<PAGE>
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.
<PAGE>
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
- ----------
<PAGE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31 June 30
1998 1998
--------------------------------------------------------------
<S> <C> <C>
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
===================== ===================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
December 31 June 30
1998 1998
------------------------------------------------------
<S> <C> <C>
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
====================== ===================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
1998 1997 1998 1997
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six Months Ended December 31
1998 1997
---------------------------------------------------
<S> <C> <C>
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
============ ============
</TABLE>
See notes to consolidated financial statements
<PAGE>
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:
<TABLE>
<CAPTION>
December 31 June 30
1998 1998
------------------ ------------------
<S> <C> <C>
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
================== ==================
</TABLE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<TABLE>
<CAPTION>
Shares were voted as follows:
Withhold
Name For Vote For
- ------------------------------- ---------- --------
<S> <C> <C>
Douglas A Cotter 26,856,163 566,008
Gerald E. McGinnis 26,876,060 546,111
Craig B. Reynolds 26,849,069 573,102
</TABLE>
(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.
<PAGE>
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
<PAGE>
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
<PAGE>
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."
<PAGE>
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
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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:
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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:
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1999
<PERIOD-START> JUL-01-1998 JUL-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 22,312,793 17,390,625
<SECURITIES> 0 0
<RECEIVABLES> 111,113,051 90,990,130
<ALLOWANCES> 8,626,000 2,146,000
<INVENTORY> 58,688,361 58,693,734
<CURRENT-ASSETS> 222,426,685 180,404,141
<PP&E> 106,074,865 92,065,130
<DEPRECIATION> 52,374,095 42,782,990
<TOTAL-ASSETS> 358,726,960 314,950,522
<CURRENT-LIABILITIES> 60,437,403 49,748,132
<BONDS> 0 0
0 0
0 0
<COMMON> 328,574 317,947
<OTHER-SE> 202,887,868 208,752,244
<TOTAL-LIABILITY-AND-EQUITY> 358,726,960 314,950,522
<SALES> 176,608,820 186,222,509
<TOTAL-REVENUES> 176,608,820 186,222,509
<CGS> 91,615,400 94,107,501
<TOTAL-COSTS> 91,615,400 94,107,501
<OTHER-EXPENSES> 60,547,256 62,817,797
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,181,284 2,148,724
<INCOME-PRETAX> 22,780,486 28,008,560
<INCOME-TAX> 9,112,194 11,200,924
<INCOME-CONTINUING> 13,668,291 16,807,636
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 13,668,291 16,807,636
<EPS-PRIMARY> 0.43 0.53
<EPS-DILUTED> 0.42 0.51
</TABLE>
