-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O1/F0pMBAjwAmIVcB7ZOU2tP2XNJv/rS6rPjL8G98F0V/htUFj76HwFG84obxwya Qc/lUUQeOzgpucMmRtZXBQ== 0000950132-99-000101.txt : 19990217 0000950132-99-000101.hdr.sgml : 19990217 ACCESSION NUMBER: 0000950132-99-000101 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESPIRONICS INC CENTRAL INDEX KEY: 0000780434 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 251304989 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16723 FILM NUMBER: 99539872 BUSINESS ADDRESS: STREET 1: 1501 ARDMORE BOULEVARD CITY: PITTSBURGH STATE: PA ZIP: 15221-4401 BUSINESS PHONE: 4127312100 MAIL ADDRESS: STREET 1: 1501 ARDMORE BOULEVARD CITY: PITTSBURGH STATE: PA ZIP: 15221-4401 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) X Quarterly Report pursuant to section 13 or 15(d) of the Securities - Exchange Act of 1934 for the quarterly period ended December 31, 1998 or ----------------- Transition Report pursuant to section 13 or 15(d) of the Securities - Exchange Act of 1934 for the transition period from to ------ ------ Commission File No. 000-16723 RESPIRONICS, INC. (Exact name of registrant as specified in its charter) Delaware 25-1304989 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 1501 Ardmore Boulevard Pittsburgh, Pennsylvania 15221 (Address of principal executive offices) (Zip Code) (Registrant's Telephone Number, including area code) 412-731-2100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No . - - As of January 31, 1999, there were 31,729,323 Common Stock of the registrant outstanding. INDEX RESPIRONICS, INC. PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements (Unaudited). Consolidated balance sheets -- December 31, 1998 and June 30, 1998. Consolidated statements of operations -- Three and six months ended December 31, 1998 and 1997. Consolidated statements of cash flows-- Six months ended December 31, 1998 and 1997. Notes to consolidated financial statements -- December 31, 1998. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings. Item 2. Changes in Securities. Item 3. Defaults Upon Senior Securities. Item 4. Submission of Matters to a Vote of Security Holders. Item 5. Other Information. Item 6. Exhibits and Reports on Form 8-K. SIGNATURES - ---------- CONSOLIDATED BALANCE SHEETS (UNAUDITED) RESPIRONICS, INC. AND SUBSIDIARIES
December 31 June 30 1998 1998 -------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and short-term investments $ 22,312,793 $ 14,874,753 Trade accounts receivable, less allowance for doubtful accounts of $8,626,000 and $8,246,000 111,113,051 90,985,120 Inventories 58,688,361 58,897,764 Prepaid expenses and other 15,364,254 14,977,842 Deferred income tax benefits 14,948,226 14,948,226 --------------------- ------------------- TOTAL CURRENT ASSETS 222,426,685 194,683,705 PROPERTY, PLANT AND EQUIPMENT Land 3,344,939 3,360,885 Building 12,412,345 13,564,623 Machinery and equipment 54,785,549 54,087,893 Furniture, office and computer equipment 34,282,120 27,170,001 Leasehold improvements 1,249,911 1,148,251 --------------------- ------------------- 106,074,865 99,331,653 Less allowances for depreciation and amortization 52,374,095 50,408,095 --------------------- ------------------- 53,700,770 48,923,558 Funds held in trust for construction of new facility 836,202 817,820 OTHER ASSETS 14,305,505 14,774,380 COST IN EXCESS OF NET ASSETS OF BUSINESS ACQUIRED 67,457,798 68,902,667 --------------------- ------------------- $ 358,726,960 $ 328,102,130 ===================== ===================
See notes to consolidated financial statements.
December 31 June 30 1998 1998 ------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 22,009,835 $ 20,966,011 Accrued expenses and other 37,476,854 33,048,316 Current portion of long-term obligations 950,714 3,119,617 --------------------- ------------------- TOTAL CURRENT LIABILITIES 60,437,403 57,133,944 LONG-TERM OBLIGATIONS 94,289,065 69,316,177 MINORITY INTEREST 784,050 812,116 COMMITMENTS SHAREHOLDERS' EQUITY Common Stock, $.01 par value; authorized 100,000,000 shares; issued and outstanding 32,857,418 shares at December 31, 1998 and 32,678,632 shares at June 30, 1998 328,574 326,786 Additional capital 106,918,454 105,376,608 Cumulative effect of foreign currency translations (77,034) (1,416,465) Retained earnings 111,316,761 97,648,469 Treasury stock (15,270,313) (1,095,505) --------------------- ------------------- TOTAL SHAREHOLDERS' EQUITY 203,216,442 200,839,893 --------------------- ------------------- $ 358,726,960 328,102,130 ====================== ===================
See notes to consolidated financial statements. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) RESPIRONICS, INC. AND SUBSIDIARIES
Three months ended Six months ended December 31 December 31 1998 1997 1998 1997 ----------------------------------------------------------------- Net sales $ 90,197,244 $ 95,472,000 $ 176,608,820 $ 186,222,509 Cost of goods sold 46,849,405 48,379,000 91,615,400 94,107,501 -------------- ------------ ------------- -------------- 43,347,839 47,093,000 84,993,420 92,115,008 General and administrative expenses 10,434,081 8,843,927 21,085,190 18,172,807 Sales, marketing and commission expenses 15,534,088 17,753,073 30,528,166 33,683,342 Research and development expenses 4,380,119 4,895,000 8,933,900 10,311,648 Costs associated with an unsolicited offer to acquire Healthdyne Technologies, Inc. 0 0 0 650,000 Interest expense 1,063,102 1,110,000 2,181,284 2,148,724 Other income (328,682) (428,000) (515,606) (860,073) -------------- ------------ ------------- -------------- 31,082,708 32,174,000 62,212,934 64,106,448 -------------- ------------ ------------- -------------- INCOME BEFORE INCOME TAXES 12,265,131 14,919,000 22,780,486 28,008,560 Income taxes 4,906,052 5,966,000 9,112,194 11,200,924 -------------- ------------ ------------- -------------- NET INCOME 7,359,078 8,953,000 13,668,291 16,807,636 ============== ============ ============= ============== Basic earnings per share $ 0.23 $ 0.28 $ 0.43 $ 0.53 ============== ============ ============= ============== Basic shares outstanding 31,764,732 31,738,965 32,088,790 31,691,301 Diluted earnings per share $ 0.23 $ 0.27 $ 0.42 $ 0.51 ============== ============ ============= ============== Diluted shares outstanding 32,291,132 33,205,305 32,568,080 33,140,761
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) RESPIRONICS, INC. AND SUBSIDIARIES
Six Months Ended December 31 1998 1997 --------------------------------------------------- OPERATING ACTIVITIES Net income $ 13,668,292 $ 16,810,207 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,983,992 8,190,822 Changes in operating assets and liabilities: Increase in accounts receivable (21,455,931) (13,393,747) Decrease (increase) in inventories 359,403 (2,685,478) Change in other operating assets and liabilities 6,279,181 (6,472,299) ------------ ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 7,834,937 2,449,505 INVESTING ACTIVITIES Purchase of property, plant and equipment (10,541,643) (11,928,437) ------------ ----------- NET CASH USED BY INVESTING ACTIVITIES (10,541,643) (11,928,437) FINANCING ACTIVITIES Net increase in borrowings 22,803,985 6,442,261 Issuance of common stock 1,543,634 1,622,741 (Acquisition) use of treasury stock (14,174,808) 188,884 Decrease in minority interest (28,066) (14,986) ------------ ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 10,144,745 8,238,900 ------------ ----------- INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 7,438,039 (1,240,032) Cash and short-term investments at beginning of period 14,874,753 18,630,657 ------------ ----------- CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 22,312,792 $ 17,390,625 ============ ============
See notes to consolidated financial statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) RESPIRONICS, INC. AND SUBSIDIARIES DECEMBER 31, 1998 NOTE A -- BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended December 31, 1998 are not necessarily indicative of the results that may be expected for the year ended June 30, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 1998. NOTE B -- INVENTORIES The composition of inventory is as follows:
December 31 June 30 1998 1998 ------------------ ------------------ Raw materials $ 21,335,030 $ 18,540,521 Work-in-process 5,815,167 7,570,524 Finished goods 31,538,165 32,786,719 ------------------ ------------------ $ 58,688,362 $ 58,897,764 ================== ==================
NOTE C -- CONTINGENCIES As previously disclosed, the Company is party to actions filed in a federal District Court in January 1995 and June 1996 in which a competitor alleges that the Company's manufacture and sale in the United States of certain products infringes four of the competitor's patents. In its response to these actions, the Company has denied the allegations and has separately sought judgment that the claims under the patents are invalid or unenforceable and that the Company does not infringe upon the patents. The January 1995 and June 1996 actions have been consolidated, and discovery is currently underway. The Court has granted the Company's motions for summary judgment that the Company does not infringe two of the competitor's patents. The Company believes that none of its products infringe any of the patents in question in the event that any one or more of such patents should be held to be valid, and it intends to vigorously defend this position. NOTE D -- MERGER; POOLING OF INTERESTS ACCOUNTING In February 1998, the Company merged a wholly owned subsidiary with Healthdyne Technologies, Inc. ("Healthdyne") in a stock for stock merger by issuing approximately 12,000,000 shares of the Company's common stock in exchange for the outstanding shares of Healthdyne. The merger was accounted for as a pooling of interests. Accordingly, the consolidated financial statements include, for all periods presented, the combined financial results and financial position of the Company and Healthdyne. Healthdyne has since been renamed Respironics Georgia, Inc. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES REFORM ACT OF 1995 The statements contained in this Quarterly Report on Form 10-Q, specifically those contained in Item 2 "Management's Discussion and Analysis of Results of Operations and Financial Condition", along with statements in other reports filed with the Securities and Exchange Commission, external documents and oral presentations which are not historical are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities and Exchange Act of 1934, as amended. These forward looking statements represent the Company's present expectations of beliefs concerning future events. The Company cautions that such statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. Results actually achieved may differ materially from expected results included in these statements. Those factors include the following: third party reimbursement; increasing price competition and other competitive factors in the sale of products; the United States Food and Drug Administration (the "FDA"), the Health Care Financing Administration ("HCFA"), the Durable Medical Equipment Regional Carriers ("DMERC's") and other government regulation; intellectual property and related litigation; foreign currency fluctuations, regulations and other factors affecting operations and sales outside the United States including potential future effects of the change in sovereignty of Hong Kong, and customer consolidation and concentration. Item 2. Management's Discussion and Analysis of Result of Operations and Financial Condition RESULTS OF OPERATIONS Net sales for the quarter ended December 31, 1998 were $90,197,000 representing a 6% decrease from the $95,472,000 recorded for the quarter ended December 31, 1997. Sales for the six months ended December 31, 1998 were $176,609,000, a decrease of 5% over the $186,223,000 recorded in the year earlier period. Sales for the current quarter and six month period were adversely impacted by a decrease in sales of the Company's non-invasive ventilatory support products compared to prior year levels. This sales decrease was due primarily to uncertainty in the market concerning insurance coverage guidelines for the home use of these products in the United States and the corresponding reduction in purchases of these units by the Company's dealer customers pending resolution of the coverage guidelines. Government policy makers issued a draft coverage policy in July 1998 that was more restrictive than had been expected. The Company, along with trade and medical associations, other device manufacturers, and home care dealers, have filed formal comments as permitted with the policy makers indicating disagreement with the draft coverage policy. The Company now estimates that a final coverage policy will be issued in June 1999 and believes that until these final guidelines are issued, sales of its noninvasive ventilatory support units for home use in the United States will continue to be negatively impacted as compared with periods prior to the uncertainty regarding insurance coverage guidelines. If the final guidelines issued are either as restrictive as, or more restrictive than, the draft guidelines, the Company's sales of its noninvasive ventilatory support units for home use in the United States will continue to be negatively impacted. Sales in the current quarter and six month period of the Company's other major product line, obstructive sleep apnea products, increased on a unit and dollar basis as compared to prior year totals. The Company's gross profit was 48% of net sales for the quarter and six months ended December 31, 1998 and 49% for the quarter and six months ended December 31, 1997. This decrease in gross margin percentage was caused by lower total sales levels and sales mix. General and administrative expenses were $10,434,000 (12% of net sales) for the quarter ended December 31, 1998 as compared to $8,844,000 (9% of net sales) for the quarter ended December 31, 1997. General and administrative expenses were $21,085,000 (12% of net sales) for the six months ended December 31, 1998 as compared to $18,173,000 (10% of net sales) for the year earlier period. The increase in the expenses for both periods was due primarily to increased information systems costs, legal fees, allowances for doubtful accounts, and other administrative expenses. These increased expenses were partially offset by cost reductions that the Company obtained since the February 1998 merger with Healthdyne. Sales, marketing and commission expenses were $15,534,000 (17% of net sales) for the quarter ended December 31, 1998 as compared to $17,753,000 (19% of net sales) for the quarter ended December 31, 1997. Sales, marketing and commission expenses were $30,528,000 (17% of net sales) for the six months ended December 31, 1998 as compared to $33,683,000 (18% of net sales) for the year earlier period. The decrease in these expenses was due primarily to the cost reductions that the Company obtained since the February 1998 merger with Healthdyne. Research and development expenses were $4,380,000 (5% of net sales) for the quarter ended December 31, 1998 as compared to $4,895,000 (5% of net sales) for the quarter ended December 31, 1997. Research and development expenses were $8,934,000 (5% of net sales) for the six months ended December 31, 1998 as compared to $10,312,000 (6% of net sales) for the year earlier period. The decrease in these expenses was due primarily to the elimination of duplicate product development efforts since the closing of the merger with Healthdyne in February 1998. Significant product development efforts are ongoing, and new product launches in all of the Company's major product areas are planned for, and in some cases have already taken place, in fiscal year 1999. During the six months ended December 31, 1997, the Company incurred $650,000 in costs associated with an unsolicited offer to acquire Healthdyne. The Company's effective income tax rate was 40% for all periods presented. As a result of the factors described above, the Company's net income was $7,359,000 (8% of net sales) or $0.23 per diluted share for the quarter ended December 31, 1998 as compared to $8,953,000 (9% of net sales) or $0.27 per diluted share for the quarter ended December 31, 1997 and $13,668,000 (8% of net sales) or $0.42 per diluted share for the six months ended December 31, 1998 and $16,808,000 (9% of net sales) or $0.51 per diluted share for the six months ended December 31, 1997. Earnings per share amounts for the three and six month periods ended December 31, 1998 reflect the impact of shares repurchased under the Company's buyback program which is described below. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company had working capital of $161,989,000 at December 31, 1998 and $137,550,000 at June 30, 1998. Net cash provided by operating activities was $7,835,000 for the six months ended December 31, 1998 as compared to $2,450,000 for the six months ended December 31, 1997. The increase in net cash provided by operating activities for the current six month period was due primarily to an increase in accounts payable and accrued expenses. Net cash used by investing activities was $10,542,000 for the six months ended December 31, 1998 as compared to $11,928,000 for the six months ended December 31, 1997. The majority of the cash used by investing activities for both periods represented capital expenditures, including the purchase of production equipment, computer and telecommunications equipment, and office equipment. The funding for the investment activities in both periods was provided by positive cash flows from operating activities and accumulated cash and short term investments. Net cash provided by financing activities includes borrowings and repayments under the Company's various long-term obligations. In August 1998, the Company's Board of Directors authorized a stock buy-back of up to 1,000,000 shares of the Company's outstanding common stock. In October 1998, the Company's Board of Directors authorized an additional 1,000,000 shares under the buyback program. During the six month period ended December 31, 1998, the Company repurchased 1,166,000 shares under the buyback program, resulting in a use of cash of $14,175,000. Shares that are repurchased are added to treasury shares pending future use and will reduce the number of shares outstanding. The Company believes that positive cash flow from operating activities projected for the remainder of the fiscal year, the availability of additional funds under its revolving credit facility (which was recently amended to provide for borrowing up to $125 million) and its accumulated cash and short-term investments will be sufficient to meet its current and presently anticipated future needs for the remainder of fiscal year 1999 for operating activities, investing activities, and financing activities. Year 2000 State of Readiness. The Company is currently executing an overall Year 2000 compliance strategy utilizing the services of a Year 2000 consulting firm. A program management office is in place consisting of full time staff resources from both the Company and the consulting firm to address the four identified primary risk areas: core business information systems and technology; issues relative to the Company's products; issues relative to third party product and service providers; and issues relative to the Company's facilities. Year 2000 compliance of the Company's core business information systems and technology has been largely addressed with the recent implementation of Year 2000 compliant enterprise-wide resource planning ("ERP") software at each of the Company's major locations. A technical review of the Company's current and discontinued product lines addressing Year 2000 issues has been completed; one non-compliance was found and the correction originally implemented for the product that was nonconforming has proven to be ineffective. A revised correction will be provided to customers of this product in March, 1999. A strategy for dealing with customer inquiries regarding Year 2000 compliance of the Company's products has been implemented as well. A review of issues relating to third party product and service providers' Year 2000 compliance, (including defining inventory and vendor management processes, planning a third party compliance assessment and identifying potential contingency planning and remediation strategies) has been completed and a detailed project plan has been developed and is now being executed. The Company's current expectation is that issues relating to the third party product and suppliers' Year 2000 compliance will be resolved by June 1999. A preliminary review of issues relating to the Year 2000 compliance of the Company's facilities infrastructure has been completed and no major problems or significant risks are anticipated based on this preliminary review. A more detailed facilities review is being conducted and is anticipated to be completed by June 1999. Year 2000 Costs. Total costs for the Company's Year 2000 compliance efforts are currently estimated to be approximately $11,000,000. The majority of these costs relate to the ERP system installations and upgrades and have been, and will be, capitalized and charged to expense over the estimated useful life of the associated software and hardware. The remaining costs have been, and will be charged directly to expense. Additional costs could be incurred if significant remediation activities are required with third party suppliers (see below). Risks and Contingency Plans. Based on the Year 2000 compliance work conducted to date and described above, the Company's most significant risk, and its reasonably likely worst case scenario relative to Year 2000 compliance, appears to be that upon completion of its review of its third party product and service providers' Year 2000 compliance, it determines that certain of its third party product and service suppliers may not be Year 2000 compliant. If such product and service suppliers in fact do not become Year 2000 compliant in a timely manner and these suppliers cannot provide the Company with products and services in a timely and cost effective manner, future operating results could be adversely affected. The Company believes that the vendor management process that is currently in place will identify these potential risks. While a formal contingency plan for dealing with third party product and service providers who are not Year 2000 compliant has not been completed, the Company expects to have several options available to deal with identified non- compliance. For product and services where the Company's needs are not unique or where a long term relationship with a supplier does not exist, a search for alternative suppliers who are Year 2000 compliant would be conducted and suppliers changed as needed prior to January 1, 2000. While the Company believes that raw materials and components for its products are readily available from a number of suppliers and believes that its service needs are not significantly unique from other companies, it is possible that for some of its suppliers who are identified as being non-compliant, certain remediation strategies with the supplier may be employed, at least initially, as an alternative to switching suppliers because of the operational difficulties that switching suppliers could cause. These remediation strategies include, but are not limited to, increasing purchases from the suppliers in question prior to January 1, 2000 to provide a safety stock if the supplier experiences difficulty and providing the Company's Year 2000 compliance resources to assist the supplier in becoming compliant. PART 2 OTHER INFORMATION Item 1: Legal Proceedings - ------- ----------------- Not applicable Item 2: Change in Securities - ------- -------------------- (a) Not applicable (b) Not applicable (c) Not applicable Item 3: Defaults Upon Senior Securities - ------- ------------------------------- (a) Not applicable (b) Not applicable Item 4: Submission of Matters to a Vote of Security Holders - ------- --------------------------------------------------- The Company's Annual Meeting of Shareholders was held on November 19, 1998. The holders of 27,422,171 shares of the Company's stock (approximately 86% of the outstanding shares) were present at the meeting in person or by proxy. The only matters voted upon at the meeting were: (i) the election of three persons to serve as directors for a three year term expiring at the Annual Meeting of Shareholders in 2001, (ii) the approval of the amendments to the Company's 1992 Incentive Stock Option Plan to increase the number of shares available for grant by 2,000,000 shares to a total of 3,000,000 shares. (iii) the ratification of the selection of Ernst & Young as independent public accountants to audit the financial statements of the Company for the fiscal year ending June 30, 1999. The results of voting were as follows: (i) Douglas A. Cotter, Gerald E. McGinnis, and Craig B. Reynolds, the nominees of the Company's Board Of Directors, were elected to serve until the Annual Meeting of Shareholders in 2001. There were no other nominees.
Shares were voted as follows: Withhold Name For Vote For - ------------------------------- ---------- -------- Douglas A Cotter 26,856,163 566,008 Gerald E. McGinnis 26,876,060 546,111 Craig B. Reynolds 26,849,069 573,102
(ii) The amendment to the Company's 1992 Incentive Stock Option Plan was approved: affirmative votes, 18,375,293 shares, negative votes, 1,385,822 shares. (iii) The selection of Ernst & Young as independent public accountants for the 1999 fiscal year was ratified: affirmative votes, 27,235,970 shares; negative votes, 94,817 shares. Item 5: Other Information - ------- ----------------- At a meeting on November 19, 1998, the Board of Directors of the Company approved the addition of new sections 1.09, 1.10 and 1.11 to Article One of the By-Laws of the Company. The new by-laws require that any shareholder of the Company intending to present a nomination of persons for election to the Board of Directors of the Company or a proposal for action by the shareholders at an annual meeting must give written notice of the proposal, containing specified information, to the Secretary of the Company not later than the notice deadline established under the new by-laws. For the 1999 annual meeting, this notice deadline will be July 20, 1999. Thereafter, the notice deadline will generally be 90 days prior to the anniversary date of the Company's proxy statement for the previous year's annual meeting. Except as described in the next paragraph, compliance with the notice requirements of the new by-laws will be required in order for a nomination or shareholder proposal to be presented for a shareholder vote at an annual meeting. The new by-laws will not affect any rights of a shareholder to request inclusion of a proposal in the Company's proxy statement pursuant to Securities and Exchange Commission Rule 14a-8 or to present for action at an annual meeting any proposal so included. Rule 14a-8 requires that notice of shareholder proposals requested to be included in the Company's proxy materials pursuant to that Rule must generally be furnished to the Company not later than 120 days prior to the anniversary date of the Company's proxy statement for the previous year's annual meeting. For the 1999 annual meeting, the Rule 14a-8 notice deadline is June 20, 1999. The Company also amended section 2.01 to Article Two of the By-Laws to delete a phrase that was inconsistent with the provisions of the Company's restated Certificate of Incorporation. Item 6: Exhibits and Reports on Form 8-K - ------- -------------------------------- (a) Exhibits 3.8 Amendment to By-laws of the Company adopted on November 19, 1998, filed as Exhibit 3.8 to this quarterly report. 10.37 First Amendment to the Credit Agreement by and among RESPIRONICS, INC. as the Borrower, THE BANKS PARTY HERETO, as the Lenders hereunder, PNC BANK, NATIONAL ASSOCIATION as the Issuing bank, PNC BANK, NATIONAL ASSOCIATION as the Administrative Agent and the Syndication Agent and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as the Documentation Agent, dated as of May 8, 1998, filed as Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended March 31, 1998. 10.38 Second Amendment to the Credit Agreement by and among RESPIRONICS, INC. as the Borrower, THE BANKS PARTY HERETO, as the Lenders hereunder, PNC BANK, NATIONAL ASSOCIATION as the Issuing bank, PNC BANK, NATIONAL ASSOCIATION as the Administrative Agent and the Syndication Agent and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as the Documentation Agent, dated as of May 8, 1998, filed as Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended March 31, 1998. (b) Reports on Form 8-K Not applicable SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RESPIRONICS, INC. Date: February 12, 1999 /s/ Daniel J. Bevevino ___________________ ________________________ Daniel J. Bevevino Vice President, and Chief Financial and Principal Accounting Officer Signing on behalf of the registrant and as Chief Financial and Accounting Officer EX-3.8 2 AMENDMENTS TO BY-LAWS Exhibit 3.8 AMENDMENTS TO BY-LAWS OF RESPIRONICS, INC. (Adopted by Board of Directors on November 18, 1998) 1. AMENDMENT TO ARTICLE I TO ADD NEW SECTIONS 1.09, 1.10 AND 1.11. Article I of the By-Laws is hereby amended by adding new Sections 1.09, 1.10 and 1.11 thereto, such Sections to read as set forth in Exhibit A attached hereto. 2. AMENDMENT TO ARTICLE II, SECTION 2.01. Section 2.01 of Article II of the By-Laws is hereby amended by deleting the first sentence thereof and replacing it with the following: "Unless otherwise provided in the Certificate of Incorporation of the Corporation, the number of directors which shall constitute the full Board of Directors shall be determined by resolution of the Board of Directors." Exhibit A -- "Advance Notice" Bylaws Section 1.09. Nomination of Directors. Only persons who are nominated in ------------ ----------------------- accordance with the procedures set forth in this Section 1.09 shall be eligible for election as directors of the Corporation. (a) Nominations of persons for election to the Board of Directors of the Corporation (the "Board") may be made at any annual meeting of stockholders by or at the direction of the Board or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who was a stockholder of record at the time of giving of notice provided for in this Section 1.09(a) and who complies with the notice procedures set forth in this Section 1.09(a). Any such nomination by a stockholder shall be made pursuant to timely notice in writing to the Secretary of the Corporation. (1) To be timely notice for an annual meeting, a stockholder's notice shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not less than 90 calendar days before the anniversary date of the Corporation's proxy statement released to stockholders in connection with the previous year's annual meeting and, if none, its most recent previous annual meeting; provided, however, that in the event that the date of the annual meeting at which such business is to be presented has been changed by more than 30 days from the date of the most recent previous annual meeting, a stockholder's notice shall be considered timely if so received by the Corporation (i) on or before the later of (x) 120 calendar days before the date of the annual meeting at which such business is to be presented or (y) 30 days following the first public announcement by the Corporation of the date of such annual meeting and (ii) in any event not later than 15 calendar days prior to the scheduled mailing date of the Corporation's proxy materials for such annual meeting. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above. (2) Notwithstanding anything in the previous paragraph to the contrary, in the event that the number of directors to be elected to the Board is increased and there is not public announcement naming all of the nominees for director or specifying the size of the increased Board made by the Corporation at least 100 days prior to the anniversary date of the Corporation's proxy statement released to stockholders in connection with the previous year's annual meeting, a stockholder's notice required by this Section 1.09(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. (3) Such stockholder's notice shall set forth in writing (i) as to each person whom the stockholder proposes to nominate for election or re-election as a director (A) the name, age, business address and residence of such person, (B) the principal occupation or employment of such person, (C) the number of shares of stock of the Corporation that are beneficially owned by such person, (D) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (E) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated by the Board; and (F) the consent of each nominee to serve as a director of the Corporation if so elected; and (ii) as to the stockholder giving the notice and the beneficial owners, if any, on whose behalf the nomination is made (A) the name and address of each such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (B) the class and number of shares of the Corporation which are owned beneficially and of record by each such stockholder and such beneficial owner. (b) Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (i) by or at the direction of the Board or (ii) provided that the Board has determined that one or more directors shall be elected at such special meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 1.09(b), who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.09(b). (1) To be timely notice for a special meeting, a stockholder's notice must be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominee(s) proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above (c) At the request of the Board, any person nominated by the Board for election as a director shall furnish to the Secretary of the Corporation that information pertaining to the nominee which is required to be set forth in a stockholder's notice of nomination. The Chairman of the Board, or in his or her absence the Chief Executive Officer, the President, any Vice President or the Secretary, shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and in that event the defective nomination shall be disregarded. Section 1.10. Transaction of Business. To be properly brought before an ------------ ----------------------- annual meeting of stockholders, business must be (a) specified in the notice of meeting (or any -2- supplement thereto) given by or at the direction of the Board, (b) otherwise brought before the meeting by or at the direction of the Board, or (c) otherwise properly brought before the meeting by a stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this Section 1.10, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 1.10. For business to be properly brought before an annual meeting by a stockholder, if such business is any matter other than the nomination of candidates for the election of directors of the Corporation, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation as provided in this Section 1.10. (1) To be timely, a stockholder's notice shall be delivered in accordance with the procedures in Section 1.09(a)(1) applicable to a stockholder's nomination of directors at an annual meeting. (2) Such stockholder's notice shall set forth in writing as to each matter the stockholder proposes to bring before the annual meeting (i) as to the matter the stockholder proposes, (A) a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting, and any material interest in such business of such stockholder and the beneficial owners, if any, on whose behalf the proposal is made and (B) such other information regarding such proposal by such stockholder as would be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the proposal been made by the Corporation; and (ii) as to the stockholder giving the notice and the beneficial owners, if any, on whose behalf the proposal is made, (A) the name and address of such stockholder, as they appear on the Corporation's books, and of each such beneficial owner and (B) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and each such beneficial owner. (3) Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 1.10. Notwithstanding anything in these Bylaws to the contrary, the Chairman of the Board, or in his or her absence the Chief Executive Officer, the President, any Vice President or the Secretary, shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 1.10, and in that event the business shall not be transacted. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above Notwithstanding anything in these Bylaws to the contrary, only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. -3- Section 1.11. General Provisions Relating to Sections 1.09 and 1.10. ------------ ----------------------------------------------------- (a) For purposes of Sections 1.09 and Section 1.10 of this Article I, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) In addition to the provisions of Sections 1.09 and 1.10 of this Article I, a stockholder also shall comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in Sections 1.09 and 1.10 of this Agreement shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. (c) The provisions of Sections 1.09 and 1.10 of this Article shall govern and control and take precedence over any other provision of these Bylaws to the contrary with respect to all matters covered by such Section 1.09 and 1.10, including without limitation the procedures described in the first sentence of Section 1.06 of this Article I. -4- EX-10.37 3 FIRST AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.37 FIRST AMENDMENT TO CREDIT AGREEMENT This FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of August 19, 1998 (this "First Amendment"), is entered into by and among RESPIRONICS, INC., a corporation organized and existing under the laws of the State of Delaware (the "Borrower"), the financial institutions listed on the signature pages hereto, and each other financial institution which, from time to time becomes a party hereto in accordance with Subsection 9.6a of the Original Credit Agreement, as defined below (individually a "Lender" and collectively the "Lenders") and PNC BANK, NATIONAL ASSOCIATION as the issuer of Letters of Credit (in such capacity, the "Issuing Bank"), PNC BANK, NATIONAL ASSOCIATION as the administrative agent and the syndication agent (in such capacity, the "Administrative Agent"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as the documentation agent (in such capacity, the "Documentation Agent") (the Administrative Agent and the Documentation Agent are herein collectively referred as the "Agents") and amends that certain Credit Agreement dated as of May 8, 1998 (the Credit Agreement, together with the exhibits and schedules thereto and all amendments, supplements, extensions, renewals, modifications or replacements thereto or thereof, is hereinafter referred to as the "Original Credit Agreement") entered into by and among the parties listed above. WITNESSETH: WHEREAS, the Borrower, the Lenders and the Agents entered into the Original Credit Agreement whereby the Lenders made available to the Borrower certain financial accommodations, including but not limited to a Revolving Credit Commitment in an amount not to exceed $100,000,000 at any one time outstanding; and WHEREAS, the Borrower has requested that the Lenders agree to certain modifications to the Original Credit Agreement. NOW THEREFORE, in consideration of the foregoing recitals (each of which is incorporated herein and made a material part hereof), the mutual covenants and agreements contained herein and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, and with the intent to be legally bound hereby, the parties hereto agree as follows: ARTICLE I AMENDMENTS TO ORIGINAL CREDIT AGREEMENT --------------------------------------- Section 1.01. Amendments to Section 1.1 of the Original Credit Agreement. ---------------------------------------------------------- Section 1.1 of the Original Credit Agreement is hereby amended as follows: (i) The following defined terms and the definitions therefor are hereby added to Section 1.1 of the Original Credit Agreement and are inserted in correct alphabetical order: First Amendment: The First Amendment to Credit Agreement dated as of --------------- August 19, 1998. First Amendment Effective Date: The date on which the Lenders shall have ------------------------------ determined that each of the conditions set forth in Article III of the First Amendment have either been satisfied by the Borrower or waived by the Lenders. Section 1.02. Amendments to Article 4 of the Original Credit Agreement. -------------------------------------------------------- Article 4 of the Original Credit Agreement is hereby amended as follows: (i) Section 4.1 of the Original Agreement is hereby amended and restated in its entirety to read as follows: 4.1 Use of Proceeds. The Loans shall be used by the Borrower --------------- only to fund (i) the Respironics Deutschland Acquisition whether as all or a portion of (x) the initial payment or (y) any subsequent installment payment in connection therewith, (ii) to repay Indebtedness assumed as part of the Healthdyne Acquisition and (iii) for the general corporate purposes of the Loan Parties. No proceeds of the Loans shall be advanced to any Unrestricted Subsidiary. Section 1.03. No Other Amendments. The amendments to the Original Credit ------------------- Agreement set forth in Sections 1.01 and 1.02 above do not either implicitly or explicitly alter, waive or amend, except as expressly provided in this First Amendment, the provisions of the Original Credit Agreement. The amendments set forth in Sections 1.01 and 1.02 hereof do not waive, now or in the future, compliance with any other covenant, term or condition to be performed or complied with nor do they impair any rights or remedies of the Lenders and the Agents and the Agents under the Original Credit Agreement with respect to any such violation. ARTICLE II BORROWER'S SUPPLEMENTAL REPRESENTATIONS --------------------------------------- Section 2.01. Incorporation by Reference. As an inducement to the Lenders and -------------------------- the Agents to enter into this First Amendment, except as previously disclosed in writing by the Borrower to the Lenders and the Agents, the Borrower hereby repeats herein for the benefit of the Lenders and the Agents the representations and warranties made by the Borrower in Article 3 of the Original Credit Agreement, except that for purposes hereof such representations and warranties shall be deemed to extend to and cover this First Amendment. -2- ARTICLE III CONDITIONS PRECEDENT -------------------- Section 3.01. Conditions Precedent. Each of the following shall be a -------------------- condition precedent to the effectiveness of this First Amendment: (i) The Lenders and the Agents shall have received, on or before the First Amendment Effective Date, the following items, each, unless otherwise indicated, dated on or before the First Amendment Effective Date and in form and substance satisfactory to the Lenders and their special counsel, Tucker Arensberg, P.C.: (A) A duly executed counterpart original of this First Amendment; (B) A certified copy of the corporate action of the Borrower authorizing the execution and delivery of and the performance under this First Amendment; (C) A Certification from the Borrower that its certificate of incorporation and its by-laws which were delivered to the Administrative Agent on May 8, 1998 continue to remain complete and correct and in full force and effect and have not been amended, supplemented or otherwise modified on or after such date, which Certification states the names of the Persons authorized to sign this First Amendment and all other documents, instruments and certificates delivered hereunder, together with the true signatures of such Persons; (D) A certificate signed by an Authorized Officer of the Borrower, dated the First Amendment Effective Date, certifying that: (1) the representations and warranties made pursuant to this First Amendment and in the other Loan Documents executed in connection with this First Amendment are true and correct on and as of the First Amendment Effective Date as though made on and as of such date; (2) no petition by or against the Borrower has at any time been filed under the United States Bankruptcy Code or under any similar act; (3) except which those matters which have previously been disclosed to the Lenders, no Material Adverse Change in the properties, -3- business, operations, financial condition or prospects of the Borrower has occurred; and (4) the Borrower has in all material respects performed all agreements, covenants and conditions required to be performed on or prior to the date hereof under the Original Credit Agreement and the other Loan Documents; (E) Such other instruments, documents and opinions of counsel as the Lenders and the Agents shall reasonably require, all of which shall be satisfactory in form and substance to the Lenders and their special counsel. ARTICLE IV GENERAL PROVISIONS ------------------ Section 4.01. Ratification of Terms. Except as expressly amended by this --------------------- First Amendment, the Original Credit Agreement and each and every representation, warranty, covenant, term and condition contained therein is specifically ratified and confirmed. The Lenders are not obligated to make further amendments, supplements, extensions or renewals thereto or thereof. Section 4.02. References. All notices, communications, agreements, ---------- certificates, documents or other instruments executed and delivered after the execution and delivery of this First Amendment in connection with the Original Credit Agreement, any other Loan Document or the transactions contemplated thereby may refer to the Original Credit Agreement without making specific reference to this First Amendment, but nevertheless all such references shall include this First Amendment unless the context requires otherwise. From and after the First Amendment Effective Date, all references in the Original Credit Agreement and each of the other Loan Documents to the "Agreement" shall be deemed to be references to the Original Credit Agreement, as amended hereby. Section 4.03. Counterparts. This First Amendment may be executed in different ------------ counterparts, each of which when executed by the Borrower and the Lenders shall be regarded as an original, and all such counterparts shall constitute one First Amendment. Section 4.04. Capitalized Terms. Except for proper nouns and as otherwise ----------------- defined herein, capitalized terms used herein as defined terms shall have the meanings ascribed to them in the Original Credit Agreement, as amended hereby. Section 4.05. Taxes. The Borrower shall pay any and all stamp and other taxes ----- and fees payable or determined to be payable in connection with the execution, delivery, filing and -4- recording of this First Amendment and such other documents and instruments as are delivered in connection herewith and agrees to save the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. Section 4.06. Costs and Expenses. The Borrower will pay all costs and ------------------ expenses of the Lenders and the Agents (including, without limitation, the reasonable fees and the disbursements of special counsel, Tucker Arensberg, P.C.) in connection with the preparation, execution and delivery of this First Amendment and the other documents, instruments and certificates delivered in connection herewith. SECTION 4.07. GOVERNING LAW. THIS FIRST AMENDMENT AND THE RIGHTS AND ------------- OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO THE PROVISIONS THEREOF REGARDING CONFLICTS OF LAW. Section 4.08. Headings. The headings of the sections in this First Amendment -------- are for purposes of reference only and shall not be deemed to be a part hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -5- IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this First Amendment to Credit Agreement to be executed by their respective duly authorized officers as of the date first written above. RESPIRONICS, INC., a Delaware corporation FLEET NATIONAL BANK By (SEAL) By ---------------------------- ---------------------------- Name: Name: Title: Title: PNC BANK, NATIONAL ASSOCIATION, NORWEST BANK COLORADO, in its capacity as a Lender, the NATIONAL ASSOCIATION Administrative Agent, the Syndication Agent and the Issuing Bank hereunder By By -------------------------------- -------------------------------- Name: Name: Title: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, in its capacity as a Lender and the Documentation Agent hereunder By -------------------------------- Name: Title: FIRST UNION NATIONAL BANK By -------------------------------- Name: Title: BF 91172.1 8/24/1998 000011 - 017117 -6- EX-10.38 4 SECOND AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.38 SECOND AMENDMENT TO CREDIT AGREEMENT This SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of December 9, 1998 (this "Second Amendment"), is entered into by and among RESPIRONICS, INC., a corporation organized and existing under the laws of the State of Delaware (the "Borrower"), the financial institutions listed on the signature pages hereto, and each other financial institution which from time to time becomes a party hereto in accordance with Subsection 9.6a of the Original Credit Agreement, as defined below (individually a "Lender" and collectively the "Lenders"), PNC BANK, NATIONAL ASSOCIATION as the issuer of Letters of Credit (in such capacity, the "Issuing Bank"), PNC BANK, NATIONAL ASSOCIATION as the administrative agent (in such capacities, the "Administrative Agent"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as the syndication agent (in such capacity, the "Syndication Agent") and FIRST UNION NATIONAL BANK as the documentation agent (in such capacity, the "Documentation Agent") (the Administrative Agent, the Syndication Agent and the Documentation Agent are herein collectively referred as the "Agents") and amends that certain Credit Agreement dated as of May 8, 1998, as previously amended by the First Amendment to Credit Agreement dated as of August 19, 1998 (the Credit Agreement, as amended by the First Amendment, together with the exhibits and schedules thereto and all amendments, supplements, extensions, renewals, modifications or replacements thereto or thereof, is hereinafter referred to as the "Original Credit Agreement") entered into by and among the Borrower, the Lenders, the Issuing Bank, the Administrative Agent, PNC Bank, National Association as the syndication agent and Bank of America National Trust and Savings Association as the documentation agent. WITNESSETH: WHEREAS, the Borrower, the Lenders and the Agents entered into the Original Credit Agreement whereby the Lenders made available to the Borrower certain financial accommodations, including but not limited to a Revolving Credit Commitment in an amount not to exceed $100,000,000 at any one time outstanding; and WHEREAS, the Borrower has requested that the Lenders agree to certain modifications to the Original Credit Agreement. NOW THEREFORE, in consideration of the foregoing recitals (each of which is incorporated herein and made a material part hereof), the mutual covenants and agreements contained herein and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, and with the intent to be legally bound hereby, the parties hereto agree as follows: ARTICLE I AMENDMENTS TO ORIGINAL CREDIT AGREEMENT --------------------------------------- Section 1.01. Amendments to preamble to the Original Credit --------------------------------------------- Agreement. The preamble to the Original Credit Agreement is hereby amended and - --------- restated to read as follows: This CREDIT AGREEMENT, dated as of May 8, 1998 (as more fully defined below, the "Agreement"), is entered into by and among RESPIRONICS, INC., a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages hereto, and each other financial institution which, from time to time becomes a party hereto in accordance with Subsection 9.6a (individually a "Lender" and collectively the "Lenders") and PNC BANK, NATIONAL ASSOCIATION as the issuer of Letters of Credit (in such capacity the "Issuing Bank"), PNC BANK, NATIONAL ASSOCIATION as the administrative agent (in such capacity the "Administrative Agent"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION as the syndication agent (in such capacity, the "Syndication Agent") and FIRST UNION NATIONAL BANK as the documentation agent (in such capacity, the "Documentation Agent"). Section 1.02. Amendments to Section 1.1 of the Original Credit ------------------------------------------------ Agreement. Section 1.1 of the Original Credit Agreement is hereby amended as - --------- follows: (i) The following defined terms and the definitions therefor are hereby added to Section 1.1 of the Original Credit Agreement and are inserted in correct alphabetical order: Recourse Purchase Agreements. Agreements entered into by the ---------------------------- Borrower or a Subsidiary pursuant to which accounts or leases are assigned to or originated by a third party with such third party having full or partial recourse to the Borrower for nonpayment of the underlying account or lease obligation, including but not limited to (i) the Master Lease Purchase Agreement dated August 23, 1995 between Healthdyne Technologies, Inc. and Copelco Capital Inc. as the same has been or may be amended, (ii) the agreement dated May 17, 1991 between Healthdyne, Inc. and Sanwa Business Credit Corporation as the same as been or may be further amended, and (iii) the Operating Agreement dated September 24, 1998, between Rockford Industries, Inc. and the Borrower, as the same may be amended. Second Amendment: The Second Amendment to Credit Agreement and ---------------- Waiver dated as of December 9, 1998. Second Amendment Effective Date: The date on which the Lenders ------------------------------- shall have determined that each of the conditions set forth in Article III of the Second Amendment have either been satisfied by the Borrower or waived by the Lenders. Syndication Agent: Bank of America National Trust and Savings ----------------- Association. -2- (ii) The definitions of the following defined terms are hereby amended to read as follows: Administrative Agent: PNC Bank, National Association, in its -------------------- capacity as the administrative agent. Agents: Any of the Administrative Agent, the Documentation Agent ------ or the Syndication Agent. Commitment: As to each Lender, the obligation of such Lender to ---------- make Loans available to the Borrower pursuant to Section 2.1 in an aggregate principal amount not to exceed the amount set forth opposite such Lender's name on the signature pages to the Second Amendment (as the same may be reduced at any time or from time to time pursuant to Subsection 2.1f and Subsection 2.3a) and, as to all Lenders, the obligation of the Lenders to make Loans available to the Borrower in a maximum aggregate amount not to exceed $125,000,000 as set forth in Section 2.1. Compliance Certificate: A certificate substantially in the form of ---------------------- Exhibit C-1 attached to the Second Amendment which has been executed by an Authorized Officer and delivered to the Administrative Agent. Consolidated EBIT: For the relevant period, the sum of the ----------------- Borrower's (i) Consolidated net income, (ii) Consolidated income tax expense and (iii) Consolidated interest expense; provided, that -------- except as adjusted by the following proviso, there shall be excluded from Consolidated net income (a) any extraordinary or non-recurring items of gain or loss (including, without limitation, those items created by mandated changes in accounting treatment), and (b) any gain or loss of any Person accounted for on the equity method, except to the extent of cash distributions received during the relevant period; and provided further that (a) the non-recurring charges -------- ------- directly related to the Healthdyne Acquisition and (b) non-recurring charges related to the defense of the attempted hostile takeover of Healthdyne by Invacare, Inc., to the extent such changes are not otherwise included in items (ii) and (iii) immediately above, shall be added to the Borrower's Consolidated Net Income for the Fiscal Quarters ending March 31, 1998, June 30, 1998, September 30, 1998, December 31, 1998 and March 31, 1999. Consolidated EBITDA: For the relevant period, the sum of the ------------------- Borrower's (i) Consolidated net income, (ii) Consolidated income tax expense, (iii) Consolidated interest expense, (iv) Consolidated depreciation and amortization expenses and (v) other Consolidated non-cash expenses for the Borrower, all determined in accordance with GAAP; provided that except as adjusted by the following proviso there -------- shall be excluded from Consolidated net income (a) any extraordinary or non-recurring items of gain or loss (including, without limitation, those items created by mandated changes in accounting treatment), and (b) any -3- gain or loss of any Person accounted for on the equity method, except to the extent of cash distributions received during the relevant period; and provided further that (a) the non-recurring charges -------- ------- directly related to the Healthdyne Acquisition and (b) non-recurring charges related to the defense of the attempted hostile takeover of Healthdyne by Invacare, Inc., to the extent such changes are not otherwise included in items (ii) and (iii) immediately above, shall be added to the Borrower's Consolidated net income for the Fiscal Quarters ending March 31, 1998, June 30, 1998, September 30, 1998, December 31, 1998 and March 31, 1999. Documentation Agent: First Union National Bank. ------------------- Guaranty: As to any Person, any obligation, direct or indirect, by -------- which such Person undertakes to guaranty, assume or remain liable for the payment of a second Person's obligations, including but not limited to (i) endorsements of negotiable instruments, (ii) discounts with recourse, (iii) agreements to pay or perform upon a second Person's failure to pay or perform, (iv) agreements to remain liable on obligations assumed by a second Person, (v) agreements to maintain the capital, working capital, solvency or general financial condition of a second Person, (vi) the Recourse Purchase Obligations and (vii) agreements for the purchase or other acquisition of products, materials, supplies or services, if in any case payment therefor is to be made regardless of the nondelivery of such products, materials or supplies or the nonfurnishing of such services. Section 1.03. Amendment to Section 2.1a of the Original Credit ------------------------------------------------ Agreement. Section 2.1a of the Original Credit Agreement is hereby amended and - --------- restated in its entirety to read as follows: 2.1a Loans. The Lenders hereby severally establish, upon the terms ----- and conditions hereinafter set forth and relying upon the representations and warranties herein set forth, a revolving credit in favor of the Borrower in the maximum aggregate amount of ONE HUNDRED TWENTY-FIVE MILLION AND NO/100 DOLLARS ($125,000,000.00) (the "Revolving Credit"). The Borrower shall have the right to borrow, repay and reborrow from the Lenders from the date hereof until the Revolving Credit Termination Date pursuant to draws upon the Revolving Credit the principal amount of which, together with the Stated Amount of all then outstanding Letters of Credit, shall not exceed $125,000,000 in the aggregate at any one time outstanding; provided, however, solely for purposes of determining Revolving -------- ------- Credit availability under this Section 2.1a, the Westminster IRB Letter of Credit issued by Norwest Bank of Colorado, N.A. and the PEDFA Letter of Credit issued by PNC Bank, National Association, each as more fully described under item 2 of Schedule 5.1 attached hereto, ------------ shall be excluded from the definition of outstanding Letters of Credit. -4- Section 1.04. Amendment to Section 2.3a of the Original Credit ------------------------------------------------ Agreement. Section 2.3a of the Original Credit Agreement is hereby amended and - --------- restated in its entirety to read as follows: 2.3a Issuance of Letters of Credit. Subject to the further terms ----------------------------- and conditions of this Agreement and in reliance upon the representations and warranties set forth herein, the Issuing Bank agrees to issue upon the request of the Borrower to the Issuing Bank, Letters of Credit for the account of the Borrower or a Subsidiary of the Borrower in an aggregate Stated Amount not to exceed TWENTY MILLION DOLLARS ($20,000,000) at any one time outstanding (as may be increased or reduced and reinstated from time to time in accordance with the terms and provisions hereof). The Stated Amount of each Letter of Credit, while the same is issued and outstanding, shall be deducted from the maximum amount otherwise available under the Commitment. By way of illustration, if there are outstanding at any one time Letters of Credit having an aggregate Stated Amount of $5,000,000, the maximum availability under the Commitment, without accounting for reductions which are a function of voluntary permanent reductions, would be $120,000,000. No Letters of Credit may be issued hereunder to the extent the Stated Amount thereof together with the aggregate amount of Disbursements made under Subsection 2.1a, would exceed the maximum availability under the Commitment (as may be reduced pursuant to the terms of this Subsection 2.3a or Subsection 2.1f hereof). No Letter of Credit issued pursuant hereto shall have an initial term which exceeds twelve (12) months from the date of issuance (except the Existing Letters of Credit) nor have an expiration date later than fifteen (15) days prior to the Revolving Credit Termination Date. At least three (3) Business Days prior to the issuance of any Letter of Credit hereunder the Borrower shall complete and deliver to the Issuing Bank the Issuing Bank's then current form of Application for Letter of Credit. The issuance of each Letter of Credit in accordance with the provisions of this Subsection 2.3a shall require the satisfaction of each condition set forth in Sections 6.1 and 6.2 hereof. The foregoing not withstanding, solely for the purposes of determining Letter of Credit availability under this Section 2.3a, the Westminster IRB Letter of Credit issued by Norwest Bank of Colorado, N.A. and the PEDFA Letter of Credit issued by PNC Bank, National Association, each as more fully described under item 2 of Schedule 5.1 attached hereto, shall be ------------ excluded from the definition of outstanding Letters of Credit Section 1.05. Amendment to Section 4.2a of the Original Credit ------------------------------------------------ Agreement. Section 5.1 of the Original Credit Agreement is amended by deleting - ---------- the phrase "Exhibit C" and inserting in its place the phrase "Exhibit C-1". ------- ------- Section 1.06. Amendment to Section 5.1 of the Original Credit ----------------------------------------------- Agreement. Section 5.1 of the Original Credit Agreement is hereby amended in its - --------- entirety to read as follows: Indebtedness. The Borrower shall not and shall not permit its ------------ Subsidiaries to create, incur, assume or permit to exist or remain outstanding any Indebtedness, except for: -5- (i) The Indebtedness owed by the Borrower to the Lenders or the Issuing Bank hereunder; (ii) Consolidated Indebtedness of the Borrower and its Subsidiaries existing on the Closing Date (exclusive of obligations under Recourse Repurchase Agreements) to remain outstanding and unpaid after the Closing Date and listed on Schedule 5.1 and any extensions, renewals ------------ or refinancings thereof, in outstanding principal amounts not greater than those shown on Schedule 5.1; ------------ (iii) Consolidated Indebtedness represented by obligations, whether contingent or actual, under Recourse Repurchase Agreements not to exceed $25,000,000 at any one time outstanding; (iv) Guarantees of the Borrower, guaranteeing the Indebtedness of its Subsidiaries permitted pursuant to this Section 5.1; and (v) Additional Consolidated Indebtedness, including without limitation purchase money indebtedness and Capitalized Lease Obligations, of the Borrower and its Subsidiaries in an amount not to exceed $12,500,000 at any one time outstanding. Section 1.07. Amendment to Title of Article 8 of the Original ----------------------------------------------- Credit Agreement. Article 8 of the Original Credit Agreement is hereby renamed - ---------------- to read as follows: ARTICLE 8. ADMINISTRATIVE AGENT, DOCUMENTATION AGENT AND SYNDICATION AGENT. Section 1.08. Amendment to Section 8.1 of the Original Credit ----------------------------------------------- Agreement. Section 8.1 of the Original Credit Agreement is hereby amended and - --------- restated in its entirety to read as follows: 8.1 Appointment and Grant of Authority. Each of the Lenders ---------------------------------- hereby appoints PNC Bank, and PNC Bank hereby agrees to act as, the Administrative Agent under this Agreement, the Revolving Credit Notes and the other Loan Documents. Each of the Lenders hereby appoints First Union National Bank, and First Union National Bank hereby agrees to act as, the Documentation Agent under this Agreement, the Revolving Credit Notes and the other Loan Documents. Each of the Lenders hereby appoints Bank of America National Trust and Savings Association, and Bank of America National Trust and Savings Association hereby agrees to act as, the Syndication Agent under this Agreement, the Revolving Credit Notes and the other Loan Documents. As such Agents, the Agents shall have and may exercise such powers under this Agreement as are specifically delegated to them in their respective capacities, by the terms hereof, of the Revolving Credit Notes or of the other Loan Documents, -6- together with such other powers as are incidental thereto. Without limiting the foregoing, the Administrative Agent, on behalf of the Lenders, is authorized to execute all of the Loan Documents (other than this Agreement) and to accept all of the Loan Documents and all other agreements, documents or instruments reasonably required to carry out the intent of the parties to this Agreement. Section 1.09. Amendment to Section 8.9a of the Original Credit ------------------------------------------------ Agreement. Section 8.9a of the Original Credit Agreement is hereby amended by - --------- replacing the opening phrase "Either of the Agents..." with "Any of the Agents...". Section 1.10. No Other Amendments. The amendments to the ------------------- Original Credit Agreement set forth in Sections 1.01 through 1.09 above do not either implicitly or explicitly waive, alter or amend, except as expressly provided in this Second Amendment, the provisions of the Original Credit Agreement. The amendments set forth in Sections 1.01 through 1.09 hereof do not waive, now or in the future, compliance with any other covenant, term or condition to be performed or complied with nor do they impair any rights or remedies of the Lenders and the Agents under the Original Credit Agreement with respect to any such violation. ARTICLE II BORROWER'S SUPPLEMENTAL REPRESENTATIONS --------------------------------------- Section 2.01. Incorporation by Reference. As an inducement to -------------------------- the Lenders and the Agents to enter into this Second Amendment, except as previously disclosed in writing by the Borrower to the Lenders and the Agents, the Borrower hereby repeats herein for the benefit of the Lenders and the Agents the representations and warranties made by the Borrower in Article 3 of the Original Credit Agreement, except that for purposes hereof such representations and warranties shall be deemed to extend to and cover this Second Amendment. ARTICLE III CONDITIONS PRECEDENT -------------------- Section 3.01. Conditions Precedent. Each of the following shall -------------------- be a condition precedent to the effectiveness of this Second Amendment: (i) The Lenders and the Agents shall have received, on or before the Second Amendment Effective Date, the following items, each, unless otherwise indicated, dated on or before the Second Amendment Effective Date and in form and substance satisfactory to the Lenders, the Agents and the Administrative Agent's special counsel, Tucker Arensberg, P.C.: (A) Duly executed counterpart originals of this Second Amendment, executed by the Borrower, the Agents, and all of the Lenders; -7- (B) Amended and Restated Revolving Credit Notes, one each payable to each Lender in the principal amount of each Lender's increased Commitment, executed by the Borrower; (C) A certified copy of the corporate action of the Borrower authorizing the execution and delivery of and the performance under this Second Amendment; (D) A certification from the Borrower that its certificate of incorporation and its by-laws which were delivered to the Administrative Agent on May 8, 1998 continue to remain complete and correct and in full force and effect and have not been amended, supplemented or otherwise modified on or after such date (except as set forth in such certificate), which certification states the names of the Persons authorized to sign this Second Amendment and all other documents, instruments and certificates delivered hereunder, together with the true signatures of such Persons; (E) A certificate signed by an Authorized Officer of the Borrower, dated the Second Amendment Effective Date, certifying that: (1) the representations and warranties made pursuant to this Second Amendment and in the other Loan Documents executed in connection with this Second Amendment are true and correct on and as of the Second Amendment Effective Date as though made on and as of such date; (2) no petition by or against the Borrower has at any time been filed under the United States Bankruptcy Code or under any similar act; (3) except which those matters which have previously been disclosed to the Lenders, no Material Adverse Change in the properties, business, operations, financial condition or prospects of the Borrower has occurred; and (4) the Borrower has in all material respects performed all agreements, covenants and conditions required to be performed on or prior to the date hereof under the Original Credit Agreement and the other Loan Documents, except to the extent waived by the Lenders on or before the Second Amendment Effective Date; and (F) Consents from each Guarantor existing as of the Second Amendment Effective Date to the execution by the Borrower of the Second Amendment; (G) Payment to the Administrative Agent for the benefit of the Lenders, pro rata in accordance with their respective increased Commitments, of a fee of $31,250; and -8- (H) Such other instruments, documents and opinions of counsel as the Lenders and the Agents shall reasonably require, all of which shall be satisfactory in form and substance to the Lenders and Agents and the Administrative Agent's special counsel. ARTICLE IV GENERAL PROVISIONS ------------------ Section 4.01. Ratification of Terms. Except as expressly amended by --------------------- this Second Amendment, the Original Credit Agreement and each and every representation, warranty, covenant, term and condition contained therein is specifically ratified and confirmed. The Lenders are not obligated to make further amendments, supplements, extensions or renewals thereto or thereof. Section 4.02. References. All notices, communications, agreements, ---------- certificates, documents or other instruments executed and delivered after the execution and delivery of this Second Amendment in connection with the Original Credit Agreement, any other Loan Document or the transactions contemplated thereby may refer to the Original Credit Agreement without making specific reference to this Second Amendment, but nevertheless all such references shall include this Second Amendment unless the context requires otherwise. From and after the Second Amendment Effective Date, all references in the Original Credit Agreement and each of the other Loan Documents to the "Agreement" shall be deemed to be references to the Original Credit Agreement, as amended hereby. Section 4.03. Counterparts. This Second Amendment may be executed ------------ in different counterparts, each of which when executed by the Borrower and the Lenders shall be regarded as an original, and all such counterparts shall constitute one Second Amendment. Section 4.04. Capitalized Terms. Except for proper nouns and as ----------------- otherwise defined herein, capitalized terms used herein as defined terms shall have the meanings ascribed to them in the Original Credit Agreement, as amended hereby. Section 4.05. Taxes. The Borrower shall pay any and all stamp ----- and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Second Amendment and such other documents and instruments as are delivered in connection herewith and agrees to save the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. Section 4.06. Costs and Expenses. The Borrower will pay all ------------------ costs and expenses of the Lenders and the Agents (including, without limitation, the reasonable fees and the disbursements of special counsel, Tucker Arensberg, P.C.) in connection with the preparation, execution and delivery of this Second Amendment and the other documents, instruments and certificates delivered in connection herewith. SECTION 4.07. GOVERNING LAW. THIS SECOND AMENDMENT AND THE RIGHTS ------------- AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE -9- WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO THE PROVISIONS THEREOF REGARDING CONFLICTS OF LAW. Section 4.08. Headings. The headings of the sections in this -------- Second Amendment are for purposes of reference only and shall not be deemed to be a part hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -10- IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Second Amendment to Credit Agreement to be executed by their respective duly authorized officers as of the date first written above. RESPIRONICS, INC., a Delaware corporation By:________________________________ (SEAL) Name: Title: PNC BANK, NATIONAL ASSOCIATION, as a Lender and in its capacities as Commitment: $30,312,500 Administrative Agent and Issuing Bank Commitment Percentage 24.25% By:________________________________ (SEAL) Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Lender and in Commitment: $28,125,000 its capacity as Syndication Agent Commitment Percentage 22.5% By:________________________________ (SEAL) Name: Title: FIRST UNION NATIONAL BANK, as a Lender and Commitment: $28,125,000 in its capacity as Documentation Agent Commitment Percentage 22.5% By:________________________________ (SEAL) Name: Title: -11- Commitment: $23,437,500 FLEET NATIONAL BANK Commitment Percentage 18.75% By:________________________________ (SEAL) Name: Title: Commitment: $15,000,000 NORWEST BANK COLORADO, NATIONAL ASSOCIATION Commitment Percentage 12.0% By:________________________________ (SEAL) Name: Title: -12- EX-27 5 FINANCIAL DATA SCHEDULE
5 6-MOS 6-MOS JUN-30-1999 JUN-30-1999 JUL-01-1998 JUL-01-1997 DEC-31-1998 DEC-31-1997 22,312,793 17,390,625 0 0 111,113,051 90,990,130 8,626,000 2,146,000 58,688,361 58,693,734 222,426,685 180,404,141 106,074,865 92,065,130 52,374,095 42,782,990 358,726,960 314,950,522 60,437,403 49,748,132 0 0 0 0 0 0 328,574 317,947 202,887,868 208,752,244 358,726,960 314,950,522 176,608,820 186,222,509 176,608,820 186,222,509 91,615,400 94,107,501 91,615,400 94,107,501 60,547,256 62,817,797 0 0 2,181,284 2,148,724 22,780,486 28,008,560 9,112,194 11,200,924 13,668,291 16,807,636 0 0 0 0 0 0 13,668,291 16,807,636 0.43 0.53 0.42 0.51
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