Edgar Filing: RESPIRONICS INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)

[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant

Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 167;240.14a-12

Respironics, Inc.
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(Name of Registrant as Specified In Its Charter)

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

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[LOGO] RESPIRONICS INC.

Dear Shareholder:

You are cordially invited to join us for our Annual Meeting of Shareholders
to be held this year on Monday, November 18, 2002, at 5:15 p.m. (local time) at
the Company's Corporate Headquarters facility at 1010 Murry Ridge Lane,
Murrysville, Pennsylvania.

The Notice of Annual Meeting of Shareholders and the Proxy Statement that
follow describe the business to be conducted at the meeting. We will also
report on matters of current interest to our shareholders.

Representatives of the Company will be available after the meeting. Please
also take this opportunity to view Respironics products, which will be on
display.

Your vote is important. Whether you own a few or many shares of Respironics
stock, it is important that your shares be represented. If you cannot
personally attend, we encourage you to make certain that you are represented at
the meeting by signing the accompanying proxy card and promptly returning it in
the enclosed envelope.

Very truly yours,
/s/ James Liken

James W. Liken
President and Chief Executive Officer
October 14, 2002

RESPIRONICS, INC.

1010 Murry Ridge Lane
Murrysville, Pennsylvania 15668

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

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The Annual Meeting of Shareholders of Respironics, Inc. will be held at the
Company's Corporate Headquarters facility at 1010 Murry Ridge Lane,
Murrysville, Pennsylvania on Monday, November 18, 2002 at 5:15 p.m. for the
following purposes:

(1) To elect three directors;

(2) To ratify the selection of auditors to examine the consolidated
financial statements of the Company for the fiscal year ending June 30,
2003; and

(3) To transact such other business as may properly come before the meeting.

Please refer to the accompanying Proxy Statement for a description of the
matters to be considered at the meeting.

Please sign, date and return the enclosed proxy promptly in the envelope
provided, which requires no United States postage.

Dorita A. Pishko
Corporate Secretary

October 14, 2002

RESPIRONICS, INC.

1010 Murry Ridge Lane
Murrysville, Pennsylvania 15668

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PROXY STATEMENT

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Annual Meeting of Shareholders to be Held November 18, 2002

GENERAL

The enclosed proxy is solicited on behalf of the Board of Directors of
Respironics, Inc. (the "Company") for use at the Annual Meeting of Shareholders
to be held at 5:15 p.m., on Monday, November 18, 2002 at the Company's
Corporate Headquarters facility at 1010 Murry Ridge Lane, Murrysville,
Pennsylvania. The accompanying Notice of Annual Meeting of Shareholders sets
forth the purposes of the meeting.

The enclosed proxy may be revoked at any time before its exercise by giving
notice of revocation to the Secretary of the Company. The shares represented by
proxies in the form solicited by the Board of Directors will be voted at the
meeting. If a choice is specified on the proxy with respect to a matter to be
voted upon, the shares represented by the proxy will be voted in accordance
with that specification. If no choice is specified, the shares will be voted as
stated below in this Proxy Statement.

It is expected that this Proxy Statement and the accompanying form of proxy
will first be mailed to shareholders of the Company on or about October 18,
2002. The Company's Annual Report to Shareholders for 2002 is enclosed with
this Proxy Statement but does not form a part of the proxy soliciting material.

SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING

If any shareholder wishes to present a proposal at the 2003 Annual Meeting
of Shareholders, the proposal must be received by the Secretary of the Company
by June 10, 2003 to be considered for inclusion in the Company's Proxy
Statement and form of proxy relating to the 2003 Annual Meeting. The Bylaws of
the Company require that any shareholder intending to present a proposal for
action at an Annual Meeting must give written notice of the proposal,
containing the information specified in the Bylaws, so that it is received by
the Company not later than the notice deadline determined under the Bylaws.
This notice deadline will generally be 90 days prior to the anniversary of the
Company's Proxy Statement for the previous year's annual meeting, or July 15,
2003 for the Company's Annual Meeting in 2003. Any shareholder proposal
received by the Secretary of the Company after July 15, 2003 will be considered
untimely under Rule 14a-4(c)(1) promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934. The 2003 Annual Meeting
is presently scheduled for November 17, 2003.

VOTING SECURITIES AND RECORD DATE

Holders of the Company's Common Stock of record as of the close of business
on October 4, 2002 (the "record date") are entitled to receive notice of and to
vote at the 2002 Annual Meeting. On the record date, the Company had
outstanding 33,358,807 shares of Common Stock, the holders of which are
entitled to one vote per share. These shares outstanding exclude 3,588,358
shares held by the Company in treasury.

SECURITY OWNERSHIP

Management

The following table shows the number of shares of Common Stock beneficially
owned by each director and nominee for director of the Company, each of the
officers of the Company named in the Summary Compensation

Table herein and by all directors, nominees and executive officers of the
Company as a group, as of the record date. As used herein, "beneficial
ownership" means the sole or shared power to vote, or to direct the voting of,
a security, or the sole or shared investment power with respect to a security
(i.e., the power to dispose of, or to direct the disposition of, a security).
A person is deemed, as of any date, to have "beneficial ownership" of any
security that the person has the right to acquire within 60 days after that
date.

Amount and
Nature of Percent
Beneficial of
Name of Beneficial Owner Ownership Class
------------------------ ---------- -------

Douglas A. Cotter (1)................................................... 31,223 0.09%
J. Terry Dewberry (1) (3)............................................... 40,956 0.12%
James H. Hardie (1) (4)................................................. 55,065 0.16%
Donald H. Jones (1)..................................................... 37,518 0.11%
Joseph C. Lawyer (1) (5)................................................ 13,556 0.04%
James W. Liken (2)...................................................... 511,714 1.52%
Candace L. Littell (1).................................................. 6,230 0.02%
Sean McDonald (1)....................................................... 4,315 0.01%
Gerald E. McGinnis (6).................................................. 580,455 1.74%
John L. Miclot (2)...................................................... 106,926 0.32%
John C. Miles II........................................................ 2,520 0.01%
Craig B. Reynolds (2)................................................... 124,027 0.37%
Geoffrey C. Waters (2).................................................. 34,725 0.10%
All directors, nominees, and executives officers as a group (17 persons) 1,681,649 4.91%

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(1) Includes shares which would be outstanding upon the exercise of currently
exercisable stock options granted under the 1991 Non-Employee Directors'
Stock Option Plan and the 2000 Stock Incentive Plan in the following
amounts: Dr. Cotter, 29,324 shares; Mr. Dewberry, 20,171 shares; Mr.
Hardie, 34,424 shares; Mr. Jones, 24,224 shares; Mr. Lawyer, 8,924 shares;
Ms. Littell, 3,824; and Mr. McDonald, 3,824 shares.

(2) Includes shares that would be outstanding upon the exercise of currently
exercisable stock options granted under the Company's 1984 Incentive Stock
Option Plan, 1992 Stock Incentive Plan and 2000 Stock Incentive Plan in the
following amounts: Mr. Liken, 393,950; Mr. Miclot, 101,550 shares;
Mr. Reynolds, 92,500 shares; and Mr. Waters 30,500 shares.

(3) Includes 20,785 shares held jointly with Mr. Dewberry's wife, as to which
voting and investment power is shared.

(4) Includes 11,000 shares held by a partnership in which Mr. Hardie is the
general partner and 6,900 shares held by Mr. Hardie's personal IRA account.
Does not include 12,000 shares owned by Mr. Hardie's wife, as to which he
disclaims beneficial ownership.

(5) Does not include 2,400 shares held by Mr. Lawyer's wife, who has sole
voting and investment power of these shares and as to which Mr. Lawyer
disclaims beneficial ownership.

(6) Includes 48,098 shares held in the Gerald E. McGinnis Charitable
Foundation. Includes 12,474 shares held jointly with Mr. McGinnis' wife, as
to which voting and investment power is shared. Includes 50,150 shares that
would be outstanding upon the exercise of currently exercisable stock
options granted under the Company's 1992 Stock Incentive Plan.

Other Beneficial Owners

The following table sets forth information with respect to each shareholder
known to the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock as of the record date.

Amount and
Nature of
Beneficial Percent
Name and Address of Beneficial Owner Ownership of Class
------------------------------------ ---------- --------

FMR Corporation
82 Devonshire Street
Boston, Massachusetts 02109 (1).... 3,389,131 10.16%

Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109 (2).... 2,052,200 6.15%

Barclays Global Investors
45 Fremont St.
San Francisco, California 94105 (2) 1,737,517 5.21%

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(1) Information regarding the beneficial owner has been determined by the
Company based solely upon data included in a Form 13G filed with the United
States Securities and Exchange Commission and the Company. Such filing
contained information as of July 31, 2002.

(2) Information regarding the beneficial owner has been determined by the
Company based solely upon data included in a Form 13F filed with the United
States Securities and Exchange Commission. Such filing contained
information as of June 30, 2002.

BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

The Board of Directors has three committees to assist in the management of
the affairs of the Company: the Compensation Committee, the Audit Committee,
and the Corporate Governance Committee.

Compensation Committee. The Compensation Committee currently consists of
Mr. McDonald (Chairman), Dr. Cotter, and Mr. Jones. The Compensation Committee
makes recommendations regarding the compensation payable, including
compensation under the Company's bonus plan, to all executive officers of the
Company and certain other management personnel. This committee also administers
the Company's 1984 Incentive Stock Option Plan, the 1992 Stock Incentive Plan,
the 2000 Stock Incentive Plan and the Company's other stock option plans, and
has the authority to grant options thereunder.

Audit Committee. The Audit Committee consists of Mr. Lawyer (Chairman),
Mr. Dewberry, and Mr. Miles, all of whom are independent members of the Board
of Directors. This committee engages independent public accountants to audit
the financial statements of the Company, reviews the proposed scope and results
of the audit, and reviews the scope, adequacy and results of the Company's
internal audit and control procedures.

Corporate Governance Committee. The Corporate Governance Committee consists
of Ms. Littell (Chairperson), Mr. Hardie, and Mr. McGinnis. The Corporate
Governance Committee reviews the size and composition of the Board of
Directors, makes recommendations with respect to nominations for directors,
provides informal feedback to the Company's Directors regarding their
performance as a director, and is responsible for succession planning to permit
orderly changes in the makeup of the Board. This Committee will consider
nominees recommended by shareholders provided that shareholders submit the
names of nominees in writing to the Secretary of the Company together with a
statement of the nominee's qualifications in accordance

with the Company's Bylaws. Such information must be received no later than
July 15, 2003 with respect to nominations for election at the 2003 Annual
Meeting of Shareholders.

During fiscal year 2002, the Compensation and Stock Option Committee met
five times, the Corporate Governance Committee met two times, and the Audit
Committee met eleven times. All of the Board's committees also met informally
by telephone during the fiscal year as needed. The Board of Directors held four
meetings during fiscal year 2002.

Each director who is not an employee of the Company receives an annual fee
of $16,000 for service as a director and committee member. Non-employee
directors receive a fee of $1,000 for attendance at meetings of the full Board
of Directors. In addition, each non-employee director serving as a committee
chairperson receives an additional annual fee of $3,500 and all non-employee
director committee members receive a fee of $500 for attendance at committee
meetings. Directors fees are payable in either cash or in shares of the
Company's Common Stock having a fair market value on the date of payment equal
to the fee being paid based upon an annual election made by each director.
Directors may also elect to defer receipt of fees. All directors are reimbursed
for travel expenses related to meetings of the Board.

Directors of the Company who are not employees also hold and receive stock
options under the Company's 1991 Non-Employee Directors' Stock Option Plan and
the Company's 2000 Stock Incentive Plan. Under these plans, each non-employee
director is granted an option on the third business day following each Annual
Meeting of Shareholders to purchase 5,100 shares of the Company's Common Stock
at the fair market value on such date. Each option has a term of 10 years,
becomes exercisable in installments and is fully exercisable after three years
from date of grant.

REPORT OF THE AUDIT COMMITTEE

The following report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Exchange Act of 1933 or the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this Report by reference therein.

The primary responsibilities of the Audit Committee are to assure the
directors, regulators and shareholders that the Company's business controls and
financial accounting and reporting practices are adequate and effective and
that the Company is complying with applicable rules and regulations relating
thereto. The Audit Committee's activities are governed by a written charter
adopted by the Board of Directors and included as an exhibit to the Company's
2001 Proxy Statement. The Audit Committee is currently reviewing the charter in
light of the recently enacted Sarbanes-Oxley Act of 2002 and the actions of
other regulatory bodies and expects to modify the charter on a timely basis as
needed.

The Audit Committee has implemented procedures to ensure that during the
course of each fiscal year it devotes the attention that it deems necessary or
appropriate to each of the matters assigned to it under the Committee's
charter. As part of its efforts to carry out its responsibilities, the
Committee met eleven times during fiscal year 2002.

In overseeing the preparation of the Company's financial statements, the
Committee met with the Company's outside auditors, Ernst & Young LLP ("Ernst &
Young"), both with and without Company management to review and discuss the
Company's annual financial statements prior to their issuance and to discuss
significant accounting issues. Additionally, the Committee met with Ernst &
Young and management prior to the issuance of the Company's quarterly financial
statements. Management advised the Committee that all financial statements were
prepared in accordance with generally accepted accounting principles, and the
Committee discussed the statements with both management and Ernst & Young. The
Committee's review included discussion with Ernst & Young of matters that are
required to be discussed pursuant to Statement on Auditing Standards No. 61
(Communication With Audit Committees).

The Committee also discussed with Ernst & Young matters relating to Ernst &
Young's independence, including disclosures made by Ernst & Young to the
Committee as required by the Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees).

On the basis of these reviews and discussions, the Committee recommended to
the Board of Directors that the Board approve the inclusion of the Company's
audited consolidated financial statements in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 2002, for filing with the
Securities and Exchange Commission.

CERTAIN FEES

The following disclosures are required by Securities and Exchange Commission
regulations.

Audit Fees

The following represents the aggregate fees of Ernst & Young for
professional services rendered for the audit of the Company's annual financial
statements for fiscal year 2002 and the review of the Company's quarterly
earnings releases and Form 10-Q's for fiscal year 2002: $258,100.

Financial Information Systems Design and Implementation Fees

The Company did not engage Ernst & Young to provide professional services
for financial information systems, design or implementation or which are
otherwise of the type identified in Rule 2-01(4)(ii)(B) of Regulation S-X for
fiscal year 2002.

All Other Fees

The following represents the aggregate fees billed for services rendered by
Ernst & Young, other than the services covered under the headings "Audit Fees"
and "Financial Information Systems Design and Implementation Fees" for fiscal
year 2002: $1,229,400. These fees included $403,100 for audit related services
(primarily acquisition due diligence, statutory audits and advisory services)
and $826,300 for tax compliance and consulting services. The Audit Committee
believes that the provision of the above services by Ernst & Young is
compatible with maintaining Ernst & Young's independence.

MEMBERS OF THE AUDIT COMMITTEE

Joseph C. Lawyer, Chairman
J. Terry Dewberry
John C. Miles II

MATTERS TO BE ACTED UPON

1. ELECTION OF DIRECTORS

The Board of Directors, acting pursuant to the Restated Certificate of
Incorporation of the Company, has determined that the number of directors
constituting the full Board of Directors shall be eleven at the present time.

The Board is divided into three classes. One such class is elected every
year at the Annual Meeting of Shareholders for a term of three years.
Accordingly, a class is to be elected at the 2002 Annual Meeting of
Shareholders, with each director so elected to hold office until the 2005
Annual Meeting of Shareholders or until the director's prior death, disability,
resignation or removal.

The Board of Directors has nominated J. Terry Dewberry, Donald H. Jones and
James W. Liken for reelection to the Board for the class of 2005, and each of
them has agreed to serve if elected. The Board of Directors recommends that the
shareholders vote "FOR" the election of the three persons nominated to the
Board of Directors. Proxies are solicited in favor of these nominees and will
be voted for them unless otherwise specified. If any nominee becomes unable or
unwilling to serve as director, it is intended that the proxies will be voted
for the election of such other person, if any, as shall be designated by the
Board of Directors.

Information concerning those nominees for director (class of 2005) and the
other directors who will continue in office after the meeting (classes of 2003
and 2004) is set forth below.

Name Position with the Company
---- -------------------------

Class of 2005
J. Terry Dewberry Director
Donald H. Jones Director
James W. Liken President, Chief Executive Officer and Director

Class of 2004
Douglas A. Cotter Ph.D. Director
Gerald E. McGinnis Chairman of the Board
Craig B. Reynolds Executive Vice President, Chief Operating Officer and Director
Candace L. Littell Director

Class of 2003
James H. Hardie Director
Joseph C. Lawyer Director
Sean McDonald Director
John C. Miles II Director

Dr. Cotter is 59 years old. He has been a director of the Company since
February 1989. Since July 2000, Dr. Cotter has been a Senior Vice President of
Leerink Swann and Company, an investment banking firm focusing on life science
and medical corporations. From April 1998 to July 2000 and from 1985 to 1996,
Dr. Cotter was President of Healthcare Decisions, Inc., a Massachusetts health
care and biotechnology consulting firm specializing in corporate development,
strategic planning and acquisitions. Between April 1996 and March 1998,
Dr. Cotter was Vice President of Decision Resources, an international
consulting firm specializing in the health care industry (primarily
pharmaceuticals). For nineteen years prior to joining Healthcare Decisions,
Dr. Cotter was employed by Corning Glass Works, where he held various
management positions in research, product development and clinical information
systems.

Mr. Dewberry, age 58, is a private investor. He has served as a director of
the Company since the completion of the merger between the Company and
Healthdyne Technologies, Inc. ("Healthdyne") on February 11, 1998. From March
1992 until March 1996, Mr. Dewberry was Vice Chairman of Healthdyne, Inc. From
1984 to 1992, Mr. Dewberry served as President and Chief Operating Officer, and
Executive Vice President of Healthdyne, Inc.

Mr. Hardie is 72 years old. He has been a director of the Company since
November 1991. He is a lawyer and of counsel to Reed Smith LLP, a leading law
firm with approximately 730 lawyers in 14 offices in the United States and the
United Kingdom, which since 1988 has performed legal services for the Company.
Mr. Hardie was a partner of that firm from 1962 through June 1999. He is also
President and a Trustee of the Audubon Society of Western Pennsylvania, a
trustee of two other non-profit corporations, and a director of one other
corporation, the securities of which are not publicly traded.

Mr. Jones is 65 years old. He has been a director of the Company since May
1996. Currently, Mr. Jones serves as chairman of Triangle Capital Corporation,
an investment banking and management firm. From 1990 to 1996, Mr. Jones served
as Chairman of IndustryNet, an online electronic commerce company linking
business-

to-business buyers and sellers through electronic networks including the
Internet. Mr. Jones founded IndustryNet in 1990. In 1996 IndustryNet, together
with a subsidiary of another large corporation, was merged into Nets, Inc.
Mr. Jones was not an executive officer of Nets, Inc., which filed for
bankruptcy under Chapter 11 in May, 1997. In 1982 Mr. Jones launched
International Cybernetics Corporation ("ICC"), a developer of advanced factory
automation control systems. In 1985 Mr. Jones merged ICC into the Industrial
Automation Systems Division of Gould Electronics Inc. ("Gould") and he became
Vice President of Business Development for Gould. In 1988 the division was sold
to AEG, a West German based multinational company and Mr. Jones ceased to be an
officer.

Mr. Lawyer is 57 years old. He has been a director of the Company since
1994. Since May 2000, Mr. Lawyer has served as Vice Chairman of Reunion
Industries, Inc. ("Reunion") which designs, manufactures and markets a broad
range of fabricated and machined parts and products and also manufactures high
volume, precision plastic parts. Mr. Lawyer served as President and Chief
Executive Officer of Reunion from March 2000 until his retirement from that
position in May 2000. He has also been a Director of Reunion since March 2000.
From 1988 through March 2000, he was President, Chief Executive Officer and a
Director of Chatwins Group, Inc. ("CGI") which merged with Reunion in March
2000. From 1986 to 1988 he was President, Chief Executive Officer and a
Director of CP Industries, a predecessor company of CGI. Prior thereto, he held
various operations, marketing, sales, finance and strategic planning positions
for U.S. Steel Corporation for 17 years.

Mr. Liken is 53 years old. He has served as a director of the Company since
January 1999 and President and Chief Executive Officer since August 1999.
Mr. Liken was President and owner of Liken Home Medical, Inc. from 1990 until
he sold that business in July 1998. Mr. Liken was a private investor from July
1998 until August 1999. In addition, Mr. Liken was a consultant to the Company
from July 1998 until January 1999. Mr. Liken has been active in the home
medical business since 1971, serving in management and ownership capacities for
several predecessor companies to Liken Home Medical, Inc. Mr. Liken also served
on the Board of Directors of the National Association for Medical Equipment
Services (NAMES) from 1984 to 1998 and was the Chairman of that board from 1987
to 1989 and again from 1997 to 1998. Since 1997, Mr. Liken has been a member of
the Business Advisory Council of the Federal Reserve Bank of Cleveland.

Ms. Littell is 45 years old. She has served as a director of the Company
since 1999. She previously served as a director of the Company in 1997. From
January 1995 through January 1998, and again since September 1999, she has been
the President of C L Littell & Associates, Inc., a consulting firm
headquartered in Virginia, specializing in health policy, payment and outcomes
management for medical technology companies and related health care
organizations. During the period from February 1998 through August 1999,
Ms. Littell served as Senior Health Policy Advisor to the Health Industry
Manufacturers Association ("HIMA"), where she advised the association's
membership and executive management on health care financing developments
affecting the medical technology industry. Between 1992 and 1994, Ms. Littell
was Executive Director of the Health Care Technology Institute, a privately
funded organization where she oversaw the development of research related to
the impact on the economy of the medical technology industry. From 1989 through
1991, she served as Vice President of Payment and Policy of HIMA.

Mr. McGinnis is 68 years old. He has been a director of the Company since
1977 and Chairman of the Board since November 1994. He served as Chief
Executive Officer of the Company between 1977 and 1994, and President between
1984 and 1994. Prior to 1977, Mr. McGinnis was President of Lanz Medical
Products Corporation, the predecessor to the Company. From 1971 to 1975,
Mr. McGinnis also served on the staff of the Critical Care Department,
Presbyterian University Hospital, Pittsburgh, where he participated in various
medical engineering programs seeking the application of technology to medical
care. Prior thereto, Mr. McGinnis was head of the Surgical Research Department
at Allegheny General Hospital, Pittsburgh, for two years and for eleven years
he was employed at the research and development laboratory of Westinghouse
Electric Corporation. At Westinghouse he served six years as the Manager of the
Bio-Engineering Department and headed the medical product development
activities.

Mr. McDonald is 42 years old. He has been a director of the Company since
2000. Mr. McDonald is the President and Chief Executive Officer of Precision
Therapeutics, Inc., a biomedical company providing

comprehensive, personalized cancer management information, a position he has
held since January 2001. From July 1999 to September 2000, he served as Group
President of the Automation Group of McKessonHBOC, a diversified Fortune 100
healthcare company. From April 1996 through June 1999, Mr. McDonald served as
President of the Automated Healthcare Division of McKesson Health Systems, a
successor company to Automated Healthcare, Inc. which Mr. McDonald founded in
1990. Automated Healthcare, Inc. was acquired by McKessonHBOC in April 1996.
For ten years prior to founding Automated Healthcare, Inc., Mr. McDonald held
engineering and engineering management positions with divisions of Westinghouse
Electric Corporation.

Mr. Miles is 60 years old. He has been a director of the Company since
February 2002. Mr. Miles is the Chairman and Chief Executive Officer of
Dentsply International, Inc. ("Dentsply"), the world's largest manufacturer of
dental products. Mr. Miles has served as Dentsply's Chief Executive Officer
since January 1996 and as the Chairman of its Board of Directors since May 1998.

Mr. Reynolds is 54 years old. He has been a director of the Company since
the completion of the merger between the Company and Healthdyne on February 11,
1998. Prior to joining the Company, Mr. Reynolds served as President of
Healthdyne from January 1987 until completion of the merger with the Company
and served as Chief Executive Officer starting in 1993. Previously, he served
as President of the Healthdyne Cardiovascular Division of Healthdyne, Inc. from
January 1985 to December 1986 and as Vice President of Business and Technology
Development of the Technologies Division of Healthdyne, Inc. from January 1981
to December 1984.

2. SELECTION OF AUDITORS

The Audit Committee has selected the independent public accounting firm of
Ernst & Young as the auditors to examine the consolidated financial statements
of the Company for fiscal year 2003. The Board of Directors recommends that the
shareholders vote "FOR" ratification of the appointment of Ernst & Young. The
proxies solicited on behalf of the Board of Directors will be voted to ratify
selection of that firm unless otherwise specified.

Ernst & Young has served as the independent auditors for the Company since
1984. Representatives of Ernst & Young are expected to be present at the Annual
Meeting of Shareholders. They will have the opportunity to make statements if
they desire to do so and will be available to respond to appropriate questions.

3. OTHER BUSINESS

The Board of Directors does not know of any other business to be presented
to the Annual Meeting of Shareholders. If any other matters properly come
before the meeting, however, the persons named in the enclosed form of proxy
will vote the proxy in accordance with their best judgment.

VOTE REQUIRED

Under Delaware law, the three nominees for election as directors at the
Annual Meeting of Shareholders who receive the greatest number of votes cast
for the election of directors by the holders of the Company's Common Stock
present in person or represented by proxy and entitled to vote at the meeting,
a quorum being present, will be elected as directors. The affirmative vote of
the holders of a majority of the shares of the Company's Common Stock present
in person or represented by proxy and entitled to vote at the Annual Meeting of
Shareholders, a quorum being present, is necessary for ratification of the
selection of Ernst & Young. The aggregate number of shares for which a vote
"For", "Against" or "Abstain" is made is counted for the purpose of determining
the minimum number of affirmative votes required for approval, and the total
number of votes cast "For" approval is counted for the purpose of determining
whether sufficient votes are received. An abstention from voting on a matter
other than election of directors by a shareholder present in person or
represented by proxy and entitled to

vote has the same legal effect as a vote "Against" the matter. If a broker or
similar nominee limits on a proxy card the number of shares voted on a proposal
or indicates that the shares represented by a proxy card are not voted on the
proposal, such broker "non-votes" will not be voted on the proposal and will
not be counted in determining the number of affirmative votes required for
approval.

EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation paid to
the Chief Executive Officer of the Company during fiscal year 2002 and the four
highest paid executive officers other than the Chief Executive Officer (the
"named officers") for services rendered in all capacities to the Company and
its subsidiaries during the fiscal years ended June 30, 2002, 2001 and 2000.

Summary Compensation Table

Long Term Compensation
-----------------------------
Annual Compensation Awards Payouts
---------------------------- --------------------- -------
Securities
Other Annual Restricted Underlying LTIP All other
Salary Bonus Compensation Stock Options/ Payouts Compensation
Name and Principal Position Year ($) (A) ($) ($) (B) Awards SAR's (#) ($) ($) (C)
--------------------------- ---- ------- ------- ------------ ---------- ---------- ------- ------------

James W. Liken 2002 247,692 75,000 -- -- 40,000 -- 76,529
President and Chief 2001 100,000 302,320 -- -- 48,150 -- 76,529
Executive Officer 2000 83,946 45,833 -- -- 381,847 -- 22,830

John L. Miclot 2002 291,622 92,197 -- -- 30,000 -- 54,207
Senior Vice President, 2001 259,327 70,595 -- -- 30,000 -- 49,743
President--Homecare 2000 235,536 31,250 -- -- 100,000 -- 45,173
Division

Craig B. Reynolds 2002 317,812 51,000 -- -- 30,000 -- 68,690
Executive Vice President, 2001 289,151 78,013 -- -- 40,000 -- 67,863
Chief Operating Officer 2000 275,059 34,978 -- -- 100,000 -- 48,513

Gerald E. McGinnis 2002 250,000 -- -- -- 20,000 -- 75,011
Chairman of the Board 2001 212,390 -- -- -- 7,500 -- 75,011
2000 190,258 -- -- -- 20,000 -- 74,711

Geoffrey Waters 2002 184,183 58,957 -- -- 15,000 -- 37,387
President-International 2001 167,640 49,725 -- -- 14,000 -- 33,637
2000 159,190 19,976 -- -- 10,000 -- 32,505

--------
(A) This column represents base salary and includes tax deferred Section 401(k)
contributions under the Company's Retirement Savings Plan.

(B) The dollar value of perquisites and other personal benefits is required to
be disclosed under this column if the amount for any named officer equals
or exceeds $50,000 or 10% of the total annual salary and bonus. The dollar
value of the perquisites and other personal benefits did not exceed the
threshold amount for any of the named officers for any of the years covered
in the table.

(C) The amounts in this column for 2002 represent the following: matching
contributions under the Company's Retirement Savings Plan (Mr. Liken,
$5,100; Mr. Miclot, $5,100; Mr. McGinnis, $5,100; Mr. Waters, $5,100);
annuity plan premiums and related income tax gross ups paid on the
officer's behalf (Mr. Liken, $71,429; Mr. Miclot, $49,107; Mr. Reynolds,
$54,433; Mr. McGinnis $69,911; Mr. Waters, $32,287); and reimbursement of
interest incurred on a loan by a commercial bank to an officer (Mr.
Reynolds, $14,257).

STOCK OPTIONS

The following table sets forth information concerning stock option grants
made to the named officers during the fiscal year ended June 30, 2002. The
Company has not granted any stock appreciation rights ("SAR's") to any of the
named officers or any other officers or employees of the Company.

Option Grants in Last Fiscal Year
All Named Officers

Number of
Securities % of Total
Underlying Options
Options granted to Exercise of
Granted employees Base Price
Name (#) (A) in fiscal year ($/Sh) (B) Expiration Date 5% ($) 10% ($)
---- ---------- -------------- ----------- --------------- ------- ---------

James W. Liken 40,000 6% 33.68 August 22, 2011 847,389 2,147,437
John L. Miclot 30,000 4% 33.68 August 22, 2011 635,542 1,610,578
Craig B. Reynolds 30,000 4% 33.68 August 22, 2011 635,542 1,610,578
Gerald E. McGinnis 20,000 3% 33.68 August 22, 2011 423,694 1,073,718
Geoffery Waters 15,000 2% 33.68 August 22, 2011 317,771 805,289

--------
(A) Options granted in 2002 are exercisable starting 12 months after the grant
date, with 25% of the shares covered thereby becoming exercisable at that
time and an additional 25% of the option shares becoming exercisable on
each successive anniversary date, with all option shares exercisable on the
fourth anniversary date. Under the terms of the Company's stock option
plans, this exercise may be accelerated in certain specific situations.

(B) Under the terms of the Company's stock option plans, there are not
provisions that permit these options to be repriced other than to reflect
stock splits, stock dividends, or similar events.

The following table sets forth information concerning the stock option
exercises by the named officers during the fiscal year 2002 and the unexercised
stock options held at June 30, 2002 by the named officers.

Aggregated Option Exercises in Last Fiscal Year FY-End Option Values

Value of Unexercised In-
Number of Unexercised the-Money Options at
Options at FY-Ends (#) FY-End ($)
Shares Value ------------------------- ------------------------
Acquired on Realized Exercisable (2)/
Name Exercise (3) ($) (1) Exercisable/Unexercisable Unexercisable
---- ------------ --------- ------------------------- ------------------------

James W. Liken -- -- 295,400 / 174,600 7,457,416 / 3,146,703
John L. Miclot -- -- 57,025 / 107,025 1,000,352 / 1,741,502
Craig B. Reynolds 50,000 1,293,312 63,575 / 114,525 741,357 / 1,858,352
Gerald E. McGinnis -- -- 35,575 / 38,325 836,710 / 410,441
Geoffrey Waters 9,100 175,130 20,574 / 34,926 339,894 / 370,469

--------
(1) Represents the amount by which the fair market value of the shares acquired
on exercise at the exercise date exceeded the exercise price of such shares.

(2) Represents the amount by which the fair market value ($34.05) of the shares
covered by the stock options on June 30, 2002 exceeded the exercise price
of such options.

Employment Agreements and Other Transactions

Effective October 1, 1999 and as subsequently amended, the Company entered
into an Employment Agreement with Mr. Liken providing for his employment as
President and Chief Executive Officer of the Company for an initial term ending
on September 30, 2004 absent prior notice by either the Company or Mr. Liken at
the end of the initial term. The Agreement will be automatically extended for
an additional three year term and thereafter will be extended each year for one
additional year. The Agreement as amended provides for a base salary of
$500,000 per year effective as of February 1, 2002 (subject to annual
adjustment) plus participation in the Company's benefit and incentive plans on
a basis comparable with other executives in the Company. The Agreement also
provided for a grant of options in fiscal year 2000 to Mr. Liken to purchase
263,700 shares of the Company's Common Stock at $8.38 per share (the fair
market value at the date of grant) pursuant to the Company's 1992 Stock
Incentive Plan. See "Report of the Compensation Committee--CEO Compensation"
below.

Effective November 11, 1997, the Company entered into Employment Agreements
with Messrs. Reynolds and Miclot providing for their employment as Senior Vice
President (now Executive Vice President and Chief Operating Officer) and Group
Vice President--Sleep Disorders (now Senior Vice President and President-- Home
Care Division), respectively, for three year terms ending February 11, 2001.
The Agreements are automatically extended each year for an additional year
absent prior notice by either party. The Agreements provide for base salaries
of $251,538 for Mr. Reynolds and $203,679 for Mr. Miclot (subject to annual
adjustment) plus participation in the Company's benefit and incentive plans on
a basis comparable with other executives in the Company. Effective August 16,
2000, Mr. Reynolds' Employment Agreement was amended to, among other things,
provide for the payment to Mr. Reynolds of an amount equal to 150% of his then
current base salary upon the expiration of the Employment Agreement or the
termination of the Employment Agreement by the Company or Mr. Reynolds for any
reason. Such amount is generally payable over a two year period beginning on
the date of expiration or termination of the Agreement. As part of the
amendment, Mr. Reynolds agreed to forego certain rights under his Employment
Agreement.

Mr. Reynolds is also entitled to certain benefits pursuant to a defined
benefit plan that was maintained by Healthdyne. The estimated annual benefit
payable to Mr. Reynolds under this plan, assuming retirement at age 65, is
approximately $66,000. This benefit will be reduced by any Social Security
benefits paid to Mr. Reynolds after retirement.

Effective April 1, 1999 the Company entered into an Employment Agreement
with Mr. McGinnis providing for his employment as Chairman of the Company's
Board of Directors until March 31, 2004, subject to termination by either party
with at least 12 months notice. Under the terms of the Agreement, Mr. McGinnis
shall not be required to devote more than approximately two-thirds of his
working time to the performance of his duties as Chairman, including insuring
that the policies and directions of the Board are being carried out by the
Company's management and assisting management in its efforts to do so,
assisting the Company's President in fulfilling the Company's civic and
charitable responsibilities, assisting in developing and maintaining strategic
plans for the Company's future, the development of its present and new products
and strategies for continued operation and growth, and providing guidance and
direction in new product development as well as acquisition of new products and
businesses. The Agreement provides for a base salary at the rate of $190,000
per year (subject to annual adjustment) plus participation in the Company's
benefit plans on a basis comparable with other executives in the Company.

Effective September 1, 2000, the Company entered into an Employment
Agreement with Mr. Waters providing for his employment as
President--International for a three year term ending September 1, 2003. The
agreement is automatically extended each year for one additional year absent
prior notice by either party. The Agreement provides for a base salary of
$178,048 per year (subject to annual adjustment) plus participation in the
Company's benefit and incentive plans on a basis comparable with other
executives in the Company.

Executive Officers

The executive officers of the Company, other than those who also serve as
directors and are described in the preceding pages, are Daniel J. Bevevino, 42,
Vice President and Chief Financial Officer; Steven P. Fulton, 43, Vice
President and General Counsel; John L. Miclot, 43, Senior Vice President and
President--Home Care Division; Geoffrey Waters, 52, President--International;
Paul L. Woodring, 62, President--Hospital Division; and Susan A. Lloyd, 53,
Vice President--Asthma and Allergy Division.

Mr. Bevevino joined the Company in 1988 as Manager of Cost Accounting. From
1990 to 1994 Mr. Bevevino served as Controller. In November of 1994, Mr.
Bevevino was elected Chief Financial Officer and in May 1996 was also elected
Vice President. Prior to his affiliation with the Company, Mr. Bevevino, who is
a Certified Public Accountant, spent five years with Ernst & Young.

Mr. Fulton joined the Company on a part time basis in May 1995 serving as
General Counsel. In January 1996 his role was expanded to full time status. In
October 1996, in addition to his General Counsel role, Mr. Fulton was elected
Vice President, Human Resources. In February 1998, Mr. Fulton was appointed to
the position of Vice President and General Counsel. Prior to joining the
Company, Mr. Fulton was a partner in the Pittsburgh office of Reed Smith LLP.
He joined the law firm in May 1984. Prior to this employment, he served briefly
in an engineering capacity for Westinghouse Electric Corporation.

Ms. Lloyd, as part of the Company's merger with Healthdyne, joined the
Company in February 1998 as Vice President--Sales and Marketing, Asthma and
Allergy. In July 1999, she was named Vice President--Asthma and Allergy
Division. Ms. Lloyd was employed by Becton, Dickinson and Company from 1974
through 1990, serving in a variety of sales and marketing positions, including
most recently as Director of Marketing for the Becton Dickinson Acute Care
Division. In 1990, she joined Healthscan Products, Inc. ("Healthscan") as
Director of Marketing. In 1994, Healthdyne acquired Healthscan and Ms. Lloyd
was named Vice President, Marketing for Healthscan. In 1997, she was named Vice
President, Sales and Marketing for Healthscan, a position she held until
Healthdyne was merged with Respironics.

Mr. Miclot, as part of the Company's merger with Healthdyne, joined the
Company in February 1998 as Group Vice President--Sleep Disorders. In August
1998, in addition to his Group Vice President role he acquired the added
responsibility of Vice President Sales and Marketing. In July 1999, Mr. Miclot
was named Senior Vice President and President--Home Care Division. From 1995 to
February of 1998, Mr. Miclot had been Senior Vice President Sales and Marketing
for Healthdyne. Prior to that time, he was Vice President of Marketing for
Medex, Inc. which he joined in February 1994. Mr. Miclot previously held
several senior positions in marketing, international activities and sales with
Ohmeda, a Division of British Oxygen Corporation, which he joined in 1988.

Mr. Waters, as part of the Company's acquisition of LIFECARE International,
Inc., joined the Company in October 1996, as Vice President Customer
Satisfaction. In February 1998, Mr. Waters was transitioned to the position of
Vice President--International Sales and Marketing. In July 1999, Mr. Waters was
named Vice President--International and was named President--International in
May 2000. Prior to joining the Company, Mr. Waters was employed in various
capacities by LIFECARE International, Inc. from 1984 to 1996. His last position
with LIFECARE was President and Chief Operating Officer.

Mr. Woodring, as part of the Company's merger with Healthdyne, joined the
Company in February 1998 as Vice President--Operations, Respiratory. In July
1999, Mr. Woodring was named Vice President--Hospital Division and was named
President--Hospital Division in February 2002. Mr. Woodring was employed by
Puritan-Bennett (now Nellcor Puritan Bennett, a division of Tyco International
Ltd.) from 1976 to 1995, serving in a variety of engineering and management
positions, including most recently as Vice President and General Manager of the
Ventilator Systems Division. Mr. Woodring formed a new company, InVentive
Technologies, in 1995, and was employed there until joining Healthdyne in 1996.

REPORT OF THE COMPENSATION COMMITTEE

Introduction

Decisions regarding compensation of the Company's executive officers
generally are made based on recommendations by the Compensation Committee,
which is composed of independent directors. All decisions of the Compensation
Committee relating to compensation of the Company's executive officers are
reviewed and approved by the full Board. Set forth below is a report submitted
by the members of the Board's Compensation Committee addressing the Company's
compensation policies for fiscal year 2002 as they affected executive officers
of the Company, including Mr. Liken, the Company's President and Chief
Executive Officer, and Messrs. Miclot, Reynolds, McGinnis and Waters, the four
executive officers other than Mr. Liken who were, for fiscal year 2002, the
Company's most highly compensated executive officers. Through May 2002, the
Compensation Committee consisted of Messrs. Dewberry, Hardie, and Lawyer and
Ms. Littell. In May 2002, the Company's Stock Option Committee and its
Compensation Committee were combined into the Compensation Committee and
Messrs. McDonald, Jones and Cotter were appointed to this committee, replacing
Messrs. Dewberry, Hardie, and Lawyer and Ms. Littell who served on the
Compensation Committee and Messrs. Dewberry and Lawyer and Ms. Littell who
served on the Stock Option Committee.

Compensation

The Company's executive and key employee compensation program consists of a
base salary component, a component providing the potential for an annual profit
sharing bonus based on overall Company performance as well as individual
performance, and a component providing the opportunity to earn stock options
linking the employee's long-term financial success to that of the Company's
shareholders.

Cash Compensation

Officers are compensated within salary ranges that are generally based on
similar positions in companies of comparable size and complexity to the
Company. Comparable companies are selected based on products marketed,
customers and markets served, geographic distribution, manufacturing locations
and complexity of operations (which involves several factors, with sales
revenue being a major factor) for those companies operating in the respiratory
products market. In addition, the Company participates in compensation surveys
and receives summary compensation survey information from these and other
sources.

The methodology used to determine guidelines for compensation was a matching
of each executive's responsibilities to a comparable position described in the
surveys. Based on this matching, each executive's salary was compared to the
corresponding salary range of comparable executives in the surveys. Then, an
appropriate salary range (e.g., 25th percentile, median, 75th percentile) was
selected based on the comparison of the executive's responsibilities to those
of the comparable position in the surveys. The comparable companies operating
in the respiratory market and other data were then examined for reasonableness
on a position-by-position basis. Salaries were established based on the
performance of the executive given his responsibilities within a specific
position and the relationship of the current salary to the appropriate
percentile for the most comparable position available within the surveys.

The primary level of compensation is based on a combination of years of
experience and performance. An officer's performance is based on how well he
meets objectives set by his supervisor through a Company-wide process of
stating objectives for each associate (employee), insuring compatibility of
objectives among associates, reviewing performance against objectives and
recognizing the accomplishment of these objectives. The Board of Directors
establishes and reviews the objectives of the Chairman of the Board, and the
Board also assesses the Chairman's performance compared to these objectives.
The salary of all officers is reviewed annually in November, with the amount of
the increases (which take effect the following February) based on factors such
as Company performance, general economic conditions, marketplace compensation
trends and

individual performance. The relative weight of each of these factors in
determining salary increases varies for each annual salary determination. There
is no fixed weighting. However, in the past, the factors which have generally
had the greatest influence on salary increases have been (in decreasing
significance) Company performance, individual performance, marketplace trends
in compensation and general economic conditions.

Profit Sharing and Other Bonuses

The second compensation component is a Company-wide profit sharing program
under the Company's Profit Sharing Bonus Plan. Bonuses are primarily based on
the Company's annual financial performance and secondarily on the performance
of the individual. Bonuses under this program generally range from zero to 50%
of base salary. The measures of annual financial performance used in
determining the amount of bonuses include sales growth, earnings growth and
achievement of net income targets. Based on these factors, profit sharing
bonuses were accrued for fiscal year 2002 for the named officers in the amounts
set forth in the Summary Compensation Table above, other than Mr. Waters' bonus
set forth which was based on international sales results.

Stock Options

The third major component of the officer's compensation consists of stock
options. The primary purpose of granting stock options is to link the officers'
financial success to that of the stockholders of the Company. The exercise
price of stock options is determined by Compensation Committee at the time the
option is granted, but may not be less than the fair market value of the
Company's Common Stock as of the date of grant. Options generally become
exercisable commencing a minimum of six months from the date of grant and are
exercisable for a maximum period of 10 years, as determined by the Compensation
Committee, and all options have vesting periods of generally not less than
three years.

The Stock Option Committee awarded stock options to 383 of the Company's
employees during fiscal year 2002. Stock options granted to named officers
during fiscal year 2002 are listed on the table entitled "Option Grants in Last
Fiscal Year."

CEO Compensation

The following factors constitute the basis for the compensation paid to Mr.
Liken, who served as the Company's Chief Executive Officer ("CEO") during
fiscal year 2002: his responsibilities as the Company's CEO; the Company's
ability to achieve its objectives for revenue and earnings growth and its
objectives for long-term growth; the salaries paid to other CEO's of comparable
companies as reported in industry surveys; and his experience compared to the
CEO's of comparable companies in industry surveys. In Mr. Liken's case, the
Compensation Committee had determined in fiscal years 2000 and 2001 that it was
most appropriate for his compensation to be highly correlated to the Company's
stock price and financial performance and to be more heavily weighted towards
performance-based cash bonuses and stock options rather than base salary.
Accordingly, during those fiscal years his annual base salary was fixed at
$100,000 and he received profit sharing bonuses and stock option grants at
levels higher than the Company's other executives. Pursuant to an amendment to
Mr. Liken's Employment Agreement referenced in the "Executive Compensation"
section of this Proxy Statement, Mr. Liken's annual base salary was adjusted to
$500,000 effective February 1, 2002 in recognition of his contribution to the
Company's performance and its substantive increase in value. He was also
awarded a profit sharing bonus of $75,000 for fiscal year 2002 as reflected in
the Summary Compensation Table above. Stock options granted to Mr. Liken in
fiscal year 2002 are shown in the Summary Compensation Table and in the Option
Grant table. The Compensation Committee believes that Mr. Liken's current
compensation components reflect market levels.

Compensation Committee of the Company's Board of Directors:

Joseph C. Lawyer, Sean McDonald, Chairman
Chairman (February 1999 (May 2002--present)
through May 2002)

J. Terry Dewberry Douglas A. Cotter (May
(February 1999 through 2002--present)
May 2002)

James H. Hardie (February Donald H. Jones (May
1999 through May 2002) 2002--present)

Candace L. Littell
(February 1999 through
May 2002)

Stock Option Committee of the Company's Board of Directors:

Joseph C. Lawyer,
Chairman (February 1999
through May 2002)

J. Terry Dewberry
(February 1999 through
May 2002)

Candace L. Littell
(February 1999 through
May 2002)

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Securities and Exchange Commission's rules relating to the disclosure of
executive compensation require that the Proxy Statement include certain
information about "insider" participation on compensation committees and about
specific kinds of "interlocking" relationships between the compensation
committees of different companies, under the foregoing caption. All members of
the Compensation Committee are outside directors, and no such interlocking
relationships exist.

The Compensation Committee of the Board of Directors is responsible for
executive compensation decisions as described above under "Board of Directors
and Committees of the Board." During fiscal year 2002, the Committee consisted
of Mr. Lawyer (Chairman), Messrs. Dewberry and Hardie, and Ms. Littell through
May 2002 and Mr. McDonald (Chairman), and Messrs. Jones and Cotter thereafter.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the
Securities and Exchange Commission (the "Commission") and the National
Association of Securities Dealers National Market System initial reports of
ownership and reports of change in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than ten percent
shareholders are required by Commission regulation to furnish the Company with
copies of all Section 16(a) forms they file.

All Forms 3, 4 and 5 have been filed within the guidelines of the Commission
during fiscal year 2002 with the following exceptions; Messrs. Jones, Lawyer
and McDonald had four late filings and Mr. Miles had one late filing, all of
which related to the receipt, at their election, of their directors' fees in
shares of the Company's common stock (see "Board of Directors and Committees of
the Board" above). In making this disclosure, the Company has relied solely on
the written representation of its directors and officers and copies of the
reports that they have filed with the Commission.

PERFORMANCE GRAPH

The following graph shows a five year comparison of cumulative total returns
for the Company, the NASDAQ Market Index, and the S&P 500 Healthcare Equipment
and Supplies Index. The graph assumes that the value of the investment in the
Company's Common Stock and each index was $100 at June 30, 1997, and that all
dividends were reinvested.

[CHART]

Fiscal Year Ended June 30,
-----------------------------------------------
1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- -------

Respironics Inc........................ $100.00 $ 73.67 $ 71.60 $ 85.21 $140.88 $161.18
NASDAQ Index........................... $100.00 $131.39 $186.27 $275.03 $149.82 $101.47
S&P 500 Healthcare Equipment & Supplies
Index................................ $100.00 $132.23 $162.30 $178.17 $172.27 $168.39

MISCELLANEOUS

The cost of soliciting proxies will be borne by the Company. Following the
original mailing of the proxy solicitation material, proxies may be solicited
personally, or by telephone, facsimile or other electronic means, by employees
of the Company and its subsidiaries who will receive no additional compensation
for such services. The Company will reimburse brokerage houses and other
custodians, nominees and fiduciaries for reasonable expenses incurred in the
sending of proxy solicitation material and the 2002 Annual Report to beneficial
owners of stock held in their names.

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 2002 MAY
BE OBTAINED WITHOUT CHARGE BY ANY SHAREHOLDER UPON WRITTEN REQUEST TO DORITA A.
PISHKO, CORPORATE SECRETARY, RESPIRONICS, INC., 1010 MURRY RIDGE LANE,
MURRSYVILLE, PENNSYLVANIA 15668.

Dorita A. Pishko
Corporate Secretary

October 14, 2002

This proxy is solicited on behalf of the Board of Directors and will be voted as
specified. If no choice is specified, this proxy will be voted FOR Items 1 and
2. A vote FOR the election of nominees listed includes discretionary authority
to vote for a substitute if any nominee is unable to serve or for good cause
will not serve.

Please mark your votes as indicated in this example [X]

1. Election of Directors. NOMINEES: 01 J. Terry Dewberry, 02 Donald H. Jones,
and 03 James W. Liken to the class of 2005.

FOR all nominees (listed above WITHHOLD AUTHORITY to vote for all
except as noted to the contrary) nominees listed above

[ ] [ ]

2. To ratify the selection of Ernst & Young LLP as independent public
accountants for the fiscal year ending June 30, 2003.

FOR AGAINST
[ ] [ ]

Instruction: To withhold authority to vote for any nominee, write that nominee's
name in the space provided below.

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PLEASE SIGN, DATE AND MAIL YOUR PROXY TODAY!

Signature Signature
----------------------------- ----------------------------

Date:
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Shareholder(s) signature should correspond to the name(s) shown hereon.
(Executors, Administrators, Trustees, etc. should so indicate when signing.)
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RESPIRONICS, INC.
1010 Murry Ridge Lane
Murrysville, PA 15668

ANNUAL MEETING OF SHAREHOLDERS, NOVEMBER 18, 2002

Gerald E. McGinnis, James W. Liken and Dorita A. Pishko, or any of them, are
hereby appointed proxies with full power of substitution, to vote the shares of
the shareholder(s) named on the reverse side hereof at the Annual Meeting of
Shareholders of Respironics, Inc. to be held at 1010 Murry Ridge Lane,
Murrysville, Pennsylvania, on November 18, 2002, at 5:15 p.m. and at any
adjournment thereof, as directed hereon, and in their discretion to vote and act
upon any other matters as may properly come before this meeting.

(Continued on reverse side)

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