710
President and 1996 191,505 61,804 7,500 5,362
Chief Executive Officer 1995 130,253 58,950 4,500 7,164
Christopher G Roberts 1997 122,434 23,362 - 28,774
Executive Vice President 1996 43,418 37,978 4,000 88,444
1995 32,451 37,662 3,000 84,850
Victor Yerbury 1997 103,495 14,391 - 7,663
Vice President, Operations 1996 98,265 - 3,000 5,405
ResMed Limited (2)
<FN>
(1) These include pension plan payments made in lieu of salary.
(2) Mr Yerbury was employed in July 1995 and as a result received no compensation for the fiscal year ended June 30, 1995
</TABLE>
STOCK OPTIONS
The Company did not grant any stock options to the Chief Executive Officer or
any of the Named Officers during the fiscal year ended June 30, 1997 as these
were deferred to August 6, 1997. The following table sets forth information
concerning the stock option exercises by the Chief Executive Officer and Named
Officers during the fiscal year ended June 30, 1997 and the unexercised stock
options held at June 30, 1997 by the named officers.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Shares Acquired Value Options at FY-End (#) Money Options at FY-End
Name on Exercise (#) Realized Exercisable Unexercisable Exercisable (1) / Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Peter C Farrell - - 5,500 6,500 $ 59,525 $59,425
Christopher G Roberts - - 3,334 3,666 $ 37,052 $34,338
Victor Yerbury - - 9,334 6,166 $118,322 $71,033
<FN>
(1) Represents the amount by which the closing sales price of the Company's common stock on the Nasdaq Stock Market on
June 30, 1997 ($24.50 per share) multiplied times the number of shares to which the options apply exceeded the exercise
price of such options.
</TABLE>
- -6-
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
INTRODUCTION
Decisions regarding compensation of the Company's executives generally are
made based on recommendations by the Compensation Committee, which is composed
of two independent outside 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 Messrs Donagh
McCarthy and Michael A Quinn in their capacity as members of the Board's
Compensation Committee addressing the Company's compensation policies for
fiscal year 1997 as they affected executive officers of the Company, including
the 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.
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.
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
profit sharing bonus based on overall Company performance and a component
providing the opportunity to earn stock options linking the employee's
long-term financial success to that of the stockholders.
- -7-
<PAGE>
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 utilizes industry compensation surveys 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 in June with the amount of the increases (which
take effect the following July) based on factors such as Company performance,
general economic conditions, marketplace compensation trends and individual
performance.
In fiscal year 1997, the Board approved a salary increase for Dr Farrell of
10% and a salary increase of 9% for Dr Roberts.
Profit Sharing Bonus
The second compensation component is a profit sharing program under the
Company's Profit Sharing Bonus Plan. Bonuses are primarily based on the
Company's annual financial performance and secondarily on the performance of
the individual. Bonuses generally range from zero to 60% of base salary. The
measures of annual financial performance used in determining the amount of
bonuses include sales growth and earnings growth.
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 stockholders 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, as
determined by the Compensation Committee.
No stock options were issued or approved to employees or named officers of the
Company during fiscal year 1997 as these options were deferred to August 6,
1997.
CEO COMPENSATION
The compensation of Dr Farrell 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.
Compensation Committee of the Company's Board of Directors:
Donagh McCarthy (Chairman)
Michael A Quinn
Dated: September 17, 1997
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.
- -8-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is responsible for
executive compensation decisions as described above under "Board of Directors
and Committees of the Board". During fiscal year 1997, the committee
consisted of Mr Donagh McCarthy (Chairman) and Mr Michael A Quinn. Dr Farrell
did not participate in discussions or decisions regarding his compensation
package.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative stockholder return on
the Company's Common Stock against the cumulative total return of the NASDAQ
United States and Foreign Index and the Standard & Poors Medical Products and
Supplies Index for the period commencing June 2, 1995 (the date the Company's
Common Stock commenced trading on the Nasdaq Stock Market) through June 30,
1997, assuming an investment of $100 on June 2, 1995.
[GRAPHIC OMITED]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
June 2, 1995 June 30, 1995 June 30, 1996 June 30, 1997
------------- -------------- -------------- --------------
ResMed Inc. $ 100.00 $ 109.09 $ 140.91 $ 222.73
NASDAQ US & Foreign $ 100.00 $ 109.67 $ 139.91 $ 170.18
Standard & Poors Medical
Products and Supplies $ 100.00 $ 105.19 $ 136.63 $ 179.22
</TABLE>
- -9-
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the
Securities and Exchange Commission (the "Commission") and the National
Association of Securities Dealers National Market System initial reports of
ownership and reports of change in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten-percent
shareholders are required by Commission regulation to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it with respect
to fiscal 1997, or written representations from certain reporting persons, the
Company believes that during fiscal 1997 all of its directors and executive
officers and persons who own more than 10% of the Company's Common Stock have
complied with the reporting requirements of Section 16(a).
MATTERS TO BE ACTED UPON
1. Election of Directors
The Board of Directors, acting pursuant to the bylaws of the Company, has
determined that the number of directors constituting the full Board of
Directors shall be five at the present time.
The Board is divided into three classes. One such class is elected every
year at the Annual Meeting of Stockholders for a term of three years. The
class of directors whose term expires in 1997 has two members, Dr Peter C.
Farrell and Dr Gary W. Pace. Accordingly, two directors are to be elected at
the 1997 Annual Meeting of Stockholders, who will hold office until the 2000
Annual Meeting of Stockholders or until the director's prior death,
disability, resignation or removal.
The Board of Directors has nominated Dr Peter C. Farrell and Dr Gary W
.Pace for re-election as directors. Proxies are solicited in favor of these
nominees and will be voted for them unless otherwise specified. If either Dr
Farrell or Dr Pace become unable or unwilling to serve as director, 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.
<TABLE>
<CAPTION>
Information concerning the nominees for directors and the other directors who will continue in office
after the Annual Meeting is set forth below.
<S> <C> <C>
Name Age Position with the Company
Peter C. Farrell(1) 55 President, Chief Executive Officer and Chairman of the Board of Directors.
Christopher G. Roberts (2) 43 Executive Vice President and Director
Donagh McCarthy (2)(3) 50 Director
Gary W Pace (1) 49 Director
Michael A. Quinn (3)(4) 50 Director
<FN>
(1) Term expires 1997
(2) Term expires 1999
(3) Member of Audit Committee and the Stock Option and Compensation Committee
(4) Term expires 1998
</TABLE>
- -10-
<PAGE>
Dr Farrell has been President and a director of the Company since its
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. Dr Farrell, from 1992 to 1996, was a director
of F.H. Faulding & Co. Limited, a pharmaceutical company based in South
Australia with annual revenues over $1 billion. 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 Roberts joined the Company in August 1992 as Executive Vice President.
He has been director of the Company since September 1992. He also served as
a director of the Company from August 1989 to November 1990. 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 which 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.
Mr McCarthy has been a director of the Company since November 1994.
Since June 1993 he has been the President of the North America Renal Division
of Baxter. Mr McCarthy has held various positions at Baxter since 1982,
including that of Vice President-Global Marketing, Strategy and Product
Development. Mr McCarthy received a B.Sc. in Engineering from the National
University of Ireland and a M.B.A. from the Wharton School, University of
Pennsylvania.
Dr Pace has been a director of the Company since July 1994. Dr Pace is
President and Chief Executive Officer of RTP Pharma Corp. (formerly Research
Triangle Pharmaceutical Ltd), a biopharmaceutical company working in the area
of drug delivery, since November 1994. From January 1993 to September 1994,
he was the founding President and Chief Executive Officer of Transcend
Therapeutics Inc. (formerly Free Radical Sciences Inc.), a biopharmaceutical
company. From September 1989 to January 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 the Massachusetts Institute of
Technology.
Mr Quinn, a director of the Company since September 1992, has been a
management and financial consultant since February 1992. From July 1988 to
January 1992, he served as Executive Chairman of Phoenix Scientific Industries
Limited, a manufacturer of health care and scientific products. From July
1983 to June 1988. Mr Quinn was Managing Director and Company Secretary at
Memtec Limited, an industrial membrane filtration company ("Memtec"). He
currently is a director of Memtec and Heggies Bulkhaul Limited. Mr Quinn
holds a B.Sc. in physics and applied mathematics and a Bachelor of Economics
from the University of Western Australia and a M.B.A. from Harvard University.
- -11-
<PAGE>
Committees of the Board of Directors
The Board of Directors has two committees to assist in the management of the
affairs of the Company the Stock Option and Compensation Committee and the
Audit Committee. The Company does not have a standing Nominating Committee.
Stock Option and Compensation Committee. The Stock Option and Compensation
Committee (the "Compensation Committee") currently consists of Messrs Donagh
McCarthy (Chairman) and Michael A Quinn. The Compensation Committee
administers the Company's 1995 Stock Option Plan and has the authority to
grant options thereunder. The Compensation Committee also makes
recommendations regarding the compensation payable, including compensation
under the Company's bonus plan, to the senior executive officers of the
Company.
Audit Committee. The Audit Committee currently consists of Messrs Michael A
Quinn (Chairman), and Donagh McCarthy. This committee assists the Board in
fulfilling its functions relating to corporate accounting and reporting
practices and financial and accounting controls.
The Compensation Committee met three times during fiscal year 1997 and the
Audit Committee met four times during fiscal year 1997. These committees also
met informally by telephone during the fiscal year as the need arose. The
Board of Directors held five meetings during fiscal year 1997.
Each director attended at least 75% 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.
Each director who is not an employee of the Company received an annual fee of
$10,000 for his service as a director during fiscal 1997. In addition, each
director is reimbursed for his travel expenses for attendance at all such
meetings. Directors of the Company who are not employees also hold and receive
stock options under the Company's 1995 Stock Option Plan.
Medical Advisory Committee
In addition the Company has an independent Medical Advisory Committee. The
Medical Advisory Committee comprises leading physicians in sleep medicine who
advise the board with respect to reviewing the Company's current and proposed
product lines from a medical perspective.
Vote
Directors will be elected by a favorable vote of a plurality of the
shares of voting stock present and entitled to vote, in person or by proxy, at
the Meeting. Abstentions or broker non-votes as to the election of directors
will not affect the election of the candidates receiving the plurality of
votes. Unless instructed to the contrary, the shares represented by the
proxies will be voted FOR the election of the two nominees named above as
directors. Although it is anticipated that each nominee will be able to serve
as a director, should any nominee become unavailable to serve, the proxies
will be voted for such other person or persons as may be designated by the
Company's Board of Directors.
- -12-
<PAGE>
2. 1997 Equity Participation Plan
In August 1997, the Company's Board of Directors adopted the 1997 Equity
Participation Plan of ResMed Inc. (the "1997 Plan"). The 1997 Plan succeeds
the Company's Stock Option Plan of 1995 (the "1995 Plan"), which covered
700,000 shares of the Company's Common Stock and was adopted by the Board of
Directors and then approved by the stockholders in April 1995, prior to the
Company's initial public offering. As of August 31, 1997, a total of 651,523
shares were subject to outstanding stock options under the 1995 Plan, and only
3,684 shares remained available for the grant of new stock options under the
1995 Plan. Assuming that the Company's stockholders approve the 1997 Plan, no
further grants will be made under the 1995 Plan.
The principal purposes of the 1997 Plan are to provide incentives for
officers, key employees and consultants of the Company and its subsidiaries
through granting of options, restricted stock and other awards, thereby
stimulating their personal and active interest in the Company's development
and financial success, and inducing them to remain in the Company's employ.
In addition to grants and awards made to officers, employees or consultants,
the 1997 Plan provides for automatic annual grants of options to the Company's
independent directors, as described in further detail below.
The total number of shares of Common Stock authorized for issuance upon
exercise of options and other awards, or upon vesting of restricted or
deferred stock awards, under the 1997 Plan is initially established at
250,000, 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 2,000,000. And, 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 75,000. On
September 22, 1997, the closing price of a share of the Company's Common Stock
on The Nasdaq Stock Market was $25.00.
The shares available under the 1997 Plan upon exercise of stock options and
other awards, and for issuance as restricted or deferred stock, may be either
previously unissued shares or treasury shares, and may be equity securities of
the Company other than Common Stock. The 1997 Plan provides for appropriate
adjustments in the number and kind of shares subject to the 1997 Plan and to
outstanding grants thereunder in the event of a stock split, stock dividend or
certain other types of recapitalizations, including restructuring.
If any portion of a stock option or other award terminates or lapses
unexercised, or is cancelled upon grant of a new option or other award (which
may be at a higher or lower exercise price than the option or other award so
cancelled) or is surrendered in payment of the exercise price or tax
withholding obligation, the shares which were subject to the unexercised
portion of such option or other award, will continue to be available for
issuance under the 1997 Plan.
The principal features of the 1997 Plan are summarized below, but the summary
is qualified in its entirety by reference to the 1997 Plan itself. A copy of
the 1997 Plan is attached as Exhibit A and can also be obtained by making
written request of the Company's Secretary.
- -13-
<PAGE>
Administration
The 1997 Plan is administered by the Compensation Committee or a subcommittee
thereof (referred to herein as the "Committee"), consisting of at least two
members of the Board, none of whom is an officer or employee of the Company.
The Committee is authorized to select from among the eligible employees and
consultants the individuals to whom options, restricted stock purchase rights
and other awards are to be granted and to determine the number of shares to be
subject thereto and the terms and conditions thereof, consistent with the 1997
Plan. The Committee is also authorized to adopt, amend and rescind rules
relating to the administration of the 1997 Plan.
Payment for Shares
The exercise or purchase price for all options, restricted stock and other
rights to acquire Company Common Stock, together with any applicable tax
required to be withheld, must be paid in full in cash at the time of exercise
or purchase or may, with the approval of the Committee, be paid in whole or in
part in Common Stock of the Company owned by the optionee (or issuable upon
exercise of the option) and having a fair market value on the date of exercise
equal to the aggregate exercise price of the shares so to be purchased. The
Committee may also provide that the purchase price may be payable within
thirty days after the date of exercise. The Committee may also authorize
other lawful consideration to be applied to the exercise or purchase price of
an award. This may also include services rendered, or the difference between
the exercise price of presently exercisable options and the fair market value
of the Common Stock covered by such options on the date of exercise.
Amendment and Termination
Amendments of the 1997 Plan to increase the number of shares as to which
options, restricted stock and other awards may be granted (except for
adjustments resulting from stock splits and the like) or to modify the per
person award limit require the approval of the Company's stockholders. In all
other respects the 1997 Plan can be amended, modified, suspended or terminated
by the Committee, unless such action would otherwise require stockholder
approval as a matter of applicable law, regulation or rule. Amendments of the
1997 Plan will not, without the consent of the participant, affect such
person's rights under an award previously granted, unless the award itself
otherwise expressly so provides. No termination date is specified for the
1997 Plan.
Eligibility
Options, restricted stock and other awards under the 1997 Plan may be granted
to individuals who are then officers or other employees of the Company or any
of its present or future subsidiaries and who are determined by the Committee
to be key employees. Such awards also may be granted to consultants of the
Company selected by the Committee for participation in the 1997 Plan.
Approximately 300 officers and other employees are eligible to participate in
the 1997 Plan. More than one option, restricted stock grant or other award
may be granted to a key employee or consultant, but the aggregate fair market
value (determined at the time of grant) of shares with respect to which an
incentive stock option is first exercisable by an optionee (i.e., "vests")
during any calendar year cannot exceed $100,000. Non-employee directors of
the Company are eligible to receive automatic grafts of non-qualified stock
options under the 1997 Plan, as described below.
- -14-
<PAGE>
Awards under the 1997 Plan
The 1997 Plan provides that the Committee may grant or issue stock options,
restricted stock, deferred stock, dividend equivalents, performance awards,
stock payments and other stock related benefits, or any combination thereof.
Each grant or issuance will be set forth in a separate agreement with the
person receiving the award and will indicate the type, terms and conditions of
the award.
Nonqualified stock options ("NQSOs") will provide for the right to purchase
Common Stock at a specified price which may be less than fair market value on
the date of grant (but not less than par value), and usually will become
exercisable (in the discretion of the Committee) in one or more installments
after the grant date. NQSOs may be granted for any term specified by the
Committee.
Incentive stock options, if granted, will be designed to comply with the
provisions of the Code and will be subject to restrictions contained in the
Code, including exercise prices equal to at least 100% of fair market value of
Common Stock on the grant date and a ten year restriction on their term, but
may be subsequently modified to disqualify them from treatment as an incentive
stock option. Incentive stock options may be granted only to employees.
Automatic Grants of NQSOs to Non-Employee Directors. During the term of the
1997 Plan, a person who is initially elected or appointed to the Company Board
of Directors as a non-employee director after the date of the 1997 Annual
Meeting shall be automatically granted an option to purchase seven thousand
five hundred (7,500) shares of Company Common Stock (subject to adjustment in
the event of certain corporate changes) on the date of such initial election
or appointment. Each non-employee Director shall be automatically granted
options to purchase five thousand (5,000) shares of Common Stock (subject to
adjustment in the event of certain corporate changes) on the first Friday of
July each year that such person continues to be a non-employee director,
commencing on the first Friday of July 1998. Options granted to non-employee
directors vest 33% per year on the first, second and third anniversaries of
the date of Option grant. Members of the Company Board of Directors who are
employees of the Company who subsequently retire from the Company and remain
on the Company Board of Directors will not receive an initial option grant.
Restricted stock may be sold to participants at various prices (but not below
par value) and made subject to such restrictions as may be determined by the
Committee. Restricted stock, typically, may be repurchased by the Company at
the original purchase price if the conditions or restrictions are not met. In
general, restricted stock may not be sold, or otherwise transferred or
hypothecated, until restrictions are removed or expire. Purchasers of
restricted stock, unlike recipients of options, will have voting rights and
will receive dividends prior to the time when the restrictions lapse.
Deferred stock may be awarded to participants, typically without payment of
consideration, but subject to vesting conditions based on continued employment
or on performance criteria established by the Committee. Like restricted
stock, deferred stock may not be sold, or otherwise transferred or
hypothecated, until vesting conditions are removed or expire. Unlike
restricted stock, deferred stock will not be issued until the deferred stock
award has vested, and recipients of deferred stock generally will have no
voting or dividend rights prior to the time when vesting conditions are
satisfied.
- -15-
<PAGE>
Dividend equivalents may be credited to a participant in the 1997 Plan. They
represent the value of the dividends per share paid by the Company, calculated
with reference to the number of shares covered by the stock options or other
awards held by the participant.
Performance awards may be granted by the Committee on an individual or group
basis. Generally, these awards will be based upon specific agreements and may
be paid in cash or in Common Stock or in a combination of cash and Common
Stock. Performance awards may include "phantom" stock awards that provide for
payments based upon increases in the price of the Company's Common Stock over
a predetermined period. Performance awards may also include bonuses which may
be granted by the Committee on an individual or group basis and which may be
payable in cash or in Common Stock or in a combination of cash and Common
Stock.
Stock payments may be authorized by the Committee in the form of shares of
Common Stock or an option or other right to purchase Common Stock as part of a
deferred compensation arrangement in lieu of all or any part of compensation,
including bonuses, that would otherwise be payable to a key employee or
consultant in cash.
Miscellaneous Provisions
The 1997 Plan specifies that the Company may make loans to Plan participants
to enable them to exercise options, purchase shares or realize the benefits of
other awards granted under the Plan. The terms and conditions of such loans,
if any are made, are to be set by the Committee.
The dates on which options or other awards under the 1997 Plan first become
exercisable and on which they expire will be set forth in individual stock
options or other agreements setting forth the terms of the awards. Such
agreements generally will provide that options and other awards expire upon
termination of the optionee's status as an employee, consultant or director,
although the Committee may provide that such options continue to be
exercisable following a termination without cause, or following a change in
control of the Company, or because of the grantee's retirement, death,
disability or otherwise. Similarly, restricted stock granted under the 1997
Plan which has not vested generally will be subject to repurchase by the
Company in the event of the grantee's termination of employment or
consultancy, although the Committee may make exceptions, based on the reason
for termination or on other factors, in the terms of an individual restricted
stock agreement.
No option or other right to acquire Common Stock granted under the 1997 Plan
may be assigned or transferred by the grantee, except by will or the laws of
intestate succession or pursuant to a qualified domestic relations order (as
defined by the Code or Title I to the Employee Retirement Income Security Act
of 1994, as amended, or the rules thereunder), although the shares underlying
such rights may be transferred if all applicable restrictions have lapsed.
During the lifetime of the holder of any option or right, the option or right
may be exercised only by the holder.
The Company requires participants to discharge withholding tax obligations in
connection with the exercise of any option or other right granted under the
1997 Plan, or the lapse of restrictions on restricted stock, as a condition to
the issuance or delivery of stock or payment of other compensation pursuant
thereto. Shares held by or to be issued to a participant may also be used to
discharge tax withholding obligations related to exercise of options or
receipt of other awards, subject to the discretion of the Committee to
disapprove such use. In addition, the Committee may grant to employees a cash
bonus in the amount of any tax related to awards.
- -16-
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The tax consequences of the 1997 Plan under current federal law are summarized
in the following discussion which deals with the general tax principles
applicable to the 1997 Plan, and is intended for general information only. In
addition, the tax consequences described below are subject to the limitation
of the 1993 Omnibus Budget Reconciliation Act ("OBRA"), as discussed in
further detail below. Alternative minimum tax and state and local income
taxes are not discussed, and may vary depending on individual circumstances
and from locality to locality.
Nonqualified Stock Options. For Federal income tax purposes, the recipient of
NQSOs granted under the 1997 Plan will not have taxable income upon the grant
of the option, nor will the Company then be entitled to any deduction.
Generally, upon exercise of NQSOs the optionee will realize ordinary income,
and the Company will be entitled to a deduction, in an amount equal to the
difference between the option exercise price and the fair market value of the
stock at the date of exercise. An optionee's basis for the stock for purposes
of determining his gain or loss on his subsequent disposition of the shares
generally will be the fair market value of the stock on the date of exercise
of the NQSO.
Incentive Stock Options. There is no taxable income to an employee when an
incentive stock option is granted to him or when that option is exercised;
however, the amount by which the fair market value of the shares at the time
of exercise exceeds the option price will be an "item of tax preference" for
the optionee. Gain realized by an optionee upon sale of stock issued on
exercise of an incentive stock option is taxable at capital gains rates, and
no tax deduction is available to the Company, unless the optionee disposes of
the shares within two years after the date of grant of the option or within
one year of the date the shares were transferred to the optionee. In such
event the difference between the option exercise price and the fair market
value of the shares on the date of the option's exercise will be taxed at
ordinary income rates, and the Company will be entitled to a deduction to the
extent the employee must recognize ordinary income. An incentive stock option
exercised more than three months after an optionee's retirement from
employment, other than by reason of death or disability, will be taxed as an
NQSO, with the optionee deemed to have received income upon such exercise
taxable at ordinary income rates. The Company will be entitled to a tax
deduction equal to the ordinary income, if any, realized by the optionee.
Restricted Stock and Deferred Stock. An employee to whom restricted or
deferred stock is issued will not have taxable income upon issuance and the
Company will not then be entitled to a deduction, unless in the case of
restricted stock an election is made under Section 83(b) of the Code.
However, when restrictions on shares of restricted stock lapse, such that the
shares are no longer subject to repurchase by the Company, the employee will
realize ordinary income and the Company will be entitled to a deduction in an
amount equal to the fair market value of the shares at the date such
restrictions lapse, less the purchase price therefor. Similarly, when
deferred stock vests and is issued to the employee, the employee will realize
ordinary income and the Company will be entitled to a deduction in an amount
equal to the fair market value of the shares at the date of issuance. If an
election is made under Section 83(b) with respect to restricted stock, the
employee will realize ordinary income at the date of issuance equal to the
difference between the fair market value of the shares at that date less the
purchase price therefor and the Company will be entitled to a deduction in the
same amount. The Code does not permit a Section 83(b) election to be made
with respect to deferred stock.
- -17-
<PAGE>
Dividend Equivalents. A recipient of a dividend equivalent award will not
realize taxable income at the time of grant, and the Company will not be
entitled to a deduction at that time. When a dividend equivalent is paid, the
participant will recognize ordinary income, and the Company will be entitled
to a corresponding deduction.
Performance Awards. A participant who has been granted a performance award
will not realize taxable income at the time of grant, and the Company will not
be entitled to a deduction at that time. When an award is paid, whether in
cash or Common Stock, the participant will have ordinary income, and the
Company will be entitled to a corresponding deduction.
Stock Payments. A participant who receives a stock payment in lieu of a cash
payment that would otherwise have been made will be taxed as if the cash
payment has been received, and the Company will have a deduction in the same
amount.
Deferred Compensation. Participants who defer compensation generally will
recognize no income, gain or loss for federal income tax purposes when
nonqualified stock options are granted in lieu of amounts otherwise payable,
and the Company will not be entitled to a deduction at that time. When and to
the extent options are exercised, the ordinary rules regarding nonqualified
stock options outlined above will apply.
Effect of 1993 Omnibus Budget Reconciliation Act on the 1997 Plan. Under
OBRA, which became law in August 1993, income tax deductions of
publicly-traded companies may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and non-qualified
benefits paid in 1997 and thereafter) 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. However, under OBRA, the deduction
limit does not apply to certain "performance-based" compensation established
by an independent compensation committee which is adequately disclosed to, and
approved by, stockholders. In particular, stock options will satisfy the
performance-based exception if the awards are made by a qualifying
compensation committee, the plan sets the maximum number of shares that can be
granted to any particular employee within a specified period and the
compensation is based solely on an increase in the stock price after the grant
date (i.e., the option exercise price is equal to or greater than the fair
market value of the stock subject to the award on the grant date).
It is the Company's policy generally 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 in excess of $1 million which qualify
as "performance-based." Accordingly, the Board of Directors is asking
stockholders to approve the 1997 Plan in compliance with OBRA requirements.
The Company intends to comply with other requirements of the performance-based
compensation exclusion under OBRA, including option pricing requirements and
requirements governing the administration of the 1997 Plan, so that, upon
stockholder approval of the 1997 Plan, the deductibility of compensation paid
to top executives thereunder is not expected to be disallowed.
- -18-
<PAGE>
REASONS FOR ADOPTION OF THE 1997 PLAN
The 1995 Plan currently provides that 700,000 shares of Common Stock are
authorized for issuance and, as of August 31, 1997, only 3,684 shares remained
available for future awards under the 1995 Plan. The Board of Directors has
determined that it is advisable to continue to provide stock-based incentive
compensation to the Company's key employees and consultants, thereby
continuing to align the interests of such employees and consultants with those
of the stockholders, and that awards under the 1997 Plan are an effective
means of providing such compensation.
REQUIRED VOTE
The affirmative vote of a majority of the Company's outstanding shares of
Common Stock present or represented and entitled to vote at the 1997 Annual
Meeting is required to approve the 1997 Plan. Abstentions as to this Proposal
2 will be treated as votes against the 1997 Plan. Broker non-votes, however,
will be treated as unvoted for purposes of determining approval of Proposal 2,
and thus will not be counted as votes for or against the 1997 Plan. Unless
instructed to the contrary properly executed Proxies will be voted FOR
Proposal 2. Your Board of Directors recommends a vote FOR approval of the
1997 Plan.
3. Ratification of Selection of Auditors
The Board of Directors, following the recommendation of the Audit
Committee, has selected the independent public accounting firm of KPMG Peat
Marwick LLP as the auditors to examine the consolidated financial statements
of the Company for fiscal year 1998. The proxies solicited on behalf of the
Board of Directors will be voted to ratify selection of that firm unless
otherwise specified.
KPMG Peat Marwick LLP has served as the independent auditors for the
Company since 1994. Representatives of KPMG Peat Marwick LLP are expected to
be present at the Annual Meeting of Stockholders. They will have the
opportunity to make statements if they desire to do so and will be available
to respond to appropriate questions.
4. Other Business
The Board of Directors does not know of any other business to be
presented to the Annual Meeting of Stockholders. 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.
- -19-
<PAGE>
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
If any stockholder wishes to present a proposal at the 1998 Annual Meeting of
Stockholders, the proposal must be received by the Secretary of the Company by
May 11, 1998 to be considered for inclusion in the Company's Proxy Statement
and form of proxy relating to the 1998 Annual Meeting. The 1998 Annual
Meeting is presently scheduled for November 9, 1998.
By Order of the Board of Directors
Walter Flicker
Secretary
Dated: October 6, 1997
- -20-
<PAGE>
EXHIBIT A
THE 1997 EQUITY PARTICIPATION PLAN
OF
RESMED INC.
RESMED INC., a Delaware corporation, has adopted The 1997 Equity Participation
Plan of ResMed Inc. (the "Plan"), effective November 10, 1997, for the benefit
of its eligible employees, consultants and directors.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key Employees and
consultants to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock and/or
rights which recognize such growth, development and financial success.
(2) To enable the Company to obtain and retain the services of directors,
key Employees and consultants considered essential to the long range success
of the Company by offering them an opportunity to own stock in the Company
and/or rights which will reflect the growth, development and financial success
of the Company.
ARTICLE I.
DEFINITIONS
1.1. General.
Wherever the following terms are used in this Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise.
1.2. Award Limit.
"Award Limit" shall mean 75,000 shares of Common Stock.
1.3. Board.
"Board" shall mean the Board of Directors of the Company.
1.4. Change in Control.
"Change in Control" shall mean a change in ownership or control of the Company
effected through either of the following transactions:
(a) any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities pursuant to a tender or
exchange offer made directly to the Company's stockholders which the Board
does not recommend such stockholders to accept; or
(b) there is a change in the composition of the Board over a period of
thirty-six (36) consecutive months (or less) such that a majority of the Board
members (rounded up to the nearest whole number) ceases, by reason of one or
more proxy contests for the election of Board members, to be comprised of
individuals who either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or nominated for election
as Board members during such period by at least a majority of the Board
members described in clause (i) who were still in office at the time such
election or nomination was approved by the Board.
1.5. Code.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
1.6. Committee.
"Committee" shall mean the Compensation Committee of the Board, or another
committee of the Board, appointed as provided in Section 8.1.
1.7. Common Stock.
"Common Stock" shall mean the common stock of the Company, par value $0.04 per
share, and any equity security of the Company issued or authorized to be
issued in the future, but excluding any preferred stock and any warrants,
options or other rights to purchase Common Stock. Debt securities of the
Company convertible into Common Stock shall be deemed equity securities of the
Company.
1.8. Company.
"Company" shall mean ResMed Inc., a Delaware corporation.
1.9. Corporate Transaction.
"Corporate Transaction" shall mean any of the following stockholder-approved
transactions to which the Company is a party:
<PAGE>
(a) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change
the State in which the Company is incorporated, form a holding company or
effect a similar reorganization as to form whereupon this Plan and all Options
are assumed by the successor entity;
(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a), above; or
(c) any reverse merger in which the Company is the surviving entity but in
which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are transferred
or issued to a person or persons different from those who held such securities
immediately prior to such merger.
1.10. Deferred Stock.
"Deferred Stock" shall mean Common Stock awarded under Article VII of this
Plan.
1.11. Director.
"Director" shall mean a member of the Board.
1.12. Dividend Equivalent.
"Dividend Equivalent" shall mean a right to receive the equivalent value (in
cash or Common Stock) of dividends paid on Common Stock, awarded under Article
VII of this Plan.
1.13. Employee.
"Employee" shall mean any officer or other employee (as defined in accordance
with Section 3401(c) of the Code) of the Company, or of any corporation which
is a Subsidiary.
1.14. Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
1.15. Fair Market Value.
"Fair Market Value" of a share of Common Stock as of a given date shall be (i)
the closing price of a share of Common Stock on the principal exchange on
which shares of Common Stock are then trading, if any (or as reported on any
composite index which includes such principal exchange), on the trading day
previous to such date, or if shares were not traded on the trading day
previous to such date, then on the next preceding date on which a trade
occurred, or (ii) if Common Stock is not traded on an exchange but is quoted
on The Nasdaq Stock Market or a successor quotation system, the mean between
the closing representative bid and asked prices for the Common Stock on the
trading day previous to such date as reported by The Nasdaq Stock Market or
such successor quotation system; or (iii) if Common Stock is not publicly
traded on an exchange and not quoted on The Nasdaq Stock Market or a successor
quotation system, the Fair Market Value of a share of Common Stock as
established by the Committee (or the Board, in the case of Options granted to
Independent Directors) acting in good faith.
1.16. Grantee.
"Grantee" shall mean an Employee or consultant granted a Performance Award,
Dividend Equivalent or Stock Payment, or an award of Deferred Stock, under
this Plan.
1.17. Incentive Stock Option.
"Incentive Stock Option" shall mean an option which conforms to the applicable
provisions of Section 422 of the Code and which is designated as an Incentive
Stock Option by the Committee.
1.18. Independent Director.
"Independent Director" shall mean a member of the Board who is not an Employee
of the Company.
1.19. Non-Qualified Stock Option.
"Non-Qualified Stock Option" shall mean an Option which is not designated as
an Incentive Stock Option by the Committee.
1.20. Option.
"Option" shall mean a stock option granted under Article III of this Plan. An
Option granted under this Plan shall, as determined by the Committee, be
either a Non-Qualified Stock Option or an Incentive Stock Option.
1.21. Optionee.
"Optionee" shall mean an Employee, consultant or Independent Director granted
an Option under this Plan.
1.22. Performance Award.
"Performance Award" shall mean a cash bonus, stock bonus or other performance
or incentive award that is paid in cash, Common Stock or a combination of
both, awarded under Article VII of this Plan.
1.23. Plan.
"Plan" shall mean The 1997 Equity Participation Plan of ResMed Inc., as
amended from time to time.
- -2-
<PAGE>
1.24. QDRO.
"QDRO" shall mean a qualified domestic relations order as defined by the Code
or Title I of the Employee Retirement Income Security Act of 1974, as amended,
or the rules thereunder.
1.25. Restricted Stock.
"Restricted Stock" shall mean Common Stock awarded under Article VI of this
Plan.
1.26. Restricted Stockholder.
"Restricted Stockholder" shall mean an Employee or consultant granted an award
of Restricted Stock under Article VI of this Plan.
1.27. Rule 16b-3.
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as
such Rule may be amended from time to time.
1.28. Stock Payment.
"Stock Payment" shall mean (i) a payment in the form of shares of Common
Stock, or (ii) an option or other right to purchase shares of Common Stock, as
part of a deferred compensation arrangement, made in lieu of all or any
portion of the compensation, including without limitation, salary, bonuses and
commissions, that would otherwise become payable to a key Employee or
consultant in cash, awarded under Article VII of this Plan.
1.29. Subsidiary.
"Subsidiary" shall mean any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50 percent or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
1.30. Termination of Consultancy.
"Termination of Consultancy" shall mean the time when the engagement of an
Optionee, Grantee or Restricted Stockholder as a consultant to the Company or
a Subsidiary is terminated for any reason, with or without cause, including,
but not by way of limitation, by resignation, discharge, death or retirement;
but excluding terminations where there is a simultaneous commencement of
employment or consulting with the Company or any Subsidiary. The Committee,
in its absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Consultancy, including, but not by way of
limitation, the question of whether a Termination of Consultancy resulted from
a discharge for good cause, and all questions of whether particular leaves of
absence constitute Terminations of Consultancy. Notwithstanding any other
provision of this Plan, the Company or any Subsidiary has an absolute and
unrestricted right to terminate a consultant's service at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
1.31. Termination of Directorship.
"Termination of Directorship" shall mean the time when an Optionee who is an
Independent Director ceases to be a Director for any reason, including, but
not by way of limitation, a termination by resignation, failure to be elected,
death or retirement. The Board, in its sole and absolute discretion, shall
determine the effect of all matters and questions relating to Termination of
Directorship with respect to Independent Directors.
1.32. Termination of Employment.
"Termination of Employment" shall mean the time when the employee-employer
relationship between an Optionee, Grantee or Restricted Stockholder and the
Company or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations
where there is a simultaneous reemployment or continuing employment of an
Optionee, Grantee or Restricted Stockholder by the Company or any Subsidiary,
(ii) at the discretion of the Committee, terminations which result in a
temporary severance of the employee-employer relationship, and (iii) at the
discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its absolute
discretion, shall determine the effect of all matters and questions relating
to Termination of Employment, including, but not by way of limitation, the
question of whether a Termination of Employment resulted from a discharge for
good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, with
respect to Incentive Stock Options, a leave of absence, change in status from
an employee to an independent contractor or other change in the
employee-employer relationship shall constitute a Termination of Employment
if, and to the extent that, such leave of absence, change in status or other
change interrupts employment for the purposes of Section 422(a)(2) of the Code
and the then applicable regulations and revenue rulings under said Section.
Notwithstanding any other provision of this Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without cause,
except to the extent expressly provided otherwise in writing.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1. Shares Subject to Plan.
(a) The shares of stock subject to Options, awards of Restricted
Stock, Performance Awards, Dividend Equivalents, awards of Deferred Stock or
Stock Payments shall be Common Stock, initially shares of the Company's Common
- -3-
<PAGE>
Stock, par value $0.04 per share. The aggregate number of such shares
available for grant of such options or rights or upon any such awards under
the Plan shall initially be equal to 250,000 shares of the Company's Common
Stock and commencing with the first business day of each fiscal year of the
Company thereafter beginning with July 1, 1998, such maximum number of shares
reserved for issuance hereunder shall be increased by a number equal to four
percent (4%) of the number of shares of Common Stock issued and outstanding as
of June 30 of the immediately preceding fiscal year; provided, however, that
notwithstanding the foregoing, the aggregate number of shares issuable upon
exercise of incentive stock options granted hereunder shall not exceed
2,000,000. Furthermore, the maximum number of shares which may be subject to
options, rights or other awards granted under the Plan to any individual in
any calendar year shall not exceed the Award Limit and the method of counting
such shares shall conform to any requirements applicable to performance-based
compensation under Section 162(m) of the Code. The shares of Common Stock
issuable upon exercise of such options or rights or upon any such awards may
be either previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to Options granted
under the Plan to any individual in any fiscal year shall not exceed the Award
Limit. To the extent required by Section 162(m) of the Code, shares subject
to Options which are canceled continue to be counted against the Award Limit
and if, after grant of an Option, the price of shares subject to such Option
is reduced, the transaction is treated as a cancellation of the Option and a
grant of a new Option and both the Option deemed to be canceled and the Option
deemed to be granted are counted against the Award Limit.
2.2. Add-back of Options and Other Rights.
If any Option, or other right to acquire shares of Common Stock under any
other award under this Plan, expires or is canceled without having been fully
exercised, or is exercised in whole or in part for cash as permitted by this
Plan, the number of shares subject to such Option or other right but as to
which such Option or other right was not exercised prior to its expiration,
cancellation or exercise may again be optioned, granted or awarded hereunder.
Furthermore, any shares subject to Options or other awards which are adjusted
pursuant to Section 9.3 and become exercisable with respect to shares of stock
of another corporation shall be considered cancelled and may again be
optioned, granted or awarded hereunder. Shares of Common Stock which are
delivered by the Optionee or Grantee or withheld by the Company upon the
exercise of any Option or other award under this Plan, in payment of the
exercise price thereof or tax withholding with respect thereto, may again be
optioned, granted or awarded hereunder. If any share of Restricted Stock is
forfeited by the Grantee or repurchased by the Company pursuant to Section 6.6
hereof, such share may again be optioned, granted or awarded hereunder.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.
ARTICLE III.
GRANTING OF OPTIONS
3.1. Eligibility.
Any Employee or consultant selected by the Committee pursuant to Section
3.4(a)(i) shall be eligible to be granted an Option. Each Independent
Director of the Company shall be eligible to be granted Options at the times
and in the manner set forth in Section 3.4(d).
3.2. Disqualification for Stock Ownership.
No person may be granted an Incentive Stock Option under this Plan if such
person, at the time the Incentive Stock Option is granted, owns stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any then existing Subsidiary or parent
corporation (within the meaning of Section 422 of the Code) unless such
Incentive Stock Option conforms to the applicable provisions of Section 422 of
the Code.
3.3. Qualification of Incentive Stock Options.
No Incentive Stock Option shall be granted to any person who is not an
Employee.
3.4. Granting of Options
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select from among
the key Employees or consultants (including Employees or consultants who have
previously received Options or other awards under this Plan) such of them as
in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of shares to be
subject to such Options granted to the selected key Employees or consultants;
- -4-
<PAGE>
(iii) Subject to Section 3.3, determine whether such Options are to be
Incentive Stock Options or Non-Qualified Stock Options and whether such
Options are to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such Options, consistent with
this Plan; provided, however, that the terms and conditions of Options
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall include, but not be limited to, such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code.
(b) Upon the selection of a key Employee or consultant to be granted
an Option, the Committee shall instruct the Secretary of the Company to issue
the Option and may impose such conditions on the grant of the Option as it
deems appropriate. Without limiting the generality of the preceding sentence,
the Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an Employee
or consultant that the Employee or consultant surrender for cancellation some
or all of the unexercised Options, awards of Restricted Stock or Deferred
Stock, Performance Awards, Dividend Equivalents or Stock Payments or other
rights which have been previously granted to him under this Plan or otherwise.
An Option, the grant of which is conditioned upon such surrender, may have an
option price lower (or higher) than the exercise price of such surrendered
Option or other award, may cover the same (or a lesser or greater) number of
shares as such surrendered Option or other award, may contain such other terms
as the Committee deems appropriate, and shall be exercisable in accordance
with its terms, without regard to the number of shares, price, exercise period
or any other term or condition of such surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan may be modified by
the Committee to disqualify such option from treatment as an "incentive stock
option" under Section 422 of the Code.
(d) During the term of the Plan, each person who is an Independent
Director shall be granted an Option to purchase Five Thousand (5,000) shares
of Common Stock (subject to adjustment as provided in Section 9.3) on the
first Friday of July each year that such Person continues to be an Independent
Director. In addition, during the term of the plan, a person who is initially
elected or appointed to the board after November 10, 1997, and who is an
Independent Director at the time of such election shall be granted an Option
to purchase Seven Thousand Five Hundred (7,500) shares of Common Stock
(subject to adjustment as provided in Section 9.3) when initially elected or
appointed to the Board. Members of the Board who are employees of the Company
who subsequently retire from the Company and remain on the Board will not
receive an initial Option grant pursuant to the above, but to the extent that
they are otherwise eligible, will receive, after retirement from employment
with the Company, the Annual Options Grant as described above. All the
foregoing Option grants authorized by this Section 3.4(d) are subject to
stockholder approval of the Plan.
ARTICLE IV.
TERMS OF OPTIONS
4.1. Option Agreement.
Each Option shall be evidenced by a written Stock Option Agreement, which
shall be executed by the Optionee and an authorized officer of the Company and
which shall contain such terms and conditions as the Committee (or the Board,
in the case of Options granted to Independent Directors) shall determine,
consistent with this Plan. Stock Option Agreements evidencing Options
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code.
Stock Option Agreements evidencing Incentive Stock Options shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 422 of the Code.
4.2. Option Price.
The price per share of the shares subject to each Option shall be set by the
Committee; provided, however, that such price shall be no less than the
par value of a share of Common Stock, unless otherwise permitted by applicable
state law, and (i) in the case of Incentive Stock Options and Options intended
to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, such price shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted;
(ii) in the case of Incentive Stock Options granted to an individual then
owning (within the meaning of Section 424(d) of the Code) more than 10% of the
total combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code) such price shall not be less than 110% of the Fair Market Value of a
share of Common Stock on the date the Option is granted; and (iii) in the case
of Options granted to Independent Directors, such price shall equal 100% of
the Fair Market Value of a share of Common Stock on the date the Option is
granted.
4.3. Option Term.
The term of an Option shall be set by the Committee in its discretion;
provided, however, that, (i) in the case of Options granted to Independent
- -5-
<PAGE>
Directors, the term shall be ten (10) years from the date the Option is
granted, without variation or acceleration hereunder, but subject to Section
5.6, and (ii) in the case of Incentive Stock Options, the term shall not be
more than ten (10) years from the date the Incentive Stock Option is granted,
or five (5) years from such date if the Incentive Stock Option is granted to
an individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code). Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of
Consultancy of the Optionee, or amend any other term or condition of such
Option relating to such a termination.
4.4. Option Vesting
(a) The period during which the right to exercise an Option in whole
or in part vests in the Optionee shall be set by the Committee and the
Committee may determine that an Option may not be exercised in whole or in
part for a specified period after it is granted; provided, however, that,
Options granted to Independent Directors shall become exercisable in
cumulative annual installments of thirty-three percent (33%) on each of the
first, second and third anniversaries of the date of Option grant, without
variation or acceleration hereunder except as provided in Section 9.3(b). At
any time after grant of an Option, the Committee may, in its sole and absolute
discretion and subject to whatever terms and conditions it selects, accelerate
the period during which an Option (except an Option granted to an Independent
Director) vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the Committee
following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422
of the Code, but without regard to Section 422(d) of the Code) are exercisable
for the first time by an Optionee during any calendar year (under the Plan and
all other incentive stock option plans of the Company and any Subsidiary)
exceeds $100,000, such Options shall be treated as Non-Qualified Options to
the extent required by Section 422 of the Code. The rule set forth in the
preceding sentence shall be applied by taking Options into account in the
order in which they were granted. For purposes of this Section 4.4(c), the
Fair Market Value of stock shall be determined as of the time the Option with
respect to such stock is granted.
ARTICLE V.
EXERCISE OF OPTIONS
5.1. Partial Exercise.
An exercisable Option may be exercised in whole or in part. However, an
Option shall not be exercisable with respect to fractional shares and the
Committee (or the Board, in the case of Options granted to Independent
Directors) may require that, by the terms of the Option, a partial exercise be
with respect to a minimum number of shares.
5.2. Manner of Exercise.
All or a portion of an exercisable Option shall be deemed exercised upon
delivery of all of the following to the Secretary of the Company or his
office:
(a) A written notice complying with the applicable rules established
by the Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to
exercise the Option or such portion;
(b) Such representations and documents as the Committee (or the Board, in
the case of Options granted to Independent Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee or Board may,
in its absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and
registrars;
(c) In the event that the Option shall be exercised pursuant to Section
10.1 by any person or persons other than the Optionee, appropriate proof of
the right of such person or persons to exercise the Option; and
- -6-
<PAGE>
(d) Full cash payment to the Secretary of the Company for the shares with
respect to which the Option, or portion thereof, is exercised. However, the
Committee (or the Board, in the case of Options granted to Independent
Directors), may in its discretion (i) allow a delay in payment up to thirty
(30) days from the date the Option, or portion thereof, is exercised; (ii)
allow payment, in whole or in part, through the delivery of shares of Common
Stock owned by the Optionee, duly endorsed for transfer to the Company with a
Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in
whole or in part, through the surrender of shares of Common Stock then
issuable upon exercise of the Option having a Fair Market Value on the date of
Option exercise equal to the aggregate exercise price of the Option or
exercised portion thereof; (iv) allow payment, in whole or in part, through
the delivery of property of any kind which constitutes good and valuable
consideration; (v) allow payment, in whole or in part, through the delivery of
a full recourse promissory note bearing interest (at no less than such rate as
shall then preclude the imputation of interest under the Code) and payable
upon such terms as may be prescribed by the Committee or the Board; (vi) allow
payment, in whole or in part, through the delivery of a notice that the
Optionee has placed a market sell order with a broker with respect to shares
of Common Stock then issuable upon exercise of the Option, and that the broker
has been directed to pay a sufficient portion of the net proceeds of the sale
to the Company in satisfaction of the Option exercise price; or (vii) allow
payment through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a promissory
note, the Committee (or the Board, in the case of Options granted to
Independent Directors) may also prescribe the form of such note and the
security to be given for such note. The Option may not be exercised, however,
by delivery of a promissory note or by a loan from the Company when or where
such loan or other extension of credit is prohibited by law.
5.3. Conditions to Issuance of Stock Certificates.
The Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory
body which the Committee or Board shall, in its absolute discretion, deem
necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee (or Board, in the case of
Options granted to Independent Directors) shall, in its absolute discretion,
determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise of
the Option as the Committee (or Board, in the case of Options granted to
Independent Directors) may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax as referenced in Section 9.5.
5.4. Rights as Stockholders.
The holders of Options shall not be, nor have any of the rights or privileges
of, stockholders of the Company in respect of any shares purchasable upon the
exercise of any part of an Option unless and until certificates representing
such shares have been issued by the Company to such holders.
5.5. Ownership and Transfer Restrictions.
The Committee (or Board, in the case of Options granted to Independent
Directors), in its absolute discretion, may impose such restrictions on the
ownership and transferability of the shares purchasable upon the exercise of
an Option as it deems appropriate. Any such restriction shall be set forth in
the respective Stock Option Agreement and may be referred to on the
certificates evidencing such shares. The Committee may require the Employee
to give the Company prompt notice of any disposition of shares of Common Stock
acquired by exercise of an Incentive Stock Option within (i) two years from
the date of granting such Option to such Employee or (ii) one year after the
transfer of such shares to such Employee. The Committee may direct that the
certificates evidencing shares acquired by exercise of an Option refer to such
requirement to give prompt notice of disposition.
5.6. Limitations on Exercise of Options Granted to Independent
Directors.
No Option granted to an Independent Director may be exercised to any extent by
anyone after the first to occur of the following events:
(a) The expiration of twelve (12) months from the date of the
Optionee's death;
- -7-
<PAGE>
(b) the expiration of twelve (12) months from the date of the Optionee's
Termination of Directorship by reason of his permanent and total disability
(within the meaning of Section 22(e)(3) of the Code);
(c) the expiration of three (3) months from the date of the Optionee's
Termination of Directorship for any reason other than such Optionee's death or
his permanent and total disability, unless the Optionee dies within said
three-month period; or
(d) The expiration of ten years from the date the Option was granted.
ARTICLE VI.
AWARD OF RESTRICTED STOCK
6.1. Award of Restricted Stock
(a) The Committee may from time to time, in its absolute discretion:
(i) Select from among the key Employees or consultants (including
Employees or consultants who have previously received other awards under this
Plan) such of them as in its opinion should be awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with this Plan.
(b) The Committee shall establish the purchase price, if any, and
form of payment for Restricted Stock; provided, however, that such
purchase price shall be no less than the par value of the Common Stock to be
purchased, unless otherwise permitted by applicable state law. In all cases,
legal consideration shall be required for each issuance of Restricted Stock.
(c) Upon the selection of a key Employee or consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of
such Restricted Stock as it deems appropriate.
6.2. Restricted Stock Agreement.
Restricted Stock shall be issued only pursuant to a written Restricted Stock
Agreement, which shall be executed by the selected key Employee or consultant
and an authorized officer of the Company and which shall contain such terms
and conditions as the Committee shall determine, consistent with this Plan.
6.3. Consideration.
As consideration for the issuance of Restricted Stock, in addition to payment
of any purchase price, the Restricted Stockholder shall agree, in the written
Restricted Stock Agreement, to remain in the employ of, or to consult for, the
Company or any Subsidiary for a period of at least one year after the
Restricted Stock is issued (or such shorter period as may be fixed in the
Restricted Stock Agreement or by action of the Committee following grant of
the Restricted Stock). Nothing in this Plan or in any Restricted Stock
Agreement hereunder shall confer on any Restricted Stockholder any right to
continue in the employ of, or as a consultant for, the Company or any
Subsidiary or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Restricted Stockholder at any time for any reason whatsoever, with or
without good cause.
6.4. Rights as Stockholders.
Upon delivery of the shares of Restricted Stock to the escrow holder pursuant
to Section 6.7, the Restricted Stockholder shall have, unless otherwise
provided by the Committee, all the rights of a stockholder with respect to
said shares, subject to the restrictions in his Restricted Stock Agreement,
including the right to receive all dividends and other distributions paid or
made with respect to the shares; provided, however, that in the discretion
of the Committee, any extraordinary distributions with respect to the Common
Stock shall be subject to the restrictions set forth in Section 6.5.
6.5. Restriction.
All shares of Restricted Stock issued under this Plan (including any shares
received by holders thereof with respect to shares of Restricted Stock as a
result of stock dividends, stock splits or any other form of recapitalization)
shall, in the terms of each individual Restricted Stock Agreement, be subject
to such restrictions as the Committee shall provide, which restrictions may
include, without limitation, restrictions concerning voting rights and
- -8-
<PAGE>
transferability and restrictions based on duration of employment with the
Company, Company performance and individual performance; provided,
however, that by action taken after the Restricted Stock is issued, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Restricted Stock Agreement. Restricted Stock may not be sold or encumbered
until all restrictions are terminated or expire. Unless provided otherwise by
the Committee, if no consideration was paid by the Restricted Stockholder upon
issuance, a Restricted Stockholder's rights in unvested Restricted Stock shall
lapse upon Termination of Employment or, if applicable, upon Termination of
Consultancy with the Company.
6.6. Repurchase of Restricted Stock.
The Committee shall provide in the terms of each individual Restricted Stock
Agreement that the Company shall have the right to repurchase from the
Restricted Stockholder the Restricted Stock then subject to restrictions under
the Restricted Stock Agreement immediately upon a Termination of Employment
or, if applicable, upon a Termination of Consultancy between the Restricted
Stockholder and the Company, at a cash price per share equal to the price paid
by the Restricted Stockholder for such Restricted Stock; provided,
however, that provision may be made that no such right of repurchase shall
exist in the event of a Termination of Employment or Termination of
Consultancy without cause, or following a change in control of the Company or
because of the Restricted Stockholder's retirement, death or disability, or
otherwise.
6.7. Escrow.
The Secretary of the Company or such other escrow holder as the Committee may
appoint shall retain physical custody of each certificate representing
Restricted Stock until all of the restrictions imposed under the Restricted
Stock Agreement with respect to the shares evidenced by such certificate
expire or shall have been removed.
6.8. Legend.
In order to enforce the restrictions imposed upon shares of Restricted Stock
hereunder, the Committee shall cause a legend or legends to be placed on
certificates representing all shares of Restricted Stock that are still
subject to restrictions under Restricted Stock Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.
ARTICLE VII.
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1. Performance Awards.
Any key Employee or consultant selected by the Committee may be granted one or
more Performance Awards. The value of such Performance Awards may be linked
to the market value, book value, net profits or other measure of the value of
Common Stock or other specific performance criteria determined appropriate by
the Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee, or may be based upon the appreciation in
the market value, book value, net profits or other measure of the value of a
specified number of shares of Common Stock over a fixed period or periods
determined by the Committee. In making such determinations, the Committee
shall consider (among such other factors as it deems relevant in light of the
specific type of award) the contributions, responsibilities and other
compensation of the particular key Employee or consultant.
7.2. Dividend Equivalents.
Any key Employee or consultant selected by the Committee may be granted
Dividend Equivalents based on the dividends declared on Common Stock, to be
credited as of dividend payment dates, during the period between the date an
Option, Deferred Stock or Performance Award is granted, and the date such
Option, Deferred Stock or Performance Award is exercised, vests or expires, as
determined by the Committee. Such Dividend Equivalents shall be converted to
cash or additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee. With
respect to Dividend Equivalents granted with respect to Options intended to be
qualified performance-based compensation for purposes of Section 162(m) of the
Code, such Dividend Equivalents shall be payable regardless of whether such
Option is exercised.
7.3. Stock Payments.
Any key Employee or consultant selected by the Committee may receive Stock
Payments in the manner determined from time to time by the Committee. The
number of shares shall be determined by the Committee and may be based upon
the Fair Market Value, book value, net profits or other measure of the value
of Common Stock or other specific performance criteria determined appropriate
by the Committee, determined on the date such Stock Payment is made or on any
date thereafter.
7.4. Deferred Stock.
Any key Employee or consultant selected by the Committee may be granted an
award of Deferred Stock in the manner determined from time to time by the
Committee. The number of shares of Deferred Stock shall be determined by the
Committee and may be linked to the market value, book value, net profits or
other measure of the value of Common Stock or other specific performance
- -9-
<PAGE>
criteria determined to be appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined by the
Committee. Common Stock underlying a Deferred Stock award will not be issued
until the Deferred Stock award has vested, pursuant to a vesting schedule or
performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Grantee of Deferred Stock shall have no rights as a Company
stockholder with respect to such Deferred Stock until such time as the award
has vested and the Common Stock underlying the award has been issued.
7.5. Performance Award Agreement, Dividend Equivalent Agreement,
Deferred Stock Agreement, Stock Payment Agreement.
Each Performance Award, Dividend Equivalent, award of Deferred Stock and/or
Stock Payment shall be evidenced by a written agreement, which shall be
executed by the Grantee and an authorized Officer of the Company and which
shall contain such terms and conditions as the Committee shall determine,
consistent with this Plan.
7.6. Term.
The term of a Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment shall be set by the Committee in its discretion.
7.7. Exercise Upon Termination of Employment.
A Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment is exercisable or payable only while the Grantee is an Employee or
consultant; provided that the Committee may determine that the Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment may
be exercised or paid subsequent to Termination of Employment or Termination of
Consultancy without cause, or following a change in control of the Company, or
because of the Grantee's retirement, death or disability, or otherwise.
7.8. Payment on Exercise.
Payment of the amount determined under Section 7.1 or 7.2 above shall be in
cash, in Common Stock or a combination of both, as determined by the
Committee. To the extent any payment under this Article VII is effected in
Common Stock, it shall be made subject to satisfaction of all provisions of
Section 5.3.
7.9. Consideration.
In consideration of the granting of a Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment, the Grantee shall agree, in a
written agreement, to remain in the employ of, or to consult for, the Company
or any Subsidiary for a period of at least one year after such Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment is
granted (or such shorter period as may be fixed in such agreement or by action
of the Committee following such grant). Nothing in this Plan or in any
agreement hereunder shall confer on any Grantee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at
any time for any reason whatsoever, with or without good cause.
ARTICLE VIII.
ADMINISTRATION
8.1. Compensation Committee.
The Compensation Committee (or another committee or a subcommittee of the
Board assuming the functions of the Committee under this Plan) shall consist
solely of two or more Independent Directors appointed by and holding office at
the pleasure of the Board, each of whom is both a "non-employee director" as
defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m)
of the Code. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may be
filled by the Board.
8.2. Duties and Powers of Committee.
It shall be the duty of the Committee to conduct the general administration of
this Plan in accordance with its provisions. The Committee shall have the
power to interpret this Plan and the agreements pursuant to which Options,
awards of Restricted Stock or Deferred Stock, Performance Awards, Dividend
Equivalents or Stock Payments are granted or awarded, and to adopt such rules
for the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Options granted to Independent Directors. Any such grant or award
under this Plan need not be the same with respect to each Optionee, Grantee or
Restricted Stockholder. Any such interpretations and rules with respect to
Incentive Stock Options shall be consistent with the provisions of Section 422
of the Code. In its absolute discretion, the Board may at any time and from
time to time exercise any and all rights and duties of the Committee under
this Plan except with respect to matters which under Rule 16b-3 or Section
162(m) of the Code, or any regulations or rules issued thereunder, are
required to be determined in the sole discretion of the Committee.
8.3. Majority Rule; Unanimous Written Consent.
The Committee shall act by a majority of its members in attendance at a
meeting at which a quorum is present or by a memorandum or other written
instrument signed by all members of the Committee.
- -10-
<PAGE>
8.4. Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee may, with the approval of
the Board, employ attorneys, consultants, accountants, appraisers, brokers, or
other persons. The Committee, the Company and the Company's officers and
Directors shall be entitled to rely upon the advice, opinions or valuations of
any such persons. All actions taken and all interpretations and
determinations made by the Committee or the Board in good faith shall be final
and binding upon all Optionees, Grantees, Restricted Stockholders, the Company
and all other interested persons. No members of the Committee or Board shall
be personally liable for any action, determination or interpretation made in
good faith with respect to this Plan, Options, awards of Restricted Stock or
Deferred Stock, Performance Awards, Dividend Equivalents or Stock Payments,
and all members of the Committee and the Board shall be fully protected by the
Company in respect of any such action, determination or interpretation.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
9.1. Not Transferable.
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Dividend Equivalents or Stock Payments under this Plan may not be sold,
pledged, assigned, or transferred in any manner other than by will or the laws
of descent and distribution or pursuant to a QDRO, unless and until such
rights or awards have been exercised, or the shares underlying such rights or
awards have been issued, and all restrictions applicable to such shares have
lapsed. No Option, Restricted Stock award, Deferred Stock award, Performance
Award, Dividend Equivalent or Stock Payment or interest or right therein shall
be liable for the debts, contracts or engagements of the Optionee, Grantee or
Restricted Stockholder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except
to the extent that such disposition is permitted by the preceding sentence.
During the lifetime of the Optionee or Grantee, only he may exercise an Option
or other right or award (or any portion thereof) granted to him under the
Plan, unless it has been disposed of pursuant to a QDRO. After the death of
the Optionee or Grantee, any exercisable portion of an Option or other right
or award may, prior to the time when such portion becomes unexercisable under
the Plan or the applicable Stock Option Agreement or other agreement, be
exercised by his personal representative or by any person empowered to do so
under the deceased Optionee's or Grantee's will or under the then applicable
laws of descent and distribution.
9.2. Amendment, Suspension or Termination of this Plan.
Except as otherwise provided in this Section 9.2, this Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time
or from time to time by the Board or the Committee. However, without approval
of the Company's stockholders given within twelve months before or after the
action by the Board or the Committee, no action of the Board or the Committee
may, except as provided in Section 9.3, increase the limits imposed in Section
2.1 on the maximum number of shares which may be issued under this Plan or
modify the Award Limit, and no action of the Board or the Committee may be
taken that would otherwise require stockholder approval as a matter of
applicable law, regulation or rule. No amendment, suspension or termination
of this Plan shall, without the consent of the holder of Options, Restricted
Stock awards, Deferred Stock awards, Performance Awards, Dividend Equivalents
or Stock Payments, alter or impair any rights or obligations under any
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Dividend Equivalents or Stock Payments theretofore granted or awarded, unless
the award itself otherwise expressly so provides. No Options, Restricted
Stock, Deferred Stock, Performance Awards, Dividend Equivalents or Stock
Payments may be granted or awarded during any period of suspension or after
termination of this Plan, and in no event may any Incentive Stock Option be
granted under this Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved by the
Company's stockholders under Section 9.4.
9.3. Changes in Common Stock or Assets of the Company, Acquisition
or Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 9.3(d), in the event that the Committee (or
the Board, in the case of Options granted to Independent Directors) determines
- -11-
<PAGE>
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company (including, but not limited to,
a Corporate Transaction), or exchange of Common Stock or other securities of
the Company, issuance of warrants or other rights to purchase Common Stock or
other securities of the Company, or other similar corporate transaction or
event, in the Committee's sole discretion (or in the case of Options granted
to Independent Directors, the Board's sole discretion), affects the Common
Stock such that an adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan or with respect to an
Option, Restricted Stock award, Performance Award, Dividend Equivalent,
Deferred Stock award or Stock Payment, then the Committee (or the Board, in
the case of Options granted to Independent Directors) shall, in such manner as
it may deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options, Performance Awards,
Dividend Equivalents or Stock Payments may be granted under the Plan, or which
may be granted as Restricted Stock or Deferred Stock (including, but not
limited to, adjustments of the limitations in Section 2.1 on the maximum
number and kind of shares which may be issued and adjustments of the Award
Limit),
(ii) the number and kind of shares of Common Stock (or other securities or
property) subject to outstanding Options, Performance Awards, Dividend
Equivalents, or Stock Payments, and in the number and kind of shares of
outstanding Restricted Stock or Deferred Stock, and
(iii) the grant or exercise price with respect to any Option, Performance
Award, Dividend Equivalent or Stock Payment.
(b) Subject to Sections 9.3(b)(vii) and 9.3(d), in the event of any
Corporate Transaction or other transaction or event described in Section
9.3(a) or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Committee (or the Board, in the case of Options
granted to Independent Directors) in its discretion is hereby authorized to
take any one or more of the following actions whenever the Committee (or the
Board, in the case of Options granted to Independent Directors) determines
that such action is appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the
Plan or with respect to any option, right or other award under this Plan, to
facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Independent Directors) may provide, either by the terms
of the agreement or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the optionee's request,
for either the purchase of any such Option, Performance Award, Dividend
Equivalent, or Stock Payment, or any Restricted Stock or Deferred Stock for an
amount of cash equal to the amount that could have been attained upon the
exercise of such option, right or award or realization of the optionee's
rights had such option, right or award been currently exercisable or payable
or fully vested or the replacement of such option, right or award with other
rights or property selected by the Committee (or the Board, in the case of
Options granted to Independent Directors) in its sole discretion;
(ii) In its sole and absolute discretion, the Committee (or the Board, in
the case of Options granted to Independent Directors) may provide, either by
the terms of such Option, Performance Award, Dividend Equivalent, or Stock
Payment, or Restricted Stock or Deferred Stock or by action taken prior to the
occurrence of such transaction or event that it cannot be exercised after such
event;
(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the case
of Options granted to Independent Directors) may provide, either by the terms
of such Option, Performance Award, Dividend Equivalent, or Stock Payment, or
Restricted Stock or Deferred Stock or by action taken prior to the occurrence
of such transaction or event, that for a specified period of time prior to
such transaction or event, such option, right or award shall be exercisable as
to all shares covered thereby, notwithstanding anything to the contrary in (i)
Section 4.4 or (ii) the provisions of such Option, Performance Award, Dividend
Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock;
- -12-
<PAGE>
(iv) In its sole and absolute discretion, and on such terms and conditions
as it deems appropriate, the Committee (or the Board, in the case of Options
granted to Independent Directors) may provide, either by the terms of such
Option, Performance Award, Dividend Equivalent, or Stock Payment, or
Restricted Stock or Deferred Stock or by action taken prior to the occurrence
of such transaction or event, that upon such event, such option, right or
award be assumed by the successor or survivor corporation, or a parent or
subsidiary thereof, or shall be substituted for by similar options, rights or
awards covering the stock of the successor or survivor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices;
(v) In its sole and absolute discretion, and on such terms and conditions
as it deems appropriate, the Committee (or the Board, in the case of Options
granted to Independent Directors) may make adjustments in the number and type
of shares of Common Stock (or other securities or property) subject to
outstanding Options, Performance Awards, Dividend Equivalents, or Stock
Payments, and in the number and kind of outstanding Restricted Stock or
Deferred Stock and/or in the terms and conditions of (including the grant or
exercise price), and the criteria included in, outstanding options, rights and
awards and options, rights and awards which may be granted in the future; and
(vi) In its sole and absolute discretion, and on such terms and conditions
as it deems appropriate, the Committee may provide either by the terms of a
Restricted Stock award or Deferred Stock award or by action taken prior to the
occurrence of such event that, for a specified period of time prior to such
event, the restrictions imposed under a Restricted Stock Agreement or a
Deferred Stock Agreement upon some or all shares of Restricted Stock or
Deferred Stock may be terminated, and, in the case of Restricted Stock, some
or all shares of such Restricted Stock may cease to be subject to repurchase
under Section 6.6 or forfeiture under Section 6.5 after such event.
(vii) None of the foregoing discretionary actions taken under this Section
9.3(b) shall be permitted with respect to Options granted under Section 3.4(d)
to Independent Directors to the extent that such discretion would be
inconsistent with the applicable exemptive conditions of Rule 16b-3. In the
event of a Change in Control or a Corporate Transaction, to the extent that
the Board does not have the ability under Rule 16b-3 to take or to refrain
from taking the discretionary actions set forth in Section 9.3(b)(iii) above,
each Option granted to an Independent Director shall be exercisable as to all
shares covered thereby upon such Change in Control or during the five days
immediately preceding the consummation of such Corporate Transaction and
subject to such consummation, notwithstanding anything to the contrary in
Section 4.4 or the vesting schedule of such Options. In the event of a
Corporate Transaction, to the extent that the Board does not have the ability
under Rule 16b-3 to take or to refrain from taking the discretionary actions
set forth in Section 9.3(b)(ii) above, no Option granted to an Independent
Director may be exercised following such Corporate Transaction unless such
Option is, in connection with such Corporate Transaction, either assumed by
the successor or survivor corporation (or parent or subsidiary thereof) or
replaced with a comparable right with respect to shares of the capital stock
of the successor or survivor corporation (or parent or subsidiary thereof).
(a) Subject to Section 9.3(d) and 9.8, the Committee (or the Board,
in the case of Options granted to Independent Directors) may, in its
discretion, include such further provisions and limitations in any Option,
Performance Award, Dividend Equivalent, or Stock Payment, or Restricted Stock
or Deferred Stock agreement or certificate, as it may deem equitable and in
the best interests of the Company.
(b) With respect to Options intended to qualify as performance-based
compensation under Section 162(m), no adjustment or action described in this
Section 9.3 or in any other provision of the Plan shall be authorized to the
extent that such adjustment or action would cause the Plan to violate Section
422(b)(1) of the Code or would cause such Option to fail to so qualify under
Section 162(m), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent
such adjustment or action would result in short-swing profits liability under
Section 16 or violate the exemptive conditions of Rule 16b-3 unless the
Committee (or the Board, in the case of Options granted to Independent
Directors) determines that the Option is not to comply with such exemptive
conditions. The number of shares of Common Stock subject to any option, right
or award shall always be rounded to the next whole number.
9.4. Approval of Plan by Stockholders.
This Plan will be submitted for the approval of the Company's stockholders
within twelve months after the date of the Board's initial adoption of this
Plan. Options, Performance Awards, Dividend Equivalents or Stock Payments may
be granted and Restricted Stock or Deferred Stock may be awarded prior to such
- -13-
<PAGE>
stockholder approval, provided that such Options, Performance Awards, Dividend
Equivalents or Stock Payments shall not be exercisable and such Restricted
Stock or Deferred Stock shall not vest prior to the time when this Plan is
approved by the stockholders, and provided further that if such approval has
not been obtained at the end of said twelve-month period, all Options,
Performance Awards, Dividend Equivalents or Stock Payments previously granted
and all Restricted Stock or Deferred Stock previously awarded under this Plan
shall thereupon be canceled and become null and void.
9.5. Tax Withholding.
The Company shall be entitled to require payment in cash or deduction from
other compensation payable to each Optionee, Grantee or Restricted Stockholder
of any sums required by federal, state or local tax law to be withheld with
respect to the issuance, vesting or exercise of any Option, Restricted Stock,
Deferred Stock, Performance Award, Dividend Equivalent or Stock Payment. The
Committee (or the Board, in the case of Options granted to Independent
Directors) may in its discretion and in satisfaction of the foregoing
requirement allow such Optionee, Grantee or Restricted Stockholder to elect to
have the Company withhold shares of Common Stock otherwise issuable under such
Option or other award (or allow the return of shares of Common Stock) having a
Fair Market Value equal to the sums required to be withheld.
9.6. Loans.
The Committee may, in its discretion, extend one or more loans to key
Employees in connection with the exercise or receipt of an Option, Performance
Award, Dividend Equivalent or Stock Payment granted under this Plan, or the
issuance of Restricted Stock or Deferred Stock awarded under this Plan. The
terms and conditions of any such loan shall be set by the Committee.
9.7. Forfeiture Provisions.
Pursuant to its general authority to determine the terms and conditions
applicable to awards under the Plan, the Committee (or the Board, in the case
of Options granted to Independent Directors) shall have the right (to the
extent consistent with the applicable exemptive conditions of Rule 16b-3) to
provide, in the terms of Options or other awards made under the Plan, or to
require the recipient to agree by separate written instrument, that (i) any
proceeds, gains or other economic benefit actually or constructively received
by the recipient upon any receipt or exercise of the award, or upon the
receipt or resale of any Common Stock underlying such award, must be paid to
the Company, and (ii) the award shall terminate and any unexercised portion of
such award (whether or not vested) shall be forfeited, if (a) a Termination of
Employment, Termination of Consultancy or Termination of Directorship occurs
prior to a specified date, or within a specified time period following receipt
or exercise of the award, or (b) the recipient at any time, or during a
specified time period, engages in any activity in competition with the
Company, or which is inimical, contrary or harmful to the interests of the
Company, as further defined by the Committee (or the Board, as applicable).
9.8. Limitations Applicable to Section 16 Persons and
Performance-Based Compensation.
Notwithstanding any other provision of this Plan, this Plan, and any Option,
Performance Award, Dividend Equivalent or Stock Payment granted, or Restricted
Stock or Deferred Stock awarded, to any individual who is then subject to
Section 16 of the Exchange Act, shall be subject to any additional limitations
set forth in any applicable exemptive rule under Section 16 of the Exchange
Act (including any amendment to Rule 16b-3 of the Exchange Act) that are
requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan, Options, Performance Awards, Dividend
Equivalents, Stock Payments, Restricted Stock and Deferred Stock granted or
awarded hereunder shall be deemed amended to the extent necessary to conform
to such applicable exemptive rule. Furthermore, notwithstanding any other
provision of this Plan, any Option intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be subject
to any additional limitations set forth in Section 162(m) of the Code
(including any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.
9.9. Effect of Plan Upon Options and Compensation Plans.
The adoption of this Plan shall not affect any other compensation or incentive
plans in effect for the Company or any Subsidiary. Nothing in this Plan shall
be construed to limit the right of the Company (i) to establish any other
forms of incentives or compensation for Employees, Directors or Consultants of
the Company or any Subsidiary or (ii) to grant or assume options or other
rights otherwise than under this Plan in connection with any proper corporate
purpose including but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or association.
9.10. Compliance with Laws.
This Plan, the granting and vesting of Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Dividend Equivalents or Stock
Payments under this Plan and the issuance and delivery of shares of Common
Stock and the payment of money under this Plan or under Options, Performance
Awards, Dividend Equivalents or Stock Payments granted or Restricted Stock or
Deferred Stock awarded hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and federal margin requirements) and to such
- -14-
<PAGE>
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law, the
Plan, Options, Restricted Stock awards, Deferred Stock awards, Performance
Awards, Dividend Equivalents or Stock Payments granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
and regulations.
9.11. Titles.
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Plan.
9.12. Governing Law.
This Plan and any agreements hereunder shall be administered, interpreted and
enforced under the internal laws of the State of California without regard to
conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of ResMed Inc. on August 11, 1997 and by the stockholders of ResMed
Inc. on November 10, 1997.
Executed on this 10th day of November 1997.
/S/ WALTER FLICKER
_____________________________
Walter Flicker,
Secretary
- -15-
<PAGE>
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTOR OF
RESMED INC
PROXY FOR 1997 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 10, 1997
The undersigned stockholder of ResMed Inc., a Delaware corporation, hereby
appoints each of Norman W. DeWitt and Walter Flicker, with full power to act
without the other and to appoint his substitute, as Proxy and attorney-in-fact
and hereby authorizes the Proxy to represent and to vote, as designated on the
reverse side, all the shares of voting stock of ResMed Inc., held of record by
the undersigned on September 23, 1997, at the 1997 Annual Meeting of
Stockholders to be held on November 10, 1997, or any adjournment or
postponement thereof.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If this proxy is executed and no
direction is made, this proxy will be voted "FOR" both nominees listed under
proposal 1, "FOR" proposal 2 and as the Proxy deems advisable on such other
matters as may properly come before the meeting.
A majority of the proxies or substitutes who shall be present and shall act at
said meeting or any adjournment or adjournments thereof (or if only one shall
be present and act, then that one) shall have and may exercise all of the
powers of said proxies hereunder.
PLEASE COMPLETE, DATE, SIGN AND RETURN
IN THE ENCLOSED ENVELOPE
(TO BE SIGNED ON REVERSE SIDE)
<PAGE>
[ X ] Please mark your votes as
in this example
FOR all WITHHOLDING AUTHORITY
nominees for only the following nominees
1. Election of
Directors [ ] [ ] Dr Peter C. Farrell
[ ] Dr Gary W. Pace
FOR AGAINST ABSTAIN
2. Approval of 1997 Equity
Participation Plan
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Ratification of KPMG Peat Marwick LLP [ ] [ ] [ ]
as the auditors to examine the financial
statements of the Company for fiscal
year 1998.
The undersigned acknowledge receipt of the Notion of Meeting and Proxy
Statement dated October 6, 1997 and the 1997 Annual Report of the Company.
SIGNATURE(S): _______________________ DATE: ____________________
SIGNATURE(S): _______________________ DATE: ____________________
