<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)
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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<PAGE>
[_] 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 join us for our Annual Meeting of Shareholders to
be held this year on Thursday, November 16, 2000, at 10:30 a.m. (local time) at
Two Mellon Bank Center in the Auditorium on the Tenth Floor, at 501 Grant
Street, Pittsburgh, Pennsylvania.
The Notice of Annual Meeting of Shareholders and the Proxy Statement that
follow describe the business to be conducted at the meeting. We will also
report on matters of current interest to our shareholders.
Representatives of the Company will be in attendance beginning at 9:30 a.m.
Please also take this opportunity to view Respironics products, which will be
on display.
Your vote is important. Whether you own a few or many shares of stock, it is
important that your shares be represented. If you cannot personally attend, we
encourage you to make certain that you are represented at the meeting by
signing the accompanying proxy card and promptly returning it in the enclosed
envelope.
Very truly yours,
[Signature of James W. Liken]
James W. Liken
President and Chief Executive Officer
October 9, 2000
<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 at 501 Grant Street, Pittsburgh, Pennsylvania on Thursday,
November 16, 2000 at 10:30 a.m., in the Auditorium on the Tenth Floor, for the
following purposes:
(1) To elect three directors;
(2) To approve the adoption of the Respironics, Inc. 2000 Stock Incentive
Plan
(3) To ratify the selection of auditors to examine the consolidated
financial statements of the Company for the fiscal year ending June
30, 2001; 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 9, 2000
<PAGE>
RESPIRONICS, INC.
1501 Ardmore Boulevard
Pittsburgh, Pennsylvania 15221-4401
------------
PROXY STATEMENT
------------
Annual Meeting of Shareholders to be Held November 16, 2000
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 10:30 a.m., on Thursday, November 16, 2000 at Two
Mellon Bank Center at 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 9,
2000. The Company's Annual Report to Shareholders for 2000 is enclosed with
this Proxy Statement but does not form a part of the proxy soliciting
material.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
If any shareholder wishes to present a proposal at the 2001 Annual Meeting
of Shareholders, the proposal must be received by the Secretary of the Company
by June 11, 2001 to be considered for inclusion in the Company's Proxy
Statement and form of proxy relating to the 2001 Annual Meeting. The Bylaws of
the Company require that any shareholder intending to present a proposal for
action at an Annual Meeting must give written notice of the proposal,
containing the information specified in the Bylaw, so that it is received by
the Company not later than the notice deadline determined under the Bylaw.
This notice deadline will generally be 90 days prior to the anniversary of the
Company's Proxy Statement for the previous year's annual meeting, or July 11,
2001 for the Company's Annual Meeting in 2001. Any shareholder proposal
received by the Secretary of the Company after July 11, 2001 will be
considered untimely under Rule 14a-4(c)(1) promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934. The 2001 Annual
Meeting is presently scheduled for November 15, 2001.
VOTING SECURITIES AND RECORD DATE
Holders of the Company's Common Stock of record as of the close of business
on October 2, 2000 (the "record date") are entitled to receive notice of and
to vote at the meeting. On the record date, the Company had outstanding
29,603,253 shares of Common Stock, the holders of which are entitled to one
vote per share. These shares outstanding exclude 3,633,750 shares held in
treasury.
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, each of the
officers of the Company named in the Summary Compensation
1
<PAGE>
Table herein 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.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name of Beneficial Owner Ownership of Class
------------------------ ---------- --------
<S> <C> <C>
Daniel P. Barry (1)........................................ 22,924 0.08%
Douglas A. Cotter (1)...................................... 42,074 0.14%
Robert D. Crouch (2)....................................... 254,786 0.86%
J. Terry Dewberry (1) (11)................................. 115,756 0.39%
James H. Hardie (1) (3).................................... 61,593 0.21%
Donald H. Jones (1)........................................ 26,593 0.09%
Joseph C. Lawyer (1) (12).................................. 32,641 0.11%
James W. Liken (4)......................................... 231,717 0.78%
Candace L. Littell......................................... 1,856 0.01%
Sean McDonald.............................................. -0- 0.00%
Gerald E. McGinnis (5)..................................... 816,117 2.75%
Dennis S. Meteny (6)....................................... 299,892 1.01%
John L. Miclot (7)......................................... 121,168 0.41%
Craig B. Reynolds (8)...................................... 262,284 0.88%
Paul L. Woodring (9)....................................... 5,043 0.02%
J. Paul Yokubinas (10)..................................... 71,338 0.24%
All directors, nominees, and executives officers as a group
(19 persons).............................................. 2,194,160 7.19%
</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, 16,675
shares; Dr. Cotter, 39,525 shares; Mr. Dewberry, 3,825 shares; Mr.
Hardie, 37,025 shares; Mr. Jones, 14,025 shares; and Mr. Lawyer, 24,225
shares.
(2) Includes 167,150 shares that would be outstanding upon the exercise of
currently exercisable stock options granted under the Company's 1984
Incentive Stock Option Plan and 1992 Stock Incentive Plans. Also
includes 2,596 shares in Mr. Crouch's 401(k) plan account, for which he
has the power to direct the voting.
(3) Includes 16,000 shares held by a partnership in which Mr. Hardie is a
general partner and 6,900 shares held by Mr. Hardie's personal IRA
account. Does not include 18,000 shares owned by Mr. Hardie's wife, as
to which he disclaims beneficial ownership.
(4) Includes 118,949 shares that would be outstanding upon the exercise of
current exercisable stock options granted under the Company's 1992 Stock
Incentive Plan.
(5) Includes 145,198 shares held in the Gerald E. McGinnis Charitable
Foundation. Includes 286,570 shares held jointly with Mr. McGinnis'
wife, as to which voting and investment power is shared. Includes 21,000
shares that would be outstanding upon the exercise of currently
exercisable stock options granted under the Company's 1992 Stock
Incentive Plan. Also includes 3,409 shares in Mr. McGinnis' 401(k) plan
account, for which he has the power to direct the voting.
(6) Includes 288,970 shares held jointly with Mr. Meteny's wife, as to which
voting and investment power is shared, and 5,000 shares held by Mr.
Meteny's minor children, as to which he controls voting and investment
power. Also includes 5,922 shares in Mr. Meteny's 401(k) plan account,
for which he has the power to direct the voting.
2
<PAGE>
(7) Includes 120,576 shares that would be outstanding upon the exercise of
currently exercisable stock options, certain of which were granted to
Mr. Miclot by Healthdyne Technologies, Inc. ("Healthdyne") and were
converted into options to purchase the Company's Common Stock pursuant
to the merger involving Healthdyne, and certain of which were granted
under the Company's 1992 Stock Incentive Plan.
(8) Includes 232,125 shares that would be outstanding upon the exercise of
currently exercisable stock options, certain of which were granted to
Mr. Reynolds by Healthdyne and were converted into options to purchase
the Company's Common Stock pursuant to the merger involving Healthdyne,
and certain of which were granted under the Company's 1992 Stock
Incentive Plan.
(9) Includes 4,950 shares that would be outstanding upon the exercise of
currently exercisable stock options which were granted under the
Company's 1992 Stock Incentive Plan.
(10) Includes 2,411 shares held jointly with Mr. Yokubinas' wife, as to which
voting and investment power is shared.
(11) Includes 6,146 shares that would be outstanding upon the exercise of
currently exercisable stock options which were granted to Mr. Dewberry
by Healthdyne and which were converted into options to purchase the
Company's Common Stock pursuant to the merger involving Healthdyne.
(12) Does not include 2,400 shares held by Mr. Lawyer's wife, who has sole
voting and investment power of these shares and as to which Mr. Lawyer
disclaims beneficial ownership.
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
Beneficial Percent
Name and Address of Beneficial Owner Ownership of Class
------------------------------------ ---------- --------
<S> <C> <C>
Snyder Capital Management, L.P.
350 California Street, Suite 1460
San Francisco, CA 94140 (1)................................. 3,247,000 11.0%
Wellington Management Company, LLP
75 State Street
Boston, MA 02109 (2)........................................ 2,030,800 6.9%
Fidelity Management & Research Company
82 Devonshire Street
Boston, MA 02109 (1)........................................ 2,000,400 6.8%
</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 and with the Company on
February 14, 2000. Such filing contained information as of December 31,
1999.
(2) 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 and with the Company on
February 9, 2000. Such filing contained information as of December 31,
1999.
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 Committee, the Compensation
Committee, the Audit Committee, and the Nominating and Corporate Governance
Committee.
3
<PAGE>
Stock Option Committee. The Stock Option Committee (the "Stock Option
Committee") currently consists of Mr. Lawyer (Chairman), Mr. Dewberry and Ms.
Littell. The Stock Option Committee administers the Company's 1984 Incentive
Stock Option Plan and the 1992 Stock Incentive Plan and the Company's other
stock option plans, and has the authority to grant options thereunder.
The Compensation Committee. The Compensation Committee consists of Mr.
Lawyer (Chairman), Messrs. Dewberry and Hardie, and Ms. Littell. The
Compensation Committee 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 Mr. Barry (Chairman), Dr.
Cotter and Mr. Yokubinas. This committee assists the Board in fulfilling its
functions relating to corporate accounting and reporting practices and
financial and accounting controls.
Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee consists of Mr. McGinnis (Chairman), Messrs. Liken and
Reynolds, and Ms. Littell. The Nominating and Corporate Governance Committee
reviews the size and composition of the Board of Directors, makes
recommendations with respect to nominations for directors, provides informal
feedback to the Company's Directors regarding their performance as a director,
and is responsible for succession planning to permit orderly changes in the
makeup of the Board. This 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
July 11, 2001 with respect to nominations for election at the 2001 Annual
Meeting of Shareholders.
During fiscal year 2000, the Compensation Committee met eight times, the
Stock Option Committee met one time, and the Audit Committee met four times.
All of the Board's committees also met informally by telephone during the
fiscal year as needed. The Board of Directors held four regular meetings and
seven special meetings during fiscal year 2000.
Each director who is not an employee of the Company receives an annual fee
of $16,000 for service as a director and committee member. Non-employee
directors receive a fee of $1,000 for attendance at meetings of the full Board
of Directors. In addition, each non-employee director serving as a committee
chairperson receives an additional annual fee of $3,500 and all non-employee
director committee members receive a fee of $500 for attendance at committee
meetings. The $16,000 annual fee is paid in shares of the Company's Common
Stock having a fair market value on the date of payment equal to the fee being
paid. All other fees are paid in cash. All directors are reimbursed for travel
expenses related to meetings of the Board. 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,
becomes exercisable in installments and is 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 Restated Certificate of
Incorporation of the Company, has determined that the number of directors
constituting the full Board of Directors shall be eleven 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 2000 Annual Meeting of
Shareholders, with each director so elected to hold office until the 2003
Annual Meeting of Shareholders or until the director's prior death,
disability, resignation or removal.
4
<PAGE>
The Board of Directors has nominated James H. Hardie and Joseph C. Lawyer
for reelection to the Board, and Sean McDonald for election to the Board, for
the class of 2003, 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.
Information concerning those nominees for director (class of 2003) and the
other directors who will continue in office after the meeting (classes of 2001
and 2002) is set forth below.
<TABLE>
<CAPTION>
Name Position with the Company
---- -------------------------
<S> <C>
Class of 2003
James H. Hardie Director
Joseph C. Lawyer Director
Sean McDonald None
Class of 2002
Daniel P. Barry Director
J. Terry Dewberry Director
Donald H. Jones Director
James W. Liken President, Chief Executive Officer and Director
Class of 2001
Douglas A. Cotter Ph.D. Director
Gerald E. McGinnis Chairman of the Board
Craig B. Reynolds Executive Vice President, Chief Operating Officer and Director
Candace L. Littell Director
</TABLE>
Mr. Barry is 53 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 57 years old. He has been a director of the Company since
February 1989. Since July 2000, Dr. Cotter has been a Senior Vice President of
Leerink Swann and Company, an investment banking firm focusing on life science
and medical corporations. From April 1998 to July 2000 and from 1985 to 1996,
Dr. Cotter was President of Healthcare Decisions, Inc., a Massachusetts health
care and biotechnology consulting firm specializing in corporate development,
strategic planning and acquisitions. Between April 1996 and March 1998, Dr.
Cotter was Vice President of Decision Resources, an international consulting
firm specializing in the health care industry (primarily pharmaceuticals). For
nineteen years prior to joining Healthcare Decisions, Dr. Cotter was employed
by Corning Glass Works, where he held various management positions in
research, product development and clinical information systems.
Mr. Dewberry, age 56, is a private investor. He has served as a director of
the Company since the completion of the merger between the Company and
Healthdyne on February 11, 1998. From March 1992 until March 1996, Mr.
Dewberry was Vice Chairman of Healthdyne, Inc. From 1984 to 1992, Mr. Dewberry
served as President and Chief Operating Officer, and Executive Vice President
of Healthdyne, Inc.
Mr. Hardie is 70 years old. He has been a director of the Company since
November 1991. He is a lawyer and of counsel to Reed Smith Shaw & McClay LLP,
a leading U.S. law firm with more than 600 lawyers located in 12 cities, which
since 1988 has performed legal services for the Company. Mr. Hardie was a
partner of that firm from 1962 through June 1999. He is also a director of a
number of other corporations, the securities of which are not publicly traded.
5
<PAGE>
Mr. Jones is 63 years old. He has been a director of the Company since May
1996. Currently, Mr. Jones serves as chairman of Triangle Capital Corporation,
an investment banking and management 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. Lawyer is 55 years old. He has been a director of the Company since
1994. Since May 2000, Mr. Lawyer has served as Vice Chairman of Reunion
Industries, Inc. ("Reunion") which designs, manufactures and markets a broad
range of fabricated and machined parts and products and also manufactures high
volume, precision plastic parts. Mr. Lawyer served as President and Chief
Executive Officer of Reunion from March 2000 until his retirement from that
position in May 2000. He has also been a Director of Reunion since March 2000.
From 1988 through March 2000, he was President, Chief Executive Officer and a
Director of Chatwins Group, Inc. ("CGI") which merged with Reunion in March
2000. 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.
Mr. Liken is 51 years old. He has served as a director of the Company since
January 1999 and President and Chief Executive Officer since August 1999. Mr.
Liken was President and owner of Liken Home Medical, Inc. from 1990 until he
sold that business in July 1998. Mr. Liken was a private investor from July
1998 until August 1999. In addition, Mr. Liken was a consultant to the Company
from July 1998 until January 1999. Mr. Liken has been active in the home
medical business since 1971, serving in management and ownership capacities
for several predecessor companies to Liken Home Medical, Inc. Mr. Liken has
also served on the Board of Directors of the National Association for Medical
Equipment Services (NAMES) since 1984 and was the Chairman of that board from
1987 to 1989 and again from 1997 to 1998. Since 1997, Mr. Liken has been a
member of the Business Advisory Council of the Federal Reserve Bank of
Cleveland.
Ms. Littell is 43 years old. She previously served as a director of the
Company in 1997. From January 1995 through January 1998, and again since
September 1999, 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. During the period from February 1998 through August
1999, Ms. Littell served as Senior Health Policy Advisor to the Health
Industry Manufacturers Association ("HIMA"), where she advised the
association's membership and executive management on health care financing
developments affecting the medical technology industry. 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 through 1991, she served as Vice President of Payment and Policy of HIMA.
Mr. McGinnis is 66 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.
6
<PAGE>
Mr. McDonald is 40 years old. From July 1999 to September 2000, he served as
Group President of the Automation Group of McKessonHBOC, a diversified Fortune
100 healthcare company. From April 1996 through June 1999, Mr. McDonald served
as President of the Automated Healthcare Division of McKesson Health Systems,
a successor company to Automated Healthcare, Inc. which Mr. McDonald founded
in 1990. Automated Healthcare, Inc. was acquired by McKessonHBOC in April
1996. For ten years prior to founding Automated Healthcare, Inc., Mr. McDonald
held engineering and engineering management positions with divisions of
Westinghouse Electric Corporation. Mr. McDonald is currently working with
several start-up companies in the medical industry to assist in financing and
business development.
Mr. Reynolds is 51 years old. He has been a director of the Company since
the completion of the merger between the Company and Healthdyne on February
11, 1998. Prior to joining the Company, Mr. Reynolds served as President of
Healthdyne from January 1987 until completion of the merger and served as
Chief Executive Officer starting in 1993. Previously, he served as President
of the Healthdyne Cardiovascular Division of Healthdyne, Inc. from January
1985 to December 1986 and as Vice President of Business and Technology
Development of the Technologies Division of Healthdyne, Inc. from January 1981
to December 1984.
Mr. Yokubinas is 62 years old and a private investor. He has been a director
of the Company since January 1999. Mr. Yokubinas joined Healthdyne, Inc. in
1979, serving in various managerial positions before being named President and
Chief Operating Officer in 1992. Mr. Yokubinas held that position until his
retirement in 1996.
2. APPROVE THE ADOPTION OF THE RESPIRONICS, INC. 2000 STOCK INCENTIVE PLAN
Options to purchase a total of approximately 760,000 shares of the Company's
Common Stock currently remain available for grant under the Company's 1992
Stock Incentive Plan and 1991 Non-Employee Directors' Stock Option Plan. In
addition, the Company's 1992 Stock Incentive Plan expires as to new grants in
September 2002. The Company's Board of Directors, therefore, believes that it
is appropriate to adopt and seek shareholder approval for a new stock option
plan this year. Accordingly, the Company's 2000 Stock Incentive Plan (the
"Plan") was adopted by the Company's Board of Directors on September 29, 2000.
If approved by the Company's shareholders, the Plan will be available for
awards to employees, non-employee directors and consultants of the Company.
The affirmative vote of at least a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting is required for
approval of adoption of the Plan.
A summary of the Plan is provided below, but 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.
The Board of Directors recommends that the Company's shareholders vote "FOR"
approval of the adoption of the Plan.
General
The purposes of the Plan are to encourage eligible individuals, which
include employees, non-employee directors and consultants of the Company and
its subsidiaries,
. to increase their efforts to make the Company and its subsidiaries more
successful,
. to provide an additional inducement for such persons to remain with the
Company or a subsidiary,
. to reward such persons by providing an opportunity to acquire the
Company's common stock on favorable terms, and
. to provide a means through which the Company may attract able persons to
enter its employ or otherwise serve as non-employee directors or
consultants.
Employees of the Company or any subsidiary who share responsibility for the
management, growth or protection of the business of the Company or any
subsidiary, directors of the Company who are not also employees, and any
consultants who share responsibility for the management, growth or protection
of the business of the Company are eligible to receive awards under the Plan.
7
<PAGE>
The aggregate number of shares of the Company's Common Stock which may be
issued under the Plan is 1,400,000 shares, subject to proportionate adjustment
in the event of stock splits and similar events. No awards may be granted
under the Plan subsequent to September 29, 2010.
Administration
Except in the case of awards to non-employee directors, the Plan will be
administered by a committee of the Board, consisting of not less than two (2)
members of the Board. Each member of the committee must be an "outside
director" as defined in Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code") and a "non-employee director" as defined in Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
the case of awards to non-employee directors, the Plan will be administered by
the Board. As used in this proxy statement, the term "Committee" is used to
refer to the Board in the case of awards to non-employee directors, or the
committee in the case of awards to employees and consultants.
Except in the case of awards to non-employee directors, the Committee has
full authority, in its discretion, to interpret the Plan and to determine the
persons who will receive awards and the number of shares to be covered by each
award. In determining the eligibility of employees and consultants, as well as
in determining the number of shares to be covered by an award and the type of
awards to be made to such individuals, the Committee will consider the
position and responsibilities of the person being considered, the nature and
value to the Company or subsidiary of his or her services, his or her present
and/or potential contribution to the success of the Company or subsidiary and
such other factors as the Committee may deem relevant.
In the case of awards to non-employee directors, the selection of those
directors to whom stock options will be granted, the timing of such grants,
the number of shares subject to any stock option, the exercise price of any
stock option, the periods during which any stock option may be exercised and
the term of any stock option are specified in the Plan and are not otherwise
generally within the discretion of the Committee.
The types of awards which the Committee has authority to grant are (1) stock
options (with or without cash payment rights) and (2) restricted shares. Each
of these types of awards is described below.
Stock Options
The Plan provides for the grant of "incentive stock options" pursuant to
Section 422 of the Code, or "nonstatutory stock options", which are stock
options that do not so qualify. Stock options may not be granted in tandem,
and incentive stock options may only be granted to employees. The option price
for each stock option may not be less than 100% of the fair market value of
the Company's common stock on the date the stock option is granted. Fair
market value, for purposes of the Plan, is generally the mean between the
publicly reported high and low sale prices per share of the Company's Common
Stock for the date as of which fair market value is to be determined. On
October 2, 2000 the fair market value of a share of the Company's Common
Stock, as so computed, was $16.13.
A stock option granted to an employee or a consultant becomes exercisable at
such time or times and/or upon the occurrence of such event or events as the
Committee may determine. Unless otherwise determined by the Committee, a stock
option granted to an employee or a consultant is exercisable from its date of
grant. A stock option granted to a non-employee director will become
exercisable with respect to twenty-five percent (25%) of the shares covered by
the option on the first anniversary of the date of grant of the option, with
respect to an additional twenty-five percent (25%) of the shares covered by
the option on the second anniversary of the date of grant of the option and
with respect to the remaining fifty percent (50%) of the shares covered by the
option on the third anniversary of the date of grant of the option. No stock
option may be exercised after the expiration of ten years from the date of
grant. A stock option to the extent exercisable at any time may be exercised
in whole or in part.
Unless the Committee, in its discretion, otherwise determines, the following
provisions of this paragraph will apply in the event of an optionee-employee
whose employment is terminated. If the employment of an
8
<PAGE>
optionee is voluntarily terminated with the consent of the Company, or the
optionee retires under any retirement plan of the Company, all outstanding
incentive stock options held by the optionee will be exercisable by the
optionee (but only to the extent exercisable immediately prior to the
termination of employment) at any time prior to the expiration date of the
stock option or within three (3) months after termination of employment,
whichever is the shorter period and all outstanding nonstatutory stock options
of the optionee will be exercisable (but only to the extent exercisable
immediately prior to the termination of employment) at any time prior to the
expiration date of the stock option or within one (1) year after termination
of employment, whichever is the shorter period. If the employment of the
optionee is voluntarily terminated because the optionee is "disabled" within
the meaning of Section 422(c)(6) of the Code, all outstanding stock options of
the optionee will be exercisable (whether or not so exercisable immediately
prior to the termination of employment) at any time prior to the expiration
date of the stock option or within one year after the date of termination of
employment, whichever is the shorter period. Following the death of an
optionee during employment, all outstanding stock options of the optionee at
the time of death will be exercisable (whether or not so exercisable
immediately prior to the death of the optionee) by the person entitled to do
so under the Will of the optionee, or, if the optionee shall fail to make
testamentary disposition of the stock option or shall die intestate, by the
legal representative of the optionee, at any time prior to the expiration date
of the stock option or within one year after the date of death of the
optionee. Following the death of the optionee after termination of employment,
all outstanding stock options of the optionee at the time of death will be
exercisable (but only to the extent exercisable immediately prior to the death
of the optionee) by the person entitled to do so under the Will of the
optionee, or, if the optionee shall fail to make testamentary disposition of
the stock option or shall die intestate, by the legal representative of the
optionee, at any time prior to the expiration date of the stock option or
within one year after the date of death of the optionee, whichever is the
shorter period. All of the time periods for exercise of options described
above in this paragraph apply to any person to whom a nonstatutory stock
option has been transferred, if transfer was permitted by the Committee, and
may be extended in certain circumstances, as described under "Additional
Rights in Certain Events" below. If the employment of an optionee terminates
for any reason other than voluntary termination with the consent of the
Company, retirement under any retirement plan of the Company or death, all
outstanding stock options granted to the optionee will automatically
terminate, unless the exercise period has been extended as described under
"Additional Rights in Certain Events" below.
The following provisions of this paragraph will apply in the event of an
optionee who is a non-employee director whose services with the Company are
terminated. If a non-employee director ceases to be a director of the Company
for any reason other than resignation, removal for cause or death, any then
outstanding stock option of the non-employee director will be exercisable (but
only to the extent exercisable immediately prior to ceasing to be a director)
at any time prior to the expiration date of the stock option or within four
(4) years after the date the non-employee director ceases to be a director,
whichever is the shorter period. Unless the Board determines otherwise in the
case of a resignation, if during his or her term of office as a director a
non-employee director resigns from the Board or is removed from office for
cause, any then outstanding stock option of such non-employee director will be
exercisable (but only to the extent exercisable immediately prior to ceasing
to be a director) at any time prior to the expiration date of such stock
option or within 90 days after the date of resignation or removal, whichever
is the shorter period. Following the death of an optionee during service as a
non-employee director, all outstanding stock options of the optionee at the
time of death will be exercisable in full (whether or not so exercisable
immediately prior to the death of the optionee) by the person entitled to do
so under the Will of the optionee, or, if the optionee shall fail to make
testamentary disposition of the stock option or shall die intestate, by the
legal representative of the optionee, at any time prior to the expiration date
of the stock option or within two (2) years after the date of death of the
optionee, whichever is the shorter period. Following the death of the optionee
after service as a non-employee director, all outstanding stock options of the
optionee at the time of death will be exercisable in full (but only to the
extent exercisable immediately prior to the death of the optionee) by the
person entitled to do so under the Will of the optionee or, if the optionee
shall fail to make testamentary disposition of the stock option or shall die
intestate, by the legal representative of the optionee, at any time prior to
the expiration date of the stock option or within one (1) year after the date
of death of the optionee, whichever is the shorter period. All of the time
periods for exercise of options described above
9
<PAGE>
in this paragraph apply to any person to whom a nonstatutory stock option has
been transferred, if transfer was permitted by the Board.
Unless the Committee, in its discretion, otherwise determines, the following
provisions of this paragraph will apply in the event of an optionee-consultant
whose services with the Company are terminated. If the retention of an
optionee as a consultant by the Company is voluntarily terminated with the
consent of the Company, any then outstanding stock option of such optionee
will be exercisable (but only to the extent exercisable immediately prior to
the termination of the optionee's retention as a consultant) at any time prior
to the expiration date of the stock option or within one year after the
termination of the retention of the optionee as a consultant, whichever is the
shorter period. Following the death of an optionee during service as a
consultant, all outstanding stock options of the optionee at the time of death
will be exercisable in full (whether or not so exercisable immediately prior
to the death of the optionee) by the person entitled to do so under the Will
of the optionee or, if the optionee shall fail to make testamentary
disposition of the stock options or shall die intestate, by the legal
representative of the optionee, at any time prior to the expiration date of
the stock option or within one (1) year after the date of death of the
optionee, whichever is the shorter period. Following the death of the optionee
after service as a consultant, all outstanding stock options of the optionee
at the time of death will be exercisable in full (but only to the extent
exercisable immediately prior to the death of the optionee) by the person
entitled to do so under the Will of the optionee, or, if the optionee shall
fail to make testamentary disposition of the stock option or shall die
intestate, by the legal representative of the optionee, at any time prior to
the expiration date of the stock option or within one year after the date of
death of the optionee, whichever is the shorter period. All of the time
periods for exercise of options described above in this paragraph apply to any
person to whom a nonstatutory stock option has been transferred, if transfer
was permitted by the Committee. If the retention of the optionee as a
consultant terminates for any reason other than voluntary termination with the
consent of the Company, all outstanding stock options granted to the optionee
will automatically terminate.
The option price for each stock option will be payable in full in cash at
the time of exercise; however, in lieu of cash the holder of an option may, if
authorized by the Committee, pay the option price in whole or in part by
delivering to the Company shares of the Company's Common Stock having a fair
market value on the date of exercise of the stock option equal to the option
price for the shares being purchased, except that any portion of the option
price representing a fraction of a share must be paid in cash, and no shares
of the Company's Common Stock which have been held less than six months may be
delivered in payment of the option price of a stock option.
For incentive stock options, the aggregate fair market value (determined on
the date of grant) of the shares with respect to which incentive stock options
are exercisable for the first time by an employee during any calendar year
under all plans of the corporation employing such employee, any parent or
subsidiary corporation of such corporation and any predecessor corporation of
any such corporation shall not exceed $100,000. If the exercise date of
incentive stock options is accelerated pursuant to any provision of the Plan
or any agreement (see "Additional Rights in Certain Events" below) and the
acceleration would result in a violation of this limitation, then, subject to
the provisions of the next sentence, the exercise dates of such incentive
stock options will be accelerated only to the extent, if any, that does not
result in a violation of such limitation and, in any such event, the exercise
dates of the incentive stock options with the lowest option prices will be
accelerated first. The Committee may, in its discretion, authorize the
acceleration of the exercise date of one or more incentive stock options even
if such acceleration would violate the $100,000 limitation and even if such
incentive stock options would as a result be converted in whole or in part
into nonstatutory stock options.
Unless and except to the extent otherwise determined by the Committee in the
case of a nonstatutory stock option, no stock option granted under the Plan is
transferable other than by Will or by the laws of descent and distribution,
and a stock option may be exercised during an optionee's lifetime only by the
optionee.
Subject to the foregoing and the other provisions of the Plan, stock options
granted under the Plan to employees and consultants may be exercised at such
times and in such amounts and be subject to such restrictions and other terms
and conditions, if any, as shall be determined, in its discretion, by the
Committee.
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<PAGE>
Cash Payment Rights
The Committee may grant cash payment rights to employees in conjunction with
a nonstatutory stock option, either at the time of the stock option grant or
at any time thereafter during the term of the stock option.
Cash payment rights entitle the person exercising them, upon exercise of the
stock option, to receive from the Company that amount of cash equal to the
excess of a percentage (not greater than 100%) of the fair market value of one
share on the date of exercise over the option price per share, multiplied by
the number of shares covered by the stock option, or portion thereof, which is
surrendered.
Cash payment rights are exercisable to the extent that the related stock
option is exercisable and only by the same person who is entitled to exercise
the related stock option.
Restricted Shares
Restricted shares of the Company's Common Stock awarded by the Committee to
employees will be subject to such restrictions (which may include restrictions
on the right to transfer or encumber the shares while subject to restriction)
as the Committee may impose and will be subject to forfeiture in whole or in
part if certain events (which may, in the discretion of the Committee, include
termination of employment and/or performance-based events) specified by the
Committee occur prior to the lapse of the restrictions. The restricted share
agreement between the Company and the awardee will set forth the number of
restricted shares awarded to the awardee, the restrictions imposed thereon,
the duration of such restrictions, the events the occurrence of which would
cause a forfeiture of the restricted shares in whole or in part and such other
terms and conditions as the Committee in its discretion deems appropriate.
Following a restricted share award and prior to the lapse or termination of
the applicable restrictions, share certificates for the restricted shares will
be held in escrow. Upon the lapse or termination of the restrictions (and not
before), the share certificates will be delivered to the awardee. From the
date a restricted share award is effective, however, the awardee will be a
shareholder with respect to the restricted shares and will have all the rights
of a shareholder with respect to such shares, including the right to vote the
shares and to receive all dividends and other distributions paid with respect
to the shares, subject only to the restrictions imposed by the Committee.
Additional Rights in Certain Events
The Plan provides for certain additional rights upon the occurrence of one
or more events described in Section 8 of the Plan ("Section 8 Events"). Such
an event is deemed to have occurred (1) when any person or group (other than
the Company, a subsidiary or any employee benefit plan sponsored by the
Company) acquires beneficial ownership of twenty percent (20%) or more of the
voting power of the Company, (2) on the Committee's specified date following a
tender offer to acquire securities of the Company representing twenty percent
(20%) or more of the voting power of the Company, (3) on the Committee's
specified date following the solicitation of proxies by a person other than
the Company relating to the election or removal of fifty percent (50%) or more
of any class of the Company's Board of Directors, or (4) when the shareholders
of the Company approve a merger, consolidation, share exchange, division or
sale or other disposition of assets of the Company as a result of which the
shareholders of the Company immediately prior to the transaction will not own
a majority of the voting power of the surviving or resulting corporation or
any corporation which acquires the stock of the Company or more than ten
percent (10%) of its consolidated assets.
Subject to the provisions of Section 4 of the Plan limiting such rights in
the case of incentive stock options, unless the agreement between the Company
and the awardee otherwise provides, if any Section 8 Event occurs (1) all
outstanding stock options will become immediately and fully exercisable, (2)
all stock options held by an awardee whose employment with the Company or a
subsidiary terminates within one year of any Section 8 Event for any reason
other than voluntary termination with the consent of the Company or a
subsidiary, retirement
11
<PAGE>
under any retirement plan of the Company or a subsidiary, or death will be
exercisable for a period of three months from the date of such termination of
employment, but in no event after the expiration date of the stock option, and
(3) all restrictions applicable to restricted shares awarded under the Plan
will lapse.
Possible Anti-Takeover Effect
The provisions of the Plan providing for the acceleration of the exercise
date of stock options, and the lapse of restrictions applicable to restricted
shares upon the occurrence of a Section 8 Event and for the extension of the
period during which stock options may be exercised upon termination of
employment following a Section 8 Event may be considered as having an anti-
takeover effect.
Miscellaneous
The maximum aggregate number of shares of the Company's Common Stock which
shall be available for the grant of stock options and restricted shares to any
one individual under the Plan during any calendar year shall be limited to
400,000 shares. The Board may amend or terminate the Plan at any time, except
that the Board may not terminate any outstanding award and except that no
amendment may be made without the approval of the Company's shareholders if
(1) the effect of the amendment is to make any changes in the class of
employees eligible to receive incentive stock options or increase the number
of shares for which incentive stock options may be granted under the Plan or
(2) if shareholder approval of the amendment is required by the rules of the
NASDAQ National Market System or any stock exchange on which the Common Stock
may then be listed or for stock options granted under the Plan to qualify as
"performance based compensation" as then defined in the regulations under
Section 162(m) of the Code.
If an awardee engages in a business which is in competition with the Company
or any of its subsidiaries, the Committee may immediately terminate all
outstanding stock options of the awardee and declare forfeited all restricted
shares of the awardee as to which the restrictions have not yet lapsed. The
preceding sentence shall not apply if the exercise period of the stock option
upon termination of employment has been extended or the lapse of the
restrictions applicable to the restricted shares has been accelerated as a
result of the occurrence of a Section 8 Event.
Federal Income Tax Consequences
The following is a brief summary of the principal Federal income tax
consequences of the grant and exercise of awards under present law.
Incentive Stock Options. An optionee will not recognize any taxable income
for Federal income tax purposes upon receipt of an incentive stock option or,
generally, at the time of exercise of an incentive stock option. The exercise
of an incentive stock option generally will result in an increase in an
optionee's taxable income for alternative minimum tax purposes.
If an optionee exercises an incentive stock option and does not dispose of
the shares received in a subsequent "disqualifying disposition" (generally, a
sale, gift or other transfer within two years after the date of grant of the
incentive stock option or within one year after the shares are transferred to
the optionee), upon disposition of the shares any amount realized in excess of
the optionee's tax basis in the shares disposed of will be treated as a long-
term capital gain, and any loss will be treated as a long-term capital loss.
In the event of a "disqualifying disposition," the difference between the fair
market value of the shares received on the date of exercise and the option
price (limited, in the case of a taxable sale or exchange, to the excess of
the amount realized upon disposition over the optionee's tax basis in the
shares) will be treated as compensation received by the optionee in the year
of disposition. Any additional gain will be taxable as a capital gain and any
loss as a capital loss, which will be long-term or short-term depending on
whether the shares were held for more than one year. Under proposed
regulations, special rules apply in determining the compensation income
recognized upon a disqualifying disposition if the option price of the
incentive stock option is paid with shares of the Company's
12
<PAGE>
Common Stock. If shares of the Company's Common Stock received upon the prior
exercise of an incentive stock option are transferred to the Company in
payment of the option price of an incentive stock option within either of the
periods referred to above, the transfer will be considered a "disqualifying
disposition" of the shares transferred, but, under proposed regulations, only
compensation income determined as stated above, and no capital gain or loss,
will be recognized.
Neither the Company nor any of its subsidiaries will be entitled to a
deduction with respect to shares received by an optionee upon exercise of an
incentive stock option and not disposed of in a "disqualifying disposition."
Except as described in "Other Tax Matters" below, if an amount is treated as
compensation received by an optionee because of a "disqualifying disposition,"
the Company or one of its subsidiaries generally will be entitled to a
corresponding deduction in the same amount for compensation paid.
Nonstatutory Stock Options. An optionee will not recognize any taxable
income for Federal income tax purposes upon receipt of a nonstatutory stock
option. Upon the exercise of a nonstatutory stock option the amount by which
the fair market value of the shares received, determined as of the date of
exercise, exceeds the option price will be treated as compensation received by
the optionee in the year of exercise. If the option price of a nonstatutory
stock option is paid in whole or in part with shares of the Company's Common
Stock, no income, gain or loss will be recognized by the optionee on the
receipt of shares equal in value on the date of exercise to the shares
delivered in payment of the option price. The fair market value of the
remainder of the shares received upon exercise of the nonstatutory stock
option, determined as of the date of exercise, less the amount of cash, if
any, paid upon exercise will be treated as compensation income received by the
optionee on the date of exercise of the stock option.
There is no published authority directly addressing the Federal income tax
consequences of certain aspects of transferring nonstatutory stock options,
and the following statements of the probable tax consequences are based on the
Company's interpretation of present law. An optionee should not recognize any
taxable income for Federal income tax purposes upon transfer of a nonstatutory
stock option by gift. Upon the exercise of a nonstatutory stock option by the
transferee, the optionee should be treated as receiving compensation, which is
subject to tax withholding, even though the nonstatutory stock option is
exercised by a transferee rather than an optionee.
Except as described in "Other Tax Matters" below, the Company or one of its
subsidiaries generally will be entitled to a deduction for compensation paid
in the same amount treated as compensation received by the optionee.
Cash Payment Rights. An awardee does not recognize any taxable income for
Federal income tax purposes upon receipt of cash payment rights. Any cash
received in payment of cash payment rights is treated as compensation received
by the awardee in the year in which the awardee becomes entitled to receive
the cash payment. Except as described in "Other Tax Matters" below, in each
instance that an amount is treated as compensation received, the Company or
one of its subsidiaries generally is entitled to a corresponding deduction in
the same amount for compensation paid.
Restricted Shares. An awardee of restricted shares will not recognize any
taxable income for Federal income tax purposes in the year of the award,
provided the shares are subject to restrictions (that is, they are
nontransferable and subject to a substantial risk of forfeiture). However, an
awardee may elect under Section 83(b) of the Code to recognize compensation
income in the year of the award in an amount equal to the fair market value of
the shares on the date of the award, determined without regard to the
restrictions. If the awardee does not make a Section 83(b) election, the fair
market value of the shares on the date the restrictions lapse will be treated
as compensation income to the awardee and will be taxable in the year the
restrictions lapse. Except as described in "Other Tax Matters" below, the
Company or one of its subsidiaries generally will be entitled to a deduction
for compensation paid in the same amount treated as compensation income to the
awardee.
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<PAGE>
Other Tax Matters. The exercise by an awardee of a stock option or cash
payment rights or the lapse of restrictions on restricted shares following the
occurrence of a Section 8 Event, in certain circumstances, may result in (i) a
20% Federal excise tax (in addition to Federal income tax) to the awardee on
certain payments of the Company's Common Stock or cash resulting from such
exercise or, in the case of restricted shares, on all or a portion of the fair
market value of the shares on the date the restrictions lapse and (ii) the
loss of a compensation deduction which would otherwise be allowable to the
Company or one of its subsidiaries as explained above. The Company and its
subsidiaries may lose a compensation deduction, which would otherwise be
allowable, for all or a part of compensation paid in the form of (i)
restricted shares, or (ii) cash payment rights granted after the grant of the
related option, to any employee if, as of the close of the tax year, the
employee is the Chief Executive Officer of the Company (or acts in that
capacity) or is among the four highest compensated officers for that tax year
(other than the Chief Executive Officer) for whom total compensation is
required to be reported to shareholders under the Exchange Act, if the total
compensation paid to such employee exceeds $1,000,000.
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 2001. 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 approval of the
adoption of the Respironics, Inc. 2000 Stock Incentive Plan and for
ratification of the selection of Ernst & Young LLP. 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 approval, and the total number of votes cast "For" approval 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
shareholder 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.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid to
all persons who served as Chief Executive Officer of the Company during fiscal
year 2000 and the four highest paid executive officers other than the Chief
Executive Officers (the "named officers") for services rendered in all
capacities to the Company and its subsidiaries during the fiscal years ended
June 30, 2000, 1999 and 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------
Annual Compensation Awards Payouts
--------------------------- --------------------- -------
Other Securities
Annual Restricted Underlying LTIP All Other
Salary Bonus Compensation Stock Options/ Payouts Compensation
Name and Principal Position Year ($) (A) ($) ($) (B) Awards SAR's (#) ($) ($) (C)
--------------------------- ---- ------- ------ ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James W. Liken 2000 83,946 45,833 -- -- 381,847 -- 22,830
President and Chief 1999 -- -- -- -- -- -- --
Executive Officer (D) 1998 -- -- -- -- -- -- --
Craig B. Reynolds 2000 275,059 34,978 -- -- 100,000 -- 48,513
Executive Vice 1999 259,533 -- -- -- 18,100 -- 44,918
President, Chief 1998(E) 95,824 -- -- -- 40,000 -- 1,474
Operating Officer
Robert D. Crouch 2000 238,927 30,122 -- -- 30,000 -- 46,988
Senior Vice 1999 229,577 -- -- -- 18,100 -- 44,979
President--New 1998 191,163 7,000 -- -- 4,300 -- 22,140
Ventures and Corporate
Services
John L. Miclot 2000 235,536 31,250 -- -- 100,000 -- 45,173
Senior Vice President, 1999 212,548 15,000 -- -- 18,100 -- 94,626
President--Homecare 1998(E) 77,592 -- -- -- 20,000 -- 86,140
Division
Paul L. Woodring 2000 175,882 22,355 -- -- 9,000 -- 32,761
Vice President-- 1999 -- -- -- -- -- -- --
Hospital Division (F) 1998 -- -- -- -- -- -- --
Dennis S. Meteny 2000 69,375 -- -- -- -- -- 307,553
President and Chief 1999 339,000 -- -- -- 25,300 -- 62,836
Executive Officer (G) 1998 277,491 25,000 -- -- 10,300 -- 30,000
</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 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
years covered in the table.
(C) The amounts in this column for 2000 represent the following: matching
contributions under the Company's Retirement Savings Plan (Mr. Liken,
$2,749; Mr. Crouch, $4,800; Mr. Miclot, $4,800; Mr. Woodring, $1,756);
and annuity plan premiums and related income tax gross ups paid on the
officer's behalf (Mr. Liken, $20,080; Mr. Reynolds, $48,513; Mr. Crouch,
$42,188; Mr. Miclot, $40,373; Mr. Woodring, $31,005). The amount in this
column for fiscal year 2000 for Mr. Meteny represents amounts paid to him
during fiscal year 2000 under the terms of his employment agreement
relating to his resignation from the Company on August 19, 1999.
15
<PAGE>
(D) Mr. Liken was named President and Chief Executive Officer of the Company
on August 19, 1999 and was not an executive officer of the Company in
fiscal years 1999 and 1998.
(E) Messrs. Reynolds and Miclot were employed by the Company effective
February 11, 1998. Amounts included herein for 1998 represent
compensation for the period February 11, 1998 through June 30, 1998.
(F) Mr. Woodring was not an executive officer of the Company in fiscal years
1999 and 1998.
(G) Mr. Meteny resigned as President and Chief Executive Officer of the
Company on August 19, 1999 and as as director of the Company on September
7, 1999.
STOCK OPTIONS
The following table sets forth information concerning stock option grants
made to the named officers during the fiscal year ended June 30, 2000. The
Company has not granted any stock appreciation rights ("SAR's") to any of the
named officers or any other officers or employees of the Company.
Option Grants in Last Fiscal Year
All Named Officers
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
----------------------------------------------------------------------- -----------------------
Number of % of Total
Securities Options
Underlying granted to
Options employees Exercise or
Granted in fiscal Base Price
Name (#) (A) year ($/Sh) (B) Expiration Date 5% ($) 10% ($)
---- ---------- ---------- ----------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
James W. Liken 281,847(C) 27% 8.38 October 1, 2009 1,485,621 3,764,833
100,000 9% 8.44 October 12, 2009 530,879 1,345,336
Craig B. Reynolds 100,000 9% 8.44 October 12, 2009 530,879 1,345,336
Robert D. Crouch 30,000 3% 8.44 October 12, 2009 159,623 403,601
John L. Miclot 100,000 9% 8.44 October 12, 2009 530,879 1,345,336
Paul L. Woodring 9,000 1% 8.44 October 12, 2009 47,779 121,080
Dennis S. Meteny -- -- -- -- -- --
</TABLE>
--------
(A) Options granted in 2000 (other than those described in (C) below) are
exercisable starting 12 months after the grant date, with 25% of the
shares covered thereby becoming exercisable at that time and 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 may be accelerated in certain specific situations.
(B) Under the terms of the Company's stock option plans, there are not
provisions that permit these options to be repriced other than to reflect
stock splits, stock dividends, or similar events.
(C) For 263,700 of these options, 1/12th become exercisable each quarter
starting January 1, 2000. For 18,147 of these options, 1/3rd became
exercisable 12 months after grant date and an additional 1/3rd become
exercisable on each successive anniversary date.
16
<PAGE>
The following table sets forth information concerning the stock option
exercises by the named officers during the fiscal year 2000 and the
unexercised stock options held at June 30, 2000 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>
James W.
Liken -- -- 43,950 / 337,897 422,799 / 3,244,569
Craig B.
Reynolds -- -- 244,000 / 133,575 1,809,480 / 1,035,278
Robert D.
Crouch -- -- 152,936 / 47,964 1,745,995 / 367,571
John L.
Miclot -- -- 91,051 / 123,575 566,829 / 1,035,278
Paul L.
Woodring -- -- 1,350 / 13,050 7,844 / 109,692
Dennis S.
Meteny 16,280 60,073 - / - - / -
</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 ($18.00) of the
shares covered by the stock options on June 30, 2000 exceeded the
exercise price of such options.
Employment Agreements and Other Transactions
Effective October 1, 1999, the Company entered into an Employment Agreement
with Mr. Liken providing for his employment as President and Chief Executive
Officer of the Company for a three year term ending September 30, 2002. The
Agreement is automatically extended for an additional three year term and
thereafter is extended each year for one additional year absent prior notice
by either party. The Agreement provides for a base salary of $100,000 per year
(subject to annual adjustment) plus participation in the Company's benefit and
incentive plans on a basis comparable with other executives in the Company.
The Agreement also provided for a grant of options to Mr. Liken to purchase
263,700 shares of the Company's Common Stock at $8.38 per share (the fair
market value at the date of grant) pursuant to the Company's 1992 Stock
Incentive Plan. See "Report of the Compensation Committee--CEO Compensation"
below.
Effective December 1, 1994 the Company entered into an Employment Agreement
with Mr. Crouch providing for his employment as Vice President of Sales and
Marketing (now Vice President--New Ventures and Corporate Services) for a
three year term ending November 30, 1997. The agreement is automatically
extended each year for one additional year absent prior notice by either
party. The Agreement provides for a base salary for Mr. Crouch of $138,200 per
year (subject to annual adjustment) plus participation in the Company's
benefit and incentive plans on a basis comparable with other executives in the
Company.
Effective November 11, 1997, the Company entered into Employment Agreements
with Messrs. Reynolds and Miclot providing for their employment as Senior Vice
President (now Executive Vice President and Chief Operating Officer) and Group
Vice President--Sleep Disorders (now Senior Vice President and President, Home
Care Division) respectively, for three year terms ending February 11, 2001.
The Agreements are automatically extended each year for an additional year
absent prior notice by either party. The Agreements provide for base salaries
of $251,538 for Mr. Reynolds and $203,679 for Mr. Miclot (subject to annual
adjustment) plus participation in the Company's benefit and incentive plans on
a basis comparable with other executives in the Company. Effective August 16,
2000, Mr. Reynolds' Employment Agreement was amended to, among other things,
provide for the payment to Mr. Reynolds of an amount equal to 150% of his then
current base salary upon the expiration of the Employment Agreement or the
termination of the Employment Agreement by the
17
<PAGE>
Company or Mr. Reynolds for any reason. Such amount is generally payable over
a two year period beginning on the date of expiration or termination of the
Agreement. As part of the amendment, Mr. Reynolds agreed to forego certain
rights under his Employment Agreement.
Mr. Reynolds is also entitled to certain benefits pursuant to a defined
benefit plan that was maintained by Healthdyne. The estimated annual benefit
payable to Mr. Reynolds under this plan, assuming retirement at age 65, is
approximately $66,000. This benefit will be reduced by any Social Security
benefits paid to Mr. Reynolds after retirement.
In June 2000, the Company guaranteed a loan made by a commercial bank to Mr.
Reynolds in the amount of $300,000. In consideration for this guarantee, Mr.
Reynolds granted to the Company a security interest in 30,159 shares of the
Company's common stock owned by him. This security interest will remain in
place until Mr. Reynolds' commercial bank loan has been repaid in full. At
June 30, 2000, the shares held by the Company pursuant to this security
interest had a fair market value of approximately $543,000.
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. Mr. Meteny resigned from this position on August 19,
1999. On September 2, 1999, the Company and Mr. Meteny entered into a
Separation Agreement. In accordance with the terms of the Employment Agreement
and the Separation Agreement, Mr. Meteny is entitled to continue to receive
his base salary through August 19, 2002.
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,
40, Vice President and Chief Financial Officer; Robert D. Crouch, 52, Senior
Vice President--New Ventures and Corporate Services; Steven P. Fulton, 41,
Vice President--General Counsel; John L. Miclot, 41, Senior Vice President and
President--Home Care Division; Geoffrey Waters, 50, President--International;
Paul L. Woodring, 60, Vice President--Hospital Division; and Susan A. Lloyd,
51, Vice President--Asthma and Allergy Division.
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 Ernst & Young.
Mr. Crouch joined the Company as Director of Sales and Marketing in January
1989. From 1989 to 1997, he was Vice President Sales and Marketing. He was
promoted to Senior Vice President Sales and Marketing in May 1997. In August
1998, Mr. Crouch accepted the position of Senior Vice President--New Ventures.
In July 1999, Mr. Crouch also assumed responsibility for Corporate Services,
including Legal, Human Resources and Information Systems. Prior to joining the
Company, 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. 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. In
October 1996, Mr. Fulton was elected Vice President, Human Resources. In
February 1998, Mr. Fulton was appointed to the position of Vice President--
General Counsel. 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.
Ms. Lloyd, as part of the Company's merger with Healthdyne, joined the
Company in February 1998 as Vice President--Sales and Marketing, Asthma and
Allergy. In July 1999, she was named Vice President--Asthma and Allergy
Division. Ms. Lloyd was employed by Becton, Dickinson and Company from 1974
through 1990, serving in a variety of sales and marketing positions, including
most recently as Director of Marketing for
18
<PAGE>
the Becton Dickinson Acute Care Division. In 1990, she joined Healthscan
Products, Inc. ("Healthscan") as Director of Marketing. In 1994, Healthdyne
acquired Healthscan and Ms. Lloyd was named Vice President, Marketing for
Healthscan. In 1997, she was named Vice President, Sales and Marketing for
Healthscan, a position she held until Healthdyne was merged with Respironics.
Mr. Miclot, as part of the Company's merger with Healthdyne, joined the
Company in February 1998 as Group Vice President--Sleep Disorders. In August
1998, in addition to his Group Vice President role he acquired the added
responsibility of Vice President Sales and Marketing. In July 1999, Mr. Miclot
was named Senior Vice President and President--Home Care Division. From 1995
to February of 1998, Mr. Miclot had been Senior Vice President Sales and
Marketing for Healthdyne. Prior to that time, he was Vice President of
Marketing for Medex, Inc. which he joined in February 1994. Mr. Miclot
previously held several senior positions in marketing, international
activities and sales with Ohmeda, a Division of British Oxygen Corporation,
which he joined in 1988.
Mr. Waters, as part of the Company's acquisition of LIFECARE International,
Inc., joined the Company in October 1996, as Vice President Customer
Satisfaction. In February 1998, Mr. Waters was transitioned to the position of
Vice President--International Sales and Marketing. In July 1999, Mr. Waters
was named Vice President--International and was named President--International
in May 2000. 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.
Mr. Woodring, as part of the Company's merger with Healthdyne, joined the
Company in February 1998 as Vice President--Operations, Respiratory. In July
1999, Mr. Woodring was named Vice President--Hospital Division. Mr. Woodring
was employed by Puritan-Bennett (now Nellcor Puritan Bennett, a division of
Mallinckrodt, Inc.) from 1976 to 1995, serving in a variety of engineering and
management positions, including most recently as Vice President and General
Manager of the Ventilator Systems Division. Mr. Woodring formed a new company,
InVentive Technologies, in 1995, and was employed there until joining
Healthdyne in 1996.
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 four 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 Messrs. Dewberry, Hardie, and Lawyer and Ms. Littell in their capacity as
members of the Board's Compensation Committee addressing the Company's
compensation policies for fiscal year 2000 as they affected executive officers
of the Company, including Mr. Meteny (who served as President and Chief
Executive Officer until his resignation on August 19, 1999) and Mr. Liken (who
served as President and Chief Executive Officer starting August 19, 1999), and
Messrs. Reynolds, Crouch, Miclot, and Woodring, the four executive officers
other than Mr. Meteny and Mr. Liken who were, for fiscal year 2000, the
Company's most highly compensated executive officers.
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
19
<PAGE>
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 compensation surveys
and receives summary compensation survey information from these and other
sources.
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
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.
Profit Sharing and Other Bonuses
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
achievement of net income targets. Based on these factors, profit sharing
bonuses were accrued for fiscal year 2000 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 Stock Option Committee
(which consists of all members of the Compensation Committee other than Mr.
Hardie) 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
generally 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 Stock Option Committee.
The Stock Option Committee awarded stock options to 319 of the Company's
employees during fiscal year 2000. Stock options granted to named officers
during fiscal year 2000 are listed on the table entitled "Option Grants in
Last Fiscal Year."
20
<PAGE>
CEO Compensation
The following factors constitute the basis for the compensation paid to
Messrs. Meteny and Mr. Liken, who served as the Company's Chief Executive
Officer ("CEO") during portions of fiscal year 2000; their 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 industry surveys;
and their experience compared to the CEO's of comparable companies in the
industry surveys. In Mr. Liken's case, the Compensation Committee determined
that it was most appropriate for his compensation to be highly correlated to
the Company's stock price performance, accordingly he received stock options
to acquire 263,700 shares at $8.38 per share (the fair market value on the
date of grant) in lieu of a portion of base salary. This option grant and the
other stock options granted to Mr. Liken in fiscal year 2000 are shown in the
Summary Compensation Table and in the Option Grant table. In fiscal year 2000
the Compensation Committee did not adjust Mr. Liken's base salary. As
indicated in the Summary Compensation Table, Mr. Liken was awarded a bonus for
fiscal year 2000 of $45,833.
Compensation Committee of the Company's Board of Directors:
Joseph C. Lawyer, Chairman
J. Terry Dewberry
James H. Hardie
Candace L. Littell
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 2000, the Committee consisted
of Mr. Lawyer (Chairman), Messrs. Dewberry, and Hardie, and Ms. Littell.
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 the Commission
during fiscal year 2000 with the following exceptions; Messrs. Barry, Cotter,
Dewberry, Jones, Lawyer and Yokubinas made two late filings each relative to
the receipt of shares of Common Stock of the Company in lieu of cash
directors' fees, Mr. Hardie made one late filing relative to the receipt of
shares of Common Stock of the Company in lieu of cash directors' fees, Ms.
Littell made three late filings relative to the receipt of shares of Common
Stock of the Company in lieu of cash directors' fees and two late filings
relative to open market purchases of shares of the Company's Common Stock, Mr.
McGinnis made one late filing relative to the purchase of shares of the
Company's Common Stock through the Company's Employee Stock Purchase Plan and
two late filings relative to gifts made in shares of the Company's Common
Stock, and Mr. Reynolds made one late filing relative to an open market sale
of shares of the Company's Common Stock. 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.
21
<PAGE>
PERFORMANCE GRAPH
The following graph shows a five year comparison of cumulative total returns
for the Company, the NASDAQ Market Index, and a peer group index consisting of
ResMed, Inc., Sunrise Medical, Inc., Invacare Corp., and Mallinckrodt, Inc.
The Company uses this peer group index, which consists of the Company's major
competitors that are publicly-held, because it believes that the peer group
index is more meaningful for comparative purposes than broader indices that
include companies with business and product lines dissimilar to that of the
Company and its competitors. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at June 30,
1995, and that all dividends were reinvested.
[Performance Graph]
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
------------------------------------------
1995 1996 1997 1998 1999 2000
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Respironics, Inc..................... $100.00 129.82 148.25 109.21 106.14 126.32
NASDAQ Index......................... $100.00 128.39 156.15 205.58 296.02 437.30
Peer Group Index..................... $100.00 104.77 103.81 94.74 109.63 131.41
</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 $7,000 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 2000 Annual Report to
beneficial owners of stock held in their names.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 2000 MAY
BE OBTAINED WITHOUT CHARGE BY ANY SHAREHOLDER UPON WRITTEN REQUEST TO DORITA
A. PISHKO, CORPORATE SECRETARY, RESPIRONICS, INC., 1501 ARDMORE BOULEVARD,
PITTSBURGH, PA 15221-4401.
Dorita A. Pishko
Corporate Secretary
October 9, 2000
22
<PAGE>
EXHIBIT A
RESPIRONICS, INC.
2000 STOCK INCENTIVE PLAN
The purposes of the 2000 Stock Incentive Plan (the "Plan") are to encourage
eligible individuals to increase their efforts to make Respironics, Inc. (the
"Corporation") and its Subsidiaries more successful, to provide an additional
inducement for such individuals to remain with the Corporation or a
Subsidiary, to reward such individuals by providing an opportunity to acquire
shares of the Common Stock, par value $.01 per share, of the Corporation (the
"Common Stock") on favorable terms and to provide a means through which the
Corporation may attract able persons to enter the service of the Corporation
or one of its Subsidiaries as employees, consultants or directors. For the
purposes of the Plan, the term "Subsidiary" means any corporation in an
unbroken chain of corporations beginning with the Corporation, 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.
SECTION 1
Administration
The Plan shall be administered by a Committee (the "Committee") appointed by
the Board of Directors of the Corporation (the "Board") and consisting of not
less than two members of the Board, each of whom at the time of appointment to
the Committee and at all times during service as a member of the Committee
shall be both (1) a "non-employee director" as then defined under Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor rule and (2) an "outside director" as then defined in the
regulations under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), or any successor provision. Notwithstanding the
foregoing, unless otherwise determined by the Board, the Board shall
administer the Plan, and otherwise exercise the same authority as the
Committee, with respect to grants to members of the Board who are not
employees of the Corporation or any Subsidiary ("Non-Employee Directors").
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.
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 approved in writing by all members of the Committee, shall be the acts
of the Committee.
SECTION 2
Eligibility
Those employees of the Corporation or any Subsidiary who share
responsibility for the management, growth or protection of the business of the
Corporation or any Subsidiary shall be eligible to be granted stock options
(with or without cash payment rights) and to receive restricted shares as
described herein. Non-Employee Directors and consultants who share
responsibility for the management, growth or protection of the business of the
Corporation shall be eligible to be granted nonstatutory stock options, as
described herein. Eligible employees, Non-Employee Directors and consultants
are collectively referred to herein as "Participants".
A-1
<PAGE>
Subject to the provisions of the Plan, the Committee shall have full and
final authority, in its discretion, to grant stock options (with or without
cash payment rights) and to award restricted shares as described herein and to
determine the Participants to whom any such grant shall be made and the number
of shares to be covered thereby. In determining the eligibility of any
Participant, as well as in determining the number of shares covered by each
grant of a stock option or restricted shares and whether cash payment rights
shall be granted in conjunction with a stock option, the Committee shall
consider the position and the responsibilities of the Participant being
considered, the nature and value to the Corporation or a Subsidiary of his or
her services, his or her present and/or potential contribution to the success
of the Corporation or a Subsidiary and such other factors as the Committee may
deem relevant. Notwithstanding any other provision contained in the Plan
except for Section 5(G)(x) and Sections 8(A)(5)(b) and (c), with regard to
Non-Employee Directors, the selection of those Non-Employee Directors to whom
stock options are to be granted, the timing of such grants, the number of
shares subject to any stock option, the exercise price of any stock option,
the periods during which any stock option may be exercised and the term of any
stock option shall be as hereinafter provided, and the Committee and the Board
shall have no discretion as to such matters.
SECTION 3
Shares Available under the Plan
The aggregate net number of shares of Common Stock which may be issued and
as to which grants of stock options or restricted shares may be made under the
Plan is 1,400,000 shares, subject to adjustment and substitution as set forth
in Section 7. If any stock option is exercised by delivering previously owned
shares in payment of the option price, the number of shares so delivered to
the Corporation shall again be available for purposes of the Plan. If any
stock option is cancelled by mutual consent or terminates or expires for any
reason without having been exercised in full, the number of shares subject
thereto shall again be available for purposes of the Plan. If shares of Common
Stock are forfeited to the Corporation pursuant to the restrictions applicable
to restricted shares, the shares so forfeited shall again be available for
purposes of the Plan. The shares which may be issued under 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.
The maximum aggregate number of shares of Common Stock which shall be
available for the grant of stock options and restricted shares to any one
individual under the Plan during any calendar year shall be limited to 400,000
shares. The limitation in the preceding sentence shall be interpreted and
applied in a manner consistent with Section 162(m) of the Code.
SECTION 4
Grant of Stock Options, Cash Payment Rights and Awards of Restricted Shares
The Committee shall have authority, in its discretion, (a) to grant
"incentive stock options" pursuant to Section 422 of the Code, to grant
"nonstatutory stock options" (i.e., stock options which do not qualify under
Sections 422 or 423 of the Code) or to grant both types of stock options (but
not in tandem) and (b) to award restricted shares. The Committee also shall
have the authority to grant cash payment rights in conjunction with
nonstatutory stock options with the effect provided in Section 5(E). Cash
payment rights may not be granted in conjunction with incentive stock options.
Cash payment rights granted in conjunction with a nonstatutory stock option
may be granted either at the time the stock option is granted or at any time
thereafter during the term of the stock option.
Notwithstanding any other provision contained in the Plan or in any stock
option agreement, but subject to the possible exercise of the Committee's
discretion contemplated in the last sentence of this Section 4, the aggregate
fair market value, determined as provided in Section 5(I) on the date of
grant, of the shares with respect
A-2
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to which incentive stock options are exercisable for the first time by an
employee during any calendar year under all plans of the corporation employing
such employee, any parent or subsidiary corporation of such corporation and
any predecessor corporation of any such corporation shall not exceed $100,000.
If the date on which one or more of such incentive stock options could first
be exercised would be accelerated pursuant to any provision of the Plan or any
stock option agreement, and the acceleration of such exercise date would
result in a violation of the restriction set forth in the preceding sentence,
then, notwithstanding any such provision, but subject to the provisions of the
next succeeding sentence, the exercise dates of such incentive stock options
shall be accelerated only to the date or dates, if any, that do not result in
a violation of such restriction and, in such event, the exercise dates of the
incentive stock options with the lowest option prices shall be accelerated to
the earliest such dates. The Committee may, in its discretion, authorize the
acceleration of the exercise date of one or more incentive stock options even
if such acceleration would violate the $100,000 restriction set forth in the
first sentence of this paragraph and even if such incentive stock options are
thereby converted in whole or in part to nonstatutory stock options.
SECTION 5
Terms and Conditions of Stock Options and Cash Payment Rights
Stock options and cash payment rights granted under the Plan shall be
subject to the following terms and conditions:
(A) The purchase price at which each stock option may be exercised (the
"option price") shall be such price as the Committee, in its
discretion, shall determine but shall not be less than one hundred
percent (100%) of the fair market value per share of the Common Stock
covered by the stock option on the date of grant, except that in the
case of an incentive stock option granted to an employee who,
immediately prior to such grant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Corporation or any Subsidiary (a "Ten Percent Employee"),
the option price shall not be less than one hundred ten percent (110%)
of such fair market value on the date of grant. For purposes of this
Section 5(A), an individual (i) shall be considered as owning not only
shares of stock owned individually but also all shares of stock that
are at the time owned, directly or indirectly, by or for the spouse,
ancestors, lineal descendants and brothers and sisters (whether by the
whole or half blood) of such individual and (ii) shall be considered
as owning proportionately any shares owned, directly or indirectly, by
or for any corporation, partnership, estate or trust in which such
individual is a shareholder, partner or beneficiary.
(B) The option price for each stock option shall be paid in full upon
exercise and shall be payable in cash in United States dollars
(including check, bank draft or money order), which may include cash
forwarded through a broker or other agent-sponsored exercise or
financing program; provided, however, that in lieu of such cash the
person exercising the stock option may (if authorized by the Committee
at the time of grant in the case of an incentive stock option, or at
any time in the case of a nonstatutory stock option) pay the option
price in whole or in part by delivering to the Corporation shares of
Common Stock having a fair market value on the date of exercise of the
stock option, determined as provided in Section 5(I), equal to the
option price for the shares being purchased; except that (i) any
portion of the option price representing a fraction of a share shall
in any event be paid in cash and (ii) no shares of Common Stock which
have been held for less than six months may be delivered in payment of
the option price of a stock option. Delivery of shares of Common Stock
in payment of the exercise price of a stock option, if authorized by
the Committee, may be accomplished through the effective transfer to
the Corporation of shares of Common Stock held through a broker or
other agent. If the person exercising a stock option participates in a
broker or other agent-sponsored exercise or financing program, the
Corporation will cooperate with all reasonable procedures of the
broker or other agent to permit participation by the person exercising
the stock option in the exercise
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or financing program. Notwithstanding any procedure of the broker or
other agent-sponsored exercise or financing program, if the option price
is paid in cash, the exercise of the stock option shall not be deemed to
occur and no shares of Common Stock will be issued until the Corporation
has received full payment in cash (including check, bank draft or money
order) for the option price from the broker or other agent. The date of
exercise of a stock option shall be determined under procedures
established by the Committee, and as of the date of exercise the person
exercising the stock option shall be considered for all purposes to be
the owner of the shares with respect to which the stock option has been
exercised.
(C) Subject to Section 8(B), a stock option granted to an employee or a
consultant shall become exercisable at such time or times and/or upon
the occurrence of such event or events as may be determined by the
Committee. Unless otherwise determined by the Committee and reflected
in the stock option agreement with an employee or a consultant, a
stock option shall be exercisable from its date of grant. No stock
option shall be exercisable after the expiration of ten years (five
years in the case of an incentive stock option granted to a Ten
Percent Employee) from the date of grant. A stock option to the extent
exercisable at any time may be exercised in whole or in part.
(D) On the third business day following the day of each annual meeting of
the shareholders of the Corporation, each Non-Employee Director shall
automatically and without further action by the Board or the Committee
be granted a nonstatutory stock option to purchase 5,100 shares of
Common Stock, subject to adjustment and substitution as set forth in
Section 7. If the number of shares remaining available for the grant
of stock options under the Plan is not sufficient for each Non-
Employee Director to be granted an option for 5,100 shares (or the
number of adjusted or substituted shares pursuant to Section 7), then
each Non-Employee Director shall be granted an option for a number of
whole shares equal to the number of shares then remaining available
divided by the number of Non-Employee Directors, disregarding any
fractions of a share. Subject to Section 8(B) and Section 5(G), no
stock option granted to a Non-Employee Director shall be exercisable
by a grantee until the first anniversary of the grant thereof, at
which time it shall become exercisable for 25% of the shares covered
thereby and shall thereafter be exercisable for an additional 25% of
the shares covered thereby on the second anniversary of the grant
thereof and shall thereafter be exercisable for the remaining 50% of
the shares covered thereby on the third anniversary of the grant
thereof, such limitations being calculated, in the case of any
resulting fraction, to the nearest lower whole number of shares.
Subject to Section 5(G) providing for earlier termination of a stock
option, any stock option granted to a Non-Employee Director and not
exercised in the year eligible shall continue to be exercisable
thereafter until the end of the term of such stock option.
Notwithstanding the foregoing provisions of this Section 5(D), a Non-
Employee Director shall not be granted a nonstatutory stock option
pursuant to this Plan in any year in which the Non-Employee Director has
been granted a nonstatutory stock option pursuant to the Corporation's
1991 Non-Employee Directors' Stock Option Plan (the "1991 Plan") in the
same year; provided that, in the event that the number of shares covered
by the option granted to such Non-Employee Director under the 1991 Plan
for such year was less than 5,100 shares of Common Stock, as adjusted
and substituted as set forth in Section 5 of the 1991 Plan, then such
Non-Employee Director shall be granted a nonstatutory stock option
pursuant to this Plan for the amount of any such deficiency.
(E) Cash payment rights granted in conjunction with a nonstatutory stock
option shall entitle the person who is entitled to exercise the stock
option, upon exercise of the stock option or any portion thereof, to
receive cash from the Corporation (in addition to the shares to be
received upon exercise of the stock option) equal to (1) such
percentage (not greater than 100%) as the Committee, in its
discretion, shall determine of the excess of the fair market value of
a share of Common Stock on the date of exercise of the stock option
over the option price per share of the stock option, multiplied by (2)
the number of shares covered by the stock option, or portion thereof,
which is exercised. Payment of the cash provided for in this Section
5(E) shall be made by the Corporation as soon as practicable after the
time the amount payable is determined.
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(F) No incentive stock option and, except to the extent otherwise
determined by the Committee and reflected in the stock option
agreement or an amendment thereto, no nonstatutory stock option shall
be transferable by the grantee otherwise than by Will, or if the
grantee dies intestate, by the laws of descent and distribution of the
state of domicile of the grantee at the time of death. All incentive
stock options and, except to the extent otherwise determined by the
Committee and reflected in the stock option agreement or an amendment
thereto, all nonstatutory stock options shall be exercisable during
the lifetime of the grantee only by the grantee.
(G) Subject to the provisions of Section 4 in the case of incentive stock
options, unless the Committee, in its discretion, shall otherwise
determine in the case of grants of stock options to employees and
consultants:
(i) If the employment of a grantee who is not disabled within the
meaning of Section 422(c)(6) of the Code (a "Disabled Grantee") is
voluntarily terminated with the consent of the Corporation or a
Subsidiary or a grantee who is an employee retires under any
retirement plan of the Corporation or a Subsidiary, any then
outstanding incentive stock option held by such grantee shall be
exercisable by the grantee (but only to the extent exercisable by
the grantee immediately prior to the termination of employment) at
any time prior to the expiration date of such incentive stock
option or within three months after the date of termination of
employment, whichever is the shorter period;
(ii) If the employment or consulting relationship of a grantee who is
not a Disabled Grantee is voluntarily terminated with the consent
of the Corporation or a Subsidiary or a grantee who is an
employee retires under any retirement plan of the Corporation or
a Subsidiary, any then outstanding nonstatutory stock option of
such grantee (whether or not then held by the grantee) shall be
exercisable (but only to the extent exercisable immediately prior
to the grantee's termination of employment or termination of the
consulting relationship) at any time prior to the expiration date
of such nonstatutory stock option or within one year after the
date of termination of service, whichever is the shorter period;
(iii) If a grantee ceases to be a Non-Employee Director of the
Corporation for any reason other than resignation, removal for
cause or death, any then outstanding nonstatutory stock option
of such grantee (whether or not then held by the grantee) shall
be exercisable (but only to the extent exercisable by the
grantee immediately prior to ceasing to be a Non-Employee
Director) at any time prior to the expiration date of such stock
option or within four years after the date the grantee ceases to
be a Non-Employee Director, whichever is the shorter period;
provided that, for purposes of determining when an outstanding
stock option held by a grantee who ceases to be a Non-Employee
Director shall be exercisable, the anniversary date of the grant
of such option in the year in question shall be deemed to be the
date immediately preceding the date on which the annual meeting
of shareholders of the Corporation is held in that year, and
further provided that, in the case such grantee is a Disabled
Grantee, any then outstanding nonstatutory stock option shall be
exercisable for such period whether or not exercisable by the
grantee immediately prior to ceasing to be a Non-Employee
Director;
(iv) If the employment or consulting relationship of a grantee who is
a Disabled Grantee is voluntarily terminated with the consent of
the Corporation or a Subsidiary, any then outstanding stock
option of such grantee (whether or not then held by the grantee)
shall be exercisable in full (whether or not so exercisable
immediately prior to the grantee's termination of employment or
the consulting relationship) at any time prior to the expiration
date of such stock option or within one year after the date of
termination of service, whichever is the shorter period;
(v) Following the death of a grantee during employment or a consulting
relationship, any stock option of the grantee outstanding at the
time of death shall be exercisable in full (whether or not so
exercisable immediately prior to the death of the grantee) by the
person entitled to do so under the Will of the grantee, or, if the
grantee shall fail to make testamentary disposition of the stock
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option or shall die intestate, by the legal representative of the
grantee (or, in the case of a nonstatutory stock option, if
permitted under the stock option agreement, by the grantee's inter
vivos transferee) at any time prior to the expiration date of such
stock option or within one year after the date of death, whichever
is the shorter period;
(vi) Following the death of a grantee during service as a Non-Employee
Director, any stock option of the grantee outstanding at the time
of death shall be exercisable in full (whether or not so
exercisable immediately prior to the death of the grantee) by the
person entitled to do so under the Will of the grantee, or, if the
grantee shall fail to make testamentary disposition of the stock
option or shall die intestate, by the legal representative of the
grantee (or, if permitted under the stock option agreement, by the
grantee's inter vivos transferee) at any time prior to the
expiration date of such stock option or within two years after the
date of death, whichever is the shorter period;
(vii) Following the death of a grantee after termination of employment
or a consulting relationship or after ceasing to be a Non-
Employee Director and during a period when a stock option is
exercisable, any stock option of the grantee outstanding at the
time of death shall be exercisable (but only to the extent the
stock option was exercisable immediately prior to the death of
the grantee) by such person entitled to do so under the Will of
the grantee or by such legal representative (or, in the case of a
nonstatutory stock option, by such inter vivos transferee) at any
time prior to the expiration date of such stock option or within
one year after the date of death, whichever is the shorter
period;
(viii) Unless the exercise period of a stock option following
termination of employment has been extended as provided in
Section 8(C), if the employment of a grantee terminates for any
reason other than voluntary termination with the consent of the
Corporation or a Subsidiary, retirement under any retirement
plan of the Corporation or a Subsidiary or death, all stock
options of the grantee outstanding at the time of such
termination of employment (whether or not then held by the
grantee) shall automatically terminate;
(ix) If the consulting relationship of a grantee terminates for any
reason other than voluntary termination with the consent of the
Corporation or a Subsidiary or death, all stock options of the
grantee outstanding at the time of such termination (whether or
not then held by the grantee) shall automatically terminate; and
(x) Unless otherwise determined by the Board in the case of a
resignation, if during his or her term of office as a Non-Employee
Director a grantee resigns from the Board or is removed from office
for cause, any outstanding stock option of the grantee (whether or
not then held by the grantee) which is not exercisable by the
grantee immediately prior to resignation or removal shall terminate
as of the date of resignation or removal, and any outstanding stock
option of the grantee (whether of not then held by the grantee)
which is exercisable by the grantee immediately prior to
resignation or removal shall be exercisable by the grantee (or, if
permitted under the stock option agreement, by the grantee's inter
vivos transferee) at any time prior to the expiration date of such
stock option or within 90 days after the date of resignation or
removal, whichever is the shorter period.
Whether termination of employment is a voluntary termination of
employment with the consent of the Corporation and whether a grantee is
a Disabled Grantee shall be determined, in each case, in its discretion,
by the Committee, and any such determination by the Committee shall be
final and binding. Retention by the Corporation of a consultant shall
terminate when the consultant is notified in writing by the Corporation
of the termination of his retention as a consultant.
If a grantee of a stock option engages in the operation or management
of a business (whether as owner, partner, officer, director, employee or
otherwise and whether during or after termination of employment or
service as a Non-Employee Director) which is in competition with the
Corporation or
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any of its Subsidiaries, the Committee may immediately terminate all
outstanding stock options of the grantee (whether or not such stock
options are then held by the grantee); provided, however, that this
sentence shall not apply if the exercise period of a stock option
following termination of employment has been extended as provided in
Section 8(C). Whether a grantee has engaged in the operation or
management of a business which is in competition with the Corporation
or any of its Subsidiaries shall also be determined, in its discretion,
by the Committee, and any such determination by the Committee shall be
final and binding.
(H) All stock options and cash payment rights shall be confirmed by an
agreement, or an amendment thereto, which shall be executed by the
Corporation and the grantee.
(I) For all purposes 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 Exchange 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 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 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 period. The average is to be determined in the manner
described above in this Section 5(I). If the fair market value of the
Common Stock cannot be determined on the basis previously set forth in
this Section 5(I) on 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. Fair market value shall
be determined without regard to any restriction other than a
restriction which, by its terms, will never lapse.
(J) The obligation of the Corporation to issue shares of Common Stock
under the Plan shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended,
with respect to such shares, if deemed necessary or appropriate by
counsel for the Corporation, (ii) the condition that the shares shall
have been listed (or authorized for listing upon official notice of
issuance) upon each stock exchange, if any, on which the Common Stock
shares may then be listed and (iii) all other applicable laws,
regulations, rules and orders which may then be in effect.
Subject to the foregoing provisions of this Section and the other provisions
of the Plan, any stock option granted under the Plan to employees or
consultants may be exercised at such times and in such amounts and be subject
to such restrictions and other terms and conditions, if any, as shall be
determined, in its discretion, by the Committee and set forth in the agreement
referred to in Section 5(H), or an amendment thereto.
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SECTION 6
Terms and Conditions of Restricted Shares
Restricted share awards shall be evidenced by a written agreement in the
form prescribed by the Committee in its discretion, which shall set forth the
number of shares of Common Stock awarded, the restrictions imposed thereon
(including, without limitation, restrictions on the right of the grantee to
sell, assign, transfer or encumber such shares while such shares are subject
to other restrictions imposed under this Section 6), the duration of such
restrictions, the events (which may, in the discretion of the Committee,
include performance-based events) the occurrence of which would cause a
forfeiture of the restricted shares in whole or in part and such other terms
and conditions as the Committee in its discretion deems appropriate.
Restricted share awards shall be effective only upon execution of the
applicable restricted share agreement by the Corporation and the grantee.
Following a restricted share award and prior to the lapse or termination of
the applicable restrictions, the Committee shall deposit share certificates
for such restricted shares in escrow. Upon the lapse or termination of the
applicable restrictions (and not before such time), the grantee shall be
issued or transferred share certificates for the restricted shares. From the
date a restricted share award is effective, the grantee shall be a shareholder
with respect to all the shares represented by such certificates and shall have
all the rights of a shareholder with respect to all such shares, including the
right to vote such shares and to receive all dividends and other distributions
paid with respect to such shares, subject only to the restrictions imposed by
the Committee.
If an awardee of restricted shares engages in the operation or management of
a business (whether as owner, partner, officer, director, employee or
otherwise and whether during or after termination of employment) which is in
competition with the Corporation or any of its Subsidiaries, the Committee may
immediately declare forfeited all restricted shares held by the grantee as to
which the restrictions have not yet lapsed; provided, however, that this
sentence shall not apply if the lapse of the restrictions applicable to the
restricted shares has been accelerated as provided in Section 8(D). Whether a
grantee has engaged in the operation or management of a business which is in
competition with the Corporation or any of its subsidiaries shall also be
determined, in its discretion, by the Committee, and any such determination by
the Committee shall be final and binding.
SECTION 7
Adjustment and Substitution of Shares
If a dividend or other distribution shall be declared upon the Common Stock
payable in shares of Common Stock, the number of shares of Common Stock then
subject to any outstanding stock options, the number of shares of Common Stock
which may be issued under the Plan but are not then subject to outstanding
stock options and the maximum number of shares as to which stock options or
restricted shares may be granted and as to which shares may be awarded during
any calendar year under Section 3, shall be adjusted by adding thereto the
number of shares of 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. Shares
of Common Stock so distributed with respect to any restricted shares held in
escrow shall also be held by the Corporation in escrow and shall be subject to
the same restrictions as are applicable to the restricted shares on which they
were distributed.
If the outstanding shares of Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, or cash or other
property, whether through reorganization, reclassification, recapitalization,
stock split-up, combination of shares, merger or consolidation, then there
shall be substituted for each share of Common Stock subject to any then
outstanding stock option, and for each share of 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 (and in the
case of outstanding options, the cash or other property) into which each
outstanding share of the Common Stock shall be so changed or for which each
such share shall be exchangeable. Unless otherwise determined by the
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Committee in its discretion, any such stock or securities, as well as any cash
or other property, into or for which any restricted shares held in escrow
shall be changed or exchangeable in any such transaction shall also be held by
the Corporation in escrow and shall be subject to the same restrictions as are
applicable to the restricted shares in respect of which such stock,
securities, cash or other property was issued or distributed.
In case of any adjustment or substitution as provided for in this Section 7,
the aggregate option price for all shares subject to each then outstanding
stock option prior to such adjustment or substitution shall be the aggregate
option price for all shares of stock or other securities (including any
fraction), cash or other property to which such shares shall have been
adjusted or which shall have been substituted for such shares. Any new option
price per share or other unit shall be carried to at least three decimal
places with the last decimal place rounded upwards to the nearest whole
number.
If the outstanding shares of the Common Stock shall be changed in value by
reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash, or extraordinary
distribution to shareholders of the Common Stock, (a) the Committee shall make
any adjustments to any then outstanding stock option which it determines are
equitably required to prevent dilution or enlargement of the rights of
optionees which would otherwise result from any such transaction, and (b)
unless otherwise determined by the Committee in its discretion, any stock,
securities, cash or other property distributed with respect to any restricted
shares held in escrow or for which any restricted shares held in escrow shall
be exchanged in any such transaction shall also be held by the Corporation in
escrow and shall be subject to the same restrictions as are applicable to the
restricted shares in respect of which such stock, securities, cash or other
property was distributed or exchanged.
No adjustment or substitution provided for in this Section 7 shall require
the Corporation 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. Owners of restricted shares held in
escrow shall be treated in the same manner as owners of Common Stock not held
in escrow with respect to fractional shares created by an adjustment or
substitution of shares, except that, unless otherwise determined by the
Committee in its discretion, any cash or other property paid in lieu of a
fractional share shall be subject to restrictions similar to those applicable
to the restricted shares exchanged therefor.
If any such adjustment or substitution provided for in this Section 7
requires the approval of shareholders in order to enable the Corporation to
grant incentive stock options, then no such adjustment or substitution shall
be made without the required shareholder approval. Notwithstanding the
foregoing, in the case of incentive stock options, if the effect of any such
adjustment or substitution would be to cause the stock option to fail to
continue to qualify as an incentive stock option or to cause a modification,
extension or renewal of such stock 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 incentive stock option.
In the case of an adjustment in the number of shares of Common Stock set
forth in Section 5(D) of the Plan on account of a dividend or other
distribution declared upon the Common Stock payable in shares of the Common
Stock, the adjustment provided for in the first paragraph of this Section 7
may not be given any or only limited effect with respect to awards subsequent
to the date of the adjustment if the Board should determine at the time of
such dividend or other distribution that no or a specified limited adjustment
would be more appropriate for purposes of the Plan. Similarly, the adjustment
provided for in the second paragraph of this Section 7 may be given a
specified limited effect if the Board should determine at the time of the
transaction otherwise occasioning such adjustment such limited effect would be
more appropriate for purposes of the Plan.
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SECTION 8
Additional Rights in Certain Events
(A) Definitions.
For purposes of this Section 8, the following terms shall have the following
meanings:
(1) The term "Person" shall be used as that term is used in Sections 13(d)
and 14(d) of the Exchange Act.
(2) Beneficial Ownership shall be determined as provided in Rule 13d-3
under the Exchange Act as in effect on the effective date of the Plan.
(3) "Voting Shares" shall mean all securities of a company entitling the
holders thereof to vote in an annual election of Directors (without
consideration of the rights of any class of stock other than the
Common Stock to elect Directors by a separate class vote); and a
specified percentage of "Voting Power" of a company shall mean such
number of the Voting Shares as shall enable the holders thereof to
cast such percentage of all the votes which could be cast in an annual
election of directors (without consideration of the rights of any
class of stock other than the Common Stock to elect Directors by a
separate class vote).
(4) "Tender Offer" shall mean a tender offer or exchange offer to acquire
securities of the Corporation (other than such an offer made by the
Corporation or any Subsidiary), whether or not such offer is approved
or opposed by the Board.
(5) "Section 8 Event" shall mean the date upon which any of the following
events occurs:
(a) The Corporation acquires actual knowledge that any Person other
than the Corporation, a Subsidiary or any employee benefit plan(s)
sponsored by the Corporation has acquired the Beneficial
Ownership, directly or indirectly, of securities of the
Corporation entitling such Person to 20% or more of the Voting
Power of the Corporation;
(b) The occurrence of the date provided for in action by the Board or
the Committee, if any, to accelerate the exercise date of stock
options and/or to release restrictions on restricted shares with
respect to any award, following the making of a Tender Offer to
acquire securities of the Corporation entitling the holders
thereof to 20% or more of the Voting Power of the Corporation; or
(c) The occurrence of the date provided for in action by the Board or
the Committee, if any, to accelerate the exercise date of stock
options and/or to release restrictions on restricted shares with
respect to any award, following the making of a solicitation
subject to Rule 14a-11 under the Exchange Act (or any successor
Rule) relating to the election or removal of 50% or more of the
members of any class of the Board by any person other than the
Corporation; or
(d) The shareholders of the Corporation shall approve a merger,
consolidation, share exchange, division or sale or other
disposition of assets of the Corporation as a result of which the
shareholders of the Corporation immediately prior to such
transaction shall not hold, directly or indirectly, immediately
following such transaction a majority of the Voting Power of (i)
in the case of a merger or consolidation, the surviving or
resulting corporation, (ii) in the case of a share exchange, the
acquiring corporation or (iii) in the case of a division or a sale
or other disposition of assets, each surviving, resulting or
acquiring corporation which, immediately following the
transaction, holds more than 10% of the consolidated assets of the
Corporation immediately prior to the transaction;
provided, however, that (i) if securities beneficially owned by a grantee are
included in determining the Beneficial Ownership of a Person referred to in
paragraph 5(a), (ii) a grantee is required to be named pursuant Item 2 of the
Schedule 14D-1 (or any similar successor filing requirement) required to be
filed by the bidder
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<PAGE>
making a Tender Offer referred to in paragraph 5(b) or (iii) if a grantee is a
"participant" as defined in 14a-11 under the Exchange Act (or any successor
Rule) in a solicitation (other than a solicitation by the Corporation)
referred to in paragraph 5(c), then no Section 8 Event with respect to such
grantee shall be deemed to have occurred by reason of such event.
(B) Acceleration of the Exercise Date of Stock Options.
Subject to the provisions of Section 4 in the case of incentive stock
options, unless the agreement referred to in Section 5(H), or an amendment
thereto, shall otherwise provide, notwithstanding any other provision
contained in the Plan, in case any "Section 8 Event" occurs all outstanding
stock options (other than those held by a person referred to in the proviso to
Section 8(a)(5)) shall become immediately and fully exercisable whether or not
otherwise exercisable by their terms.
(C) Extension of the Expiration Date of Stock Options.
Subject to the provisions of Section 4 in the case of incentive stock
options and to the extent any stock options are exercisable on the date of the
grantee's termination of employment, unless the agreement referred to in
Section 5(H), or an amendment thereto, shall otherwise provide,
notwithstanding any other provision contained in the Plan, all stock options
held by a grantee (other than a grantee referred to in the proviso to Section
8(a)(5)) whose employment with the Corporation or a Subsidiary terminates
within one year of any Section 8 Event for any reason other than voluntary
termination with the consent of the Corporation or a Subsidiary, retirement
under any retirement plan of the Corporation or a Subsidiary or death shall be
exercisable for a period of three months from the date of such termination of
employment, but in no event after the expiration date of the stock option.
(D) Lapse of Restrictions on Restricted Share Awards.
If any "Section 8 Event" occurs prior to the scheduled lapse of all
restrictions applicable to restricted share awards under the Plan (other than
those held by a person referred to in the proviso to Section 8(a)(5)), then
unless the agreement referred to in Section 6, or an amendment thereto, shall
otherwise provide, all such restrictions shall lapse upon the occurrence of
any such "Section 8 Event" regardless of the scheduled lapse of such
restrictions.
SECTION 9
Effect of the Plan on the Rights of Participants and the Corporation
Neither the adoption of the Plan nor any action of the Board or the
Committee pursuant to the Plan shall be deemed to give any employee,
consultant or Non-Employee Director any right to be granted a stock option
(with or without cash payment rights) or to be awarded restricted shares under
the Plan. Nothing in the Plan, in any stock option, in cash payment rights
granted under the Plan, in any restricted share award under the Plan or in any
agreement providing for any of the foregoing shall confer any right to any
employee to continue in the employ of the Corporation or any Subsidiary or any
consultant or Non-Employee Director to continue as a consultant or Non-
Employee Director of the Corporation or interfere in any way with the rights
of the Corporation or any Subsidiary to terminate the employment of any
employee or relationship with a consultant at any time or with the rights of
the shareholders of the Corporation or the Board to elect and remove Non-
Employee Directors.
SECTION 10
Amendment
The right to amend the Plan at any time and from time to time and the right
to revoke or terminate the Plan are hereby specifically reserved to the Board;
provided that no amendment of the Plan shall be made without
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<PAGE>
shareholder approval (1) if the effect of the amendment is (a) to make any
changes in the class of employees eligible to receive incentive stock options
under the Plan, (b) to increase the number of shares with respect to which
incentive stock options may be granted under the Plan or (2) if shareholder
approval of the amendment is at the time required (a) by the rules of the
NASDAQ National Market System or any stock exchange on which the Common Stock
may then be listed or (b) for stock options granted under the Plan to qualify
as "performance based compensation" as then defined in the regulations under
Section 162(m) of the Code. No alteration, amendment, revocation or
termination of the Plan shall, without the written consent of the holder of a
stock option, cash payment rights or restricted shares theretofore awarded
under the Plan, adversely affect the rights of such holder with respect
thereto.
SECTION 11
Effective Date and Duration of Plan
The effective date and date of adoption of the Plan shall be September 29,
2000, the date of adoption of the Plan by the Board, provided that such
adoption of the Plan by the Board is approved by a majority of the votes cast
at a duly held meeting of shareholders held on or prior to September 28, 2001
at which a quorum representing a majority of the outstanding voting stock of
the Corporation is, either in person or by proxy, present and voting. No stock
option granted under the Plan may be exercised, and no restricted shares may
be awarded until after such approval. No stock option or cash payment rights
may be granted and no restricted shares may be awarded under the Plan
subsequent to September 29, 2010.
SECTION 12
Withholding
Income or employment taxes may be required to be withheld by the Corporation
or a Subsidiary in connection with the exercise of a stock option, upon a
"disqualifying disposition" of the shares acquired upon exercise of an
incentive stock option, at the time restricted shares are granted or vest or
upon the receipt by the grantee of cash in payment of cash payment rights or
dividends, if any, on restricted stock which has not vested. To the extent
required by applicable Federal, state, local or foreign law, the grantee shall
make arrangements satisfactory to the Corporation, in its discretion for the
satisfaction of any withholding tax obligations that arise in connection with
the Plan. The Corporation shall not be required to issue any Common Stock or
make any cash payment under the Plan until such obligations are satisfied.
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<PAGE>
Respironics, Inc.
1501 Ardmore Boulevard
Pittsburgh, PA 15221
Annual Meeting of Shareholders, November 16, 2000
Gerald E. McGinnis, James W. Liken 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 on the Tenth Floor, at 501 Grant Street, Pittsburgh, Pennsylvania, on
November 16, 2000 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)
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<PAGE>
Unless you attend and vote in person, you MUST sign and return your proxy in
order to have your shares voted at the meeting.
Please mark
your votes as
indicated in X
this example
1. Election of Directors.
NOMINEES: James H. Hardie, Joseph C. Lawyer, and Sean McDonald to the class
of 2003.
FOR all nominees WITHHOLD AUTHORITY
(listed above except to vote for all
as marked to the nominees listed above
contrary)
[ ] [ ]
FOR AGAINST ABSTAIN
2. To approve the adoption of the
Respironics, Inc. 2000 Stock
Incentive Plan [ ] [ ] [ ]
3. To ratify the selection of Ernst
& Young LLP as independent public
accountants for the fiscal year
ending June 30, 2001. [ ] [ ] [ ]
(Instruction: To withhold authority to vote for any nominee, write that
nominee's name in the space provided below.)
_______________________________________________________________________________
________ This proxy is solicited on behalf of the Board of Directors and will
be voted as 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: ___________________________________________, 2000
_____________________________________________________________________
_____________________________________________________________________
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!
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