Document:

Ex-10.1

 

EXHIBIT 10.1

RESPIRONICS, INC.

2005 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

ARTICLE I — PURPOSE; EFFECTIVE DATE

	1.1.	 	Purpose. The purpose of this Respironics, Inc. 2005 Supplemental Executive Retirement
Plan (hereinafter, the “Plan”) is to permit a select group of management and highly
compensated employees of RESPIRONICS, INC. (“Respironics”) and its subsidiaries to
defer the receipt of Compensation which would otherwise become payable to them. It is
intended that this Plan, by providing this deferral opportunity, will assist the Company in
retaining and attracting individuals of exceptional ability by providing them with these
benefits.

	1.2.	 	Effective Date. The Plan shall be effective as of January 1, 2005.

ARTICLE II — DEFINITIONS

     For the purpose of this Plan, the following terms shall have the meanings indicated, unless
the context clearly indicates otherwise:

	2.1.	 	Account(s). “Account(s)” means the account or accounts maintained on the books of
the Company used solely to calculate the amount payable to each Participant under this Plan
and shall not constitute a separate fund of assets. The Accounts available for each
Participant shall be identified as:

	 	(a)	 	Retirement Account; and
	 
	 	(b)	 	In-Service Account.

	2.2.	 	Beneficiary. “Beneficiary” means the person(s) designated by the Participant,
entitled under Article VI to receive any Plan benefits payable after the Participant’s death.

	2.3.	 	Beneficial Ownership. “Beneficial Ownership” shall be determined as provided in Rule
13d-3 under the Exchange Act.

	2.4.	 	Board. “Board” means the Board of Directors of the Company.

	2.5.	 	Change in Control. A “Change in Control” shall occur upon:

	 	(a)	 	The Company’s acquisition of actual knowledge that any Person (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) other than the Company, a
Subsidiary or any employee benefit plan(s) sponsored by the Company has acquired the
Beneficial Ownership, directly or indirectly, of securities of the Company entitling
such Person to 20% or more of the Voting Power of the Company;

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	 	(b)	 	The occurrence of the date provided for in action by the Board or the
Committee, if any, to require election of the Committee as provided in Section 7.5 of
this Plan, following the making of a Tender Offer to acquire securities of the Company
entitling the holders thereof to 20% or more of the Voting Power of the Company; or

	 	(c)	 	The occurrence of the date provided for in action by the Board or the
Committee, if any, to require election of the Committee as provided in Section 7.5 of
the Plan, 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 Company; or

	 	(d)	 	The shareholders of the Company’s approval of 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 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 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 Company immediately
prior to the transaction.

	2.6.	 	Committee. “Committee” means the Committee appointed by the Board to administer the
Plan pursuant to Article VII. The Committee shall consist of Daniel J. Bevevino, Vice
President and Chief Financial Officer; James C. Woll, Vice President and Corporate Controller;
William R. Wilson, Vice President – Human Resources; and Kathy Dober, Director of Compensation
and Benefits, and may change from time to time as designated by the Board.

	2.7.	 	Company. “Company” means Respironics, Inc., a Delaware corporation, and any directly
or indirectly affiliated subsidiary corporations, any other affiliate designated by the Board,
or any successor to the business thereof.

	2.8.	 	Compensation. “Compensation” means the base salary, commission, and bonus or
incentive compensation payable to a Participant with respect to employment services performed
for the Company by the Participant and considered to be “wages” for purposes of federal income
tax withholding. For purposes of this Plan only, Compensation shall be calculated before
reduction for any amounts deferred by the Participant pursuant to the Company’s tax qualified
plans which may be maintained under Section 401(k) or Section 125 of the Internal Revenue Code
of 1986, as amended, (the “Code”), or pursuant to this Plan or any other non-qualified
plan which permits the voluntary deferral of compensation. Inclusion of any other forms of
compensation other than as provided in the first sentence of this Section is subject to
Committee approval.

	2.9.	 	Deferral Commitment. “Deferral Commitment” means a commitment made by a Participant
to defer a portion of Compensation as set forth in Article III. The Deferral

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	 	 	Commitment shall apply to each payment of Compensation payable to a Participant, and shall
specify the Account or Accounts to which the Compensation deferred shall be credited. Such
designation shall be made in whole percentages and shall be made in a form acceptable to the
Committee. A Deferral Commitment shall remain in effect for the Deferral Period until
modified as provided under Section 3.5, below.
	 
	2.10.	 	Deferral Period. “Deferral Period” means the calendar year in which deferrals are
permitted; provided, however, that deferrals may not be made with respect to compensation for
services rendered prior to participation in the Plan.

	2.11.	 	Determination Date. “Determination Date” means each calendar day.

	2.12.	 	Disability. “Disability” means a Participant is “disabled” as defined in Section
409A(a)(2)(C) of the Code, as determined by a physician approved by the Committee or its
delegate.

	2.13.	 	Discretionary Contribution. “Discretionary Contribution” means the Company
contribution credited to a Participant’s Retirement Account under Section 4.4, below.

	2.14.	 	Distribution Election. “Distribution Election” means the form prescribed by the
Committee and completed by the Participant, indicating the chosen form of payment for benefits
payable from each Account under this Plan, as elected by the Participant.

	2.15.	 	Exchange Act. “Exchange Act” means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

	2.16.	 	Interest. “Interest” means the hypothetical amount credited to a Participant’s
Account(s) on each Determination Date, which may include interest, dividends, gains and losses
and which shall be based on the Valuation Funds chosen by the Participant in a manner
consistent with Section 4.3, below. Such credits to a Participant’s Account may be either
positive or negative to reflect the increase or decrease in value of the Account in accordance
with the provisions of this Plan.

	2.17.	 	Participant. “Participant” means any employee who is eligible, pursuant to Section
3.1, below, to participate in this Plan, and who has elected to defer Compensation under this
Plan in accordance with Article III, below or is credited with a Discretionary Contribution
under this Plan in accordance with Section 4.4, below. Such employee shall remain a
Participant in this Plan for the period of deferral and until such time as all vested benefits
payable under this Plan have been paid in accordance with the provisions hereof.

	2.18.	 	Plan. “Plan” means this Respironics, Inc. 2005 Supplemental Executive Retirement
Plan as amended from time to time.

	2.19.	 	Separation from Service. “Separation from Service” means, for any Participant, such
Participant’s death, retirement, voluntary or involuntary termination of employment,
Disability or any other absences or termination that cause such Participant to cease to be an
employee of the Company. Retirement means the termination of employment with the Company by
the Participant after attaining age fifty-five (55).

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	2.20.	 	Subsidiary. “Subsidiary” means any corporation in an unbroken chain of corporations
beginning with the Company, if each of the corporations other than the last corporation in the
unbroken chain owns stock possessing at least fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations in the chain.

	2.21.	 	Tender Offer. “Tender Offer” means a tender offer or exchange offer to acquire
securities of a corporation (other than such an offer made by the Company or a Subsidiary),
whether or not such offer is approved or opposed by the Board.

	2.22.	 	Unforeseeable Emergency. “Unforeseeable Emergency” means a severe financial
hardship to the Participant resulting from (1) an illness or accident affecting the
Participant or his or her spouse or dependent; (2) loss of the Participant’s property due to
casualty; or (3) other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the Participant’s control.

	2.23.	 	Valuation Funds. “Valuation Funds” means one or more of the independently
established funds or indices that are identified and listed by the Committee. These Valuation
Funds are used solely to calculate the Interest that is credited to each Participant’s
Account(s) in accordance with Article IV, below, and does not represent, nor should it be
interpreted to convey, any beneficial interest on the part of the Participant in any asset or
other property of the Company. The determination of the increase or decrease in the
performance of each Valuation Fund shall be made by the Committee in its reasonable
discretion. The Committee shall select the various Valuation Funds available to the
Participants with respect to this Plan and shall set forth a list of these Valuation Funds
attached hereto as Exhibit A, which may be amended from time to time in the discretion of the
Committee.

	2.24.	 	Voting Power. “Voting Power” of the Company means such number of the Voting Shares
of the Company as shall enable the holders thereof to cast such percentage of all of the votes
that could be cast in an annual election of directors (without consideration of the rights of
any other class of stock other than the Company’s Common Stock to elect directors by a
separate class vote). “Voting Shares” means all securities of the Company entitling
the holders thereof to vote in an annual election of directors (without consideration of the
rights of any other class of stock other than the Company’s Common Stock to elect directors by
a separate class vote).

ARTICLE III — ELIGIBILITY AND PARTICIPATION

	3.1.	 	Eligibility and Participation.

	 	(a)	 	Eligibility. Eligibility to participate in the Plan shall be limited
to those select key employees of the Company who are designated by management, from
time to time, and approved by the Committee, and who make up a group of management or
highly compensated employees consistent with maintaining this Plan as an Unfunded Plan
as provided in Section 10.1.

	 	(b)	 	Participation. An employee’s participation in the Plan shall be
effective upon notification to the employee by the Committee of eligibility to
participate, and completion and submission of a Deferral Commitment, an Allocation
Form, and a

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	 	 	 	Distribution Election to the Committee prior to the beginning of the Deferral
Period; provided further that any Deferral Commitment with respect to incentive,
commission or bonuses must be made by the end of the calendar year preceding the
year in which the relevant performance period with respect to such amounts begins.

	 	(c)	 	First-Year Participation. When an individual first becomes eligible
to participate in this Plan during a Deferral Period, a Deferral Commitment may be
submitted to the Committee within thirty (30) days after the Committee notifies the
individual of eligibility to participate; provided further that any Deferral Commitment
with respect to incentive, commission or bonuses must be made by the end of the
calendar year preceding the year in which the relevant performance period with respect
to such amounts begins. Such Deferral Commitment will be effective only with regard to
Compensation earned following submission of the Deferral Commitment to the Committee.

	3.2.	 	Form of Deferral Commitment. A Participant may elect to make a Deferral Commitment
in the form permitted by the Committee. The Deferral Commitment shall specify the following:

	 	(a)	 	Deferral Amounts; Accounts. Subject to the last sentence of this
Section 3.2, a Deferral Commitment shall be effective with respect to each payment of
Compensation payable by the Company to a Participant during the Deferral Period, and
shall designate the portion of each deferral that shall be allocated among the various
Accounts, except that no deferral shall be made to an Account at the same time that a
distribution is to be made from that Account. The Participant shall set forth the
amount to be deferred as a full percentage of Compensation (the Participant may
designate a different percentage of each item that is to be deferred under this Plan).
The percentage specified shall apply equally to each periodic payment of Compensation
during the Deferral Period, subject to the last sentence of this Section 3.2.

	 	(b)	 	Allocation to Valuation Funds. The Participant shall specify in a
separate form (known as the “Allocation Form”) filed with the Committee, the
Participant’s initial allocation of the amounts deferred into each Account among the
various available Valuation Funds.

	 	(c)	 	Maximum Deferral. The maximum amount of each payment of base salary
that may be deferred shall be seventy-five percent (75%), and the maximum amount of
each payment of commission, bonus or incentive compensation that may be deferred shall
be one hundred percent (100%).

	 	(d)	 	Minimum Deferral. The minimum amount of each payment of base salary
that may be deferred shall be one percent (1%), and the minimum amount of each payment
of commission, bonus or incentive compensation that may be deferred shall be one
percent (1%).

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	 	 	Notwithstanding anything to the contrary, no Deferral Commitment shall be effective for a
Participant (1) who has made a hardship withdrawal from the Company’s tax qualified plan
maintained under section 401(k) of the Code (a) for a period of 6 months from the date of
such hardship withdrawal, if the hardship withdrawal has been made in reliance on Treasury
Regulation § 1.401(k)-1(d)(2)(iii)(B) and the deferred compensation would constitute an
employee elective contribution or employee contribution under an employer plan within the
meaning of Treasury Regulation § 1.401(k)-1(d)(2)(iii)(B)(3) or any successor regulation or
(b) for such other period as required for suspension of deferred compensation pursuant to
the provisions of such tax qualified plan and (2) until such Participant has contributed the
maximum amount permitted by law to the Company’s tax qualified plan maintained under section
401(k) of the Code for such Deferral Period, unless the Participant is not a participant in
such tax qualified plan.
	 
	3.3.	 	Period of Commitment. Once a Participant has made a Deferral Commitment, that
Commitment shall remain in effect for each Deferral Period unless the Deferral Commitment is
revoked or amended in writing prior to the beginning of such succeeding Deferral Period, if
succeeding Deferral Periods are permitted by the Committee.

	3.4.	 	Commitment Limited by Termination or Disability. If a Participant suffers a
Disability or terminates employment with the Company for any reason prior to the end of the
Deferral Period, the Deferral Period shall end as of the date of Disability or termination.

	3.5.	 	Modification of Deferral Commitment. Except as provided in Section 3.3 or 3.4 above,
or Section 5.4 below, and subject to the limitations of the Deferral Commitment as provided in
the last sentence of Section 3.2, a Deferral Commitment shall be irrevocable by the
Participant during a Deferral Period.

	3.6.	 	Change in Employment Status. If the Committee determines that a Participant’s
employment performance is no longer at a level that warrants reward through participation in
this Plan, but does not terminate the Participant’s employment with Company, the Participant’s
existing Deferral Commitment shall terminate at the end of the Deferral Period, and no new
Deferral Commitment may be made by such Participant and no Discretionary Contribution will be
made for such Participant after notice of such determination is given by the Committee, unless
the Participant later satisfies the requirements of Section 3.1, above. If the Committee, in
its sole discretion, determines that the Participant no longer qualifies as a member of a
select group of management or highly compensated employees, as determined in accordance with
the Employee Retirement Income Security Act of 1974, as amended, the Committee may, in its
sole discretion terminate any Deferral Commitment and Discretionary Contributions for that
year.

	3.7.	 	Defaults in Event of Incomplete or Inaccurate Deferral Commitments. In the event
that a Participant submits a Deferral Commitment to the Committee that contains information
which, in the sole discretion of the Committee, is incomplete or inaccurate, the Committee
shall be authorized to assume the following, and such assumptions shall be communicated to the
Participant:

	 	(a)	 	If no Account is listed – assume Retirement Account was selected;

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	 	(b)	 	If Accounts listed equal less than 100% – assume balance is deferred into
Retirement Account;

	 	(c)	 	If Accounts listed equal more than 100% – assume proportionate reduction to
each Account selected;

	 	(d)	 	If no Valuation Fund is selected – assume a Money Market type Fund was
selected;

	 	(e)	 	If Valuation Fund(s) selected equal less than 100% – assume that a Money Market
type Fund was selected for balance;

	 	(f)	 	If Valuation Fund(s) selected equal more than 100% – assume proportionate
reduction to each Valuation Fund selected;

	 	(g)	 	If no Distribution Election is chosen – assume lump sum for In-Service Account
and three (3) annual installments for Retirement Account was selected;

	 	(h)	 	If no time of payment is chosen for In-Service Account – assume the earliest
possible date available under the provisions of Section 5.2 below was selected; and

	 	(i)	 	If no Beneficiary is designated, Participant’s Beneficiary will be his or her
estate.

	3.8.	 	Modification of Distribution Election. Except as set forth in this Section 3.8, a
Distribution Election shall be irrevocable. Any modifications to a Distribution Election for
the Deferral Period:

	 	(a)	 	Shall not become effective for twelve (12) months following the date of the
modification;

	 	(b)	 	Shall be made at least twelve (12) prior to the initial distribution date of
the Participant’s Account for the Deferral Period;

	 	(c)	 	Shall delay such distribution date for a minimum of five (5) years from the
date the payment would otherwise have been made; and

	 	(d)	 	Shall not reduce the number of payments that otherwise would be made to the
Participant.

ARTICLE IV — DEFERRED ACCOUNT

	4.1.	 	Accounts. The Compensation deferred by a Participant under the Plan, any
Discretionary Contributions and Interest shall be credited to the Participant’s Account(s).
Separate accounts may be maintained on the books of the Company to reflect the different
Accounts chosen by the Participant, and the Participant shall designate the portion of each
deferral of compensation that will be credited to each Account as set forth in Section 3.2(a),
above. These Accounts shall be used solely to calculate the amount payable to each
Participant under this Plan and shall not constitute a separate fund of assets.

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	4.2.	 	Timing of Credits; Withholding. A Participant’s deferred Compensation shall be
credited to each Account designated by the Participant as soon as administratively practicable
following the day on which the compensation deferred would have otherwise been payable to the
Participant. Any Discretionary Contributions shall be credited to the appropriate Account(s)
as provided in Section 4.4. Any withholding of taxes or other amounts with respect to
deferred Compensation that is required by local, state or federal law shall be withheld from
the Participant’s corresponding non-deferred portion of the Compensation.

	4.3.	 	Valuation Funds. A Participant shall designate, at a time and in a manner acceptable
to the Committee, one or more Valuation Funds for each Account for the sole purpose of
determining the amount of Interest to be credited or debited to such Account. Such election
shall designate the portion of each deferral of Compensation made into each Account that shall
be deemed to be allocated among the available Valuation Fund(s), and such election shall apply
to each succeeding deferral of Compensation until such time as the Participant shall file a
new election with the Committee. Upon notice to the Committee, the Participant may also
reallocate the balance in each Valuation Fund among the other available Valuation Funds as of
the next succeeding Determination Date, but in no event shall such re-allocation occur more
frequently than daily. The election of deemed investments among the options provided shall be
the sole responsibility of each Participant. The Company and Committee members are not
authorized to make any recommendation to any Participant with respect to such election. Each
Participant assumes all risk connected with any adjustment to the value of his or her Account.
Neither the Committee nor the Company in any way guarantees against loss or depreciation.

	4.4.	 	Discretionary Contributions. Company may, but shall not be obligated to, make
Discretionary Contributions to a Participant’s Account. Discretionary Contributions shall be
credited at such times and in such amounts as recommended by the Committee and approved by the
Compensation Committee of the Board, or the Board in its sole discretion. A Participant must
be employed by the Company on the date that any Discretionary Contributions are credited to
the Participant’s Account. When an individual first becomes eligible to participate in this
Plan during a Deferral Period, any Discretionary Contribution awarded to such Participant
shall be prorated based upon the number of months that he or she was a Participant during such
Deferral Period. Unless the Committee specifies otherwise, such Discretionary Contribution
shall be allocated to the Retirement Account.

	4.5.	 	Determination of Accounts. Each Participant’s Account as of each Determination Date
shall consist of the balance of the Account as of the immediately preceding Determination
Date, adjusted as follows:

	 	(a)	 	New Deferrals. Each Account shall be increased by any deferred
Compensation credited since such prior Determination Date in the proportion chosen by
the Participant, except that no amount of new deferrals shall be credited to an Account
at the same time that a distribution is to be made from that Account.

	 	(b)	 	Company Contributions. Each Account shall be increased by any
Discretionary Contributions credited since such prior Determination Date as set forth
above in sections 4.1 and 4.4 or as otherwise directed by the Committee.

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	 	(c)	 	Distributions. Each Account shall be reduced by the amount of each
benefit payment made from that Account since the prior Determination Date.
Distributions shall be deemed to have been made proportionally from each of the
Valuation Funds maintained within such Account based on the proportion that such
Valuation Fund bears to the sum of all Valuation Funds maintained within such Account
for that Participant as of the Determination Date immediately preceding the date of
payment.

	 	(d)	 	Interest. Each Account shall be increased or decreased by the Interest
credited to such Account since such Determination Date as though the balance of that
Account as of the prior Determination Date had been invested in the applicable
Valuation Funds chosen by the Participant.

	4.6.	 	Vesting of Accounts. Each Participant shall be vested in the amounts credited to
such Participant’s Account and Interest thereon as follows:

	 	(a)	 	Amounts Deferred. A Participant shall be one hundred percent (100%)
vested at all times in the amount of Compensation elected to be deferred under this
Plan and Interest thereon.

	 	(b)	 	Discretionary Contributions. Participants shall become one hundred
percent (100%) vested in any Discretionary Contributions and Interest thereon upon the
Participant’s having attained five (5) Years of participation in this Plan. In the
event of a Change in Control, all Participants shall immediately become one hundred
percent (100%) vested in any Discretionary Contributions and Interest thereon.

	4.7.	 	Loans. No loans to Participants of amounts credited to a Participant’s Account shall
be permitted.

	4.8.	 	Statement of Accounts. The Committee shall provide to each Participant a statement
showing the balances in the Participant’s Account on a quarterly basis.

ARTICLE V — PLAN BENEFITS

	5.1.	 	Retirement Account. The vested portion of a Participant’s Retirement Account shall
be distributed to the Participant following the Participant’s Separation from Service with the
Company. Distribution of the vested portion of a Participant’s Retirement Account shall be
made in a lump sum, except that if the payment under this provision is a result of the
Participant’s retirement, then the benefit may be paid in annual installments as indicated on
the Participant’s Distribution Election. The first payment to the Participant, or Beneficiary
in the event of the Participant’s death, shall be made as soon as administratively practicable
following the Separation from Service. Notwithstanding the foregoing, distributions to “key
employees” as defined in Section 416(i) of the Code may not be made earlier than six (6)
months after the date of Separation from Service.

	5.2.	 	In-Service Account. The vested portion of a Participant’s In-Service Account with
respect to a particular Deferral Period shall be distributed to the Participant upon the
Participant’s attainment of a specified age between ages 30 through 65, as elected by the
Participant in the Deferral Commitment for the Deferral Period which designated a portion of
the

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	 	 	Compensation deferred be allocated to the In-Service Account, but in no event shall the date
selected be earlier than the first day of the sixth calendar year following the initial
filing of the Deferral Commitment with respect to that In-Service Account. The first
payment to the Participant, or Beneficiary in the event of the Participant’s death, shall be
made as soon as administratively practicable following the day on which the Participant
attains the designated age. Distribution of the vested portion of the Participant’s
In-Service Account shall be made in a lump sum or annual installments as indicated on the
Participant’s Distribution Election; provided, however, if the Participant terminates
employment with the Company prior to the year so chosen by the Participant and the
Participant’s Distribution Election with respect to his or her Retirement Account would
require earlier distribution, the vested portion of the In-Service Account shall be added to
the Retirement Account as of the date of termination of service and shall be paid in
accordance with the provisions of Section 5.1, above.
	 
	5.3.	 	Death Benefit. Upon the death of a Participant prior to the commencement of benefits
under this Plan from any particular Account, the Company shall pay to the Participant’s
Beneficiary an amount equal to the vested Account balance in that Account in the form of a
lump sum payment as soon as administratively practicable following the Participant’s death.
In the event of the death of the Participant after the commencement of benefits under this
Plan from any Account, the benefits from that Account(s) shall be paid to the Participant’s
designated Beneficiary from that Account at the same time and in the same manner as if the
Participant had survived.

	5.4.	 	Hardship Distributions. Notwithstanding the terms of any Deferral Commitment made by
a Participant hereunder, the Committee may, in its sole discretion, permit the withdrawal of
all or a portion of the vested amounts credited to a Participant’s Account, upon the request
of the Participant or the Participant’s representative, or following the death of a
Participant upon the request of a Participant’s Beneficiary or such Beneficiary’s
representative, if the Committee determines that the Participant or Beneficiary, as the case
may be, is confronted with an Unforeseeable Emergency. The Participant or Beneficiary shall
provide to the Committee such evidence as the Committee may require to demonstrate that such
emergency exists and financial hardship would occur if the withdrawal were not permitted
including, whether and the extent to which the hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise or liquidation of the Participant’s
assets, and other evidence as may be required under Section 409A of the Code. Any withdrawal
under this Section shall be limited to the amount necessary to meet the emergency. Payment
shall be made, as soon as practicable after the Committee approves the payment and determines
the amount of the payment, in a single lump sum from the portion of the Account for Deferral
Periods with the longest number of installment payments being first (from deferred
compensation first and then from Discretionary Contributions for the same Deferral Period),
and then from the portion of the Account representing Deferral Periods with the latest payment
commencement dates first (from deferred compensation first and then from Discretionary
Contributions for the same Deferral Period), in each case in accordance with Section 4.5(c).

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	5.5.	 	Form of Payment. Unless otherwise specified in Section 5.1, 5.2, 5.3, or 5.4, the
benefits payable from any Account under this Plan shall be paid in the form of benefit as
provided below, and specified by the Participant in the Distribution Election, which
Distribution Election shall be filed by the Participant when the Participant files his or her
Deferral Commitment with respect to a Deferral Period. The Distribution Election filed for a
Deferral Period shall govern deferrals made together with Interest thereon and is irrevocable.
The permitted forms of benefit payments are:

	 	(a)	 	A lump sum amount which is equal to the vested Account balance; and

	 	(b)	 	Annual installments for a period of up to ten (10) years (or in the event of
payment of the In-Service Account, a maximum of five (5) years) where the annual
payment shall be equal to the balance of the Account immediately prior to the payment,
multiplied by a fraction, the numerator of which is one (1) and the denominator of
which commences at the number of annual payments initially chosen and is reduced by one
(1) in each succeeding year. Interest on the unpaid balance shall be based on the most
recent allocation among the available Valuation Funds chosen by the Participant, made
in accordance with Section 4.3, above.

	5.6.	 	Small Account. If the total of a Participant’s vested, unpaid Account balance as of
the time the payments are to commence from the Participant’s Account is less than $10,000, the
remaining unpaid, vested Account shall be paid in a lump sum, notwithstanding any election by
the Participant to the contrary.

	5.7.	 	Withholding; Payroll Taxes. The Company shall withhold from any payment made
pursuant to this Plan any taxes required to be withheld from such payments under local, state
or federal law. A Beneficiary, however, may elect not to have withholding of federal income
tax pursuant to Section 3405(a)(2) of the Code, or any successor provision thereto.

	5.8.	 	Payment to Guardian. If a Plan benefit is payable to a minor or a person declared
incompetent or to a person incapable of handling the disposition of the property, the
Committee may direct payment to the guardian, legal representative or person having the care
and custody of such minor, incompetent or person. The Committee may require proof of
incompetency, minority, incapacity or guardianship as it may deem appropriate prior to
distribution. Such distribution shall completely discharge the Committee and Company from all
liability with respect to such benefit.

	5.9.	 	Effect of Payment. The full payment of the applicable benefit under this Article V
shall completely discharge all obligations on the part of the Company to the Participant (and
the Participant’s Beneficiary) with respect to the operation of this Plan, and the
Participant’s (and Participant’s Beneficiary’s) rights under this Plan shall terminate.

	5.10.	 	Limitation on Distributions. In the case of a change in ownership or effective
control of the Company, as defined in Section 409A of the Code or the regulations thereunder,
notwithstanding anything to the contrary herein, no distributions may be made earlier than the
date permitted under Section 409A of the Code and the regulations thereunder to any
Participant who is subject to such requirements.

11

 

ARTICLE VI — BENEFICIARY DESIGNATION

	6.1.	 	Beneficiary Designation. Each Participant shall have the right, at any time, to
designate one (1) or more Beneficiaries (both primary as well as secondary) to whom benefits
under this Plan and/or prior plans shall be paid in the event of Participant’s death prior to
complete distribution of the Participant’s vested Account balance. Each Beneficiary
designation shall be in a written form prescribed by the Committee and shall be effective only
when filed with the Committee during the Participant’s lifetime.

	6.2.	 	Changing Beneficiary. Any Beneficiary designation may be changed by a Participant
without the consent of the previously named Beneficiary by the filing of a new Beneficiary
designation with the Committee.

	6.3.	 	No Beneficiary Designation. If any Participant fails to designate a Beneficiary in
the manner provided above, if the designation is void, or if the Beneficiary designated by a
deceased Participant predeceases the Participant or dies before complete distribution of the
Participant’s benefits, the Participant’s benefits under this Plan shall be payable to the
Participant’s estate.

	6.4.	 	Effect of Payment. Payment to the Beneficiary or the Participant’s estate shall
completely discharge the Company’s obligations under this Plan.

ARTICLE VII — ADMINISTRATION

	7.1.	 	Committee; Duties. This Plan shall be administered by the Committee, which shall
consist of not less than three (3) persons appointed by the Board, except in the event of a
Change in Control as provided in Section 7.5 below. The Committee shall have the authority to
make, amend, interpret and enforce all appropriate rules and regulations for the
administration of the Plan and decide or resolve any and all questions, including
interpretations of the Plan, as they may arise in such administration. A majority vote of the
Committee members shall control any decision. Members of the Committee may be Participants
under this Plan.

	7.2.	 	Agents. The Committee may, from time to time, employ agents, including employees of
the Company, and delegate to them such administrative or other duties as are required under
the Plan and as it sees fit, and may from time to time consult with counsel who may be counsel
to the Company.

	7.3.	 	Binding Effect of Decisions. The decision or action of the Committee with respect to
any question arising out of or in connection with the administration, interpretation and
application of the Plan and the rules and regulations promulgated hereunder shall be final,
conclusive and binding upon all persons having any interest in the Plan.

	7.4.	 	Indemnity of Committee. The Company shall indemnify and hold harmless the members of
the Committee against any and all claims, loss, damage, expense or liability arising from any
action or failure to act with respect to this Plan on account of such member’s service on the
Committee, except in the case of such member’s gross negligence or willful misconduct.

12

 

	7.5.	 	Election of Committee After Change in Control. After a Change in Control, vacancies
on the Committee shall be filled by majority vote of the remaining Committee members and
Committee members may be removed only by such a vote. If no Committee members remain, a new
Committee shall be elected by majority vote of the Participants in the Plan immediately
preceding such Change in Control. No amendment shall be made to Article VII or other Plan
provisions regarding Committee authority with respect to the Plan without prior approval by
the Committee.

ARTICLE VIII — CLAIMS PROCEDURE

	8.1.	 	Claims and Appeals Procedure. Any person or entity claiming a benefit, requesting an
interpretation or ruling under the Plan (hereinafter referred to as “Claimant”), or
requesting information under the Plan shall present the request in writing to the Committee,
which shall respond in writing as soon as practicable. The Committee shall establish a claims
procedure that is in accordance with Company policies and that is intended to afford a
reasonable opportunity to any Claimant for a full and fair review of any adverse decision of
the Committee with respect to a Claimant’s claim or request.

ARTICLE IX — AMENDMENT AND TERMINATION OF PLAN

	9.1.	 	Amendment. The Company, acting through the Board or the Board’s authorized delegate,
may at any time amend the Plan in whole or in part by written instrument, notice of which is
given to all Participants and to any Beneficiary receiving installment payments, provided,
however, that no amendment shall reduce the amount accrued in any Account as of the date such
notice of the amendment is given.

	9.2.	 	Termination of the Plan. The Company, acting through the Board or the Board’s
authorized delegate, may at any time suspend or terminate the Plan as follows:

	 	(a)	 	Suspension. The Board may suspend the Plan by instructing the
Committee not to accept any additional Deferral Commitments. If such a suspension
occurs, the Plan shall continue to operate and be effective with regard to Deferral
Commitments entered into prior to the effective date of such suspension.

	 	(b)	 	Termination. The Board may terminate the Plan in whole or in part by
instructing the Committee not to accept any additional Deferral Commitments, and by
terminating all ongoing Deferral Commitments. In the event of complete termination,
the Plan shall cease to operate except with respect to the administration of prior
deferred amounts.

ARTICLE X — MISCELLANEOUS

	10.1.	 	Unfunded Plan. The Plan constitutes a mere promise by the Company to make benefit
payments in the future. The Company’s obligations under the Plan shall be unfunded and
unsecured promises to pay. The Company shall not be obligated under any circumstance to fund
its financial obligations under this Plan. It may, in its discretion, set aside funds in a
trust or other vehicle, subject to the claims of its creditors, in order to assist it in
meeting its obligations under the Plan, if such arrangement will not cause the Plan to be

13

 

	 	 	considered a funded deferred compensation plan under ERISA, or the Code and provided,
further, that any trust created by the Company and any assets held by such trust to assist
the Company in meeting its obligations under the Plan will conform to the terms of any model
rabbi trust, as then promulgated by the Internal Revenue Service. This Plan is an unfunded
plan maintained primarily to provide deferred compensation benefits for a select group of
“management or highly-compensated employees” within the meaning of Sections 201, 301, and
401 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
and therefore is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.
Accordingly, the Board may terminate the Plan in whole or in part and take appropriate
measures if it is determined by the United States Department of Labor, a court of competent
jurisdiction, or an opinion of counsel that the Plan constitutes an employee pension benefit
plan within the meaning of Section 3(2) of ERISA (as currently in effect or hereafter
amended) which is not so exempt. Notwithstanding anything to the contrary herein, there
shall be no acceleration of the time or schedule of any payments under the Plan, except as
may be provided in regulations under Section 409A of the Code.
	 
	10.2.	 	Company Obligation. The obligation to make benefit payments to any Participant
under the Plan shall be an obligation solely of the Company with respect to the deferred
Compensation receivable from, and contributions by, the Company and shall not be an obligation
of another company.

	10.3.	 	Unsecured General Creditor. Neither the Company nor this Plan gives the Participant
any beneficial ownership interest in any assets of the Company. To the extent that any
Participant or Beneficiary or other person acquires a right to receive payments under the
Plan, such right shall be no greater than the right, and each Participant and Beneficiary
shall at all times have the status, of a general unsecured creditor of the Company.

	10.4.	 	Nonalienation/Nonassignability. Except as may be required by law, neither the
Participant nor any Beneficiary shall have the right to, directly or indirectly, alienate,
assign, transfer, pledge, anticipate or encumber (except by reason of death) any amount that
is or may be payable hereunder, including in respect of any liability of a Participant or
Beneficiary for alimony or other payments for the support of a spouse, former spouse, child or
other dependent, prior to actually being received by the Participant or Beneficiary hereunder,
nor shall the Participant’s or Beneficiary’s rights to benefit payments under the Plan be
subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the Participant or Beneficiary or to
the debts, contracts, liabilities, engagements, or torts of any Participant or Beneficiary, or
transfer by operation of law in the event of bankruptcy or insolvency of the Participant or
any Beneficiary, or any legal process.

	10.5.	 	Not a Contract of Employment. This Plan shall not constitute a contract of
employment between Company and the Participant. Nothing in this Plan shall give a Participant
the right to be retained in the service of Company or to interfere with the right of the
Company to discipline or discharge a Participant at any time.

14

 

	10.6.	 	Protective Provisions. A Participant will cooperate with Company by furnishing any
and all information requested by Company, in order to facilitate the payment of benefits
hereunder, and by taking such physical examinations as Company may deem necessary and taking
such other action as may be requested by Company.

	10.7.	 	Governing Law. The provisions of this Plan shall be construed and interpreted
according to the laws of the Commonwealth of Pennsylvania, without regard to conflicts of laws
principles, except as preempted by federal law.

	10.8.	 	Validity. If any provision of this Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts hereof, but this
Plan shall be construed and enforced as if such illegal and invalid provision had never been
inserted herein.

	10.9.	 	Notice. Any notice required or permitted under the Plan shall be sufficient if in
writing and hand delivered or sent by registered or certified mail or recognized overnight
delivery service. Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the third business day following the date shown on the
postmark on the receipt for registration or certification. Mailed notice to the Committee
shall be directed to the Company’s address at 1010 Murry Ridge Lane, Murrysville,
Pennsylvania, Attention: Vice President, Human Resources. Mailed notice to a Participant or
Beneficiary shall be directed to the individual’s last known address in Company’s records.

	10.10.	 	Successors. The provisions of this Plan shall bind and inure to the benefit of
Company and its successors and assigns. The term successors as used herein shall include any
corporate or other business entity which shall, whether by merger, consolidation, purchase or
otherwise acquire all or substantially all of the business and assets of Company, and
successors of any such corporation or other business entity.

15Ex-10.2

 

EXHIBIT 10.2

RESPIRONICS, INC.

2005 NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN

ARTICLE I — PURPOSE; EFFECTIVE DATE

	1.1.	 	Purpose. The purpose of this Respironics, Inc. 2005 Non-Employee Director Deferred
Compensation Plan (hereinafter, the “Plan”) is to permit non-employee members of the
Board of Respironics, Inc. to defer the receipt of Compensation which would otherwise become
payable to them. It is intended that this Plan, by providing this deferral opportunity, will
assist the Company in retaining and attracting individuals of exceptional ability by providing
them with these benefits.
	 
	1.2.	 	Effective Date. The Plan shall be effective as of January 1, 2005.

ARTICLE II — DEFINITIONS

     For the purpose of this Plan, the following terms shall have the meanings indicated, unless
the context clearly indicates otherwise:

	2.1.	 	Account. “Account” means the account maintained on the books of the Company used
solely to calculate the amount payable to each Participant under this Plan and shall not
constitute a separate fund of assets.
	 
	2.2.	 	Beneficiary. “Beneficiary” means the person(s) designated by the Participant,
entitled under Article VI to receive any Plan benefits payable after the Participant’s death.
	 
	2.3.	 	Beneficial Ownership. “Beneficial Ownership” shall be determined as provided in Rule
13d-3 under the Exchange Act.
	 
	2.4.	 	Board. “Board” means the Board of Directors of the Company.
	 
	2.5.	 	Change in Control. A “Change in Control” shall occur upon:

	 	(a)	 	The Company’s acquisition of actual knowledge that any Person (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) other than the Company, a
Subsidiary or any employee benefit plan(s) sponsored by the Company has acquired the
Beneficial Ownership, directly or indirectly, of securities of the Company entitling
such Person to 20% or more of the Voting Power of the Company;
	 
	 	(b)	 	The occurrence of the date provided for in action by the Board or the
Committee, if any, to require election of the Committee as provided in Section 7.5 of
this Plan, following the making of a Tender Offer to acquire securities of the Company
entitling the holders thereof to 20% or more of the Voting Power of the Company;

1

 

	 	(c)	 	The occurrence of the date provided for in action by the Board or the
Committee, if any, to require election of the Committee as provided in Section 7.5 of
the Plan, 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 Company; or
	 
	 	(d)	 	The shareholders of the Company’s approval of 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 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 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 Company immediately
prior to the transaction.

	2.6.	 	Committee. “Committee” means the Compensation Committee of the Board, except in the
event of a Change in Control as provided in Section 7.5.
	 
	2.7.	 	Company. “Company” means Respironics, Inc., a Delaware corporation, or any
successor.
	 
	2.8.	 	Company Stock Fund. The term “Company Stock Fund” means an investment alternative
that provides for a hypothetical investment in shares of Company Common Stock, which may in
the discretion of the Committee be offered as a Valuation Fund.
	 
	2.9.	 	Compensation. “Compensation” means a Director’s aggregate compensation payable by
the Company for services rendered as a Director, including the annual base retainer and
attendance fees for Board and committee meetings, but excluding any travel expense allowances,
other expense reimbursements, or any non-cash compensation.
	 
	2.10.	 	Deferral Commitment. “Deferral Commitment” means a commitment made by a Participant
to defer a portion of Compensation as set forth in Article III. The Deferral Commitment shall
apply to each payment of Compensation. Such designation shall be made in whole percentages
and shall be made in a form acceptable to the Committee. A Deferral Commitment shall remain
in effect until modified as provided under Section 3.5, below.
	 
	2.11.	 	Deferral Period. “Deferral Period” means the calendar year in which deferrals are
permitted; provided, however, that deferrals may not be made with respect to Compensation for
services rendered prior to participation in the Plan.
	 
	2.12.	 	Determination Date. “Determination Date” means each calendar day.
	 
	2.13.	 	Director. The term “Director” means a non-employee member of the Company’s Board.

2

 

	2.14.	 	Disability. “Disability” means a Participant is “disabled” as defined in Section
409A(a)(2)(c) of the Code, as determined by a physician approved by the Committee or its
delegate.
	 
	2.15.	 	Distribution Election. “Distribution Election” means the form prescribed by the
Committee and completed by the Participant, indicating the chosen form of payment for benefits
payable from the Account under this Plan, as elected by the Participant.
	 
	2.16.	 	Exchange Act. “Exchange Act” means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
	 
	2.17.	 	Fair Market Value. “Fair Market Value” means the fair market value of Company
Common Stock 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 or cite as the Committee, in its discretion, may determine to rely upon): (i) so
long as the Company Common Stock is not listed on any principal United States securities
exchange registered under the Exchange Act, the highest and lowest sales prices per share of
the Company Common Stock for such date on the National Association of Securities Dealers
Automated Quotations System or any successor system then in use, or (ii) in the event that the
Company Common Stock is listed on such an exchange, the highest and lowest sales prices per
share of the Company Common Stock for such date on such exchange. If there are no such sale
price quotations for the date as of which Fair Market Value is to be determined, then Fair
Market Value shall be determined by taking a weighted average of the means between the highest
and lowest sales prices per share of the Company Common Stock as so quoted on the nearest
reasonable date before and after the date as of which Fair Market Value is to be determined.
If the Fair Market Value of the Company Common Stock cannot be determined on the basis
previously set forth in this Section 2.17, the Committee shall in good faith determine the
fair market value of the Company 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.
	 
	2.18.	 	Interest. “Interest” means the amount credited to a Participant’s Account on each
Determination Date, which may include interest, dividends, gains and losses and which shall be
based on the Valuation Funds chosen by the Participant in a manner consistent with Section
4.3, below. Such credits to a Participant’s Account may be either positive or negative to
reflect the increase or decrease in value of the Account in accordance with the provisions of
this Plan.
	 
	2.19.	 	Mutual Fund. The term “Mutual Fund” means an investment alternative that provides
for a hypothetical investment in various mutual funds, which may in the discretion of the
Committee be offered as a Valuation Fund.
	 
	2.20.	 	Participant. “Participant” means any Director who is eligible, pursuant to Section
3.1, below, to participate in this Plan, and who has elected to defer Compensation under this
Plan in accordance with Article III, below. Such Director shall remain a Participant in this
Plan for the period of deferral and until such time as all vested benefits payable under this
Plan have been paid in accordance with the provisions hereof.

3

 

	2.21.	 	Plan. “Plan” means this Respironics, Inc. 2005 Non-Employee Director Deferred
Compensation Plan as amended from time to time.
	 
	2.22.	 	Retirement. “Retirement” means, for any Participant, the date on which a
Participant ceases to be a Director of the Company for any reason other than resignation or
removal for cause, provided that the Participant has attained at least age 55.
	 
	2.23.	 	Subsidiary. “Subsidiary” means any corporation in an unbroken chain of corporations
beginning with the Company, if each of the corporations other than the last corporation in the
unbroken chain owns stock possessing at least fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations in the chain.
	 
	2.24.	 	Tender Offer. “Tender Offer” means a tender offer or exchange offer to acquire
securities of a corporation (other than such an offer made by the Company or a Subsidiary),
whether or not such offer is approved or opposed by the Board.
	 
	2.25.	 	Unforeseeable Emergency. “Unforeseeable Emergency” means a severe financial
hardship to the Participant resulting from (1) an illness or accident affecting the
Participant or his or her spouse or dependent; (2) loss of the Participant’s property due to
casualty; or (3) other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the Participant’s control.
	 
	2.26.	 	Valuation Funds. “Valuation Funds” means one or more of the independently
established funds or indices that are identified and listed by the Committee. These Valuation
Funds are used solely to calculate the Interest that is credited to each Participant’s Account
in accordance with Article IV, below, and does not represent, nor should it be interpreted to
convey, any beneficial interest on the part of the Participant in any asset or other property
of the Company. The determination of the increase or decrease in the performance of each
Valuation Fund shall be made by the Committee in its reasonable discretion. The Committee
shall select the various Valuation Funds available to the Participants with respect to this
Plan and shall set forth a list of these Valuation Funds attached hereto as Exhibit A, which
may be amended from time to time in the discretion of the Committee by revision to Exhibit A
and without requiring amendment of the Plan.
	 
	2.27.	 	Voting Power. “Voting Power” of the Company means such number of the Voting Shares
of the Company as shall enable the holders thereof to cast such percentage of all of the votes
that could be cast in an annual election of directors (without consideration of the rights of
any other class of stock other than the Company’s Common Stock to elect directors by a
separate class vote). “Voting Shares” means all securities of the Company entitling
the holders thereof to vote in an annual election of directors (without consideration of the
rights of any other class of stock other than the Company’s Common Stock to elect directors by
a separate class vote).

ARTICLE III — ELIGIBILITY AND PARTICIPATION

	3.1.	 	Eligibility and Participation.

	 	(a)	 	Eligibility. Eligibility to participate in the Plan shall be limited
to Directors.

4

 

	 	(b)	 	Participation. A Director shall be eligible to participate in this
Plan as long as he or she remains a Director of the Company. Participation in the Plan
by an eligible Director is voluntary and shall be effective upon the Participant’s
completion and submission of a Deferral Commitment, an Allocation Form, and a
Distribution Election to the Committee prior to the beginning of the Deferral Period.
	 
	 	(c)	 	First-Year Participation. When an individual first becomes eligible to
participate in this Plan during a Deferral Period, a Deferral Commitment may be
submitted to the Committee within thirty (30) days after the individual first becomes
eligible to participate. Such Deferral Commitment will be effective only with regard
to Compensation earned following submission of the Deferral Commitment to the
Committee.

	3.2.	 	Form of Deferral Commitment. A Participant may elect to make a Deferral Commitment
in the form permitted by the Committee. The Deferral Commitment shall specify the following:

	 	(a)	 	Deferral Amounts; Accounts. A Deferral Commitment shall be effective
with respect to each payment of Compensation payable by the Company to a Participant
during the Deferral Period. All investment elections and investment change elections
shall be made in accordance with the procedures established by the Committee and, if
applicable, shall comply with any “insider” trading policies adopted by the Company and
Rule 16b-3 of the Exchange Act as described in Section 3.2(e) below. The Participant
shall set forth the amount to be deferred as a full percentage of Compensation. The
percentage specified shall apply equally to each periodic payment of Compensation
during the Deferral Period.
	 
	 	(b)	 	Allocation to Valuation Funds. The Participant shall specify in a
separate form (known as the “Allocation Form”) filed with the Committee, the
Participant’s initial allocation of the amounts deferred into his or her Account among
the various available Valuation Funds.
	 
	 	(c)	 	Maximum Deferral. The maximum amount of each payment of Compensation
that may be deferred shall be one hundred percent (100%).
	 
	 	(d)	 	Minimum Deferral. The minimum amount of each payment of Compensation
that may be deferred shall be twenty-five percent (25%).
	 
	 	(e)	 	Restrictions on Transfers and Distributions. If a Director is an
“insider” subject to Section 16 of the Exchange Act, the Plan shall be administered in
accordance with Rule 16b-3 of the Exchange Act, as it applies to the Director. If
required to comply with Rule 16b-3 of the Exchange Act:

	 	(i)	 	A Director’s election to transfer deferrals from the Company
Stock Fund to a Mutual Fund must be made at least 6 months after the Director
last elected to transfer deferrals from the Mutual Fund to the Company Stock
Fund.

5

 

	 	(ii)	 	A Director’s election to transfer deferrals from a Mutual Fund
to the Company Stock Fund must be made at least 6 months after the Director
last elected to transfer deferrals from the Company Stock Fund to the Mutual
Fund or to receive a cash distribution from the Company Stock Fund.
	 
	 	(iii)	 	If a Director’s benefit from the Company Stock Fund is to be
paid in cash, the Director’s election to receive cash must be made at least 6
months after the Director’s most recent election to transfer deferrals into the
Company Stock Fund.

     3.3. Period of Commitment. Once a Participant has made a Deferral Commitment, that
Commitment shall remain in effect for each Deferral Period unless the Deferral Commitment is
revoked or amended in writing prior to the beginning of such succeeding Deferral Period, if
succeeding Deferral Periods are permitted by the Committee.

     3.4. Commitment Limited by Termination. If a Participant’s service with the Company as a
Director is terminated for any reason prior to the end of the Deferral Period, the Deferral
Period shall end as of the date of termination.

     3.5. Modification of Deferral Commitment. Except as provided in Section 3.3 or 3.4 above,
or Section 5.3 below, a Deferral Commitment shall be irrevocable by the Participant during a
Deferral Period.

     3.6. Defaults in Event of Incomplete or Inaccurate Deferral Commitments. In the event
that a Participant submits a Deferral Commitment to the Committee that contains information
which, in the sole discretion of the Committee, is incomplete or inaccurate, the Committee
shall be authorized to assume the following, and such assumptions shall be communicated to the
Participant:

	 	(a)	 	If no Valuation Fund is selected – assume Money Market Fund was selected;
	 
	 	(b)	 	If Valuation Fund(s) selected equal less than 100% – assume that Money Market
Fund was selected for balance;
	 
	 	(c)	 	If Valuation Fund(s) selected equal more than 100% – assume proportionate
reduction to each Valuation Fund selected;
	 
	 	(d)	 	If no Distribution Election is chosen – assume three (3) annual installments
were elected; and
	 
	 	(e)	 	If no Beneficiary is designated, Participant’s Beneficiary will be his or her
estate.

	3.7.	 	Modification of Distribution Election. Except as set forth in this Section 3.7, a
Distribution Election shall be irrevocable. Any modifications to a Distribution Election for
the Deferral Period:

	 	(a)	 	Shall not become effective for 12 months following the date of the
modification;

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	 	(b)	 	Shall be made at least 12 months prior to the initial distribution date of the
Participant’s Account for the Deferral Period;
	 
	 	(c)	 	Shall delay such distribution date for a minimum of five years from the date
the payment would otherwise have been made; and
	 
	 	(d)	 	Shall not reduce the number of payments that otherwise would be made to the
Participant.

ARTICLE IV — DEFERRED ACCOUNT

	4.1.	 	Accounts. The Compensation deferred by a Participant under the Plan and Interest
shall be credited to the Participant’s Account. The Participants’ Accounts shall be used
solely to calculate the amount payable to each Participant under this Plan and shall not
constitute a separate fund of assets.
	 
	4.2.	 	Timing of Credits. A Participant’s deferred Compensation shall be credited to each
Participant’s Account as soon as administratively practicable following the day on which the
Compensation deferred would have otherwise been payable to the Participant.
	 
	4.3.	 	Valuation Funds.

	 	(a)	 	Designation and Reallocation. A Participant shall designate, at a time
and in a manner acceptable to the Committee, one or more Valuation Funds for the sole
purpose of determining the amount of Interest to be credited or debited to the
Participants’ Accounts. Such election shall designate the portion of each deferral of
Compensation that shall be deemed to be allocated among the available Valuation
Fund(s), and such election shall apply to each succeeding deferral of Compensation
until such time as the Participant shall file a new election with the Committee.
Subject to Section 3.2(e), upon notice to the Committee, the Participant may also
reallocate the balance in each Valuation Fund among the other available Valuation Funds
as of the next succeeding Determination Date, but in no event shall such re-allocation
occur more frequently than daily. The election of deemed investments among the options
provided shall be the sole responsibility of each Participant. The Company and
Committee members are not authorized to make any recommendation to any Participant with
respect to such election. Each Participant assumes all risk connected with any
adjustment to the value of his or her Account. Neither the Committee nor the Company
in any way guarantees against loss or depreciation.
	 
	 	(b)	 	Company Stock Fund. The Committee may make a Company Common Stock Fund
available as a Valuation Fund under the Plan. The deferrals that a Participant elects
to invest in the Company Stock Fund shall be converted into a hypothetical number of
            shares of Company Common Stock by dividing the applicable amount of deferrals by the
Fair Market Value of the Company Common Stock on the date the deferrals are credited to
the Participant’s Account or on such other date as may be determined by the Committee.
As of the date that dividends (if any) are declared on outstanding shares of Company
Common Stock

7

 

	 	 	 	(or on such later date as may be determined by the Committee), the Company shall
credit a Participant’s Company Stock Fund with additional hypothetical shares of
Company Common Stock in an amount equal to the “Dividend Amount.” The “Dividend
Amount” is the amount of dividends declared on the hypothetical shares of Company
Common Stock in a Participant’s Account divided by the Fair Market Value of the
Company stock on the date dividends are declared or on such other date as may be
determined by the Committee. When deferrals are transferred out of the Company
Stock Fund, the deferrals will be converted to a cash equivalent based upon the Fair
Market Value of the Company Common Stock on the effective date of such transfer.
	 
	 	(c)	 	Mutual Fund. The Committee may make a Mutual Fund available as a
Valuation Fund under the Plan. The deferrals that a Participant elects to invest in the
Mutual Fund shall be adjusted for investment experience (either gains or losses) in a
manner that equals the investment experience attributable to the one or more mutual
funds offered as Valuation Funds by the Committee under the Plan. Participants who
elect the Mutual Fund investment alternative for all or a portion of their Account
shall elect among the mutual funds that are listed in Exhibit A (as may be amended by
the Committee from time to time). Any deferrals that a Participant elects to invest in
the Mutual Fund shall begin accruing investment experience at the time the deferrals
are credited to the Participant’s Account or on such other date as may be determined by
the Committee. When deferrals are transferred out of the Mutual Fund, the deferrals
shall stop accruing investment experience under the Mutual Fund as of the effective
date of such transfer.

	4.4.	 	Determination of Accounts. Each Participant’s Account as of each Determination Date
shall consist of the balance of the Account as of the immediately preceding Determination
Date, adjusted as follows:

	 	(a)	 	New Deferrals. Each Account shall be increased by any deferred
Compensation credited since such prior Determination Date.
	 
	 	(b)	 	Distributions. Each Account shall be reduced by the amount of each
benefit payment made from that Account since the prior Determination Date.
Distributions shall be deemed to have been made proportionally from each of the
Valuation Funds maintained within such Account based on the proportion that such
Valuation Fund bears to the sum of all Valuation Funds maintained within such Account
for that Participant as of the Determination Date immediately preceding the date of
payment.
	 
	 	(c)	 	Interest. Each Account shall be increased or decreased by the Interest
credited to such Account since such Determination Date as though the balance of that
Account as of the prior Determination Date had been invested in the applicable
Valuation Funds chosen by the Participant.

8

 

	4.5.	 	Vesting of Accounts. Each Participant shall be one hundred percent (100%) vested at
all times in the amounts of Compensation elected to be deferred under this Plan and Interest
thereon.
	 
	4.6.	 	Loans. No loans to Participants of amounts credited to a Participant’s Account shall
be permitted.
	 
	4.7.	 	Statement of Accounts. The Committee shall provide to each Participant a statement
showing the balances in the Participant’s Account on a periodic basis.

ARTICLE V — PLAN BENEFITS

	5.1.	 	Distributions.

	 	(a)	 	Retirement Distributions. Following the Participant’s Retirement with
the Company, the vested portion of a Participant’s Account shall be distributed to the
Participant as soon as administratively practicable following the date on which the
Participant’s Retirement occurs. Distribution of the vested portion of a Participant’s
Account shall be made in a lump sum or annual installments as indicated on the
Participant’s Distribution Election.
	 
	 	(b)	 	Non-Retirement Distributions. If a Participant ceases to serve as a
Director of the Company prior to the attainment of age 55, or if the Participant ceases
to serve as a Director at any time by reason of resignation (other than for Disability)
or is removed from office for cause, then the vested portion of the Participant’s
Account shall be distributed to the Participant as soon as administratively practicable
following termination from service. Distribution of the vested portion of a
Participant’s Account shall be made in a lump sum.

	5.2.	 	Death or Disability Benefit. Upon the death or Disability of a Participant prior to
the commencement of benefits under this Plan, the Company shall pay to the Participant, or the
Participant’s Beneficiary, an amount equal to the vested Account balance in that Account in
the form of a lump sum payment as soon as practicable following the Participant’s death or
Disability. In the event of the death of the Participant after the commencement of benefits
under this Plan from the Participant’s Account, the benefits from that Account shall be paid
to the Participant’s designated Beneficiary from that Account at the same time and in the same
manner as if the Participant had survived.
	 
	5.3.	 	Hardship Distributions. Notwithstanding the terms of any Deferral Commitment made by
a Participant hereunder, the Committee may, in its sole discretion, permit the withdrawal of
all or a portion of the vested amounts credited to a Participant’s Account, upon the request
of the Participant or the Participant’s legal representative, or following the death of a
Participant upon the request of a Participant’s Beneficiary or such Beneficiary’s
representative, if the Committee determines that the Participant or Beneficiary, as the case
may be, is confronted with an Unforeseeable Emergency. The Participant or Beneficiary shall
provide to the Committee such evidence as the Committee may require to demonstrate that such
emergency exists and financial hardship would occur if the withdrawal were not permitted
including, whether and the extent to

9

 

	 	 	which the hardship is or may be relieved through reimbursement or compensation by insurance
or otherwise or liquidation of the Participant’s assets, and other evidence as may be
required under Section 409A of the Code. Any withdrawal under this Section shall be limited
to the amount necessary to meet the emergency. Payment shall be made, as soon as
practicable after the Committee approves the payment and determines the amount of the
payment, in a single lump sum and in accordance with Section 4.4(b).
	 
	5.4.	 	Form of Payment. Unless otherwise specified in Section 5.1, 5.2, 5.3 or 5.5, the
benefits payable from any Account under this Plan shall be paid in the form of benefit as
provided below, and specified by the Participant in the Distribution Election, which
Distribution Election shall be filed by the Participant when the Participant files his or her
Deferral Commitment with respect to a Deferral Period. The Distribution Election filed for a
Deferral Period shall govern deferrals made together with Interest thereon and is irrevocable.
The permitted forms of benefit payments are:

	 	(a)	 	A lump sum amount which is equal to the vested Account balance; and
	 
	 	(b)	 	Annual installments for a period of up to ten (10) years where the annual
payment shall be equal to the balance of the Account immediately prior to the payment,
multiplied by a fraction, the numerator of which is one (1) and the denominator of
which commences at the number of annual payments initially chosen and is reduced by one
(1) in each succeeding year. Interest on the unpaid balance shall be based on the most
recent allocation among the available Valuation Funds chosen by the Participant, made
in accordance with Section 4.3, above.

	5.5.	 	Small Account. If the total of a Participant’s vested, unpaid Account balance as of
the time the payments are to commence from the Participant’s Account is less than $10,000, the
remaining unpaid, vested Account shall be paid in a lump sum, notwithstanding any election by
the Participant to the contrary.
	 
	5.6.	 	Payment to Guardian. If a Plan benefit is payable to a minor or a person declared
incompetent or to a person incapable of handling the disposition of the property, the
Committee may direct payment to the guardian, legal representative or person having the care
and custody of such minor, incompetent or person. The Committee may require proof of
incompetency, minority, incapacity or guardianship as it may deem appropriate prior to
distribution. Such distribution of the vested Account balance shall completely discharge the
Committee and Company from all liability with respect to such benefit.
	 
	5.7.	 	Effect of Payment. The full payment of the applicable benefit under this Article V
shall completely discharge all obligations on the part of the Company to the Participant (and
the Participant’s Beneficiary) with respect to the operation of this Plan, and the
Participant’s (and Participant’s Beneficiary’s) rights under this Plan shall terminate.
	 
	5.8.	 	Limitation on Distributions. In the case of a change in ownership or effective
control of the Company, as defined in Section 409A of the Code or the regulations thereunder,
notwithstanding anything to the contrary herein, no distributions may be made earlier than

10

 

	 	 	the date permitted under Section 409A of the Code and the regulations thereunder to any
Participant who is subject to such requirements.

ARTICLE VI — BENEFICIARY DESIGNATION

	6.1.	 	Beneficiary Designation. Each Participant shall have the right, at any time, to
designate one (1) or more Beneficiaries (both primary as well as secondary) to whom benefits
under this Plan and/or prior plans shall be paid in the event of the Participant’s death prior
to complete distribution of the Participant’s vested Account balance. Each Beneficiary
designation shall be in a written form prescribed by the Committee and shall be effective only
when filed with the Committee during the Participant’s lifetime.
	 
	6.2.	 	Changing Beneficiary. Any Beneficiary designation may be changed by a Participant
without the consent of the previously named Beneficiary by the filing of a new Beneficiary
designation with the Committee.
	 
	6.3.	 	No Beneficiary Designation. If any Participant fails to designate a Beneficiary in
the manner provided above, if the designation is void, or if the Beneficiary designated by a
deceased Participant predeceases the Participant or dies before complete distribution of the
Participant’s vested benefits, the Participant’s benefits under this Plan shall be payable to
the Participant’s estate.
	 
	6.4.	 	Effect of Payment. Payment of the vested Account balance to the Beneficiary or the
Participant’s estate shall completely discharge the Company’s obligations under this Plan.

ARTICLE VII — ADMINISTRATION

	7.1.	 	Committee; Duties. This Plan shall be administered by the Committee, except in the
event of a Change in Control as provided in Section 7.5 below. The Committee shall have the
authority to make, interpret and enforce all appropriate rules and regulations for the
administration of the Plan and decide or resolve any and all questions, including
interpretations of the Plan, as they may arise in such administration. A majority vote of the
Committee members shall control any decision. Members of the Committee may be Participants
under this Plan.
	 
	7.2.	 	Agents. The Committee may, from time to time, employ agents, including employees of
the Company, and delegate to them such administrative or other duties as are required under
the Plan and as it sees fit, and may from time to time consult with counsel who may be counsel
to the Company.
	 
	7.3.	 	Binding Effect of Decisions. The decision or action of the Committee with respect to
any question arising out of or in connection with the administration, interpretation and
application of the Plan and the rules and regulations promulgated hereunder shall be final,
conclusive and binding upon all persons having any interest in the Plan.
	 
	7.4.	 	Indemnity of Committee. The Company shall indemnify and hold harmless the members of
the Committee against any and all claims, loss, damage, expense or liability arising from

11

 

	 	 	any action or failure to act with respect to this Plan on account of such member’s service
on the Committee, except in the case of such member’s gross negligence or willful
misconduct.
	 
	7.5.	 	Election of Committee After Change in Control. After a Change in Control, vacancies
on the Committee shall be filled by majority vote of the remaining Committee members and
Committee members may be removed only by such a vote. If no Committee members remain, a new
Committee shall be elected by majority vote of the Participants in the Plan immediately
preceding such Change in Control. After a Change in Control, no amendment shall be made to
Article VII or other Plan provisions regarding Committee authority with respect to the Plan
without prior approval by the Committee.

ARTICLE VIII — CLAIMS PROCEDURE

	8.1.	 	Claims and Appeals Procedure. Any person or entity claiming a benefit, requesting an
interpretation or ruling under the Plan (hereinafter referred to as “Claimant”), or
requesting information under the Plan shall present the request in writing to the Committee,
which shall respond in writing as soon as practicable. The Committee shall establish a claims
procedure that is in accordance with Company policies and that is intended to afford a
reasonable opportunity to any Claimant for a full and fair review of any adverse decision of
the Committee with respect to a Claimant’s claim or request.

ARTICLE IX — AMENDMENT AND TERMINATION OF PLAN

	9.1.	 	Amendment. The Company, acting through the Board or the Board’s authorized delegate,
may at any time amend the Plan in whole or in part by written instrument, notice of which is
given to all Participants and to any Beneficiary receiving installment payments, provided,
however, that no amendment shall reduce the amount accrued in any Account as of the date such
notice of the amendment is given.
	 
	9.2.	 	Termination of the Plan. The Company, acting through the Board or the Board’s
authorized delegate, may at any time suspend or terminate the Plan as follows:

	 	(a)	 	Suspension. The Board may suspend the Plan by instructing the
Committee not to accept any additional Deferral Commitments. If such a suspension
occurs, the Plan shall continue to operate and be effective with regard to Deferral
Commitments entered into prior to the effective date of such suspension.
	 
	 	(b)	 	Termination. The Board may terminate the Plan in whole or in part by
instructing the Committee not to accept any additional Deferral Commitments, and by
terminating all ongoing Deferral Commitments. In the event of complete termination,
the Plan shall cease to operate except with respect to the administration of prior
deferred amounts.

ARTICLE X — MISCELLANEOUS

	10.1.	 	Unfunded Plan. The Plan constitutes a mere promise by the Company to make benefit
payments in the future. The Company’s obligations under the Plan shall be unfunded and
unsecured promises to pay. The Company shall not be obligated under any circumstance

12

 

	 	 	to fund its financial obligations under this Plan. It may, in its discretion, set aside
funds in a trust or other vehicle, subject to the claims of its creditors, in order to
assist it in meeting its obligations under the Plan, if such arrangement will not cause the
Plan to be considered a funded deferred compensation plan under ERISA, or the Code and
provided, further, that any trust created by the Company and any assets held by such trust
to assist the Company in meeting its obligations under the Plan will conform to the terms of
any model rabbi trust, as then promulgated by the Internal Revenue Service. This Plan is an
unfunded plan maintained primarily to provide deferred compensation benefits for a select
group of “management or highly-compensated employees” within the meaning of Sections 201,
301, and 401 of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), and therefore is exempt from the provisions of Parts 2, 3 and 4 of Title
I of ERISA. Accordingly, the Board may terminate the Plan in whole or in part and take
appropriate measures if it is determined by the United States Department of Labor, a court
of competent jurisdiction, or an opinion of counsel that the Plan constitutes an employee
pension benefit plan within the meaning of Section 3(2) of ERISA (as currently in effect or
hereafter amended) which is not so exempt. Notwithstanding anything to the contrary herein,
there shall be no acceleration of the time or schedule of any payments under the Plan,
except as may be provided in regulations under Section 409A of the Code.
	 
	10.2.	 	Company Obligation. The obligation to make benefit payments to any Participant
under the Plan shall be an obligation solely of the Company with respect to the deferred
Compensation receivable from the Company and shall not be an obligation of another company.
	 
	10.3.	 	Unsecured General Creditor. Neither the Company nor this Plan gives the Participant
any beneficial ownership interest in any assets of the Company. To the extent that any
Participant or Beneficiary or other person acquires a right to receive payments under the
Plan, such right shall be no greater than the right, and each Participant and Beneficiary
shall at all times have the status, of a general unsecured creditor of the Company.
	 
	10.4.	 	Nonalienation/Nonassignability. Except as may be required by law, neither the
Participant nor any Beneficiary shall have the right to, directly or indirectly, alienate,
assign, transfer, pledge, anticipate or encumber (except by reason of death) any amount that
is or may be payable hereunder, including in respect of any liability of a Participant or
Beneficiary for alimony or other payments for the support of a spouse, former spouse, child or
other dependent, prior to actually being received by the Participant or Beneficiary hereunder,
nor shall the Participant’s or Beneficiary’s rights to benefit payments under the Plan be
subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the Participant or Beneficiary or to
the debts, contracts, liabilities, engagements, or torts of any Participant or Beneficiary, or
transfer by operation of law in the event of bankruptcy or insolvency of the Participant or
any Beneficiary, or any legal process.
	 
	10.5.	 	No Retention Guarantee. Nothing contained herein shall be deemed to give any
Director the right to be retained in the service of the Company.

13

 

	10.6.	 	Protective Provisions. A Participant will cooperate with the Company by furnishing
any and all information requested by the Company, in order to facilitate the payment of
benefits hereunder, and by taking such other action as may be requested by the Company.
	 
	10.7.	 	Governing Law. The provisions of this Plan shall be construed and interpreted
according to the laws of the Commonwealth of Pennsylvania, without regard to conflicts of laws
principles.
	 
	10.8.	 	Validity. If any provision of this Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts hereof, but this
Plan shall be construed and enforced as if such illegal and invalid provision had never been
inserted herein.
	 
	10.9.	 	Notice. Any notice required or permitted under the Plan shall be sufficient if in
writing and hand delivered or sent by registered or certified mail or recognized overnight
delivery service. Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the third business day following the date shown on the
postmark on the receipt for registration or certification. Mailed notice to the Committee
shall be directed to the Company’s address at 1010 Murry Ridge Lane, Murrysville,
Pennsylvania, Attention: Vice President, Human Resources, with a separate copy mailed to the
Company’s General Counsel at the Company’s address. Mailed notice to a Participant or
Beneficiary shall be directed to the individual’s last known address in Company’s records.
	 
	10.10.	 	Successors. The provisions of this Plan shall bind and inure to the benefit of
Company and its successors and assigns. The term successors as used herein shall include any
corporate or other business entity which shall, whether by merger, consolidation, purchase or
otherwise acquire all or substantially all of the business and assets of Company, and
successors of any such corporation or other business entity.

14

 

EXHIBIT A

Valuation Funds

BlackRock Money Market

BlackRock Intermediate Gov’t. Bond Portfolio

BlackRock Managed Income Portfolio

AIM Basic Value Fund

American Funds: Balanced Fund-A

Janus Adviser International Fund

Janus Adviser Worldwide Fund

America Funds-Growth Fund of America — A

INVESCO Dynamics — K

Respironics Common Stock

Respironics Non-Qualified SLF

MFS Value

BlackRock Large Cap Growth — A

Federated Mid-Cap Index

Fidelity Advisor Value Strategies

1

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