SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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CONMED CORPORATION
(Name of Registrant as Specified in Its Charter)
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CONMED CORPORATION
525 French Road
Utica, New York 13502
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of CONMED
Corporation (the "Company") will be held at the offices of the Company at 525
French Road, Utica, New York on Tuesday, May 20, 2003 at 3:30 p.m. (New York
time), for the following purposes:
(1) To elect eight directors to serve on the Company's Board of
Directors;
(2) To ratify the appointment of independent accountants for the
Company for 2003; and
(3) To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
The shareholders of record at the close of business on March 31, 2003, are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
Even if you plan to attend the meeting in person, we request that you
mark, date, sign and return your proxy in the enclosed self-addressed envelope
as soon as possible so that your shares may be certain of being represented and
voted at the meeting. Any proxy given by a shareholder may be revoked by that
shareholder at any time prior to the voting of the proxy.
By Order of the Board of Directors,
Thomas M. Acey
Secretary
April 15, 2003
CONMED CORPORATION
525 French Road
Utica, New York 13502
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 20, 2003
The enclosed proxy is solicited by and on behalf of the Board of Directors
of CONMED Corporation (the "Company") for use at the Annual Meeting of
Shareholders to be held on Tuesday, May 20, 2003, at 3:30 p.m. (New York time),
at the offices of the Company at 525 French Road, Utica, New York, and any
adjournment thereof. The matters to be considered and acted upon at such meeting
are described in the foregoing notice of the meeting and this proxy statement.
This proxy statement, the related form of proxy and the Company's Annual Report
to Shareholders are being mailed on or about April 15, 2003, to all shareholders
of record on March 31, 2003. Shares of the Company's common stock, par value
$.01 per share ("Common Stock") represented in person or by proxy will be voted
as described in this proxy statement or as otherwise specified by the
shareholder. Any proxy given by a shareholder may be revoked by the shareholder
at any time prior to the voting of the proxy by delivering a written notice to
the Secretary of the Company, by executing and delivering a later-dated proxy or
by attending the meeting and voting in person.
The persons named as proxies are Eugene R. Corasanti and Robert E.
Remmell, who are presently directors and, in the case of Mr. Corasanti, an
officer of the Company. The cost of preparing, assembling and mailing the proxy,
this proxy statement and other material enclosed, and all clerical and other
expenses of solicitations, will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, directors, officers and employees
of the Company and its subsidiaries may solicit proxies by telephone, telegram
or personal interview. The Company also will request brokerage houses and other
custodians, nominees and fiduciaries to forward soliciting material to the
beneficial owners of Common Stock held of record by such parties and will
reimburse such parties for their expenses in forwarding soliciting material.
Votes at the 2003 Annual Meeting will be tabulated by a representative of
Registrar and Transfer Company, which has been appointed by the Company's Board
of Directors to serve as inspector of election.
VOTING RIGHTS
The holders of record of the 28,907,933 shares of Common Stock outstanding
on March 31, 2003 will be entitled to one vote for each share held on all
matters coming before the meeting. The holders of record of a majority of the
outstanding shares of Common Stock present in person or by proxy will constitute
a quorum for the transaction of business at the meeting. Shareholders are not
entitled to cumulative voting rights. Under the rules of the Securities and
Exchange Commission, or the SEC, boxes and a designated blank space are provided
on the proxy card for shareholders if they wish either to abstain on one or more
of the proposals or to withhold authority to vote for one or more nominees for
director. In accordance with New York State law, such abstentions are not
counted in determining the votes cast at the meeting. With respect to Proposal
(1), the director nominees who receive the greatest number of votes at the
meeting will be elected to the Board of Directors of the Company. Votes against,
and votes withheld in respect of, a candidate have no legal effect. Proposal (2)
requires the affirmative vote of the holders of a majority of the votes cast at
the meeting in order to be approved by the shareholders.
When properly executed, a proxy will be voted as specified by the
shareholder. If no choice is specified by the shareholder, a proxy will be voted
"for" all portions of items (1) and (2) and in the proxies' discretion on any
other matters coming before the meeting.
Under the rules of the New York Stock Exchange, Inc., which effectively
govern the voting by any brokerage firm holding shares registered in its name or
in the name of its nominee on behalf of a beneficial owner, Proposals (1) and
(2) are considered "discretionary" items upon which brokerage firms may vote in
their discretion on behalf of their clients if such clients have not furnished
voting instructions within ten days prior to the Annual Meeting.
I. PROPOSALS TO BE SUBMITTED AT THE SHAREHOLDERS MEETING
There are two proposals expected to be submitted for shareholder approval.
The first concerns the election of directors. The second concerns ratifying the
appointment of the Company's independent auditors. These proposals are more
fully described below.
PROPOSAL ONE: ELECTION OF DIRECTORS
At the meeting, eight directors are to be elected to serve on the
Company's Board of Directors. The shares represented by proxies will be voted as
specified by the shareholder. If the shareholder does not specify his or her
choice, the shares will be voted in favor of the election of the nominees listed
on the proxy card, except that in the event any nominee should not continue to
be available for election, such proxies will be voted for the election of such
other persons as the Board of Directors may recommend. The Company does not
presently contemplate that any of the nominees will become unavailable for
election for any reason. The director nominees who receive the greatest number
of votes at the meeting will be elected to the Board of Directors of the
Company. Votes against, and votes withheld in respect of, a candidate have no
legal effect. Shareholders are not entitled to cumulative voting rights.
The Board of Directors presently consists of seven directors. Directors
hold office for terms expiring at the next annual meeting of shareholders and
until their successors are duly elected and qualified. Each of the nominees
proposed for election at the Annual Meeting is presently a member of the Board
of Directors and has been elected by the shareholders, with the exception of Ms.
Golden, who is not a member of the Board of Directors.
The following table sets forth certain information regarding the members
of, and nominees for, the Board of Directors:
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NOMINEES FOR ELECTION AT THE 2002 ANNUAL MEETING
Served As
Director Principal Occupation or
Name Age Since Position with the Company
---- --- ----- -------------------------
Eugene R. Corasanti 72 1970 Chairman of the Board of Directors and Chief
Executive Officer of the Company
Robert E. Remmell 72 1983 Partner of Steates Remmell Steates & Dziekan
(Attorneys); Director of the Company
Bruce F. Daniels 68 1992 Executive, retired; former Controller of the
international division of Chicago Pneumatic Tool
Company; Director of the Company
William D. Matthews 68 1997 Retired Chairman of the Board of Directors and
retired Chief Executive Officer of Oneida Ltd.
(NYSE:"OCQ"), director of Oneida Financial Corporation
(NASD:"ONFC") anda former director of Coyne Textile Services;
Director of the Company
Stuart J. Schwartz 66 1998 Physician, retired; Director of the Company
Joseph J. Corasanti 39 1994 President and Chief Operating Officer of the Company;
Director of the Company; Director of II-VI, Inc.
(NASD:"IIVI")
Stephen M. Mandia 38 2002 President of East Coast Olive Oil Corp.; Director of
the Company
Jo Ann Golden 55 N/A Partner of Dermody, Burke and Browne, CPA, PLLC
(accountants)
More information concerning the directors and nominees is set forth below
in Section II.A (1).
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL TWO: INDEPENDENT PUBLIC ACCOUNTANTS
The independent accountants for the Company have been
PricewaterhouseCoopers LLP since 1982. The Audit Committee recommended to the
Board of Directors that PricewaterhouseCoopers LLP be nominated as independent
accountants for 2003, and the Board has approved the recommendation.
Unless otherwise specified, shares represented by proxies will be voted
for the ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants for 2003. Neither our certificate of incorporation nor
our by-laws require that the shareholders ratify the appointment of
PricewaterhouseCoopers LLP as our independent accountants. We are doing so
because we believe it is a matter of good corporate governance. If the
shareholders do not ratify the appointment, the Board of Directors and the Audit
Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP,
but may elect to retain them. Even if the appointment is ratified, the Board of
Directors and the Audit Committee in their discretion may change the appointment
at any time during the year if they determine that such change would be in the
best interests of the Company and its shareholders.
Representatives of PricewaterhouseCoopers LLP are expected to be present
at the meeting. Such representatives will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
The affirmative vote of the holders of a majority of votes cast at the
meeting is necessary for the ratification of the appointment of
PricewaterhouseCoopers LLP as independent accountants for the Company for 2003.
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The Board of Directors recommends a vote FOR this proposal.
OTHER BUSINESS
Management knows of no other business which will be presented for
consideration at the Annual Meeting, but should any other matters be brought
before the meeting, it is intended that the persons named in the accompanying
proxy will vote such proxy at their discretion.
SHAREHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
Any shareholder desiring to present a proposal to the shareholders at the
2004 Annual Meeting, which currently is expected to be scheduled on or about May
18, 2004, and who desires that such proposal be included in the Company's proxy
statement and proxy card relating to that meeting, must transmit such proposal
to the Company so that it is received by the Company at its principal executive
offices on or before December 17, 2003. All such proposals should be in
compliance with applicable SEC regulations. The Company's Nominating and
Corporate Governance Committee will consider nominees for election of directors
by shareholders if the following procedures are followed. Shareholders wishing
to propose matters for consideration at the 2004 Annual Meeting or to propose
nominees for election as directors at the 2004 Annual Meeting must follow
specified advance notice procedures contained in the Company's by-laws, a copy
of which is available on request to the Secretary of the Company, c/o CONMED
Corporation, 525 French Road, Utica, New York 13502 (Telephone (315) 624-3000).
As of the date of this proxy statement, shareholder proposals, including
director nominee proposals, must comply with the conditions set forth in Section
1.13 of the Company's by-laws and to be considered timely, notice of a proposal
must be received by the Company between February 18, 2004 and March 17, 2004.
II. CORPORATE GOVERNANCE MATTERS
A. DIRECTORS, EXECUTIVE OFFICERS, SENIOR OFFICERS AND NOMINEE FOR THE
BOARD OF DIRECTORS
1. Directors and Nominee for Director
EUGENE R. CORASANTI (age 72) has served as Chairman of the Board of the
Company since its incorporation in 1970. Mr. Corasanti is also the Company's
Chief Executive Officer. Prior to that time he was an independent public
accountant. Mr. Corasanti holds a B.B.A. degree in Accounting from Niagara
University. Eugene R. Corasanti's son, Joseph J. Corasanti, is President and
Chief Operating Officer and a Director of the Company.
JOSEPH J. CORASANTI (age 39) has served as President and Chief Operating
Officer of the Company since August 1999 and as a Director of the Company since
May 1994. Mr. Corasanti is also a member of the Board of Directors of II-VI,
Inc. (NASD: "IIVI"), a manufacturer of optical and electro-optical components
and devices for infrared, e-ray, gamma-ray, telecommunication and other
applications, where Mr. Corasanti is a member of the audit committee. He also
served as General Counsel and Vice President-Legal Affairs of the Company from
March 1993 to August 1998 and Executive Vice-President/General Manager of the
Company from August 1998 to August 1999. Prior to that time he was an Associate
Attorney with the law firm of Morgan, Wenzel & McNicholas, Los Angeles,
California from 1990 to March 1993. Mr. Corasanti holds a B.A. degree in
Political Science
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from Hobart College and a J.D. degree from Whittier College School of Law.
Joseph J. Corasanti is the son of Eugene R. Corasanti, Chairman and Chief
Executive Officer of the Company.
BRUCE F. DANIELS (age 68) has served as a Director of the Company since
August 1992. Mr. Daniels is a retired executive. From August 1974 to June 1997,
Mr. Daniels held various executive positions, including a position as Controller
with Chicago Pneumatic Tool Company. Mr. Daniels holds a B.S. degree in Business
from Utica College.
JO ANN GOLDEN (age 55) was nominated to the Board of Directors upon the
recommendation of the Nominating and Corporate Governance Committee, which
nomination was approved by the full Board of Directors in February 2003. Ms.
Golden is a certified public accountant and the managing partner of the New
Hartford, New York office of Dermody Burke and Brown, CPA, PLLC, an accounting
firm. Ms. Golden is also the current President of the New York State Society of
Certified Public Accountants (the "State Society"), having served previously as
the Secretary and Vice President of the State Society. In addition, Ms. Golden
is the incoming president of the the State Society's Foundation for Accounting
Education. Ms. Golden is also a member of the governing Council of the American
Institute of Certified Public Accountants ("AICPA"), and was a member of the
AIPCPA's Global Credential Survey Task Force in 2001. Ms. Golden holds a B.A.
from the State University College at New Paltz, and a B.S. in Accounting from
the Utica College of Syracuse University.
STEPHEN M. MANDIA (age 38) was appointed as a Director of the Company in
July 2002. Mr. Mandia has been the President and Chief Executive Officer of East
Coast Olive Oil Corp. since 1991. Mr. Mandia also possesses financial ownership
and sits on the board of Gem Packing Corp., Utica Plastics, LLC, ECOO Realty
Corp., Olive Transport Corp. and Northside Gourmet Corp., which are all
affiliated with East Coast Olive Oil Corp. Mr. Mandia holds a B.S. Degree from
Bentley College, located in Waltham, Massachusetts, having also undertaken
undergraduate studies at Richmond College in London.
WILLIAM D. MATTHEWS (age 68) has served as a Director of the Company since
August 1997. From 1986 until retiring from the positions in 1999, Mr. Matthews
was the Chairman of the Board and the Chief Executive Officer of Oneida Ltd.
(NYSE:"OCQ"). Mr. Matthews is a director and a member of the audit committee of
Oneida Financial Corporation (NASD:"ONFC")) and a former director of Coyne
Textile Services. Mr. Matthews holds a B.A. degree from Union College and an
L.L.B. degree from Cornell University School of Law. Following law school, Mr.
Matthews held a position with the Division of Corporation Finance of the
Securities and Exchange Commission.
ROBERT E. REMMELL (age 72) has served as a Director since June 1983. Mr.
Remmell also served as a non-employee Assistant Secretary of the Company and as
a non-employee officer of several of the Company's subsidiaries from June 1983,
until March 1, 2000, when he resigned from his position as Assistant Secretary
of the Company, and from the positions he had held in the Company's
subsidiaries. Mr. Remmell has been a partner since January 1961 of Steates
Remmell Steates & Dziekan, Utica, New York, which has served as counsel to the
Company. Mr. Remmell holds a B.A. degree from Utica College and an L.L.B. from
Syracuse University School of Law.
STUART J. SCHWARTZ (age 66) has served as a Director of the Company since
May 1998. Dr. Schwartz is a retired physician. From 1969 to December 1997 he was
engaged in private practice as a urologist. Dr. Schwartz holds a B.A. degree
from Cornell University and an M.D. degree from SUNY Upstate Medical College,
Syracuse.
- 5 -
2. Executive Officers and Officers
WILLIAM W. ABRAHAM (age 71) joined the Company in May 1977 as General
Manager. He served as the Company's Vice President-Manufacturing and
Engineering since June 1983. In November of 1989 he was named Executive Vice
President and in March 1993, he was named Senior Vice President of the Company.
Mr. Abraham holds a B.S. degree in Industrial Management from Utica College.
THOMAS M. ACEY (age 56) has been employed by the Company since August 1980
and has served as the Company's Treasurer since August 1988 and as the Company's
Secretary since January 1993. Mr. Acey holds a B.S. degree in Public Accounting
from Utica College and prior to joining the Company was employed by the
certified public accounting firm of Tartaglia & Benzo in Utica, New York.
DANIEL S. JONAS (age 39) joined the Company as General Counsel in August
1998 and in addition became the Vice President-Legal Affairs in March 1999. In
September 1999, Mr. Jonas assumed responsibility for certain of the Company's
Regulatory Affairs and Quality Assurance. In March 2003, Mr. Jonas also became
responsible for the administration of the Company's ethics policy. Prior to his
employment with the Company he was a partner with the law firm of Harter,
Secrest & Emery, LLP in Syracuse from January 1998 to August 1998, having joined
the firm as an Associate Attorney in 1995. Prior to that he was an Associate
Attorney at Miller, Alfano & Raspanti, P.C. in Philadelphia from 1992 to 1995 as
well as an adjunct professor of law at the University of Pennsylvania Law School
from 1991 to 1995. Mr. Jonas holds an A.B. degree from Brown University and a
J.D. from the University of Pennsylvania Law School.
LUKE A. POMILIO (age 38) joined the Company as Controller in September
1995. In addition, in September 1999, Mr. Pomilio became a Vice President with
responsibility for certain of the Company's manufacturing and research and
development activities. Prior to his employment with the Company, Mr. Pomilio
served for two years as Controller of Rome Cable Corporation, a wire and cable
manufacturer. He was also employed as a certified public accountant for seven
years with Price Waterhouse LLP where he served most recently as an audit
manager. Mr. Pomilio graduated with a B.S. degree in Accounting and Law from
Clarkson University.
ROBERT D. SHALLISH, JR. (age 54) joined the Company as Chief Financial
Officer and Vice President-Finance in December 1989 and has also served as an
Assistant Secretary since March 1995. Prior to this he was employed as
Controller of Genigraphics Corporation in Syracuse, New York since 1984. He was
employed by Price Waterhouse LLP as a certified public accountant and senior
manager from 1972 through 1984. Mr. Shallish graduated with a B.A. degree in
Economics from Hamilton College and holds a Master's degree in Accounting from
Syracuse University.
EUGENE T. STARR (age 57) joined the company as President of CONMED
Electrosurgery in July 2001. Prior to his employment with the Company, Mr. Starr
served as President of TYCO Healthcare Group, Canada from October 1999 (when
TYCO acquired U.S. Surgical Corporation) to January 2001. Before his position
with TYCO, Mr. Starr spent 17 years with U.S. Surgical, the most recent being
Vice President and General Manager of Auto Suture Co., U.S. Surgical's Canadian
subsidiary. Mr. Starr holds a B.S. degree in Business Administration from the
University of Charleston.
JOHN J. STOTTS (age 46) joined the Company as Vice President-Marketing and
Sales for Patient Care in July 1993 and became Vice President-Marketing in
December 1996. In January 2000, Mr. Stotts became Vice President - Marketing and
Sales for Patient Care Products, a position now referred to as Vice President -
Patient Care. Prior to his employment with the Company, Mr. Stotts served as
Director of Marketing and Sales for Medtronic Andover Medical, Inc. Mr. Stotts
holds a B.A. degree in Business Administration from Ohio University.
- 6 -
FRANK R. WILLIAMS (age 54) joined the Company in 1974 as Sales Manager and
Director of Marketing and became Vice President-Marketing and Sales in June
1983. In September 1989, Mr. Williams was named Vice President-Business
Development. In November 1995, he was named Vice President-Technology Assessment
and in January 2000, was also named Vice President-Research and Development and
Marketing for Minimally Invasive Surgical Products, a position now known as Vice
President-Endoscopy. Mr. Williams graduated with a B.A. degree from Hartwick
College in 1970 as a biology major and did his graduate study in Human Anatomy
at the University of Rochester College of Medicine.
GERALD G. WOODARD (age 55) joined the Company as President of Linvatec
Corporation, a wholly-owned subsidiary of the Company, in May 2000. Prior to his
employment with the Company, Mr. Woodard served as the President of Elekta
Holdings, Inc. from March 1998 to May 2000. Prior to holding this position Mr.
Woodard was the President of the Monitoring and Information Systems Division of
Marquette Medical Systems from November 1995 to March 1998. Mr. Woodard holds a
B.G.S. degree from Indiana University.
The Company's Directors are elected at each annual meeting of shareholders
and serve until the next annual meeting and until their successors are duly
elected and qualified. Eugene R. Corasanti's employment is subject to an
employment agreement which had been scheduled to expire on December 31, 2001,
and was extended until December 31, 2006, as further described below. Joseph J.
Corasanti's employment is subject to an employment agreement which expires on
December 31, 2004. The Company's other officers are appointed by the Board of
Directors and, except as set forth in the following section, hold office at the
will of the Board of Directors.
C. COMPENSATORY ARRANGEMENTS AND RELATED TRANSACTIONS
The Company has outstanding agreements with certain executive employees of
the Company selected by the Board of Directors. These agreements provide that
the individuals will not, in the event of the commencement of steps to effect a
Change of Control (defined generally as an acquisition of 20% or more of the
outstanding voting shares or a change in a majority of the Board of Directors),
voluntarily leave the employ of the Company until a third person has terminated
his or her efforts to effect a Change of Control or until a Change of Control
has occurred.
In the event of a termination of the individual's employment within two
years and six months of a Change of Control, the executive is entitled to three
years' compensation, including bonus, retirement benefits equal to the benefits
he would have received had he completed three additional years of employment,
continuation of all life, accident, health, savings, or other fringe benefits
for three years, as well as any excise or other tax that may become due as a
result of such Change of Control.
The Board of Directors of the Company may terminate any such agreement
upon three years prior written notice. The Board of Directors may also, at any
time, terminate an agreement with respect to any executive employee who is
affiliated with any group seeking or accomplishing a Change of Control. Messrs.
E. Corasanti, J. Corasanti, Abraham, Woodard and Starr are each a party to such
an agreement, as are certain other officers of the Company and/or its
subsidiaries.
D. MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The full Board of Directors met six times in person and voted by
unanimous consent once during 2002. Each incumbent director attended or acted
upon 100% of the total 2002 board meetings or unanimous consents and committee
meetings or unanimous consents held or acted upon during periods that he was a
member of the Board or such committees.
- 7 -
The Company's Board of Directors has four standing committees: the Audit
Committee, the Stock Option Committee, the Nominating and Corporate Governance
Committee and the Compensation Committee.
The Audit Committee presently consists of Messrs. Daniels, Matthews and
Mandia. The Audit Committee is charged with evaluating accounting and control
procedures and practices of the Company and reporting on such matters to the
Board of Directors. The Audit Committee also serves as the direct liaison with
the Company's independent public accountants and recommends the engagement or
discharge of such auditors. The Audit Committee met four times during 2002. The
current Audit Committee Charter is attached as an appendix to this proxy
statement.
The Stock Option Committee presently consists of Messrs. Daniels and
Remmell and Dr. Schwartz. The Stock Option Committee administers the Company's
employee stock option plans and has authority to grant options to officers and
key employees, as designated by the Stock Option Committee, and to determine the
terms of such options in accordance with the employee stock option plans. The
Stock Option Committee did not meet in person and acted by unanimous written
consent on resolutions seven times during 2002.
The Compensation Committee presently consists of Messrs. Matthews, Daniels
and Mandia. The Compensation Committee is charged with reviewing and
establishing levels of salary, bonuses, benefits and other compensation for the
Company's officers. The Compensation Committee met once during 2002.
The Nominating and Corporate Governance Committee presently consists of
Messrs. Daniels and Mandia and Dr. Schwartz. The Nominating and Corporate
Governance committee is responsible for recommending individuals to the full
Board of Directors for nominations as members of the Board of Directors, and for
developing and recommending to the full Board of Directors a set of corporate
governance principles. The Nominating and Corporate Governance Committee will
consider, but is not obligated to accept, shareholder recommendations for
individuals to be nominated provided that such recommendations are submitted in
writing to the Company's General Counsel within the time frame for Shareholder
Proposals for the Annual Meeting. The Nominating and Corporate Governance
Committee was formed in 2002, and held only informal meetings during 2002.
Each Director was paid $1,000 for each of the six meetings of the full
Board of Directors personally attended and Messrs. Daniels, Matthews and Remmell
and Dr. Schwartz, as non-employee directors, were paid $3,000 for each of the
four fiscal quarters of service on the Board of Directors. Each member of the
Audit Committee was paid $500 for each meeting of the Audit Committee attended,
and each director is paid $500 for each committee on which he serves. In
addition, under the Company's Stock Option Plan for Non-Employee Directors, each
non-employee director (Messrs. Daniels, Matthews and Remmell and Dr. Schwartz in
1999), (Messrs. Daniels, Matthews, Remmell and Dr. Schwartz in 2001), (Messr.
Daniels, Matthews, Remmell, Mandia and Dr. Schwartz in 2002) re-elected or
continuing as a director, receives 4,500 options with an option price equal to
the fair market value of the Company's Common Stock on the business day
following each annual meeting of the shareholders. In addition, Mr. Mandia was
granted an initial award of options relating to 4,500 shares of common stock
upon being appointed to the Board of Directors.
- 8 -
The Board of Directors has the following committees, with the membership
of each committee as indicated:
Board of Directors Compensation Committee Stock Option Committee Audit Committee
------------------ ---------------------- ---------------------- ---------------
Eugene R. Corasanti, William D. Matthews, Robert E. Remmell, Bruce F. Daniels,
Chairman Chairman Chairman Chairman
Joseph J. Corasanti Bruce F. Daniels Bruce F. Daniels William D. Matthews
Bruce F. Daniels Stephen M. Mandia Stuart J. Schwartz Stephen M. Mandia
William D. Matthews
Robert E. Remmell
Stuart J. Schwartz
Stephen Mandia
Nominating and
Corporate Governance
Committee
---------
Bruce F. Daniels,
Chairman
Stuart J. Schwartz
Stephen M. Mandia
D. AUDIT COMMITTEE REPORT
The role of the Audit Committee is to assist the Board of Directors in its
oversight of the Company's financial reporting process. The Board of Directors,
in its business judgment, has determined that all members of the Audit Committee
are "independent", as required by applicable listing standards of NASDAQ, in
that no member of the Audit Committee has received any payments, other than
compensation for Board services from the Company. Although not currently engaged
professionally in the practice of auditing or accounting, the Audit Committee
and Board of Directors have determined that Messrs. Daniels and Matthews qualify
as "audit committee financial experts" within the meaning of Section 407 of the
Sarbanes-Oxley Act of 2002 and the implementing regulations. The Audit Committee
operates pursuant to a Charter that was last amended and restated by the Board
of Directors on March 17, 2003. A copy of the amended and restated charter is
attached to this proxy statement.
Management is responsible for CONMED's internal controls, financial
reporting process and compliance with laws and regulations. The independent
accountants are responsible for performing an independent audit of CONMED's
consolidated financial statements in accordance with generally accepted auditing
standards and to issue a report thereon. The Audit Committee's responsibility is
to monitor and oversee these processes, as well as to attend to the matters set
forth in the amended and restated charter.
In this context, the Audit Committee has met and held discussions with
management and with the independent auditors, including executive meetings
without management present. Management represented to the Audit Committee that
the Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee has reviewed and
discussed the consolidated financial statements with management and the
independent accountants. The Audit Committee discussed with the independent
auditors matters required to be discussed by Statement on Auditing Standards No.
61 (Communication with Audit Committees).
CONMED's independent auditors also provided to the Audit Committee the
written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the Audit
Committee discussed with the independent accountants their independence. In this
regard, the Audit Committee has determined that the provision of non-audit
- 9 -
services by the independent auditors is compatible with the auditor's
independence in light of the nature and extent of permissible non-audit services
provided to the Company.
Members of the Audit Committee rely without independent verification on
the information provided to them and on the representations made by management
and the independent accountants. Accordingly, the Audit Committee's oversight
does not provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles or
appropriate internal control and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, the Audit
Committee's considerations and discussions referred to above do not assure that
the audit of the Company's financial statements has been carried out in
accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that the Company's auditors are in fact "independent".
Based upon the Audit Committee's review and discussions referred to above,
and subject to the limitations on the role and responsibilities of the Audit
Committee referred to above and in the Charter, the Audit Committee recommended
that the Board of Directors include the Company's audited consolidated financial
statements in CONMED's Annual Report on Form 10-K for the year ended December
31, 2002 filed with the SEC.
Submitted by the Audit Committee,
Bruce Daniels (Chairman)
William Matthews
Stephen Mandia
E. ETHICS DISCLOSURE
Although Section 406 of the Sarbanes-Oxley Act of 2002 is not yet in
effect, the Company has adopted, as of March 31, 2003, an ethics program which
applies to all employees, including senior financial officers and the principal
executive officer. The ethics program is generally available through the Conmed
Corporation web site, (www.Conmed.com) and is to be administered by the
Company's General Counsel. The Program codifies standards reasonably necessary
to deter wrongdoing and to promote honest and ethical conduct, avoidance of
conflicts of interest, full, fair, accurate, timely and understandable
disclosure, compliance with laws, prompt internal reporting of code violations
and accountability for adherence to the code and permits anonymous reporting by
employees to an independent third-party, which will alert the Chair of Audit
Committee of Board of Directors if and when it receives any anonymous reports.
F. AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for professional
services rendered for the audit of the Company's annual financial statements for
the year ended December 31, 2002 and for the reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-Q for that year were
$258,500.
Financial Information Systems Design and Implementation Fees
There were no fees billed by PricewaterhouseCoopers LLP for professional
services rendered for information technology services relating to financial
information systems design and implementation for the year ended December 31,
2002.
- 10 -
All Other Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for services
rendered to the Company, other than the services described above under "Audit
Fees" for the year ended December 31, 2002 were $313,320, all of which
related to tax returns and tax consulting matters.
G. COMPENSATION OF EXECUTIVE OFFICERS
The following information relates to all plan and non-plan compensation
awarded to, earned by, or paid to (i) Eugene R. Corasanti, the Chairman of the
Board of Directors and Chief Executive Officer of the Company (the "CEO") and
(ii) the Company's four most highly compensated executive officers, other than
the CEO, who were serving as executive officers of the Company at December 31,
2002 (the CEO and such officers, the "Named Executive Officers").
The following information does not reflect any compensation awarded to or
earned by the Named Executive Officers subsequent to December 31, 2002, except
as may otherwise be indicated. Any compensation awarded to or earned by the
Named Executive Officers during 2002 will be reported in the proxy statement for
the Company's 2003 Annual Meeting of Shareholders, unless such compensation has
been previously reported.
Summary Compensation Table
The following table sets forth for the Named Executive Officers for each
of the last three fiscal years: (i) the name and principal position of the
executive officer (column (a)); (ii) the year covered (column (b)); (iii) annual
compensation (columns (c), (d) and (e)), including: (A) base salary earned
during the year covered (column (c)); (B) bonus earned during the year covered
(column (d)); and (C) other annual compensation not properly categorized as
salary or bonus (column (e)); (iv) long-term compensation, including the sum of
the number of stock options granted (column (f)); and all other compensation
(column (g)).
Summary Compensation Table
- -------------------------------------------------------------------------------------------------------------------
Long-Term All
Compensation Other
Annual Compensation Awards Compensation(4)
- -------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (f) (e) (g)
- -------------------------------------------------------------------------------------------------------------------
Other Annual
Name Fiscal Salary Bonus(1) Options(2) Compensation(3)
Principal Position Year ($) ($) (#) ($) ($)
- -------------------------------------------------------------------------------------------------------------------
Eugene R. Corasanti, 2002 361,928 0 112,500 448,293 6,566
Chief Executive Officer, 2001 344,366 52,502 112,500 407,539 6,000
Chairman of the Board 2000 337,335 0 112,500 370,490 --
- -------------------------------------------------------------------------------------------------------------------
Joseph J. Corasanti, 2002 222,590 0 112,500 121,000 13,046
President, Chief 2001 221,432 34,655 154,687 110,000 9,062
Operating Officer 2000 208,895 0 112,500 100,000 --
- -------------------------------------------------------------------------------------------------------------------
William W. Abraham, 2002 192,137 0 10,000 12,341
Senior Vice President 2001 184,185 27,986 15,000 -- 10,820
2000 183,807 0 15,000 -- --
- -------------------------------------------------------------------------------------------------------------------
Gerald G. Woodard, 2002 221,169 0 10,000 12,700
President of Linvatec(5) 2001 209,153 0 15,000 -- 114,441
2000 118,794 0 52,500 -- --
- -------------------------------------------------------------------------------------------------------------------
Eugene T. Starr(6) 2002 205,156 0 10,000 -- 10,300
President of CONMED 2001 90,000 30,518 52,500 -- 32,450
Electrosurgery 2000 N/A
- -------------------------------------------------------------------------------------------------------------------
- 11 -
================================================================================
(1) Annual Compensation - Bonus includes cash bonuses in year earned even if
paid after the fiscal year end.
(2) Options figures are adjusted to reflected 3-for-2 stock dividend as of
September 7, 2001.
(3) Amounts represent deferred compensation and accrued interest for Messrs.
E. and J. Corasanti. See the discussion of the employment agreements for
Messrs. E. and J. Corasanti, below.
(4) All Other Compensation consists of company contributions, if any, to
employee 401(k) plan accounts on the same terms offered to all other
employees, as well as certain other reimbursements (for example, for
non-recurring relocation expense for Mr. Woodard) and other payments.
Information for these amounts for 2000 is not reported separately as it is
for 2002 and 2001.
(5) Mr. Woodard was hired effective May 30, 2000.
(6) Mr. Starr was hired effective July 9, 2001.
Eugene R. Corasanti has a five-year employment agreement (the "CEO
Employment Agreement") with the Company, which originally extended through
December 31, 2001, and was extended through December 31, 2006. The CEO
Employment Agreement provides for Mr. Corasanti to serve as chief executive
officer of the Company for five years at an annual salary not less than
$300,000, as determined by the Board of Directors. Mr. Corasanti also receives
deferred compensation of $100,000 per year (which the Board increased to
$200,000 for 2000 and subsequent years) with interest at 10% per annum, payable
in 120 equal monthly installments upon his retirement or to his beneficiaries at
death, and is entitled to participate in the Company's employee stock option
plan and pension and other employee benefit plans and such bonus or other
compensatory arrangements as may be determined by the Board of Directors. In the
event that the Board of Directors should fail to re-elect Mr. Corasanti as chief
executive officer or should terminate his employment for reasons other than just
cause, Mr. Corasanti will become entitled to receive the greater of three years'
base annual salary or the balance of his base annual salary plus the average of
the bonuses, deferred compensation and incentive compensation awarded to Mr.
Corasanti during the three years prior to such termination for the five-term
employment term, and shall continue to receive other employment benefits, for
the greater of three years or the balance of the CEO Employment Agreement's
five-year term. In the event of Mr. Corasanti's death or disability, Mr.
Corasanti or his estate or beneficiaries will be entitled to receive 100% of his
base annual salary and other employment benefits (other than deferred
compensation) for the balance of the CEO Employment Agreement's term. If, during
the term of Mr. Corasanti's employment under the Employment Agreement and within
two years after a Change in Control, his employment with the Company is
terminated by the Company, other than for Cause or by him for Good Reason (as
such capitalized terms are defined in the Employment Agreement), Mr. Corasanti
will be entitled to receive (a) a lump sum payment equal to three times the sum
of (i) his base salary on the date of such termination or his base salary in
effect immediately prior to the Change in Control, whichever is higher, plus
(ii) the average of the bonuses, deferred compensation and incentive
compensation awarded to Mr. Corasanti during the three years prior to such
termination; (b) continued coverage under the benefit plans in which he
participates for a period of two years from the date of such early termination;
(c) a lump sum payment equal to the aggregate amount
- 12 -
credited to his deferred compensation account; and (d) awards for the calendar
year of such termination under incentive plans maintained by the Company as
though any performance or objective criteria used in determining such awards
were satisfied. The Board of Directors determined that Mr. Corasanti's base
salary would be $370,000 for 2002.
Joseph J. Corasanti has a five-year employment agreement (the "COO
Employment Agreement") with the Company, extending through December 31, 2004.
The COO Employment Agreement provides for Mr. Corasanti to serve as chief
operating officer of the Company for five years at an annual salary not less
than $200,000, as determined by the Board of Directors. Mr. Corasanti also
receives deferred compensation of $100,000 per year with interest at 10% per
annum, payable in 120 equal monthly installments, at his option, upon his
departure or retirement or to his beneficiaries at death, and is entitled to
participate in the Company's employee stock option plan and pension and other
employee benefit plans and such bonus or other compensatory arrangements as may
be determined by the Board of Directors. In the event that the Board of
Directors should fail to re-elect Mr. Corasanti as chief operating officer or
should terminate his employment for reasons other than just cause, Mr. Corasanti
will become entitled to receive the greater of three years' base annual salary
or the balance of his base annual salary plus the average of the bonuses,
deferred compensation and incentive compensation awarded to Mr. Corasanti during
the three years prior to such termination for the five-term employment term, and
shall continue to receive other employment benefits, for the greater of three
years or the balance of the COO Employment Agreement's five-year term. In the
event of Mr. Corasanti's death or disability, Mr. Corasanti or his estate or
beneficiaries will be entitled to receive 100% of his base annual salary and
other employment benefits (other than deferred compensation) for the balance of
the COO Employment Agreement's term. If, during the term of Mr. Corasanti's
employment under the COO Employment Agreement and within two years after a
Change in Control, his employment with the Company is terminated by the Company,
other than for Cause or by him for Good Reason (as such capitalized terms are
defined in the Employment Agreement), Mr. Corasanti will be entitled to receive
(a) a lump sum payment equal to three times the sum of (i) his base salary on
the date of such termination or his base salary in effect immediately prior to
the Change in Control, whichever is higher, plus (ii) the average of the
bonuses, deferred compensation and incentive compensation awarded to Mr.
Corasanti during the three years prior to such termination; (b) continued
coverage under the benefit plans in which he participates for a period of two
years from the date of such early termination; (c) a lump sum payment equal to
the aggregate amount credited to his deferred compensation account; and (d)
awards for the calendar year of such termination under incentive plans
maintained by the Company as though any performance or objective criteria used
in determining such awards were satisfied. The Board of Directors determined
that Mr. J. Corasanti's base salary would be $275,000 for 2002.
The Company paid the premiums on three split-dollar life insurance
policies for Eugene R. Corasanti through July 2002, at which time the Board of
Directors and management elected to halt such payments in light of the enactment
of the Sarbanes-Oxley Act of 2002, as further described below. In 2002, there
were no premiums paid on these policies by the Company. In addition, there were
no premiums paid by the Company for a split-dollar life insurance policy for Mr.
J. Corasanti in 2002. These matters are described below under "Board of
Directors Interlocks and Insider Participation; Certain Relationships and
Related Transactions."
H. STOCK OPTION PLANS
1999 Long-Term Incentive Stock Plan
In May 1999, the shareholders approved the CONMED Corporation 1999
Long-Term Incentive Plan (the "1999 LTIP"). Under the 1999 LTIP, in the
discretion of the Stock Option Committee of the Board of Directors (the
"Committee"), options, performance shares and restricted stock may be granted to
- 13 -
employees and/or consultants of the Company and its subsidiaries. The Committee
presently consists of Messrs. Remmell, Daniels and Dr. Schwartz.
Options may be granted which are (i) incentive stock options within the
meaning of Internal Revenue Code Section 422, (ii) options other than incentive
stock options (i.e., non-qualified options), (iii) performance shares, and (iv)
restricted stock (collectively, the "awards"). A total of 2,500,000 shares of
Common Stock (subject to adjustment for stock splits and other changes in the
Company's capital structure) had been reserved against the issuance of awards to
be granted under the 1999 LTIP. Shares reserved under an award which for any
reason expires or is terminated, in whole or in part, shall again be available
for the purposes of the 1999 LTIP. As of March 31, 2003, options relating to
1,984,127 shares of Common Stock have been granted and not terminated under the
1999 LTIP. As of March 31, 2003, 830,441 of the options are exercisable. As of
March 31, 2003, options relating to 515,873 shares of Common Stock remain
available to be granted.
The 1992 Plan
In April 1992, the shareholders approved the CONMED Corporation 1992 Stock
Option Plan (as amended and approved by the shareholders on May 21, 1996, the
"1992 Plan"). Under the 1992 Plan, in the discretion of the Stock Option
Committee of the Board of Directors, options may be granted to officers and key
employees of the Company and its subsidiaries for the purchase of shares of
Common Stock. The Stock Option Committee presently consists of Messrs. Remmell,
Daniels and Dr. Schwartz.
Options may be granted which are (i) incentive stock options within the
meaning of Internal Revenue Code Section 422 or (ii) options other than
incentive stock options (i.e., non-qualified options). A total of 3,000,000
shares of Common Stock (subject to adjustment for stock splits and other changes
in the Company's capital structure) had been reserved against the exercise of
options to be granted under the 1992 Plan. Shares reserved under an option which
for any reason expires or is terminated, in whole or in part, shall again be
available for the purposes of the 1992 Plan. No additional options are available
to be granted under the 1992 Plan. Options relating to 3,000,000 shares of
Common Stock have been granted and not terminated under the 1992 Plan, of which
options relating to 1,352,317 shares of Common Stock are still exercisable.
The 1983 Plan
In June 1983, the shareholders of the Company approved an employee stock
option plan (the "1983 Plan"), which was subsequently amended and approved by
the shareholders on June 30, 1987 and April 10, 1992. Options may be granted
which are (i) incentive stock options within the meaning of Internal Revenue
Code Section 422 or (ii) options other than incentive stock options (i.e.,
non-qualified options). Pursuant to the 1983 Plan, officers and key employees of
the Company were eligible for grants of stock options at the fair market value
of the Company's Common Stock on the date of grant, exercisable commencing one
year after grant. The 1983 Plan is administered by the Stock Option Committee.
No additional options may be granted under the 1983 Plan. Options relating
to 1,508,813 shares of Common Stock were granted under the 1983 Plan, of which
options for 9,355 shares of Common Stock are still exercisable.
Stock Option Plan for Non-Employee Directors
In May 1995, the shareholders of the Company approved the Stock Option
Plan For Non-Employee Directors of CONMED Corporation (the "Non-Employee
Directors Plan"). All members of the Company's Board of Directors who are not
current or former employees of the Company or any of its
- 14 -
subsidiaries ("Non-Employee Directors") are eligible to participate in the
Non-Employee Directors Plan. Under the Non-Employee Directors Plan, each
Non-Employee Director elected, reelected or continuing as a director receives
4,500 options (which are non-qualified stock options under the Internal Revenue
Code of 1986) with an option price equal to the fair market value of the
Company's Common Stock on the business day following each annual meeting of the
shareholders.
A total of 212,500 shares of Common Stock (subject to adjustment for stock
splits and other changes in the Company's capital structure) are reserved
against the exercise of options to be granted and not terminated under the
Non-Employee Directors Plan, of which options for 83,334 shares of Common Stock
have been granted and options for 49,564 shares are still exercisable. Options
relating to 129,166 shares of Common Stock remain available to be granted.
Shares issuable under the Non-Employee Directors Plan may be authorized but
unissued shares or treasury shares. Shares reserved under an option which for
any reason expires or is terminated, in whole or in part, shall again be
available for the purposes of the Non-Employee Directors Plan.
Plan Category Number of Securities to Weighted-Average Number of Securities
be Issued Upon Exercise Price of Remaining Available for
Exercise of Outstanding Options, Future Issuance Under
Outstanding Options, Warrants and Rights Equity Compensation
Warrants and Rights Plans (Excluding
Securities Reflected in the
Second Column)
Equity compensation 1999 Long-Term 1,940,093 18.19 515,873
plans approved by Incentive Stock Plan
security holders
1983 Stock Option 9,355 3.85 0
Plan
1992 Stock Option Plan 1,352,317 16.39 0
Stock Option Plan 72,064 18.87 129,166
for Non-Employee
Directors
Equity compensation None N/A N/A N/A
plans not approved by
security holders
Option Grants Table
The following table sets forth, with respect to grants of stock options
made during 2002 to each of the Named Executive Officers: (i) the name of the
executive officer (column (a)); (ii) the number of securities underlying options
granted (column (b)); (iii) the percent the grant represents of the total
options granted to all employees during 2002; (iv) the per share exercise price
of the options granted (column (d)); (v) the expiration date of the options
(column (e)); and (vi) the potential realizable value of
- 15 -
each grant, assuming the market price of the Common Stock appreciates in value
from the date of grant to the end of the option term at a rate of (A) 5% per
annum (column (f)) and (B) 10% per annum (column (g)).
Option Grants in 2002
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
- --------------------------------------------------------------------------------------------- -----------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise or
Granted Employees Base Price
Name (#) in 2002 ($/Sh) Expiration Date 5%($) 10%($)
- ------------------- ---------- ---------- ----------- --------------- --------- ---------
Eugene R. Corasanti 75,000 10.11 20.06 02/25/2012 946,172 2,397,786
112,500 15.16 25.89 05/14/2012 1,831,734 4,641,974
Joseph J. Corasanti 112,500 15.16 25.89 05/14/2012 1,831,734 4,641,974
William W. Abraham 10,000 1.35 25.89 05/14/2012 162,821 412,620
Gerald Woodard 10,000 1.35 25.89 05/14/2012 162,821 412,620
Eugene T. Starr 10,000 1.35 25.89 05/14/2012 162,821 412,620
Aggregated Option Exercises and Year-End Option Value Table
The following table sets forth, with respect to each exercise of stock
options during 2002 by each of the Named Executive Officers and the year-end
value of unexercised options on an aggregated basis: (i) the name of the
executive officer (column (a)); (ii) the number of shares received upon
exercise, or, if no shares were received, the number of securities with respect
to which the options were exercised (column (b)); (iii) the aggregate dollar
value realized upon exercise (column (c)); (iv) the total number of securities
underlying unexercised options held at December 31, 2002, separately identifying
the exercisable and unexercisable options (column (d)); and (v) the aggregate
dollar value of in-the-money, unexercised options held at December 31, 2002,
separately identifying the exercisable and unexercisable options (column (e)).
The Company's stock option plans do not provide for stock appreciation rights.
- 16 -
Aggregated Option Exercises in 2002 and
December 31, 2002 Option Values
(a) (b) (c) (d) (e)
Name of Securities Underlying Value of Unexercised In-the-
Unexercised Options at Money Options at 12/31/02 ($)(1)
12/31/02 (#) ---------------------------------
Shares -----------------------------
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ------------ ------------ ----------- ------------- ----------- -------------
Eugene R. Corasanti 343,927 4,276,251 571,863 112,500 1,930,181 483,310
Joseph J. Corasanti 0 0 336,975 247,526 1,600,069 565,195
William W. Abraham 0 0 131,201 10,000 653,974 0
Gerald Woodard 0 0 24,002 53,512 108,880 203,647
Eugene T. Starr 0 0 10,500 52,002 0 0
================================================================================
(1) Assumes $19.59 per share fair market value on December 31, 2002 which was
the closing price on December 31, 2002, the last day of trading on NASDAQ
in 2002.
I. PENSION PLANS
The Company maintains a broadly based defined benefit pension plan (the
"Pension Plan") for all employees. The Pension Plan entitles a participant to a
normal monthly retirement benefit equal to 1 1/2% of the participant's average
monthly earnings over the period of employment times years of service. The
deferred compensation for Messrs. E. and J. Corasanti is not included in the
calculation of retirement benefits. Benefits are fully vested after five years
of service, starting from date of hire. Upon reaching normal retirement age,
generally age 65 with five years of credited service, participants are entitled
to receive vested benefits under the Pension Plan either in the form of a lump
sum payment or a monthly retirement benefit.
The Pension Plan represents a "fresh start" as of January 1, 1989,
replacing the three pension plans formerly in place. The three former plans have
been merged into the Pension Plan, which is the former broadly based plan with
the benefit formula increased from 1/2% of pay to 1 1/2% of pay. Benefits
accrued by participants under the former plans became fully vested as of
December 31, 1988 and are paid, when due, from this "fresh start" Pension Plan.
Benefits accrued under the former plans are payable from the Pension Plan in
addition to the benefits to be received under the Pension Plan.
As of December 31, 2002, Messrs. E. Corasanti, J. Corasanti and Abraham
had seven, ten and six years of credited service, respectively in the Conmed
Pension Plan. Messrs. Woodard and Starr had three and two years of credited
service in the Linvatec and CONMED Electrosurgery Pension Plans respectively.
The first table presents information concerning the annual pension payable under
the Pension Plan based upon various assumed levels of annual compensation and
years of service.
CONMED Pension Plan
Years of Service
Average
Pay 15 20 25 30 35
- ----------- ------- ------- ------- ------- -------
$125,000 $28,125 $37,500 $46,875 $56,250 $65,625
$150,000 33,750 45,000 56,250 67,500 78,750
$175,000(1) 36,000 48,000 60,000 72,000 84,000
$200,000(1) 36,000 48,000 60,000 72,000 84,000
$225,000(1) 36,000 48,000 60,000 72,000 84,000
$250,000(1) 36,000 48,000 60,000 72,000 84,000
$300,000(1) 36,000 48,000 60,000 72,000 84,000
$400,000(1) 36,000 48,000 60,000 72,000 84,000
$450,000(1) 36,000 48,000 60,000 72,000 84,000
$500,000(1) 36,000 48,000 60,000 72,000 84,000
(1) 2002 statutory limits are $160,000 and straight life annuity benefit
payable at age 65 and $200,000 annual compensation taken into account in
determining average pay.
- 17 -
Linvatec Pension Plan
Years of Service
Average -------------------------------------------------------
Pay 15 20 25 30 35
- ----------- ------- ------- ------- ------- -------
$125,000 $33,924 $45,232 $56,540 $67,848 $79,156
$150,000 41,424 55,232 69,040 82,848 96,656
$175,000(1) 44,424 59,232 74,040 88,848 103,656
$200,000(1) 44,424 59,232 74,040 88,848 103,656
$225,000(1) 44,424 59,232 74,040 88,848 103,656
$250,000(1) 44,424 59,232 74,040 88,848 103,656
$300,000(1) 44,424 59,232 74,040 88,848 103,656
$400,000(1) 44,424 59,232 74,040 88,848 103,656
$450,000(1) 44,424 59,232 74,040 88,848 103,656
$500,000(1) 44,424 59,232 74,040 88,848 103,656
================================================================================
(1) 2002 statutory limits are $130,000 for straight life annuity benefit
payable at age 65 and $160,000 annual compensation taken into account in
determining average pay.
CONMED Electrosurgery Pension Plan
Years of Service
Average
Pay 15 20 25 30 35
- ----------- ------- ------- ------- ------- -------
$125,000 $33,045 $44,060 $55,075 $66,090 $77,105
$150,000 40,545 54,060 67,575 81,090 94,605
$175,000 48,045 64,060 80,075 96,090 112,105
$200,000(1) 55,545 74,060 92,575 111,090 129,605
$225,000(1) 55,545 74,060 92,575 111,090 129,605
$250,000(1) 55,545 74,060 92,575 111,090 129,605
$300,000(1) 55,545 74,060 92,575 111,090 129,605
$400,000(1) 55,545 74,060 92,575 111,090 129,605
$450,000(1) 55,545 74,060 92,575 111,090 129,605
$500,000(1) 55,545 74,060 92,575 111,090 129,605
(1) 2002 statutory limits are $160,000 as a straight life annuity payment
at age 65 and $2000,000 annual compensation taken into account in determining
average pay.
- 18 -
J. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Board of Directors, pursuant to the terms of the CEO and COO
Employment Agreements, establishes the annual salary of Eugene R. Corasanti and
Joseph J. Corasanti. The Compensation Committee establishes the compensation
plans and specific compensation levels for the Company's other executive and
senior officers. The Stock Option Committee administers the Company's stock
option plans. The Compensation Committee is presently composed of Messrs.
Matthews, Daniels and Mandia. The Stock Option Committee is presently composed
of Messrs. Remmell and Daniels and Dr. Schwartz.
The Board of Directors believes that the compensation of Eugene R.
Corasanti, the Company's Chairman and Chief Executive Officer, should be heavily
influenced by company performance, long-term growth and strategic positioning.
Therefore, although there is necessarily some subjectivity in setting the CEO's
salary, major elements of the compensation package are directly tied to company
performance, long-term growth and strategic positioning. This philosophy is
reflected in Mr. Corasanti's current five-year employment contract, which
provides for a base annual salary of $300,000 and permits the Board of
Directors, in its discretion, to establish a higher salary for him. As set forth
below, the current annualized base salary for Mr. E. Corasanti is $370,000.
The Board of Directors believes that the compensation of Joseph J.
Corasanti, the President and Chief Operating Officer ("COO"), should also be
heavily influenced by company performance, long-term growth and strategic
positioning. This philosophy is reflected in the employment contract for the COO
which is generally similar to the contract provided to the CEO, and which
provides for a base annual salary of $200,000 and permits the Board of Directors
to determine a higher salary for the COO in its discretion. As set forth below,
the current base salary for Mr. J. Corasanti is $275,000.
In 2000, the Company continued to integrate its completed acquisitions,
again recording record revenues of $392.2 million. The Company acquired certain
minimally invasive surgery products from Imagyn Medical Technologies, Inc. for a
cash purchase price of $6.0 million, subject to additional contingent
consideration of up to $2.0 million. During part of this period, Mr. E.
Corasanti managed the operations of Linvatec until a new President was appointed
for Linvatec, and Mr. J. Corasanti assumed the responsibilities as President and
COO. During this period, the Company also undertook efforts to improve its
distribution channels in all product areas and intensified efforts to produce
internal growth through the development and introduction of new products. For
2000, excluding certain one-time charges, the Company had net income of $20.3
million, or $1.31 per diluted share, or $0.87 per share when adjusted to account
for the September 2001 stock dividend. In light of these factors, the Board of
Directors awarded Mr. E. Corasanti 2001 base salary compensation of $350,000 and
awarded Mr. J. Corasanti 2001 base salary compensation of $225,000.
In addition, the Board of Directors awarded Mr. E. Corasanti an increase
in deferred compensation to $200,000 for 2000 and subsequent years and awarded
Mr. J. Corasanti deferred compensation of $100,000 in 2000, 2001 and 2002 under
the terms of his employment agreement.
In 2001, the Company continued to focus on internal growth through the
introduction of new products, even as it continued to integrate the Imagyn
acquisition from the fall of 2000. In addition, the Company completed a second
Imagyn acquisition that prompted the creation of an Endoscopy product line with
a dedicated sales force. In addition, the Company acquired real estate which was
significant to the operations of its orthopedic subsidiary, and secured less
expensive financing through a $50.0 million accounts receivable securitization.
With the trend of increasing revenues and earnings for 2001, the
- 19 -
Board of Directors approved an increase in base compensation for Mr. E.
Corasanti to $350,000. In addition, the Board of Directors, with Messrs. E.
Corasanti and J. Corasanti abstaining, voted to approve a five-year extension to
the employment agreement of Mr. E. Corasanti together with a grant of options
relating to 75,000 shares of common stock. In light of the Company's performance
during 2001, a bonus of $52,502 was awarded to Mr. E. Corasanti and a bonus of
$34,655 was awarded to Mr. J. Corasanti.
In 2002, the Company continued to focus on internal growth, through the
introduction of a number of new products and improved distribution. In addition,
the Company completed a number of strategic acquisitions and continued to
integrate completed acquisitions. While the Company experienced record revenues
and earnings, the results recognized at the end of the year were nonetheless
lower than expected. In light of the continued trend toward increasing revenues
and earnings, as well as the improvements to the Company's balance sheet, the
Board of Directors, with Messrs. E. Corasanti and J. Corasanti abstaining,
approved an increase in base compensation for Mr. E. Corasanti to $350,000, and
approved an increase in base compensation for Mr. J. Corasanti to $275,000. In
light of the year-end results proving to be lower than expected, no bonuses were
paid to Messrs. E .Corasanti and J. Corasanti. Likewise, no officers were
awarded any bonus in light of the final year-end performance.
The Compensation Committee has adopted similar policies with respect to
compensation of the other executive officers of the Company. The Company's
performance, long-term growth and strategic positioning and the individual's
past performance and future potential are considered in establishing the base
salaries of executive officers. The policy regarding other elements of the
compensation package for executive officers is similar to the CEO's in that the
package is tied to achievement of performance targets. In light of the Company's
performance during 2002, Mr. E. Corasanti was granted options relating to
112,500 shares, and Mr. J. Corasanti was granted options relating to 112,500
shares. In 2002, the Compensation Committee also granted options to certain
other executive officers.
Stock options are granted to the Company's executive officers primarily
based on the executive's ability to influence the Company's long-term growth and
profitability. The number of options granted is determined by using the same
subjective criteria. All options are granted at the current market price. Since
the value of an option bears a direct relationship to the Company's stock price,
it is an effective incentive for managers to create value for shareholders. The
Committee therefore views stock options as an important component of its
long-term, performance-based compensation philosophy.
The Board of Directors has not yet adopted a policy with respect to
qualification of executive compensation in excess of $1 million per individual
for deduction under Section 162(m) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder. The Board of Directors does not
anticipate that the compensation of any executive officer during 2003 will
exceed the limits for deductibility. In determining a policy for future periods,
the Board of Directors would expect to consider all relevant factors, including
the Company's tax position and the materiality of the amounts likely to be
involved.
K. BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION; CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Board of Directors, which is presently composed of Eugene R.
Corasanti, Joseph J. Corasanti, Bruce F. Daniels, William D. Matthews, Robert E.
Remmell, Stuart J. Schwartz, and Stephen Mandia establishes the compensation
plans and specific compensation levels for Eugene R. Corasanti directly (with
Messrs. E. Corasanti and J. Corasanti abstaining) and for other executive
officers through the Compensation Committee, and administers the Company's stock
option plans through the Stock Option Committee. As disclosed above, Eugene R.
Corasanti, the Chairman of the Board of Directors, is the Chief Executive
Officer of the Company and also serves as an officer of the Company's
- 20 -
subsidiaries. Joseph J. Corasanti, a director of the Company, is the President
and Chief Operating Officer of the Company, and also serves as an officer of
several of the Company's subsidiaries and is the son of Eugene R. Corasanti.
Robert E. Remmell had served as the Assistant Secretary of the Company,
and as an officer of several of the Company's subsidiaries, until March 1, 2000,
when he resigned from those positions. Mr. Remmell is a partner in the law firm
of Steates, Remmell, Steates and Dziekan, which has served as counsel to the
Company. The Company made payments to the firm of $5,826 in 2002.
During 2002, the Company made aggregate payments of $121,444 to with
George A. Nole & Son, Inc., a construction company, in connection with certain
renovations being made to one of the Company's Central New York facilities. The
sole shareholder of George A. Nole & Son, Inc., a New York corporation, is
Angelo Nole, who is the brother-in-law of Eugene R. Corasanti. The
sub-contractors were awarded contracts following a competitive bidding process
which was conducted through an architectural firm.
During 2002, the Company made aggregate payments of $3,917 to Cohen &
Cohen, a Utica, New York law firm partnership consisting of Daniel Cohen and
Richard Cohen, the father-in-law and brother-in-law, respectively, of Joseph J.
Corasanti. These payments related to fees associated with representation of the
Company in connection with certain litigation matters in Utica, New York.
Through December 31, 2001, the Company had all premiums on three
split-dollar life insurance policies with face amounts totaling $3,175,000 for
the benefit of Eugene R. Corasanti. The Company did not pay or accrue premiums
in the fiscal year ended December 31, 2002. Premiums paid by the Company in
prior years are treated by the Company as a loan to Mr. Eugene Corasanti, and at
December 31, 2002, the aggregate amount due the Company from Mr. E. Corasanti
related to these split-dollar life insurance policies is $637,200. This amount
(and loans, if any, for future premiums) will be repaid to the Company on Mr.
E. Corasanti's death and the balance of the policy will be paid to Mr. E.
Corasanti's estate or beneficiaries.
The Company likewise paid certain premiums associated with a split-dollar
life insurance policy totaling $1,000,000 for the benefit of Joseph J.
Corasanti. The Company did not pay or accrue premiums in the fiscal year ended
December 31, 2002. Premiums paid by the Company in prior years are treated by
the Company as a loan to Mr. J. Corasanti, and at December 31, 2002, the
aggregate amount due the Company from Mr. J. Corasanti related to these
split-dollar life insurance policies is $11,900. This amount (and loans, if any,
for future premiums) will be repaid to the Company on Mr. J. Corasanti's
death and the balance of the policy will be paid to Mr. J. Corasanti's estate or
beneficiaries.
In connection with the enactment of the Sarbanes-Oxley Act of 2002 (the
"Act") and the general prohibition against loans to officers, subject to an
exception for certain pre-existing loan arrangements, the Board of Directors and
management opted, as of October 2002, to stop making the premium payments which
previously had been accounted for as loans pending further clarification of the
regulations and interpretation of the Act. The policies for which the Company
had previously been funding premium payments have cash balances sufficient to
permit the payment of premiums. The Board of Directors and management may,
however, elect to resume such payments if management and the Board of Directors
conclude that the obligation to make such payments was maintained by the Company
on the date of the enactment of the Act and was not materially modified pursuant
to Section 402 of the Act and the implementing regulations, or if such payments
are otherwise permitted.
- 21 -
L. INSURANCE FOR DIRECTORS AND OFFICERS
The Company has entered into directors and officers insurance policies
with National Union Fire Insurance Company of Pittsburgh, PA covering the period
from January 31, 2003 through January 31, 2004 at a total cost of $450,000,
which covers directors and officers of the Company and its subsidiaries.
M. PERFORMANCE GRAPH
The graph below compares the yearly percentage change in the Company's
Common Stock with the cumulative total return of the Center for Research for
Stock Performance ("CRSP") Total Return Index for the NASDAQ Stock Market and
the cumulative total return of the Standard & Poor's Medical Products and
Supplies Industry Group Index. In each case, the cumulative total return assumes
reinvestment of dividends into the same class of equity securities at the
frequency with which dividends are paid on such securities during the applicable
fiscal year.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG CONMED CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S & P HEALTH CARE EQUIPMENT INDEX
[LETTERHEAD OF CONMED CORPORATION GRAPH OMITTED CUMMULATIVE TOTAL RETURN
POINTS PLOTTED BELOW]
CONMED CORPORTION 100.00 125.71 98.57 65.24 114.05 111.94
NASDAQ STOCK MARKET (U.S.) 100.00 140.99 261.48 157.42 124.89 86.33
S & P HEALTH CARE EQUIPMENT 100.00 141.59 130.52 191.60 181.88 158.86
N. ANNUAL REPORT
The annual report for the fiscal year ended December 31, 2002, including
financial statements, is being furnished with this proxy statement to
shareholders of record on March 31, 2003. The annual report does not constitute
a part of the proxy soliciting material and is not deemed "filed" with the SEC.
III. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of, by each shareholder
known by the Company to be the beneficial owner of more than 5% of its
outstanding Common Stock, by each director and nominee director, by each of the
Named Executive Officers (as defined above) and by all directors and executive
officers as a group.
Amount and Nature
of Beneficial Percent of
Name of Beneficial Owner Ownership Class
- ------------------------------------------- ----------------- ----------
William W. Abraham(1) 277,907 *
Eugene R. Corasanti(2) 1,096,151 3.79
Joseph J. Corasanti(3) 585,373 2.02
Bruce F. Daniels(4) 21,393 *
William D. Matthews(5) 30,764 *
Robert E. Remmell(5) 16,447 *
Stuart J. Schwartz(6) 17,889 *
Stephen M. Mandia 3,750 *
Eugene T. Starr 16,073 *
Gerald Woodard (7) 29,004 *
Directors and executive officers as a group 2,531,057 8.76
(16 persons)(1)(2)(3)(4)(5)(6)(7)(8)
Wellington Management Company, LLP (9) 3,897,450 13.48
75 State Street
Boston, Massachusetts 02109
AXA Financial, Inc. (and related entities)(10) 1,519,425 5.26
1290 Avenue of the Americas
New York, New York 10104
Barclay's Global Investors, N.A. (11) 1,937,179 6.70
45 Fremont Street
San Francisco, California 94105
================================================================================
o Unless otherwise set forth above, the address of each of the above
listed shareholders is c/o CONMED Corporation, 525 French Road,
Utica, New York 13502.
* Less than 1%.
- 22 -
(1) Includes 10,000 shares subject to options, exercisable within 60 days.
(2) Includes 112,500 shares subject to options, exercisable within 60 days.
Also includes 63,787 shares owned beneficially by the wife of Eugene R.
Corasanti. Eugene R. Corasanti disclaims beneficial ownership of these
shares.
(3) Includes 136,505 shares subject to options, exercisable within 60 days.
Joseph J. Corasanti is the son of Eugene R. Corasanti.
(4) Includes 4,500 shares subject to options, exercisable within 60 days. Also
includes 3,375 shares owned beneficially by the wife of Bruce F. Daniels.
Mr. Daniels disclaims beneficial ownership of these shares.
(5) Includes 4,500 shares subject to options, exercisable within 60 days.
(6) Includes 4,500 shares subject to options, exercisable within 60 days. Also
includes 850 shares owned beneficially by the wife of Stuart J. Schwartz.
Dr. Schwartz disclaims beneficial ownership of these shares.
(7) Includes 5,002 shares subject to options, exercisable within 60 days.
(8) Includes shares subject to options, exercisable within 60 days, held by
William W. Abraham, Eugene R. Corasanti, Joseph J. Corasanti, Bruce F.
Daniels, William D. Matthews, Robert E. Remmell, Stuart J. Schwartz ,
Gerald Woodard and Eugene T. Starr, directors and executive officers of the
Company. Such 277,507 shares are equal to approximately .96% of the Common
Stock outstanding. As of March 31, 2003, the Company's directors and
executive officers as a group (16 persons) are the beneficial owners of
2,531,057 shares, which is approximately 8.76% of the Common Stock
outstanding.
(9) An amendment to a Schedule 13G filed with the SEC by Wellington Management
Company, LLP on February 12, 2003 indicates that Wellington Management
Company, LLP may be deemed to beneficially own 3,897,450 shares of Common
Stock that are held of record by its clients by virtue of having shared
voting power over 2,968,500 shares and shared dispositive power over
3,897,450 shares in its capacity as an investment adviser.
(10) A Schedule 13G filed with the SEC by AXA Assurances I.A.R.D. Mutuelle; AXA
Assurances Vie Mutuelle; AXA Conseil Vie Assurance Mutuelle; AXA Courtage
Assurance Mutuelle, as a group, AXA and AXA Financial, Inc. on February
12, 2003 indicates that such entities beneficially own 1,519,425 shares of
Common Stock by virtue of having sole dispositive power over 880,075
shares acquired solely for investment purposes by AXA Rosenberg Investment
Management LLC and shared dispositive power over 639,350 shares acquired
solely for investment purposes by Alliance Capital Management L.P. on
behalf of client discretionary investment advisory accounts. The group
also reports having sole voting power with respect to 1,223,250 shares and
shared voting power with respect to 9,350 shares.
(11) A Schedule 13G filed with the SEC by Barclays Global Investors, N.A. on
February 12, 2003 indicates that Barclays Global Investors, N.A. and
Barclays Global Fund Advisors beneficially own 1,937,179 shares of Common
Stock by virtue of having sole voting power over 1,937,179 shares of
Common Stock and sole dispositive power over 1,937,179 shares of Common
Stock in their roles as investment advisors for certain funds.
On March 31, 2003, there were 1,163 shareholders of record of the
Company's Common Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to regulations promulgated by the Securities and Exchange
Commission, the Company is required to identify, based solely on a review of
reports filed under Section 16(a) of the Securities Exchange Act of 1934, and
furnished to the Company pursuant to Rule 16a-3(c) thereunder, each person who,
at any time during its fiscal year ended December 31, 2002, was a director,
officer or beneficial owner of more than 10% of the Company's Common Stock that
failed to file on a timely basis any such reports. Based on such reports, the
Company is not aware of any such failure to file on a timely basis any such
reports by any such person that has not previously been disclosed, except with
respect to Thomas M. Acey, who filed a Form 5 approximately ten days after it
was due. The Company recognized in the fall of 2002 that previous filings for
directors and officers required to report under Section 16 had failed to note
the issuance of stock options. The failure to report such awards was
retrospectively corrected in Form 4 and/or Form 5 filings, and all previous
awards had been disclosed in filings submitted by the end of February 2003.
- 23 -
ANNEX A
CONMED CORPORATION
AUDIT COMMITTEE CHARTER
Amended and Restated as of March 17, 2003
I. Composition of the Audit Committee: The Audit Committee shall be
----------------------------------
comprised of at least three directors. Each such director (i) shall be
"independent" under the rules of the Nasdaq Stock Market, Inc. and the
provisions of the Sarbanes-Oxley Act of 2002 (the "2002 Act"), and
(ii) should not accept and should not permit any member of such
director's immediate family to accept (during such director's service
on the Audit Committee and during the five years preceding such
director's service on the Audit Committee) any consulting, advisory or
other compensatory fee from the issuer other than in his or her
capacity as a member of the Board or any committee of the Board, and
(iii) is not an affiliate of the Company (other than by virtue of
serving on the Company's Board of Directors) and does not own or
control such amount of the Company's voting securities as may be
established by the Securities and Exchange Commission (the "SEC") for
purposes of being deemed to be an affiliate. All members of the Audit
Committee must be able to read and understand fundamental financial
statements, including a company's balance sheet, income statement, and
cash flow statement, and the Audit Committee shall have at least one
member who is an "audit committee financial expert", as defined by the
SEC for purposes of the 2002 Act.
No director may serve as a member of the Audit Committee if such
director serves on the audit committee of more than two other public
companies unless the Board of Directors determines that such
simultaneous service would not impair the ability of such director to
effectively serve on the Audit Committee, and discloses this
determination in the Company's annual proxy statement. No member of
the Audit Committee may receive (or shall have received during the
preceding five years) any compensation from the Company other than (i)
director's fees, which may be received in cash, stock options or other
in-kind consideration ordinarily available to directors; (ii) a
pension or other deferred compensation for prior service that is not
contingent on future service; and (iii) any other regular benefits
that other directors receive. In addition, no member of the immediate
family of a member of the Audit Committee may receive any compensation
from the Company.
Members shall be appointed by the Board based on nominations by the
Corporate Governance and Nominating Committee, and shall serve at the
pleasure of the Board and for such term or terms as the Board may
determine.
The Audit Committee shall designate one member of the Audit Committee
as its chairperson. In the event of a tie vote on any issue, the
chairperson's vote shall decide the issue.
A-1
II. Purposes of the Audit Committee: The purposes of the Audit
---------------------------------
Committee are to assist the Board of Directors:
1. in its oversight of the Company's accounting and financial
reporting principles and policies and internal accounting
controls and procedures;
2. in its oversight of the Company's financial statements and the
independent audit thereof;
3. in nominating the outside auditors to be proposed for shareholder
approval in any proxy statement, evaluating and, where deemed
appropriate, replacing the outside auditors;
4. in evaluating the independence of the outside auditors;
5. by pre-approving all services permitted by the 2002 Act to be
performed by the independent auditors;
6. by pre-approving all related party transactions;
7. by receiving and reviewing any reports concerning internal
controls and/or disclosure controls;
8. by establishing procedures for (a) the receipt, retention and
treatment of complaints by the Company regarding accounting,
internal accounting controls or auditing matters; and (b) the
confidential, anonymous submission by employees of the Company of
concerns regarding questionable accounting or auditing matters;
and
9. by receiving and reviewing any reports required by or otherwise
contemplated by the 2002 Act and, as appropriate, responding to
such reports.
The function of the Audit Committee is oversight. The management
of the Company is responsible for the preparation, presentation
and integrity of the Company's financial statements. Management
and the internal accounting and financial departments are
responsible for maintaining appropriate accounting and financial
reporting principles and policies and internal controls and
procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The outside
auditors are responsible for planning and carrying out a proper
audit and reviews, including reviews of the Company's quarterly
financial statements prior to the filing of each quarterly report
on Form 10-Q, and other procedures. In fulfilling their
responsibilities hereunder, it is recognized that members of the
Audit Committee are not full-time employees of the Company and
are not, and do not represent themselves to be, accountants or
auditors by profession or experts in the fields of accounting or
auditing including in respect of auditor independence, although
at least one member of the Audit Committee must be an "audit
committee financial expert" as defined by the SEC for purposes of
the 2002 Act. As such, it is not the duty or responsibility of
the Audit Committee or its members to conduct "field work" or
A-2
other types of auditing or accounting reviews or procedures or to
set auditor independence standards, and each member, to the
extent that he or she, in the exercise of business judgment,
determines such reliance to be appropriate, of the Audit
Committee shall be entitled to rely on (i) the integrity of those
persons and organizations within and outside the Company that it
receives information from, (ii) the accuracy of the financial and
other information provided to the Audit Committee by such persons
or organizations absent actual knowledge to the contrary (which
shall be promptly reported to the Board of Directors), and (iii)
representations made by management as to any information
technology, internal audit and any non-audit services provided by
the auditors to the Company.
The outside auditors for the Company are ultimately accountable
to the Board of Directors (as assisted by the Audit Committee).
The Board of Directors, with the assistance of the Audit
Committee, has the ultimate authority and responsibility to
nominate and evaluate the outside auditors to be proposed for
shareholder approval in the proxy statement, and, where
appropriate, to replace such auditors.
The outside auditors shall submit to the Company annually a
formal written statement delineating all relationships between
the outside auditors and the Company ("Statement as to
Independence"), addressing each non-audit service provided to the
Company and the matters set forth in Independence Standards Board
No. 1.
The outside auditors shall submit to the Company annually a
formal written statement of fees billed for each of the following
categories of services rendered by the outside auditors: (i) the
audit of the Company's annual financial statements for the most
recent fiscal year and the reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-Q or
Annual Report on Form 10-K for that fiscal year; and (ii) all
other permissible services rendered by the outside auditors for
the most recent fiscal year, in the aggregate and by each
service.
III. Meetings of the Audit Committee: The Audit Committee shall meet
--------------------------------
periodically, as circumstances dictate, to discuss with management the
annual audited financial statements and quarterly financial
statements. The Audit Committee shall also meet separately at least
annually with management, the officers of the Company responsible for
internal accounting and financial controls and the outside auditors to
discuss any matters that the Audit Committee or any of these persons
or firms believe should be discussed privately. The Audit Committee
may request any officer or employee of the Company or the Company's
outside counsel or outside auditors to attend a meeting of the Audit
Committee or to meet with any members of, or consultants to, the Audit
Committee. Members of the Audit Committee may participate in a meeting
of the Audit Committee by means of conference call or similar
communications equipment by means of which all persons participating
in the meeting can hear each other.
IV. Duties and Powers of the Audit Committee: To carry out its
----------------------------------------------
purposes, the Audit Committee shall have the following duties and
powers:
1. with respect to the outside auditor,
A-3
(i) to provide advice to the Board of Directors in nominating,
selecting, evaluating or replacing outside auditors;
(ii) to review the fees charged by the outside auditors for audit
and non-audit services;
(iii)to ensure that the outside auditors prepare and deliver
annually a Statement as to Independence (it being understood
that the outside auditors are responsible for the accuracy
and completeness of this Statement), to discuss with the
outside auditors any relationships or services disclosed in
this Statement that may impact the objectivity and
independence of the Company's outside auditors and to
recommend that the Board of Directors take appropriate
action in response to this Statement to satisfy itself of
the outside auditors' independence;
(iv) to consider whether the outside auditors' provision of
non-audit services to the Company is compatible with
maintaining the independence of the outside auditors; and
(v) to instruct the outside auditors that the outside auditors
are ultimately accountable to the Board of Directors and
Audit Committee;
2. with respect to the internal officer or officers of the Company
responsible for internal accounting and financial controls,
(i) to review the appointment and replacement of the officer or
officers of the Company responsible for internal accounting
and financial controls; and
(ii) to advise that he or she is, or they are, expected to
provide to the Audit Committee summaries of and, as
appropriate, the significant reports to management prepared
by any internal or other auditor and management's responses
thereto;
3. with respect to financial reporting principles and policies and
internal accounting and financial controls and procedures,
(i) to advise management, officers responsible for internal
accounting and financial controls, and the outside auditors
that they are expected to provide to the Audit Committee a
timely analysis of significant financial reporting issues
and practices;
(ii) to consider any reports or communications (and management's
and any other internal responses thereto) submitted to the
Audit Committee by the outside auditors required by or
referred to in SAS 61 (as codified by AU Section 380), as
may be modified or supplemented, including reports and
communications related to:
o deficiencies noted in the audit in the design or
operation of internal controls;
A-4
o consideration of fraud in a financial statement audit;
o detection of illegal acts;
o the outside auditor's responsibility under generally
accepted auditing standards;
o significant accounting policies;
o management judgments and accounting estimates;
o adjustments arising from the audit;
o the responsibility of the outside auditor for other
information in documents containing audited financial
statements;
o disagreements with management;
o consultation by management with other accountants;
o major issues discussed with management prior to
retention of the outside auditor;
o difficulties encountered with management in performing
the audit;
o the outside auditor's judgments about the quality of
the entity's accounting principles; and
o reviews of interim financial information conducted by
the outside auditor;
(iii) to meet with management, the officer or officers of the
Company responsible for internal accounting and financial controls
and/or the outside auditors:
o to discuss the scope of the annual audit;
o to discuss the audited financial statements;
o to discuss any significant matters arising from any
audit or report or communication referred to in items
2(ii) or 3(ii) above, whether raised by management, the
officer or officers of the Company responsible for
internal accounting and financial controls, or the
outside auditors, relating to the Company's financial
statements;
o to review the form of opinion the outside auditors
propose to render to the Board of Directors and
shareholders; o to discuss significant changes to the
A-5
Company's financial and accounting principles,
policies, controls, procedures and practices proposed
or contemplated by the outside auditors, the officer or
officers of the Company responsible for internal
accounting and financial controls or management; and
o to inquire about significant risks and exposures, if
any, and the steps taken to monitor and minimize such
risks;
(iv) to obtain from the outside auditors assurance that the audit
was conducted in a manner consistent with the Securities
Exchange Act of 1934, as amended, which sets forth certain
procedures to be followed in any audit of financial
statements required under the Securities Exchange Act of
1934; and
(v) to discuss with the Company's General Counsel any
significant legal matters that may have a material effect on
the financial statements, the Company's compliance policies,
including material notices to or inquiries received from
governmental agencies; and
4. with respect to reporting and recommendations,
(i) to prepare any report or other disclosures, including any
recommendation of the Audit Committee, required by the rules
of the Securities and Exchange Commission to be included in
the Company's annual proxy statement;
(ii) to review this Charter at least annually and recommend any
changes to the full Board of Directors; and
(iii)to report its activities to the full Board of Directors on
a regular basis and to make such recommendations with
respect to the above and other matters as the Audit
Committee may deem necessary or appropriate.
V. Delegation to Subcommittee. The Audit Committee may, in its discretion,
----------------------------
delegate all or a portion of its duties and responsibilities to a
subcommittee of the Audit Committee. The Audit Committee may, in its
discretion, delegate to one or more of its members the authority (i) to
pre-approve any audit or non-audit services to be performed by the
independent auditors, and/or (ii) to pre-approve related party
transactions, provided, in both cases, that any such approvals are
presented to the Audit Committee at its next scheduled meeting.
VI. Resources and Authority of the Audit Committee: The Audit Committee shall
------------------------------------------------
have the resources and authority appropriate to discharge its
responsibilities, including the authority to engage outside auditors for
special audits, reviews and other procedures and to retain special counsel
and other experts or consultants without seeking approval of the Board or
management.
A-6