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OMB APPROVAL
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OMB Number:
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3235-0059
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Expires:
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January 31, 2008
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
x
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Filed by a Party other than the Registrant
o
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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x
Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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ROCHESTER MEDICAL CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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x
No fee required.
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o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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o
Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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SEC 1913 (02-02)
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Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number.
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ROCHESTER
MEDICAL CORPORATION
One Rochester Medical
Drive
Stewartville, Minnesota
55976
Telephone
(507) 533-9600
December 20, 2007
Dear Shareholders:
You are cordially invited to join us for our 2008 annual meeting
of shareholders, which will be held on Wednesday,
February 6, 2008, at 3:30 p.m. (Central Standard Time)
in the Rochester Room, Minneapolis Hilton and Towers Hotel, 1001
Marquette Avenue, Minneapolis, Minnesota 55403. Holders of
record of our common stock as of December 10, 2007, are
entitled to notice of and to vote at the 2008 annual meeting.
The Notice of Annual Meeting of Shareholders and the proxy
statement that follow describe the business to be conducted at
the annual meeting.
We hope you will be able to attend the annual meeting. However,
even if you plan to attend in person, please vote your shares
promptly to ensure that they are represented at the annual
meeting. You may submit your proxy vote by telephone or internet
as described in the following materials or by completing and
signing the enclosed proxy card and returning it in the envelope
provided. If you decide to attend the annual meeting and wish to
change your proxy vote, you may do so automatically by voting in
person at the annual meeting.
We look forward to seeing you at the annual meeting.
Sincerely,
Anthony J. Conway
President and Secretary
ROCHESTER
MEDICAL CORPORATION
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
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Date and Time:
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Wednesday, February 6, 2008 at 3:30 p.m., Central
Standard Time
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Place:
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Minneapolis Hilton and Towers Hotel
Rochester Room
1001 Marquette Avenue
Minneapolis, Minnesota 55403
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Items of Business:
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1. To elect five directors to serve until the next Annual
Meeting of Shareholders.
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2. To act upon any other business that may properly come
before the Annual Meeting of Shareholders and any adjournment
thereof.
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Record Date and Voting of Securities:
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Our common stock, without par value, is our only authorized
voting security. Only holders of our common stock whose names
appear of record on our books on December 10, 2007, are
entitled to receive notice of, and to vote at, the 2008 annual
meeting. At the close of business on December 10, 2007, a
total of 11,821,886 shares of common stock were
outstanding, each entitled to one vote. The holders of a
majority of the common stock entitled to vote shall constitute a
quorum for the transaction of business at the 2008 annual
meeting. If such quorum shall not be present or represented at
the 2008 annual meeting, the shareholders present or represented
at the 2008 annual meeting may adjourn the meeting from time to
time without notice other than announcement at the meeting until
a quorum shall be present or represented. Holders of common
stock do not have cumulative voting rights.
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Voting by Proxy:
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The persons named as proxies in the enclosed form of proxy will
vote the common stock according to the instructions given
therein or, if no instruction is given, then in favor of all
nominations. A person giving a proxy may revoke it before it is
exercised by delivering to our Corporate Secretary a written
notice terminating the proxys authority or by duly
executing a proxy bearing a later date. A shareholder who
attends the annual meeting need not revoke his or her proxy and
vote in person unless he or she wishes to do so.
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By Order of the Board of Directors:
Anthony J. Conway
President and Secretary
December 20, 2007
PROXY
STATEMENT
TABLE OF
CONTENTS
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ii
PROXY STATEMENT
2008 ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD ON FEBRUARY 6,
2008
The Board of Directors of Rochester Medical Corporation is
soliciting proxies for use at the annual meeting of shareholders
to be held on February 6, 2008, and at any adjournment of
the meeting. This proxy statement and the enclosed proxy card
are first being mailed or given to shareholders on or about
December 20, 2007.
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What
is the purpose of the annual meeting?
At our annual meeting, shareholders will act upon the matters
outlined in the Notice of Annual Meeting of Shareholders,
including the election of directors. Also, management will
report on our performance during the last fiscal year and, once
the business of the annual meeting is concluded, respond to
questions from shareholders, as time permits.
Who
is entitled to vote at the annual meeting?
The Board has set December 10, 2007, as the record date for
the annual meeting. If you were a shareholder of record at the
close of business on December 10, 2007, you are entitled to
vote at the annual meeting.
As of the record date, 11,821,886 shares of our common
stock were issued and outstanding and, therefore, eligible to
vote at the annual meeting.
What
are my voting rights?
Holders of our common stock are entitled to one vote per share.
Therefore, a total of 11,821,886 votes are entitled to be cast
at the annual meeting. There is no cumulative voting.
How
many shares must be present to hold the annual
meeting?
In accordance with our bylaws, shares equal to a majority of all
of the shares of the outstanding common stock as of the record
date must be present at the annual meeting in order to hold the
meeting and conduct business. This is called a quorum. Your
shares are counted as present at the annual meeting if:
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you are present and vote in person at the meeting; or
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you have properly submitted a proxy card by mail, telephone or
internet.
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If you are a shareholder of record as of the record date, you
can give a proxy to be voted at the annual meeting in any of the
following way
s
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over the telephone by calling a toll-free number;
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electronically, using the internet; or
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by completing, signing and mailing the enclosed proxy card.
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The telephone and internet procedures have been set up for your
convenience. We encourage you to save corporate expense by
submitting your vote by telephone or internet. The procedures
have been designed to authenticate your identity, to allow you
to give voting instructions, and to confirm that those
instructions have been recorded properly. If you are a
shareholder of record and you would like to submit your proxy by
telephone or internet, please refer to the specific instructions
provided on the enclosed proxy card. If you wish to submit your
proxy by mail, please return your signed proxy card to us before
the annual meeting.
If you hold your shares in street name, you must
vote your shares in the manner prescribed by your broker or
other nominee. Your broker or other nominee has enclosed or
otherwise provided a voting instruction card for you to use in
directing the broker or nominee how to vote your shares, and
telephone and internet voting is also encouraged for
shareholders who hold their shares in street name.
What
is the difference between a shareholder of record and a
street name holder?
If your shares are registered directly in your name, you are
considered the shareholder of record with respect to those
shares.
If your shares are held in a stock brokerage account or by a
bank, trust or other nominee, then the broker, bank, trust or
other nominee is considered to be the shareholder of record with
respect to those shares. However, you still are considered the
beneficial owner of those shares, and your shares are said to be
held in street name. Street name holders generally
cannot vote their shares directly and must instead instruct the
broker, bank, trust or other nominee how to vote their shares
using the method described above.
What
does it mean if I receive more than one proxy card?
If you receive more than one proxy card, it means that you hold
shares registered in more than one account. To ensure that all
of your shares are voted, sign and return each proxy card or, if
you submit your proxy vote by telephone or internet, vote once
for each proxy card you receive.
Can
I vote my shares in person at the annual meeting?
If you are a shareholder of record, you may vote your shares in
person at the annual meeting by completing a ballot at the
meeting. Even if you currently plan to attend the annual
meeting, we recommend that you also submit your proxy as
described above so that your vote will be counted if you later
decide not to attend the meeting.
If you are a street name holder, you may vote your shares in
person at the annual meeting only if you obtain a signed letter
or other proxy from your broker, bank, trust or other nominee
giving you the right to vote the shares at the meeting.
What
vote is required for a proposal to be approved?
Directors are elected by a plurality of the votes cast. A
plurality means that the nominees with the greatest number of
votes are elected as directors up to the maximum number of
directors to be chosen at the meeting.
Each other matter that may be acted upon at the meeting will be
determined by the affirmative vote of the holders of a majority
of the shares of our common stock present in person or by proxy
at the meeting and entitled to vote.
You may either vote FOR or WITHHOLD
authority to vote for each nominee for the Board of Directors.
You may vote FOR, AGAINST or
ABSTAIN on other proposals.
2
If you submit your proxy but abstain from voting or withhold
authority to vote on one or more matters, your shares will be
counted as present at the annual meeting for the purpose of
determining a quorum. Your shares also will be counted as
present at the annual meeting for the purpose of calculating the
vote on the particular matter with respect to which you
abstained from voting or withheld authority to vote. If you
abstain from voting on a proposal, your abstention has the same
effect as a vote against that proposal.
If you hold your shares in street name and do not provide voting
instructions to your broker or other nominee, your shares will
be considered to be broker non-votes and will not be
voted on any proposal on which your broker or other nominee does
not have discretionary authority to vote under the rules of the
Nasdaq Stock Market. Shares that constitute broker non-votes
will be counted as present at the annual meeting for the purpose
of determining a quorum, but will not be considered entitled to
vote on the proposal in question. Your broker or other nominee
has discretionary authority to vote your shares on the election
of directors, even if your broker or other nominee does not
receive voting instructions from you.
How
will the proxies vote on any other business brought up at the
annual meeting?
By submitting your proxy card, you authorize the proxies to use
their judgment to determine how to vote on any other matter
brought before the annual meeting. We do not know of any other
business to be considered at the annual meeting.
The proxies authority to vote according to their judgment
applies only to shares you own as the shareholder of record.
Representatives of Wells Fargo Shareowner Services, our transfer
agent, will tabulate votes and act as independent inspectors of
election.
How
does the Board recommend that I vote?
You will vote on the following management proposal:
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Election of directors: Anthony J. Conway, Darnell L. Boehm,
Peter R. Conway, Roger W. Schnobrich and Benson Smith.
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The Board of Directors recommends that you vote
FOR
the
election of each of the nominees to the Board of Directors.
What
if I do not specify how I want my shares voted?
If you submit a signed proxy card or submit your proxy by
telephone and do not specify how you want to vote your shares,
we will vote your shares
FOR
the election of all of the
nominees for director.
Can
I change my vote after submitting my proxy?
Yes. You may revoke your proxy and change your vote at any time
before your proxy is voted at the annual meeting. If you are a
shareholder of record, you may revoke your proxy and change your
vote by delivering to our Corporate Secretary a written notice
terminating the proxys authority or by duly executing a
proxy bearing a later date. A shareholder who attends the annual
meeting need not revoke his or her proxy and vote in person
unless he or she wishes to do so.
3
Where
and when will I be able to find the results of the
voting?
Preliminary results will be announced at the annual meeting. We
will publish the final results in our quarterly report on
Form 10-Q
for the quarter ending March 31, 2008 to be filed with the
Securities and Exchange Commission.
Who
pays for the cost of proxy preparation and
solicitation?
We will pay expenses for solicitation of proxies. Proxies are
being solicited primarily by mail, but, in addition, directors,
officers and regular employees of the company, who will receive
no extra compensation for their services, may solicit proxies
personally, by telephone or by special letter. So far as our
management is aware, only matters described in this Proxy
Statement will be acted upon at the annual meeting. If another
matter requiring a vote of shareholders properly comes before
the annual meeting, the persons named as proxies in the enclosed
proxy form will vote on such matter according to their judgment.
What
are the deadlines for submitting shareholder proposals for the
2009 annual meeting?
In order for a shareholder proposal to be considered for
inclusion in our proxy statement for the 2009 annual meeting,
the written proposal must be received at our principal executive
offices at One Rochester Medical Drive, Stewartville, Minnesota
55976, Attention: Corporate Secretary, on or before
August 22, 2008. The proposal must comply with Securities
and Exchange Commission regulations regarding the inclusion of
shareholder proposals in company-sponsored proxy materials.
Our bylaws provide that a shareholder may present a proposal at
the 2009 annual meeting that is not included in the proxy
statement if proper written notice is received by our Corporate
Secretary at our principal executive offices by the close of
business on August 22, 2008. The proposal must contain the
specific information required by our bylaws. You may obtain a
copy of the bylaws by writing to our Corporate Secretary at the
address stated above.
How
can I communicate with Rochester Medical Corporations
Board of Directors?
Shareholders may communicate with our Board of Directors by
sending a letter addressed to the Board of Directors, all
independent directors or specified individual directors to:
Rochester Medical Corporation,
c/o Corporate
Secretary, One Rochester Medical Drive, Stewartville, Minnesota
55976. All communications will be compiled by the Corporate
Secretary and submitted to the Board of Directors or the
specified directors on a periodic basis.
4
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership of our common
stock by each person or group who beneficially owned five
percent or more of our common stock, each of our directors, each
of the executive officers named in the Summary Compensation
Table in this proxy statement and our directors and executive
officers as a group, as of December 10, 2007. Percentage
ownership calculations for beneficial ownership are based on
11,821,886 shares outstanding as of December 10, 2007.
Unless otherwise noted, the shareholders listed in the table
have sole voting and investment power with respect to the shares
of common stock owned by them, and their address is
c/o One
Rochester Medical Drive, Stewartville, Minnesota 55976.
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Amount and Nature
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Name of Beneficial Owner
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of Beneficial Ownership(1)
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Percent of Class
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Anthony J. Conway
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1,101,834
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(2)(3)(4)
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9.1
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R. Scott Asen
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998,666
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(5)
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8.4
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Peter R. Conway
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818,256
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(3)(6)
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6.9
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Townsend Group Investments, Inc.
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738,864
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(7)
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6.2
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Philip J. Conway
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563,243
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(2)(3)(8)
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4.7
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David A. Jonas
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190,500
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(2)(9)
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1.6
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Dara Lynn Horner
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157,084
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(2)(10)
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1.3
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Robert W. Schnobrich
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115,000
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(11)
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Darnell L. Boehm
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64,000
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(12)
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Martyn R. Sholtis
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79,500
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(2)(13)
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Benson Smith
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106,000
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(14)
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All directors and executive officers as a group (9 persons)
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3,195,417
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(15)
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24.6
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*
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The percentage of shares of common stock beneficially owned does
not exceed one percent of the outstanding shares of common stock.
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(1)
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Beneficial ownership is determined in accordance with rules of
the Securities and Exchange Commission, and includes general
voting power and/or investment power with respect to securities.
Shares of common stock subject to options or warrants currently
exercisable or exercisable within 60 days of
December 10, 2007 are deemed to be outstanding for the
purpose of computing the percentage of the person holding such
options or warrants, but are not deemed outstanding for
computing the percentage of any other person.
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(2)
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The address of each of our executive officers is One Rochester
Medical Drive, Stewartville, Minnesota 55976.
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(3)
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Messrs. Anthony J. Conway, Peter R. Conway and Philip J.
Conway are brothers.
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(4)
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Includes 246,000 shares issuable upon exercise of currently
outstanding options. Also includes 63,755 shares held by
his wife.
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(5)
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We have relied upon information supplied by R. Scott Asen in a
Schedule 13G/A filed by Mr. Asen with the SEC on
January 29, 2007, reporting beneficial ownership data as of
December 31, 2006. As of that date, Mr. Asen held
908,954 shares of common stock and had sole voting and
investment power with respect to these shares. Mr. Asen is
the President of Asen and Co., which provides certain advisory
services to accounts (the Managed Accounts) that
held 89,712 shares of common stock. Mr. Asen had
shared voting and investment power with respect to the shares
owned by the Managed Accounts. Mr. Asen may be deemed to
beneficially own the shares held by the Managed Accounts, but
Mr. Asen disclaims beneficial ownership of such shares. The
address for Mr. Asen is
c/o Asen
and Co., 224 East
49
th
Street, New York, NY 10017.
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(6)
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Includes 122,000 shares issuable upon exercise of currently
outstanding options. Also includes 39,000 shares held by
his wife. Mr. Peter R. Conways address is Route 1,
Box 1575, Chatfield, Minnesota 55923.
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(7)
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We have relied upon information supplied by Townsend Group
Investments, Inc. (Townsend) in a
Schedule 13G/A filed by Townsend with the SEC on
January 25, 2007, reporting beneficial ownership data as of
December 31, 2006. As of that date, Townsend held sole
voting and investment power with respect to 88,400 shares
of common stock, and shared voting and investment power with
respect to 650,464 shares of common stock. The address for
Townsend is 22601 Pacific Coast Highway, Suite 200, Malibu,
CA 90265.
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(8)
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Includes 159,500 shares issuable upon exercise of currently
outstanding options. Also includes 9,600 shares held in an
IRA for the benefit of Mr. Philip J. Conways wife, as
to which he disclaims beneficial ownership.
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(9)
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Includes 169,000 shares issuable upon exercise of currently
outstanding options.
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(10)
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Includes 157,084 shares issuable upon exercise of currently
outstanding options.
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(11)
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Includes 90,000 shares issuable upon exercise of currently
outstanding options. Also includes 24,000 shares held in an
IRA for the benefit of Mr. Schnobrich.
Mr. Schnobrichs address is 530 Waycliffe North,
Wayzata, Minnesota 55391.
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(12)
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Includes 50,000 shares issuable upon exercise of currently
outstanding options. Mr. Boehms address is 19330
Bardsley Place, Monument, Colorado 80132.
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(13)
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Includes 59,500 shares issuable upon exercise of currently
outstanding options.
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(14)
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Includes 106,000 shares issuable upon exercise of currently
outstanding options. Mr. Smiths address is 3028
Castle Pines Drive, Duluth, Georgia 30097.
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(15)
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Includes 1,159,084 shares issuable upon exercise of
currently outstanding options.
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SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our executive officers and directors to file initial
reports of ownership and reports of changes in ownership of our
securities with the Securities and Exchange Commission.
Executive officers and directors are required to furnish us with
copies of these reports. Based solely on a review of the
Section 16(a) reports furnished to us with respect to the
fiscal year ended September 30, 2007 and written
representations from the executive officers and directors, we
believe that all Section 16(a) filing requirements
applicable to our executive officers and directors during the
fiscal year ended September 30, 2007 were satisfied.
ELECTION
OF DIRECTORS
Following the recommendation of the Nominating Committee, the
Board of Directors has nominated the persons named below for
re-election to the Board of Directors at the 2008 annual
meeting. It is intended that the persons named as proxies in the
enclosed form of proxy will vote the proxies received by them
for the election as directors of the nominees named in the table
below except as specifically directed otherwise. Each nominee
has indicated a willingness to serve, but in case any nominee is
not a candidate at the meeting, for reasons not now known to us,
the proxies named in the enclosed form of proxy may vote for a
substitute nominee in their discretion. Information regarding
these nominees is set forth in the table below.
6
The affirmative vote of a plurality of the shares of common
stock present and entitled to vote at the 2008 annual meeting
with respect to the election of directors is necessary to elect
the nominees for director.
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Director
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Name
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Age
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Since
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Position
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Anthony J. Conway
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63
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1988
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|
|
Chairman of the Board, Chief Executive Officer, President and
Secretary
|
Darnell L. Boehm
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|
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59
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1995
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|
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Director
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Peter R. Conway
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53
|
|
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|
1988
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|
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Director
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Roger W. Schnobrich
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77
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1995
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|
|
Director
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Benson Smith
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60
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|
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2001
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|
Director
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The Board of Directors recommends a vote FOR election of the
nominated directors. Proxies will be voted FOR the election of
the nominees unless otherwise specified.
The nominees for election as directors have provided the
following information about themselves.
Anthony J. Conway
, age 63, a founder of Rochester
Medical, has served as Chairman of the Board,
Chief Executive Officer, President, and Secretary of
Rochester Medical since May 1988, and was its Treasurer until
September 1997. In addition to his duties as Chief Executive
Officer, Mr. Anthony Conway actively contributes to our
research and development and design activities. From 1979 to
March 1988, he was President, Secretary and Treasurer of Arcon
Corporation (Arcon), a company that he co-founded in
1979 to develop, manufacture and sell latex-based male external
catheters and related medical devices. Prior to founding Arcon,
Mr. Anthony Conway worked for twelve years for
International Business Machines Corporation in various research
and development capacities. Mr. Anthony Conway is one of
the named inventors on numerous patent applications that have
been assigned to Rochester Medical, of which to date 20 have
resulted in issued United States patents and 32 have resulted in
issued foreign patents.
Darnell L. Boehm
, age 59, has served as a Director
of Rochester Medical since October 1995. Since 1986,
Mr. Boehm has served as a Director of Aetrium, Inc.
(Aetrium), a manufacturer of electromechanical
equipment for handling and testing semiconductors, and also
serves on its Audit Committee and Compensation Committee. From
1986 to 2000, Mr. Boehm also served as the Chief Financial
Officer and Secretary of Aetrium. From August 1999 to January
2002, Mr. Boehm served as a Director of ALPNET, Inc., a
supplier of multilingual information services including language
translation, product localization and other services. He is also
the principal of Darnell L. Boehm & Associates, a
management consulting firm.
Peter R. Conway
, age 53, has served as a Director of
Rochester Medical since May 1988. He is a Director and the Chief
Executive Officer of Halcon Corporation, a manufacturer of
quality custom office furniture of which he was a co-founder in
1978. From 1979 to 1985 Mr. Peter Conway served as a
director of Arcon.
Roger W. Schnobrich
, age 77, has served as a
Director of Rochester Medical since October 1995. Since
September 2004, Mr. Schnobrich has served as a principal of
Waynorth, Inc., a business consulting company.
Mr. Schnobrich served as a partner and then of counsel with
the law firm of Hinshaw & Culbertson from 1997 to
September 2004. Prior to joining Hinshaw & Culbertson,
Mr. Schnobrich was a partner in the law firm of Popham,
Haik, Schnobrich and Kaufman Ltd. for more than five years.
Benson Smith
, age 60, has served as a Director of
Rochester Medical since May 2001. Mr. Smith is the founding
partner of BFS and Associates LLC, a company that provides sales
organization consulting and training. From April 2000 to 2006,
Mr. Smith was a lecturer for the Gallup organization. Prior
to joining the Gallup organization, Mr. Smith worked for
several years with C.R. Bard, Inc. (C.R. Bard), a company
specializing in medical devices, serving most recently as
President and Chief Operating Officer. In 1991, Mr. Smith
was elected to the position of Group Vice President, responsible
for C.R. Bards urological product group. He was promoted
to the
7
position of Executive Vice President in 1993 and became a member
of C.R. Bards Board of Directors in 1994. Shortly
thereafter, Mr. Smith was promoted to the position of
President and Chief Operating Officer. Mr. Smith is also a
director for Zoll Medical and Teleflex Inc.
Our Board of Directors reviews at least annually the
independence of each director. During these reviews, our Board
of Directors considers transactions and relationships between
each director (and his immediate family and affiliates) and our
company and its management to determine whether any such
transactions or relationships are inconsistent with a
determination that the director was independent. This review is
based primarily on responses of the directors to questions in a
directors and officers questionnaire regarding
employment, business, familial, compensation and other
relationships with Rochester Medical and our management. In
November 2007, our Board of Directors determined that no
transactions or relationships existed that would disqualify any
of our directors under Nasdaq Stock Market rules or require
disclosure under Securities Exchange Commission rules, with the
exception of Anthony J. Conway, our President and Chief
Executive Officer, because of his employment relationship with
Rochester Medical, and Peter R. Conway, because of his familial
relationship with Anthony J. Conway. Based upon that finding,
the Board determined that Messrs. Boehm, Schnobrich and
Smith are independent. Each of our Audit, Nominating
and Compensation Committees is composed only of independent
directors.
Director
Qualifications and Selection Process
The Nominating Committee determines the required selection
criteria and qualifications of director nominees based upon the
needs of the Company at the time nominees are considered.
Directors should possess the highest personal and professional
ethics, integrity and values, and be committed to representing
the long-term interests of our shareholders. In evaluating a
candidate for nomination as a director of Rochester Medical, the
Nominating Committee will consider criteria including business
and financial expertise; geography; experience as a director of
a public company; gender and ethnic diversity on the Board; and
general criteria such as ethical standards, independent thought,
practical wisdom and mature judgment. The Nominating Committee
will consider these criteria for nominees identified by the
Nominating Committee, by shareholders, or through some other
source.
These general criteria are subject to modification and the
Nominating Committee shall be able, in the exercise of its
discretion, to deviate from these general criteria from time to
time, as the Nominating Committee may deem appropriate or as
required by applicable laws and regulations.
The Nominating Committee will consider qualified candidates for
possible nomination that are submitted by our shareholders.
Shareholders wishing to make such a submission may do so by
sending the following information to the Nominating Committee
c/o Secretary
at One Rochester Medical Drive, Stewartville, Minnesota 55976:
(1) name of the candidate and a brief biographical sketch
and resume; (2) contact information for the candidate and a
document evidencing the candidates willingness to serve as
a director if elected; and (3) a signed statement as to the
submitting shareholders current status as a shareholder
and the number of shares currently held.
The Nominating Committee makes a preliminary assessment of each
proposed nominee based upon the resume and biographical
information, an indication of the individuals willingness
to serve and other background information. This information is
evaluated against the criteria set forth above and our specific
needs at that time. Based upon a preliminary assessment of the
candidate(s), those who appear best suited to meet our needs may
be invited to participate in a series of interviews, which are
used as a further means of evaluating potential candidates. On
the basis of information learned during this process, the
Nominating Committee determines which nominee(s)
8
to recommend to the Board to submit for election at the next
annual meeting. The Nominating Committee uses the same process
for evaluating all nominees, regardless of the original source
of the nomination.
No candidates for director nominations were submitted to the
Nominating Committee by any shareholder in connection with the
2008 annual meeting.
Board
Meetings and Committees
The Board of Directors conducts its business through meetings of
the Board and the following standing committees: Audit,
Nominating and Compensation. The standing committees regularly
report on their activities and actions to the full Board. Each
of the standing committees has the authority to engage outside
experts, advisors and counsel to the extent it considers
appropriate to assist the committee in its work. Each of the
standing committees has adopted and operates under a written
charter. These charters can be found on the Corporate Governance
section of the Investor Relations page on our website at
www.rocm.com
. Shareholders may request a free printed
copy of any of these charters by contacting our Corporate
Secretary at Rochester Medical Corporation, One Rochester
Medical Drive, Stewartville, Minnesota 55976.
During the fiscal year ended September 30, 2007, the Board
of Directors met on three occasions. Except for Mr. Peter
Conway, no director of the Company attended fewer than 75% of
all board and committee meetings during the fiscal year ended
September 30, 2007. Members of the Board and its committees
also consulted informally with management from time to time and
acted at various times by written consent without a meeting
during fiscal 2007.
The following table reflects the current membership of each
Board committee.
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Committee Membership
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Name
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Audit
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|
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Nominating
|
|
|
Compensation
|
|
|
Anthony J. Conway
|
|
|
|
|
|
|
|
|
|
|
|
|
Darnell L. Boehm
|
|
|
Chair
|
|
|
|
ü
|
|
|
|
ü
|
|
Peter R. Conway
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger W. Schnobrich
|
|
|
ü
|
|
|
|
ü
|
|
|
|
Chair
|
|
Benson Smith
|
|
|
ü
|
|
|
|
Chair
|
|
|
|
ü
|
|
Audit
Committee
The Audit Committee is responsible for assisting the Board of
Directors in monitoring the quality and integrity of our
financial statements, our internal controls, our compliance with
legal and regulatory requirements and the qualifications,
performance and independence of our independent auditor. The
Audit Committee has sole authority to retain and terminate the
independent auditor and is directly responsible for the
compensation and oversight of the work of the independent
auditor. The Audit Committee reviews and discusses with
management and the independent auditor the annual audited and
quarterly financial statements (including the disclosures under
Managements Discussion and Analysis of Financial
Condition and Results of Operations), reviews the
integrity of the financial reporting processes, both internal
and external, reviews the qualifications, performance and
independence of the independent auditor, and prepares the Audit
Committee Report included in the proxy statement in accordance
with the rules and regulations of the Securities and Exchange
Commission. All of the Audit Committee members meet the existing
independence and experience requirements of the Nasdaq Stock
Market and the Securities and Exchange Commission. Our Board of
Directors has identified Mr. Boehm as an audit committee
financial expert under the rules of the Securities and Exchange
Commission. The Audit Committee met six times during the fiscal
year ended September 30, 2007.
9
Nominating
Committee
The Nominating Committee is responsible for assisting the Board
by identifying individuals qualified to become Board members and
recommending to the Board the nominees for election as directors
at the next annual meeting of shareholders. The Nominating
Committee also periodically reviews the structure and membership
of the Board and makes recommendations with respect to the size
and composition of the Board, and develops qualification
criteria for Board members. All of the Nominating Committee
members meet the existing independence requirements of the
Nasdaq Stock Market. The Nominating Committee did not separately
meet during the fiscal year ended September 30, 2007, but
recommended to the Board the nominees for election as directors
for the 2007 annual meeting during a regularly convened meeting
of the Board of Directors.
Compensation
Committee
The Compensation Committee is responsible for assisting the
Board by overseeing the administration of our compensation
programs and reviewing and approving the compensation paid to
our executive officers. The Compensation Committee approves
corporate goals related to the compensation of the Chief
Executive Officer, evaluates the Chief Executive Officers
performance and compensates the Chief Executive Officer based on
this evaluation. All of the Compensation Committee members meet
the existing independence requirements of the Nasdaq Stock
Market. The Compensation Committee met two times during the
fiscal year ended September 30, 2007.
Attendance
at the Annual Meeting
We encourage, but do not require, our Board members to attend
the annual meeting of shareholders. All directors except
Mr. Smith attended our 2007 Annual Meeting of Shareholders.
Code
of Business Conduct and Ethics
We have adopted the Rochester Medical Corporation Code of
Business Conduct and Ethics, which applies to all of our
employees, officers and directors. The Code of Business Conduct
and Ethics includes particular provisions applicable to our
senior financial management, which includes our Chief Executive
Officer, Chief Financial Officer, controller and other employees
performing similar functions. A copy of our Code of Business
Conduct and Ethics is available on the Corporate Governance
section of the Investor Relations page on our website at
www.rocm.com.
We intend to post on our website any
amendment to, or waiver from, a provision of our Code of
Business Conduct and Ethics that applies to any director or
officer, including our principal executive officer, principal
financial officer, principal accounting officer, controller and
other persons performing similar functions, promptly following
the date of such amendment or waiver.
This section provides information relating to our executive
compensation programs and the compensation paid to or accrued
for our named executive officers during fiscal 2007. Our named
executive officers are determined in accordance with the rules
of the Securities and Exchange Commission. For fiscal 2007, our
named executive officers include Anthony J. Conway, our Chief
Executive Officer, President and Secretary; David A. Jonas, our
Chief Financial Officer and Treasurer; Martyn R. Sholtis, our
Corporate Vice President; Philip J. Conway, our Vice President,
Product Technologies; and Dara Lynn Horner, our Vice President,
Marketing (collectively, our NEOs).
10
Compensation
Discussion and Analysis
Rochester Medical develops, manufactures and markets a broad
line of innovative, technologically enhanced PVC-free and
latex-free urinary continence and urine drainage care products
for the extended care and acute care markets. We participate in
the large U.S. medical device industry, and for
compensation purposes we generally compare ourselves against
other publicly-traded medical device companies with market
capital of $100 million to $250 million. We believe
the overall salary structure for our company is below the
mid-point for comparably sized publicly-traded medical device
companies.
Our Compensation Committee, which is comprised of three
independent, non-employee directors, discharges the
responsibilities of our Board of Directors with respect to all
forms of compensation of our executive officers and oversight of
our compensation plans. The Compensation Committee operates
under a written charter, and has the authority to retain outside
counsel, experts and other advisors as it determines appropriate
to assist it in the performance of its functions.
The Compensation Committee believes that compensation paid to
executive officers should be closely aligned with Rochester
Medicals performance on both a short-term and long-term
basis, linked to specific, measurable results intended to create
value for shareholders, and that such compensation should assist
us in attracting and retaining key executives critical to our
long-term success.
In establishing compensation for executive officers, the
following are the Compensation Committees objectives:
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Attract and retain individuals of superior ability and
managerial talent;
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Ensure senior officer compensation is aligned with our corporate
strategies, business objectives and the long-term interests of
our shareholders;
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|
|
|
Increase the incentive to achieve key strategic and financial
performance measures by linking incentive award opportunities to
the achievement of performance goals in these areas; and
|
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|
Enhance the officers incentive to increase our stock price
and maximize shareholder value, as well as promote retention of
key people, by providing a portion of total compensation
opportunities for senior management in the form of direct
ownership in Rochester Medical through stock options
and/or
restricted stock.
|
Our overall compensation program is structured to attract,
motivate and retain highly qualified executive officers by
paying them competitively, consistent with our success and their
contribution to that success. We believe compensation should be
structured to ensure that a significant portion of an
executives compensation opportunity will be directly
related to our performance and other factors that directly and
indirectly influence shareholder value. Accordingly, we set
goals designed to link each NEOs compensation to our
performance. Consistent with our performance-based philosophy,
we provide a base salary to our executive officers and include a
significant incentive based component, payable in cash. We do
not currently have an annual performance-based equity plan for
our executive officers, but may make discretionary awards of
equity-based compensation to our NEOs under our 2001 Stock
Incentive Plan.
Compensation
Determination Process and Components
The Compensation Committee is provided with the primary
authority to determine and recommend the compensation awards
available to the our executive officers. The Compensation
Committee reviews the executive compensation program in
connection with our annual performance review process, which
typically concludes in
11
November of each fiscal year, with changes to base compensation
effective January 1st. In general, the Compensation
Committee begins by reviewing credible third-party survey
information of comparably sized, publicly-traded medical device
companies to benchmark our competitive position for the three
principal components of executive compensation base
salary, annual incentives and long-term incentives. The Chief
Executive Officer and Chief Financial Officer participate in the
Compensation Committees meetings at the committees
request. Management does not participate in the final
determination of the amount or form of executive compensation.
The Compensation Committee evaluated the following in
determining the amount of executive compensation relative to the
market:
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Competitive practices and the amounts and nature of compensation
paid to executive officers of similarly sized and type of
companies in the medical device industry; the proportionate
share of compensation related to base salary and incentive cash
compensation categorized by quartiles; and the job
responsibilities of the executive positions included in the
comparable compensation data.
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|
To aid the Compensation Committee in making its determination,
the Chief Executive Officer provides recommendations annually to
the Compensation Committee regarding the compensation of all
executive officers, excluding himself. Each member of the
executive management team, in turn, participates in an annual
performance review with the Chief Executive Officer to provide
input about their contributions to our success for the period
being assessed. The Chief Executive Officers
recommendations to the Compensation Committee are provided in
the context of benchmarking and considering the contribution of
each individual executive officers contribution to our
performance.
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|
|
|
For the compensation of the Chief Executive Officer, the
Compensation Committee reviewed benchmark data for Chief
Executive Officers of similarly sized and type of
companies in the medical device industry.
|
We set base salary structures and annual incentive targets after
taking into consideration a peer group of similarly sized and
type of companies in the medical device industry. This approach
ensures that our compensation cost structures will allow us to
remain competitive in our markets. An important component of
setting and structuring compensation for our executive officers
is determining the compensation packages offered by the leading
healthcare companies in order for Rochester Medical to offer
competitive compensation within that group of companies. From
time to time, the Compensation Committee may use outside
compensation consultants to assist it in analyzing our
compensation programs and determining appropriate levels of
compensation and benefits. The decision to retain consultants
and, if so, which consultants to retain, is made solely by the
Compensation Committee. For fiscal 2007, the Compensation
Committee utilized salary data of similarly sized and type of
medical device companies and considered actual salary amounts
provided in peer group proxy statements. Our annual review
indicates that, in general, we are providing annual cash
compensation below the median of the companies in the data we
reviewed. We believe, however, the design of base and incentive
annual cash compensation appropriately provides market
compensation to our executive officers.
Base
Salary
Base salaries are designed to provide regular recurring
compensation for the fulfillment of the regular duties and
responsibilities associated with job roles, and are paid in cash
on a semi-monthly basis. The base salaries for our executive
officers are established at the beginning of each fiscal year
based on each individuals experience, an analysis of each
individuals performance during the prior year, market
factors including the salary levels of comparable positions in
the medical device industry using credible third-party survey
information, and other publicly available data of comparable
companies. The base salaries for our executive officers are
structured to be market-competitive and to attract and retain
these key employees. An executives base salary is also
determined by reviewing the executives other compensation
to ensure that the executives total compensation is in
line with our overall compensation philosophy.
12
The Compensation Committee reviews base salaries annually.
Additionally, we may adjust base salaries as warranted
throughout the year for promotions or other changes in the scope
or breadth of an executives role or responsibilities.
Our NEOs received the following base salaries for fiscal year
2007:
|
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|
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% Change from 2006
|
|
Name
|
|
2007 Base Salary
|
|
|
Base Salary
|
|
|
Anthony J. Conway
|
|
$
|
234,812
|
|
|
|
6.2
|
%
|
David A. Jonas
|
|
$
|
176,503
|
|
|
|
8.1
|
%
|
Martyn R. Sholtis
|
|
$
|
174,844
|
|
|
|
7.1
|
%
|
Philip C. Conway
|
|
$
|
161,955
|
|
|
|
5.2
|
%
|
Dara Lynn Horner
|
|
$
|
154,960
|
|
|
|
5.4
|
%
|
Annual
Cash Incentives
Rochester Medicals Management Incentive Plan is designed
to provide executive officers with annual incentive compensation
based on the achievement of certain corporate performance
objectives. At the beginning of each year, the objectives are
initially proposed by our Chief Executive Officer. The
objectives are then reviewed, revised and approved by the
Compensation Committee. Target, minimum,
and maximum levels are assigned to each performance
objective to determine payouts. Under the Management Incentive
Plan, there are no guaranteed minimum payouts. In other words,
the minimum level of payout is zero. While the Management
Incentive Plan allows for payouts at less than the target level,
all such payments are made at the sole discretion of the Board
of Directors. The bonuses are reviewed by the Compensation
Committee and, upon the recommendation of the Compensation
Committee, approved by the Board of Directors.
As necessary, the Compensation Committee may modify or re-weight
the objectives during the course of the fiscal year to reflect
changes in the companys business plan. In the event
certain threshold performance levels are exceeded but applicable
target levels are not achieved, the executive officers will earn
proportional awards. Incentive amounts to be paid under the
performance-based programs may be adjusted by the Compensation
Committee to account for unusual events such as extraordinary
transactions, asset dispositions and purchases, and mergers and
acquisitions if, and to the extent, the Compensation Committee
does not consider the effect of such events indicative of
company performance. Payments under each of the programs are
contingent upon continued employment, though pro rata bonus
payments will be paid in the event of death or disability based
on actual performance at the date relative to the targeted
performance measures for each program.
For fiscal 2007, our performance objectives included
quantitative financial goals based on net sales (exclusive of
sales under the Premier GPO hospital contract and related
expenditures) and operating income targets. Under the Management
Incentive Plan for fiscal 2007, Mr. Anthony Conway could
have earned a maximum bonus up to 60% of his base salary with a
target of 40% of his base salary. Messrs. Jonas, Sholtis
and Philip Conway, and Ms. Horner, could have earned a
maximum bonus of 52.5% of their respective base salary with a
target of 35% of their respective base salaries. Each of their
bonuses was weighted 50% on sales performance objectives and 50%
on operating income objectives, with the exception of
Mr. Sholtis and Ms. Horner whose bonuses were weighted
75% on sales performance objectives and 25% on operating income
objectives.
At its November 2007 meeting, the Compensation Committee
reviewed the achievement of the corporate objectives in awarding
bonuses under the Management Incentive Plan, and concluded that
total sales were at 97.94% of the level needed to achieve the
maximum bonus, and total adjusted operating income was at 90.0%
of the level needed to achieve the maximum bonus. The Board of
Directors, upon the recommendation of the
13
Compensation Committee, approved the 2007 bonus awards on
November 15, 2007. As a result, the following bonuses were
awarded to each of the executive officers named in this proxy
statement for the year ended September 30, 2007:
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2007 Base
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% Bonus
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Amount of
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Name
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Salary
|
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Earned
|
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|
Bonus Paid
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Anthony J. Conway
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|
$
|
234,812
|
|
|
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56.09
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%
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$
|
131,704
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|
David A. Jonas
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$
|
176,503
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|
|
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49.08
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%
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$
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86,624
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Martyn R. Sholtis
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|
$
|
174,844
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|
|
|
49.99
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%
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$
|
87,413
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|
Philip C. Conway
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|
$
|
161,955
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|
|
|
49.08
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%
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|
$
|
79,485
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|
Dara Lynn Horner
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|
$
|
154,960
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49.99
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%
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$
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77,472
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|
Long-Term
Incentives
As discussed above, we believe that equity ownership in
Rochester Medical is important to tie the ultimate level of an
executive officers compensation to the performance of our
stock and shareholder gains while creating an incentive for
sustained growth. Our 2001 Stock Incentive Plan allows us the
opportunity to grant stock options and restricted stock awards.
We typically grant stock options to executive officers at the
commencement of their employment. The number of stock options
granted to an executive officer upon commencement of employment
is based on several factors, including the executives
responsibilities, experience and the value of the stock option
at the time of grant. Additional grants other than the initial
grant may be made following a significant change in job
responsibility or in recognition of performance. We do not
currently have an annual performance-based equity plan. The
Compensation Committee may consider adopting such a plan in the
future.
Stock options granted to our executive officers generally vest
in 25% annual cumulative installments beginning one year from
the date of grant. Stock option grants are made with an exercise
price equal to the closing market price of our common stock on
the date of grant. Shares of restricted stock granted under our
2001 Stock Incentive Plan and vest 100% on the fourth
anniversary of the date of grant.
The Compensation Committee does not award stock options
according to a prescribed formula or target. In determining the
number of stock options granted to individuals and to the
officers as a group, individual experience, contributions and
achievements are considered, as well as the recommendations of
the Chief Executive Officer. A review of each component of the
executives compensation is conducted when determining
annual equity awards to ensure that an executives total
compensation is in line with our overall compensation philosophy.
The Board of Directors approved the following stock option
awards to our NEOs in fiscal 2007 in recognition of their
contributions to the company:
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2007 Stock
|
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Exercise Price
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Name
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Option Award
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per Share
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Anthony J. Conway
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40,000
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$
|
12.30
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David A. Jonas
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|
20,000
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$
|
12.30
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|
Martyn R. Sholtis
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|
20,000
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$
|
12.30
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|
Philip C. Conway
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20,000
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$
|
12.30
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Dara Lynn Horner
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|
|
20,000
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$
|
12.30
|
|
Messrs. Jonas and Sholtis also received 20,000 shares
of restricted stock pursuant to the 2001 Stock Incentive Plan,
based on their substantial contribution to the companys
success, particularly during the prior year with regard to the
asset transactions with Coloplast A/S and Mentor Corporation and
the development of our new subsidiary in the United Kingdom.
14
Other
Compensation
We provide our executive officers with benefits, including
health insurance, life and disability insurance and dental
insurance, that we believe are reasonable, competitive and
consistent with our overall executive compensation program in
order to attract and retain talented executives. The
Compensation Committee periodically reviews the levels of
benefits provided to executive officers.
Rochester Medical provides a 401(k) retirement savings plan in
which all full-time employees, including the executive officers,
may participate. Eligible employees may elect to reduce their
current compensation by an amount no greater than the
statutorily prescribed annual limit and may have that amount
contributed to the 401(k) plan. Participation of the executive
officers is on precisely the same terms as any other participant
in the plan. Matching contributions may be made to the 401(k)
plan at the discretion of our Board. Currently we match 50% of
the employees contribution up to a cap of 2.5%.
Severance
Benefits
We have entered into employment agreements with Anthony Conway
and Philip Conway that provide severance benefits upon
termination of employment without cause or by reason of death or
permanent disability. Rochester Medical has also entered into
change-in-control
severance agreements with each of our executive officers that
provide financial protection in the event of a
change-in-control
of the company that disrupts an executive officers career.
These agreements are designed to attract and retain high caliber
executive officers, recognizing that change in control
protections are commonly provided at comparable companies with
which we compete for executive talent. In addition, the
Compensation Committee believes
change-in-control
protections enhance the impartiality and objectivity of the
executive officers in the event a
change-in-control
transaction and better ensure that shareholder interests are
protected. A more complete description of the employment
agreements and
change-in-control
agreements is found at page 20 of this proxy statement.
Compliance
with Internal Revenue Code Section 162(m)
As a result of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the Code), we will not be
allowed a federal income tax deduction for compensation paid to
certain executive officers to the extent that compensation
exceeds $1 million per officer in any one year. This
limitation will apply to all compensation paid to the covered
executive officers which is not considered to be
performance-based. Compensation which does qualify as
performance-based compensation will not have to be taken into
account for purposes of this limitation.
Section 162(m) of the Code did not affect the deductibility
of compensation paid to our executive officers in 2007 and it is
anticipated it will not affect the deductibility of such
compensation expected to be paid in the foreseeable future. The
Compensation Committee will continue to monitor this matter and
may propose additional changes to the executive compensation
program if warranted.
Compensation
Committee Report
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management. Based upon
this review and discussion, the Compensation Committee
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this proxy statement.
Compensation
Committee of the Board of Directors of Rochester
Medical
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Darnell L. Boehm
|
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Roger W. Schnobrich
|
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Benson Smith
|
15
Summary
Compensation Table
The following table shows the cash and non-cash compensation for
the last fiscal year awarded to or earned by individuals who
served as our Chief Executive Officer or Chief Financial Officer
and each of our three other most highly compensated executive
officers during fiscal year 2007.
SUMMARY
COMPENSATION TABLE
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Non-Equity
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Stock
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Option
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|
Incentive Plan
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All Other
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Compensation
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Total
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Name and Principal Position
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Year
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($)
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($)(1)
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($)(2)
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($)(3)
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($)(4)
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($)
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($)
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Anthony J. Conway
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2007
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234,812
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176,415
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131,704
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542,931
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Chief Executive Officer,
President and Secretary
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David A. Jonas
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2007
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176,503
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52,165
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110,715
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86,624
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426,007
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Chief Financial
Officer and Treasurer
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Martyn R. Sholtis
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2007
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174,844
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52,165
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105,522
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87,413
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5,923
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425,867
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Corporate Vice President
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Philip J. Conway
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2007
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161,955
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105,522
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79,485
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346,962
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Vice President, Product Technologies
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Dara Lynn Horner
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2007
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154,960
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105,074
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77,472
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8,479
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345,985
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Vice President, Marketing
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(1)
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Under current reporting rules, only discretionary or guaranteed
bonuses are disclosed in this column. We award bonuses under our
Management Incentive Plan based on our achievement of certain
performance targets. Accordingly, bonus payments are reported in
the Non-Equity Incentive Plan Compensation column.
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(2)
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The amounts in this column are calculated based on FAS 123R
and equal the financial statement compensation expense as
reported in our 2007 statement of operations for the fiscal
year excluding the financial impact of the estimated forfeitures
related to service-based vesting conditions. A pro rata portion
of the total expense calculated at time of grant is recognized
over the applicable service period generally corresponding with
the vesting schedule of the grant. The initial expense is based
on the fair value of the restricted stock grants on the date of
grant.
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(3)
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The amounts in this column are calculated based on FAS 123R
and equal the financial statement compensation expense as
reported in our 2007 statement of operations for the fiscal
year excluding the financial impact of the estimated forfeitures
related to service-based vesting conditions. A pro rata portion
of the total expense calculated at time of grant is recognized
over the applicable service period generally corresponding with
the vesting schedule of the grant. The initial expense is based
on the fair value of the stock option grants as estimated using
the Black-Scholes option-pricing model. The assumptions used to
arrive at the value are disclosed in Note 6 to our
financial statements included in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2007.
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(4)
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Represents bonuses earned under our Management Incentive Plan.
|
16
Grants
of Plan-Based Awards
The following table summarizes the 2007 grants of equity and
non-equity plan-based awards to the executive officers named in
the Summary Compensation Table. All of these equity and
non-equity plan-based awards were granted under the Rochester
Medical Corporation 2001 Stock Incentive Plan.
GRANTS OF
PLAN-BASED AWARDS
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All
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All
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Other
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Other
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Option
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Awards:
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Awards:
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Exercise
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Grant
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Number of
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Number of
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or Base
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Date Fair
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Estimated Future Payouts Under Non-Equity
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Shares of
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Securities
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Price of
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Closing
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Value of
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Incentive Plan Awards(1)
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Stock or
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Underlying
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Option
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Market
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Stock and
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Grant
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Approval
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Threshold
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Target
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Maximum
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Units
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Options
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Awards
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Price
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Option Awards
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Name
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Date
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Date
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|
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($)
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|
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($)
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|
|
($)
|
|
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(#)(2)
|
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(#)(3)
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($/Sh)
|
|
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($/Sh)
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($)(4)
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Anthony J. Conway
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11/21/06
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|
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11/16/06
|
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93,925
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|
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140,887
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40,000
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12.30
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12.30
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290,896
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David A. Jonas
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11/21/06
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11/16/06
|
|
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61,776
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92,664
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20,000
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|
|
|
20,000
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12.30
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12.30
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380,848
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Martyn R. Sholtis
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11/21/06
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11/16/06
|
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61,195
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91,793
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20,000
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|
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20,000
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12.30
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12.30
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380,848
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Philip J. Conway
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11/21/06
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11/16/06
|
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56,684
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85,026
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20,000
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12.30
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|
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12.30
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|
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|
145,448
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Dara Lynn Horner
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11/21/06
|
|
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11/16/06
|
|
|
|
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54,236
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|
|
|
81,354
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|
|
|
|
|
|
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20,000
|
|
|
|
12.30
|
|
|
|
12.30
|
|
|
|
145,448
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|
|
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|
(1)
|
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Represents bonuses earned under our Management Incentive Plan.
The target bonus for each executive officer is a percentage of
the respective base salary for the executive officer. Under the
Management Incentive Plan for fiscal 2007, Mr. Anthony
Conway could have earned a bonus up to 60% of his base salary
with a target of 40% of his base salary. Messrs. Jonas,
Sholtis and Philip Conway, and Ms. Horner, could have
earned a bonus of 52.5% of their respective base salary with a
target of 35% of their respective base salaries. Each of their
bonuses was weighted 50% on sales performance objectives
(exclusive of sales under the Premier GPO hospital contract and
related expenditures) and 50% on operating income objectives,
with the exception of Mr. Sholtis and Ms. Horner whose
bonuses were weighted 75% on sales performance objectives and
25% on operating income objectives. Under the Management
Incentive Plan, there are no guaranteed minimum payouts. In
other words, the minimum level of payout or the threshold level
is zero. While the Management Incentive Plan allows for payouts
at less than the target level, all such payments are made at the
sole discretion of the Board of Directors. The bonuses are
reviewed by the Compensation Committee and, upon the
recommendation of the Compensation Committee, approved by the
Board of Directors. The actual awards made to the executive
officers in the table are reported in the Non-Equity Incentive
Plan Compensation column in the Summary Compensation table and
are discussed further above under the heading Compensation
Discussion and Analysis.
|
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(2)
|
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Shares of restricted stock are granted under our 2001 Stock
Incentive Plan and vest 100% on the fourth anniversary of the
date of grant.
|
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(3)
|
|
Stock options are granted under our 2001 Stock Incentive Plan
and vest in 25% annual cumulative installments beginning one
year from the date of grant.
|
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(4)
|
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Valuation of option awards based on the grant date fair value of
the grants as estimated using the Black-Scholes option-pricing
model. The assumptions used to arrive at the Black-Scholes value
are disclosed in Note 6 to our financial statements
included in our Annual Report on Form
10-K
for the
fiscal year ended September 30, 2007.
|
2001
Stock Incentive Plan
Our 2001 Stock Incentive Plan was adopted in February 2001, and
amended by our shareholders in January 2006. The number of
shares of common stock authorized for issuance under the Plan is
2,000,000 shares. As of September 30, 2007, options to
purchase an aggregate of 1,261,500 shares of common stock
were outstanding under the Plan and an
17
aggregate of 170,500 shares of common stock had been issued
upon the exercise of stock options under the Plan. Additionally,
40,000 shares of common stock had been issued as restricted
stock. Any options or restricted stock granted under the Plan
that expire or are terminated prior to exercise will be eligible
again for issuance under the Plan.
The Plan provides for the grant of incentive stock options and
nonqualified stock options. Incentive stock options must be
granted at an exercise price not less than the fair market value
of the common stock on the grant date. The options granted to
participants owning more than 10% of our outstanding voting
stock must be granted at an exercise price not less than 110% of
fair market value of the common stock on the grant date. The
options expire on the date determined by the Board of Directors,
but may not extend more than 10 years from the grant date,
while incentive stock options granted to participants owning
more than 10% of our outstanding voting stock expire five years
from the grant date. Options typically vest in 25% annual
cumulative installments beginning one year from date of grant.
Our officers, employees, directors, consultants, independent
directors and affiliates are eligible to receive options under
the Plan; however, incentive stock options may only be granted
to our employees.
The Compensation Committee of our Board of Directors administers
the Plan. Our Board of Directors or the Compensation Committee
may select the recipients of options and restricted stock and
determine, subject to any limitations in the Plan:
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the number of shares of common stock covered by options and the
dates upon which those options become exercisable;
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the number of shares of restricted stock and the dates upon
which those shares vest;
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the exercise prices of options;
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the duration of options; and
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the methods of payment of the exercise price.
|
Certain option agreements issued pursuant to the Plan provide
that on the date (i) a public announcement is made by us or
any person that such person beneficially owns more than 50% of
our outstanding common stock, (ii) we consummate a merger,
consolidation or statutory share exchange with any other person
in which the surviving entity would not have as its directors at
least 60% of our current Board and would not have at least 60%
of its common stock owned by our shareholders prior to such
merger, consolidation or statutory share exchange, (iii) a
majority of our Board is not comprised of our current directors
or directors elected upon recommendation of our Board of
Directors, or (iv) a sale or disposition of all or
substantially all of our assets or our dissolution (a
Change in Control), 100% of the unvested options
outstanding as of the date of the
change-in-control
event will become immediately exercisable. Additionally, our
restricted stock agreements issued pursuant to the Plan provide
that upon the occurrence of a Change in Control, such shares
shall fully vest.
Our Board of Directors may amend, alter, suspend, discontinue or
terminate any outstanding award, only with the consent of the
holder, unless our Board determines that such action would not
adversely affect the holder. Our Board of Directors may at any
time amend, alter, suspend, discontinue or terminate the Plan,
except that, to the extent determined by our Board, no amendment
requiring shareholder approval under any applicable securities
exchange listing requirement will become effective until the
requisite shareholder approval is obtained.
18
Outstanding
Equity Awards at Fiscal Year-End
The following table shows the unexercised stock options and
restricted stock held at the end of fiscal year 2007 by the
executive officers named in the Summary Compensation Table. We
have not granted other equity incentive plan awards to our
executive officers.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
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|
|
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|
|
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Option Awards
|
|
Stock Awards
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Market Value
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
of Shares
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
or Units
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock Held
|
|
of Stock that
|
|
|
Options (#)
|
|
Options (#)
|
|
Exercise
|
|
Expiration
|
|
that Have Not
|
|
Have Not
|
Name
|
|
Exercisable(1)
|
|
Unexercisable(1)
|
|
Price ($)
|
|
Date
|
|
Vested (#)(2)
|
|
Vested ($)(3)
|
|
Anthony J. Conway
|
|
|
30,000
|
|
|
|
|
|
|
|
7.69
|
|
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
|
|
|
|
|
|
|
6.81
|
|
|
|
12/17/08
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
3.66
|
|
|
|
9/30/09
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
2.36
|
|
|
|
3/12/11
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
2.34
|
|
|
|
4/6/11
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
2.17
|
|
|
|
10/16/11
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
|
|
|
|
4.13
|
|
|
|
1/2/13
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
4,000
|
|
|
|
4.63
|
|
|
|
1/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
4.70
|
|
|
|
1/1/15
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
15,000
|
|
|
|
5.70
|
|
|
|
1/26/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
12.30
|
|
|
|
11/21/16
|
|
|
|
|
|
|
|
|
|
David A. Jonas
|
|
|
20,000
|
|
|
|
|
|
|
|
5.00
|
|
|
|
6/17/09
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
2.56
|
|
|
|
11/21/10
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
2.34
|
|
|
|
4/6/11
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
2.17
|
|
|
|
10/16/11
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
4.13
|
|
|
|
1/2/13
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500
|
|
|
|
3,500
|
|
|
|
4.63
|
|
|
|
1/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
4.70
|
|
|
|
1/1/15
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
15,000
|
|
|
|
5.70
|
|
|
|
1/26/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
12.30
|
|
|
|
11/21/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
363,000
|
|
Martyn R. Sholtis
|
|
|
9,000
|
|
|
|
|
|
|
|
2.34
|
|
|
|
4/6/11
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
2.17
|
|
|
|
10/16/11
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
4.13
|
|
|
|
1/2/13
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
3,000
|
|
|
|
4.63
|
|
|
|
1/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
4.70
|
|
|
|
1/1/15
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
15,000
|
|
|
|
5.70
|
|
|
|
1/26/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
12.30
|
|
|
|
11/21/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
363,000
|
|
Philip J. Conway
|
|
|
20,000
|
|
|
|
|
|
|
|
7.69
|
|
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
|
|
|
|
6.81
|
|
|
|
12/17/08
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
3.66
|
|
|
|
9/30/09
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
|
|
|
|
|
|
|
2.63
|
|
|
|
2/20/11
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
2.34
|
|
|
|
4/6/11
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
2.17
|
|
|
|
10/16/11
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
4.13
|
|
|
|
1/2/13
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
3,000
|
|
|
|
4.63
|
|
|
|
1/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
4.70
|
|
|
|
1/1/15
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
15,000
|
|
|
|
5.70
|
|
|
|
1/26/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
12.30
|
|
|
|
11/21/16
|
|
|
|
|
|
|
|
|
|
Dara Lynn Horner
|
|
|
40,000
|
|
|
|
|
|
|
|
6.94
|
|
|
|
11/16/08
|
|
|
|
|
|
|
|
|
|
|
|
|
17,078
|
|
|
|
|
|
|
|
4.75
|
|
|
|
10/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
2,506
|
|
|
|
|
|
|
|
3.66
|
|
|
|
12/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
2.56
|
|
|
|
11/21/10
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
2.34
|
|
|
|
4/6/11
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
2.16
|
|
|
|
10/16/11
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
4.13
|
|
|
|
1/2/13
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
2,500
|
|
|
|
4.63
|
|
|
|
1/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
4.70
|
|
|
|
1/1/15
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
15,000
|
|
|
|
5.70
|
|
|
|
1/26/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
12.30
|
|
|
|
11/21/16
|
|
|
|
|
|
|
|
|
|
19
|
|
|
(1)
|
|
Stock options are granted under our 2001 Stock Incentive Plan
and vest in 25% annual cumulative installments beginning one
year from the date of grant.
|
|
(2)
|
|
Shares of restricted stock are granted under our 2001 Stock
Incentive Plan and vest 100% on the fourth anniversary of the
date of grant.
|
|
(3)
|
|
Market value based on the closing market price of our common
stock on September 28, 2007, or $18.15 per share.
|
Option
Exercises and Stock Vested
The following table summarizes the option exercises for each of
our named executive officers for the fiscal year ended
September 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
Acquired on
|
|
|
Value Realized
|
|
Name
|
|
Exercise (#)
|
|
|
Exercise ($)(1)
|
|
|
Vesting (#)
|
|
|
on Vesting ($)
|
|
|
Anthony J. Conway
|
|
|
30,000
|
|
|
|
93,750
|
|
|
|
|
|
|
|
|
|
David A. Jonas
|
|
|
40,000
|
|
|
|
367,870
|
|
|
|
|
|
|
|
|
|
Martyn R. Sholtis
|
|
|
53,000
|
|
|
|
594,986
|
|
|
|
|
|
|
|
|
|
Philip J. Conway
|
|
|
24,000
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
Dara Lynn Horner
|
|
|
40,416
|
|
|
|
548,095
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Value based on the difference between the market price of our
common stock on the date of exercise and the exercise price per
share of the options.
|
Potential
Payments Upon Termination or
Change-in-Control
Employment
Agreements
On August 31, 1990, we entered into an Employment Agreement
with Anthony J. Conway as Chief Executive Officer through the
period ending August 31, 1992, which agreement
automatically renews for successive one year periods until
employment is terminated in accordance with the agreement. The
agreement provides for a base salary to be reviewed periodically
by the Board of Directors or a committee thereof, and such
additional bonus and other compensation as may be established
from time to time by the Board based upon an annual business
plan setting goals for the company. Mr. Conway is also
entitled to participate in customary employee benefit programs
determined from time to time by the Board.
Mr. Conways Employment Agreement may be terminated
(i) by Mr. Conway at any time by giving us
30 days prior written notice; (ii) by the Board
without cause on any annual renewal date upon written notice to
Mr. Conway at least 90 days prior to the annual
renewal date; (iii) by the Board, upon written notice
effective immediately, for cause as defined in the Employment
Agreement; or (iv) by either party upon written notice
effective immediately if the other party becomes bankrupt or
initiates similar proceedings for the protection of creditors.
The Employment Agreement also terminates automatically upon
Mr. Conways death or permanent disability.
If the Employment Agreement is terminated voluntarily or with
cause, Mr. Conway will be entitled to the base salary
earned by him prior to the date of termination plus any
unreimbursed expenses. If the Employment Agreement is terminated
without cause, Mr. Conway will be entitled to receive a
severance cash payment as liquidated damages for, and in lieu
of, any and all damages which he may incur as a result of such
termination in an amount equal to the greater of (i) his
then base salary for six months, or (ii) the amounts
reasonably estimated to be due under the Employment Agreement
for the six months following the annual renewal date upon which
the
20
termination becomes effective, which shall be payable within
30 days from the date of termination plus, in either case,
one half of the cash bonus to which he would have been entitled
to had he continued in the employment of the company for the
year following termination. In the event of
Mr. Conways death or permanent disability, Mr. Conway
(or his estate) will be entitled to his then base salary for a
period of six months, plus the cash bonus payable with respect
to the fiscal year of death or disability, in accordance with
normal payment procedures.
Mr. Conways Employment Agreement also includes the
agreement of Mr. Conway not to compete with Rochester
Medical for a period of one year after he has ceased to be
employed by Rochester Medical.
On August 31, 1990, we entered into an Employment Agreement
with Philip J. Conway as an officer of Rochester Medical, with
the same terms as the Employment Agreement with Anthony Conway
(other than position and initial base salary).
On November 16, 1998, we entered into an Employment
Agreement with Dara Lynn Horner, as Marketing Director and such
additional duties as may be assigned from time to time, which
continues until employment is terminated in accordance with the
agreement. Ms. Horners Employment Agreement also
provides for base salary, bonus and other compensation and
benefits as established from time to time by the Board, as well
as a relocation allowance if Mr. Horner elects to relocate
to the Rochester, Minnesota area. We currently reimburse
Ms. Horner on an annual basis for mileage and lodging
expense incurred when working at our headquarters.
Ms. Horners Employment Agreement may be terminated
(i) by Ms. Horner at any time by giving us two weeks
prior written notice, or (ii) by the Company at any time by
giving 30 days prior written notice. The Employment
Agreement also terminates automatically upon
Ms. Horners death or permanent disability. In the
event of termination, Ms. Horner or her estate shall be
entitled to base salary and any commissions earned by her prior
to the date of termination.
Change
in Control Agreements
The Compensation Committee of the Board authorized change in
control agreements with Philip J. Conway, Vice President of
Production Technologies, on December 1, 1998, and with
Anthony J. Conway, President and Chief Executive Officer, Dara
Lynn Horner, Vice President of Marketing, David A. Jonas, Chief
Financial Officer, and Martyn R. Sholtis, Corporate Vice
President, on November 21, 2000. The Compensation Committee
and the Board believe that the arrangements are appropriate to
reinforce and encourage the continued attention and dedication
of members of our management to their assigned duties without
distraction if a change in control of Rochester Medical is
proposed. The Compensation Committee and the Board believe that
it is important, should we or our shareholders receive a
proposal for transfer of control of the company, that management
be able to assess and advise the Board whether such proposal
would be in the best interests of Rochester Medical and our
shareholders and to take such other actions regarding such
proposal as the Board might determine to be appropriate, without
being influenced by the uncertainties of managements own
personal situation. The change in control agreements also
include an agreement not to compete with Rochester Medical for a
period of one year after termination of employment.
The change in control agreements, which are substantially the
same for each individual, provide that each employee agrees to
continue employment with us following a Change in Control (as
defined), unless such employment is terminated because of death,
disability or by the employee for Good Reason (as defined). If a
Change in Control occurs and the individual remains employed by
us for twelve months following such Change in Control, then the
individual will be entitled to receive a lump sum cash payment
equal to 2.5 times such individuals earned compensation
(salary plus cash bonuses) during the 12 month period. If
an individuals employment is terminated within twelve
months following a Change in Control by us without Cause (as
defined) or by the individual for Good Reason, then the
individual will be entitled to receive a lump sum cash payment
equal to 2.5 times such individuals earned
compensation during the one year period prior to the date of the
Change in
21
Control. In either case, payments to an individual are subject
to excess payment limitations, such that the amounts payable
under such individuals agreement shall be reduced until no
portion of the total payments by Rochester Medical to such
individual as a result of the change in control (including the
value of accelerated vesting of stock options) will not be
deductible solely as a result of Section 280G of the
Internal Revenue Code of 1986, as amended.
Additionally, the agreements provide that following a Change in
Control, unless and until employment is terminated for Cause or
Disability or the individual terminates employment other than
for Good Reason, we will maintain for the continued benefit of
the individual and his or her dependents for a period
terminating on the earliest of (i) twelve months after the
date of termination or (ii) the commencement date of
equivalent benefits from a new employee, each insured and
self-insured employee welfare benefit plan (including, without
limitation, group health, death, dental and disability plans) in
which the individual was entitled to participate immediately
prior to the Change in Control (provided the terms of such plans
allow for continued participation and such individual continues
to pay his or her regular contribution).
Stock
Options and Restricted Stock Agreements
Our stock option agreements generally provide that, upon a
Change in Control, the vesting of the options will be
accelerated and the options may be exercised as to all shares of
common stock remaining subject to the option. Likewise, our
restricted stock agreements provide that, upon a Change in
Control, the shares subject thereto will become fully vested.
See the description of our 2001 Stock Incentive Plan on
page 17 for additional information regarding the definition
of a Change in Control for purposes of such plan.
The table below shows potential payments to the executive
officers named in the Summary Compensation Table upon
termination without cause or upon a
change-in-control
of Rochester Medical. The amounts shown assume that termination
was effective as of September 28, 2007, the last business
day of the year, under
change-in-control
agreements that were effective as of such date and are estimates
of the amounts that would be paid to the executives upon
termination in addition to the base salary and bonus earned by
the executives during 2007. The actual amounts to be paid can
only be determined at the actual time of an executives
termination.
POTENTIAL
PAYMENTS UPON TERMINATION AND
CHANGE-IN-CONTROL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Upon
|
|
|
|
|
|
Payments Upon
|
|
|
|
|
|
Termination Without
|
|
|
|
|
|
Termination Without
|
|
|
Payments Upon
|
|
|
Cause or for Good
|
|
|
|
|
|
Cause Without
|
|
|
Termination After a
|
|
|
Reason After a
|
|
|
|
|
|
Change-in-Control
|
|
|
Change-in-Control
|
|
|
Change-in Control
|
|
Name
|
|
Type of Payment
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Anthony J. Conway
|
|
Base Pay
|
|
|
119,066
|
|
|
|
595,330
|
|
|
|
595,330
|
|
|
|
Total Spread Value of Acceleration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(1)
|
|
|
|
|
|
|
3,872,907
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
119,066
|
|
|
|
4,468,237
|
|
|
|
595,330
|
|
David A. Jonas
|
|
Base Pay
|
|
|
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
Total Spread Value of Acceleration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(1)
|
|
|
|
|
|
|
3,123,290
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
363,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
3,963,290
|
|
|
|
450,000
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Upon
|
|
|
|
|
|
Payments Upon
|
|
|
|
|
|
Termination Without
|
|
|
|
|
|
Termination Without
|
|
|
Payments Upon
|
|
|
Cause or for Good
|
|
|
|
|
|
Cause Without
|
|
|
Termination After a
|
|
|
Reason After a
|
|
|
|
|
|
Change-in-Control
|
|
|
Change-in-Control
|
|
|
Change-in Control
|
|
Name
|
|
Type of Payment
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Martyn R. Sholtis
|
|
Base Pay
|
|
|
|
|
|
|
445,000
|
|
|
|
445,000
|
|
|
|
Total Spread Value of Acceleration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(1)
|
|
|
|
|
|
|
1,435,050
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
363,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
2,243,050
|
|
|
|
445,000
|
|
Philip J. Conway
|
|
Base Pay
|
|
|
82,000
|
|
|
|
410,000
|
|
|
|
410,000
|
|
|
|
Total Spread Value of Acceleration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(1)
|
|
|
|
|
|
|
2,551,744
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
82,000
|
|
|
|
2,961,744
|
|
|
|
410,000
|
|
Dara Lynn Horner
|
|
Base Pay
|
|
|
|
|
|
|
392,500
|
|
|
|
392,500
|
|
|
|
Total Spread Value of Acceleration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(1)
|
|
|
|
|
|
|
2,391,406
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
2,783,906
|
|
|
|
392,500
|
|
|
|
|
(1)
|
|
Value computed for each stock option grant by multiplying
(i) the difference between (a) $18.15, the closing
market price of a share of our common stock on
September 28, 2007, the last business day of our fiscal
year and (b) the exercise price per share for that option
grant by (ii) the number of shares subject to that option
grant.
|
To determine director compensation, we periodically review
director compensation information for a peer group of comparably
sized publicly traded medical device companies. Compensation for
our directors is designed to result in compensation for our
directors that is competitive with that provided by the peer
group.
Fees for 2007.
For 2007, our non-employee
directors received the following cash payments:
|
|
|
|
|
Fees for attendance at Board and Committee meetings
|
|
$
|
2,000
|
|
Fees for attendance at Board and Committee meetings by telephone
|
|
$
|
1,000
|
|
No director who is also an employee of Rochester Medical
receives any separate compensation for services as a director.
Non-employee directors can also each receive non-qualified stock
options under our 2001 Stock Incentive Plan. Each grant
typically has the following terms: (1) the exercise price
is equal to the fair market value (as defined in the 2001 Stock
Incentive Plan) of the common stock on the date of grant;
(2) the exercise price is payable upon exercise in cash or
in common stock held at least six months, (3) the term of
the option is 10 years, (4) the option is immediately
exercisable and (5) the option expires if not exercised
within twelve months (i) after the optionee ceases to serve
as a director or (ii) following the optionees death.
Messrs. Darnell Boehm, Peter R. Conway, Roger W. Schnobrich
and Benson Smith are the only non-employee directors and
therefore the only directors eligible to receive the
compensation described above. On November 21,
23
2006, Messrs. Boehm, Schnobrich, Smith and Peter Conway
each received an option to purchase 40,000 shares of common
stock. The stock options vested immediately, except in the case
of Mr. Peter Conway, whose stock options vested 25% on each
of March 31, 2007, June 30, 2007, September 30,
2007 and November 20, 2007.
We reimburse all of our non-employee directors for reasonable
travel and other expenses incurred in attending Board of
Directors and committee meetings. Any director who is also one
of our employees receives no additional compensation for serving
as a director.
Director Compensation Table.
The following
table shows the compensation of the members of our Board of
Directors during fiscal year 2007.
DIRECTOR
COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Option Awards
|
|
|
Total
|
|
Name(1)
|
|
($)
|
|
|
($)(2)
|
|
|
($)
|
|
|
Darnell L. Boehm
|
|
|
8,000
|
|
|
|
290,896
|
|
|
|
298,896
|
|
Peter R. Conway
|
|
|
2,000
|
|
|
|
275,799
|
|
|
|
277,799
|
|
Roger W. Schnobrich
|
|
|
8,000
|
|
|
|
290,896
|
|
|
|
298,896
|
|
Benson Smith
|
|
|
7,000
|
|
|
|
290,896
|
|
|
|
297,896
|
|
|
|
|
(1)
|
|
Anthony J. Conway, Chief Executive Officer, President and
Secretary is not included in this table because he is an
employee of Rochester Medical Corporation and thus received no
compensation for his services as a director. The compensation he
received as an employee of Rochester Medical Corporation is
shown in the Summary Compensation Table.
|
|
(2)
|
|
The amounts in this column are calculated based on FAS 123R and
equal the financial statement compensation expense as reported
in our 2007 statement of operations for the fiscal year.
Under FAS 123R, a pro rata portion of the total expense at
time of grant is recognized over the applicable service period
generally corresponding with the vesting schedule of the grant.
The initial expense is based on the fair value of the stock
option grants as estimated using the Black-Scholes
option-pricing model. The assumptions used to arrive at the
Black-Scholes value are disclosed in Note 6 to our
financial statements included in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2007.
|
|
|
|
The option awards granted in 2007 are as follows:
Mr. Boehm: 40,000 options; Mr. Peter Conway: 40,000
options; Mr. Schnobrich: 40,000 options; and
Mr. Smith: 40,000 options. The directors held options as of
September 30, 2007, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
Unvested
|
|
Name
|
|
Options
|
|
|
Options
|
|
|
Mr. Boehm
|
|
|
70,000
|
|
|
|
0
|
|
Mr. Peter Conway
|
|
|
114,000
|
|
|
|
10,000
|
|
Mr. Schnobrich
|
|
|
90,000
|
|
|
|
0
|
|
Mr. Smith
|
|
|
136,000
|
|
|
|
0
|
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Compensation
Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the board
of directors or compensation committee, or other committee
serving an equivalent function, of any other entity that has one
or more of its executive officers
24
serving as a member of our Board of Directors or Compensation
Committee. The members of our Compensation Committee are Roger
Schnobrich, Darnell Boehm and Benson Smith. None of the current
members of the Compensation Committee of our Board has ever been
one of our employees.
Review
of Related Person Transactions
Our Audit Committee has the authority to review and approve all
related party transactions as they are presented. Additionally,
we annually require each of our directors and executive officers
to complete a directors and officers questionnaire
that elicits information about related person transactions. Our
Board of Directors annually reviews all transactions and
relationships disclosed in the director and officer
questionnaires, and the Board makes a formal determination
regarding each directors independence.
In November 2007, the Audit Committee adopted a written policy
and procedures for the review, approval or ratification of
Related-Person Transactions. For purposes of the
policy, a Related Person Transaction includes any
financial transaction, arrangement or relationship (including
any indebtedness or guarantee of indebtedness) or any series of
similar transactions, arrangements or relationships, in which
Rochester Medical is a participant and a Related Person will
have a direct or indirect interest. A Related-Person
Transaction does not include compensation arrangements
with an executive officer or director of Rochester Medical in
connection with his or her duties to Rochester Medical or any of
its subsidiaries, including the reimbursement of business
expenses incurred in the ordinary course, or indemnification
payments and advancement of expenses made pursuant to Rochester
Medicals Articles of Incorporation or Bylaws or pursuant
to any agreement or instrument. The policy defines Related
Person as:
|
|
|
|
|
any person who is in any of the following categories:
(i) any director or executive officer of Rochester Medical;
(ii) any nominee for director of Rochester Medical; or
(iii) any Immediate Family Member of any of the foregoing
persons (which means any child, stepchild, parent, stepparent,
spouse, sibling,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
or
sister-in-law,
and any person (other than a tenant or employee) sharing the
household of a person); and
|
|
|
|
any person who is in any of the following categories when a
Transaction in which such person had a direct or indirect
material interest occurred or existed: (i) a security
holder known to Rochester Medical to be the beneficial owner of
more than five percent of any class of Rochester Medicals
voting securities; or (ii) any Immediate Family Member of
any such security holder.
|
Under the policy, management of Rochester Medical is responsible
for disclosing to the Audit Committee (through its President and
Chief Executive Officer) all material information with respect
to any Related-Person Transaction. The Audit Committee may, in
its sole discretion, approve or deny any Related-Person
Transaction. In determining whether to authorize, approve
and/or
ratify any Related-Person Transaction, the Audit Committee shall
use any process and review any information that it determines is
reasonable in light of the circumstances in order to determine
if the Related-Person Transaction is fair and reasonable and on
terms no less favorable to Rochester Medical than could be
obtained in a comparable arms length transaction with an
unrelated third party to Rochester Medical. Any Related-Person
Transaction that is not approved or ratified, as the case may
be, shall be voided, terminated or amended, or such other
actions shall be taken, in each case as determined by the Audit
Committee so as to avoid or otherwise address any resulting
conflict of interest.
No director or executive officer of Rochester Medical was
indebted to the company during fiscal year 2006. There were no
related party transactions which were required to be disclosed
under the rules of the Securities and Exchange Commission.
25
AUDIT
COMMITTEE REPORT AND PAYMENT OF FEES TO AUDITOR
The Audit Committee of the Board of Directors is responsible for
assisting the Board in monitoring the integrity of the financial
statements of Rochester Medical, compliance by Rochester Medical
with legal and regulatory requirements, and the independence and
performance of Rochester Medicals internal and external
auditors.
The financial statements of Rochester Medical for the year ended
September 30, 2007, were audited by McGladrey &
Pullen LLP, independent registered public accounting firm.
As part of its activities, the Audit Committee has:
1. Reviewed and discussed with management the audited
financial statements of Rochester Medical;
2. Discussed with the independent registered public
accounting firm the matters required to be discussed under
Statement on Auditing Standards No. 61 (Communications
with Audit Committees), Statement of Auditing Standards
No. 99 (Consideration of Fraud in a Financial Statement
Audit)
, and under the Securities and Exchange Commission,
U.S. Public Company Accounting Oversight Board and Nasdaq
Stock Exchange rules;
3. Received the written disclosures and letter from the
independent registered public accounting firm required by
Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees)
; and
4. Discussed with the independent registered public
accounting firm their independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements of Rochester Medical for the year ended
September 30, 2007, be included in our Annual Report on
Form 10-K
filed with the Securities and Exchange Commission.
Audit
Committee of the Board of Directors of Rochester
Medical
|
|
|
Darnell L. Boehm,
Chair
|
|
Roger W. Schnobrich
Benson Smith
|
Payment
of Fees to Auditor
Audit
Fees
The aggregate fees billed to us by McGladrey & Pullen
LLP for 2007 and 2006 for the audit of our financial statements
included in our Annual Report on
Form 10-K
and reviews of our financial statements included in each of our
Quarterly Reports on
Form 10-Q,
were $300,000 for 2007 and $107,250 for 2006.
Audit-Related
Fees
The aggregate fees billed for audit-related services provided to
us by McGladrey & Pullen LLP during 2007 and 2006 were
$11,970 and $11,090, respectively. Audit-related services
include primarily benefit plan audits.
Tax
Fees
The aggregate fees billed for tax services provided to us by
McGladrey & Pullen LLP during 2007 and 2006 were
$35,470 and $8,690, respectively. Tax fees include primarily tax
returns, advice and planning. In regard to tax services, we
engage Deloitte & Touche LLP to assist us with tax
compliance services, including preparation and
26
assistance with tax returns and filings, which we believe is
more cost efficient and effective than to have only our
employees conduct those services and for which we paid $18,400
in 2007. The Public Company Accounting Oversight Board and
certain investor groups have recognized that the involvement of
an independent registered public accounting firm in providing
certain tax services may enhance the quality of an audit because
it provides the auditor with better insights into a
companys tax accounting activities.
All
Other Fees
The aggregate fees billed for all other services provided to us
by McGladrey & Pullen LLP during 2007 and 2006 were
$3,700 and $87,769, respectively. Other services include
primarily assistance with acquisition and financing projects.
Administration
of Engagement of Independent Auditor
The Audit Committee is responsible for appointing, setting
compensation for and overseeing the work of our independent
registered public accounting firm. The Audit Committee has
established a policy for pre-approving the services provided by
our independent registered public accounting firm in accordance
with the auditor independence rules of the Securities and
Exchange Commission. This policy requires the review and
pre-approval by the Audit Committee of all audit and permissible
non-audit services provided by our independent registered public
accounting firm and an annual review of the financial plan for
audit fees. To ensure that auditor independence is maintained,
the Audit Committee annually pre-approves the audit services to
be provided by our independent registered public accounting firm
and the related estimated fees for such services, as well as the
nature and extent of specific types of audit-related, tax and
other non-audit services to be provided by the independent
registered public accounting firm during the year.
As the need arises, other specific permitted services are
pre-approved on a
case-by-case
basis during the year. A request for pre-approval of services on
a
case-by-case
basis must be submitted by our Chief Financial Officer,
providing information as to the nature of the particular service
to be provided, estimated related fees and managements
assessment of the impact of the service on the auditors
independence. The Audit Committee has delegated to its Chair
pre-approval authority between meetings of the Audit Committee.
Any pre-approvals made by the Chair must be reported to the
Audit Committee. The Audit Committee will not delegate to
management the pre-approval of services to be performed by our
independent registered public accounting firm.
All of the services provided by our independent registered
public accounting firm in 2007, including services related to
the Audit-Related Fees, Tax Fees and All Other Fees described
above, were approved by the Audit Committee under its
pre-approval policies.
ANNUAL
REPORT TO SHAREHOLDERS AND
FORM 10-K
Our 2007 Annual Report to Shareholders and
Form 10-K,
including financial statements for the year ended
September 30, 2007, accompanies, or has been mailed to you
immediately prior to, this proxy statement. Our
Form 10-K
is available to you, without charge, upon written request to
Corporate Secretary, Rochester Medical, One Rochester Medical
Drive, Stewartville, MN 55976, and is also available on our
website at
www.rocm.com
. If requested, we will provide
you copies of any exhibits to the
Form 10-K
upon the payment of a fee covering our reasonable expenses in
furnishing the exhibits. You can request exhibits to the
Form 10-K
by writing to Corporate Secretary, Rochester Medical, One
Rochester Medical Drive, Stewartville, MN 55976.
HOUSEHOLDING
OF PROXY MATERIALS
The Securities and Exchange Commission has adopted rules that
permit companies and intermediaries such as brokers to satisfy
delivery requirements for proxy statements and annual reports
with respect to two or more
27
shareholders sharing the same address by delivering a single
proxy statement or annual report, as applicable, addressed to
those shareholders. This process, which is commonly referred to
as householding, potentially provides extra
convenience for shareholders and cost savings for companies.
Although we do not household for our registered shareholders,
some brokers household Rochester Medical proxy materials and
annual reports, delivering a single proxy statement and annual
report to multiple shareholders sharing an address unless
contrary instructions have been received from the affected
shareholders. Once you have received notice from your broker
that they will be householding materials to your address,
householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer
wish to participate in householding and would prefer to receive
a separate proxy statement or annual report, or if you are
receiving multiple copies of either document and wish to receive
only one, please notify your broker. We will deliver promptly
upon written or oral request a separate copy of our annual
report
and/or
proxy
statement to a shareholder at a shared address to which a single
copy of either document was delivered. For copies of either or
both documents, shareholders should write to Corporate
Secretary, Rochester Medical Corporation, One Rochester Medical
Drive, Stewartville, MN 55976.
We do not know of any other matters that may be presented for
consideration at the annual meeting. If any other business does
properly come before the annual meeting, the persons named as
proxies on the enclosed proxy card will vote as they deem in the
best interests of Rochester Medical.
Anthony J. Conway
President and Secretary
Dated: December 20, 2007
28
ROCHESTER MEDICAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
Wednesday, February 6, 2008
3:30 p.m. CST
Minneapolis Hilton and Towers Hotel
1001 Marquette Avenue
Minneapolis, MN 55403
|
|
|
Rochester Medical Corporation
One Rochester Medical Drive
Stewartville, MN 55976
|
|
proxy
|
This Proxy Is Solicited On Behalf Of The Board of Directors
The undersigned, having duly received the Notice of Annual Meeting and Proxy Statement dated
December 20, 2007, hereby appoints Anthony J. Conway and David A. Jonas as Proxies (each with the
power to act alone and with the power of substitution and revocation) to represent the undersigned
and to vote, as designated below, all Common Shares of Rochester Medical Corporation held of record
by the undersigned on December 10, 2007, at the meeting of shareholders to be held Wednesday,
February 6, 2008, at the Minneapolis Hilton and Towers Hotel, 1001 Marquette Avenue, Minneapolis,
Minnesota 55403, at 3:30 p.m. CST, and any adjournment(s) thereof, and, in their discretion, upon
any other matters which may be brought before the meeting.
If no choice is specified, the proxy will be voted FOR each item.
See reverse for voting instructions.
There are three ways to vote your Proxy
Your telephone or Internet vote authorizes the Named Proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE TOLL FREE 1-800-560-1965 QUICK
«
«
«
EASY
«
«
«
IMMEDIATE
|
|
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until
12:00 p.m. (CT) on February 5, 2008.
|
|
|
|
Please have your proxy card and the last four digits of your Social Security Number
or Tax Identification Number available. Follow the simple instructions the voice provides you.
|
VOTE BY INTERNET http://www.eproxy.com/rocm/ QUICK
«
«
«
EASY
«
«
«
IMMEDIATE
|
|
Use the Internet to vote your proxy 24 hours a day, 7 days a
week until 12:00 p.m. (CT) on February 5, 2008.
|
|
|
|
Please have your proxy card and the last four digits of your Social Security Number
or Tax Identification Number available. Follow the simple instructions to obtain your records and
create an electronic ballot.
|
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope weve provided or
return it to
Rochester Medical Corporation,
c/o Shareowner Services
SM
, P.O. Box 64873,
St. Paul, MN 55164-0873.
If you vote by Phone or Internet, please do not mail your Proxy Card
|
|
|
|
|
|
|
1.
|
|
Election of Directors:
|
|
01 Darnell L. Boehm
|
|
04 Roger W. Schnobrich
|
|
|
|
|
02 Anthony J. Conway
|
|
05 Benson Smith
|
|
|
|
|
03 Peter R. Conway
|
|
|
|
|
|
|
|
|
|
o
|
|
Vote FOR all nominees
(except as marked
to the contrary)
|
|
o
|
|
Vote WITHHELD
from all nominees
|
|
|
|
(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to the right.)
|
|
|
2.
|
|
In their discretion, the Proxies are authorized to vote upon other business of which the
Board of Directors is presently unaware and which may properly come before the meeting, and
for the election of any person as a member of the Board of Directors if a nominee named in the
accompanying Proxy Statement is unable to serve or for good cause will not serve. In their
discretion the Proxies are authorized to vote upon such other business as may properly come
before the meeting.
|
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY UNDERSIGNED
SHAREHOLDER, IF NO DIRECTION IS GIVEN, THIS PROXY SHALL BE VOTED FOR THE ELECTION OF ALL NOMINEES
FOR DIRECTOR, AND UPON ALL OTHER MATTERS, THE PROXIES SHALL VOTE AS THEY DEEM IN THE BEST INTERESTS
OF THE COMPANY.
Address Change? Mark Box
o
Indicate changes below:
Signature(s)in Box
PLEASE SIGN exactly as name appears at
left. When shares are held by joint
tenants, both should sign. If signing as
attorney, executor, administrator or
guardian, please give full title as such.
If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by an
authorized person.
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