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)
N/A
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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 18, 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 2004;
(3) To approve and authorize an amendment to the Company's 1999
Long-Term Incentive Plan to increase the number of shares of
common stock authorized for issuance by 1,000,000 shares;
(4) 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, 2004, 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, 2004
CONMED CORPORATION
525 French Road
Utica, New York 13502
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 18, 2004
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 18, 2004, 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, 2004, to all shareholders
of record on March 31, 2004. 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 Daniel S. Jonas,
who are, respectively, the Chief Executive Officer and Chairman of the Board,
and the Vice President - Legal Affairs and General Counsel 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 2004 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 29,725,841 shares of Common Stock outstanding
on March 31, 2004 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. Proposals
(2) and (3) require the affirmative vote of the holders of a majority of the
votes cast at the meeting in order to be approved by the shareholders.
2
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), (2) and (3) 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. Proposal (3) is
considered "non discretionary" and brokers who have received no instructions
from their clients do not have discretion to vote on this item. The broker
non-votes will be treated in the same manner as votes present.
PROPOSALS TO BE SUBMITTED AT THE SHAREHOLDERS MEETING
There are three 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. The third
concerns an amendment to the 1999 Long-Term Incentive Plan. 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 Corporate Governance and Nominating Committee of 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 eight 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.
The following table sets forth certain information regarding the members
of, and nominees for, the Board of Directors:
3
NOMINEES FOR ELECTION AT THE 2004 ANNUAL MEETING
Served As
Director Principal Occupation or
Name Age Since Position with the Company
---- --- --------- -------------------------
Eugene R. Corasanti 73 1970 Chairman of the Board of Directors and Chief
Executive Officer of the Company.
40 1994 President and Chief Operating Officer of the Company;
Joseph J. Corasanti Director of the Company; Director of II-VI, Inc.
(NASD: IIVI).
69 1992 Executive, retired; former Controller of the
Bruce F. Daniels international division of Chicago Pneumatic Tool
Company; Director of the Company. As noted below,
the Board of Directors has determined that Mr.
Daniels is independent, and is a financial expert.
56 2003 Partner of Dermody, Burke and Browne, CPA, PLLC
Jo Ann Golden (accountants); Director of the Company. As noted
below, the Board of Directors has determined that Ms.
Golden is independent, and is a financial expert.
39 2002 President of East Coast Olive Oil Corp.; Director of
Stephen M. Mandia the Company. As noted below, the Board of Directors
has determined that Mr. Mandia is independent.
69 1997 Retired Chairman of the Board of Directors and
William D. Matthews retired Chief Executive Officer of Oneida Ltd. (NYSE:
OCQ), Chairman of the Board of Directors of Oneida
Financial Corporation (NASD: ONFC) and a former
director of Coyne Textile Services; Director of the
Company. As noted below, the Board of Directors has
determined that Mr. Matthews is independent, and is a
financial expert.
73 1983 Partner of Steates Remmell Steates & Dziekan
Robert E. Remmell (Attorneys); Director of the Company. As noted
below, the Board of Directors has determined that Mr.
Remmell is independent.
67 1998 Physician, retired; Director of the Company. As
Stuart J. Schwartz noted below, the Board of Directors has determined
that Dr. Schwartz is independent.
4
More information concerning the directors and nominees is set forth below
under the heading Corporate Governance Matters - Directors and Nominees for the
Board of Directors, Executive Officers and Senior Officers.
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 appointed
PricewaterhouseCoopers LLP to be nominated as independent accountants for 2004,
subject to shareholder ratification.
Unless otherwise specified, shares represented by proxies will be voted
for the ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants for 2004. 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 Audit Committee will reconsider
whether or not to retain PricewaterhouseCoopers LLP, but may elect to retain
them. Even if the appointment is ratified, the Audit Committee in its discretion
may change the appointment at any time during the year if it determines 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 2004.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL THREE: AMENDMENT TO THE 1999 LONG-TERM
INCENTIVE PLAN
The Board of Directors adopted the Company's 1999 Long-Term Incentive Plan
on March 3, 1999, subject to the approval of shareholders (filed as Exhibit A to
the Company's 1999 Proxy Statement dated April 16, 1999, the "1999 LTIP"). The
Company's shareholders approved the 1999 LTIP at the 1999 shareholders' meeting,
and approved certain amendments in 2002. The 1999 LTIP provides the Company an
opportunity to encourage selected employees and consultants and employees and
consultants of its subsidiaries to acquire an ownership interest in the Company
and helps align their economic interests directly with those of the Company's
shareholders. The 1999 LTIP also provides the Company with flexibility to offer,
in line with competitive practices, compensation packages to selected candidates
whose contributions and skills are important to its long-term success. The
present executive officers of the Company are potential beneficiaries under the
proposed amendment to the 1999 LTIP. The Company historically has declined to
reprice options as a matter of policy. This policy is incorporated into the 1999
LTIP to ensure that the interests of employees and consultants who receive
options continue to be closely tied to the long-term performance of the Company.
5
The Board of Directors has adopted, subject to shareholder approval, an
amendment to the 1999 LTIP to make an additional 1,000,000 shares of Common
Stock available under the 1999 LTIP. Except for the increase in the number of
shares which can be issued under the 1999 LTIP, the provisions of the 1999 LTIP
will remain the same as those presently in effect. The Company intends to file a
registration statement on Form S-8 covering the additional shares of Common
Stock issuable under the 1999 LTIP promptly after approval by the shareholders
of this proposal. The following summary of the principal terms of the 1999 LTIP
is qualified in its entirety by reference to the complete text of the 1999 LTIP
set forth in Exhibit A to our 1999 proxy statement.
General. Under the 1999 LTIP, the Company may grant employees or
consultants stock options (either incentive stock options within the meaning of
Section 422 of the Code or nonstatutory stock options), performance shares and
restricted stock (collectively, the "awards"). The 1999 LTIP is administered by
the Compensation Committee (the "Committee" or the "Compensation Committee"),
which is authorized to select employees of the Company and its subsidiaries and
consultants to receive awards, determine the type, size and terms of awards to
be made, determine the number of shares of Common Stock or share units subject
to any award and determine the other terms and conditions of such awards to the
extent not provided for in the 1999 LTIP. The Committee also has the authority
to interpret the Plan, to establish, amend or rescind any rules and regulations
relating to the Plan and to make all other determinations necessary or advisable
for the administration of the Plan. Subject to limits it may establish, the
Committee may delegate such authority with respect to employees other than those
considered to be Covered Employees under the 1999 LTIP (including the Chief
Executive Officer and employees whom the Committee considers likely to be among
the four most other highly compensated executive officers for the year in which
an award is made or payable) and other employees who are subject to Section 16
of the Exchange Act.
All employees of the Company and its subsidiaries and certain consultants
who have entered into consultancy agreements with the Company or any subsidiary
who have demonstrated significant management potential or who have the capacity
for contributing in a substantial measure to the successful performance of the
Company, as determined by the Compensation Committee, are eligible to receive
awards under the 1999 LTIP. The Compensation Committee may also deem other
Company or subsidiary employees and consultants eligible to receive awards of
nonstatutory options under the 1999 LTIP. While such criteria are subjective in
nature, as a historical matter, approximately 150 employees receive awards each
year under the 1999 LTIP, in addition to certain consultants who received
awards. The Company anticipates that the number of employees receiving awards
each year under the 1999 LTIP will decrease.
It is not possible to determine the benefits or amounts to be received
under the 1999 LTIP because all amounts to be received will be based solely on
future performance.
The maximum aggregate number of shares of Common Stock which are available
for the grant of awards under the 1999 LTIP shall not exceed 2,500,000 shares of
Common Stock (proposed to be increased to 3,500,000 shares), adjusted for any
stock dividend or split, recapitalization, merger or any similar change.
Notwithstanding the foregoing, in no event shall more than 600,000 shares of
Common Stock (subject to adjustment in accordance with the preceding sentence)
be available for the issuance of Common Stock pursuant to performance shares and
restricted stock awards.
As of March 31, 2004, there were options to purchase a total of 2,014,761
shares of Common Stock under the 1999 LTIP. Also, as of March 31, 2004 there
were only 26,462 options available for grant under the 1999 LTIP.
The 1999 LTIP is administered by the Compensation Committee, which is
presently comprised of Messrs. Matthews, Daniels and Mandia.
6
On April 1, 2004, the closing price of the Common Stock on the Nasdaq
Stock Market was $30.70 per share.
Stock Options. Stock options entitle the holder to purchase shares of
Common Stock at a per share price determined by the Compensation Committee which
price will not be less than the closing price of Common Stock on the Nasdaq
Stock Market (or, if applicable, on the principal securities exchange on which
such shares of Common Stock are traded) on the date of grant ("Fair Market
Value"). Stock options will be exercisable for such period as is determined by
the Compensation Committee, but in no event may options be exercisable more than
10 years after the date of grant. The Compensation Committee may permit an
employee or a consultant who has received a grant of nonstatutory stock options
to transfer the options, subject to such terms and conditions specified by the
Compensation Committee, to the employee's or consultant's spouse and issue
(including adopted and step-children) or to a trust for the benefit of the
employee or consultant and such family members. No employee or consultant may
receive stock option grants under the Plan for more than 300,000 shares of
Common Stock in any 12 month period.
Upon the grant or exercise of an incentive stock option, no income will be
realized by the optionee for Federal income tax purposes (except in certain
circumstances if taxes are due under the alternate minimum tax), and the Company
will not be entitled to any deduction. If the Common Stock acquired upon
exercise is not disposed of within the one-year period beginning on the date of
the transfer of the Common Stock to the optionee, nor within the two-year period
beginning on the date of the grant of the option, any gain or loss realized by
the optionee upon the disposition of such shares will be taxed as long-term
capital gain or loss. In such event, no deduction will be allowed to the
Company. If the Common Stock is disposed of within the one-year or two-year
periods referred to above, the optionee will realize ordinary income at the time
of disposition in an amount equal to the excess of the Fair Market Value of the
Common Stock on the date of exercise (or, if less, the net proceeds of the
disposition) over the exercise price, and the Company will be entitled to a
corresponding deduction.
Upon the grant of a nonstatutory option, no income will be realized by the
optionee for Federal income tax purposes, and the Company will not be entitled
to any deduction. Upon the exercise of such an option, the optionee will realize
ordinary income in the amount by which the Fair Market Value of the Common Stock
at the time of exercise exceeds the exercise price, and the Company will be
entitled to a corresponding deduction. The Compensation Committee may permit an
optionee to satisfy the Company's obligation to withhold required taxes upon the
exercise of a nonstatutory option by having the Company retain the number of
shares of Common Stock, the Fair Market Value of which is equal to the required
withholding amount.
Performance Shares. Performance share awards consist of a grant of actual
shares of Common Stock or share units having a value equal to an identical
number of shares of Common Stock. The number of shares of Common Stock or share
units to which the holder is entitled is based upon performance conditions of
the Company over a performance period (which in no event may be less than twelve
months) as determined by the Compensation Committee. Performance share awards
may provide the holder with dividends or dividend equivalents and voting rights
prior to vesting. The Compensation Committee will determine whether performance
shares granted in the form of share units shall be paid in cash, Common Stock or
a combination thereof.
Awards of performance shares to the Chief Executive Officer and the
employees whom the Compensation Committee considers likely to be among the four
most highly compensated executive officers for the year in which an award is
made or payable shall, except to the extent determined otherwise by the
Compensation Committee, be subject to performance conditions. The conditions
must be established within 90 days after the start of the performance period and
be based on the achievement by the Company or, if applicable, a business unit of
a specified target operating or net income, earnings per share, return on
assets, return on equity, any combination of the foregoing, or on the
achievement of a targeted shareholder return. The Compensation Committee may
reduce or eliminate an award of
7
performance shares to such officers, notwithstanding the achievement of a
specified target. The maximum number of performance shares subject to any award
under the Plan to such an officer is 300,000 for each twelve months during the
performance period; to the extent the award is paid in cash, the maximum is the
cash value of such shares at the closing price on the Common Stock's last
trading day on the Nasdaq Stock Market or, if applicable, the principal
securities exchange on which such shares of Common Stock are traded during the
period. If such an officer terminates employment for any reason during the
period, the award will be payable to the extent determined by the Compensation
Committee if the performance conditions are achieved.
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be
granted under the Plan to provide holders of options granted under the Plan with
an alternative method of realizing the benefits of those options. Upon exercise
of a SAR and surrender of the related option, the Company will pay to the holder
of the SAR an amount equal to 100%, or such lesser percentage as the Committee
may determine, of the excess of (a) the fair market value of the shares of
Common Stock subject to the related option on the date the SAR is exercised over
(b) the exercise price for those shares of Common Stock (the "spread"). This
amount is payable by the Company at the time of exercise in cash, in shares of
Common Stock, or in any combination of cash and shares of Common Stock, as
determined by the Committee. SARs may be exercised only at a time and to the
same extent as the related option is exercisable. Upon exercise of a SAR, the
holder of the SAR must surrender, unexercised, the related option or any
applicable portion thereof.
Restricted Stock. Restricted stock awards consist of a grant of actual
shares of Common Stock or share units having a value equal to an identical
number of shares of Common Stock. Restricted stock awards may provide the holder
with dividends or dividend equivalents and voting rights prior to vesting. The
Compensation Committee will determine whether restricted stock granted in the
form of share units shall be paid in cash, Common Stock or a combination
thereof. The conditions and the length of the period for vesting of restricted
stock awards are established by the Compensation Committee at the time of grant.
A restricted period of not less than three years shall apply to all Common Stock
or share units subject to restricted stock awards, except that a restricted
period of less than three years may apply to such grants with respect to up to
ten percent (10%) of the total shares of Common Stock available for the grant of
awards under the Plan.
Change in Control. In the event of a "Change in Control" (as defined in
the Plan), (i) the restrictions applicable to all shares of restricted stock and
restricted share units shall lapse and such shares and share units shall be
deemed fully vested, (ii) all restricted stock granted in the form of share
units shall be paid in cash, (iii) all performance shares granted in the form of
shares of Stock or share units shall be deemed to be earned in full, (iv) all
performance shares granted in the form of share units shall be paid in cash, and
(v) stock options and SARs that are not exercisable in full shall be deemed
fully exercisable. The amount of any cash payment in respect of a restricted
share unit or performance share unit shall be equal to: (A) in the event the
Change in Control is the result of a tender offer or exchange offer for Common
Stock, the final offer price per share paid for the Common Stock or (B) in the
event the Change in Control is the result of any other occurrence, the aggregate
per share value of Common Stock as determined by the Compensation Committee at
such time. The Compensation Committee may, in its discretion, include such
further provisions and limitations in any agreement documenting such awards as
it may deem equitable and in the best interests of the Company.
Consistent with the Company's past practices in respect of awards under
the 1983 Plan and the 1992 Plan, the 1999 LTIP expressly prohibits the repricing
of any of the options or stock appreciation rights that may be granted under the
1999 LTIP, except pursuant to adjustments of and changes in the Common Stock,
all as more fully described in Section 16 of the 1999 LTIP.
8
The 1999 LTIP or any portion thereof may be amended, suspended or
terminated by the Board of Directors at any time, provided that no amendment
shall be made without shareholder approval if such approval is necessary for the
1999 LTIP to continue to comply with Rule 16b-3 under the Exchange Act. Unless
terminated earlier by the Board of Directors, the term of the 1999 LTIP will
expire on December 31, 2008.
Approval. In order to approve the proposal to amend the 1999 LTIP, the
Company is seeking the approval by the holders of a majority of the outstanding
shares of Common Stock represented at the 2004 Annual Meeting, which is the
approval generally required for amendments to the 1999 LTIP. Proxies will be
voted for or against such proposal in accordance with the specification marked
thereon, and, if no specification is made, will be voted in favor of such
proposal.
The Board of Directors believes that the 1999 LTIP benefits the Company
and its Shareholders by further aligning long-term interests of the employees
with those of the Shareholders. The Board of Directors also believes that grants
under the plan are a favorable method to the Company for compensating the
recipients for past contributions to the Company's success, as well as for
anticipated contributions in the future.
The Board of Directors, therefore, recommends a vote FOR approval of the
amendment to the 1999 LTIP.
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 2005 ANNUAL MEETING
Any shareholder desiring to present a proposal to the shareholders at the
2005 Annual Meeting, which currently is expected to be scheduled on or about May
17, 2005, 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 15, 2004. 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 2005 Annual Meeting or to propose
nominees for election as directors at the 2005 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 General Counsel of the Company, c/o
CONMED Corporation, 525 French Road, Utica, New York 13502 (Telephone (315)
793-8375). 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 16, 2005 and March
18, 2005.
9
CORPORATE GOVERNANCE MATTERS
DIRECTORS, EXECUTIVE OFFICERS, SENIOR OFFICERS AND
NOMINEES FOR THE BOARD OF DIRECTORS
Directors and Nominees for Director
EUGENE R. CORASANTI (age 73) 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 40) 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 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 69) 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 of Syracuse University. The Board of Directors has determined
that Mr. Daniels is independent, and that he is an audit committee financial
expert, within the meaning of the rules of the Securities and Exchange
Commission.
JO ANN GOLDEN (age 56) was elected to the Board of Directors in 2003 following
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 the past 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 current president of the New York 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. The Board of Directors has
determined that Ms. Golden is independent, and that she is an audit committee
financial expert, within the meaning of the rules of the Securities and Exchange
Commission.
STEPHEN M. MANDIA (age 39) has served as a Director of the Company since 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. The Board of Directors has
determined that Mr. Mandia is independent within the meaning of the rules of the
Securities and Exchange Commission.
10
WILLIAM D. MATTHEWS (age 69) 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 the Chairman of the Board of Directors 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. The Board of
Directors has determined that Mr. Matthews is independent, and that he is an
audit committee financial expert, within the meaning of the rules of the
Securities and Exchange Commission.
ROBERT E. REMMELL (age 73) 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. The Board of Directors has determined that
Mr. Remmell is independent within the meaning of the rules of the Securities and
Exchange Commission.
STUART J. SCHWARTZ (age 67) 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. The Board of Directors has determined that Dr. Schwartz is independent
within the meaning of the rules of the Securities and Exchange Commission.
The Board of Directors has determined that Messrs. Daniels, Mandia,
Matthews and Remmell, Ms. Golden and Dr. Schwartz have no material relationship
with the Company and are independent under the standards of the Nasdaq Stock
Market.
After conducting a self-assessment in December 2003, the Board agreed that
the independent directors would meet in executive session after at least two
Board meetings each year. Currently there is no lead director, and the
independent directors designate, on a rotational basis, which director will
preside at each executive session.
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, as amended, expires on 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.
11
Executive Officers and Senior Officers
WILLIAM W. ABRAHAM (age 72) joined the Company in May 1977 as General
Manager. He served as the Company's Vice President-Manufacturing and Engineering
from June 1983 until October 1989. 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 of Syracuse University.
THOMAS M. ACEY (age 57) 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 of Syracuse University 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 40) 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 departments. 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 39) 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 as Controller of Rome Cable Corporation, a wire and cable manufacturer.
He was also employed as a certified public accountant for Price Waterhouse LLP
where he most recently served as an audit manager. Mr. Pomilio graduated with a
B.S. degree in Accounting and Law from Clarkson University.
ROBERT D. SHALLISH, JR. (age 55) 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.
JOHN J. STOTTS (age 47) 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.
12
FRANK R. WILLIAMS (age 55) 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 56) 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.
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 and Woodard are each a party to such an
agreement, as are certain other officers of the Company.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The full Board of Directors met eight times in person and voted by
unanimous consent on two occasions during 2003. Each director attended or acted
upon 100% of the total 2003 board meetings or unanimous consents and committee
meetings or unanimous consents held or acted upon during periods that he or she
was a member of the Board or such committees.
The Company's Board of Directors currently has three standing committees:
the Audit Committee, the Nominating and Corporate Governance Committee and the
Compensation Committee. In addition, during a portion of 2003 the Board of
Directors had a Stock Option Committee, which was disbanded during 2003 and
whose responsibilities were transferred to the Compensation Committee.
13
The Audit Committee presently consists of Messrs. Daniels, Matthews and
Mandia and Ms. Golden. As more fully detailed in its charter, the Audit
Committee is charged with (a) oversight of the Company's accounting and
financial reporting principles, policies and internal accounting controls and
procedures; (b) oversight of the Company's financial statements and the
independent audit thereof; (c) nominating the outside auditors to be proposed
for shareholder approval; (d) evaluating and, where deemed appropriate,
replacing the independent auditors; (e) pre-approving all services permitted by
law to be performed by the independent auditors, (f) approving all related-party
transactions; and (g) establishing procedures for (i) the receipt, retention and
treatment of complaints by the Company regarding accounting, internal accounting
controls or auditing matters, and (ii) the confidential, anonymous submission by
employees of the Company of concerns regarding questionable accounting or
auditing matters. The Audit Committee has delegated its authority to pre-approve
work by the independent auditors and related party transactions to the Chairman
of the Audit Committee, who is required to disclose any such pre-approvals at
the Audit Committee's next meeting. The Audit Committee met seven times during
2003. The current Audit Committee Charter is attached as an appendix to this
proxy statement.
The Compensation Committee presently consists of Messrs. Matthews, Daniels
and Mandia. As set forth in its charter 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 five
times during 2003. The current Compensation Committee Charter is attached as an
appendix to this proxy statement.
The Nominating and Corporate Governance Committee presently consists of
Messrs. Daniels and Mandia and Dr. Schwartz. As stated in its charter, 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 held two meetings in person during 2003. The
current Nominating and Corporate Governance Committee Charter is attached as an
appendix to this proxy statement.
The Stock Option Committee consisted of Messrs. Remmell and Daniels and
Dr. Schwartz. Prior to its being disbanded and its responsibilities being
reassigned, the Stock Option Committee administered the Company's employee stock
option plans and had 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 during 2003, and acted by unanimous written
consent on resolutions five times during 2003.
Each Director was paid $1,000 for each of the eight meetings of the full
Board of Directors personally attended and Messrs. Daniels, Matthews and
Remmell, Dr. Schwartz and Ms. Golden, as non-employee directors, are paid $5,000
for each fiscal quarter 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 or she serves,
with the chair of each committee receiving an additional $500 per meeting,
except with respect to the Audit Committee chair, who receives an additional
$1,000 per meeting. 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), (Messrs. Daniels, Matthews, Remmell, Mandia and Dr.
Schwartz in 2002) (Messrs. Daniels, Matthews, Remmell, Mandia, Ms. Golden and
Dr. Schwartz in 2003) 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.
14
The Board of Directors has the following committees, with the membership
of each committee as indicated:
Board of Directors Compensation Committee Audit Committee
------------------ ---------------------- ---------------
Eugene R. Corasanti, William D. Matthews, Bruce F. Daniels,
Chairman Chairman Chairman
Joseph J. Corasanti Bruce F. Daniels Jo Ann Golden
Bruce F. Daniels Stephen M. Mandia Stephen M. Mandia
Jo Ann Golden William D. Matthews
Stephen M. Mandia
William D. Matthews
Robert E. Remmell
Stuart J. Schwartz
Nominating and Corporate
Governance Committee
--------------------
Bruce F. Daniels,
Chairman
Stuart J. Schwartz
Stephen M. Mandia
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 the Nasdaq
Stock Market, 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. In addition, the Audit Committee and Board of Directors have
determined that Ms. Golden qualifies as an "audit committee financial expert"
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, 2004.
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.
15
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 auditors. The Audit Committee discussed with the independent
auditors matters required to be discussed by Statement on Auditing Standards
Nos. 61, 89 and 90 (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
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, 2003 filed with the SEC.
Submitted by the Audit Committee,
Bruce F. Daniels (Chairman)
Jo Ann Golden
Stephen M. Mandia
William D. Matthews
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE REPORT
The role of the Corporate Governance and Nominating Committee is to
recommend individuals to the Board for nomination as members of the Board and
its committees and to develop and recommend to the Board a set of corporate
governance principles applicable to the Company. The Board of Directors, in its
business judgment, has determined that all members of the Corporate Governance
and Nominating Committee are "independent", as required by applicable listing
standards of the Nasdaq Stock Market, in that no member of the Corporate
Governance and Nominating Committee has received any payments, other than
compensation for Board services from the Company. The Corporate Governance and
Nominating Committee operates pursuant to a Charter that was last amended and
restated by the Board of Directors on February 29, 2004. A copy of the amended
and restated charter is attached to this proxy statement.
16
The Corporate Governance and Nominating Committee has no fixed process for
identifying and evaluating potential candidates to be nominees. To date, the
Corporate Governance and Nominating Committee has not retained the services of
any third party to assist in the process of identifying or evaluating
candidates, although this could change should circumstances warrant the services
of a third party. Likewise, the Corporate Governance and Nominating Committee
has no fixed set of qualifications that must be satisfied before a candidate
will be considered. Rather, the Corporate Governance and Nominating Committee
has the flexibility to consider such factors as it deems appropriate. These
factors may include judgment, skill, diversity, experience with businesses and
other organizations of comparable size, the interplay of the candidate's
experience with the experience of other Board members, and the extent to which
the candidate would be a desirable addition to the Board and any committees of
the Board.
The Committee may consider candidates proposed by management, but is not
required to do so. As previously disclosed, the Corporate Governance and
Nominating Committee will consider any nominees submitted to the Company by
shareholders wishing to propose nominees for election as directors at the 2005
Annual Meeting, provided that the shareholders proposing any such nominees have
adhered to specified advance notice procedures contained in the Company's
by-laws, a copy of which is available on request to the General Counsel of the
Company, CONMED Corporation, 525 French Road, Utica, New York 13502 (Telephone
(315) 793-8375).
Submitted by the Corporate Governance and Nominating Committee,
Bruce F. Daniels (Chairman)
Stephen M. Mandia
Stuart J. Schwartz
SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Shareholders who wish to communicate with the Board of Directors may do so
by sending correspondence to the attention of the General Counsel of the Company
at 525 French Road, Utica New York 13502 with a cover letter explaining that the
correspondence is intended for the Board of Directors. At this time, no
communications received by the Company in this manner will be screened, although
this could change without prior notice. In addition, questions may be posed to
directors during the question and answer period at the Annual Meeting of
Shareholders. The Company has no formal policy requiring that directors attend
the Annual Meeting of Shareholders, although the Company's expectation is that
all directors will attend absent exceptional circumstances. Historically, all
directors have attended the Annual Meeting of Shareholders, and all directors
were present at the 2003 Annual Meeting of Shareholders.
ETHICS DISCLOSURE
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
investor relations section of 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.
17
AUDIT FEES
The aggregate fees and expenses billed by PricewaterhouseCoopers LLP for
professional services rendered for the audit of the Company's annual financial
statements for the years ended December 31, 2003 and December 31, 2002, and for
the reviews of the financial statements included in the Company's Quarterly
Reports on Form 10-Q for those years, were $377,165 and $359,855, respectively.
For those same periods, the audit related fees were $32,502 and $21,042,
respectively. Audit related fees represent fees related to audits of employee
benefit plans.
The aggregate fees billed by PricewaterhouseCoopers LLP for tax services
rendered to the Company, other than the services described above, for the years
ended December 31, 2003 and December 31, 2002 were $287,527 and $363,638. The
aggregate fees for all other services or products provided by PriceWaterhouse
Coopers, were $1,500 in 2003, and $0 in 2002. All other fees represent fees
related to tax compliance, tax consulting and tax planning services.
The Audit Committee has adopted procedures requiring prior approval of
particular engagements for services rendered by the Company's independent
auditors. Consistent with applicable laws, the procedures permit one or more
members of the Audit Committee to approve such services pursuant to authority
delegated by the Audit Committee, provided the Audit Committee is informed.
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, 2003, except
as may otherwise be indicated. Any compensation awarded to or earned by the
Named Executive Officers during 2004 will be reported in the proxy statement for
the Company's 2005 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)).
18
Summary Compensation Table
- --------------------------------------------------------------------------------------------------------------------------
Long-Term All
Compensation Other
Annual Compensation Awards Compensation(4)
- --------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
- --------------------------------------------------------------------------------------------------------------------------
Other
Annual Options(3)
Name Fiscal Salary Bonus(1) Compensation(2) (#)
Principal Position Year ($) ($) ($) ($)
- --------------------------------------------------------------------------------------------------------------------------
Eugene R. Corasanti, 2003 387,307 120,000 493,122 125,000 36,320
Chief Executive Officer, 2002 361,928 0 448,293 187,500 6,566
Chairman of the Board 2001 344,366 52,502 407,539 112,500 6,000
- --------------------------------------------------------------------------------------------------------------------------
Joseph J. Corasanti, 2003 292,308 91,500 133,000 125,000 20,319
President, Chief 2002 222,590 0 121,000 112,500 13,046
Operating Officer 2001 221,432 34,655 110,000 154,687 9,062
- --------------------------------------------------------------------------------------------------------------------------
William W. Abraham, 2003 200,425 61,122 10,000 43,746
Senior Vice President 2002 192,137 0 10,000 12,341
2001 184,185 27,986 -- 15,000 10,820
- --------------------------------------------------------------------------------------------------------------------------
Gerald G. Woodard, 2003 231,292 11,565 10,000 15,805
President of Linvatec 2002 221,169 0 10,000 12,700
2001 209,153 0 -- 15,000 114,441
- --------------------------------------------------------------------------------------------------------------------------
Eugene T. Starr (5) 2003 217,141 43,428 10,000 31,851
President of CONMED 2002 205,156 0 -- 10,000 10,300
Electrosurgery 2001 90,000 30,518 -- 52,500 32,450
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Annual Compensation - Bonus includes cash bonuses in year earned even if
paid after the fiscal year end.
(2) 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.
(3) Options figures are adjusted to reflected 3-for-2 stock dividend as of
September 7, 2001.
(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, payments for supplemental insurance policies, as well as
certain other reimbursements (for example, for non-recurring relocation
expense for Mr. Woodard) and other payments relating to automobile leases
and/or allowances and dues payments.
(5) Mr. Starr was hired effective July 9, 2001, and resigned from the Conmed
Electrosurgery as of February 1, 2004.
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, pension and other employee benefit plans and such bonus or other
compensatory arrangements as may be determined by the Board of
19
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 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 annualized salary would be
400,000 for 2003.
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 annualized salary would be $305,000 for 2003.
20
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 2003, 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 2003. These matters are described below under "Board of
Directors Interlocks and Insider Participation; Certain Relationships and
Related Transactions."
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 Compensation Committee of the Board of Directors (the
"Committee"), options, performance shares and restricted stock may be granted to
employees and/or consultants of the Company and its subsidiaries. The Committee
presently consists of Messrs. Matthews, Daniels and Mandia.
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, 2004, options relating to
2,473,538 shares of Common Stock have been granted and not terminated under the
1999 LTIP. As of March 31, 2004, 973,932 of the options are exercisable. As of
March 31, 2004, options relating to 26,462 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 Compensation
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 Compensation Committee presently consists of Messrs. Matthews,
Daniels and Mandia.
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 1,295,179 shares of Common Stock are still exercisable.
21
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 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 110,384 shares of Common Stock
have been granted and options for 74,292 shares are still exercisable. Options
relating to 102,166 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.
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities to Weighted-Average Equity Compensation
be Issued Upon Exercise Exercise Price of Plans (Excluding
of Outstanding Options, Outstanding Options, Securities Reflected in the
Plan Category Warrants and Rights Warrants and Rights Second Column)
Equity compensation 1999 Long-Term
plans approved by Incentive Stock Plan 2,010,486 $37,534,107 26,462
security holders
1992 Stock Option Plan 1,295,179 $21,738,341 0
Stock Option Plan for
Non-Employee Directors 74,292 $ 1,450,389 102,166
Equity compensation
plans not approved by
security holders
22
Option Grants Table
The following table sets forth, with respect to grants of stock options
made during 2003 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 2003; (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 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 2003
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 in Base Price
Name (#) 2003 ($/Sh) Expiration Date 5%($) 10%($)
- ------------------- ----------- ------------ ----------- --------------- ---------- ----------
Eugene R. Corasanti 125,000 21.35 17.74 May 20, 2013 $1,394,574 $3,534,124
Joseph J. Corasanti 125,000 21.35 17.74 May 20, 2013 $1,394,574 $3,534,124
William W. Abraham 10,000 1.71 17.74 May 20, 2013 $111,566 $282,730
Gerald Woodard 10,000 1.71 17.74 May 20, 2013 $111,566 $282,730
Eugene T. Starr 10,000 1.71 17.74 01/12/2004 N/A N/A
Aggregated Option Exercises and Year-End Option Value Table
The following table sets forth, with respect to each exercise of stock
options during 2003 by each of the Named Executive Officers and the year-end
value of unexercised options on an aggregated basis: (i) the name of the
executive officer (column (a)); (ii) the number of shares received upon
exercise, or, if no shares were received, the number of securities with respect
to which the options were exercised (column (b)); (iii) the aggregate dollar
value realized upon exercise (column (c)); (iv) the total number of securities
underlying unexercised options held at December 31, 2003, separately identifying
the exercisable and unexercisable options (column (d)); and (v) the aggregate
dollar value of in-the-money, unexercised options held at December 31, 2003,
separately identifying the exercisable and unexercisable options (column (e)).
The Company has not issued any stock appreciation rights.
23
Aggregated Option Exercises in 2003 and
December 31, 2003 Option Values
(a) (b) (c) (d) (e)
Name of Securities Underlying
Unexercised Options at Value of Unexercised In-the-Money
12/31/03 (#) Options at 12/31/03 ($)(1)
------------------------------ ---------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Eugene R. Corasanti 0 $ 0.00 684,363 125,000 $4,753,882.00 $757,500.00
Joseph J. Corasanti 45,267 $554,977.58 521,225 143,009 $3,330,508.00 $848,317.00
William W. Abraham 9,355 $127,210.51 131,846 10,000 $1,009,236.00 $ 60,600.00
Gerald Woodard 0 $ 0.00 39,505 48,009 $ 329,282.00 $328,079.00
Eugene T. Starr 27,001 $ 56,879.10 10,000 35,501 $ 21,173.00 $106,919.00
- --------------------------------------------------------------------------------
(1) Assumes $23.80 per share fair market value on December 31, 2003 which was
the closing price on December 31, 2003, the last day of trading on the
Nasdaq Stock Market in 2003.
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, 2003, Messrs. E. Corasanti, J. Corasanti and Abraham
had eight, eleven and seven years of credited service, respectively in the
Conmed Pension Plan. Messrs. Woodard and Starr had four and three 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.
24
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) 2003 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.
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) 2003 statutory limits are $160,000 for straight life annuity
benefit payable at age 65 and $200,000 annual compensation taken into account in
determining average pay.
25
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) Statutory limits are $160,000 as a straight life annuity payment
payable at age 65 and $200,000 annual compensation taken into account in
determining average pay.
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 Compensation Committee administers the Company's stock
option plans. The Compensation Committee is presently composed of Messrs.
Matthews, Daniels and Mandia.
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 $400,000.
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 $305,000.
26
In 2001, the Company focused 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 a dedicated endoscopy 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 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.
During 2003, the Company continued its focus on internal growth, through
the introduction of a number of new products and an increase in the number of
sales representatives representing its orthopedic products. In addition, the
Company completed strategic acquisitions and continued to integrate completed
acquisitions. The Company experienced record revenues and net income, before
certain charges. Further, the Company lowered its debt to total capitalization
ratio despite one significant acquisition at the beginning of the year, and
reduced its interest cost for outstanding debt. Moreover, the Company resolved
significant litigation on favorable terms. 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 $400,000, and approved an increase in base compensation for Mr. J.
Corasanti to $305,000. These increases were effective on or about June 1, 2003.
In addition, in light of the uncertainty surrounding split-dollar life insurance
premiums following the enactment of the Sarbanes-Oxley Act of 2002 and its
implementing regulations, and because the Company had a prior contractual
commitment to provide such insurance, the Company agreed to provide payments to
Mr. J. Corasanti in an amount sufficient to allow him to continue to pay the
premiums due on a split-dollar life insurance policy in which the Company no
longer has any interest. In light of the Company's year-end results, a bonus of
$120,000 was awarded to Mr. E. Corasanti and a bonus of $91,500 was awarded to
Mr. J. Corasanti. Likewise, certain other officers were awarded bonuses 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 2003, Mr. E. Corasanti was granted options relating to
125,000 shares, and Mr. J. Corasanti was granted options relating to 125,000
shares. In 2003, the Compensation Committee also granted options to certain
other executive officers.
27
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.
Although the Company's Board of Directors, including its Compensation
Committee, retains full discretion to structure executive compensation in the
best overall interests of the Company, the Board of Directors will consider the
implications of Section 162(m) of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder in structuring and managing executive
compensation. The Board's consideration of Section 162(m) may include, among
other things, structuring compensation as qualified performance-based
compensation, requesting that executive officers defer compensation in excess of
$1 million per year, and requesting that executive officers delay the exercise
of stock options if such exercise would lead to the related compensation being
non-deductible under Section 162(m).
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, Jo Ann Golden, 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 Compensation 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
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 no payments to the firm in 2003, although a nominal
amount of work has been performed for which bills have not been issued. This
work was pre-approved pursuant to the procedures of the Audit Committee.
During 2003, the Company made aggregate payments of $71,175 to George A.
Nole & Son, Inc., a construction company, in connection with certain renovations
being made to 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 contracts were awarded following a
competitive bidding process, except for certain contracts the expected value of
which was under $40,000. This work was pre-approved pursuant to the procedures
of the Audit Committee.
28
Through December 31, 2001, the Company had paid all premiums on certain
split-dollar life insurance policies with face amounts totaling $4,397.567 for
the benefit of Eugene R. Corasanti. The Company did not pay or accrue premiums
in the fiscal year ended December 31, 2003. Premiums paid by the Company in
prior years are treated by the Company as a loan to Mr. Eugene Corasanti, and at
December 31, 2003, the aggregate amount due the Company from Mr. E. Corasanti
related to these split-dollar life insurance policies is $815,633. 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, 2003. Premiums paid by the Company in prior years are treated by
the Company as a loan to Mr. J. Corasanti, and at December 31, 2003, the
aggregate amount due the Company from Mr. J. Corasanti related to these
split-dollar life insurance policies is $36,390. 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.
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, 2004 through March 31, 2005 at a total cost of $ 450,000, which
covers directors and officers of the Company and its subsidiaries.
29
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.
[LINE GRAPH OMITTED]
ANNUAL REPORT
The annual report for the fiscal year ended December 31, 2003, including
financial statements, isbeing furnished with this proxy statement to
shareholders of record on March 31, 2004. The annual report does not constitute
a part of the proxy soliciting material and is not deemed "filed" with the SEC.
30
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
Name of Beneficial Owner Ownership Percent of Class
- ----------------------------------------------- ----------------- ----------------
William W. Abraham(1) 229,321 0.74
Eugene R. Corasanti(2) 1,045,906 3.31
Joseph J. Corasanti(3) 539,616 1.75
Bruce F. Daniels(4) 21,393 0.07
Jo Ann Golden(5) 5,912 0.02
William D. Matthews(6) 20,264 0.07
Robert E. Remmell(7) 14,177 0.05
Stuart J. Schwartz(8) 22,389 0.07
Stephen M. Mandia(9) 8,250 0.03
Eugene T. Starr(10) 572 0.00
Gerald Woodard(11) 36,504 0.12
Directors and executive officers as a group 2,508,640 8.0
(16 persons)(1-12)
Wellington Management Company, LLP(13) 3,744,750 12.91
75 State Street
Boston, Massachusetts 02109
AXA Financial, Inc.(and related entities)(14) 1,761,541 6.7
1290 Avenue of the Americas
New York, New York 10104
Barclay's Global Investors, N.A.(15) 1,880,416 6.48
45 Fremont Street
San Francisco, California 94105
MMI Investments, L.P.(16) 1,756,000 6.1
152 West 57th Street
New York, New York 10019
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.
o * Less than 1%.
31
(1) Includes 133,846 shares subject to options, exercisable within 60 days.
(2) Includes 722,319 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 507,229 shares subject to options, exercisable within 60 days.
Joseph J. Corasanti is the son of Eugene R. Corasanti.
(4) Includes 18,018 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 13,508 shares subject to options, exercisable within 60 days.
(7) Includes 13,502 shares subject to options, exercisable within 60 days.
(8) Includes 20,264 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.
(9) Includes 4,500 shares subject to options, exercisable within 60 days
(10) Eugene Starr is no longer an employee.
(11) Includes 36,504 shares subject to options, exercisable within 60 days.
(12) Includes shares subject to options, exercisable within 60 days, held by
William W. Abraham, Eugene R. Corasanti, Joseph J. Corasanti, Bruce F.
Daniels, Jo Ann Golden, William D. Matthews, Robert E. Remmell, Stuart J.
Schwartz, and Gerald Woodard, 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
2,508,640 shares, which is approximately 8% of the Common Stock
outstanding.
(13) An amendment to a Schedule 13G filed with the SEC by Wellington Management
Company, LLP on February 12, 2004 indicates that Wellington Management
Company, LLP may be deemed to beneficially own 3,744,750 shares of Common
Stock that are held of record by its clients by virtue of having shared
voting power over 2,495,850 shares and shared dispositive power over
3,744,750 shares in its capacity as an investment adviser.
(14) 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
10, 2004 indicates that such entities beneficially own 1,761,541 shares of
Common Stock by virtue of having sole dispositive power over 921,522
shares acquired solely for investment purposes by AXA Rosenberg Investment
Management LLC and shared dispositive power over 838,719 shares acquired
solely for investment purposes by Alliance Capital Management L.P. on
behalf of client discretionary investment advisory accounts, and 1,300
shares acquired solely for investment purposes by Equitable Life Assurance
Society of the United States. The group also reports having sole voting
power with respect to 1,422,441 shares and shared voting power with
respect to 8,425 shares.
(15) A Schedule 13G filed with the SEC by Barclays Global Investors, N.A. on
February 17, 2004 indicates that Barclays Global Investors, N.A. and
Barclays Global Fund Advisors beneficially own 1,880,416 shares of Common
Stock by virtue of having sole voting power over 1,706,856 shares of
Common Stock and sole dispositive power over 1,706,856 shares of Common
Stock in their roles as investment advisors for certain funds.
(16) A Schedule 13D/A filed with the SEC by MMI Investments L.P. on October 29,
2003 indicates that MMI Investments beneficially owns 1,756,000 shares of
Common Stock by virtue of having sole voting power over 1,706,856 shares
of Common Stock and sole dispositive power over 1,706,856 shares of Common
Stock.
On March 31, 2004, there were 1,168 shareholders of record of the
Company's Common Stock.
32
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, 2003, 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 the following: Luke A. Pomilio and Frank R. Williams were each one
day late in filing a Form 4 due to miscommunications by a filing service.
Appendices:
A. Audit Committee Charter
B. Compensation Committee Charter
C. Nominating and Corporate Governance Committee Charter
33
ANNEX A
CONMED CORPORATION
AUDIT COMMITTEE CHARTER
Amended and Restated as of March 17, 2004
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 and the rules promulgated thereunder (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 three 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 within the meaning of any rules established by
the Securities and Exchange Commission (the "SEC") for these purposes. .
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 three 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.
II. Purposes of the Audit Committee: The purposes of the Audit Committee are
to oversee the accounting and financial reporting processes of the Company
and the audits of the financial statements of the Company, and to assist
the Board of Directors:
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III.
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;
9. by receiving and reviewing any reports required by or otherwise
contemplated by the 2002 Act and, as appropriate, responding to such
reports; and
10. preparing such reports required of the Audit Committee by the SEC
for inclusion in the Company's annual proxy or otherwise.
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
A - 2
or its members to conduct "field work" or 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 Audit Committee annually a
formal written statement of fees billed in each of the last two
fiscal years for each of the following categories of services
rendered by the outside auditors: (i) the audit of the Company's
annual financial statements and the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q
; or services that are normally provided by the independent auditors
in connection with statutory and regulatory filings or engagements;
(ii) assurance and related services not included in clause (i) that
are reasonably related to the performance of the audit or review of
the Company's financial statements, in the aggregate and by each
service; (iii) tax compliance, tax advice and tax planning services,
in the aggregate and by each service; and (iv) all other products
and services rendered by the outside auditors , 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
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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,
(i) to be directly responsible for the appointment,
compensation, retention and oversight of the work of the
independent auditors (including the resolution of
disagreements between management and the independent
auditors regarding financial reporting), who shall report
directly to the Audit Committee ;
(ii) to be directly responsible for the appointment,
compensation, retention and oversight of the work of any
other registered public accounting firm engaged for the
purpose of preparing or issuing an audit report or to
perform audit, review or attestation services, which firm
shall also report directly to the Audit Committee;
(iii) to pre-approve or adopt appropriate procedures to
pre-approve, all audit and non-audit services to be provided
by the independent auditors , and to review the fees charged
by the outside auditors for audit and non-audit services;
(iv) 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;
(v) 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
(vi) to instruct the outside auditors that the outside auditors
are ultimately accountable to the Board of Directors and
Audit Committee;
(vii) to obtain from the independent auditors in connection with
any audit a timely report relating to the Company's annual
audited financial statements describing critical accounting
policies and practices used, alternative treatments of
financial information within generally accepted accounting
principles that have been discussed with management,
ramifications of the use of such alternative disclosures and
treatments, and
A - 4
the treatment preferred by the independent auditors and
management, and any material written communications between
the independent auditors and management, such as any
"management" letter or schedule of unadjusted differences;
(viii) to review and evaluate the qualifications, performance and
independence of the lead partner of the independent
auditors;
(ix) to discuss with management the timing and process for
implementing the rotation of the lead audit partner, the
concurring partner and any other active audit engagement
team partner, and to consider whether there should be a
regular rotation of the audit firm itself;
(x) to review and approve all related party transactions of the
Company ; and
(xi) to take into account the opinions of management and the
internal officer or officers of the Company responsible for
internal accounting and financial controls in assessing the
independent auditors' qualifications, performance and
independence;
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 accounting principles and policies, financial
reporting and internal control over financial reporting,
(i) to advise management and officers responsible for internal
accounting and financial controls that they are expected to
provide to the Audit Committee a timely communication of
significant financial reporting issues and practices
relating to accounting principles and policies, financial
reporting and internal control over financial reporting;
(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, including, but not
limited to, reports or communications required by or
referred to in Statements on Auditing Standards Nos. 61, 89
and 90 (as codified by AU Section 380), as may be modified
or supplemented, including reports and communications
related to:
A - 5
o deficiencies noted in the audit in the design or
operation of internal controls including significant
deficiencies or material weaknesses, in internal control
identified during the audit or other matters relating to
internal control over financial reporting;
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 any restriction on audit scope
o significant accounting policies, or matters that
otherwise are required to be disclosed to the Audit
Committee, which the Audit Committee may discuss with
the auditor's national office as the Audit Committee may
deem necessary, with respect to auditing or accounting
issues presented by the engagement team;
o management judgments and accounting estimates;
o any accounting adjustments arising from the audit that
were noted or proposed by the auditors but were passed
(as immaterial or otherwise);
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;
A - 6
(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, including
the annual audited financial statements and quarterly
financial statements, including the Company's
disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operations ;
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 discuss significant changes to the 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;to discuss any difficulties the independent
auditors encountered in the course of the audit,
including any restrictions on their activities or access
to requested information and any significant
disagreements with management;
o to discuss any "management" or "internal control" letter
issued, or proposed to be issued, by the independent
auditors to the Company;
o to review the form of opinion the independent auditors
propose to render to the Board of Directors and
shareholders; and
o to discuss, as appropriate: (a) any major issues
regarding accounting principles and financial statement
presentations, including any significant changes in the
Company's selection or application of accounting
principles, and major issues as to the adequacy of the
Company's internal controls and any special audit steps
adopted in light of material control deficiencies; (b)
analyses prepared by management and/or the independent
auditors setting forth significant financial
A - 7
reporting issues and judgments made in connection with
the preparation of the financial statements, including
analyses of the effects of alternative GAAP methods on
the financial statements; and (c) the effect of
regulatory and accounting initiatives, as well as
off-balance sheet structures, on the financial
statements of the Company;
(iv) to inquire of the Company's chief executive officer and chief
financial officer as to the existence of any significant
deficiencies or material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the Company's ability to record,
process, summarize and report financial information, and as to
the existence of any fraud, whether or not material, that
involves management or other employees who have a significant
role in the Company's internal control over financial reporting;
(v) to obtain from the outside auditors assurance that the audit was
conducted in a manner consistent with the auditing standards
generally accepted in the United States of America and with
applicable standards adopted or required by other regulators with
respect to certain procedures to be followed in any audit of
financial statements; 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; to discuss and review the type and
presentation of information to be included in earnings press
releases;
(viii) to discuss the types of financial information and earnings
guidance provided, and the types of presentations made, to
analysts and rating agencies;
(ix) to establish procedures for the receipt, retention and treatment
of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and for the
confidential, anonymous submission by Company employees of
concerns regarding questionable accounting or auditing matters;
(x) to review and discuss any reports concerning material violations
submitted to it by Company attorneys or outside counsel pursuant
to the SEC attorney professional responsibility rules or
otherwise; and
(xi) to establish hiring policies for employees or former employees of
the independent auditors.
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;
A - 8
(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.
(iv) to prepare and review with the Board an annual performance
evaluation of the Audit Committee, which evaluation must
compare the performance of the Audit Committee with the
requirements of this charter. The performance evaluation
by the Audit Committee shall be conducted in such manner
as the Audit Committee deems appropriate. The report to
the Board may take the form of an oral report by the
chairperson of the Audit Committee or any other member of
the Audit Committee designated by the Audit Committee to
make this report.
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. The Company shall provide for appropriate funding, as
determined by the Audit Committee, in its capacity as a committee of the
Board, for payment of:
1. Compensation to the independent auditors and any other public
accounting firm engaged for the purpose of preparing or issuing an
audit report or performing other audit, review or attest services
for the Company;
2. Compensation of any advisers employed by the Audit Committee; and;
3. Ordinary administrative expenses of the Audit Committee that are
necessary or appropriate in carrying out its duties.
A - 9
ANNEX B
CONMED CORPORATION
COMPENSATION COMMITTEE CHARTER
Purpose of Committee
The purpose of the Compensation Committee (the "Committee") of the Board
of Directors (the "Board") of Conmed Corporation (the "Company") is to
discharge the Committee's responsibilities relating to compensation of the
Company's executives and to produce an annual report on executive
compensation for inclusion in the Company's proxy statement, in accordance
with the rules and regulations of the Securities and Exchange Commission
(the "SEC") and applicable law.
Committee Membership
Except as permitted by Nasdaq rule 4350(c)(3), the Committee shall consist
solely of "independent directors," i.e., those directors who neither are
officers or employees of the Company or its subsidiaries nor have a
relationship which, in the opinion of the Board, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director, and who are otherwise "independent" under the rules of the
Nasdaq Stock Market, Inc. Members shall be appointed by the Board based on
nominations by the Company's Corporate Governance Nominating and Committee
and shall serve at the pleasure of the Board and for such term or terms as
the Board may determine.
Committee Structure and Operations
The Committee shall designate one member of the Committee as its
chairperson. [In the event of a tie vote on any issue, the chairperson's
vote shall decide the issue.] The Committee shall meet in person or
telephonically at least twice a year, and perhaps more frequently, in
conjunction with regularly scheduled meetings of the Board at regularly
scheduled times and places determined by the Committee chairperson, with
further meetings to occur, or actions to be taken by unanimous written
consent, when deemed necessary or desirable by the Committee or its
chairperson. The Company's Chief Executive Officer ("CEO") may not be
present during any voting or deliberations of the Committee regarding the
CEO's compensation.
Committee Duties and Responsibilities
The following are the duties and responsibilities of the Committee:
1. In consultation with senior management, to establish the Company's
general compensation philosophy, and to oversee the development and
implementation of compensation programs.
2. To review and approve corporate goals and objectives relevant to the
compensation of the CEO, to evaluate the performance of the CEO in
light of those goals and objectives, and to determine, or recommend
to the Board for determination, the CEO's compensation level based
on this evaluation. In determining or recommending the long-term
incentive
B - 1
component of CEO compensation, the Committee shall consider, among
other factors, the Company's performance and relative stockholder
return, the value of similar incentive awards to CEOs at comparable
companies, the awards given to the CEO in past years, and other
factors that the Committee deems appropriate.
3. To determine, or recommend to the Board for determination, the
compensation of all other executive officers of the Company.
4. To make recommendations to the Board with respect to the Company's
incentive compensation plans and equity-based plans, including the
Conmed Corporation 1992 Stock Option Plan and the Conmed Corporation
1999 Long-Term Incentive Plan, to oversee the activities of the
individuals and committees responsible for administering these
plans, to approve grants and issuances under these plans, and to
discharge any responsibilities imposed on the Committee by any of
these plans.
5. To approve issuances under, or any material amendment of, any tax
qualified, non-discriminatory employee benefit plan or parallel
nonqualified plan pursuant to which a director, officer, employee or
consultant will acquire stock or options.
6. To approve issuances under, or any material amendment of, any stock
option or other similar plan pursuant to which a person not
previously an employee or director of the Company, as an inducement
material to the individual's entering into employment with the
Company, will acquire stock or options, upon recommendation and
approval of President or CEO.
7. In consultation with management, to oversee regulatory compliance
with respect to compensation matters, including overseeing the
Company's policies on structuring compensation programs to preserve
tax deductibility, and, as and when required, establishing
performance goals and certifying that performance goals have been
attained for purposes of Section 162(m) of the Internal Revenue
Code.
8. To review and approve any severance or similar termination payments
proposed to be made to any current or former executive officer of
the Company.
9. To prepare and issue the evaluations and reports required under
"Committee Reports" below.
10. To perform any other duties or responsibilities expressly delegated
to the Committee by the Board from time to time relating to the
Company's compensation programs.
Delegation to Subcommittee
The Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Committee consisting
of one or more members. In particular, the Committee may delegate the
approval of certain transactions to a subcommittee consisting solely of
members of the Committee who are (i) "Non-Employee Directors" for the
purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as in
effect from time to time, and (ii) "outside directors" for the purposes of
Section 162(m) of the Internal Revenue Code, as in effect from time to
time.
Committee Reports
The Committee shall produce the following reports and provide them to the Board.
1. An annual report of the Compensation Committee on executive
compensation for inclusion in the Company's annual proxy statement
in accordance with applicable SEC rules and regulations.
2. An annual performance evaluation of the Committee, which evaluation
must compare the performance of the Committee with the requirements
of this charter. The performance evaluation should also recommend to
the Board any improvements to this charter deemed
B - 2
necessary or desirable by the Committee. The performance evaluation
by the Committee shall be conducted in such manner as the Committee
deems appropriate. The report to the Board may take the form of an
oral report by the chairperson of the Committee or any other member
of the Committee designated by the Committee to make this report.
3. A summary of the actions taken at each Committee meeting, which
shall be presented to the Board at the next Board meeting.
Resources and Authority of the Committee
The Committee shall have the resources and authority appropriate to
discharge its duties and responsibilities, including the authority to
select, retain, terminate, and approve the fees and other retention terms
of special counsel or other experts or consultants, as it deems
appropriate, without seeking approval of the Board or management with
respect to compensation consultants retained to assist in the evaluation
of director, CEO or executive officer compensation, this authority shall
be vested solely in the Committee.
B - 3
ANNEX C
CORPORATE GOVERNANCE AND
NOMINATING COMMITTEE CHARTER
Amended and Restated as of February 29, 2004
I. Purpose of Committee
The purpose of the Corporate Governance and Nominating Committee (the
"Committee") of the Board of Directors (the "Board") of Conmed Corporation
(the "Company") is to recommend individuals to the Board for nomination as
members of the Board and its committees and to develop and recommend to
the Board a set of corporate governance principles applicable to the
Company. The Committee shall report to the Board on a regular basis and
not less than once a year.
II. Committee Membership
The Committee shall consist solely of three or more members of the Board,
each of whom is, in the business judgment of the Board, "independent"
under the rules of the NASDAQ, or any other similar national stock
exchange on which the Company's stock may be listed. The initial members
of the Committee shall be appointed by the Board. Candidates to fill
subsequent vacancies in the Committee shall be nominated by the Committee
as set forth below and appointed by the Board. Members shall serve at the
pleasure of the Board and for such term or terms as the Board may
determine.
III. Committee Structure and Operations
The Committee shall designate one member of the Committee as its
chairperson. In the event of a tie vote on any issue, the chairperson's
vote shall decide the issue. The Committee shall meet in person or
telephonically at least twice a year at a time and place determined by the
Committee chairperson, with further meetings to occur when deemed
necessary or desirable by the Committee or its chairperson.
IV. Committee Duties and Responsibilities
The following are the duties and responsibilities of the Committee:
1. To make recommendations to the Board from time to time as to
changes that the Committee believes to be desirable to the
size of the Board.
2. To identify individuals believed to be qualified to become
Board members, and to recommend to the Board the nominees to
stand for election as directors at the annual meeting of
stockholders or, if applicable, at a special meeting of
stockholders. In the case of a vacancy in the office of a
director (including a vacancy created by an increase in the
size of the board), the Committee shall recommend to the Board
an individual to fill such vacancy either through appointment
by the Board or through election by stockholders. In
nominating candidates, the Committee shall take into
consideration such factors as it deems appropriate. These
factors may include judgment, skill, diversity, experience
with businesses and other organizations of comparable size,
the interplay of the candidate's experience with the
experience of other Board members, and the
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extent to which the candidate would be a desirable addition to
the Board and any committees of the Board. The Committee shall
consider all candidates recommended by the Company's
shareholders in accordance with the procedures set forth in
the Company's annual proxy statement. The Committee may also
consider candidates proposed by management, but is not
required to do so.
3. To identify Board members qualified to fill vacancies on any
committee of the Board (including the Committee) and to
recommend that the board appoint the identified member or
members to the respective committee. In nominating a candidate
for committee membership, the Committee shall take into
consideration the factors set forth in the charter of the
committee, if any, as well as any other factors it deems
appropriate, including without limitation the consistency of
the candidate's experience with the goals of the committee and
the interplay of the candidate's experience with the
experience of other committee members.
4. Establish procedures for the Committee to exercise oversight
of the evaluation of the Board and management.
5. Develop and recommend to the Board a set of corporate
governance principles applicable to the Company, and to review
those principles at least once a year.
6. Prepare and issue the evaluation required under "Performance
Evaluation" below.
7. Any other duties or responsibilities expressly delegated to
the Committee by the Board from time to time relating to the
nomination of Board and committee members.
V. Performance Evaluation
The Committee shall produce and provide to the Board an annual performance
evaluation of the Committee, which evaluation shall compare the
performance of the Committee with requirements of this charter and set
forth the goals and objectives of the Committee for the upcoming year. The
performance evaluation shall also recommend to the Board any improvements
to the Committee's charter deemed necessary or desirable by the Committee.
The performance evaluation by the Committee shall be conducted in such
manner as the committee deems appropriate. The report to the Board may
take the form of any oral report by the chairperson of the Committee or
any other member of the Committee designated by the Committee to make this
report.
VI. Delegation to Subcommittee
The Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Committee.
VII. Resources and Authority of the Committee
The Committee shall have the resources and authority appropriate to
discharge its duties and responsibilities, including the authority to
retain counsel and other experts or consultants. The Committee shall have
the sole authority to select and retain a consultant or search firm, to
terminate any consultant or search firm retained by it, and to approve the
consultant or search firm's fees and other retention terms.
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