Exhibit 10.61

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AGREEMENT (the “Agreement”), made as of November 13, 2007, by and between
RESPIRONICS, INC., a Delaware corporation (the “Company”) and Craig Reynolds
(“Executive”). If future benefits provided to Executive Vice Presidents, Senior
Vice Presidents or the President (other than base salary) become more favorable
than those contained herein, Executive will receive the benefit of those
changes.

W I T N E S S E T H:

WHEREAS, the Company is engaged in the business of the design, development,
manufacture, marketing and sale principally of respiratory and other medical
equipment;

WHEREAS, Executive possesses valuable knowledge and skills that will contribute
to the successful operation of the Company’s business;

WHEREAS, Executive and the Company are currently parties to an Employment
Agreement executed on or about November 11, 1997 (as amended, from time to time
prior to the date of this Agreement, the “Original Agreement”);

WHEREAS, pursuant to the Original Agreement, as partial consideration for
Executive’s agreement to forego the exercise of certain rights worth One
Million, Seven Hundred Thousand Dollars ($1,700,000) set forth in the Original
Agreement and remain in the employ of the Company in accordance with the terms
and conditions of the Original Agreement, the Company agreed on August 16, 2000
to (i) pay Executive certain additional amounts upon termination or expiration
of the Original Agreement, and (ii) guaranty a $300,000 loan obtained by
Executive, to reimburse Executive for interest payable on such loan and to
gross-up one time Executive’s income to account for any additional federal and
state income tax payable by Executive as a result of the Company’s reimbursement
of Executive for interest payable on such loan;

WHEREAS, Executive and the Company desire to amend and restate the Original
Agreement as herein set forth;

WHEREAS, the Company and Executive have agreed to execute and deliver this
Agreement in consideration, among other things, of (i) the access Executive will
have to confidential or proprietary information of the Company, (ii) the access
Executive will have to confidential or proprietary information to be acquired
hereafter by the Company, and (iii) Executive’s receipt of compensation from
time to time by the Company; and

WHEREAS, the Company desires to retain the services of Executive, and Executive
is willing to accept employment with the Company, subject to the terms and
conditions hereinafter set forth.

NOW, THEREFORE, intending to be legally bound, the Company agrees to employ
Executive, and Executive hereby agrees to be employed by the Company, upon the
following terms and conditions:

--------------------------------------------------------------------------------

ARTICLE I

EMPLOYMENT

1.01. Office. Executive will be employed as Executive Vice President and Chief
Operating Officer of the Company, having such duties and responsibilities as are
commensurate with such position and title. Executive shall report to the
President and Chief Executive Officer of the Company and shall also perform such
other duties unrelated to his title and position as may be mutually agreed upon
by Executive and the Company. (Such duties and responsibilities shall
hereinafter be referred to as Executive’s “Services”.) In such capacity or
capacities Executive shall use his best energies or abilities in the performance
of his Services hereunder and as prescribed in the By-Laws of the Company.

1.02. Term. Subject to the terms and provisions of Article II hereof, Executive
shall be employed by the Company for a period of three years (the “Term”),
commencing on the date of this Agreement. Subject to the terms and provisions of
Article II hereof, the Term shall automatically be extended for additional three
year periods unless, not less than ninety (90) days prior to the expiration of
the first year of the then-current Term, either Executive or the Company shall
advise the other that the Term will not be further extended. “Term” shall also
include any extension or renewals of the original Term, but shall not include
the Extended Employment Period, as defined in Section 2.08.

1.03. Base Salary. Compensation shall be paid to Executive by the Company at the
rate of $529,876.00 per annum (the “Base Salary”), payable bi-weekly. The Base
Salary to be paid to Executive may be adjusted upward (but not downward) by the
Board of Directors of the Company at any time (but not less frequently than
annually) based upon Executive’s contribution to the success of the Company and
on such other factors as the Board of Directors of the Company shall deem
appropriate.

1.04. Executive Benefits. At all times during the Term, Executive shall have the
right to participate in and receive benefits under and in accordance with the
then-current provisions of all incentive, profit sharing, retirement, stock
option or purchase plans, life, health and accident insurance, hospitalization
and other incentive and benefit plans or programs (except for any such plan in
which Executive may not participate pursuant to the terms of such plan or
Executive’s geographic location) which the Company may at any time or from time
to time have in effect for executive employees of the Company or its
subsidiaries, Executive’s participation to be on a basis commensurate with other
executive employees considering their respective responsibilities and
compensation. Prior service of Executive with the Company, Healthdyne
Technologies, Inc. (“Healthdyne”) or a Healthdyne subsidiary (including service
with predecessor entities to the extent recognized under analogous Healthdyne
benefit plans) shall be counted in determining eligibility to participate in
benefit plans and programs applicable to Executive hereunder and for purposes of
vesting. Executive shall also be entitled to be reimbursed for all reasonable
expenses incurred by him in the performance of his Services hereunder.

1.05. Principal Place of Business. The headquarters and principal place of
business of the Company is located in Pittsburgh, Pennsylvania. For Executive’s
convenience, Executive’s principal place of business will be in Kennesaw,
Georgia, and he will reside within a reasonable distance thereof.

 

-2-

--------------------------------------------------------------------------------

ARTICLE II

SEPARATION OF SERVICE

2.01. Illness, Incapacity. If, during the Term, the Board of Directors of the
Company shall determine that Executive shall be prevented from effectively
performing all his Services hereunder by reason of illness or disability,
confirmed by a physician mutually acceptable to Executive and the Company, and
such failure so to perform shall have continued for a period of not less than
six months, then the Company may, by written notice to Executive, separate the
Executive from performance of Services hereunder (such separation shall
hereinafter be referred to as “Separation of Service”) effective at any time
after such six month period. Upon delivery to Executive of such notice, together
with payment of any salary accrued and unpaid under Section 1.03 hereof,
Executive’s Services and all obligations of the Company under Article I (except
any obligation for vested benefits) hereof shall forthwith terminate. The
obligations of Executive under Articles III and IV (but only Sections 4.01-4.04,
4.06, and 4.07) hereof, and the Company’s obligations under Section 2.08 hereof,
shall continue notwithstanding Executive’s Separation of Service pursuant to
this Section 2.01.

2.02. Death. If Executive dies during the Term, Executive’s Services shall
terminate and all obligations of the Company hereunder, other than any
obligations with respect to the payment of accrued, unpaid salary and vested
benefits, shall terminate; provided, however, that the Company’s obligations
under Section 2.08 hereof shall continue notwithstanding Executive’s Separation
of Service pursuant to this Section 2.02.

2.03. Separation of Service by Company. (a) For Cause. In the event that, in the
reasonable judgment of the Board of Directors of the Company after a meeting at
which Executive is given reasonable notice and afforded an opportunity to
attend, be heard and be accompanied by a lawyer, Executive shall have (a) been
guilty of any act of dishonesty material with respect to the Company, (b) been
convicted of a crime involving moral turpitude which affects Executive’s ability
to perform his Services under this Agreement or which materially adversely
affects the Company or (c) intentionally disregarded express instructions of the
Board of Directors of the Company with respect to material matters of policy
continuing (in the case of clause (c)) for a period of not less than thirty
(30) days after notice of such disregard, the Company may terminate Executive’s
Services effective at such date as it shall specify in a written notice to
Executive (other than any such disregard resulting from incapacity due to
physical or mental illness or following Executive’s delivery of a notice of
Separation of Service pursuant to Section 2.04(a)). Any such Separation of
Service by the Company shall be deemed to be “for cause”. During the Change of
Control Protection Period (as defined below), (1) for purposes of this
Section 2.03(a), no act, or failure to act, on the part of Executive shall be
considered “intentional” unless it is done, or omitted to be done, by Executive
in bad faith or without reasonable belief that Executive’s action or omission
was in the best interests of the Company, (2) any act, or failure to act, based
upon authority (x) given pursuant to a resolution duly adopted by the Board of
Directors, or if the Company is not the ultimate parent corporation and is not
publicly-traded, the board of directors of the ultimate parent of the Company
(the “Applicable Board”), (y) upon the instructions of the President of the
Company or (z) based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company and (3) the Separation of Service
of Executive shall not be deemed to be for cause unless and until there shall
have been delivered to Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the independent directors of
the Applicable Board (excluding Executive, if Executive is a member of the

 

-3-

--------------------------------------------------------------------------------

Applicable Board) at a meeting of the Applicable Board called and held for such
purpose (after reasonable notice is provided to Executive and Executive is given
an opportunity, together with counsel for Executive, to be heard before the
Applicable Board), finding that, in the good faith opinion of the Applicable
Board, Executive is guilty of the conduct described in Section 2.03, and
specifying the particulars thereof in detail. Upon delivery to Executive of
notice of Separation of Service in accordance with the procedural requirements
of this Section 2.03, together with payment of any salary accrued and unpaid
under Section 1.03 hereof and vested benefits for which the Company is
obligated, Executive’s Services and all obligations of the Company under Article
I hereof shall forthwith terminate. The obligations of Executive under Articles
III and IV hereof, and the Company’s obligations under Section 2.08 hereof,
shall continue notwithstanding Executive’s Separation of Service pursuant to
this Section 2.03(a). “Change of Control Protection Period” means the period
commencing upon the occurrence of a Change of Control (as defined in
Section 2.06(b)) through and including the twenty-four (24) month anniversary of
the Change of Control.

(b) Without Cause. Executive’s Services hereunder may be terminated at any time
by the Company without cause if the Board of Directors of the Company, by
resolution duly adopted by the Board, so determines. Except as set forth in
Sections 2.05 and 2.06 hereof, all obligations of the Company under Article I
cease upon Separation of Service pursuant to this Section 2.03 (b) (except for
accrued and unpaid salary and any obligation for vested benefits). The
obligations of Executive under Articles III and IV hereof, and the Company’s
obligations under Section 2.08 hereof, shall continue notwithstanding
Executive’s Separation of Service pursuant to this Section 2.03(b).

2.04. Separation of Service by Executive. (a) Except during the Change of
Control Protection Period, Executive agrees to give the Company ninety (90) days
prior written notice of the termination of his Services with the Company.
Simultaneously with such notice, except during the Change of Control Protection
Period, Executive shall inform the Company in writing as to his employment plans
following the Separation of Service with the Company. In the event Executive has
terminated his Services with the Company because there has been: (i) a material
downgrading in Executive’s duties, titles or responsibilities for the Company or
a reduction in his annual target incentive of 10% or more, (ii) a change in
Executive’s principal place of business to a location not within 30 miles of its
present location, (iii) any significant and prolonged increase in the traveling
requirements applicable to the discharge of Executive’s responsibilities,
(iv) he has been removed from or not reelected to the Board of Directors of the
Company, (v) any breach of the Company of its duties or obligations pursuant to
this Agreement which has not been cured within thirty (30) days after notice of
such breach, (vi) any failure of any successors to the Company after a Change of
Control (as defined herein) to assume the obligations of the Company hereunder,
(vii) as a condition to any renewal or extension of this Agreement, the
imposition by the Company of any adverse change in any material term or
provision of this Agreement, (viii) any other material adverse change in working
conditions, responsibilities or prestige, (ix) during the Change of Control
Protection Period only, the failure by the Company to continue to provide
Executive with employee benefits substantially similar to those enjoyed by him
immediately prior to the Change of Control or the taking of any action by the
Company which would directly or indirectly materially reduce any of such
benefits or deprive Executive of any material fringe benefit enjoyed by the
Executive immediately prior to the Change of Control or (x) during the Change of
Control

 

-4-

--------------------------------------------------------------------------------

Protection Period only, notice by the Company that it will not extend the Term
pursuant to Section 1.02; then, in the case of any of the events described in
clauses (i) through (x), Executive shall be entitled to the compensation
provided for in Section 2.05 upon such Separation of Service. For purposes of
this Section 2.04(a), during the Change of Control Protection Period, any good
faith determination made by Executive regarding the occurrence of any of the
events described in clauses (i) through (x) of this Section 2.04(a) shall be
presumed correct unless the Company can prove otherwise. In addition, for
purposes of this Section 2.04(a), the Executive’s mental or physical incapacity
following the occurrence of an event described above in clauses (i) through
(x) shall not affect the Executive’s ability to terminate his Services for any
of the reasons described in clauses (i) through (x) of this Section 2.04(a).

(b) Without prejudice to Executive’s rights under Section 2.04(a), all
obligations of the Company under Article I shall cease upon Executive’s
Separation of Service pursuant to this Section 2.04, except for the payment of
any salary accrued and unpaid under Section 1.03 hereof and any obligation for
vested benefits. The obligations of Executive under Articles III and IV hereof,
and the Company’s obligations under Section 2.08 hereof, shall continue
notwithstanding Executive’s Separation of Service pursuant to this Section 2.04.

2.05. Separation of Service Payments – Discharge Without Cause; Separation of
Service Pursuant to Section 2.04(a). If (a) the Company terminates Executive’s
Services without cause pursuant to Section 2.03(b) or (b) Executive terminates
his Services pursuant to Section 2.04(a) (either of clauses (a) and (b), a
“Qualifying Separation of Service”), Executive shall be entitled to a lump sum
payment in an amount equal to (i) his W-2 wages as required to be reported to
the Internal Revenue Service (“IRS”) in Box 1 on Executive’s W-2 Wage and Tax
Statement during the immediately preceding three completed calendar years, plus
(ii) the aggregate amount of Executive’s car allowance (as in effect immediately
prior to the Separation of Service (without giving effect to any reduction)) for
a thirty-six month period, such amount to be paid within sixty (60) days of
Executive’s Separation of Service; provided, however, that, subject to the
immediately following sentence, with respect to clause (ii) only, such amounts
shall be payable upon the later of (i) the date specified in this Section 2.05
and (ii) January 1, 2008. Notwithstanding the immediately preceding sentence, in
the event that the Executive is a “specified employee” within the meaning of
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (as
determined in accordance with the methodology established by the Company as in
effect on the date of Separation of Service), amounts that would otherwise be
payable under this Section 2.05 during the six-month period immediately
following the date of Separation of Service shall instead be paid on the first
business day after the date that is six months following the Executive’s
“separation from service” within the meaning of Section 409A of the Code. In
addition, for three years after the Executive’s date of Separation of Service,
the Company shall continue to provide health insurance coverage (which includes
dental coverage) to the Executive at a level substantially similar to the health
insurance benefits enjoyed by Executive prior to his Separation of Service
(without giving effect to any reduction); provided, however, that the health
insurance coverage provided during such period shall be provided in such a
manner that such benefits (and the costs and premiums thereof) are excluded from
the Executive’s income for federal income tax purposes (if the Company
reasonably determines that providing continued coverage under one or more of its
health care benefit plans contemplated herein could be taxable to the Executive,
the Company shall provide such benefits at the level required hereby through the
purchase of individual insurance coverage). For the avoidance of doubt, this
Section 2.05 shall apply to a Qualifying Separation of Service prior to, upon
the occurrence of, or following a Change of Control and the Company acknowledges
that Executive will be entitled to the payments contemplated by this
Section 2.05 if Executive experiences a Qualifying Separation of Service prior
to, upon the occurrence of, or following a Change of Control. In addition, for
the avoidance of doubt, in the event that the Company makes full payment of all
the

 

-5-

--------------------------------------------------------------------------------

amounts contemplated by this Section 2.05, the Company will have no obligation
to make any payments contemplated by Section 2.06(a). Executive has no duty to
mitigate the payments contemplated by this Section 2.05 and these payments will
not be reduced in any way should Executive obtain other employment during the
period in which payments are being made.

2.06. Separation of Service Payments – After Certain Business Combinations.
(a) If Executive or the Company (except pursuant to Section 2.03(a) hereof)
terminates Executive’s Services during the Term upon or after the occurrence of
a Business Combination not approved by a majority of Disinterested Directors
then in office, as those terms are defined in Article Ninth of the Company’s
Certificate of Incorporation, Executive shall be paid an amount equal to
(i) three times Executive’s average W-2 wages as required to be reported to the
IRS in Box 1 on Executive’s W-2 Wage and Tax Statement during the immediately
preceding three completed calendar years, plus (ii) the aggregate amount of
Executive’s car allowance (as in effect immediately prior to the Separation of
Service (without giving effect to any reduction)) for a thirty-six month period,
such payment to be made in a lump sum within sixty (60) days of Executive’s
Separation of Service. Notwithstanding the immediately preceding sentence, in
the event that the Executive is a “specified employee” within the meaning of
Section 409A of the Code (as determined in accordance with the methodology
established by the Company as in effect on the date of Separation of Service),
amounts that would otherwise be payable under this Section 2.06(a) during the
six-month period immediately following the date of Executive’s Separation of
Service shall instead be paid on the first business day after the date that is
six months following the Executive’s “separation from service” within the
meaning of Section 409A of the Code. In addition, for three years after the
Executive’s date of Separation of Service, the Company shall continue to provide
health insurance coverage (which includes dental coverage) to the Executive at a
level substantially similar to the health insurance benefits enjoyed by
Executive prior to his Separation of Service (without giving effect to any
reduction); provided, however, that the health insurance coverage provided
during such period shall be provided in such a manner that such benefits (and
the costs and premiums thereof) are excluded from the Executive’s income for
federal income tax purposes (if the Company reasonably determines that providing
continued coverage under one or more of its health care benefit plans
contemplated herein could be taxable to the Executive, the Company shall provide
such benefits at the level required hereby through the purchase of individual
insurance coverage). For the avoidance of doubt, in the event that the Company
makes full payment of all the amounts contemplated by this Section 2.06(a), the
Company will have no obligation to make any payments contemplated by
Section 2.05. Executive has no duty to mitigate the payments contemplated by
this Section 2.06(a) and these payments will not be reduced in any way should
Executive obtain other employment during the period in which payments are being
made.

(b) As used herein a “Change of Control” shall be deemed to have occurred if
(a) there shall be consummated (i) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of the Company’s common stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company’s common stock immediately prior to the merger have the
same proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (b) the stockholders of the
Company approve any plan or proposal for the liquidation or dissolution of the
Company, or (c) any person (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), shall
become the beneficial

 

-6-

--------------------------------------------------------------------------------

owner (within the meaning of Rule 13d-3 under the Exchange Act) of 30% of the
Company’s outstanding common stock, or (d) during any period of two consecutive
years, individuals who at the beginning of such period constitute the entire
Board of Directors of the Company shall cease for any reason to constitute a
majority thereof unless the election, or the nomination for election by the
Company’s stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period; provided, however, that, in the absence of a majority
vote of the directors to the contrary, the sale, lease, exchange or other
disposition (in one transaction or a series of related transactions) of less
than 70% of the total fair market value of all of the assets of the Company
immediately prior to such transaction or transactions shall not be deemed to be
a Change in Control and provided further that the transaction or transactions
which involve the sale, lease, exchange or other disposition of 70% or more of
the total fair market value of all of the assets of the Company immediately
prior to such transaction or transactions shall be deemed to be a Change in
Control even if approved by the Board of Directors of the Company.

2.07. Separation of Service Payments – Taxes. The parties hereto agree that the
Separation of Service payments contemplated by this Article II are reasonable
compensation in consideration of the Executive’s adherence to the terms of
Article IV hereof. Neither party shall contest the payment of such benefits as
constituting an “excess parachute payment” within the meaning of
Section 280G(b)(I) of the Code. In the event that Executive becomes entitled to
the Separation of Service payments contemplated by this Article II and Executive
becomes subject to the tax imposed by Section 4999 of the Code (the “Excise
Tax”) as a result of the Separation of Service payments and any other benefits
or payments required to be taken into account under Code Section 280G(b)(2)
(“Parachute Payments”), the Company shall pay to Executive an additional amount
(the “Gross-Up Payment”) such that the net amount retained by Executive, after
deduction of any Excise Tax on the Parachute Payments and any Federal, state and
local income tax and Excise Tax upon the payment provided for by this paragraph,
shall be equal to the Parachute Payments determined prior to the application of
this paragraph. For purposes of determining the amount of the Parachute
Payments, no payments or benefits shall be included if, in the opinion of tax
counsel selected by the Company’s independent auditors and acceptable to
Executive, such payments or benefits (in whole or in part) do not constitute
Parachute Payments, or such payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code. The value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company’s independent
auditors. For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay Federal income taxes at the highest marginal
rate of Federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rates of taxation in the state and locality of Executive’s residence on the date
of Separation of Service, net of the maximum reduction in Federal income taxes
which could be obtained from deduction of such state and local taxes. In the
event that the Excise Tax payable by Executive is subsequently determined to be
less than the amount taken into account hereunder at the time of Executive’s
Separation of Service, Executive shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined the portion of the
Gross-Up Payment attributable to such reduction plus interest on the amount of
such repayment at the rate provided for in Section 1274(b)(2)(B) of the Code
(“Repayment Amount”). In the event that the Excise Tax payable by Executive is
determined to exceed the amount taken into account thereunder at the time of the
Executive’s Separation of Service (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest

 

-7-

--------------------------------------------------------------------------------

payable with respect to such excess) at the time that the amount of such excess
is finally determined (“Additional Gross-up”). The obligation to pay any
Repayment Amount or Additional Gross-up shall remain in effect under this
Agreement for the entire period during which the Executive remains liable for
the Excise Tax, including the period during which any applicable statute of
limitation remains open. Such Gross-Up Payment and Additional Gross-Up shall be
paid at such time as Executive remits payment for Excise Tax to any taxing
authority; however, in no event will any Gross-Up Payment or Additional Gross-Up
be made later than the end of Executive’s taxable year in which the related
taxes are remitted to the taxing authority.

Section 2.08 Extended Employment Period and Additional Payments Upon Separation
of Service or Expiration of the Term. (a) Commencing simultaneously upon the
earlier of (i) the expiration of the Term, or (ii) Executive’s Separation of
Service for any reason (including, but not limited to any Separation of Service
initiated either by the Company or by the Executive, but excluding a Separation
of Service due to the death of Executive in accordance with Section 2.02 hereof)
(hereinafter an “Extended Employment Event”), Executive shall remain in the
employ of the Company for the Extended Employment Period (as defined below) in
accordance with the terms of this Section 2.08. As used herein, the “Extended
Employment Period” shall mean two (2) years from the Extended Employment Event.
At all times during the Extended Employment Period, Executive shall have the
right to participate in stock option or purchase plans and health insurance
plans as specified in this Section 2.08 hereof and shall have the right to
participate in the then current provisions of all life, disability and accident
insurance plans or programs (except for any such plan in which Executive may not
participate pursuant to the terms of such plan or Executive’s geographic
location) which the Company may at any time or from time to time have in effect
for employees of the Company or its subsidiaries.

(b) Upon an Extended Employment Event or upon Executive’s Separation of Service
pursuant to Section 2.02 hereof, the Company shall pay to Executive (or
Executive’s estate or beneficiaries following Executive’s death) a lump sum
amount equal to (i) one hundred and fifty percent (150%) of his Base Salary in
effect immediately prior to Executive’s Extended Employment Event and
commencement of the Extended Employment Period (without giving effect to any
reduction), plus (ii) the aggregate amount of (x) Executive’s car allowance (as
in effect immediately prior to Executive’s Extended Employment Event (without
giving effect to any reduction)) for a twenty-four month period, (y) an amount
equal to two hundred percent (200%) of the Company’s matching contributions on
behalf of Executive under the Company’s Retirement Savings Plan during the last
completed fiscal year of the Company immediately prior to Executive’s Extended
Employment Event and commencement of the Extended Employment Period (or, if
greater, the last completed fiscal year of the Company preceding a Change of
Control) and (z) an amount equal to two hundred percent (200%) of the Company’s
contributions on behalf of the Executive under the Company’s supplemental
executive retirement plan during the last completed fiscal year of the Company
immediately prior to Executive’s Extended Employment Event and commencement of
the Extended Employment Period (or, if greater, the last completed fiscal year
of the Company preceding a Change of Control) (clauses (i) and (ii), (the
“Additional Payments”). Notwithstanding the immediately preceding sentence, in
the event that the Executive is a “specified employee” within the meaning of
Section 409A of the Code (as determined in accordance with the methodology
established by the Company as in effect on the date of Executive’s Extended
Employment Event), amounts that would otherwise be payable under this
Section 2.08(b) during the six-month period immediately following the
Executive’s Extended Employment Event shall instead be paid on the first
business day after the date that is six months following the Executive’s
“separation from service” within the meaning of Section 409A of the Code. In
addition,

 

-8-

--------------------------------------------------------------------------------

during the Extended Employment Period, the Company shall continue to provide
health insurance coverage (which includes dental coverage) to the Executive at a
level substantially similar to the health insurance benefits enjoyed by
Executive prior to Executive’s Extended Employment Event (without giving effect
to any reduction); provided, however, that such benefits provided during such
two-year period shall be provided in such a manner that such benefits (and the
costs and premiums thereof) are excluded from the Executive’s income for federal
income tax purposes (if the Company reasonably determines that providing
continued coverage under one or more of its welfare benefit plans contemplated
herein could be taxable to the Executive, the Company shall provide such
benefits at the level required hereby through the purchase of individual
insurance coverage). The Company shall withhold all amounts required with
respect to the Additional Payments. Executive has no duty to mitigate the
payments contemplated by this Section 2.08(b) and these payments will not be
reduced in any way should Executive obtain other employment during the period in
which payments are being made.

(c) During the Extended Employment Period, Executive shall perform general
advisory duties for the Company for a minimum of one (1) eight (8) hour day per
calendar month or as mutually agreed upon by Executive and the Company. It is
acknowledged and agreed that Executive shall not be an executive officer of the
Company during the Extended Employment Period, and shall not be subject to the
Company’s policy restricting the sale of securities by the Company’s officers
and employees; provided, however, that Executive shall comply with all trading
restrictions as may be applicable under federal and state securities laws.
During the Extended Employment Period, Executive will not be required to travel
from his place of employment in Kennesaw, Georgia (or such other location as
Executive may designate in writing from time to time) on Company business
without Executive’s consent. Executive shall receive the Additional Payments and
the benefits provided for in this Section 2.08 during the Extended Employment
Period regardless of whether the Company requests Executive to perform advisory
services. Executive shall voluntarily resign from the Board of Directors of the
Company effective as of the commencement of the Extended Employment Period.

(d) It is the intention of the parties that Executive shall remain an employee
of the Company during the Extended Employment Period and that, accordingly, the
Company represents and warrants that any and all stock options or awards granted
to Executive (collectively, “Options”) under any stock option plan, stock
incentive plan or similar plan or program maintained by the Company or any of
its predecessors (collectively, “Option Plans”) which were outstanding
immediately prior to Executive’s Extended Employment Event and commencement of
the Extended Employment Period shall remain in full force and effect during the
Extended Employment Period and shall continue to vest and become exercisable
during the Extended Employment Period, and that the Options shall be exercisable
after the expiration of the Extended Employment Period in accordance with the
terms of the respective Option Plans. The Company further represents and
warrants that the number of shares of Common Stock covered by the Options and
the exercise price thereof shall not be affected by any change in tax treatment
of such Options and that such Options shall remain in full force and effect
notwithstanding any change in tax treatment of such Options. The Company makes
no representation and warranty with respect to the tax treatment of the Options
upon the exercise of such Options by Executive; however, the Company agrees that
it will at all times recognize and treat Executive as an employee during the
term of the Extended Employment Period. The Company agrees that it will take any
and all actions necessary to insure that the Option Plans are consistent with
the Company’s obligations under this Section 2.08, and the Company agrees that
no provision of the Option Plans will preclude the Company from meeting its
obligations hereunder. For purposes of clarity, any provision in any Option
Plan, Option agreement or other agreement

 

-9-

--------------------------------------------------------------------------------

or document executed by Executive that purports to limit what may be included in
the calculation of any payment or benefit due Executive following Executive’s
Separation of Service or the expiration of the Term shall be void in its
inception and shall not be effective, including, but not limited to, Section 7
of the Option agreements executed by Executive pursuant to the Company’s 2000
and 2006 Option Plans; such Option agreements shall remain in full force and
effect and shall be construed as if Section 7 did not appear therein.

(e) If Executive’s Services are terminated pursuant to Section 2.02 as a result
of the death of Executive, or if Executive dies during the Extended Employment
Period, then all Options outstanding on the date of Executive’s death shall
immediately vest and shall be exercisable by his estate for the earlier of (i) a
period of one (1) year from the date of his death, or (ii) the original maximum
term of the Option.

(f) In the event that Executive is entitled to receive monetary benefits upon a
Separation of Service in accordance with any of the other Sections of Article II
(if applicable), such monetary benefits shall be paid in full as if Executive’s
employment had not been continued for the Extended Employment Period and shall
be in addition to the amounts payable to Executive in accordance with this
Section 2.08. Amounts payable under this Section 2.08 shall be payable upon the
later of (i) the date specified for such payment in this Section 2.08, or
(ii) January 1, 2008. If Executive is entitled to continuation of health
insurance and other benefits as a result of a Separation of Service (e.g.,
benefits are continued in accordance with Sections 2.04, 2.05 and/or 2.06
hereof), such continuation shall commence at the end of the Extended Employment
Period, it being the intention of the parties that such periods shall run
consecutively and that Executive shall receive continuation of benefits under
this Section 2.08, followed by continuation of benefits to which Executive may
be entitled under Sections 2.04, 2.05 and/or 2.06 hereof, followed by full COBRA
benefits. If the Company’s COBRA coverage does not allow continuation of
benefits in accordance with this Section 2.08, the Company agrees to provide
Executive continuation of such benefits for the period of time that would have
otherwise been available to Executive, his spouse or dependants under COBRA,
e.g., for eighteen (18) months (or, with respect to Executive’s spouse, in the
event that Executive dies during the benefits continuation periods described
above, for thirty-six (36) months), commencing at the end of the later of the
benefit continuation periods specified above; provided, however, that the health
insurance coverage provided during such period shall be provided in such a
manner that such benefits (and the costs and premiums thereof) are excluded from
the Executive’s income for federal income tax purposes (if the Company
reasonably determines that providing continued coverage under one or more of its
health care benefit plans contemplated herein could be taxable to the Executive,
the Company shall provide such benefits at the level required hereby through the
purchase of individual insurance coverage).

(g) This Section 2.08 shall survive Executive’s Separation of Service, the
expiration of the Term and the termination of this Agreement for any reason. The
Company may not terminate Executive during the Extended Employment Period for
any reason whatsoever other than upon the death of Executive. In the event that
the Company terminates Executive in contravention of the immediately preceding
sentence, (A) any Options which were outstanding immediately prior to such
termination shall remain in full force and effect for the shorter of (i) the
original two year term of the Extended Employment Period, (ii) the original
maximum term of the Option, and (iii) ten (10) years from the original Option
grant date, (B) any unvested Options held by Executive that would have vested
during the original term of the Extended Employment Period shall automatically
vest and become fully exercisable, (C) all such Options shall remain exercisable
for the shorter of (1) the period of time that the Options would have remained
exercisable had

 

-10-

--------------------------------------------------------------------------------

Executive remained an employee in good standing until the end of the Extended
Employment Period, (2) the original maximum term of the Option, and (3) ten
(10) years from the original Option grant date, and (D) Executive’s health
insurance coverage shall be continued by the Company for the original term of
the Extended Employment Period as set forth in this Section 2.08(b) and (f).
Executive may terminate his employment during the Extended Employment Period by
giving the Company at least ninety (90) days prior written notice of his intent
to terminate the Extended Employment Period; provided that if Executive
terminates his employment during the Extended Employment Period, all unvested
Options shall terminate upon Executive’s termination of employment and any
vested Options may be exercised in accordance with the terms of the Option
Plans. Such termination by Executive shall not affect any other obligation of
the Company to Executive in this Agreement. In the event of any conflict between
the provisions of this Section 2.08 and the other provisions of this Agreement,
the provisions of Section 2.08 shall prevail. For the avoidance of doubt, the
payments and benefits contemplated by this Section 2.08 shall be in addition to
any payments and benefits contemplated by Sections 2.04, 2.05, 2.06 or 2.07 of
this Agreement.

ARTICLE III

EXECUTIVE’S ACKNOWLEDGMENTS

Executive recognizes and acknowledges that in the course of Executive’s
employment by the Company: (a) he will be privy to certain confidential and
proprietary information which constitutes trade secrets as defined in the
Uniform Trade Secrets Act and as adopted by the various states (the “Act”); and
(b) he will be privy to certain other confidential and/or proprietary
information that may not constitute trade secrets as defined in the Act.

Executive acknowledges that the Company must protect both above kinds of
information from disclosure or misappropriation, and Executive further
acknowledges that the processes, machines, technical documentation, computer
programs, customer lists, business plans, marketing plans and techniques,
pricing data, financial data, marketing programs, customer files, financial
institution files, technical expertise and know how, and other information and
trade secrets, whether as defined in the Act or which may lie beyond it
(collectively the “Property”), which have been or will be provided to Executive
by the Company, are unique, confidential and proprietary Property of the Company
and by the provision of such Property to Executive, the Company is not conveying
any ownership or other interest to Executive. Executive acknowledges that such
confidential and proprietary information derives independent, actual, and
potential commercial value from not being generally, readily ascertainable
through independent development and is the subject of efforts by the Company
that are reasonable under the circumstances to maintain its secrecy. Property
shall not include any information that is in the public domain, so long as such
information is not in the public domain as a result of any action or inaction by
Executive which would constitute a violation of this Agreement or the Company’s
policies with respect to such Property. Executive agrees to hold in trust and
confidence for the Company and to not to disclose to any third party, without
prior written consent of the Company, said Property and information, whether it
is tangible or intangible. Executive further agrees not to use any such
confidential information or trade secrets to his/her personal benefit or for the
benefit of any third party.

Executive further acknowledges that for purposes of interpreting Articles III
and IV of this Employment Agreement, covenants and obligations of Executive with
respect to the Company apply equally with respect to its affiliates. Executive
also acknowledges that Property belongs to the Company and agrees to return to
the Company all such information and Property which is tangible upon the
Executive’s Separation of Service.

 

-11-

--------------------------------------------------------------------------------

Executive acknowledges that the use, misappropriation, or disclosure of the
Property would constitute a breach of trust and could cause irreparable injury
to the Company, and it is essential to the protection of the Company’s good will
and to the maintenance of the Company’s competitive position that the Property
be kept secret and that Executive not disclose the Property to others or use the
property to Executive’s own advantage or the advantage of others.

Executive further recognizes and understands that his Services at the Company
may include the preparation of materials, including written or graphic
materials, and that any such materials conceived or written by him shall be done
as “work made for hire” as defined and used in the Copyright Act of 1976, 17 USC
Section 1 et seq. In the event of publication of such materials, Executive
understands that since the work is a “work made for hire”, the Company will
solely retain and own all rights in said materials, including right of
copyright, and that the Company may, at its discretion, on a case-by-case basis,
grant Executive by-line credit on such materials as the Company may deem
appropriate.

ARTICLE IV

EXECUTIVE’S COVENANTS AND AGREEMENTS

4.01. Non-Disclosure of Property. Executive agrees to hold and safeguard the
Property in trust for the Company, its successors and assigns and agrees that he
shall not, without the prior written consent of the Company, misappropriate or
disclose or make available to anyone for use outside the Company’s organization
at any time, either during his employment with the Company or subsequent to the
termination of his employment with the Company for any reason, including without
limitation Separation of Service by the Company for cause or without cause, any
confidential information that constitutes trade secrets, whether or not
developed by Executive, except as required in the performance of Executive’s
Services to the Company or as otherwise required by law or legal process.
Executive and the Company agree that Executive’s obligations under the above
non-disclosure provision as it relates to confidential information that does not
constitute trade secrets shall apply for a period of three (3) years following
the Separation of Service of the Executive.

4.02. Disclosure of Works and Inventions/Assignment of Patents and Other Rights.
(a) Executive shall disclose promptly to the Company or its nominee any and all
works, inventions, discoveries and improvements authored, conceived or made by
Executive during the period of employment and related to the business or
activities of the Company, and hereby assigns and agrees to assign all his
interest therein to the Company or its nominee. Whenever requested to do so by
the Company, Executive shall execute any and all applications, assignments or
other instruments which the Company shall deem necessary to apply for and obtain
Letters Patent or Copyrights of the United States or any foreign country or to
otherwise protect the Company’s interest therein. Such obligations shall
continue beyond the termination of employment with respect to works, inventions,
discoveries and improvements authored, conceived or made by Executive during the
period of employment, and shall be binding upon Executive’s assigns, executors,
administrators and other legal representatives.

(b) Executive agrees that in the event of publication by Executive of written or
graphic materials the Company will retain and own all rights in said materials,
including right of copyright.

 

-12-

--------------------------------------------------------------------------------

4.03. Services. During the Term of this Agreement, Executive agrees to devote
his best efforts full time to the performance of his Services for the Company,
to give proper time and attention to furthering the Company’s business, and to
comply in all material respects with all rules, regulations and instruments
established or issued by the Company and made known to Executive. Executive
further agrees that during the Term of this Agreement, Executive shall not,
directly or indirectly, engage in any business which would detract from
Executive’s ability to apply his best efforts to the performance of his Services
hereunder. Executive also agrees that he shall not usurp any corporate
opportunities of the Company during the Term of this Agreement. The Services set
forth in this Section 4.03 shall apply during the Term of this Agreement.

4.04. Return of Materials. Upon the Executive’s Separation of Service with the
Company for any reason, including without limitation Separation of Service by
the Company for cause or without cause, Executive shall promptly deliver to the
Company all correspondence, drawings, blue-prints, manuals, letters, notes,
notebooks, reports, flow-charts, programs, proposals and any documents
concerning the Company’s customers or concerning products or processes used by
the Company and, without limiting the foregoing, will promptly deliver to the
Company any and all other documents or materials containing or constituting
Property.

4.05. Restrictions on Competition. Executive acknowledges that as Executive Vice
President and Chief Operating Officer he will be a “high impact” person in the
Company’s business who is in possession of selective and specialized skills,
learning abilities, supplier and customer contacts, and supplier and customer
information as a result of his relationship with the Company, and agrees that
the Company has a substantial business interest in the covenant described below.
Executive further acknowledges that he is involved at the highest level of the
Company in the development of strategy and products, and is responsible for new
product development nationally and internationally, has significant and regular
contact with customers and suppliers of the Company, and that he has access to
and responsibility for trade secret and confidential information pertaining to
the business of the Company, its products and plans. In recognition of that
status, Executive covenants and agrees that during the Term plus a period of two
years (or such longer period, not in excess of three years, to the extent
Separation of Service payments are paid to Executive pursuant to Sections 2.04,
2.05 or 2.06 in an amount representing a period in excess of two years)
following Executive’s Separation of Service, including without limitation
Separation of Service by the Company for cause or without cause (excepting a
Separation of Service pursuant to Section 2.01), Executive shall not, in the
United States of America engage, directly or indirectly, whether as principal or
as agent, officer, director, employee, consultant, shareholder (other than as a
shareholder owning up to 5% of the outstanding stock of any company whose stock
is publicly traded and listed on a national securities exchange or included in
NASDAQ), alone or in association with any other person, corporation or other
entity, in any Competing Business; provided, however, that with respect to a
Separation of Service occurring during the Change of Control Protection Period,
the foregoing restriction shall apply for a period equal to one half of the
applicable period otherwise prescribed by this sentence. For purposes of this
Agreement, the term “Competing Business” shall mean and include any person,
corporation or other entity which develops, manufactures, sells, markets or
attempts to develop, manufacture, sell or market any product or services which
are the same as or similar to the Products and services sold by the Company at
any time and from time to time during the last two years prior to the
Executive’s Separation of Service hereunder; provided, however, that for
purposes of determining what constitutes a Competing Business there shall not be
included (x) any product or service of any entity which product or service
Executive determines is not material to the business or prospects of the Company
and which product or service the

 

-13-

--------------------------------------------------------------------------------

Company’s Board, having been requested to do so by Executive, also so
determines; the parties agree that any product which has been marketed in the
United States for five years and has not achieved a five percent revenue level
for the Company is not material for purposes of this provision or (y) any
product or service of any entity so long as the Executive and such entity can
demonstrate to the reasonable satisfaction of the Company that Executive is and
will continue to be effectively isolated from, and not participate in the
development, manufacture, sale or marketing of, such product or service, but
only so long as Executive is effectively so isolated and does not so
participate. To trigger this provision, the Executive and entity must perform
the following: (i) the Executive must provide the Company with a letter pledging
that he will abide by this Agreement; provided, however, that this requirement
shall not apply in the event of a Separation of Service during the Change of
Control Protection Period, and (ii) the prospective/new employer must provide a
letter acknowledging that it is aware of the Executive’s obligations hereunder;
provided, however, that this requirement shall not apply in the event of a
Separation of Service during the Change of Control Protection Period. The letter
also must contain a pledge by the new/prospective employer that it will abide by
those obligations. In the event the Term expires before Executive obtains the
age of 65 and because the Company has elected not to further extend the Term
pursuant to Section 1.02, then the provisions of this Section 4.05 and Sections
4.06 and 4.07 shall not be applicable after the conclusion of the Term unless
the Company advises Executive at least six months prior to conclusion of the
Term that it will continue to pay the Base Salary in effect at conclusion of the
Term for such two-year period or such shorter portion thereof as the Company may
specify (which specification shall shorten such two-year period accordingly) and
the Company pays such amounts during such two-year or shorter period in equal
bi-weekly installments; provided, however, that payment of any such amount will
not begin until six (6) months after the expiration of the Term and any payment
for this six-month waiting period will be paid in a lump sum as part of the
first payment immediately after the six-month period has passed and thereafter
any payments due will be paid bi-weekly in accordance with the Company’s then
current payroll practice; and provided further, however, that, in the event that
Executive receives payments contemplated by Section 2.05 as a result of the
Company’s failure to extend the Term in a Change in Control Protection Period as
set forth in Section 2.04(a)(x), then Sections 4.05, 4.06 and 4.07 shall apply
for the following time period(s) without any further payment: Section 4.05
(eighteen months), Section 4.06 (one year) and Section 4.07 (one year). For the
avoidance of doubt, (1) if the Company elects to continue to pay Executive’s
Base Salary as contemplated by the immediately preceding sentence so that
Sections 4.05, 4.06 and 4.07 will apply following the Company’s failure to
extend the Term, such payments shall be in addition to any other payments
contemplated by this Agreement, and (2) the Company may only make such election
if Section 4.05, 4.06 and 4.07 would not otherwise not apply.

4.06. Non-Solicitation of Customers and Suppliers. Executive agrees that during
the Term he shall not, directly or indirectly, solicit the trade of, or trade
with, any customer, prospective customer, supplier, or prospective supplier of
the Company for any business purpose other than for the benefit of the Company,
with respect to any products competitive with those of the Company. Executive
further agrees that for two years following Executive’s Separation of Service
with the Company, including without limitation Separation of Service by the
Company for cause or without cause, Executive shall not, directly or indirectly,
solicit the trade of, or trade with, any customers or suppliers of the Company
with respect to any products competitive with those of the Company; provided,
however, that with respect to a Separation of Service occurring during the
Change of Control Protection Period, the foregoing restriction shall apply for a
period of one year following the Executive’s Separation of Service with the
Company (in lieu of the longer period described at the beginning of this
sentence).

 

-14-

--------------------------------------------------------------------------------

4.07. Non-Solicitation of Employees. Executive agrees that, during the Term and
for two years following Executive’s Separation of Service with the Company,
including without limitation Separation of Service by the Company with cause or
without cause, Executive shall not, directly or indirectly, solicit or induce,
or attempt to solicit or induce, any employee of the Company to leave the
Company for any reason whatsoever, or hire any employee of the Company without
permission from the Company; provided, however, that with respect to a
Separation of Service occurring during the Change of Control Protection Period,
the foregoing restriction shall apply for a period of one year following the
Executive’s Separation of Service with the Company (in lieu of the longer period
described at the beginning of this sentence).

ARTICLE V

EXECUTIVE’S REPRESENTATIONS AND WARRANTIES

5.01. No Prior Agreements. Executive represents and warrants that he is not a
party to or otherwise subject to or bound by the terms of any contract,
agreement or understanding which in any manner would limit or otherwise affect
his ability perform his obligations hereunder, including without limitation any
contract, agreement or understanding containing terms and provisions similar in
any manner to those contained in Article IV hereof. Executive further represents
and warrants that his employment with the Company will not require him to
disclose or use any confidential information belonging to prior employers or
other persons or entities other than Healthdyne.

5.02. Executive’s Abilities. Executive acknowledges that it would cause the
Company serious and irreparable injury and cost if Executive were to use his
ability and knowledge in competition with the Company or to otherwise breach the
obligations contained in Article IV.

5.03. Remedies. In the event of a breach by Executive of the terms of this
Agreement, the Company shall be entitled, if it shall so elect, to institute
legal proceedings to obtain damages for any such breach, or to enforce the
specific performance of this Agreement by Executive and to enjoin Executive from
any further violation of this Agreement and to exercise such remedies
cumulatively or in conjunction with all other rights and remedies provided by
law. Executive acknowledges, however, that the remedies at law for any breach by
him of the provisions of this Agreement may be inadequate and that the Company
shall be entitled to injunctive relief against him in the event of any breach.
During the Change of Control Protection Period, in no event shall an asserted
violation of the provisions of Article IV constitute a basis for deferring or
withholding any amounts otherwise payable to Executive under this Agreement.

ARTICLE VI

MISCELLANEOUS

6.01. PNC Loan and Related Provisions. (a) The parties hereby acknowledge that
Executive has borrowed $300,000 from PNC Bank, National Association to Executive
(the “PNC Loan”).

(b) The Company agrees during the Term and the Extended Employment Period to
reimburse Executive on a monthly basis for, or advance to Executive, an amount
equal to the interest payable by Executive on the PNC Loan. Payment of such
reimbursements or advance shall be made no later than the end of Executive’s
taxable year following the taxable year in which the expense is incurred.
Amounts eligible for

 

-15-

--------------------------------------------------------------------------------

reimbursement or advance in one taxable year shall not affect the amount
eligible for reimbursement or advance to be provided in any other taxable year.
The right to any such reimbursement or advance hereunder shall not be subject to
liquidation or exchange for any other benefit.

(c) For each calendar year during the Term of Employment Agreement and the
Extended Employment Period, the Company shall gross-up one time Executive’s
income to account for any additional federal and state income tax payable by
Executive as a result of the Company’s reimbursement of Executive for interest
payable on the PNC Loan. Such gross-up shall be paid at the maximum applicable
rate on an annual basis at such time as Executive has determined his tax
liability with respect to such interest reimbursement for the prior year,
however, in no event will any gross-up payment be made later than the end of any
taxable year of Executive in which the related taxes are remitted to the taxing
authority.

6.02. Authorization to Modify Restrictions. It is the intention of the parties
that the provisions of Article IV hereof shall be enforceable to the fullest
extent permissible under applicable law, but that the unenforceability (or
modification to conform to such law) of any provision or provisions hereof shall
not render unenforceable, or impair, the remainder thereof. If any provision or
provisions hereof shall be deemed invalid or unenforceable, either in whole or
in part, this Agreement shall be deemed amended to delete or modify, as
necessary, the offending provision or provisions and to alter the bounds thereof
in order to render it valid and enforceable.

6.03. Entire Agreement. This Agreement represents the entire agreement of the
parties with respect to the employment of Executive by the Company and may be
amended only by a writing signed by each of them. For the avoidance of doubt,
the Supplemental Employment Agreement, dated as of November 11, 1997, by and
between Executive and the Company, shall terminate by virtue of the execution of
this Agreement and shall no longer have any effect.

6.04. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.

6.05. Consent to Jurisdiction; Venue. Executive hereby irrevocably submits to
the personal jurisdiction of the United States District Court for the Western
District of Pennsylvania or the Court of Common Pleas of Allegheny County,
Pennsylvania in any action or proceeding arising out of or relating to this
Agreement that cannot be finally resolved by arbitration pursuant to
Section 6.06 hereof (and for enforcement of any such arbitration decision), and
Executive hereby irrevocably agrees that all claims in respect of any such
action or proceeding may be heard and determined in either such court. Executive
hereby irrevocably waives any objection which he now or hereafter may have to
the laying of venue of any action or proceeding arising out of or relating to
this Agreement brought in the United States District Court for the Western
District of Pennsylvania or the Court of Common Pleas of Allegheny County,
Pennsylvania and any objection on the ground that any such action or proceeding
in either of such Courts has been brought in an inconvenient forum. Nothing in
this Section 6.05 shall affect the right of the Company to bring any action or
proceeding against Executive or his property in the courts of other
jurisdictions where the Executive resides or has his principal place of business
or where such property is located. The parties agree and acknowledge that a
breach by the Company of its obligations under this Agreement will result in
significant damages to Executive. Accordingly, in order to provide certainty
with respect to Executive’s ability to receive the benefit of his bargain,

 

-16-

--------------------------------------------------------------------------------

Executive, in the event of a breach by the Company of its covenants,
representations and warranties in this Agreement, shall be entitled, in addition
to any other remedies that he may have, to require specific performance of the
covenants, representations and warranties of this Agreement.

6.06. Arbitration. Unless the party seeking relief is seeking relief not
available through arbitration hereunder (see Section 6.05), any dispute related
to this Agreement shall be referred to arbitration by three arbitrators selected
from a list of arbitrators affiliated with American Arbitration Association
(“AAA”) who are familiar with executive employment matters, with one arbitrator
being selected by the Company, one arbitrator being selected by Executive, and
the third arbitrator being selected jointly by the two arbitrators selected by
the Company and by Executive. The decision of a majority of the arbitrators
shall constitute the arbitral decision. The arbitration hereunder, shall be
conducted pursuant to the rules and procedures of AAA then in effect and
otherwise in such manner as the arbitrator or arbitrators shall determine and
shall be conducted in Pittsburgh, Pennsylvania. All parties shall cooperate with
each other to expedite the arbitration process as much as possible so that the
dispute can be resolved as quickly as possible and with as little cost as
possible. The arbitral decision shall be final, binding and conclusive on the
parties and may be entered, if necessary, in a court of competent jurisdiction
with the same force and effect as a final and binding judgment. The arbitrators
shall further be authorized to allocate or assess the costs of arbitration,
including attorneys’ fees, between the respective parties. If the arbitrators do
not award costs and expenses, then each party shall bear its own costs and
expenses, including attorneys’ fees, and the cost of the arbitration shall be
paid by the party whose position in the arbitration does not prevail.

6.07. Agreement Binding. The obligations of Executive under this Agreement that
continue after the Separation of Service with the Company for any reason, with
or without cause, and shall be binding on his heirs, executors, legal
representatives and assigns and shall inure to the benefit of any successors and
assigns of the Company.

6.08. Counterparts, Section Headings. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument. The section
headings of this Agreement are for convenience of reference only and shall not
affect the construction or interpretation of any of the provisions hereof.

6.09. Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if (a) hand
delivered or (b) mailed, registered mail, first class postage paid, return
receipt requested, or (c) sent via overnight delivery service or courier,
delivery acknowledgment requested, or (d) via any other delivery service with
proof of delivery:

if to the Company:

Respironics, Inc.

1010 Murry Ridge Lane

Murrysville, PA 15668

Attn: President

if to Executive, at the address set forth on the signature page hereof or to
such other address or to such other person as either party hereto shall have
last designated by notice to the other party.

 

-17-

--------------------------------------------------------------------------------

6.10. Section 409A. Within the time period permitted by the applicable Treasury
Regulations, the parties may agree to modify the Agreement, in the least
restrictive manner necessary and without any diminution in the value of the
payments to, or protections for, Executive, in order to cause the provisions of
the Agreement to comply with the requirements of Section 409A of the Code, so as
to avoid the imposition of taxes and penalties on Executive pursuant to
Section 409A of the Code. In the event that the Executive requests in writing
that the Company agree to modify provisions of this Agreement in a manner that
will not result in any increase in the cost to the Company (other than
administrative or legal costs) in order to cause the provisions to comply with
the requirements of Section 409A of the Code, the Company agrees in good faith
to make such amendment.

6.11. Attorney’s Fees. The Company agrees to pay as incurred (within 10 days
following the Company’s receipt of an invoice from Executive), at any time from
the date of this Agreement through Executive’s remaining lifetime or, if longer,
through the 20th anniversary of the Effective Date, to the full extent permitted
by law, all legal fees and expenses that Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company,
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by Executive about the amount of any
payment pursuant to this Agreement) arising in connection with a Change of
Control, Separation of Service or termination of employment during the Change of
Control Protection Period, plus, in each case, interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of the
Code, provided, that Executive shall have submitted an invoice for such fees and
expenses at least 10 days before the end of the calendar year next following the
calendar year in which such fees and expenses were incurred.

6.12. Successor to the Company. The Company will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly,
absolutely and unconditionally to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. Any failure of
the Company to obtain such agreement prior to the effectiveness of any such
succession or assignment shall be a material breach of this Agreement and shall
entitle the Executive to terminate Executive’s Services and to receive the
payments and other benefits set forth in Section 2.05 and Section 2.08 as if
Executive’s Services had been terminated without cause during the Change of
Control Protection Period. As used in this Agreement, “Company” shall mean the
Company as hereinbefore defined and any successor or assign to its business
and/or assets as aforesaid.

 

-18-

--------------------------------------------------------------------------------

Executive acknowledges that he has read and understands the foregoing provisions
and that such provisions are reasonable and enforceable. IN WITNESS WHEREOF, the
parties hereto have executed this Agreement or caused this Agreement to be
executed the day and year first above written.

 

/s/ CRAIG REYNOLDS

Address:

 

1046 MIDDLEBROOK WAY NW

KENNESAW, GA 30152

 

RESPIRONICS, INC.

By:

 

/s/ William R. Wilson

Title:

  Chief Human Resources Officer

 

-19-