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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

Filed by the Registrant x

Filed by a Party other than the Registrant ¨

Check the appropriate box:

RESMED INC.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of ResMed Inc. on Thursday, November 20, 2008, at 2:00 p.m. Pacific Time (Friday, November 21, 2008 at 9:00 a.m. Australian Eastern Time), in the corporate offices of ResMed Inc., located at 14040 Danielson Street, Poway, California 92064.

Information about the business of the meeting, the nominees for election as directors and the other proposals are set forth in the attached Notice of Meeting and Proxy Statement. This year you are asked to elect two directors of the Company, approve the Amended and Restated ResMed Inc. 2006 Incentive Award Plan and ratify the selection of our independent auditors for fiscal year 2009. Your vote is important.

Very truly yours,

Peter C. Farrell

Chairman of the Board

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

OF RESMED INC.

Friday, November 21, 2008 at 9:00 a.m. (Australian Eastern Time)

14040 Danielson Street

Poway, California 92064

At the 2008 Annual Meeting, stockholders will act on the following matters:

Please refer to the accompanying proxy statement for a more complete description of the matters to be considered at the meeting. In addition, stockholders are advised that there are special voting and other requirements under the Australian Securities Exchange Listing Rules relating to the approval of the Amended and Restated ResMed Inc. 2006 Incentive Award Plan. Please see “Matter To Be Acted On – Proposal 2: Approval of the Amended and Restated ResMed Inc. 2006 Incentive Award Plan” for a description of these requirements.

Stockholders of record of our common stock at the close of business on September 24, 2008, will be entitled to vote at the Annual Meeting and at any adjournments or postponements of the meeting.

Only individuals with proof of share ownership will be admitted to the Annual Meeting. If you are a stockholder of record, you will need to bring an admission ticket or proof of share ownership with you to the Annual Meeting, together with photo identification. If you are a stockholder of record, your admission ticket is attached to your proxy card. If your shares are not registered in your name, you must bring proof of share ownership (such as a recent bank or brokerage firm account statement, together with proper identification) in order to be admitted to the Annual Meeting.

It is important that your shares be represented and voted at the annual meeting whether or not you plan to attend the annual meeting in person. You may vote by completing and mailing the proxy card or voting instruction card enclosed with the proxy statement. If you are a record holder of shares that trade on the New York Stock Exchange or if your shares are held in “street name,” which means shares held of record by a broker, bank or other nominee, you also will be able to submit your vote by the internet or by telephone. Please review the proxy card or voting instruction card to determine how you will be able to submit your proxy. Submitting your proxy, in any permitted form, will ensure your shares are represented at the annual meeting.

By order of the Board of Directors,

David Pendarvis

Secretary

Dated: October 15, 2008

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GENERAL INFORMATION

The Board of Directors of ResMed Inc. (“ResMed,” “we,” “us,” or “our”) is providing this proxy statement in connection with our 2008 Annual Meeting of Stockholders to be held on Thursday, November 20, 2008, at 2:00 p.m. Pacific Time (Friday, November 21, 2008 at 9:00 a.m. Australian Eastern Time), in the corporate offices of ResMed Inc., located at 14040 Danielson Street, Poway, California 92064. Directions to attend the meeting can be found on our website at http://investor.resmed.com/.

DELIVERY OF AND ACCESS TO PROXY MATERIALS

We expect to first mail this proxy statement, the Proxy Card and the Annual Report to our stockholders and our holders of CHESS Units of Foreign Securities (CUFS) on or about October 15, 2008.

Important Notice Regarding the Availability of Proxy Materials for the 2008 Stockholder Meeting to be held on November 20, 2008.

This proxy statement and our 2008 annual report to stockholders are available on our website at http://investor.resmed.com/. This website contains the following documents: the notice of the annual meeting, this proxy statement, a sample proxy card and the 2008 annual report to stockholders. You are encouraged to access and review all of the important information contained in the proxy materials before voting. Instructions for voting by telephone are provided.

VOTING INSTRUCTIONS AND INFORMATION

Who Can Vote?

You are entitled to vote or direct the voting of your ResMed Inc. shares if you were a stockholder on September 24, 2008, the record date for the Annual Meeting.

How Do I Vote?

Your vote is important. The shares represented by proxies (in the form solicited by the board of directors) received by us before, or, if submitted in person, at the meeting will be voted at the meeting. If a choice is specified on the proxy with respect to a matter to be voted on, the shares represented by the proxy will be voted in accordance with that specification. If no choice is specified, the shares represented by a properly executed proxy will be voted: (i) FOR each of the two nominees to our board listed in this proxy statement; (ii) FOR approval of the Amended and Restated ResMed Inc. 2006 Incentive Award Plan, which approval will also constitute approval under Australian Stock Exchange Listing Rules 10.11 and 10.14 as described further below; and (iii) FOR ratification of the selection of KPMG LLP as our independent auditors to examine our consolidated financial statements for the fiscal year ending June 30, 2008. You may vote by attending the annual meeting and voting in person or you may vote by submitting your proxy. We encourage you to vote promptly.

Holders of Common Stock Listed on the NYSE

If you hold your shares of common stock as a record holder, that is, you own shares in your own name in an account at ResMed’s transfer agent, American Stock Transfer, you may vote by completing, signing and submitting the enclosed proxy card in the postage pre-paid envelope provided or you may vote over the internet or by telephone. The enclosed proxy card includes instruction on how to vote over the internet or by telephone. Internet and telephone voting closes at 11:59 p.m. Eastern Time on November 19, 2008.

If you hold your shares of common stock in street name, which means your shares are held of record by a broker, bank or nominee, you may receive a Notice from your broker, bank or other nominee that includes instructions on how to vote your shares. Your broker, bank or nominee may allow you to deliver your voting instructions over the Internet or by telephone. Information concerning how you can vote is included in the voting instruction card sent to you with this proxy statement. If your broker holds your common stock in “street name” and you have not provided your broker with voting instructions, your broker will vote your shares in its discretion on “routine” proposals. The election of directors and ratification of auditor selection are both considered routine proposals. Approval of the amendments to the ResMed Inc. 2006 Incentive Award Plan are not considered a routine proposal, and brokers generally do not have discretionary authority to vote on this proposal without your direction.

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CUFS

If you hold our CHESS Units of Foreign Securities (CUFS), in order to vote, you must direct the CHESS nominee how to vote the shares of our common stock underlying your CUFS holdings using the form of proxy the CHESS nominee sent to you. You are not permitted to vote by telephone or via the Internet.

Voting By Attending the Annual Meeting

If you attend the Annual Meeting and wish to vote in person, you can vote your shares in person by requesting a ballot at the Annual Meeting. You will need to have an admission ticket or other proof of ownership and valid photo identification with you for admission to the Annual Meeting. Please refer to the instruction noted on the proxy card. Please note, however, that if your shares are held in “street name,” which means your shares are held of record by a broker, bank or other nominee, and you wish to vote at the Annual Meeting, you must bring to the Annual Meeting a legal proxy from the record holder of the shares, which is the broker or other nominee, authorizing you to vote at the annual meeting

Your vote is important. We encourage you to submit your proxy card, or provide instructions to your brokerage firm, bank or the CHESS nominee, as applicable, by completing the proxy or voting instruction form. This will ensure that your shares are voted at the Annual Meeting.

Solicitation of Proxies. The cost of soliciting proxies will be borne by us. After the original mailing of the proxy soliciting material, further solicitation of proxies may be made by mail, telephone, facsimile, electronic mail, and personal interview by our regular employees, who will not receive additional compensation for such solicitation. We will also request that brokerage firms and other nominees or fiduciaries forward copies of the proxy soliciting material, Form 10-K and the 2008 Annual Report to beneficial owners of the stock held in their names, and we will reimburse them for reasonable out-of-pocket expenses incurred in doing so. We have selected Morrow & Co., LLC to act as a proxy solicitor to contact stockholders and will pay approximately $15,000 in fees (plus reimbursement of expenses) for these services in US and Australia.

List of Stockholders. In accordance with Delaware law, a list of stockholders entitled to vote at the meeting will be available at the meeting, and for 10 days before the Annual Meeting at ResMed Inc., located at 14040 Danielson Street, Poway, California 92064 between the hours of 9:00 a.m. and 4:00 p.m. (Pacific).

How Many Votes Are Required?

Only record holders of our common stock as of the close of business on September 24, 2008 (the “record date”) are entitled to receive notice of and to vote at the meeting. At the record date we had 75,708,098 outstanding shares of common stock (excluding treasury shares), the holders of which are entitled to one vote per share. Accordingly, an aggregate of 75,708,098 votes may be cast on each matter to be considered at the meeting.

To constitute a quorum for the conduct of business, a majority of the outstanding shares entitled to vote must be represented at the meeting. Shares represented by proxies that reflect abstentions or “broker non-votes” (street name shares held by a broker or nominee which are represented at the meeting, but with respect to which the broker or nominee is not empowered to vote on a particular proposal and has not been instructed to vote on the proposal by the beneficial owner of such shares) will be counted as shares represented at the meeting for purposes of determining a quorum.

For Proposal 1, directors will be elected by a plurality of the votes cast. Thus the two nominees receiving the largest number of votes will be elected. As a result, abstentions will not be counted in determining which nominees received the largest number of votes cast. Brokers generally have discretionary authority to vote on the election of directors and thus we do not expect broker non-votes to result from the vote on election of directors. Any broker non-votes that may result will not affect the outcome of the election.

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For Proposal 2, the approval of the Amended and Restated ResMed Inc. 2006 Incentive Award Plan (the “2006 Plan”), the affirmative vote of a majority of the shares cast in person or by proxy at the meeting is required for the approval of the 2006 Plan, provided that the total vote cast on the proposal represents over 50% of the outstanding shares of common stock entitled to vote on the proposal. Votes “for” and “against” and abstentions count as votes cast, while broker non-votes do not count as votes cast. All outstanding shares, including broker non-votes, count as shares entitled to vote. Thus, the total sum of votes “for,” plus votes “against,” plus abstentions, which are referred to as the “NYSE Votes Cast,” must be greater than 50% of the total outstanding shares of our common stock. Once satisfied, the number of votes “for” the proposal must be greater than 50% of the NYSE Votes Cast. The approval of an equity plan is a matter on which brokers or other nominees are not empowered to vote without direction from the beneficial owner. Thus, broker non-votes can result from Proposal 2 and make it difficult to satisfy the NYSE Votes Cast requirement. Abstentions have the effect of a vote against this proposal. There are special voting and other requirements under the ASX Listing Rules relating to the approval of the Amended and Restated ResMed Inc. 2006 Incentive Award Plan. Please see “Matter To Be Acted On – Proposal 2: Approval of the Amended and Restated ResMed Inc. 2006 Incentive Award Plan” for a description of these requirements.

For Proposal 3, the affirmative vote of a majority of the shares cast in person or by proxy at the meeting is required for the ratification of the selection of KPMG LLP as our independent auditors. Abstentions will not affect the outcome of this proposal. Brokers generally have discretionary authority to vote on the ratification of our independent auditors, thus we do not expect broker non-votes to result from the vote on Proposal 3. Any broker non-votes that may result will not affect the outcome of this proposal.

How Can I Revoke My Proxy or Change My Vote?

You may revoke your proxy and change your vote at any time before the proxy is exercised by:

Holders of Record

Stock Held by Brokers, Banks and Nominees and CUFS

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COMMON STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

The following table shows the number of shares of our common stock that, according to information supplied to us, are beneficially owned as of the record date by: (1) each person who, to our knowledge based on Schedule 13G filed with the SEC and Substantial Stockholder Notices filed with the ASX, is the beneficial owner of more than five percent of our outstanding common stock; (2) each person who is currently a director, two of whom are also nominees for election as directors; (3) each of the Named Executive Officers as defined on page 6, and (4) all current directors and executive officers as a group. In this proxy statement, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (that is, the power to dispose of, or to direct the disposition of, a security). All of the following calculations are based on 75,708,098 shares of common stock outstanding (excluding treasury shares) on September 24, 2008, the record date.

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Executive Officers

Our executive officers, as of September 24, 2008, were:

Changes in Executive Officers

Effective January 1, 2008, Dr. Peter C. Farrell resigned as our Chief Executive Officer and has continued as our Executive Chairman of the Board. Effective January 1, 2008, Kieran T. Gallahue was promoted to Chief Executive Officer and appointed to serve as a director with a term of office until 2010. Keith Serzen resigned as our Chief Operating Officer, Americas, on April 9, 2008, but will remain employed by us in a non-executive officer capacity through June 30, 2009. See our Current Report on Form 8-K filed on April 10, 2008 relating to the disclosure of his resignation.

For a description of the business background of Dr. Farrell and Mr. Gallahue, see “Matters to be Acted Upon/Election of Directors.”

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BRETT SANDERCOCK

Chief Financial Officer

Brett Sandercock has been Chief Financial Officer since January 1, 2006. From November 2004 until December 31, 2005, Mr. Sandercock was Vice President, Treasury and Finance. Before that, from 1998 to November 2004, Mr. Sandercock was Group Accountant and then Controller. From March 1996 to August 1998 he was Manager, Financial Accounting and Group Reporting at Norton Abrasives, a division of the French multi-national, Saint Gobain. Mr. Sandercock also held finance and accounting roles from November 1994 to March 1996 at Health Care of Australia, a large private hospital operator in Australia. From 1989 to 1994, Mr. Sandercock worked at PricewaterhouseCoopers in Sydney, achieving the position of audit manager. Mr. Sandercock holds a B.Ec. from Macquarie University and is a Certified Chartered Accountant.

DAVID PENDARVIS

Sr. Vice President, Organizational Development and General Counsel

David Pendarvis has been Sr. Vice President, Organizational Development since February 2005. Mr. Pendarvis has been Global General Counsel since he joined ResMed in September 2002, and from February 2003, has been Corporate Secretary. From September 2000 until September 2002, Mr. Pendarvis was a partner in the law firm of Gray Cary Ware & Freidenrich LLP, where he specialized in intellectual property and general business litigation. Until September 2000 he was a partner with Gibson, Dunn & Crutcher LLP, where he began working in 1986. From 1984 until 1986 he was a law clerk to the Hon. J. Lawrence Irving, US District Judge, Southern District of California. Mr. Pendarvis holds a B.A. from Rice University; a J.D., cum laude, from the University of Texas School of Law; and a Masters of Science in Executive Leadership from the University of San Diego.

LASSE BEIJER

Chief Operating Officer, Europe

Lasse Beijer has been Chief Operating Officer, Europe since June 1, 2007. From July 1, 2002 to May 31, 2007, Mr. Beijer was Chief Executive Officer, ResMed Nordics. He began his career with ResMed in 1998 as a principal officer and February 1, 2000, he became ResMed’s country manager for Sweden. Mr. Beijer has 20 years of experience in the respiratory industry, which began in 1987 when he became President of Egnell/AMEDA, a Swedish/Swiss biomedical company. He later built the sleep and oxygen markets in Sweden for the US-based Healthdyne Technologies. He has also held numerous management positions within the Swedish export, shipping and nuclear research industries and was on the board of directors for a number of small and mid-sized industrial enterprises in Sweden. Mr. Beijer was educated in Electronic Engineering at Hermods College and has also studied financing and distribution economics at Lund University.

ROBERT DOUGLAS

Chief Operating Officer, Sydney

Robert Douglas has been Chief Operating Officer, Sydney since November 2005. From April 2001 to November 2005, Mr. Douglas was Vice President of Operations and responsible for ResMed’s Australian manufacturing, and was Vice President of Corporate Marketing. Before joining ResMed in 2001, and beginning in 1995, Mr. Douglas was the General Manager, Strategy and New Business for Keycorp Ltd., an Australian electronic commerce company providing services to major banks and telecommunications companies around the world. Before Keycorp, he held senior R & D and operational roles in Telectronics Pty Ltd., mainly working on the development of an implantable defibrillator. Mr. Douglas sits on the Board of Directors of Colocare, a private startup medical device company unrelated to ResMed. Mr. Douglas has an M.B.A. from Macquarie University and a B.S. in Electrical Engineering and Computer Sciences from New South Wales University, Sydney.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis (CD&A)

Introduction

This Compensation Discussion and Analysis section discusses the compensation policies and programs for our Named Executive Officers. During fiscal year 2008, our Named Executive Officers were the two people who served as Chief Executive Officer, our Chief Financial Officer, our three next most highly paid executive officers, and one person who ceased serving as an executive officer before the end of the fiscal year, as determined under the rules of the US Securities and Exchange Commission.

This section also discusses the Compensation Committee’s role in the design and administration of these programs and policies and in making compensation decisions for our executive officers.

The Compensation Committee is a subcommittee of our board of directors. It decides matters regarding compensation of our executive officers. Compensation Committee members are independent directors who meet the standards for independence set by the US Securities and Exchange Commission, the New York Stock Exchange, and the Australian Stock Exchange. The Committee operates under a written charter adopted by our board of directors. We have posted a copy of the charter of the Compensation Committee on our website, at www.resmed.com. During fiscal year 2008, Donagh McCarthy, Gary Pace, Richard Sulpizio and Ronald Taylor served as members of the Compensation Committee. Mr. Taylor served as Chair of the Compensation Committee during the entire fiscal year.

General Philosophy and Objectives

The Compensation Committee reviews and approves salaries, bonuses, equity-based compensation, and all other elements of the compensation packages offered to our executive officers, including the Named Executive Officers, and establishes our general compensation policies.

We desire to attract, motivate and retain high quality employees who will enable us to achieve our short- and long-term strategic goals and values. We participate in a high-growth environment where substantial competition exists for skilled employees. Our ability to attract, motivate and retain high caliber individuals depends in large part on the compensation packages we offer.

We believe that our executive compensation programs should reflect our financial and operating performance. In addition, individual contribution to our success should be supported and rewarded. The objectives of our compensation programs are to:

Each element of our compensation program is designed to satisfy one or more of these compensation objectives and each element is an integral part of and supports our overall compensation objectives. Our executive compensation program consists of:

The Compensation Committee considers each of these components individually, considers total cash compensation (salary plus on-target bonus amounts), and considers total direct remuneration (total cash compensation plus stock options) as a whole in making its decisions.

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Generally, our executive officers’ compensation is adjusted each year effective as of October 1, the beginning of our second fiscal quarter. Accordingly, the Compensation Committee generally makes decisions on the principal components of executive officer compensation – base salary, bonus potential, stock options, and perquisites – during the first or second quarter. Specific performance bonus targets for executive officers are generally determined before or during the end of the first month of the fiscal year for that year.

We highlight two executive compensation matters for fiscal year 2008. First, the philosophy and objectives of the Compensation Committee relating to performance-based pay were reflected in overall executive compensation. The Company did not meet internal targets of performance, resulting in lower bonus payments to executives compared to other higher performing peer companies. In addition, a relative flat stock price for the Company during the course of the year meant that stock-based compensation provided less value. Together, these impacts meant that our executives received lower overall compensation than their higher-performing peers and reflected an alignment to stockholder returns. Second, in addressing the transition of Dr. Farrell to an Executive Chairman role and Kieran Gallahue to Chief Executive, the Committee made compensation decisions for these individuals benchmarked to the prior year cumulative compensation for the two in their previous roles, so that the combined compensation for these two executives was relatively consistent with the prior year. At the same time, the Committee structured Dr. Farrell’s compensation to reflect his retained executive functions as Executive Chairman.

Determination of Compensation

In making its decisions on executive compensation, the Compensation Committee generally uses industry compensation surveys prepared by outside consultants

Base Salary

The Compensation Committee begins its analysis with assessing each element of compensation (base salary, cash bonus and equity incentives) against peer company comparables. It assesses base salaries at the 50^th and the 60^th percentiles with the goal of positioning base salary around the 60^th percentile. In fiscal year 2008, the Committee decided to increase the target base salaries from 50^th to 60^th percentile to reflect the Company’s relative high performance and to enhance its ability to attract and retain executive talent.

Cash Incentives

Bonus targets are assessed at the 50^th and 75^th percentiles of peer comparables (both in terms of targets and amounts actually earned). During fiscal year 2008, the Committee increased target bonus percentages for Named Executive Officers, other than the Chief Executive Officer and Executive Chairman, from 60% to 65% of base salary to reflect stretch targets goals and to deliver above median cash compensation if the targets were met.

Equity Incentive Compensation

Equity compensation is assessed using comparables of median annual grants and carried-interest ownership of peer companies.

The Committee considers adjustments to the elements of compensation based on market analysis, individual performance, the perceived value of the individual to the Company and other factors it deems relevant. The Committee also considers regional variation. For example, the base salaries for certain positions in Australia or Europe, when translated to US dollars, may reflect a different percentile when compared to US market peers than when compared to Australian or European market peers. There are similar variations by region in the use of short-term and long-term incentives. The Committee attempts to balance the goal of paying consistent with the local market, with the goal of maintaining internal consistency in compensating executives in different regions.

In making its decisions, the Committee reviews data obtained from peer group companies and considers the recommendations of management regarding each element of compensation. The Committee also considers the experience and knowledge of committee members regarding compensation practices for comparable positions. Although the Committee considers various sources of information and recommendations, ultimately, of course, the Committee relies on its own independent judgment.

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Compensation Committee Retention of Compensation Consultant

During fiscal years 2007 and 2008, the Compensation Committee retained Frederic W. Cook & Co., Inc., an independent compensation consultant, to advise the Committee with respect to executive compensation matters for US and non-US-based executive officers. In addition, during those periods, the Committee considered information from the following independent compensation consultants retained by the company: (1) Dell Consulting regarding the compensation of Australian-based executive officers, and (2) Watson Wyatt, regarding the compensation of our European-based executive officer. Frederic W. Cook & Co., Inc, Dell Consulting and Watson Wyatt have provided similar consulting services in prior fiscal years, including consulting by Frederic W. Cook in areas of director compensation and Watson Wyatt in areas of senior management, but do not otherwise provide additional services that might interfere with their independent assessments on compensation matters.

Role of Management

The Company’s Chief Executive Officer and other members of management provide input and recommendations to the Committee for their review and approval. Management provides the compensation consultants and the Committee with historical and prospective breakdowns of total compensation components for each executive officer. Management also provides recommendations that include financial goals and criteria for the Company’s annual and long-term incentive plans. The information provided is gathered from consultants, the market and from internal resources, allowing designs and strategies to be tied directly to the needs of the Company’s business. While management typically attends Compensation Committee meetings, the Committee Chairman excuses individual management members when deemed necessary for independent review or decision-making.

Benchmarking

In September 2007, Frederic W. Cook & Co. Inc. performed an executive compensation review based on current market compensation data from a peer group of 20 publicly traded medical device and medical technology companies.

The companies comprising the peer group for fiscal year 2008 review of executive compensation consisted of the following:

The Compensation Committee believes that this peer group reflected a reasonable cross-section of our labor market for talent, and included companies that our investors might consider in trying to determine the reasonableness of our pay and alignment of our pay with our performance. The Compensation Committee periodically reviews the composition of the peer group and the criteria and data used in compiling the list, and considers modifications to the group. We select peer companies primarily on the basis of their being medical device or medical technology companies with a market capitalization, stockholder return, profitability, revenue and employee population roughly comparable to ours.

The Compensation Committee also considered compensation survey data prepared for our Chief Financial Officer and Chief Operating Officer – Sydney by Dell Consulting and for our Chief Operating Office – Europe, by Watson Wyatt. Dell Consulting updated a prior report for the Committee’s review in October 2007. This report was comprised of 50 companies listed in the ASX Top Industrial, with 25 companies above and 25 companies below us based on market capitalization and as selected by the consultant. Finally, Watson Wyatt’s June 2007 report provided a market scan for our newly appointed Chief Operating Officer – Europe. In its analysis, the consultant compared the position to the “Watson Wyatt Global Grade 18” position (Group Business Unit Manager) within the “General Industry Sector” (comprised of 35 companies) as selected by Watson Wyatt.

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Components of Compensation

Base Salary

Base salaries provide our executives with a degree of financial certainty and stability. In order to attract and retain highly qualified executives, we pay within salary ranges that are generally based on similar positions in companies of comparable size and complexity to us.

Salary adjustments are generally made annually in October, at the commencement of the second quarter of our fiscal year. Overall, the increases in base salary of the Named Executive Officers for fiscal year 2008 were based on a variety of factors, including a comparison of salaries for comparable positions at our peer group companies.

In fiscal year 2008, the Compensation Committee approved base salary increases for the Named Executive Officers, other than the Executive Chairman and the Chief Executive Officer, ranging from 6% to 18% with an average increase of 11%. These increases resulted in salaries that fell between the benchmark and up to approximately 17% lower and 7% higher than the 60^th percentile for the positions the Committee deemed to be relevant comparables in the local markets where each named officer primarily works, based on the peer group data provided by consultants as set forth in the table below. The differences from the comparable 60th percentile were based primarily on differences in the scope and complexity of certain positions versus the comparables, the length of time certain officers had been in their positions, and on geographic differences in the officers’ locations.

The Compensation Committee approved a salary increase of 11% for Dr. Farrell for the period through December 31, 2007 when he served as our Chief Executive Officer, and a salary decrease of 36% for the period from January 1, 2008 through June 30, 2008, based on his transition to Executive Chairman. Dr. Farrell’s base compensation as Executive Chairman places his compensation slightly above 60th percentile, based on the limited data available regarding comparable positions. The Committee approved a salary increase for Mr. Gallahue of 7% through December 31, 2007 for his service as President and Global Chief Operating Officer, and an additional 55% increase for the period from January 1, 2008 through June 30, 2008, based on his transition to the additional role of Chief Executive Officer. Overall, Mr. Gallahue’s compensation as Chief Executive Officer placed him at approximately 50^th percentile among comparable positions at peer companies. The adjustments for the Chief Executive Officer transition were made with the goal that the Company would pay roughly the equivalent amount in base compensation, including salary increases based on peer data, for the two roles of Dr. Farrell and Mr. Gallahue as Executive Chairman and Chief Executive Officer, respectively, as had been paid for their two positions before the transition. The Committee did not commit to a similar goal for future fiscal years. Instead, the Committee intends to make individual decisions regarding compensating these individuals or positions.

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Annual Performance-Based Bonuses

The second compensation component is a cash bonus under our annual bonus program. The primary purpose of our annual performance incentive awards is to motivate our executives to meet or exceed our company-wide and regional short-term performance objectives. The program is intended to share our success with eligible executives to the extent that our performance and their individual performance warrant, and to provide compensation to eligible executives that is competitive in a manner consistent with our philosophy of paying for performance.

We are committed to a philosophy of total pay (the sum of cash compensation, equity compensation and benefits programs) being competitive within relevant markets when our performance meets target performance criteria set forth in our bonus program. Total pay will typically lag the market when performance is below the target performance criteria set forth in the bonus program and may significantly exceed competitive levels when performance is above the target performance criteria set forth in the bonus program.

The following sets forth the 2008 bonus parameters, showing the percent of salary payable at target performance and its dollar equivalent, along with the actual percentage of bonus paid and its cash value:

In fiscal year 2007, Mr. Gallahue’s target bonus as a percentage of base salary was 75%. The target bonus for all other Named Executive Officers was 60%. The adjustments made this year reflected the change in Mr. Gallahue’s role to President and Chief Executive Officer, as well as the Committee’s decision to increase the percentages for all other Named Executive Officers as a result of stretch target components for the fiscal 2008 bonus, recognition of our growth rate in revenues and profitability compared to peers and competitors, and challenging market conditions. These target bonus levels have been established based on a variety of factors, including a comparison of total cash compensation and bonus levels in our peer group companies. Variations from the market comparisons, and different assessments of the individual performance and job functions of the Named Executive Officers, resulted in the varying target bonus levels.

For fiscal year 2008, we had in effect three bonus plans for our Named Executive Officers:

Bonuses for our Named Executive Officers are primarily based on our overall corporate financial performance. Dr. Farrell’s bonus was also based on three pre-established areas of special focus, including both non-financial and financial areas. These areas of special focus did not transfer to Mr. Gallahue due to the timing of his appointment as Chief Executive Officer during the fiscal year.

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There was only one significant change in the fiscal 2008 plans compared to the fiscal year 2007 plans. The fiscal year 2008 plans are based on a full fiscal year measurement period, with one annual payout at the end of the fiscal year. In fiscal year 2007, bonus plans for Named Executive Officers were based and paid on two separate six-month measurement periods. These changes aligned the payout with the more common practices among peer companies and aligned bonus payments with longer-term annual performance.

The measures of financial performance used in determining the amount of bonuses payable under the Global Plan for fiscal year 2008 were:

The two fiscal measures were weighted equally under the Global Plan. The measures of financial performance used in determining the amount of bonuses payable under the Regional Plan were based 30% on global results using the metrics under the Global Plan (resulting in weighting of 15% for global revenue and 15% for global net profit), and the remaining 70% weighted 50% on regional revenue performance to budget and 20% on regional expenses to budget.

Actual bonus payments were based on the combined achievement of the bonus plan objectives. The ranges of revenue and net-profit based component payments are as follows:

with linear extrapolations between and beyond such points, without any cap on the amounts payable.

Payments during fiscal year 2008 for the regional revenue component under the Regional Plan were paid on the same scale as shown above for the Global Plan.

Payments during fiscal year 2008 for the expense component under the Regional Plan were paid on a similar scale, except that there was no opportunity to achieve more than 150% of the target for the regional expense component. Regional expense component payouts are shown below.

This was a change from fiscal year 2007, in which there was no opportunity to achieve more than 100% of the target for the regional expense component. This opportunity was capped at 150% of the bonus potential for that component. The Committee believed this change provided an appropriate incentive for regional leaders to reduce expenses below budget, particularly if revenue fell short of budgeted levels, and to reward good cost control rather than simply punishing expense overruns.

The Compensation Committee approves the actual bonus amounts for executive officers before they are paid. For fiscal year 2008, applying the pre-determined bonus payment formula, the Committee approved bonuses at 73% of target under the Global Bonus Plan, based on a combined 92% achievement in both the revenue and net profit components.

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During fiscal year 2008, 80% of Dr. Farrell’s bonus was based on the results under our Global Plan discussed above. The remaining 20% was based on special pre-established metrics in three special focus areas through June 30, 2008. These metrics, each comprising 6.66% of the total bonus, were based on: (i) a growth target in German operational revenues; (ii) production improvements relating to ventilation products; and (iii) a growth target in ventilation product revenues. These special focus area metrics were measured on a full year basis and paid following the end of fiscal year 2008. The Committee determined that Dr. Farrell achieved 33% achievement of the pre-established performance metrics in recognition of production improvements relating to the ventilation products. In addition, Dr. Farrell received a discretionary bonus cash payment of $40,000 based upon the success of his transition from Chief Executive Officer to Executive Chairman.

Mr. Gallahue’s bonus was based on the Committee’s approval of payment of 73% of target under the Global Bonus Plan, as discussed above. In addition, the annual bonus calculations for both Dr. Farrell and Mr. Gallahue were applied against their respective base salary amounts as of January 1, 2008.

The Chief Financial Officer, General Counsel and Chief Operating Officer – Sydney received a bonus under the Global Plan. Bonuses under the Regional Plans for other Named Executive Officers based from 77% to 87% achievement of the total targets within the regions.

Dr. Farrell will continue to be eligible for a bonus based on his status as an Executive Chairman. Changes to the components of the bonus compensation programs for Dr. Farrell and Mr. Gallahue for fiscal year 2009 will include increasing the target bonus amounts from 100% to 120% of base salary. Also, the bonus calculations will include specific performance targets, constituting 20% of their bonus compensation in the following areas:

Also for fiscal year 2009, in the Regional Plans, the Committee will replace the regional expense component with a regional net profit component.

Stock Options

The third major component of the Named Executive Officers’ compensation consists of stock options. The primary purpose of granting stock options is to link the officers’ financial success to that of our stockholders, with the value of the options increasing only as the stock price increases. Stock options were issued to our Named Executive Officers during fiscal year 2008 in accordance with the ResMed Inc. 2006 Incentive Award Plan. The 2006 Incentive Award Plan requires that the exercise price of options equal the fair market value on the day of the grant, as measured by the closing price of our common stock on the New York Stock Exchange on the grant date. Options are generally exercisable 25% per year on each anniversary of the grant date starting on the first anniversary of the grant date. In addition, vesting is automatically accelerated on a change of control. After vesting, options are exercisable for a maximum period of the earlier of: (1) seven years after the date of grant; or (2) one year after termination, retirement, death or disability.

We have generally provided annual option grants to our Named Executive Officers each fiscal year. In determining the number of options granted, the Compensation Committee reviews company performance, the number of outstanding options available and the percentage of the pool represented by the proposed grant, the present value of the proposed grant, the existing option ownership, the number of options granted in the prior year and the three prior years, the carried interest ownership, and the grant practices of our peer group companies. In October 2007, the Compensation Committee reviewed Frederic W. Cook’s report concerning our historic equity grants and practices relative to those of our peer companies, including our three-year average net annual share usage for equity grants or run-rate (3.1% of shares outstanding, which was consistent with the 75^th percentile of the peer companies average run-rate over the past three years, but only .4% above the median so not significantly higher than the median), our three-year average estimated net P&L cost from equity awards (approximately 0.9% of our market capitalization and falling between the median and 75^th percentile for peer companies), and our outstanding dilution overhang (9.2%, which is near the median of our peer group). The consultant reported that our fiscal year 2007 and three-year average award levels were in a median range for the Chief Executive Officer and most other Named Executive Officers. In fiscal year 2008, the Named Executive Officers’ option grants

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were below the market-cap adjusted median in aggregate.

In October 2007, the Compensation Committee authorized a pool of 2.5 million shares (an increase from the 2.3 million share pool for fiscal 2007) to be granted during fiscal year 2008 and approved specific grants to our Named Executive Officers. This pool approximated a net run-rate of 2.86% of the shares outstanding, compared to the median of our peer companies of a 2.01% run-rate. The Compensation Committee reduced the option grant level for fiscal year 2008, as compared to fiscal year 2007, for Dr. Farrell by 50% (from 200,000 to 100,000 shares) and increased the option grant for Mr. Gallahue by 385% (from 70,000 to 300,000 shares) based on comparable market data, their performance and value to us, and the transition of these individuals to their new positions with the Company as of January 1, 2008.

In fiscal year 2008, the Committee made adjustments to option grants to reflect the promotions. Our Chief Operating Officer – Europe’s grants increased by 27,000 based on his new Chief Operating Officer role. The other Named Executive Officers’ fiscal year 2008 stock option grants as compared to fiscal year 2007 resulted in increased grants ranging from 15,000 to 25,000 options. The following table sets forth option grants provided to Named Executive Officers in fiscal year 2008 with comparisons to the relevant peer data.

The option grants provided to Dr. Farrell and Mr. Gallahue were based upon their roles as Executive Chairman and Chief Executive Officer, respectively, in the latter half of the fiscal year. As a result, Dr. Farrell received significantly lower grants and Mr. Gallahue received a substantial increase. The remaining Named Executive Officers grants ranged from 13% less than and 38% more than the peer group.

As of the end of fiscal year 2008, only 3,488,000 shares of our common stock remain available for issuance under our 2006 Incentive Award Plan. The Committee has recommended, and the board of directors has approved, subject to stockholder approval, the Amended and Restated 2006 Incentive Award Plan that, in part, increases the number of shares available under the Plan by 2.1 million shares, extends the life of the plan until 2018, and expands the list of stockholder-approved performance criteria that the Compensation Committee may utilize whenever it elects to make Section 162(m) performance-based awards under the plan. Adoption of the Amended and Restated 2006 Plan would allow ResMed to continue to attract, retain and motivate our employees, directors and consultants, on whose judgment, interest, and special efforts the Company largely depends for the successful conduct of the Company’s operation, and to promote the success and enhance the value of the Company by linking the personal interests of our employees, directors and consultants to the interests of our stockholders.

In order to continue to provide proper incentives to our employees (including those employees who are not eligible for stock option grants) and to further align the interests of our employees with our stockholders, in 2003 we implemented our Employee Stock Purchase Plan (ESPP), which is intended to qualify under Section 423 of the Internal Revenue Code of 1986, and which provides

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employees with the opportunity to purchase our common stock at a discount through payroll deductions. These purchases occur through successive six-month offering periods under the plan. Named Executive Officers who are not members of our board of directors are eligible to participate in the ESPP on the same terms as our other employees.

Policies with Respect to Equity Compensation Awards Determinations

The Compensation Committee in fiscal year 2008 continued its preexisting policy to have its annual stock option grants to Named Executive Officers and non-executive management effective on or about the annual stockholder meeting date. In setting this policy the Compensation Committee considered many factors, including that this date aligns with the election of directors and is shortly after the traditional October 1 salary adjustment date for management, so management and the Compensation Committee can combine the salary review process with the option grant process for consistency and administrative convenience. Given our traditional earnings release date in late October or early November, the stockholder meeting is likely to occur in an open window period. In addition, the stockholder meeting date is set and announced several months in advance, which provides transparency to the process. Based on the foregoing reasons, the Compensation Committee has set the annual meeting date as the target for our annual stock option grants, although the actual grant date (i.e., the date on which the Committee takes the formal action to make the grants) may vary by a few days from the annual meeting date due to administrative or other factors. The exercise price for such grants, however, will equal the closing price of our common stock on the actual grant date. In addition, the actual annual stockholder meeting date will be selected based on all relevant circumstances at the time.

The Compensation Committee’s policy with regard to granting stock options for promotions, new hire and other special situations is that such option grants must be properly approved in advance of or on the grant date and the grant date is to occur on the first business day of the month following the promotion, new hire or other special situation; unless the event occurs on the first day of the month, in which case the grant may be made as of that day. The Compensation Committee has delegated authority to the Senior Vice President, Organizational Development to make grants, not to exceed 20,000 per individual, in accordance with this policy to employees in connection with new hires, provided that the grants are not to executive officers and are within pre-determined guidelines approved by the Compensation Committee. In fiscal year 2008, the Senior Vice President, Organizational Development made grants of an aggregate amount of 55,000 stock options, to individuals under this delegation.

Equity Ownership Guidelines for Officers and Directors

We believe that our officers and directors should be stockholders and have a financial stake in us, and we encourage them to own shares of our stock. We currently compensate our officers and directors with stock options and our officers who are not board members are eligible to participate in our ESPP. Nevertheless, the number of shares of our stock any officer or director owns is a personal decision and, at this time, the board has chosen not to adopt a policy requiring ownership by officers or directors of a minimum number of shares.

Perquisites and Other Benefits

We provide certain of our Named Executive Officers with perquisites and other personal benefits that the Compensation Committee believes are reasonable and consistent with our overall compensation programs and philosophy. These benefits are intended to be part of a competitive overall compensation program that will enable us to attract and retain these executives. These benefits are also intended to provide job satisfaction and enhance productivity, provide for healthcare needs, and provide stability of benefits. They are not tied to any formal individual or company performance criteria. The type and amount of these benefits is reviewed annually by our Compensation Committee. During fiscal year 2008, we provided the benefits described below.

We provided comprehensive medical examinations to all of our Named Executive Officers to promote their personal health and work/life balance. We believe this benefits us as well as the individuals from improved health, productivity and longevity.

We also provided certain Named Executive Officers personal use of corporate club memberships to promote work/life balance, business entertainment, and their community affiliations. During fiscal year 2008, we transferred a club membership from the company’s ownership to Dr. Farrell, in connection with the transition of his responsibilities. The amount was “grossed up”, that is, the company also paid Dr. Farrell an amount sufficient to reimburse him for any income taxes payable in connection with the transfers, including any taxes payable in connection with the reimbursement.

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We participate in a fractional interest program for private aircraft. We make private air travel under that program available for business use by our executive chairman, our chief executive officer and to a lesser extent and only with the approval of our chief executive officer, by our other Named Executive Officers. This provides for more efficient use of their time and provides a more confidential and secure travel environment.

We also make private air travel under that program available to our executive chairman for personal use. Other Named Executive Officers may travel for personal use together with the executive chairman. Finally, Named Executive Officers may invite their spouses or other guests to accompany them on aircraft under that program during specified business trips when space is available.

Our chief executive officer is authorized to make limited exceptions to this policy, if viewed as essential or appropriate under the circumstances.

When any travel by a Named Executive Officer, spouse or guest does not meet the IRS standard for “business use,” the cost of the travel at Standard Industry Fare Level rates is imputed as income to the officer. We do not reimburse the officers for taxes on that imputed income. We reflect all personal use as a perquisite at our incremental cost as set forth in our Summary Compensation Table. We believe these policies are appropriate in providing a competitive overall compensation package, particularly to our chief executive officer, and in enhancing security and productivity.

We have provided company car or car allowances to certain of our Named Executive Officers, which also allows for personal use of the vehicles. This benefit is provided based on the extent to which vehicle benefits are a competitive practice in the relevant markets as supported by data provided by our compensation consultants and, in the need for certain Named Executive Officers to maintain residences in more than one of our world-wide locations. During the fiscal year, in connection with the transition of his responsibilities, we transferred to Dr. Farrell a car previously owned by the Company, which had been available for his use in Australia. The fair market value ($164,035) of the car was included in “All Other Compensation” above. This value was based upon a midpoint of transaction ranges from an automotive pricing guide for used cars in Australia. The amount shown has been converted to US dollars. Additionally, based upon the fair market value of the car, the Company “grossed up” the transaction, that is, the Company also paid Dr. Farrell an amount sufficient to reimburse him for any taxes payable in connection with the transfer and the tax reimbursement. Our Chief Operating Officer – Europe receives a monthly motor vehicle allowance of $1,500.

In connection with job transfers, we have provided relocation benefits. In connection with our Chief Operating Officer – Europe’s job transfer from Sweden to Switzerland we provided him with financial assistance for set-up of his home in Switzerland. These benefits ensure that we continue to attract high caliber employees in global regions, encourage their relocation, avoid distraction, and mitigate expenses the officers might otherwise incur in connection with relocation. In addition, the company provided Mr. Gallahue with a tax equalization payment in fiscal year 2008 that was related to his temporary employment relocation to our Sydney office in prior years.

We provided certain of our Named Executive Officers with benefits in connection with a sales incentive award travel program. The company believes their participation in this program enhances the overall sales incentive program and requires their attendance, to the extent determined by the appropriate operating officer. The cost of this benefit includes the incremental cost to us of travel, hotel, meals, entertainment and other expenses for the Named Executive Officer and the officer’s spouse or guest. The cost also includes amounts we reimburse the officer for the tax associated with the personal income imputed to the officer in connection with the program. But we do not reimburse for tax associated with amounts related to the officer’s spouse or guest. For fiscal year 2008, this cost reflects the incremental cost that is not related to costs incurred by the Named Executive Officers at such events for business purposes. This change reflected the Compensation Committee’s decision that the Named Executive Officers’ attendance in this program is a part of their general business duties.

We also offer paid time off, medical plans, dental plans, vision plans, defined contribution plans, and disability and life insurance plans. Named Executive Officers participate in these benefit programs on the same basis as other similarly-situated employees in their respective locations.

Change of Control and Termination Arrangements

Our form of option award agreement for Named Executive Officers provides:

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These provisions are intended to facilitate financial planning following termination of employment and to ensure that the executive would be in a position to exercise his options and sell the underlying shares when he is not in possession of material public information about us. In addition, these provisions protect the intended economic benefit of the options in the event of terminations of employment in connection with certain change of control transactions.

We have additional agreements with each of our Named Executive Officers and certain other members of our senior management team. These agreements provide certain change of control payments and benefits, including accelerated option vesting on a change of control. These agreements also provide for certain additional compensation and benefits, including severance payments based on a multiplier (based on position) of salary, bonus and other benefits, and limited tax-gross up payments, to be made to the Named Executive Officers if their employment is terminated under specified circumstances within six months before or two years after a change of control. There are three tiers of participation in these agreements: 1) with our executive chairman and chief executive officer, with a benefit multiplier of two; 2) with our other executive officers (which includes all of the other Named Executive Officers) with a benefit multiplier of one and one-half; and 3) with the other selected members of management with a benefit multiplier of one. All severance benefits (other than option acceleration) are payable only after a double trigger, that is, only after both a change of control and a termination under specified circumstances. A description of the material terms of our change of control arrangements can be found beginning on page 24 of this proxy statement under “Potential Payments On Termination or Change of Control – Change of Control Agreements”. These agreements are maintained in order to recruit and retain new executives. Both Mr. Eisen’s and Mr. Serzen’s agreements were cancelled as part of their transition out of their executive officer roles, without payment under the agreements. Dr. Farrell’s agreement remains in effect while he continues in his role as executive chairman.

We also have stock option agreements for all employees that provide for accelerated option vesting upon a change of control. We provide these vesting terms for employees who are not members of senior management for reasons similar to those described above for senior management. In addition, we believe it is consistent with our culture to provide similar benefits to all employees holding options.

Tax Considerations

Section 162(m) of the US Internal Revenue Code limits the US federal income tax deductions of publicly-traded companies to the extent total compensation for certain Named Executive Officers exceeds $1 million in any one year. Under Section 162(m) the deduction limit does not apply to payments that constitute “qualified performance-based compensation.” Generally, objectively determinable performance bonus payments and option grants to our Named Executive Officers are intended to constitute “qualified performance-based compensation” under Section 162(m) and not be subject to the Section 162(m) limit. However, in certain circumstances, the Committee may provide bonus payments, option grants, and other payments and awards that do not constitute “qualified performance-based compensation,” if the Committee determines such payments and awards would be in the best interest of the Company. If compensation to certain Named Executive Officers does not constitute “qualified performance-based compensation,” the Company’s deduction for US federal income tax purposes for such compensation may be wholly or partially disallowed under Section 162(m). There is a risk that a portion of Mr. Gallahue’s compensation paid under the bonus program for fiscal year 2008 might not constitute “qualified performance-based compensation” under Section 162(m) as his transition to Chief Executive Officer and President, and the corresponding adjustments in the bonus program occurred later than 90 days following the commencement of the fiscal year.

Sections 280G and 4999 of the Internal Revenue Code impose certain adverse tax consequences on excess parachute payments, which are compensatory payments or benefits that are contingent on a change in the control and exceed in the aggregate three times the executive’s base amount. Excess parachute payments are subject to a 20% excise tax and our compensation deduction in respect of the excess parachute payments is disallowed. If we were to be subject to a change of control, certain amounts received by our executives (for example, amounts attributable to the accelerated vesting of stock options and certain of the severance payments) could be excess parachute payments. The change of control agreements generally provide that tax gross up payments will be made only if the aggregate payments and distributions to the executive are 10% or greater than 2.99 times the executive’s “base amount,” as calculated under relevant US Internal Revenue Code provisions.

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Summary Compensation Table

The following table sets forth summary information concerning the compensation awarded, paid to, or earned by each of our Named Executive Officers for all services rendered in all capacities to us for the fiscal year ended June 30, 2007, and fiscal year ended June 30, 2008. Certain of our executive officers were paid in the local currencies of Australia, Sweden and Switzerland that are represented here in US dollars based on the application of the quarterly currency conversion rates.

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The table below shows how much of the overall amount of the compensation cost is attributable to each award.

Stock options granted in fiscal years 2008 and 2007 were issued under our 2006 Stock Incentive Award Plan, are exercisable for a maximum period of 7 years after the grant date and have an exercise price equal to closing price of our common stock on the New York Stock Exchange on the grant date. Stock options granted in fiscal year 2006 and earlier years were made under our 1997 Equity Participation Plan, are exercisable for a maximum of 10 years after the grant date, and have an exercise price equal to closing price of our common stock on the New York Stock Exchange on the last trading day before the grant date. Stock options granted after December 1, 2005, through the end of fiscal year 2008 are exercisable 25% per year on each anniversary of the grant date, while stock options granted in fiscal year 2003, 2004, 2005, and through November 30, 2005, in fiscal year 2006 are exercisable 33% per year on each anniversary of the grant date. This exercise schedule may be accelerated in certain specific situations, subject to earlier termination in connection with a termination of service with us.

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The company provided Mr. Gallahue with tax equalization payments (shown as Tax Gross Up) in fiscal year 2008 that were related to his temporary employment relocation to our Sydney office in prior years.

In connection with job transfers, we have provided relocation benefits to certain of our Named Executive Officers. Amounts shown for Mr. Beijer represent financial assistance for set-up of his home in Switzerland.

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The amounts shown as “All Other Compensation” include Company matching contributions made under our US 401(k) Plan and certain government mandated defined contribution programs in Australia under the ResMed Limited Superannuation Plan, and executive long-term disability and life insurance premiums paid by us on behalf of the Named Executive Officers as follows:

Grants of Plan-Based Awards

The following table sets forth summary information regarding all grants of plan-based awards made to our Named Executive Officers for the fiscal year ended June 30, 2008.

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Outstanding Equity Awards at Fiscal Year(s) End

The following table sets forth summary information regarding the outstanding equity awards held by our Named Executive Officers at June 30, 2008.

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Option Awards Vesting Schedule

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Option Exercises and Stock Vested

The following table summarizes the option exercises for each of our Named Executive Officers for the fiscal years ending June 30, 2008. None of our Named Executive Officers hold any stock awards.

Potential Payments on Termination or Change-of-Control

Beginning in July, 2007, we entered into agreements with each of our Named Executive Officers and certain other members of senior management (a total of 15 currently employed people as of September 24, 2008), that provide certain change of control payments and benefits.

Upon the effective date of a “change of control” as defined in the agreement, all of the executive’s unvested stock options will vest in full.

In addition, if at any time during the period that commences six months before and ends one year after the effective date of a “change of control,” an executive terminates employment under certain conditions described below, then the executive will be entitled to receive certain additional compensation and benefits from us. The conditions that entitle an executive to additional compensation are:

In the event of a qualifying termination, the executive will be entitled to compensation and benefits, including the following:

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All payments under the change of control agreements are designed to be paid in lump sum.

Throughout the change of control payout period (two years in the cases of Dr. Farrell and Mr. Gallahue and 1.5 years in the cases of Mr. Sandercock, Mr. Pendarvis, Mr. Beijer and Mr. Douglas), the executive will not induce any person in our employment to terminate such employment or accept employment with anyone other than us or, subject to certain limited exceptions, engage in any business or activity or render any services or provide any advice to any person, activity, business or entity that directly or indirectly competes in any material manner with us or meaningfully support any such person, business, entity or activity or initiate or further any such business or activity. In addition, as a condition to payment and provision of any benefits under the agreements, the executive must deliver a general release of claims in favor of us.

The initial term of the agreements terminates on July 9, 2010, the third anniversary of the effective date of the agreements. Unless either party gives notice of its intention not to renew, the term will be automatically extended for successive three-year periods.

“Cause” is generally defined as the executive’s (a) conviction or plea of guilty or nolo contendere of a misdemeanor involving moral turpitude, dishonesty or a breach of trust; (b) commission of any act of theft, fraud, embezzlement or misappropriation against us; (c) failure to devote substantially all of his or her business time to our business affairs or material breach of the terms of any employment-related agreement; (d) failure to comply with any corporate policies, which failure results or is likely to result in substantial injury, financial or otherwise, to us or our reputation; (e) unauthorized disclosure or use of our confidential information, which results or is likely to result in substantial injury, financial or otherwise, to us or our reputation; (f) violation of any rules or regulations of any governmental or regulatory body, which violation results or is likely to result in substantial injury, financial or otherwise, to us or our reputation; or (g) abuse of drugs, alcohol or illegal substances, which results or is likely to result in substantial injury, financial or otherwise, to us or our reputation.

A “change of control” is generally defined as (a) a transaction or series of transactions whereby any person or related group of people directly or indirectly acquires beneficial ownership of our securities possessing more than 50% of the total combined voting power of our securities outstanding immediately after such acquisition, subject to certain exceptions; (b) individuals who, as of the date hereof, constitute the board cease for any reason to constitute at least a majority of the board, subject to certain exceptions; (c) the consummation by us of (i) a merger, consolidation, reorganization, or business combination, subject to certain exceptions; (ii) a sale or other disposition of all or substantially all of our assets in any single transaction or series of related transactions; or (iii) the acquisition of assets or stock of another entity, subject to certain exceptions; or (d) our stockholders approve a liquidation or dissolution of us.

“Good reason” is generally defined as (a) the assignment to executive of duties, responsibilities and authority that are materially diminished when compared with executive’s duties, responsibilities and authority with us immediately before the Change of Control; (b) a material reduction in executive’s base salary as in effect at the time of the Change of Control; (c) any failure by us to continue in effect any material benefit plan or arrangement in which the executive is participating at the time of the Change of Control; (d) any failure by us to continue in effect, or any material reduction in target bonus opportunity or any material increase in target performance objectives under, any bonus or incentive plan or arrangement in which the executive is participating at the time of the Change of Control; (e) any requirement by us that the executive be based anywhere that is at least fifty (50) miles away from both (i) the executive’s office location as of the date of the Change of Control and (ii) the executive’s then primary residence, except for required travel by the executive on our business; (f) any failure by us to obtain the assumption of this agreement by our successor or assign; or (g) any purported termination by us of executive’s employment which is not effected by a notice of termination satisfying the requirements set forth in the agreement.

Keith Serzen resigned as our Chief Operating Officer – Americas on April 9, 2008, but he will remain employed by us in a non-executive officer capacity through June 30, 2009. Mr. Serzen is not eligible for benefits under this change of control agreement.

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In accordance with the requirements of the rules of the SEC, the following table presents our reasonable estimate of the benefits payable to the Named Executive Officers under our agreements assuming that a change of control and qualifying termination of employment occurred on June 30, 2008, the last business day of fiscal year 2008. Excluded are benefits provided to all employees, such as accrued vacation, and benefits provided by third parties under our life and other insurance policies. While we have made reasonable assumptions regarding the amounts payable, there can be no assurance that in the event of a qualifying termination in connection with a change of control, the Named Executive Officers will receive the amounts reflected below.