<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Respironics, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(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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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF RESPIRONICS INC.]
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Respironics, Inc. at 1:00 p.m., local time, on Wednesday, November 19, 1997 at
Two Mellon Bank Center, in the Auditorium on the Tenth Floor, at 501 Grant
Street, Pittsburgh, Pennsylvania.
Information about the business of the meeting and the nominees for election as
directors of the Company is set forth in the notice of the meeting and the
Proxy Statement, which are attached. This year you are asked to elect three
directors, approve the adoption of the 1997 Employee Stock Purchase Plan and
ratify the selection of independent auditors for fiscal year 1998.
It is important that your shares be represented at the meeting. Even if you
plan to attend the meeting in person, please sign, date and return your proxy
in the enclosed envelope as promptly as possible. This will not prevent you
from voting your shares in person if you do attend, but will make sure that
your shares are represented in the event that you cannot attend.
Very truly yours,
/S/ Dennis S. Meteny
Dennis S. Meteny
President and Chief Executive
Officer
October 17, 1997
<PAGE>
RESPIRONICS, INC.
1501 Ardmore Boulevard
Pittsburgh, Pennsylvania 15221-4401
--------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
--------------
The Annual Meeting of Shareholders of Respironics, Inc. will be held at Two
Mellon Bank Center, 501 Grant Street, Pittsburgh, Pennsylvania, on Wednesday,
November 19, 1997 at 1:00 p.m., local time, in the Auditorium on the Tenth
Floor, for the following purposes:
(1) To elect three directors;
(2) To approve the adoption of the 1997 Employee Stock Purchase Plan;
(3) To ratify the selection of auditors to examine the consolidated
financial statements of the Company for the fiscal year ending June 30,
1998; and
(4) To transact such other business as may properly come before the
meeting.
Please refer to the accompanying Proxy Statement for a description of the
matters to be considered at the meeting.
Please sign, date and return the enclosed proxy promptly in the envelope
provided, which requires no United States postage.
Dorita A. Pishko
Corporate Secretary
October 17, 1997
<PAGE>
RESPIRONICS, INC.
1501 Ardmore Boulevard
Pittsburgh, Pennsylvania 15221-4401
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PROXY STATEMENT
------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 19, 1997
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Respironics, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held at 1:00 p.m., local time, on Wednesday, November 19,
1997 at Two Mellon Bank Center, 501 Grant Street, Pittsburgh, Pennsylvania.
The accompanying Notice of Annual Meeting of Shareholders sets forth the
purposes of the meeting.
The enclosed proxy may be revoked at any time before its exercise by giving
notice of revocation to the Secretary of the Company. The shares represented
by proxies in the form solicited by the Board of Directors will be voted at
the meeting. If a choice is specified on the proxy with respect to a matter to
be voted upon, the shares represented by the proxy will be voted in accordance
with that specification. If no choice is specified, the shares will be voted
as stated below in this Proxy Statement.
It is expected that this Proxy Statement and the accompanying form of proxy
will first be mailed to shareholders of the Company on or about October 23,
1996. The Company's Annual Report to Shareholders for 1997 is enclosed with
this Proxy Statement but does not form a part of the proxy soliciting
material.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
If any shareholder wishes to present a proposal at the 1998 Annual Meeting
of Shareholders, the proposal must be received by the Secretary of the Company
by May 31, 1998 to be considered for inclusion in the Company's Proxy
Statement and form of proxy relating to the 1998 Annual Meeting. The 1998
Annual Meeting is presently scheduled for November 20, 1998.
VOTING SECURITIES AND RECORD DATE
Holders of the Company's Common Stock of record as of the close of business
on September 26, 1997 (the "record date") are entitled to receive notice of
and to vote at the meeting. On the record date, the Company had outstanding
19,794,497 shares of Common Stock, the holders of which are entitled to one
vote per share.
SECURITY OWNERSHIP
Management
The following table shows the number of shares of Common Stock beneficially
owned by each director and nominee for director of the Company, the Chief
Executive Officer and the four other most highly compensated executive
officers of the Company and by all directors, nominees and executive officers
of the Company as a group, as of the record date. As used herein, "beneficial
ownership" means the sole or shared power to vote, or to direct the voting of,
a security, or the sole or shared investment power with respect to a security
(i.e., the power to dispose of, or to direct the disposition of, a security).
A person is deemed, as of any date, to have "beneficial ownership" of any
security that the person has the right to acquire within 60 days after that
date.
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENFICIAL OWNER OWNERSHIP OF CLASS
- ----------------------- ---------- --------
<S> <C> <C>
Daniel P. Barry (1)........................................ 8,825 0.04%
Douglas A. Cotter (1)...................................... 24,565 0.12%
Robert D. Crouch (2)....................................... 277,284 1.39%
Steven P. Fulton (3)....................................... 5,949 0.03%
James H. Hardie (1), (4)................................... 34,725 0.18%
Donald H. Jones (1)........................................ 2,275 0.01%
Joseph C. Lawyer (1), (5).................................. 12,025 0.06%
Candace Littell (1)........................................ 1,475 0.01%
George J. Magovern, M.D. (1), (6).......................... 723,809 3.65%
Gerald E. McGinnis (7)..................................... 913,986 4.62%
Dennis S. Meteny (8)....................................... 403,725 2.03%
Robert M. Oates (9)........................................ 45,100 0.23%
All directors, nominees and executive officers as a group
(15 persons) (10):........................................ 2,497,855 12.28%
</TABLE>
- --------
(1) Includes shares which would be outstanding upon the exercise of currently
exercisable stock options granted under the 1991 Non-Employee Directors'
Stock Option Plan in the following amounts: Mr. Barry, 3,825 shares; Dr.
Cotter, 24,225 shares; Mr. Hardie, 21,725 shares; Mr. Jones, 1,275 shares;
Mr. Lawyer, 8,925 shares; Ms. Littell, 1,275 shares; and Dr. Magovern,
44,225 shares.
(2) Includes 224,000 shares which would be outstanding upon the exercise of
currently exercisable stock options granted under the Company's 1984
Incentive Stock Option Plan. Also includes 2,284 shares in Mr. Crouch's
401(k) plan account, for which he has the power to direct the voting.
(3) Includes 5,000 shares which would be outstanding upon the exercise of
currently exercisable stock options granted under the Company's 1992 Stock
Incentive Plan. Also includes 949 shares in Mr. Fulton's 401(k) plan
account, for which he has the power to direct the voting.
(4) Includes 11,000 shares held by a partnership in which Mr. Hardie is a
general partner and 1,900 shares which Mr. Hardie deposited into a
personal IRA account. Does not include 16,000 shares owned by Mr. Hardie's
wife, as to which he disclaims beneficial ownership.
(5) Does not include 1,400 shares held by Mr. Lawyer's wife, who has sole
voting and investment power over these shares and as to which he disclaims
beneficial ownership.
(6) Includes 319,697 shares held jointly with Dr. Magovern's wife, as to which
voting and investment power is shared, 236,686 shares held by the Magovern
Grandchildren's Trust, of which Dr. Magovern and his wife are the
trustees, 5,554 shares held by the Magovern Family Foundation Trust, of
which Dr. Magovern and his wife are the trustees, and 117,647 shares held
by the Broadmore Trust, of which Dr. Magovern and his wife are the
trustees.
(7) Includes 270,198 shares held in the Gerald E. McGinnis Charitable
Foundation. Does not include 29,200 shares held by Mr. McGinnis' wife, as
to which he disclaims beneficial ownership. Also includes 3,102 shares in
Mr. McGinnis' 401(k) plan account, for which he has the power to direct
the voting.
(8) Includes 144,000 shares held jointly with Mr. Meteny's wife, as to which
voting and investment power is shared, and 4,000 shares held by Mr.
Meteny's minor children, as to which he controls voting and investment
power. Also included are 128,000 shares which would be outstanding upon
the exercise of currently exercisable stock options granted under the
Company's 1984 Incentive Stock Option Plan. Also includes 5,157 shares in
Mr. Meteny's 401(k) plan account, for which he has the power to direct the
voting.
(9) Included 36,705 shares which would be outstanding upon the exercise of
currently exercisable stock options granted under the Company's 1984
Incentive Stock Option Plan. Also includes 1,217 shares in Mr. Oates'
401(k) plan account, for which he has the power to direct the voting.
2
<PAGE>
(10) Includes 41,400 shares which executive officers, other than those named
in the above table, have the right to acquire upon the exercise of
currently exercisable stock options under the Company's 1984 Incentive
Stock Option Plan and/or 1992 Stock Incentive Plan and 1,212 shares in
such executive officers' 401(k) plan accounts, for which such executive
officers have the power to direct the voting.
The information presented is based upon the knowledge of management and, in
the case of the named individuals, upon information furnished by them.
Other Beneficial Owners
The following table sets forth information with respect to each shareholder
known to the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock as of the record date.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL BENEFICIAL PERCENT
OWNER OWNERSHIP OF CLASS
- ------------------------------ ---------- --------
<S> <C> <C>
Wanger Asset Management, L.P.
227 West Monroe Street, Suite 3000
Chicago, IL 60606 (1) 1,778,300 8.98%
</TABLE>
- --------
(1) Information regarding the beneficial owner has been determined by the
Company based solely upon data included in a Form 13G filed with the
United States Securities and Exchange Commission ("Commission") and with
the Company on February 14, 1997. Such filing contained information as of
December 31, 1996. Includes 1,162,000 shares owned by Acorn Investment
Trust, Series Designated Acorn Fund (the "Trust"), of which Wanger Asset
Management, L.P. ("WAM") is considered to be the beneficial owner as a
result of shared voting and dispositive power. The Trust also filed a Form
13G with the Commission and the Company on February 14, 1997 regarding
such shares.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors has four committees to assist in the management of
the affairs of the Company: the Stock Option and Compensation Committee, the
Audit Committee, the Nominating Committee and the Strategy Committee.
Stock Option and Compensation Committee. The Stock Option and Compensation
Committee (the "Compensation Committee") currently consists of Dr. Cotter
(Chairman) and Messrs. Jones and Lawyer. The Compensation Committee
administers the Company's 1984 Incentive Stock Option Plan and the 1992 Stock
Incentive Plan and has the authority to grant options thereunder. The
Compensation Committee also makes recommendations regarding the compensation
payable, including compensation under the Company's bonus plan, to all
executive officers of the Company and certain other management personnel.
Audit Committee. The Audit Committee consists of Messrs. Hardie (Chairman)
and Barry. This committee assists the Board in fulfilling its functions
relating to corporate accounting and reporting practices and financial and
accounting controls.
Nominating Committee. The Nominating Committee consists of Messrs. McGinnis
(Chairman) and Meteny, Ms. Littell and Dr. Magovern. The Nominating Committee
reviews the size and composition of the Board of Directors and makes
recommendations with respect to nominations for directors. The Nominating
Committee will consider nominees recommended by shareholders provided that
shareholders submit the names of nominees in writing to the Secretary of the
Company together with a statement of the nominee's qualifications. Such
information should be received no later than May 31, 1998 with respect to
nominations for election at the 1998 Annual Meeting of Shareholders.
Strategy Committee. The Strategy Committee consists of all Directors. The
Strategy Committee makes recommendations to the Board of Directors with
respect to general corporate strategy, including the development or
acquisition of present and new products, and the development of strategies for
continued growth and profitability of the Company's business.
3
<PAGE>
The Compensation Committee and Strategy Committee both met four times during
fiscal year 1997, the Audit Committee met twice during fiscal year 1997, and
the Nominating Committee did not meet during fiscal year 1997. These
committees also met informally by telephone during the fiscal year as the need
arose. The Board of Directors held five meetings during fiscal year 1997. Mr.
Jones, because of personal illness and an illness in his immediate family, was
unable to attend the August 1996 and February 1997 meetings of the Board. All
of the other Directors attended all of the meetings of the Board and each
committee on which the Director served.
Each director who is not an employee of the Company receives an annual fee
of $9,600 for his service as a director and committee member. In addition,
each non-employee director receives fees of $500 and $300 for attendance at
meetings of the full Board of Directors and of committees of the Board of
Directors, respectively, and is reimbursed for travel expenses for attendance
at all such meetings. Directors of the Company who are not employees also hold
and receive stock options under the Company's 1991 Non-Employee Directors'
Stock Option Plan. Under this Plan, each non-employee director is granted an
option on the third business day following each Annual Meeting of Shareholders
to purchase 5,100 shares of the Company's Common Stock at the fair market
value on such date. Each option has a term of 10 years, is exercisable in
installments and becomes fully exercisable after three years from date of
grant.
MATTERS TO BE ACTED UPON
1. ELECTION OF DIRECTORS
The Board of Directors, acting pursuant to the bylaws of the Company, has
determined that the number of directors constituting the full Board of
Directors shall be nine at the present time.
The Board is divided into three classes. One such class is elected every
year at the Annual Meeting of Shareholders for a term of three years.
Accordingly, a class is to be elected at the 1997 Annual Meeting of
Shareholders, with each director to hold office until the 2000 Annual Meeting
of Shareholders or until the director's prior death, disability, resignation
or removal.
The Board of Directors has nominated James H. Hardie, Joseph C. Lawyer and
Dennis S. Meteny for reelection as directors, and each of them has agreed to
serve if elected. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE ELECTION OF THE THREE PERSONS NOMINATED TO THE BOARD OF DIRECTORS.
Proxies are solicited in favor of these nominees and will be voted for them
unless otherwise specified. If any nominee becomes unable or unwilling to
serve as director, it is intended that the proxies will be voted for the
election of such other person, if any, as shall be designated by the Board of
Directors.
The bylaws of the Company provide that the size of the Board of Directors
may be determined either by the Board of Directors or by shareholders at an
Annual Meeting of Shareholders. Vacancies in the Board of Directors may be
filled by Board action. The term of office of any director so elected to the
Board by the Board itself lasts until the next election of the class of
directors to which such director was elected.
Information concerning those nominees for director (class of 2000) and the
other directors who will continue in office after the meeting (classes of 1998
and 1999) is set forth below, together with information concerning the
Company's executive officers who are not directors.
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY
---- -------------------------
<S> <C>
Class of 2000
James H. Hardie Director
Joseph C. Lawyer Director
Dennis S. Meteny President, Chief Executive Officer and Director
Class of 1999
Daniel P. Barry Director
Donald H. Jones Director
Candace Littell Director
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY
---- -------------------------
<S> <C>
Class of 1998
Douglas A. Cotter, Ph.D. Director
George J. Magovern, M.D. Director
Gerald E. McGinnis Chairman of the Board
</TABLE>
Mr. Barry is 50 years old and a private investor. He has been a director of
the Company since August 1995. Mr. Barry had been the Vice Chairman of the
former AMSCO International, Inc. ("AMSCO") (now merged with Steris
Corporation) from July 1995 through May 1996. Prior to that, he served as
President and Chief Executive Officer of AMSCO from October 1994 through July
1995 and had been the Chief Financial Officer of, as well as serving in
various other executive and consulting capacities with AMSCO, since 1981. Mr.
Barry was a director of AMSCO from 1991 through 1996. He is also a director of
Tollgrade Communications, Inc.
Dr. Cotter is 54 years old. He has been a director of the Company since
February 1989. He is currently Vice President of Decision Resources, an
international consulting firm specializing in the health care industry
(primarily pharmaceuticals). From 1985 to 1996, he was President of Healthcare
Decisions, Inc., a health care and biotechnology consulting firm specializing
in corporate development, strategic planning and acquisitions. For nineteen
years prior to joining Healthcare Decisions he was employed by Corning Glass
Works, where he held various management positions in research, product
development and clinical information systems.
Mr. Hardie is 67 years old. He has been a director of the Company since
November 1991. He is a lawyer and a partner of Reed Smith Shaw & McClay LLP, a
law firm with principal offices in Pittsburgh, Washington and Philadelphia,
which since 1988 has performed legal services for the Company. Mr. Hardie has
been a partner of that firm since 1962. He is a Director of Access
Corporation, a marketer and developer of document and image handling systems
and related software. He is also a director of a number of other corporations,
the securities of which are not publicly traded.
Mr. Jones is 60 years old. He has been a director of the Company since May
1996. Currently, Mr. Jones serves as chairman of DHJ Enterprises, a private
investment firm. From 1990 to 1996, Mr. Jones served as Chairman of
IndustryNet, an online electronic commerce company linking business-to-
business buyers and sellers through electronic networks including the
Internet. Mr. Jones founded IndustryNet in 1990. In 1996 IndustryNet, together
with a subsidiary of another large corporation, was merged into Nets, Inc. Mr.
Jones was not an executive officer of Nets, Inc., which filed for bankruptcy
under Chapter 11 in May, 1997. In 1982 Mr. Jones launched International
Cybernetics Corporation ("ICC"), a developer of advanced factory automation
control systems. In 1985 Mr. Jones merged ICC into the Industrial Automation
Systems Division of Gould Electronics Inc. ("Gould") and he became Vice
President of Business Development for Gould. In 1988 the division was sold to
AEG, a West German based multinational company and Mr. Jones ceased to be an
officer. Mr. Jones is a director of the Associated Group Inc., a
telecommunications company and PNC Equity Management Group.
Mr. Lawyer is 52 years old. Since 1988, he has been President, Chief
Executive Officer and a Director of Chatwins Group, Inc. ("CGI"),
headquartered in Pittsburgh, which designs, manufactures and markets a broad
range of fabricated and machined parts and products, in a variety of
industries primarily to original equipment manufacturers. From 1986 to 1988 he
was President, Chief Executive Officer and a Director of CP Industries, a
predecessor company of CGI. Prior thereto, he held various operations,
marketing, sales, finance and strategic planning positions for U.S. Steel
Corporation for 17 years.
Ms. Littell is 40 years old. Since 1995, she has been the President of C L
Littell & Associates, Inc., a consulting firm, headquartered in Virginia,
specializing in health policy, payment and outcomes management for medical
technology companies and related health care organizations. Between 1992 and
1994, Ms. Littell was Executive Director of the Health Care Technology
Institute, a privately funded organization where she oversaw the development
of research related to the impact on the economy of the medical technology
industry. From 1989 to 1991, Ms. Littell served as Vice President of payment
and policy for the Health Industry Manufacturing Association ("HIMA"), an
organization representing more than 700 manufacturers of medical devices,
diagnostic products and health care information systems.
5
<PAGE>
Dr. Magovern is 73 years old. He has been a director of the Company since
1983. Currently, he is Executive Vice President for Health Services Delivery
and Professor of Surgery at Allegheny General Hospital, a 736-bed, acute care
teaching hospital in Pittsburgh. Between 1968 and 1995 Dr. Magovern was
director of the Department of Surgery. He has been affiliated with Cardio-
Thoracic Surgical Associates, Inc., a professional corporation, since 1970. He
has been a Clinical Associate Professor of Surgery at the University of
Pittsburgh School of Medicine and is currently a Professor of Surgery at the
Medical College of Pennsylvania. Dr. Magovern has participated in the
development of the application of bio-engineering to cardiac and thoracic
surgery at Allegheny General Hospital.
Mr. McGinnis is 63 years old. He has been a director of the Company since
1977 and Chairman of the Board since November 1994. He served as Chief
Executive Officer of the Company between 1977 and 1994, and President between
1984 and 1994. Prior to 1977, Mr. McGinnis was President of Lanz Medical
Products Corporation, the predecessor to the Company. From 1971 to 1975, Mr.
McGinnis also served on the staff of the Critical Care Department,
Presbyterian University Hospital, Pittsburgh, where he participated in various
medical engineering programs seeking the application of technology to medical
care. Prior thereto, Mr. McGinnis was head of the Surgical Research Department
at Allegheny General Hospital, Pittsburgh, for two years and for eleven years
he was employed at the research and development laboratory of Westinghouse
Electric Corporation. At Westinghouse he served six years as the Manager of
the Bio-Engineering Department and headed the medical product development
activities.
Mr. Meteny is 44 years old. He has been a director of the Company since
January 1986 and President and Chief Executive Officer since November 1994.
From August 1992 through November 1994, Mr. Meteny served as Executive Vice
President and Chief Operating and Financial Officer of the Company. He was
Vice President--General Manager and Chief Financial Officer of the Company
from January 1988 through August 1992 and was Vice President--Finance and
Accounting from 1984 through January 1988. For eight years prior to joining
the Company he was employed as an accountant in various auditing capacities by
Ernst & Young.
2. 1997 EMPLOYEE STOCK PURCHASE PLAN
The 1997 Employee Stock Purchase Plan (the "Plan") was adopted by the
Company's Board of Directors on February 13, 1997. The Directors hold to the
view that ownership of Company Common Stock by the Company's employee team
fosters increased awareness of and commitment to corporate-wide goals and
objectives. A principal goal of the Plan is to broaden beyond upper management
the base of employees who have an ownership interest in Company shares;
consequently, the Plan is deliberately structured to attract investment from
all levels of the Company and it contains limitations on participation by the
Company's most highly compensated employees. AS EVIDENCED BY ITS ACTION IN
FEBRUARY, THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" APPROVAL OF ADOPTION OF THE PLAN.
The principal features of the Plan are summarized below. The summary is
qualified in its entirety by the full text of the Plan, which is set forth as
Exhibit A to this Proxy Statement.
GENERAL
The purpose of the Plan is to promote the continued success of the Company
by encouraging eligible employees of the Company and its subsidiaries to
purchase shares of Common Stock of the Company and by facilitating those
purchases through annual sales of Company shares directly to employees
financed by payroll deductions.
The aggregate number of shares which may be issued and sold under the Plan
is 300,000 shares of Common Stock, subject to proportionate adjustment in the
event of stock splits and similar events.
There will be no charges or credits to the Company's reported earnings in
connection with the issuance and sale of shares under the Plan.
6
<PAGE>
ADMINISTRATION
The Plan is administered by a committee of directors (the "Committee")
appointed by the Board and authorized to interpret the Plan and to prescribe
rules, regulations and procedures governing its operation.
ELIGIBILITY OF EMPLOYEES
All employees of the Company and of any subsidiary designated by the
Committee are eligible to participate in the Plan. As of March 1, 1997, an
estimated 808 employees were eligible for participation.
No employee will be eligible to participate in the Plan during a Purchase
Period (as described below) if the employee owns shares which, when added to
the maximum number of shares the employee may purchase under the Plan and any
outstanding stock options, would exceed 5% of the voting power or value of the
Company's outstanding Common Stock.
PURCHASE PERIODS AND PAYROLL DEDUCTIONS
It is anticipated that there will be five annual Purchase Periods for the
purchase of Common Stock under the Plan. The first such period will extend
from March 1, 1997 through December 31, 1997. All remaining purchase periods
are expected to begin on January 1 and end on the following December 31. The
Committee has the authority to change the number or duration of the Purchase
Periods at its discretion, but no Purchase Period may extend beyond 27 months
in duration, and no Common Stock may be sold under the Plan after December 31,
2001. The Committee may also establish special Purchase Periods to permit
participation by employees of companies acquired by the Company after the
start of a regular Purchase Period.
Eligible employees may participate in the Plan during any Purchase Period by
filing a payroll deduction authorization form by the enrollment deadline
established for that period. Participants may authorize payroll deductions of
between 1% and 20%, in whole percentages, of regular compensation (including
overtime, vacation pay and holiday pay, but excluding bonuses, incentive
compensation, other fringe benefits or contributions under
any employee benefit plans) for each pay period ending during the Purchase
Period. The deduction will be credited to a stock purchase account to be
applied at the end of the Purchase Period to the purchase of Common Stock.
Interest on payroll deductions will be credited to participating employees'
stock purchase accounts at such rates as may be determined by the Committee.
Employees may increase, decrease or suspend payroll deductions only once
during a Purchase Period unless otherwise determined by the Committee.
At any time prior to the last day of a Purchase Period, an employee may
withdraw from the Plan and receive the balance in his/her stock purchase
account, including accrued interest. Upon such withdrawal, payroll deductions
are terminated and the employee may purchase no Common Stock under the Plan
during that Purchase Period. Partial withdrawals are not permitted.
PURCHASE OF COMMON STOCK
The purchase price of shares of Common Stock purchased under the Plan will
be the lower of (a) 85% of the fair market value of the Common Stock as of the
first day of the Purchase Period or (b) 85% of the fair market value of the
Common Stock as of the last day of the Purchase Period. Fair market value will
generally be interpreted as the mean between the publicly reported high and
low sales prices per share of the Common Stock for the date for which the fair
market value is to be determined.
Effective as of the closing day of a Purchase Period, the balance in each
participating employee's stock purchase account will automatically be applied
to the purchase of a number of whole shares of Common Stock equal to the
balance in the account divided by the purchase price. As soon as practicable
after the end of the Purchase Period, employees will receive certificates for
the number of whole shares purchased. Unless otherwise requested by the
employee, any remaining account balance will be retained for the following
Purchase Period.
7
<PAGE>
LIMITATION ON NUMBER OF SHARES PURCHASED BY INDIVIDUAL EMPLOYEES
The maximum number of shares which may be purchased by any employee for any
Purchase Period is limited to the lesser of (a) $25,000 divided by the fair
market value of a share of Common Stock as of the first day of the Purchase
Period, or (b) 20% of the employee's regular compensation for the 12 months
preceding the first day of the Purchase Period divided by 85% of the fair
market value of a share of Common Stock on the first day of the Purchase
Period. Any amount remaining in the employee's stock purchase account because
of these limitations will be refunded.
TERMINATION OF EMPLOYMENT
Participation in the Plan will conclude as of the date of an employee's
termination of employment, whether by death, retirement, disability or other
cause. Should termination of employment occur on or before the last day of a
Purchase Period, payroll deductions will cease, no shares will be purchased
and the balance in the employee's stock purchase account will be refunded as
soon as practicable. In the event that death is the cause of termination, the
refund will be made to the employee's estate.
AMENDMENT AND TERMINATION
The Board of Directors may amend or terminate the Plan at any time. Without
shareholder approval, however, no amendment may (a) increase the total number
of shares which may be issued and sold under the Plan, (b) lower the minimum
purchase price of shares under the Plan or (c) permit Plan shares to be
purchased by individuals other than employees of the Company and its
subsidiaries.
Unless previously terminated by the Board, the Plan will terminate on the
earlier of (a) December 31, 2001 or (b) the last day of the Purchase Period
that participating employees become entitled to purchase a number of shares
equal to or greater than those remaining available for purchase under the
Plan.
If on the last day of a Purchase Period the number of shares eligible for
purchases by employees is greater than the number of shares remaining
available, the Committee will allocate the available shares among the
participating employees in such manner as it deems fair and which complies
with the requirements of Section 423 of the Internal Revenue Code. If during a
Purchase Period it appears that, at the end of the Purchase Period, the shares
eligible for purchase through authorized payroll deductions may exceed the
shares remaining available, the Committee may reduce the payroll deductions
authorized by participating employees. Following any termination of the Plan,
any balances in employees' stock purchase accounts not applied to the purchase
of shares will be refunded.
FEDERAL INCOME TAX CONSEQUENCES
The principal Federal income tax consequences of participation in the Plan
can be summarized as follows:
Under Federal income tax law, participants in the Plan are viewed as having
been granted a stock option on the first day of the Purchase Period and as
having exercised the stock option by the automatic purchase of shares on the
last day of the Purchase Period. A participant, therefore, will not recognize
taxable income either at the time of grant of the option or on the date the
shares are purchased. Instead, with the exception of interest income, a
participant will generally recognize taxable income only upon disposition of
the Common Stock acquired under the Plan or upon death.
Interest credited to employee accounts under the Plan will be taxable income
to employees, and the Company will be entitled to a corresponding deduction.
Additionally, the Company or one of its subsidiaries will generally be
entitled to a deduction in the year of a disqualifying disposition equal to
the amount of ordinary income recognized by the participant as a result of the
disqualifying disposition. In all other cases, no deduction with respect to
options granted or shares of Common Stock issued under the Plan is allowed for
the Company or one of its subsidiaries.
8
<PAGE>
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the shares of
Common Stock represented in person or by proxy at the Annual Meeting and
entitled to vote on the proposal is required for approval of adoption of the
Plan. Since the aggregate number of shares voted "For," "Against" or "Abstain"
is counted in determining the minimum number of affirmative votes required for
approval, an abstention has the same legal effect as a vote "Against" the
proposal. If a broker or similar nominee limits on the proxy card the number
of shares voted on the proposal or indicates that the shares represented by a
proxy card are not voted on the proposal, such "broker non-votes" will not be
voted on the proposal and will not be counted in determining the number of
affirmative votes required for approval.
3. SELECTION OF AUDITORS
The Board of Directors, following the recommendation of the Audit Committee,
has selected the independent public accounting firm of Ernst & Young LLP as
the auditors to examine the consolidated financial statements of the Company
for fiscal year 1998. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP. The proxies
solicited on behalf of the Board of Directors will be voted to ratify
selection of that firm unless otherwise specified.
Ernst & Young LLP has served as the independent auditors for the Company
since 1984. Representatives of Ernst & Young LLP are expected to be present at
the Annual Meeting of Shareholders. They will have the opportunity to make
statements if they desire to do so and will be available to respond to
appropriate questions.
4. OTHER BUSINESS
The Board of Directors does not know of any other business to be presented
to the Annual Meeting of Shareholders. If any other matters properly come
before the meeting, however, the persons named in the enclosed form of proxy
will vote the proxy in accordance with their best judgment.
VOTE REQUIRED
Under Delaware law, the three nominees for election as directors at the
Annual Meeting of Shareholders who receive the greatest number of votes cast
for the election of directors by the holders of the Company's Common Stock
present in person or represented by proxy and entitled to vote at the meeting,
a quorum being present, will be elected as directors. The affirmative vote of
the holders of a majority of the shares of the Company's Common Stock present
in person or represented by proxy and entitled to vote at the Annual Meeting
of Shareholders, a quorum being present, is necessary for the ratification of
the selection of Ernst & Young LLP. The vote required for the approval of the
1997 Employee Stock Purchase Plan, and the effect of absentions and "broker
non-votes" with respect thereto, is set forth above. The aggregate number of
shares for which a vote "For", "Against" or "Abstain" is made is counted for
the purpose of determining the minimum number of affirmative votes required
for ratification of the selection of Ernst & Young LLP, and the total number
of votes cast "For" ratification of the selection is counted for the purpose
of determining whether sufficient votes are received. An abstention from
voting on a matter other than election of directors by a stockholder present
in person or represented by proxy and entitled to vote has the same legal
effect as a vote "Against" the matter. If a broker or similar nominee limits
on a proxy card the number of shares voted on a proposal or indicates that the
shares represented by a proxy card are not voted on the proposal, such broker
"non-votes" will not be voted on the proposal and will not be counted in
determining the number of affirmative votes required for approval.
9
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid to
the Chief Executive Officer of the Company and the four highest paid executive
officers other than the Chief Executive Officer (the "named officers") for
services rendered in all capacities to the Company and its subsidiaries during
the fiscal years ended June 30, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- --------------------- -------
SECURITIES
OTHER UNDERLYING
ANNUAL RESTRICTED OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION STOCK SAR'S PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) (A) ($) ($) (B) AWARDS (#) ($) ($) (C)
------------------ ---- ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald E. McGinnis
Chairman of the Board 1997 190,258 -- -- -- -- -- 145,191
1996 190,258 -- 19,277 -- -- -- 138,413
1995 231,704 34,171 -- -- -- -- 130,474
Dennis S. Meteny
President and Chief
Executive Officer 1997 232,005 94,500 -- -- 10,600 -- 32,486
1996 204,888 130,898 -- -- -- -- 28,294
1995 187,696 74,094 -- -- -- -- 26,018
Robert D. Crouch
Senior Vice
President--Sales and
Marketing 1997 162,207 65,025 -- -- 4,500 -- 23,034
1996 144,830 82,402 -- -- -- -- 20,232
1995 137,205 53,260 -- -- -- -- 17,831
Ronald J. Zdrojkowski
Former Vice
President--Research
and Development 1997 179,661(D) -- -- -- -- -- 7,880
1996 246,403(D) -- -- -- -- -- 9,088
1995 228,695(D) -- -- -- -- -- 9,166
Robert M. Oates
Vice President--
Engineering 1997 111,457 43,725 -- -- 3,100 -- 14,898
1996 106,252 31,801 -- -- -- -- 14,983
1995 109,020 27,503 -- -- -- -- 14,007
Steven P. Fulton
Vice President, Human
Resources and
General Counsel 1997 155,421 58,088 -- -- 8,800 -- 21,073
1996(E) -- -- -- -- -- -- --
1995(E) -- -- -- -- -- -- --
</TABLE>
- --------
(A) This column represents base salary and includes tax deferred Section
401(k) contributions under the Company's Retirement Savings Plan.
(B) The dollar value of perquisites and other personal benefits is required to
be disclosed under this column if the amount for any named officer equals
or exceeds $50,000 or 10% of the total of annual salary and bonus. The
dollar value of the perquisites and other personal benefits did not exceed
the threshold amount for any of the named officers for any of the year
covered in the table other than for Mr. McGinnis in 1996. The
10
<PAGE>
only prequisite received by Mr. McGinnis in that year in excess of 25% of
the total perquisites received by him was an auto allowance of $17,100.
(C) The amounts in this column for 1997 represent the following: matching
contributions under the Company's Retirement Savings Plan (Mr. McGinnis,
$6,221; Mr. Meteny, $10,576; Mr. Crouch, $7,554; Dr. Zdrojkowski, $1,120;
Mr. Oates, $4,298; and Mr. Fulton, $6,321); annuity plan premiums paid on
the officer's behalf (Mr. McGinnis, $39,150; Mr. Meteny, $21,910; Mr.
Crouch, $15,480; Dr. Zdrojkowski, $6,760; Mr. Oates, $10,600; and Mr.
Fulton, $14,752); and life insurance premiums paid by the Company for
policies under which the named officer (or his estate) will receive the
accumulated cash surrender value of the policy upon the earlier of his
death or his reaching age 65 and the Company will receive the remainder of
the death benefit (Mr. McGinnis, $99,818).
(D) The amounts shown for Dr. Zdrojkowski include royalties paid to him based
on sales of a product developed by him pursuant to his employment
agreement. See "Employment Agreements and Other Transactions." Dr.
Zdrojkowski retired in December 1996, and such royalty payments ceased at
that time.
(E) Mr. Fulton was not an executive officer in fiscal year 1996 or fiscal year
1995.
STOCK OPTIONS
The following table sets forth information concerning stock option grants
made to the named officers during the fiscal year ended June 30, 1997. The
Company has not granted any stock appreciation rights ("SAR's") to any of the
named officers or any other officers or employees of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ------------------------------------------------------------------------ ----------------------
NUMBER OF
SECURITIES % OF
UNDERLYING TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE OF
GRANTED EMPLOYEES IN BASE PRICE
NAME (#) (A) FISCAL YEAR ($/SH) (B) EXPIRATION DATE 5% ($) 10% ($)
- ---- ---------- ------------- ----------- ----------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dennis S. Meteny 10,600 8% 16.88 December 27, 2006 112,546 285,211
Robert D. Crouch 4,500 3% 16.88 December 27, 2006 47,779 121,080
Robert M. Oates 3,100 2% 16.88 December 27, 2006 32,914 83,411
Steven P. Fulton 5,000 4% 23.25 October 8, 2006 73,121 185,303
3,800 3% 16.88 December 27, 2006 40,347 102,246
</TABLE>
- --------
(A) Options granted in 1997 are exercisable starting 12 months after the grant
date, with 25% of the shares covered thereby becoming exercisable at that
time with an additional 25% of the option shares becoming exercisable on
each successive anniversary date, with all option shares exercisable on
the fourth anniversary date. Under the terms of the Company's stock option
plans, this exercise schedule may be accelerated in certain specific
situations.
(B) Under the terms of the Company's stock option plans, there are no
provisions that permit these options to be repriced other than to reflect
stock splits, stock dividends, or similar events.
11
<PAGE>
The following table sets forth information concerning the stock option
exercises by the named officers during the fiscal year 1997 and the
unexercised stock options held at June 30, 1997 by the named officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)
VALUE -------------- -----------------
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE (2)/
NAME ON EXERCISE (#) ($) (1) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- --------- -------------- -----------------
<S> <C> <C> <C> <C>
Gerald E. McGinnis 385,000 4,864,475 -- --
Dennis S. Meteny -- -- 120,000/18,600 1,821,600/130,790
Robert D. Crouch -- -- 212,000/16,500 3,498,560/153,435
Robert M. Oates -- -- 31,705/8,100 345,753/68,525
Steven P. Fulton -- -- 3,750/15,050 18,925/34,750
</TABLE>
- --------
(1) Represents the amount by which the fair market value of the shares
acquired on exercise at the exercise date exceeded the exercise price of
such shares.
(2) Represents the amount by which the fair market value ($20.63) of the
shares covered by the stock options on June 30, 1997 exceeded the exercise
price of such stock options.
EMPLOYMENT AGREEMENTS AND OTHER TRANSACTIONS
The Company paid royalties to Dr. Zdrojkowski for fiscal years 1997, 1996
and 1995 on the sale of a product developed by him pursuant to his employment
agreement. These royalties are included in Dr. Zdrojkowski's compensation
shown in the Summary Compensation Table. Dr. Zdrojkowski retired in December
1996, and such royalty payments ceased at that time.
Effective in May 1988, Mr. McGinnis transferred to the Company his rights to
all inventions, improvements, processes or discoveries made or conceived by
him during his employment with the Company, and his right to royalty payments
under a former employment and license agreement terminated. In exchange for
his patents on certain of the Company's products, the Company in May 1988 paid
Mr. McGinnis $600,000 in cash and in exchange for all other intellectual
properties transferred granted him the right to purchase 400,000 shares of
common stock of the Company at a price of $1.88 per share. The exercise price
of the option granted to Mr. McGinnis was determined through arms' length
negotiations between Mr. McGinnis and the Company's directors other than Mr.
McGinnis. As of June 30, 1997, the option has been exercised in full. The
information on Mr. McGinnis' option has been adjusted to reflect stock splits.
The Company believes that securing full rights to the Company's products
from Mr. McGinnis and terminating future royalty payments to him was in the
best interests of the Company. The consideration paid was determined by
negotiations between the Board of Directors of the Company and Mr. McGinnis,
taking into account all relevant factors including a review of past royalty
payments and estimate of future royalty payments. The terms of this agreement
were approved by the Board of Directors, including all of the disinterested
directors of the Company.
Effective April 1, 1995 the Company entered into an Employment Agreement
with Mr. McGinnis providing for his employment as Chairman of the Company's
Board of Directors for a three year term ending March 31, 1998. Each year
until March 31, 1997, the term of the Agreement is automatically extended for
one additional year unless previously either Mr. McGinnis or the Company gives
notice in the then current first year of the term that the term will not be
further extended. Under the terms of the Agreement, Mr. McGinnis agreed to
spend
12
<PAGE>
not less than two-thirds of his working time in the performance of his duties
as Chairman, including assisting the Company's President in fulfilling the
Company's civic and charitable responsibilities, serving as Chairman of the
Company's Strategy Committee, providing guidance and direction in new product
development as well as acquisition of new products and businesses and ensuring
good liaison between the Board and the Company's management. The Agreement
provides for a base salary at the rate of $190,000 per year (subject to annual
adjustment) plus participation in the Company's benefit plans (other than
stock option and stock purchase plans) on a basis comparable with other
executives in the Company.
Effective December 1, 1994 the Company entered into an Employment Agreement
with Mr. Meteny providing for his employment as President and Chief Executive
Officer of the Company for a three year term ending November 30, 1997.
Effective the same date the Company and Mr. Crouch entered into an Employment
Agreement providing for his employment as Vice President of Sales and
Marketing also for a three year term ending November 30, 1997. Each agreement
is automatically extended each year for one additional year absent prior
notice by either party. The Agreements provide for base salaries for Messrs.
Meteny and Crouch of $195,600 per year (subject to annual adjustment) and
$138,200 per year (subject to annual adjustment), respectively, plus
participation in the Company's benefit and incentive plans on a basis
comparable with other executives in the Company.
Effective December 30, 1996, the Company entered into an Employment
Agreement with Mr. Fulton providing for his employment as Vice President,
Human Resources and General Counsel for a three year term ending December 30,
1999. Effective March 4, 1997, the Company entered into an Employment
Agreement with Mr. Oates providing for his employment as Vice President,
Engineering for a three year term ending March 4, 2000. Each agreement is
automatically extended each year for one additional year absent prior notice
by either party. The Agreements provide for base salaries for Messrs. Fulton
and Oates of $147,524 per year (subject to annual adjustment) and $116,600 per
year (subject to annual adjustment), respectively, plus participation in the
Company's benefit and incentive plans on a basis comparable with other
executives in the Company.
In April 1995, the Company guaranteed a loan made by a commercial bank to
Mr. Crouch in the amount of $400,000. In consideration for this guarantee, Mr.
Crouch granted to the Company a security interest in 80,000 shares of the
Company's common stock owned by him. Mr. Crouch repaid the commercial bank
loan in full in June 1996, at which time the Company's guarantee and its
security interest terminated.
EXECUTIVE OFFICERS
The executive officers of the Company, other than those who also serve as
directors and are described in the preceding pages, are Daniel J. Bevevino,
37, Vice President and Chief Financial Officer; Robert D. Crouch, 49, Senior
Vice President Sales and Marketing; Raymond W. Dyer, 51, Vice President
Marketing; Steven P. Fulton, 38, Vice President Human Resources and General
Counsel; Robert M. Oates, 53, Vice President Engineering; and Geoffrey C.
Waters, 47, Vice President Customer Satisfaction.
Mr. Bevevino joined the Company in 1988 as Manager of Cost Accounting. From
1990 to 1994 Mr. Bevevino served as Controller. In November of 1994, Mr.
Bevevino was elected Chief Financial Officer and in May 1996 was also elected
Vice President. Prior to his affiliation with the Company, Mr. Bevevino--a
Certified Public Accountant--spent five years with the international
accounting firm of Ernst & Young.
Mr. Crouch joined the Company as Director of Sales and Marketing in January
1989. He was promoted to Senior Vice President Sales and Marketing in May
1997. From 1989 to 1997, he was Vice President Sales and Marketing. Prior to
joining Respironics, from 1986 to 1989, Mr. Crouch worked as a consultant for
various companies on administrative and governmental affairs issues. From 1985
to 1986, he was employed by Cryogenic Associates, serving as Executive Vice
President and later President. From 1983 to 1985, Mr. Crouch was President,
Chief Executive Officer and Chairman of the Board of BetaMed Pharmaceuticals.
Mr. Dyer joined the Company in May 1997, as Vice President Marketing. He had
been President of DeVilbiss Health Care, a subsidiary of Sunrise Medical, Inc.
since 1994. Mr. Dyer served in various positions
13
<PAGE>
with Cobe Laboratories, Inc. from 1972 to 1992. In 1994, Mr. Dyer moved to
National Medical Care, Inc. as President of its Renal Products Group. He
assumed the Presidency of the DeVilbiss organization shortly thereafter.
Mr. Fulton joined the Company on a part time basis in May 1995 serving as
General Counsel. In January 1996 his role was expanded to full time status. On
October 8, 1996, Mr. Fulton was also elected Vice President, Human Resources.
Prior to joining the Company, Mr. Fulton was a partner in the Pittsburgh
office of Reed Smith Shaw & McClay. He joined the law firm in May 1984. Prior
to this employment, he served briefly in an engineering capacity for
Westinghouse Electric Corporation.
Mr. Oates joined the Company as Vice President--Engineering in July 1992.
From 1982 to July 1992, he was employed by Westinghouse Electric Company
Science & Technology Center, serving as the Manager of Communication Systems,
Sensor Development and Electo-optic Systems.
Mr. Waters, as part of the Company's acquisition of LIFECARE International,
Inc., joined Respironics in October 1996, as Vice President Customer
Satisfaction. Prior to joining the Company, Mr. Waters was employed in various
capacities by LIFECARE International, Inc. from 1984 to 1996. His last
position with LIFECARE was President and Chief Operating Officer.
REPORT OF THE COMPENSATION COMMITTEE
INTRODUCTION
Decisions regarding compensation of the Company's executives generally are
made based on recommendations by the Compensation Committee, which is composed
of three independent outside directors. All decisions of the Compensation
Committee relating to compensation of the Company's executive officers are
reviewed and approved by the full Board. Set forth below is a report submitted
by Dr. Cotter and Messrs. Jones and Lawyer (the members of the Compensation
Committee at the relevant time during fiscal year 1997) in their capacity as
members of the Board's Compensation Committee addressing the Company's
compensation policies for fiscal year 1997 as they affected executive officers
of the Company, including Mr. Meteny, the President and Chief Executive
Officer, and Messrs. McGinnis, Crouch, Oates and Fulton and Dr. Zdrojkowski,
the five executive officers other than Mr. Meteny who were, for fiscal year
1997, the Company's most highly compensated executives.
COMPENSATION
The Company's executive and key employee compensation program consists of a
base salary component, a component providing the potential for an annual
profit sharing bonus based on overall Company performance as well as
individual performance, and a component providing the opportunity to earn
stock options linking the employee's long-term financial success to that of
the Company's stockholders.
Cash Compensation
Officers are compensated within salary ranges that are generally based on
similar positions in companies of comparable size and complexity to the
Company. Companies are selected based on products marketed, customers and
markets served, geographic distribution, manufacturing locations and
complexity of operations (which involves several factors, with sales revenue
being a major factor) for those companies operating in the respiratory
products market. In addition, the Company participates in and receives summary
compensation survey information from several sources, including the Health
Industry Manufacturers Association ("HIMA").
The methodology used to determine guidelines for compensation was a matching
of each executive's responsibilities to a comparable position described in the
surveys. Based on this matching, each executive's salary was compared to the
corresponding salary range of comparable executives in the surveys. Then, an
14
<PAGE>
appropriate salary range (e.g., 25th percentile, median, 75th percentile) was
selected based on the comparison of the executive's responsibilities to those
of the comparable position in the surveys. The comparable companies operating
in the respiratory market and other data were then examined for reasonableness
on a position-by-position basis. Salaries were established based on the
performance of the executive given his responsibilities within a specific
position and the relationship of the current salary to the appropriate
percentile for the most comparable position available within the surveys.
The primary level of compensation is based on a combination of years of
experience and performance. An officer's performance is based on how well he
meets objectives set by his supervisor through a Company-wide process of
stating objectives for each associate (employee), insuring compatibility of
objectives among associates, reviewing performance against objectives and
recognizing the accomplishment of these objectives. The Board of Directors
establishes and reviews the objectives of the Chairman of the Board, and the
Board also assesses the Chairman's performance compared to these objectives.
The salary of all officers is reviewed annually in November, with the amount
of the increases (which take effect the following February) based on factors
such as Company performance, general economic conditions, marketplace
compensation trends and individual performance. The relative weight of each of
these factors in determining salary increases varies for each annual salary
determination. There is no fixed weighting. However, in the past, the factors
which have generally had the greatest influence on salary increases have been
(in decreasing significance) Company performance, individual performance,
marketplace trends in compensation and general economic conditions.
In fiscal year 1997 the Compensation Committee recommended and the Board
approved a base salary increase for Mr. Meteny of 15% considering the
foregoing factors. It also recommended and the Board approved a 12% increase
in base salary for Mr. Crouch, a 10% increase for Mr. Oates, and a 5% increase
for Mr. Fulton, all based on the above mentioned factors. In the case of Mr.
McGinnis, who became Chairman of the Board of Directors in 1994 and spends not
less than two-thirds of his working time on Company matters, the Committee
recommended and the Board approved no change in base salary. In the case of
Dr. Zdrojkowski, the committee recommended and the Board approved no change in
base salary. Dr. Zdrojkowski retired in December 1996. See "Executive
Compensation--Employment Agreements and Other Transactions."
Profit Sharing Bonus
The second compensation component is a Company-wide profit sharing program
under the Company's Profit Sharing Bonus Plan. Bonuses are primarily based on
the Company's annual financial performance and secondarily on the performance
of the individual. Bonuses under this program generally range from zero to 50%
of base salary. The measures of annual financial performance used in
determining the amount of bonuses include sales growth, earnings growth and
net income as a percentage of sales. Based on these factors, profit sharing
bonuses were accrued for fiscal year 1997 for the named officers in the
amounts set forth in the Summary Compensation Table above.
Stock Options
The third major component of the officer's compensation consists of stock
options. The primary purpose of granting stock options is to link the
officers' financial success to that of the stockholders of the Company. The
exercise price of stock options is determined by the Compensation Committee at
the time the option is granted, but may not be less than the fair market value
of the Company's Common Stock as of the date of grant. Options become
exercisable commencing a minimum of six months from the date of grant and are
exercisable for a maximum period of 10 years, as determined by the
Compensation Committee.
The Compensation Committee awarded stock options to 110 of the Company's
employees during fiscal year 1997. Stock options granted to named officers
during fiscal year 1997 are listed on the table entitled "Option Grants in
Last Fiscal Year."
15
<PAGE>
CEO COMPENSATION
The following factors constitute the basis for the compensation paid to Mr.
Meteny, the Company's Chief Executive Officer ("CEO"), during fiscal year
1997; his responsibilities as the Company's CEO; the Company's ability to
achieve its objectives for revenue and earnings growth and its objectives for
long-term growth; the salaries paid to other CEO's of comparable companies as
reported in the surveys; and Mr. Meteny's experience compared to the CEO's of
comparable companies in the surveys. As indicated in the Summary Compensation
Table, Mr. Meteny was awarded a bonus for fiscal year 1997 of $94,500.
Compensation Committee of the Company's Board of Directors:
Douglas A. Cotter, Chairman
Donald H. Jones
Joseph C. Lawyer
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Securities and Exchange Commission's rules relating to the disclosure of
executive compensation require that the Proxy Statement include certain
information about "insider" participation on compensation committees and about
specific kinds of "interlocking" relationships between the compensation
committees of different companies, under the foregoing caption. All members of
the Compensation Committee are outside directors, and no such interlocking
relationships exist.
The Compensation Committee of the Board of Directors is responsible for
executive compensation decisions as described above under "Board of Directors
and Committees of the Board." During fiscal year 1997, the Committee consisted
of Dr. Cotter (Chairman) and Messrs. Jones and Lawyer.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the
Securities and Exchange Commission (the "Commission") and the National
Association of Securities Dealers National Market System initial reports of
ownership and reports of change in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten percent
shareholders are required by Commission regulation to furnish the Company with
copies of all Section 16(a) forms they file.
All Forms 3, 4, and 5 have been filed within the guidelines of Commission
during fiscal year 1997 with the exception of (i) the Form 4 filed for the
Gerald E. McGinnis Charitable Foundation and (ii) the Forms 5 filed for Dennis
S. Meteny and Steven P. Fulton. In making this disclosure, the Company has
relied solely on the written representation of its directors and officers and
copies of the reports that they have filed with the Commission.
16
<PAGE>
PERFORMANCE GRAPH
The following graph shows a five year comparison of cumulative total returns
for the Company, the NASDAQ Market Index and the Standard & Poor's Medical
Products and Supplies Index ("Hlthcare-500"). The graph assumes that the value
of the investment in the Company's Common Stock and each index was $100 at June
30, 1992, and that all dividends were reinvested.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG RESPIRONICS, NASDAQ INDEX AND S&P HEALTHCARE INDEX
<CAPTION>
MEASUREMENT PERIOD RESPIRONICS NASDAQ S&P HEALTHCARE
(FISCAL YEAR COVERED) INDEX INDEX
- --------------------- ------------- ---------- ----------------
<S> <C> <C> <C>
Measurement PT -
6/30/92 $100.00 $100.00 $100.00
FYE 6/30/93 $133.82 $125.76 $ 82.02
FYE 6/30/94 $ 99.26 $126.97 $ 79.07
FYE 6/30/95 $167.65 $169.48 $121.31
FYE 6/30/96 $217.65 $212.59 $159.37
FYE 6/30/97 $248.53 $264.61 $211.19
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30
-------------------------------------------------
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------
NASDAQ.......................... $100.00 $125.76 $126.97 $169.48 $217.59 $264.61
S&P Hlthcare--500............... $100.00 $ 82.02 $ 79.07 $121.31 $159.37 $211.19
Respironics, Inc................ $100.00 $133.82 $ 99.26 $167.65 $217.65 $248.53
</TABLE>
MISCELLANEOUS
The cost of soliciting proxies will be borne by the Company. Following the
original mailing of the proxy solicitation material, proxies may be solicited
personally, or by telephone, facsimile or other electronic means, by employees
of the Company and its subsidiaries who will receive no additional compensation
for such services. In addition, D.F. King & Co., Inc., 77 Water Street, New
York, New York 10005, has been retained by the Company to assist in the
solicitation of proxies at a retainer of $6,000 plus reasonable out-of-pocket
expenses. The Company will reimburse brokerage houses and other custodians,
nominees and fiduciaries for reasonable expenses incurred in the sending of
proxy solicitation material and the 1997 Annual Report to beneficial owners of
stock held in their names.
Dorita A. Pishko
Corporate Secretary
October 17, 1997
17
<PAGE>
EXHIBIT A
1997 EMPLOYEE STOCK PURCHASE PLAN
RESPIRONICS, INC.
The purposes of the 1997 Employee Stock Purchase Plan (the "Plan") are to
provide eligible employees of Respironics, Inc. (the "Company") and its
Subsidiaries a convenient opportunity to purchase shares of the Common Stock,
par value $.01 per share, of the Company (the "Common Stock") through annual
offerings financed by payroll deductions and to provide a stock ownership
incentive for such employees to promote the continued success of the Company.
For the purposes of the Plan, the term "Subsidiary" means any corporation in
an unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing at least fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
The Plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986 (the "Code"). The provisions
of the Plan shall accordingly be construed so as to extend and limit
participation in a manner consistent with the requirements of Section 423 of
the Code and the regulations thereunder.
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee") appointed by
the Board of Directors of the Company (the "Board") and consisting of not less
than two members of the Board.
The Committee shall keep records of action taken at its meetings. A majority
of the Committee shall constitute a quorum at any meeting, and the acts of a
majority of the members present at any meeting at which a quorum is present,
or acts unanimously approved in writing by the Committee, shall be the acts of
the Committee.
The Committee shall interpret the Plan and prescribe such rules, regulations
and procedures in connection with the operations of the Plan as it shall deem
to be necessary and advisable for the administration of the Plan consistent
with the purposes of the Plan. All questions of interpretation and application
of the Plan shall be subject to the determination of the Committee, which
shall be final and binding.
SECTION 2
ELIGIBILITY
Any person who as of the first day of a Purchase Period (as defined in
Section 4) is an employee of the Company or an employee of a Subsidiary
authorized by the Committee to participate in the Plan shall be eligible to
participate in the Plan during such Purchase Period.
Notwithstanding any other provision of the Plan, no employee shall be
granted an option under the Plan if such employee, immediately after the
option is granted, owns stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company or
any Subsidiary. For purposes of the preceding sentence, the rules of Section
424(d) of the Code shall apply in determining the stock ownership of an
employee, and stock which the employee may purchase under outstanding options
shall be treated as stock owned by the employee.
SECTION 3
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares of the Common Stock which may be issued under
the Plan is 300,000 shares, subject to adjustment and substitution as set
forth in Section 8. The shares which may be issued under
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<PAGE>
the Plan may be either authorized but unissued shares or treasury shares or
partly each, as shall be determined from time to time by the Board.
SECTION 4
PURCHASE PERIODS; GRANT OF STOCK OPTIONS
Unless otherwise determined by the Committee, (a) there shall be five annual
Purchase Periods under the Plan, (b) the first Purchase Period under the Plan
shall commence on March 1, 1997 and shall end on December 31, 1997 and (c)
beginning with the calendar year 1998 through the year 2001, each succeeding
Purchase Period shall be equivalent to the calendar year, beginning on January
1 and ending on December 31. In no event shall the duration of any Purchase
Period exceed twenty-seven (27) months.
On the first day of each Purchase Period, each employee participating in the
Plan on such date shall be granted an option to purchase a number of full
shares of Common Stock (subject to adjustment as provided in Section 8)
determined by dividing (a) twenty percent (20%) of the employee's Basic
Compensation, as defined in Section 5, for the twelve months immediately
preceding the first day of the Purchase Period, by (b) eighty-five percent
(85%) of the fair market value of a share of Common Stock on the first day of
such Purchase Period, determined as provided in Section 7. To the extent an
option to purchase shares of Common Stock is not exercised at the end of the
Purchase Period as provided for in Section 6, the option shall terminate.
If as a result of a merger, acquisition or similar transaction occurring
after the first day of the then current Purchase Period a corporation or other
entity (a) becomes a Subsidiary authorized to participate in the Plan or (b)
becomes part of the Company or an existing Subsidiary authorized to
participate in the Plan, the Committee may authorize a special Purchase Period
to accommodate the employees affected by such transaction, provided that such
special Purchase Period is consistent with the requirements of Section 423 of
the Code and the regulations thereunder.
Notwithstanding any other provision of the Plan, no employee participating
in the Plan shall be granted an option which permits the employee's rights to
purchase stock under all employee stock purchase plans under Section 423 of
the Code of the Company or any Subsidiary to accrue at a rate which exceeds
$25,000 of the fair market value of the Common Stock, determined at the time
such option is granted, or such other maximum as may be prescribed for
qualifying employee stock purchase plans under Section 423 of the Code, for
each calendar year in which such option is outstanding at any time.
SECTION 5
PAYROLL DEDUCTIONS
An eligible employee may become a participant in the Plan for a Purchase
Period by completing the authorization for a payroll deduction on the form
provided by the Company and filing it with the appropriate, designated Company
employee by the enrollment deadline established for the Purchase Period. An
eligible employee who was a participant in the Plan at the close of the
preceding Purchase Period shall automatically be enrolled as a participant in
the Plan for the succeeding Purchase Period, if any, unless written notice of
the employee's election not to participate for the succeeding Purchase Period
is received by the designated Company employee by the enrollment deadline
established for the Purchase Period.
At the time an employee files an authorization for payroll deduction, the
employee shall elect to have deductions made from the employee's pay for each
pay period ending during the Purchase Period at a rate of not less than one
percent (1%) and not more than twenty percent (20%), in whole percentages, of
the employee's Basic Compensation for such pay periods. Unless a new payroll
deduction authorization form changing the employee's prior payroll deduction
is received by the designated Company employee by the enrollment deadline for
a Purchase Period, an employee who is automatically reenrolled in the Plan for
a Purchase Period by virtue of having been a participant for the preceding
Purchase Period shall be deemed to have elected the same level of
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<PAGE>
payroll deductions for the new Purchase Period as was in effect for the
participant as of the close of the preceding Purchase Period. For this
purpose, Basic Compensation shall mean the sum of (a) base salary or base
wages paid to an employee, including overtime, vacation pay and holiday pay,
but excluding the items set forth in the next succeeding sentence to the
extent they are included in such definition of base salary or base wages, and
(b) any contribution made to the Respironics, Inc. Retirement Savings Plan
pursuant to a salary reduction agreement (exclusive of the employer's matching
contribution). Basic Compensation shall exclude (a) bonuses or other incentive
compensation, (b) any fringe benefits not specifically listed in the preceding
sentence, and (c) contributions or benefits (except as specifically listed in
the preceding sentence) under any employee benefit plans maintained by the
Company or a subsidiary. Notwithstanding the foregoing, no payroll deduction
shall be made pursuant to a payroll deduction authorization form filed by any
employee who has made a hardship withdrawal from the Respironics, Inc.
Retirement Savings Plan for a period of 12 months from the date of such
hardship withdrawal if the hardship withdrawal has been made in reliance on
Treasury Regulation (S) 1.401(k)-1(d)(2)(iv)(B) or any successor regulation.
Payroll deductions made under the Plan need not be set aside or segregated
from other corporate funds of the Company or any Subsidiary and may be used
for any corporate purpose. With respect to such payroll deductions and any
interest accrued thereon, the rights of participants shall be those of an
unsecured general creditor.
An employee stock purchase account will be established for each employee
participating in the Plan, and payroll deductions made pursuant to this
Section 5 shall be credited to the individual employee's stock purchase
account. The Company shall also credit each employee's stock purchase account
with interest at such rate and at such times as the Committee may from time to
time determine. Unless otherwise determined by the Committee, interest shall
be credited to employee stock purchase accounts at the end of each calendar
month during a Purchase Period, on the last day of a Purchase Period, on the
date of withdrawal as provided for below in this Section 5, on the date of
termination of employment as provided in Section 9 and on the date of
termination of the Plan.
Subject to such rules, regulations or procedures as may be adopted by the
Committee, an employee may at any time increase, decrease or suspend the
employee's payroll deduction by filing a new payroll deduction authorization
form. The change shall be effective as soon as practicable but in no event
shall it become effective earlier than the first pay period ending after
receipt of the form. Unless otherwise provided in rules, regulations or
procedures established by the Committee, a payroll deduction may be changed
only once during a Purchase Period. In addition, all payroll deductions for an
employee will be automatically suspended for a period of 12 months from the
date of a hardship withdrawal by the employee from the Respironics, Inc.
Retirement Savings Plan if the hardship withdrawal has been made in reliance
on Treasury Regulation (S) 1.401(k)-1(d)(2)(iv)(B) or any successor
regulation.
An employee may at any time prior to the last day of the Purchase Period and
for any reason permanently withdraw the balance accumulated in the employee's
stock purchase account, including interest accrued thereon, and thereby
withdraw from participation in the Plan. An employee electing to withdraw must
sign and deliver a notice of withdrawal as prescribed by the Committee, and
the withdrawal shall be effective as of the date of receipt of the notice by
the designated Company employee. Payroll deductions shall cease and the
amounts credited to the employee's stock purchase account shall be paid to the
employee as soon as practicable after receipt of the notice of withdrawal. The
employee may thereafter elect to participate in the Plan for a subsequent
Purchase Period but may not again elect participation for the Purchase Period
including the date of withdrawal. Partial withdrawals shall not be permitted.
SECTION 6
PURCHASE OF SHARES
Subject to Section 9, and unless a notice of withdrawal has been received
prior to such date as provided in Section 5, an employee having a balance in
the employee's stock purchase account on the last day of a Purchase
A-3
<PAGE>
Period at least equal to the Purchase Price, as defined in Section 7, of a
full share of Common Stock shall thereby automatically exercise the employee's
option to purchase shares of Common Stock under the Plan. The number of shares
purchased by each participating employee shall be determined by dividing (a)
the balance in the employee's stock purchase account by (b) the Purchase Price
for such Purchase Period, provided that the number of shares purchased shall
not exceed the maximum number of shares subject to the option granted to the
employee as provided in Section 4. No fractional shares shall be purchased.
Any balance in an employee's stock purchase account after the exercise of the
option and purchase of full shares shall be paid to the employee as soon as
practicable, except that if an employee is a participant in the Plan for the
succeeding Purchase Period, if any, and the employee does not notify the
designated Company employee prior to the deadline established by the Company
or, if none, prior to the first day of the succeeding Purchase Period that any
such balance should be paid to the employee, any balance in the employee's
stock purchase account which was not applied to the purchase of Common Stock
because it was less than the Purchase Price of a full share shall remain in
the employee's stock purchase account and be carried over to the succeeding
Purchase Period.
Certificates for full shares shall be issued to purchasing employees as soon
as practicable after the end of each Purchase Period. Certificates shall be
registered in the name of the employee, or if the employee so indicates on the
employee's payroll deduction authorization form, in the employee's name
jointly with a member of the employee's family, with the right of
survivorship, or in the name of the employee's spouse. As of the date of
exercise, the person(s) in whose name(s) the Certificates are to be registered
shall be considered for all purposes to be the owner of the shares with
respect to which the stock options have been exercised.
SECTION 7
PURCHASE PRICE
The Purchase Price of shares of Common Stock under the Plan for each
Purchase Period shall be the lesser of (a) an amount equal to eight-five
percent (85%) of the fair market value of the Common Stock as of the first day
of such Purchase Period, the day the options are granted under the Plan, or
(b) an amount equal to eighty-five percent (85%) of the fair market value of
the Common Stock as of the last day of the Purchase Period, the day the
options may be exercised under the Plan.
Fair market value of the Common Stock shall be the mean between the
following prices, as applicable, for the date as of which fair market value is
to be determined as quoted in The Wall Street Journal (or in such other
reliable publication as the Committee, in its discretion, may determine to
rely upon): (a) if the Common Stock is listed on the New York Stock Exchange,
the highest and lowest sales prices per share of the Common Stock as quoted in
the NYSE- Composite Transactions listing for such date, (b) if the Common
Stock is not listed on such exchange, the highest and lowest sales prices per
share of Common Stock for such date on (or on any composite index including)
the principal United States securities exchange registered under the 1934 Act
on which the Common Stock is listed, or (c) if the Common Stock is not listed
on any such exchange, the highest and lowest sales prices per share of the
Common Stock for such date on the National Association of Securities Dealers
Automated Quotations System or any successor system then in use ("NASDAQ"). If
there are no such sale price quotations for the date as of which fair market
value is to be determined but there are such sale price quotations within a
reasonable period both before and after such date, then fair market value
shall be determined by taking a weighted average of the means between the
highest and lowest sales prices per share of the Common Stock as so quoted on
the nearest date before and the nearest date after the date as of which fair
market value is to be determined. The average should be weighted inversely by
the respective numbers of trading days between the selling dates and the date
as of which fair market value is to be determined. If there are no such sale
price quotations on or within a reasonable period both before and after the
date as of which fair market value is to be determined, then fair market value
of the Common Stock shall be the mean between the bona fide bid and asked
prices per share of Common Stock as so quoted for such date on NASDAQ, or if
none, the weighted average of the means between such bona fide bid and asked
prices on the nearest trading date before and the nearest trading date after
the date as of which fair market value is to be determined, if both such dates
are within a reasonable
A-4
<PAGE>
period. The average is to be determined in the manner described above in this
Section 7. If the fair market value of the Common Stock cannot be determined
on the basis previously set forth in this Section 7 for the date as of which
fair market value is to be determined, the Committee shall in good faith
determine the fair market value of the Common Stock on such date.
SECTION 8
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Common Stock
payable in shares of the Common Stock, the number of shares of the Common
Stock then subject to any outstanding stock options and the number of shares
of the Common Stock which may be issued under the Plan but are not then
subject to outstanding stock options shall be adjusted by adding thereto the
number of shares of the Common Stock which would have been distributable
thereon if such shares had been outstanding on the date fixed for determining
the shareholders entitled to receive such stock dividend or distribution.
Subject to the Board's ability to terminate the Plan pursuant to Section 11,
if the outstanding shares of the Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up,
combination of shares, merger or consolidation, then there shall be
substituted for each share of the Common Stock subject to any then outstanding
stock option and for each share of the Common Stock which may be issued under
the Plan but which is not then subject to any outstanding stock option, the
number and kind of shares of stock or other securities into which each
outstanding share of the Common Stock shall be so changed or for which each
such share shall be exchangeable.
In case of any adjustment or substitution as provided for in this Section 8,
the Committee shall equitably adjust the formula for determining the Purchase
Price of outstanding stock options in accordance with the requirements of
Sections 423 and 424 of the Code.
No adjustment or substitution provided for in this Section 8 shall require
the Company to issue or sell a fraction of a share or other security.
Accordingly, all fractional shares or other securities which result from any
such adjustment or substitution shall be eliminated and not carried forward to
any subsequent adjustment or substitution.
If any adjustment or substitution provided for in this Section 8 requires
the approval of shareholders in order to enable the Company to grant stock
options under the Plan, then no such adjustment or substitution shall be made
without the required shareholder approval. Notwithstanding the foregoing, if
the effect of any such adjustment or substitution would be to cause any
outstanding option granted under the Plan to fail to continue to qualify as an
option subject to Sections 421 and 423 of the Code or to cause a modification,
extension or renewal of such option within the meaning of Section 424 of the
Code, the Committee may elect that such adjustment or substitution not be made
but rather shall use reasonable efforts to effect such other adjustment of
each then outstanding stock option as the Committee, in its discretion, shall
deem equitable and which will not result in any disqualification,
modification, extension or renewal (within the meaning of Section 424 of the
Code) of such outstanding stock option.
SECTION 9
TERMINATION OF EMPLOYMENT, TRANSFERABILITY
Participation in the Plan shall terminate as of the date of termination of
employment of a participating employee (whether by death, retirement,
disability or otherwise). In the event of a participating employee's
termination of employment on or before the last day of a Purchase Period,
payroll deductions shall be terminated as soon as practicable, no shares shall
be purchased for such employee under Section 6 and the balance in the
A-5
<PAGE>
employee's stock purchase account shall be paid as soon as practicable to the
employee, or in the event of the employee's death, to the employee's estate.
The Committee shall have the power to determine the date of an employee's
retirement or other termination of employment, and any such determination by
the Committee shall be final and binding. The Company shall have no liability
to any person in the event shares are purchased for a deceased employee under
Section 6 prior to receipt by the designated Company employee of notice of the
death of the participating employee.
Rights granted under the Plan may not be assigned, transferred, pledged or
otherwise disposed of in any way by a participating employee, other than on
death as described above. Any other attempt to assign, transfer, pledge or
otherwise dispose of rights under the Plan shall be without effect, except
that the Company may treat such act as a notice of withdrawal from
participation in the Plan in accordance with Section 5. Stock options granted
under the Plan are not transferable by the participating employee otherwise
than by Will or the laws of descent and distribution, and are exercisable
during the employee's lifetime only by the employee.
SECTION 10
EFFECT OF THE PLAN ON THE RIGHTS OF EMPLOYEES AND EMPLOYER
Nothing in the Plan or any stock option under the Plan shall confer any
right to any employee to continue in the employ of the Company or any
Subsidiary or interfere in any way with the rights of the Company or any
Subsidiary to terminate the employment of any employee at any time.
SECTION 11
AMENDMENT AND TERMINATION
The right to amend the Plan at any time and from time to time and the right
to terminate the Plan at any time are hereby specifically reserved to the
Board, provided that no amendment of the Plan shall, without shareholder
approval, (a) increase the total number of shares which may be issued under
the Plan, except as provided in Section 8, (b) amend the first paragraph of
Section 7 to lower the minimum Purchase Price or (c) make any changes in the
class of corporations whose employees may be offered options under the Plan.
The Plan and all rights of employees under the Plan shall terminate on the
earlier of:
(a) December 31, 2001
(b) the date the Plan is terminated by the Board, in its discretion; or
(c) the last day of the Purchase Period that participating employees become
entitled to purchase a number of shares equal to or greater than the number of
shares remaining available for purchase under the Plan. If the number of
shares so purchasable is greater than the shares remaining available, the
available shares shall be allocated by the Committee among the participating
employees in such manner as it deems fair and which complies with the
requirements under Section 423 of the Code for employee stock purchase plans.
In the event at any time during a Purchase Period it appears that the shares
purchasable with authorized payroll deductions may exceed the number of shares
remaining available for purchase under the Plan, the Committee shall have
discretion to reduce the payroll deductions authorized by participating
employees in such manner as it deems fair and which complies with the
requirements under Section 423 of the Code for employee stock purchase plans.
The Company shall provide written notice to each affected employee of any such
reduction.
As soon as practicable following termination of the Plan, all amounts
credited to the stock purchase accounts of participating employees, together
with any interest accrued thereon, shall, to the extent not applied to the
purchase of shares as provided in subparagraph (c) above, be refunded to the
participating employees.
A-6
<PAGE>
SECTION 12
EFFECTIVE DATE OF PLAN
The effective date and date of adoption of the Plan shall be February 13,
1997, the date of adoption of the Plan by the Board, provided that on or prior
to December 31, 1997 such adoption of the Plan by the Board is approved by the
affirmative vote of the holders of at least a majority of the shares of Common
Stock represented in person or by proxy and entitled to vote at a duly called
and convened meeting of such holders. Notwithstanding any other provision
contained in the Plan, no stock option granted under the Plan may be exercised
until after such shareholder approval. In the event shareholder approval of
the Plan is not obtained on or before December 31, 1997, all amounts credited
to the stock purchase accounts of participating employees, together with
interest thereon, shall be refunded to the participating employees.
A-7
<PAGE>
RESPIRONICS, INC.
1501 Ardmore Boulevard
Pittsburgh, PA 15221
Annual Meeting of Shareholders, November 19, 1997
Gerald E. McGinnis, Dennis S. Meteny and Dorita A. Pishko, or any of them,
are hereby appointed proxies with full power of substitution, to vote the shares
of the shareholder(s) named on the reverse side hereof at the Annual Meeting of
Shareholders of Respironics, Inc. to be held at Two Mellon Bank Center, in the
Auditorium, at 501 Grant Street, Pittsburgh, Pennsylvania, on November 19, 1997,
and at any adjournment thereof, as directed hereon, and in their discretion to
vote and act upon any other matters as may properly come before this meeting.
(Continued on reverse side)
/\ FOLD AND DETACH HERE /\
<PAGE>
Please mark
your votes as [X]
indicated in
this example
Unless you attend and vote in person, you MUST sign and return
your proxy in order to have your shares voted at the meeting.
1. Election of Directors.
NOMINEES: James H. Hardie, Joseph C. Lawyer, Dennis S. Meteny
FOR all nominees WITHHOLD
(listed above except AUTHORITY
as marked to the to vote for all
contrary) nominees listed above
[ ] [ ]
(Instruction: To withhold authority to vote for any nominee, write
that nominee's name in the space provided below.)
- -----------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approve the adoption of the 1997 Employee Stock
Purchase Plan. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. To ratify the selection of Ernst & Young LLP as
independent public accountants for the fiscal year [ ] [ ] [ ]
ending June 30, 1998.
_________ This proxy is solicited on behalf of the Board of
| Directors and will be voted as specified. A vote FOR the
| election of nominees listed includes discretionary
| authority to vote for a substitute if any nominee
| is unable to serve or for good cause will not serve.
Date: , 1997
-------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Shareholder(s) signature should correspond to the name(s)
shown hereon. (Executors, Administrators, Trustees, etc.
should so indicate when signing.)
PLEASE SIGN, DATE AND MAIL YOUR PROXY TODAY!
/\ FOLD AND DETACH HERE /\
