SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 10, 1997
Healthdyne Technologies, Inc.
--------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 0-21776 52-1756497
--------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1255 Kennestone Circle, Marietta, Georgia 30066
--------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 499-1212
Not Applicable
-------------------------------------------------------------------
(Former name or former address, if changed since last report)
ITEM 5. Other Events.
Healthdyne Technologies, Inc. (the "Company") has entered into an
Agreement and Plan of Reorganization, dated as of November 10, 1997,
with Respironics, Inc. ("Respironics") and its wholly-owned
subsidiary, RIGA, Inc. ("RIGA") and a related Agreement and Plan of
Merger by and among the same parties (collectively, the "Merger
Agreement"). As provided in the Merger Agreement, RIGA will be merged
with and into the Company, which will be the surviving corporation
(the "Merger"). In the Merger, each outstanding share of the
Company's common stock, par value $0.01 per share, will be converted
into and become a right to receive $24.00 in value of Respironics
common stock, par value $0.01 per share (the "Respironics Shares"),
based on the trading value of the Respironics Shares during a period
preceding the closing of the Merger as set forth in the Merger
Agreement, provided that each share of Healthdyne common stock will be
converted into no more than approximately .92 Respironics Shares nor
less than approximately .77 Respironics Shares.
The Merger is subject to customary conditions including, among
others, approval of the Merger Agreement by a majority of the
outstanding Healthdyne shares and expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
A copy of the Agreement and Plan of Reorganization and the
related Agreement and Plan of Merger are filed as Exhibit 2 to this
Form 8-K and are incorporated herein by reference.
On November 10, 1997, in connection with the Merger Agreement,
the Board of Directors of the Company approved an amendment to the
Company's Rights Agreement, dated May 22, 1995, as amended, between
the Company and SunTrust Bank, Atlanta, as Rights Agent. A copy of
the amendment to the Rights Agreement is filed as Exhibit 4 to this
Form 8-K and is incorporated herein by reference.
On November 11, 1997, the Company and Respironics issued a joint
press release announcing the Merger Agreement, a copy of which is
filed as Exhibit 99 to this Form 8-K and is incorporated herein by
reference.
ITEM 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Businesses Acquired.
None.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Exhibits.
Exh. No. Description
-------- -----------
2 Agreement and Plan of Reorganization, dated
as of November 10, 1997, by and among the
Company, Respironics, Inc. and RIGA, Inc.,
and related Agreement and Plan of Merger
(filed herewith).
4 Amendment to Rights Agreement, dated as of
November 10, 1997, between the Company and
SunTrust Bank, Atlanta, as Rights Agent
(filed herewith).
99 Text of Press Release, dated November 11,
1997 (filed herewith).
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 hereunto duly authorized.
Healthdyne Technologies, Inc.
Registrant
By: /s/ M. Wayne Boylston
-----------------------------
Name: M. Wayne Boylston
Title: Vice President-Finance
Dated: November 12, 1997
EXHIBIT INDEX
Exh. No. Description Page
-------- ----------- ----
2 Agreement and Plan of Reorganization,
dated as of November 10, 1997, by and
among the Company, Respironics, Inc.
and RIGA, Inc., and related Agreement
and Plan of Merger.
4 Amendment to Rights Agreement, dated
as of November 10, 1997, between the
Company and SunTrust Bank, Atlanta,
as Rights Agent.
99 Text of Press Release, dated
November 11, 1997.
CONFORMED COPY
AGREEMENT AND PLAN OF REORGANIZATION
By and Among
RESPIRONICS, INC.,
RIGA, INC.
and
HEALTHDYNE TECHNOLOGIES, INC.
Dated as of November 10, 1997
TABLE OF CONTENTS
ARTICLE I THE MERGER....................................................1
1.1. The Merger......................................................1
ARTICLE II CONDITIONS...................................................2
2.1. Mutual Conditions...............................................2
2.2. Respironics Conditions..........................................3
2.3. Healthdyne Conditions...........................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HEALTHDYNE................6
3.1. Organization....................................................6
3.2. Capitalization..................................................6
3.3. Subsidiaries....................................................6
3.4. Joint Ventures, etc.............................................7
3.5. Corporate Authority; Absence of Violation.......................7
3.6. Exchange Act Reports and Financial Statements...................8
3.7. Absence of Certain Changes......................................8
3.8. Taxes...........................................................8
3.9. Employee Contracts and Plans....................................9
3.10. Material Contracts and Activities Since September 30, 1997.....10
3.11. Litigation and Other Proceedings..............................10
3.12. Compliance with Laws; Regulatory Matters......................10
3.13. Environmental Matters.........................................10
3.14. Insurance.....................................................11
3.15. Intellectual Property.........................................11
3.16. Takeover Statutes.............................................12
3.17. Healthdyne Rights Agreements..................................12
3.18. Accounting and Tax Matters....................................12
3.19. Proxy Statement/Prospectus, etc...............................12
3.20. Investment Banker's Opinion...................................13
3.21. Investigation by Healthdyne..................................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF RESPIRONICS...............13
4.1. Organization...................................................13
4.2. Capitalization.................................................14
4.3. Subsidiaries....................................................14
4.4. Corporate Authority; Absence of Violation......................14
4.5. Exchange Act Reports and Financial Statements..................15
4.6. Absence of Certain Changes.....................................16
4.7. Taxes..........................................................16
4.8. Employee Contracts and Plans...................................16
4.9. Litigation and Other Proceedings...............................17
4.10. Compliance with Laws; Regulatory Matters......................17
4.11. Environmental Matters.........................................17
4.12. Insurance.....................................................18
4.13. Intellectual Property.........................................18
4.14. Accounting and Tax Matters....................................19
4.15. Proxy Statement/Prospectus, etc...............................19
4.16. Investment Banker's Opinion...................................20
4.17. Investigation by Respironics..................................20
ARTICLE V CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME...............20
5.1. Conduct of Business in Ordinary Course.........................20
5.2. Conduct of Respironics Business in Ordinary Course.............21
ARTICLE VI COVENANTS AND ACTIONS PENDING THE EFFECTIVE TIME............22
6.1. Securities Registration and Disclosure.........................22
6.2. Regulatory Clearances and Approvals............................23
6.3. Shareholders' Meetings.........................................23
6.4. Affiliates' Agreements..........................................24
6.5. Public Announcements...........................................24
6.6. Notice of Certain Events.......................................24
6.7. All Reasonable Best Efforts....................................24
6.8. Healthdyne Acquisition Proposals...............................25
6.9. Transactions Involving Respironics.............................25
6.10. Access and Information........................................27
ARTICLE VII AMENDMENT, WAIVER AND TERMINATION..........................27
7.1. Amendment......................................................27
7.2. Waiver.........................................................27
7.3. Termination....................................................28
7.4. Effect of Termination..........................................29
7.5. Respironics Fee................................................29
7.6. Healthdyne Fee.................................................30
7.7. Arbitration of Disputes Regarding Adverse Regulatory
Condition Notice...............................................31
ARTICLE VIII MISCELLANEOUS PROVISIONS..................................32
8.1. Closing and Effective Time.....................................32
8.2. Confidentiality................................................33
8.3. Entire Agreement...............................................33
8.4. Counterparts; Headings.........................................33
8.5. Further Assurances.............................................33
8.6. Communications.................................................33
8.7. Expenses.......................................................34
8.8. Brokers........................................................35
8.9. Survival.......................................................35
8.10. Successors and Assigns; No Third Party Beneficiaries..........35
8.11. Governing Law.................................................35
ARTICLE IX POST-EFFECTIVE TIME COVENANTS...............................35
9.1. Indemnification of Healthdyne Directors and Officers...........35
9.2. Healthdyne Stock Option........................................36
9.3. Respironics Benefit Plans......................................37
9.4. Transition Team................................................38
9.5. Nominees to Respironics Board..................................38
9.6. Stipulation Regarding Litigation...............................39
9.7. Directors and Officers Letters.................................39
Appendix A Agreement and Plan of Merger
Appendix B Individuals to Enter Into Employment Agreements
Appendix C Form of Employment Agreements
Appendix D Form of Matria Letter
Appendix E Individuals to Enter Into Consulting Agreements
Appendix F Employees and Directors Whose Agreements will be
Honored After Effective Time
Appendix G Form of Stipulation Regarding Litigation
Appendix H Form of Healthdyne Directors and Officers Letter
Appendix I Form of Respironics Directors and Officers Letter
INDEX OF DEFINED TERMS
Term Section
AAA Rules....................................................... 7.7(a)
Adverse Regulatory Condition Notice............................. 6.6
Agreement....................................................... Para 1
Apria Contract.................................................. 3.1
Arbitrator...................................................... 7.7(b)
Binding Arbitration............................................. 7.7(a)
Claim........................................................... 9.1(a)
Closing......................................................... 8.1
Code............................................................ Para 4
Confidentiality Agreements...................................... 6.10
Consulting Agreements........................................... 9.2(d)
D&O Insurance................................................... 9.1(d)
Determination Date.............................................. 7.3
Effective Time.................................................. 8.1
ERISA........................................................... 3.9
Exchange Act.................................................... 3.6
Exchange Ratio.................................................. 1.1
Former Property................................................. 3.13
GBCC............................................................ 3.16
Hazardous Substances.......................................3.13 and 4.11
Healthdyne...................................................... Para 1
Healthdyne Acquisition Proposal................................. 6.8
Healthdyne Affiliates........................................... 6.4
Healthdyne Business Combination................................. 7.5
Healthdyne Common Stock......................................... 1.1
Healthdyne Continuing Directors................................. 9.5
Healthdyne Disclosure Letter....................................Art. III
Healthdyne Employee Benefit Plans............................... 3.9
Healthdyne Entity............................................... 3.13
Healthdyne Fee.................................................. 7.6
Healthdyne Intellectual Property Rights......................... 3.15
Healthdyne Joint Ventures....................................... 3.4
Healthdyne Material Adverse Effect.............................. 3.1
Healthdyne Option Plans......................................... 3.2
Healthdyne Preferred Stock...................................... 3.2
Healthdyne Reports ............................................. 3.6
Healthdyne Rights Plan ......................................... 3.2
Healthdyne Section 6.9(a) Statement of Intention ............... 6.9
Healthdyne Subsidiaries......................................... 3.3
Healthdyne Third-Party Intellectual Property Rights............. 3.15
HSR Act......................................................... 2.1(b)
Issue........................................................... 7.7(a)
Indemnified Party............................................... 9.1(a)
Matria.......................................................... 2.2
Matria Letter................................................... 2.2
Matria License Agreement........................................ 2.2
Matria Services Agreement....................................... 2.2
Merger.......................................................... 1.1
Merger Agreement................................................ 1.1
Merger Shares................................................... 6.4
Merger Subsidiary............................................... Para 1
Merger Subsidiary Common Stock.................................. 1.1
NASD ........................................................... 2.1
NMS............................................................. 2.1
Notice of Dispute............................................... 7.7(a)
Outstanding Healthdyne Options.................................. 3.2
Outstanding Respironics Options................................. 5.2
Participation Facility.....................................3.11 and 4.11
Present Property................................................ 3.13
Proxy Statement/Prospectus...................................... 2.1
Registration Statement.......................................... 6.1
Regulatory Condition or Requirement............................. 1.1(b)
Respironics..................................................... Para 1
Respironics Acquisition Proposal................................ 6.9
Respironics Affiliates.......................................... 6.4
Respironics Business Combination................................ 7.6
Respironics Common Stock........................................ 1.1
Respironics Disclosure Letter................................... Art. IV
Respironics Employee Benefit Plans.............................. 4.8
Respironics Entity.............................................. 4.11
Respironics Fee................................................. 7.5
Respironics Intellectual Property Rights........................ 4.13
Respironics Material Adverse Effect............................. 4.1
Respironics Option Plans........................................ 5.2
Respironics Reports............................................. 4.5
Respironics Rights Agreement.................................... 5.2
Respironics Subsidiaries........................................ 4.3
Respironics Third-Party Intellectual Property Rights............ 4.13
Restricted Period............................................... 6.4
SEC............................................................. 2.1
Section 6.9(a) Agreement........................................ 6.9
Section 6.9(a) Notice........................................... 6.9
Securities Act.................................................. 2.1
Shareholders' Meetings.......................................... 6.3
Significant Healthdyne Subsidiary............................... 7.3
Significant Respironics Subsidiary.............................. 7.6
Significant Subsidiary.......................................... 7.5
Stock Option Exchange Agreement................................. 9.2(b)
Substitute Option............................................... 9.2(a)
Surviving Corporation........................................... 1.1
Takeover Statute................................................ 3.16
Transition Team................................................. 9.4
Unexercisable Option............................................ 9.2(b)
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT dated as of November 10, 1997 (the "Agreement") by
and among RESPIRONICS, INC., a Delaware corporation ("Respironics"),
RIGA, INC., a Georgia corporation ("Merger Subsidiary"), and HEALTHDYNE
TECHNOLOGIES, INC., a Georgia corporation ("Healthdyne"),
W I T N E S S E T H :
WHEREAS, Merger Subsidiary and Healthdyne desire to merge in the
manner provided for herein;
WHEREAS, the respective Boards of Directors of Respironics,
Merger Subsidiary and Healthdyne have determined that the merger of
Merger Subsidiary with and into Healthdyne (the "Merger"), upon the terms
and subject to the conditions set forth in this Agreement, would be fair
to and in the best interest of their respective stockholders;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger
shall be accounted for as a "pooling-of-interests";
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements herein contained and intending to be
legally bound hereby, covenant and agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. The reorganization contemplated by this
Agreement is the merger of Merger Subsidiary with and into Healthdyne
(the "Merger") pursuant to the Agreement and Plan of Merger attached
hereto as Appendix A (the "Merger Agreement"). As provided in the Merger
Agreement, at the Effective Time (as defined in Section 8.1 hereof)
Merger Subsidiary will be merged with and into Healthdyne, which will be
the surviving corporation (the "Surviving Corporation"). In the Merger,
(a) each outstanding share of Common Stock, par value $0.01 per share, of
Healthdyne ("Healthdyne Common Stock") will be converted into shares of
Common Stock, par value $0.01 per share, of Respironics ("Respironics
Common Stock") (with cash in lieu of any fractional share) as provided in
the Merger Agreement (the number of shares of Respironics Common Stock
into which shares of Healthdyne Common Stock will be converted being
referred to as the "Exchange Ratio") and (b) each outstanding share of
Common Stock, par value $0.01 per share, of Merger Subsidiary ("Merger
Subsidiary Common Stock") will be converted into one share of Common
Stock, par value $0.01 per share, of the Surviving Corporation, which
shall be held by Respironics.
ARTICLE II
CONDITIONS
2.1. Mutual Conditions. The respective obligations of each party
to effect the Merger shall be subject to the fulfillment at or prior to
the Closing of the following conditions:
(a) Shareholder Approval. This Agreement and the Merger
Agreement shall have been approved by the affirmative vote of the
holders of at least a majority of the issued and outstanding
shares of Healthdyne Common Stock and the issuance of shares of
Respironics Common Stock in connection with the Merger shall have
been approved by the holders of at least a majority of the shares
of Respironics Common Stock present in person or represented by
proxy and entitled to vote at the Respironics Shareholders'
Meeting described in Section 6.3, a quorum being present.
(b) Regulatory Clearances and Approvals. The waiting
period applicable to the consummation of the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act") shall have expired or been terminated; any other
Federal, state, local or foreign regulatory clearances and
approvals necessary to the consummation of the Merger shall have
been obtained; and all other waiting periods imposed by any
Federal, state, local and foreign governmental authority in
connection therewith shall have expired. None of such regulatory
clearances or approvals shall contain or impose any conditions or
requirements, including without limitation requirements relating
to divestiture of product lines, manufacturing operations, one or
more subsidiaries or divisions or any other material assets or
require Respironics to sell or license any rights to any of its
tangible or intangible properties or those of the combined
entities (a "Regulatory Condition or Requirement"), which
Respironics in its reasonable business judgment considers to be
materially adverse to the best interests of the combined
entities. No action or suit to enjoin or prohibit the Merger
shall have been filed by any Federal, state, local or foreign
governmental authority under Federal, state, local or foreign
antitrust or similar laws, which action or suit has not been
dismissed or otherwise terminated in a manner reasonably
satisfactory to Respironics.
(c) Securities Act Registration. The Registration
Statement contemplated by Section 6.1 hereof shall have been
filed by Respironics with the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), and shall have been declared effective prior
to the time the joint proxy statement/prospectus contained
therein (the "Proxy Statement/Prospectus") is first mailed to the
shareholders of Healthdyne and Respironics, and no stop order
with respect to the effectiveness of the Registration Statement
shall have been issued nor any proceeding therefor initiated or
threatened. In addition, the shares of Respironics Common Stock
to be issued pursuant to the Merger Agreement shall be duly
registered or qualified under the securities or "blue sky" laws
of all states in which such action is required for purposes of
the initial issuance of such stock and its distribution to the
shareholders of Healthdyne entitled to receive it.
(d) NASD Quotation. The National Association of Securities
Dealers, Inc. ("NASD") shall have approved for quotation on the
NASD National Market System ("NMS"), upon official notice of
issuance, all of the shares of Respironics Common Stock to be
issued in the Merger.
2.2. Respironics Conditions. The obligations of Respironics to
effect the Merger shall be subject to the fulfillment at or prior to the
Closing of the following additional conditions:
(a) Representations and Warranties; Performance of
Obligations. Except as otherwise consented to in writing by
Respironics or contemplated by this Agreement, the
representations and warranties of Healthdyne contained herein
shall be true and correct as of the date hereof and as of the
date of the Closing as though made on such date, except that any
representation or warranty which specifically relates to an
earlier date shall be true and correct in all material respects
as of such earlier date, except where the failure of such
representations and warranties to be so true and correct (without
giving effect to any limitation as to "materiality" or "Material
Adverse Effect" set forth therein) would not individually or in
the aggregate reasonably be expected to have a Target Material
Adverse Effect; Healthdyne shall have performed or complied in
all material respects with all agreements, covenants and
conditions under this Agreement and the Merger Agreement required
to be performed or complied with by Healthdyne at or prior to the
Closing; and Respironics shall have received a certificate to
each of the foregoing effects signed by the principal executive
officer and the principal accounting and financial officers of
Healthdyne.
(b) Accounting Treatment. The Merger shall as of the date
of the Closing meet the requirements for pooling-of-interests
accounting treatment under generally accepted accounting
principles and under the accounting rules of the SEC, and
Respironics shall have received a letter from Ernst & Young LLP
in form and substance reasonably satisfactory to Respironics as
to the foregoing matters.
(c) Affiliates' Agreements. Respironics shall have
received from each of the persons identified by Healthdyne
pursuant to Section 6.4(a) hereof an executed counterpart of an
affiliate's agreement in the form contemplated by such Section.
(d) Legal Opinion. Respironics shall have received from
Skadden, Arps, Slate, Meagher & Flom LLP and/or Troutman Sanders
LLP, counsel for Healthdyne, one or more customary opinions dated
the date of the Closing and in form and substance reasonably
satisfactory to Respironics as to such matters related to this
Agreement, the Merger Agreement and the transactions contemplated
thereby as Respironics may reasonably request.
(e) Orders, etc. Neither Respironics nor Healthdyne shall
be subject to any order, decree or injunction of any court or
agency of competent jurisdiction which enjoins, prohibits or
materially adversely affects the Merger or to any pending or
threatened litigation or proceeding by governmental authority or
agency which seeks to enjoin or prohibit the Merger or to impose
material damages on either party or any of Respironics directors
or officers by reason thereof.
(f) Employment Agreements and Related Agreements. Each of
the Employment Agreements and related agreements executed on or
before the date of this Agreement by the individuals identified
on Appendix B attached hereto in substantially the forms attached
hereto as Appendix C shall not have been terminated, repudiated
or breached by the individual party thereto, except in the case
of termination due to death or disability of the individual party
thereto as provided in the applicable Employment Agreement and
related agreements.
(g) Matria Agreement. The letter agreement substantially
in the form of Appendix D attached hereto executed on or before
the date of this Agreement (the "Matria Letter") by Matria
Healthcare, Inc., successor to Healthdyne, Inc. ("Matria")
relating to the Tradename License Agreement between Matria and
Healthdyne dated April 21, 1995 (the "Matria License Agreement")
and the Corporate Services Agreement between Matria and
Healthdyne dated April 21, 1995 (the "Matria Services Agreement")
shall not have been terminated, repudiated or breached by Matria.
(h) Federal Tax Opinion. There shall have been received by
Respironics an opinion of Reed Smith Shaw & McClay LLP, to the
effect that:
(i) The Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code and
Respironics, Merger Subsidiary and Healthdyne will each be
a "party to a reorganization" within the meaning of
Section 368(b) of the Code;
(ii) No gain or loss will be recognized by
Respironics, Merger Subsidiary or Healthdyne as a result
of the Merger;
(iii) Except for cash received in lieu of
fractional shares, no gain or loss will be recognized by
the shareholders of Healthdyne who receive solely
Respironics Common Stock on the exchange of their shares
of Healthdyne Common Stock for shares of Respironics
Common Stock;
(iv) The basis of the shares of Respironics
Common Stock to be received by the shareholders of
Healthdyne will be the same as the basis of the shares of
Healthdyne Common Stock exchanged therefor; and
(v) The holding period of the shares of
Respironics Common Stock to be received by the
shareholders of Healthdyne will include the period during
which the Healthdyne Common Stock surrendered in exchange
therefor was held by the Healthdyne shareholder, provided
such Healthdyne Common Stock was held as a capital asset
in the hands of the Healthdyne shareholder at the time of
the exchange.
2.3. Healthdyne Conditions. The obligations of Healthdyne to
effect the Merger shall be subject to the fulfillment at or prior to the
Closing of the following additional conditions:
(a) Representations and Warranties; Performance of
Obligations. Except as otherwise consented to in writing by
Healthdyne or contemplated by this Agreement, the representations
and warranties of Respironics contained herein shall be true and
correct as of the date hereof and as of the date of the Closing
as though made on such date, except that any representation or
warranty which specifically relates to an earlier date shall be
true and correct in all material respects as of such earlier
date, except where the failure of such representations and
warranties to be so true and correct (without giving effect to
any limitation as to "materiality" or "Material Adverse Effect"
set forth therein) would not individually or in the aggregate
reasonably be expected to have a Respironics Material Adverse
Effect; Respironics shall have performed or complied in all
material respects with all agreements, covenants and conditions
under this Agreement and the Merger Agreement required to be
performed or complied with by Respironics at or prior to the
Closing; and Healthdyne shall have received a certificate to each
of the foregoing effects signed by the principal executive
officer and the principal accounting and financial officers of
Respironics.
(b) Accounting Treatment. Healthdyne shall be eligible as
of the date of the Closing for pooling-of-interests accounting
treatment under generally accepted accounting principles and
under the accounting rules of the SEC, and Healthdyne shall have
received a letter from KPMG Peat Marwick LLP in form and
substance reasonably satisfactory to Healthdyne as to the
foregoing matters.
(c) Affiliates' Agreements. Healthdyne shall have received
from each of the persons identified by Respironics pursuant to
Section 6.4(b) hereof an executed counterpart of an affiliate's
agreement in the form contemplated by such Section.
(d) Legal Opinion. Healthdyne shall have received from
Reed Smith Shaw & McClay LLP, counsel for Respironics, a
customary opinion dated the date of the Closing and in form and
substance reasonably satisfactory to Healthdyne as to such
matters related to this Agreement, the Merger Agreement and the
transactions contemplated thereby as Healthdyne may reasonably
request.
(e) Orders, etc. Neither Respironics nor Healthdyne shall
be subject to any order, decree or injunction of any court or
agency of competent jurisdiction which enjoins or prohibits the
Merger or to any pending or threatened litigation or proceeding
by any government authority or agency which seeks to enjoin or
prohibit the Merger or to impose material damages on either party
or any of Healthdyne's directors or officers by reason thereof.
(f) Federal Tax Opinion. There shall have been received by
Healthdyne an opinion of Skadden, Arps, Slate, Meagher & Flom LLP
or Troutman Sanders LLP, to the effect that:
(i) The Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, and
Respironics, Merger Subsidiary and Healthdyne will each be
a "party to a reorganization" within the meaning of
Section 368(b) of the Code;
(ii) No gain or loss will be recognized by
Respironics, Merger Subsidiary or Healthdyne as a result
of the Merger;
(iii) Except for cash received in lieu of
fractional shares, no gain or loss will be recognized by
the shareholders of Healthdyne who receive solely
Respironics Common Stock on the exchange of their shares
of Healthdyne Common Stock for shares of Respironics
Common Stock;
(iv) The basis of the shares of Respironics
Common Stock to be received by the shareholders of
Healthdyne will be the same as the basis of the shares of
Healthdyne Common Stock exchanged therefor; and
(v) The holding period of the shares of
Respironics Common Stock to be received by the
shareholders of Healthdyne will include the period during
which the Healthdyne Common Stock surrendered in exchange
therefor was held by the Healthdyne shareholder, provided
such Healthdyne Common Stock was held as a capital asset
in the hands of the Healthdyne shareholder at the time of
the exchange.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HEALTHDYNE
Healthdyne represents and warrants to Respironics that, except in
each case as disclosed in a letter delivered to Respironics on the date
of this Agreement (the "Healthdyne Disclosure Letter"):
3.1. Organization. Healthdyne is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Georgia and is duly qualified to do business and in good standing in the
United States of America and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and the failure to be so qualified would, individually or in
the aggregate, have a material adverse effect on the business,
operations, assets (taken as a whole), condition (financial or otherwise)
or results of operation of Healthdyne and the Healthdyne Subsidiaries,
taken as a whole, or Healthdyne's ability to consummate the transactions
contemplated by this Agreement (a "Healthdyne Material Adverse Effect");
provided, however, in determining whether a Healthdyne Material Effect
shall have occurred, no effect or consequence shall be given as to
whether Healthdyne is awarded a contract ("Apria Contract") in response
to the request for proposal submitted by Apria Healthcare. Healthdyne has
full corporate power and legal authority (including all material
licenses, franchises, permits and other governmental authorizations which
are legally required) to own its assets and to transact the business in
which it is presently engaged.
3.2. Capitalization. (a) The authorized capital stock of
Healthdyne consists as of the date of this Agreement of (i) 50,000,000
shares of Healthdyne Common Stock, of which 12,869,615 shares were issued
and outstanding as of August 1, 1997 and no shares were held in treasury,
and (ii) 10,000,000 shares of preferred stock, no par value per share
(the "Healthdyne Preferred Stock"), of which no shares are issued or
outstanding. All of such issued and outstanding shares are duly and
validly authorized and issued, fully paid and nonassessable.
(b) Except for (i) stock options for 1,621,096 shares of
Healthdyne Common Stock outstanding as of October 31, 1997 under
Healthdyne's 1993 Stock Option Plan, 1993 Nonemployee Director Stock
Option Plan, 1995 Stock Option Plan II and 1996 Stock Option Plan (the
"Healthdyne Option Plans"), (ii) stock options exercisable under
Healthdyne's 1995 Employee Stock Purchase Plan (together with the options
outstanding under the Healthdyne Option Plans, the "Outstanding
Healthdyne Options"), and (iii) the Rights Agreement, dated as of May 22,
1995 by and between Healthdyne and SunTrust Bank, Atlanta, as Rights
Agent (as amended, the "Healthdyne Rights Plan"), Healthdyne is not a
party to or bound by any option, call, warrant, conversion privilege or
other agreement obligating Healthdyne at present, at any future time or
upon the occurrence of any event to issue or sell any shares of
Healthdyne Common Stock or other capital stock of Healthdyne. At the
Effective Time, the Outstanding Healthdyne Options shall be treated as
provided in Section 9.2 hereof.
3.3. Subsidiaries. (a) Except as set forth in the Healthdyne
Disclosure Letter, Healthdyne owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of the corporations listed
in the Healthdyne Disclosure Letter (collectively, the "Healthdyne
Subsidiaries") and such Healthdyne Subsidiaries constitute all of the
material subsidiaries of Healthdyne. Healthdyne has no other direct or
indirect subsidiaries. All of the issued and outstanding capital stock of
the Healthdyne Subsidiaries is duly and validly authorized and issued,
fully paid and nonassessable and is owned by Healthdyne or a Healthdyne
Subsidiary free and clear of any liens, security interests, encumbrances,
restrictions or other rights of any third person with respect thereto.
There are no options, calls, warrants, conversion privileges or other
agreements obligating any Healthdyne Subsidiary at present or upon the
occurrence of any event to issue or sell any shares of its capital stock.
(b) Each Healthdyne Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its state or
country of incorporation or formation. Each Healthdyne Subsidiary is duly
qualified to do business and in good standing in the United States of
America and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified
and the failure to be so qualified would, individually or in the
aggregate, have a Healthdyne Material Adverse Effect. Each Healthdyne
Subsidiary has full corporate power and legal authority (including all
material licenses, franchises, permits and other governmental
authorizations which are legally required) to own its assets and to
transact the business in which it is presently engaged.
3.4. Joint Ventures, etc.. Except as set forth in the Healthdyne
Disclosure Letter, neither Healthdyne nor any Healthdyne Subsidiary is a
party to any joint venture, a general or limited partner of any
partnership or the owner of any equity or similar interest in any other
person (including without limitation any interest pursuant to which
Healthdyne or a Healthdyne Subsidiary has or may in any circumstance have
an obligation to make a capital contribution to, or be liable for or on
account of the liabilities, acts or omissions of, such other person)
except (i) Healthdyne's ownership of all the issued and outstanding
capital stock of the Healthdyne Subsidiaries, (ii) the ownership of
marketable equity securities held as investments in the ordinary course
of business and not exceeding 5% of the outstanding shares of any class
and (iii) joint venture or other interests disclosed to Respironics in
writing on the date hereof (the "Healthdyne Joint Ventures").
3.5. Corporate Authority; Absence of Violation. (a) The Board of
Directors of Healthdyne has authorized the execution and delivery by
Healthdyne of this Agreement and the Merger Agreement, has authorized the
performance by Healthdyne of this Agreement, has directed or will direct
that this Agreement and the Merger Agreement be submitted to the
shareholders of Healthdyne for their approval and, subject to such
approval, has authorized the performance by Healthdyne of the Merger
Agreement.
(b) Healthdyne has the full power, authority and legal right to
enter into this Agreement and the Merger Agreement, to perform its
obligations hereunder and, subject to the approval of its shareholders
and regulatory authorities, to perform its obligations under the Merger
Agreement. This Agreement and the Merger Agreement have been duly and
validly executed and delivered by Healthdyne, and this Agreement
constitutes, and subject to the approval of its shareholders and approval
and/or clearance from regulatory authorities the Merger Agreement
constitutes, a valid and binding obligation of Healthdyne enforceable
against Healthdyne in accordance with its terms, except to the extent
enforcement is limited by bankruptcy, insolvency, moratorium,
conservatorship, receivership or other similar laws of general
application affecting creditors' rights or by the application by a court
of equitable principles.
(c) Except as set forth in the Healthdyne Disclosure Letter,
neither the execution and delivery by Healthdyne of this Agreement or the
Merger Agreement, compliance by Healthdyne with any provision hereof nor,
subject to the approval of its shareholders and regulatory authorities,
compliance by Healthdyne with any provision of the Merger Agreement will
(i) violate any provision of the Articles of Incorporation or By-Laws of
Healthdyne, (ii) conflict with or result in a breach of or default under
any agreement, obligation or instrument to which Healthdyne or any
Healthdyne Subsidiary is a party or by which any of them is bound or to
which any of their properties or assets is subject or (iii) violate any
order or decree of any court or governmental authority or any statute,
rule or regulation applicable to Healthdyne, any Healthdyne Subsidiary or
any of their properties or assets other than, in the case of clauses (ii)
and (iii), any such conflicts, breaches, defaults or violations which
would not reasonably be expected to have a Healthdyne Material Adverse
Effect.
3.6. Exchange Act Reports and Financial Statements. Healthdyne
has delivered to Respironics (i) Healthdyne's Annual Report on Form 10-K
for the year ended December 31, 1996 containing consolidated balance
sheets of Healthdyne at December 31, 1996 and 1995 and consolidated
statements of earnings, shareholders' equity and cash flows of Healthdyne
for the three years ended December 31, 1996, all certified by KPMG Peat
Marwick LLP, independent auditors, (ii) Healthdyne's Quarterly Reports on
Form 10-Q for the quarters ended March 31 and June 30, 1997 containing
unaudited consolidated balance sheets of Healthdyne as of such dates and
unaudited consolidated statements of earnings and cash flows of
Healthdyne for the interim periods reflected therein and (iii) any
Current Reports on Form 8-K filed by Healthdyne since June 30, 1997
(collectively, the "Healthdyne Reports"). All Healthdyne Reports as of
their respective dates (i) comply in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations of the SEC thereunder, (ii)
do not contain any untrue statement of a material fact and (iii) do not
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. All such financial statements, including
the related notes and schedules, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
(except as indicated therein) and fairly present the consolidated
financial condition, assets and liabilities of Healthdyne at the dates
thereof and the consolidated results of operations, shareholders' equity
and cash flows of Healthdyne for the periods stated therein, subject, in
the case of the interim financial statements, to normal and recurring
year-end audit adjustments and except that the interim financial
statements do not contain all of the notes required by generally accepted
accounting principles.
3.7. Absence of Certain Changes. Since September 30, 1997 there
has not been any material adverse change in the condition, financial or
otherwise, or in the assets, liabilities or business of Healthdyne and
the Healthdyne Subsidiaries taken as a whole.
3.8. Taxes. (a) The Federal income tax returns of Healthdyne and
the Healthdyne Subsidiaries have either been audited by the Internal
Revenue Service or closed by statute for all periods beginning prior to
January 1, 1993. All taxes, deficiencies, interest and penalties which
are reflected as due under such returns or which have been assessed as a
result of such audits have been paid in full, and there are no
outstanding agreements to extend periods during which additional
assessments may be made.
(b) Federal income tax returns of Healthdyne and the Healthdyne
Subsidiaries for all periods beginning before January 1, 1997 have been
timely filed. Such returns are accurate in all material respects, and to
the best of Healthdyne's knowledge there is no material proposed
deficiency, assessment, penalty or delinquency with respect to any of
such returns or any of the taxes reflected as due and payable thereby.
All taxes, deficiencies, interest and penalties which are reflected as
due under such returns or which have been assessed as a result of audits
thereof have either been paid in full or have been accrued or adequately
reserved against in the financial statements contained in Healthdyne's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
(c) All required Federal income tax returns of any Healthdyne
Joint Venture and all returns in respect of all other Federal, state and
local taxes of any kind required to be filed by Healthdyne, any
Healthdyne Subsidiary or any Healthdyne Joint Venture have been timely
filed, and all taxes, interest and penalties due in respect thereof have
been paid. Such returns are accurate in all material respects, and to the
best of Healthdyne's knowledge there is no material proposed deficiency,
assessment, penalty or delinquency with respect to any of such returns or
any of the taxes reflected as due and payable thereby.
3.9. Employee Contracts and Plans. (a) Except as disclosed in the
Healthdyne Reports or the Healthdyne Disclosure Letter, neither
Healthdyne nor any U.S. Healthdyne Subsidiary (i) is as of the date
hereof a party or subject to any contract of employment with any person
who earns a base salary in excess of $50,000 per year which is not
terminable at will without penalty (other than standard severance
policies offered to all employees generally) or any collective bargaining
agreement or (ii) maintains or contributes to any profit sharing,
pension, retirement, thrift, savings, incentive compensation, deferred
compensation, bonus, stock option, stock purchase, restricted stock,
stock appreciation right, performance share, performance unit, severance,
salary continuation, holiday, vacation, disability, insurance, medical or
other employee benefit, incentive or welfare plan, policy, material
contract or material arrangement (collectively, the "Healthdyne Employee
Benefit Plans"). Healthdyne has heretofore made available to Respironics
copies of all Healthdyne Employee Benefit Plans of Healthdyne and the
Healthdyne Subsidiaries, including individual employment contracts and
stock option agreements. Except as disclosed in the Healthdyne Reports or
the Healthdyne Disclosure Letter, consummation of the Merger will not
accelerate the rights of any third party consultant under a consulting
agreement with Healthdyne or any Healthdyne Subsidiary or terminate the
rights of Healthdyne or any Healthdyne Subsidiary under any such
consulting agreement.
(b) There are no pending or threatened strikes or labor stoppages
involving any employees of Healthdyne or any Healthdyne Subsidiary, nor
is Healthdyne or any U.S. Healthdyne Subsidiary aware of any organizing
activity seeking to certify a collective bargaining unit or
representative for any of such employees.
(c) All retirement and employee benefit or welfare plans of
Healthdyne or any Healthdyne Subsidiary have been maintained and operated
in accordance with their terms in all material respects, and all such
plans which are subject to the Employee Retirement Income Security Act of
1974 ("ERISA") and/or the Code have been maintained and operated in
material compliance with all applicable provisions of ERISA and the Code
and the regulations thereunder and are not subject to any accumulated
funding deficiency within the meaning of ERISA and the regulations
thereunder or to any outstanding liability to the Pension Benefit
Guaranty Corporation (other than for routine premium payments). No
"prohibited transaction" has occurred and is continuing with respect to
any such plan, nor has any "reportable event" occurred in respect thereof
(with respect to which the 30-day notice period has not been waived), as
such terms are defined in ERISA and the regulations thereunder, and,
except as set forth in the Healthdyne Disclosure Letter, no such plan is
a "Multiemployer Plan" or a "Multiple Employer Plan", as such terms are
defined in ERISA and the regulations thereunder.
(d) The current value of the assets of each Healthdyne Employee
Benefit Plan that is subject to Title IV of ERISA equals or exceeds the
present value of the accrued benefits under such plan based upon the
actuarial assumptions (to the extent reasonable) presently used by such
plan for financial disclosure purposes, and there is no complete or
partial withdrawal liability within the meaning of Sections 4205 and 4203
of ERISA (and there would be no such liability assuming a complete or
partial withdrawal from all Healthdyne Employee Benefit Plans at the
Effective Time) with respect to any such plan. There are no pending or,
to the knowledge of Healthdyne, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of the
Healthdyne Employee Benefit Plans or any trusts related thereto.
3.10. Material Contracts and Activities Since September 30, 1997.
Except as disclosed in the Healthdyne Reports or the Healthdyne
Disclosure Letter, since September 30, 1997 neither Healthdyne nor any
Healthdyne Subsidiary has become a party or subject to any other contract
or agreement or taken or omitted to take any other action which, if
entered into, taken or omitted to be taken after the date hereof, would
require the consent of Respironics under Section 5.1 hereof.
3.11. Litigation and Other Proceedings. Except as disclosed in
the Healthdyne Reports or the Healthdyne Disclosure Letter, neither
Healthdyne nor any Healthdyne Subsidiary is a party or subject to any
pending, or to the knowledge of Healthdyne is likely to become a party or
subject to any threatened, action, suit, arbitration, administrative
proceeding or investigation, or judicial or administrative order,
judgment or decree, which individually or in the aggregate will have, or
could reasonably be expected to have, a Healthdyne Material Adverse
Effect.
3.12. Compliance with Laws; Regulatory Matters. Healthdyne and
the Healthdyne Subsidiaries are in compliance with all Federal, state,
local and foreign laws, rules and regulations, all clearances, approvals,
orders, directives and supervisory letters of, and all agreements,
memoranda of understanding or similar arrangements with, Federal, state,
local and foreign regulatory authorities and all other legal requirements
applicable to them or their businesses except where the failure to so
comply would not have a Healthdyne Material Adverse Effect. Neither
Healthdyne nor any Healthdyne Subsidiary is subject to any order,
directive, warning letter or supervisory letter of, or agreement,
memorandum of understanding or similar arrangement (including board
resolutions adopted at the request of a regulatory authority) with, any
Federal, state, local or foreign regulatory authority restricting its
operations, restricting it from taking any action or requiring that
certain actions be taken, and Healthdyne has no knowledge that any such
order, directive, supervisory letter, agreement, memorandum of
understanding or similar arrangement is threatened, contemplated or under
consideration by any such regulatory authority.
3.13. Environmental Matters. To the knowledge of Healthdyne, (a)
no Hazardous Substances (as hereinafter defined) have been stored,
treated, dumped, spilled, disposed of, discharged, released or deposited
in violation of any law or regulation or in a manner which would subject
Healthdyne or any Healthdyne Subsidiary to liability under any law or
regulation at, under or on (i) any property now owned, occupied or leased
("Present Property") by Healthdyne, any Healthdyne Subsidiary, any former
subsidiary of Healthdyne or any Healthdyne Joint Venture (each, a
"Healthdyne Entity"), (ii) any property previously owned, occupied or
leased ("Former Property") by any Healthdyne Entity during the time of
such previous ownership, occupancy or lease or (iii) any Participation
Facility (as hereinafter defined) during the time that any Healthdyne
Entity participated in the management of, or may be deemed to be or to
have been an owner or operator of, such Participation Facility; and (b)
no Healthdyne Entity has disposed of, or arranged for the disposal of,
Hazardous Substances in violation of any law or regulation or in a manner
which would subject Healthdyne or any Healthdyne Subsidiary to liability
under any law or regulation from any Present Property, Former Property or
Participation Facility, and no owner or operator of a Participation
Facility disposed of, or arranged for the disposal of, Hazardous
Substances in violation of any law or regulation or in a manner which
would subject Healthdyne or any Healthdyne Subsidiary to liability under
any law or regulation from a Participation Facility during the time that
any Healthdyne Entity participated in the management of, or may be deemed
to be or to have been an owner or operator of, such Participation
Facility.
As used in this Section 3.13, (a) "Participation Facility" shall
mean any property or facility of which any Healthdyne Entity (i) has at
any time participated in the management or (ii) may be deemed to be or to
have been an owner or operator and (b) "Hazardous Substances" shall mean
(i) any flammable substances, explosives, radioactive materials,
hazardous materials, hazardous substances, hazardous wastes, toxic
substances, pollutants, contaminants or any related materials or
substances specified in any applicable Federal or state law or regulation
relating to pollution or protection of human health or the environment
(including, without limitation, ambient or indoor air, surface water,
groundwater, land surface or subsurface strata) and (ii) friable
asbestos, polychlorinated biphenyls, urea formaldehyde, and petroleum and
petroleum-based fuels.
3.14. Insurance. Healthdyne has heretofore made available to
Respironics a summary of all insurance coverages maintained by Healthdyne
and the Healthdyne Subsidiaries.
3.15. Intellectual Property. (a) Healthdyne and/or each
Healthdyne Subsidiary owns, or is licensed or otherwise possesses legally
enforceable rights to use all patents, trademarks, trade names, service
marks, copyrights and any applications therefor, technology, know-how,
computer software programs or applications, and tangible or intangible
proprietary information or materials that are used in the business of
Healthdyne and the Healthdyne Subsidiaries as currently conducted, except
for any such failures to own, be licensed or possess (i) that,
individually or in the aggregate, are not reasonably likely to have a
Healthdyne Material Adverse Effect or (ii) that relate to claims of
Respironics.
(b) Except as disclosed in the Healthdyne Reports or the
Healthdyne Disclosure Letter or as is not reasonably likely to have a
Healthdyne Material Adverse Effect:
(i) Healthdyne and each Healthdyne Subsidiary is not, nor
will it be as a result of the execution and delivery of this
Agreement or the performance of Healthdyne's obligations
hereunder, in violation of any licenses, sublicenses and other
agreements as to which Healthdyne or any Healthdyne Subsidiary is
a party and pursuant to which any of them is authorized to use
any third-party patents, trademarks, service marks, and
copyrights ("Healthdyne Third-Party Intellectual Property
Rights");
(ii) no claims with respect to the patents, registered and
material unregistered trademarks and service marks, registered
copyrights, trade names, any applications therefor owned by
Healthdyne or any Healthdyne Subsidiary (the "Healthdyne
Intellectual Property Rights"), any trade secret material to
Healthdyne or any Healthdyne Subsidiary, or Healthdyne
Third-Party Intellectual Property Rights to the extent arising
out of any use, reproduction or distribution of such Healthdyne
Third Party Intellectual Property Rights by or through Healthdyne
or any Healthdyne Subsidiary, are currently pending or, to the
knowledge of Healthdyne, are overtly threatened by any person;
(iii) Healthdyne does not know of any valid grounds for
any bona fide claims (A) to the effect that the manufacture,
sale, licensing or use of any product as now used, sold or
licensed or proposed for use, sale or license by Healthdyne or
any Healthdyne Subsidiary, infringes on any copyright, patent,
trademark, service mark or trade secret of any third party other
than Respironics; (B) against the use by Healthdyne or any
Healthdyne Subsidiary, of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer
software programs and applications of any third party other than
Respironics used in the business of Healthdyne or any Healthdyne
Subsidiary as currently conducted or as proposed to be conducted;
(C) challenging the ownership, validity or effectiveness of any
Healthdyne Intellectual Property Rights or other trade secret
material to Healthdyne; or (D) challenging the license or legally
enforceable right to the use of the Healthdyne Third-Party
Intellectual Rights by Healthdyne or any of Healthdyne
Subsidiary;
(iv) to the knowledge of Healthdyne, all patents,
registered trademarks and service marks, and copyrights held by
Healthdyne and the Healthdyne Subsidiaries are valid, enforceable
and subsisting; and
(v) to the knowledge of Healthdyne, there is no material
unauthorized use, infringement or misappropriation of any
Healthdyne Intellectual Property Rights by any third party,
including any employee or former employee of Healthdyne or any
Healthdyne Subsidiary.
3.16. Takeover Statutes. The Board of Directors of Healthdyne has
taken all necessary action, if any, to exempt the Merger and the other
transactions contemplated by this Agreement from the provisions of
Sections 14-2-1110 et seq. and 14-2-1131 et seq. of the Georgia Business
Corporation Code ("GBCC"). No "business combination," "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover
statue or regulation (each a "Takeover Statute") or any other applicable
anti-takeover provision in Healthdyne's Articles and By-laws is, or at
the Effective Time will be, applicable to Healthdyne, the Healthdyne
Common Stock, the Respironics Common Stock, the Merger or the other
transactions contemplated by this Agreement. All such actions have been
duly and validly taken by the Healthdyne Board of Directors and are
binding on and enforceable against Healthdyne, except to the extent
enforcement is limited by bankruptcy, insolvency, moratorium,
conservatorship, receivership or other similar laws of general
application affecting creditors' rights or by the application by a court
of equitable principles.
3.17. Healthdyne Rights Agreements. Healthdyne has taken all
necessary actions, if any, to ensure that, for the purposes of the
Healthdyne Rights Agreement, the execution of this Agreement does not,
and the consummation of the Merger and the other transactions
contemplated hereby and thereby will not, result in the grant of any
rights to any person under the Healthdyne Rights Agreement, or enable or
require any outstanding rights to be exercised, distributed or triggered,
and that the Rights (as defined in the Healthdyne Rights Agreement) will
expire without any further force or effect as of the Effective Time. All
such actions have been duly and validly taken by the Healthdyne Board of
Directors and are binding on and enforceable against Healthdyne, except
to the extent enforcement is limited by bankruptcy, insolvency,
moratorium, conservatorship, receivership or other similar laws of
general application affecting creditors' rights or by the application by
a court of equitable principles.
3.18. Accounting and Tax Matters. As of the date hereof, neither
Healthdyne nor any of its affiliates has taken or agreed to take any
action, nor does Healthdyne have any knowledge of any fact or
circumstance, that would prevent Healthdyne from accounting for the
business combination to be effected by the Merger as a
"pooling-of-interests" or prevent the Merger and the other transactions
contemplated by this Agreement from qualifying as a "reorganization"
within the meaning of Section 368(a) of the Code.
3.19. Proxy Statement/Prospectus, etc.. None of the information
relating to Healthdyne or any Healthdyne Subsidiary contained in the
Proxy Statement/Prospectus or in any amendment or supplement thereto, at
the time the Registration Statement is declared effective, at the time
the Proxy Statement/Prospectus is mailed to the shareholders of
Healthdyne and Respironics or at the dates of the Shareholders' Meetings
of Healthdyne and Respironics to consider the Merger, will contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading. All documents which Healthdyne is responsible for filing with
the SEC or any regulatory agency in connection with the Merger will
comply as to form in all material respects with the requirements of
applicable law, and all of the information relating to Healthdyne and the
Healthdyne Subsidiaries in any document filed with the SEC or any other
regulatory agency in connection with this Agreement, the Merger Agreement
or the transactions contemplated thereby shall be true and correct in all
material respects.
3.20. Investment Banker's Opinion. The Board of Directors of
Healthdyne has received the opinion of Cowen & Company, dated the date
hereof, to the effect that, as of the date of such opinion, the terms of
the Merger are fair, from a financial point of view, to Healthdyne's
shareholders.
3.21. Investigation by Healthdyne. Investigation by
Healthdyne. Healthdyne has conducted its own independent review and
analysis of the business, operations, assets, liabilities, results of
operations, financial condition, technology and prospects of Respironics
and its subsidiaries and acknowledges that Healthdyne has been provided
access to the personnel, properties, premises and records of Respironics
and its subsidiaries for such purpose. In entering into this Agreement,
Healthdyne has relied solely upon its own investigation and analysis and
the representations and warranties contained herein, and Healthdyne: (a)
acknowledges that none of Respironics or any of its respective directors,
officers, shareholders, employees, affiliates, controlling persons,
agents, advisors or representatives makes or has made any representation
or warranty, either express or implied, as to the accuracy of
completeness of any of the information provided or made available to
Healthdyne or its directors, officers, employees, affiliates, controlling
persons, agents or representatives; and (b) agrees, to the fullest extent
permitted by law, that none of Respironics or any of its directors,
officers, employees, shareholders, affiliates, controlling persons,
agents, advisors or representatives shall have any liability or
responsibility whatsoever to Healthdyne or its directors, officers,
employees, affiliates, controlling persons, agents or representatives on
any basis (including, without limitation, in contract or tort, under
federal or state securities laws or otherwise) based upon any information
provided or made available, or statements made, to Healthdyne or its
directors, officers, employees, affiliates, controlling persons,
advisors, agents or representatives (or any omissions therefrom), except
that the foregoing limitations shall not apply (i) to the extent
Respironics makes the specific representations and warranties set forth
in this Agreement and (ii) in the case of fraud, willful
misrepresentation or willful nondisclosure, but always subject to the
limitations and restrictions contained herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RESPIRONICS
Respironics represents and warrants to Healthdyne that, except in
each case as disclosed in a letter delivered to Healthdyne on the date of
this Agreement (the "Respironics Disclosure Letter"):
4.1. Organization. Respironics is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware is duly qualified to do business and in good standing in the
United States of America and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and the failure to be so qualified would, individually or in
the aggregate, have a material adverse effect on the business,
operations, assets (taken as a whole), condition (financial or otherwise)
or results of operation of Respironics and the Respironics Subsidiaries,
taken as a whole, or the ability of Respironics to consummate the
transactions contemplated by this Agreement (a "Respironics Material
Adverse Effect"); provided, however, in determining whether a Respironics
Material Adverse Effect shall have occurred, no effect or consequence
shall be given to whether Respironics is awarded or denied an Apria
Contract. Respironics has full corporate power and legal authority
(including all material licenses, franchises, permits and other
governmental authorizations which are legally required) to own its assets
and to transact the business in which it is presently engaged.
4.2. Capitalization. As of the date of this Agreement, the
authorized capital stock of Respironics consists of 100,000,000 shares of
Respironics Common Stock, of which 19,776,855 shares were issued and
outstanding as of August 31, 1997. All of such issued and outstanding
shares are, and upon consummation of the Merger the shares of Respironics
Common Stock to be issued pursuant to the Merger Agreement will be, duly
and validly authorized and issued, fully paid and nonassessable.
4.3. Subsidiaries. (a) Respironics owns, directly or indirectly,
all of the issued and outstanding shares of capital stock of the
corporations listed in the Respironics Disclosure Letter (collectively,
the "Respironics Subsidiaries") and such Respironics Subsidiaries
constitute all of the material subsidiaries of Respironics. All of the
issued and outstanding capital stock of the Respironics Subsidiaries is
duly and validly authorized and issued, fully paid and nonassessable and
is owned by Respironics free and clear of any liens, security interests,
encumbrances, restrictions on transfer or other rights of any third
person with respect thereto. There are no options, calls, warrants,
conversion privileges or other agreements obligating any Respironics
Subsidiary at present or upon the occurrence of any event to issue or
sell any shares of its capital stock.
(b) Each Respironics Subsidiary (including Merger Subsidiary) is
a corporation duly organized, validly existing and in good standing under
the laws of its state or country of incorporation or formation. Each
Respironics Subsidiary is duly qualified to do business and in good
standing in the United States of America and foreign jurisdictions where
its ownership or leasing of property or the conduct of its business
requires it to be so qualified and the failure to be so qualified would,
individually or in the aggregate, have a Respironics Material Adverse
Effect. Each Respironics Subsidiary has full corporate power and legal
authority (including all material licenses, franchises, permits and other
governmental authorizations which are legally required) to own its assets
and to transact the business in which it is presently engaged. Prior to
the date hereof, Merger Subsidiary has not engaged in any activities
other than activities related to its formation and approval of this
Agreement, the Merger Agreement and the transactions contemplated hereby.
4.4. Corporate Authority; Absence of Violation. (a) The Board of
Directors of each of Respironics and Merger Subsidiary and the sole
shareholder of Merger Subsidiary has authorized the execution and
delivery by Respironics and Merger Subsidiary, respectively, of this
Agreement and the Merger Agreement and has authorized the performance by
each of Respironics and Merger Subsidiary of this Agreement, and the
Board of Directors of Respironics has directed or will direct that the
issuance of shares of Respironics Common Stock pursuant to the Merger be
submitted to the shareholders of Respironics for their approval and,
subject to such approval and to the clearance and/or approval of
regulatory authorities, has authorized the performance by Respironics and
Merger Subsidiary of the Merger Agreement.
(b) Each of Respironics and Merger Subsidiary has the full power,
authority and legal right to enter into this Agreement and the Merger
Agreement to perform its obligations hereunder and, subject to the
approval of its shareholders and approval and/or clearance of regulatory
authorities, to perform its obligations under the Merger Agreement. This
Agreement and the Merger Agreement have been duly and validly executed
and delivered by each of Respironics and Merger Subsidiary, and this
Agreement constitutes, and subject to the approval of its shareholders
and approval and/or clearance of regulatory authorities the Merger
Agreement constitutes, a valid and binding obligation of each of
Respironics and Merger Subsidiary enforceable against Respironics and
Merger Subsidiary in accordance with its terms, except to the extent
enforcement is limited by bankruptcy, insolvency, moratorium,
conservatorship, receivership or other similar laws of general
application affecting creditors' rights or by the application by a court
of equitable principles.
(c) Except as set forth in the Respironics Disclosure Letter,
neither the execution and delivery by Respironics or Merger Subsidiary of
this Agreement or the Merger Agreement or compliance by Respironics or
Merger Subsidiary with any provision hereof nor, subject to the approval
of its shareholders and approval and/or clearance of regulatory
authorities, compliance by Respironics or Merger Subsidiary with any
provision of the Merger Agreement will (i) violate any provision of the
Articles of Incorporation or By-Laws of Respironics or Merger Subsidiary,
as the case may be, (ii) conflict with or result in a breach of or
default under any agreement, obligation or instrument to which
Respironics or any Respironics Subsidiary is a party or by which any of
them is bound or to which any of their properties or assets is subject or
(iii) violate any order or decree of any court or governmental authority
or any statute, rule or regulation applicable to Respironics, any
Respironics Subsidiary or any of their properties or assets other than,
in the case of clauses (ii) and (iii), any such conflicts, breaches,
defaults or violations which would not reasonably be expected to have a
Respironics Material Adverse Effect.
4.5. Exchange Act Reports and Financial Statements. Respironics
has delivered to Healthdyne (i) Respironics' Annual Report on Form 10-K
for the fiscal year ended June 30, 1997 containing consolidated
statements of condition of Respironics at June 30, 1997 and 1996 and
consolidated statements of income, changes in shareholders' equity and
cash flows of Respironics for the three fiscal years ended June 30, 1997,
all certified by Ernst & Young LLP, independent auditors and (ii) any
Current Reports on Form 8-K filed by Respironics since June 30, 1997
(collectively, the "Respironics Reports"). All Respironics Reports as of
their respective dates (i) comply in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder, (ii) do not contain any untrue statement of a material fact
and (iii) do not omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All such
financial statements, including the related notes and schedules, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as indicated therein) and fairly
present the consolidated financial condition, assets and liabilities of
Respironics at the dates thereof and the consolidated results of
operations and changes in shareholders' equity and cash flows of
Respironics for the periods stated therein, subject, in the case of the
interim financial statements, to normal and recurring year-end audit
adjustments and except that the interim financial statements do not
contain all of the notes required by generally accepted accounting
principles.
4.6. Absence of Certain Changes. Since September 30, 1997, there
has not been any material adverse change in the consolidated financial
condition, results of operations or business of Respironics and its
Subsidiaries taken as a whole.
4.7. Taxes. (a) The Federal income tax returns of Respironics and
the Respironics Subsidiaries have either been audited by the Internal
Revenue Service or closed by statute for all periods beginning prior to
July 1, 1992. All taxes, deficiencies, interest and penalties which are
reflected as due under such returns or which have been assessed as a
result of such audits have been paid in full, and there are no
outstanding agreements to extend periods during which additional
assessments may be made.
(b) Federal income tax returns of Respironics and the Respironics
Subsidiaries for all periods beginning before July 1, 1996 have been
timely filed. Such returns are accurate in all material respects, and to
the best of Respironics' knowledge there is no material proposed
deficiency, assessment, penalty or delinquency with respect to any of
such returns or any of the taxes reflected as due and payable thereby.
All taxes, deficiencies, interest and penalties which are reflected as
due under such returns or which have been assessed as a result of audits
thereof have either been paid in full or have been accrued or adequately
reserved against in the financial statements contained in Respironics'
Annual Report on Form 10-K for the fiscal year ended June 30, 1997.
(c) All required Federal income tax returns of any Respironics
Joint Venture and all returns in respect of all other Federal, state and
local taxes of any kind required to be filed by Respironics, any
Respironics Subsidiary or any Respironics joint venture have been timely
filed, and all taxes, interest and penalties due in respect thereof have
been paid. Such returns are accurate in all material respects, and to the
best of Respironics' knowledge there is no material proposed deficiency,
assessment, penalty or delinquency with respect to any of such returns or
any of the taxes reflected as due and payable thereby.
4.8. Employee Contracts and Plans. (a) Except as disclosed in the
Respironics Reports or the Respironics Disclosure Letter, neither
Respironics nor any U.S. Respironics Subsidiary (i) is as of the date
hereof a party or subject to any contract of employment with any person
who earns a base salary in excess of $50,000 per year which is not
terminable at will without penalty (other than standard severance
policies offered to all employees generally), or any collective
bargaining agreement or (ii) maintains or contributes to any profit
sharing, pension, retirement, thrift, savings, incentive compensation,
deferred compensation, bonus, stock option, stock purchase, restricted
stock, stock appreciation right, performance share, performance unit,
severance, salary continuation, holiday, vacation, disability, insurance,
medical or other employee benefit, incentive or welfare plan, policy,
material contract or material arrangement (collectively, the "Respironics
Employee Benefit Plans"). Respironics has heretofore made available to
Healthdyne copies of all Respironics Employee Benefit Plans of
Respironics and the Respironics Subsidiaries, including individual
employment contracts and stock option agreements. Except as disclosed in
the Respironics Reports or the Respironics Disclosure Letter,
consummation of the Merger will not accelerate the rights of any third
party to a consulting agreement with Respironics or any Respironics
Subsidiary or terminate the rights of Respironics or any Respironics
Subsidiary under any such consulting agreement. The Respironics Employee
Benefit Plans are competitive with the employee benefit plans of other
public companies in the medical device industry.
(b) There are no pending or threatened strikes or labor stoppages
involving any employees of Respironics or any Respironics Subsidiary, nor
is Respironics or any U.S. Respironics Subsidiary aware of any organizing
activity seeking to certify a collective bargaining unit or
representative for any of such employees.
(c) All retirement and employee benefit or welfare plans of
Respironics or any Respironics Subsidiary have been maintained and
operated in accordance with their terms in all material respects, and all
such plans which are subject to ERISA and/or the Code have been
maintained and operated in material compliance with all applicable
provisions of ERISA and the Code and the regulations thereunder and are
not subject to any accumulated funding deficiency within the meaning of
ERISA and the regulations thereunder or to any outstanding liability to
the Pension Benefit Guaranty Corporation (other than routine premium
payments). No "prohibited transaction" has occurred and is continuing
with respect to any such plan, nor has any "reportable event" occurred in
respect thereof (with respect to which the 30-day notice period has not
been waived), as such terms are defined in ERISA and the regulations
thereunder, and no such plan is a "Multiemployer Plan" or a "Multiple
Employer Plan", as such terms are defined in ERISA and the regulations
thereunder.
(d) The current value of the assets of each Respironics Employee
Benefit Plan that is subject to Title IV of ERISA equals or exceeds the
present value of the accrued benefits under such plan based upon the
actuarial assumptions (to the extent reasonable) presently used by such
plan for financial disclosure purposes, and there is no complete or
partial withdrawal liability within the meaning of Sections 4205 and 4203
of ERISA (and there would be no such liability assuming a complete or
partial withdrawal from all Respironics Employee Benefit Plans at the
Effective Time) with respect to any such plan. There are no pending or,
to the knowledge of Respironics, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of the
Respironics Employee Benefit Plans or any trusts related thereto.
4.9. Litigation and Other Proceedings67. Except as disclosed in
the Respironics Reports or the Respironics Disclosure Letter, neither
Respironics nor any of its subsidiaries is a party or subject to any
pending, or to the knowledge of Respironics is likely to become a party
or subject to any threatened, action, suit, arbitration, administrative
proceeding or investigation, or judicial or administrative order,
judgment or decree, which individually or in the aggregate will have, or
could reasonably be expected to have, a Respironics Material Adverse
Effect.
4.10. Compliance with Laws; Regulatory Matters. Respironics and
its subsidiaries are in compliance in all material respects with all
laws, rules and regulations, all clearances, approvals, orders,
directives and supervisory letters of, and all agreements, memoranda of
understanding or similar arrangements with, regulatory authorities and
all other legal requirements applicable to them or their businesses
except where the failure to so comply would not have a Respironics
Material Adverse Effect. Neither Respironics nor any of its Subsidiaries
is subject to any order, directive, warning letter or supervisory letter
of, or agreement, memorandum of understanding or similar arrangement
(including board resolutions adopted at the request of a regulatory
authority) with, any regulatory authority restricting its operations,
restricting it from taking any action or requiring that certain actions
be taken, and Respironics has no knowledge that any such order,
directive, supervisory letter, agreement, memorandum of understanding or
similar arrangement is threatened, contemplated or under consideration by
any regulatory authority.
4.11. Environmental Matters. To the knowledge of Respironics, (a)
no Hazardous Substances (as hereinafter defined) have been stored,
treated, dumped, spilled, disposed of, discharged, released or deposited
in violation of any law or regulation or in a manner which would subject
Respironics or any Respironics Subsidiary to liability under any law or
regulation at, under or on (i) any Present Property by Respironics or any
Respironics Subsidiary or former subsidiary of Respironics (each, a
"Respironics Entity"), (ii) any Former Property by any Respironics Entity
during the time of such previous ownership, occupancy or lease; or (iii)
any Participation Facility (as hereinafter defined) during the time that
any Respironics Entity participated in the management of, or may be
deemed to be or to have been an owner or operator of, such Participation
Facility; and (b) no Respironics Entity has disposed of, or arranged for
the disposal of, Hazardous Substances in violation of any law or
regulation or in a manner which would subject Respironics or any
Respironics subsidiary to liability under any law or regulation from any
Present Property, Former Property or Participation Facility, and no owner
or operator of a Participation Facility disposed of, or arranged for the
disposal of, Hazardous Substances in violation of any law or regulation
or in a manner which would subject Respironics or any Respironics
Subsidiary to liability under any law or regulation from a Participation
Facility during the time that any Respironics Entity participated in the
management of, or may be deemed to be or to have been an owner or
operator of, such Participation Facility.
As used in this Section 4.11, (a) "Participation Facility" shall
mean any property or facility of which any Respironics Entity (i) has at
any time participated in the management or (ii) may be deemed to be or to
have been an owner or operator and (b) "Hazardous Substances" shall mean
(i) any flammable substances, explosives, radioactive materials,
hazardous materials, hazardous substances, hazardous wastes, toxic
substances, pollutants, contaminants or any related materials or
substances specified in any applicable Federal or State law or regulation
relating to pollution or protection of human health or the environment
(including, without limitation, ambient or indoor air, surface water,
groundwater, land surface or subsurface strata) and (ii) friable
asbestos, polychlorinated biphenyls, urea formaldehyde, and petroleum and
petroleum-based fuels.
4.12. Insurance. Respironics has heretofore made available to
Healthdyne a summary of all insurance coverages maintained by Respironics
and the Respironics Subsidiaries.
4.13. Intellectual Property. (a) Respironics and/or each
Respironics Subsidiary owns, or is licensed or otherwise possesses
legally enforceable rights to use all patents, trademarks, trade names,
service marks, copyrights and any applications therefor, technology,
know-how, computer software programs or applications, and tangible or
intangible proprietary information or materials that are used in the
business of Respironics and the Respironics Subsidiaries as currently
conducted, except for any such failures to own, be licensed or possess
that, individually or in the aggregate, are not reasonably likely to have
a Respironics Material Adverse Effect.
(b) Except as disclosed in the Respironics Reports or the
Respironics Disclosure Letter or as is not reasonably likely to have a
Respironics Material Adverse Effect:
(i) Respironics and each Respironics Subsidiary is not,
nor will it be as a result of the execution and delivery of this
Agreement or the performance of Respironics' obligations
hereunder, in violation of any licenses, sublicenses and other
agreements as to which Respironics or any Respironics Subsidiary
is a party and pursuant to which any of them is authorized to use
any third-party patents, trademarks, service marks, and
copyrights ("Respironics Third-Party Intellectual Property
Rights");
(ii) no claims with respect to the patents, registered and
material unregistered trademarks and service marks, registered
copyrights, trade names, any applications therefor owned by
Respironics or any Respironics Subsidiary (the "Respironics
Intellectual Property Rights"), any trade secret material to
Respironics or any Respironics Subsidiary, or Respironics
Third-Party Intellectual Property Rights to the extent arising
out of any use, reproduction or distribution of such Respironics
Third Party Intellectual Property Rights by or through
Respironics or any Respironics Subsidiary, are currently pending
or, to the knowledge of Respironics, are overtly threatened by
any person;
(iii) Respironics does not know of any valid grounds for
any bona fide claims (A) to the effect that the manufacture,
sale, licensing or use of any product as now used, sold or
licensed or proposed for use, sale or license by Respironics or
any Respironics Subsidiary, infringes on any copyright, patent,
trademark, service mark or trade secret of any third party other
than Respironics; (B) against the use by Respironics or any
Respironics Subsidiary, of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer
software programs and applications of any third party used in the
business of Respironics or any Respironics Subsidiary as
currently conducted or as proposed to be conducted; (C)
challenging the ownership, validity or effectiveness of any
Respironics Intellectual Property Rights or other trade secret
material to Respironics; or (D) challenging the license or
legally enforceable right to the use of the Respironics
Third-Party Intellectual Rights by Respironics or any of
Respironics Subsidiary; and
(iv) to the knowledge of Respironics, all patents,
registered trademarks and service marks, and copyrights held by
Respironics and the Respironics Subsidiaries are valid,
enforceable and subsisting.
(c) The parties hereby acknowledge that Respironics is party to
various lawsuits and proceedings described in the Respironics Reports and
bilevel positive airway pressure patent enforcement proceedings against
AirSep Corporation and Healthdyne. The foregoing representations and
warranties in this Section 4.13 do not address matters at issue in such
lawsuits and proceedings.
4.14. Accounting and Tax Matters. As of the date hereof, neither
Respironics nor any of its affiliates has taken or agreed to take any
action, nor does Respironics have any knowledge of any fact or
circumstance, that would prevent Respironics from accounting for the
business combination to be effected by the Merger as a
"pooling-of-interests" or prevent the Merger and the other transactions
contemplated by this Agreement from qualifying as a "reorganization"
within the meaning of Section 368(a) of the Code.
4.15. Proxy Statement/Prospectus, etc.. Except for information
relating to Healthdyne and the Healthdyne Subsidiaries, neither the
Registration Statement, the Proxy Statement/Prospectus nor any amendment
or supplement thereto, at the time the Registration Statement is declared
effective, at the time the Proxy Statement/Prospectus is mailed to the
shareholders of Healthdyne and Respironics or at the dates of the
Shareholders' Meetings of Healthdyne and Respironics to consider the
Merger, will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they are made, not misleading. All documents which Respironics is
responsible for filing with the SEC or any regulatory agency in
connection with the Merger will comply as to form in all material
respects with the requirements of applicable law, and all of the
information relating to Respironics and its subsidiaries in any document
filed with the SEC or any other regulatory agency in connection with this
Agreement, the Merger Agreement or the transactions contemplated thereby
shall be true and correct in all material respects.
4.16. Investment Banker's Opinion. The Board of Directors of
Respironics has received the opinion of BT Alex. Brown Incorporated,
dated the date of the Agreement, to the effect that, as of the date of
such opinion, the Exchange Ratio is fair, from a financial point of view,
to Respironics.
4.17. Investigation by Respironics. Investigation by
Respironics. Respironics has conducted its own independent review and
analysis of the business, operations, assets, liabilities, results of
operations, financial condition, technology and prospects of Healthdyne
and its subsidiaries and acknowledges that Respironics has been provided
access to the personnel, properties, premises and records of Healthdyne
and its subsidiaries for such purpose. In entering into this Agreement,
Respironics has relied solely upon its own investigation and analysis and
the representations and warranties contained herein, and Respironics: (a)
acknowledges that none of Healthdyne or any of its respective directors,
officers, shareholders, employees, affiliates, controlling persons,
agents, advisors or representatives makes or has made any representation
or warranty, either express or implied, as to the accuracy of
completeness of any of the information provided or made available to
Respironics or its directors, officers, employees, affiliates,
controlling persons, agents or representatives; and (b) agrees, to the
fullest extent permitted by law, that none of Healthdyne or any of its
directors, officers, employees, shareholders, affiliates, controlling
persons, agents, advisors or representatives shall have any liability or
responsibility whatsoever to Respironics or its directors, officers,
employees, affiliates, controlling persons, agents or representatives on
any basis (including, without limitation, in contract or tort, under
federal or state securities laws or otherwise) based upon any information
provided or made available, or statements made, to Respironics or its
directors, officers, employees, affiliates, controlling persons,
advisors, agents or representatives (or any omissions therefrom), except
that the foregoing limitations shall not apply (i) to the extent
Healthdyne makes the specific representations and warranties set forth in
this Agreement and (ii) in the case of fraud, willful misrepresentation
or willful nondisclosure, but always subject to the limitations and
restrictions contained herein.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME
5.1. Conduct of Business in Ordinary Course. Pending the
Effective Time, except as otherwise consented to in writing by
Respironics or as contemplated by this Agreement, (a) Healthdyne will and
will cause each Healthdyne Subsidiary to (i) conduct its business only in
the ordinary course thereof as conducted on the date hereof and (ii) use
its commercially reasonable efforts to preserve its business organization
and assets intact and to preserve its good will with its customers and
others having business relations with it; and (b) Healthdyne will not
and, except in the case of clause (ii) below, will not permit any
Healthdyne Subsidiary to:
(i) amend its Articles of Incorporation or By-Laws or the
Healthdyne Rights Agreement;
(ii) declare, pay or set aside any dividend or other
distribution in respect of its capital stock;
(iii) except for the issuance and sale of Healthdyne
Common Stock upon exercise of the Outstanding Healthdyne Options
or pursuant to Healthdyne's Employee Stock Purchase Plan or
pursuant to Healthdyne's Rights Agreement, issue, sell, purchase,
redeem or otherwise dispose of or acquire, or grant any shares of
its capital stock or options, warrants or other rights to
purchase or acquire, or combine, split or reclassify, any shares
of its capital stock or any securities convertible into its
capital stock, or modify or amend any Healthdyne Option Plans or
Outstanding Healthdyne Options;
(iv) adopt or modify to increase the compensation or
benefits under any Healthdyne Employee Benefit Plan or otherwise
increase the compensation payable to its employees, except for
modifications or increases required by law or existing contract
or involving merit increases in accordance with past practices,
normal cost-of-living increases, regular bonuses (including under
Healthdyne's executive incentive plan) and normal increases
related to promotions or increased job responsibilities;
(v) subject to the proviso to the first sentence of
Section 6.8, merge or consolidate with or into any other
corporation, acquire control over, or acquire any equity interest
in, any other corporation, firm, entity or organization;
liquidate; or purchase or acquire or sell or otherwise dispose of
any material assets otherwise than in the ordinary course of
business;
(vi) make any material expenditure for a capital asset or
lease any real property, except for capital expenditures and
leases in accordance with Healthdyne's capital expenditure budget
or similar plans applicable to leases approved by Healthdyne's
Board of Directors;
(vii) take any action which if taken as of the date hereof
would constitute a material breach of any representation or
warranty contained herein;
(viii) settle or compromise any material claims or
litigation or, except, in the ordinary and usual course of
business modify, amend or terminate any of its material contracts
or waive, release or assign any material rights or claims (other
than shareholder litigation in connection with this Agreement or
the attempted acquisition of Healthdyne by Invacare Corporation
or any of its affiliates, provided that in the case of such
litigation or attempted acquisition, Respironics shall have the
right to consent to any settlement or compromise (unless such
litigation is covered by insurance and a full release of
Healthdyne and Respironics, if applicable, and the other named
parties is obtained in connection therewith), but such consent
shall not be unreasonably withheld or delayed);
(ix) make any tax election or permit any insurance policy
naming it as a beneficiary or loss-payable payee to be cancelled
or terminated, except in the ordinary and usual course of
business;
(x) take any action or omit to take any action that would
prevent the Merger from qualifying for "pooling-of-interests"
accounting treatment or as a "reorganization" within the meaning
of Section 368(a) of the Code; or
(xi) enter into any agreement, commitment or understanding
with any person relating to any action prohibited by this
Agreement, subject the proviso to the first sentence of Section
6.8.
5.2. Conduct of Respironics Business in Ordinary Course. Pending
the Effective Time, except as otherwise consented to in writing by
Healthdyne or as contemplated by this Agreement, Respironics will not
and, except in the case of clause (ii) below, will not permit any
Respironics Subsidiary to:
(i) amend its Articles of Incorporation or By-Laws or the
Respironics Rights Agreement;
(ii) declare, pay or set aside any dividend or other
distribution in respect of its capital stock;
(iii) except for (A) the issuance and sale of Respironics
Common Stock upon exercise of the Outstanding Respironics Options
or pursuant to Respironics' Employee Stock Purchase Plan or
401(k) plan or pursuant to the Respironics Rights Agreement, (B)
the grant of options under Respironics Option Plans in the
ordinary course of business consistent with past practice and (C)
issuances of shares of Respironics Common Stock representing not
more than 3% of the shares of Respironics Common Stock
outstanding on the date hereof, issue, sell, purchase, redeem or
otherwise dispose of or acquire, or grant any shares of its
capital stock or options, warrants or other rights to purchase or
acquire, or combine, split or reclassify, any shares of its
capital stock or any securities convertible into its capital
stock, or modify or amend any Respironics Option Plans or
Outstanding Respironics Options;
(iv) acquire control over, or acquire any equity interest
in, any other corporation, firm, entity or organization;
liquidate; or purchase or acquire or sell or otherwise dispose of
any assets otherwise than in the ordinary course of business or
for consideration in excess of $10,000,000;
(v) take any action which if taken as of the date hereof
would constitute a material breach of any representation or
warranty contained herein; or
(vi) take any action or omit to take any action that would
prevent the Merger from qualifying for "pooling-of-interests"
accounting treatment or as a "reorganization" within the meaning
of Section 368(a) of the Code.
As used herein, "Respironics Option Plans" shall mean the Amended and
Restated Incentive Stock Option Plan, the Agreements between Respironics
and Gerald E. McGinnis dated October 28, 1983, the Consulting Agreement
dated July 1, 1988 with Dr. Mark Sanders, the 1991 Non-Employee
Directors' Stock Option Plan, the 1992 Incentive Stock Option Plan and
the 1997 Employee Stock Purchase Plan; "Outstanding Respironics Options"
shall mean all stock options outstanding under the Respironics Option
Plans; and "Respironics Rights Agreement" shall mean the Rights Agreement
between Respironics and Chase Mellon Shareholders Services L.L.C. dated
as of June 28, 1996.
ARTICLE VI
COVENANTS AND ACTIONS PENDING THE EFFECTIVE TIME
6.1. Securities Registration and Disclosure. (a) As soon as
practicable after the date hereof, Respironics and Healthdyne will file
the preliminary Proxy Statement/Prospectus with the SEC under the
Exchange Act and following receipt of and response to the comments of the
SEC, Respironics will file with the SEC under the Securities Act a
registration statement for the registration of the shares of Respironics
Common Stock to be issued pursuant to the Merger Agreement (the
"Registration Statement"). The parties shall cooperate in the preparation
of the Proxy Statement/Prospectus and any amendments or supplements
thereto, and each party shall be responsible for providing all
information concerning itself and its subsidiaries required to be
included therein.
(b) Respironics shall take any action required to be taken under
any applicable state securities or "blue sky" laws in connection with the
issuance of shares of Respironics Common Stock pursuant to the Merger
Agreement, and Healthdyne shall furnish Respironics all information
concerning Healthdyne as Respironics may reasonably request in connection
with any such action.
(c) Each party will promptly provide the other with copies of all
correspondence, comment letters, notices or other communications to or
from the SEC relating to the Registration Statement, the Proxy
Statement/Prospectus or any amendment or supplement thereto, and
Respironics will advise Healthdyne promptly after it receives notice
thereof, of the effectiveness of the Registration Statement, of the
issuance of any stop order with respect to the effectiveness thereof, of
the suspension of the qualification of the Respironics Common Stock
issuable in connection with the Merger for offering or sale in any
jurisdiction, or of the initiation or threat of any proceeding for any
such purpose.
6.2. Regulatory Clearances and Approvals. As soon as practicable
after the date hereof, the parties shall prepare and file (i) all filings
and applications required under the HSR Act and (ii) all filings and
applications with any Federal, state, local and foreign regulatory
authorities having jurisdiction for any other clearances, approvals or
consents which may be necessary for the consummation of the Merger.
Subject to the limitations herein provided, the parties will take or
cause to be taken all actions necessary for such applications to be
cleared, approved and/or consented to, and each party will promptly
provide the other with copies of all correspondence, notices or other
communications to or from such authorities relating to such applications
to the extent permitted by law; provided that nothing contained herein
shall require disclosure of any confidential or privileged information to
the other party.
6.3. Shareholders' Meetings. Subject to the fiduciary duties of
its Board of Directors, Healthdyne and Respironics will each take
appropriate action to call a meeting of its shareholders (the
"Shareholders' Meetings"), to be held not more than forty-five (45) days
following the effective date of the Registration Statement or such other
date as Healthdyne and Respironics shall agree, to consider, in the case
of Healthdyne, approval of this Agreement and the Merger Agreement and,
in the case of Respironics, the issuance of shares of Respironics Common
Stock pursuant to the Merger. Subject to the fiduciary duties of its
Board of Directors, the Board of Directors of Healthdyne and Respironics
will recommend to their respective shareholders the approval of the
foregoing matters and Healthdyne and Respironics will each use its
reasonable best efforts to secure such approval. In connection with its
Shareholders' Meeting, Healthdyne and Respironics will duly solicit, in
compliance with Section 14(a) of the Exchange Act and the proxy rules of
the SEC thereunder, the vote of its shareholders by mailing or delivering
to each such shareholder, as soon as practicable after the effectiveness
of the Registration Statement, the Proxy Statement/Prospectus, and as
soon as practicable thereafter, any amendments or supplements thereto as
may be necessary to assure that at the date of its Shareholders' Meeting
the Proxy Statement/Prospectus shall conform to the requirements of
Sections 3.19 and 4.15 hereof.
6.4. Affiliates' Agreements.
(a) Healthdyne Affiliates' Agreement. At or prior to the
date the Proxy Statement/Prospectus is first mailed to shareholders,
Healthdyne will furnish to Respironics a list of all persons known to
Healthdyne who at the date of the Healthdyne Shareholders' Meeting may be
deemed to be "affiliates" of Healthdyne within the meaning of Rule 145
under the Securities Act and for purposes of qualifying the Merger for
"pooling-of-interests" accounting treatment ("Healthdyne Affiliates").
Healthdyne will use its reasonable best efforts to cause each Healthdyne
Affiliate to deliver to Respironics prior to the date the Proxy
Statement/Prospectus is first mailed to shareholders a written agreement
providing that such person will not sell, pledge, transfer or otherwise
dispose of (i) the shares of Respironics Common Stock to be received by
such person in the Merger (the "Merger Shares") or any other shares of
Respironics Common Stock or Healthdyne Common Stock held by such person
during the period commencing 30 days prior to the Effective Time and
ending at such time as financial results covering at least 30 days of
post-Merger combined operations have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies
(the "Restricted Period") or (ii) the Merger Shares except in compliance
with the applicable provisions of the Securities Act and the rules and
regulations thereunder.
(b) Respironics Pooling Affiliates' Agreement. At or prior
to the date the Proxy Statement/Prospectus is first mailed to
shareholders, Respironics will furnish to Healthdyne a list of all
persons known to Respironics who at the date of the Respironics
Shareholders' Meeting may be deemed to be "affiliates" of Respironics for
purposes of qualifying the Merger for "pooling-of-interests" accounting
treatment ("Respironics Affiliates"). Respironics will use its reasonable
best efforts to cause each Respironics Affiliate to deliver to
Respironics and Healthdyne prior to the date the Proxy
Statement/Prospectus is first mailed to shareholders a written agreement
providing that such person will not sell, pledge, transfer or otherwise
dispose of any shares of Respironics Common Stock held by such person
during the period commencing 30 days prior to the Effective Time and
ending at such time as financial results covering at least 30 days of
post-Merger combined operations have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies.
6.5. Public Announcements. The parties will consult with each
other as to the form and substance of any press release or other public
disclosure of matters related to this Agreement or any of the
transactions contemplated hereby.
6.6. Notice of Certain Events. Pending the Effective Time, each
party will promptly notify the other of (i) any material change in the
normal course of its business or in the operation of its properties, (ii)
any event which would cause any of its representations and warranties
hereunder to be inaccurate in any material respect as of the time of the
Closing and (iii) any actions, claims or legal, administrative or
arbitration proceedings or investigations threatened or commenced against
it or its subsidiaries which are or may be material to their business or
assets or to the consummation of the Merger and the transactions
contemplated hereby. Respironics shall promptly notify Healthdyne if
Respironics considers any Regulatory Condition or Requirement to be in
Respironics' reasonable business judgment materially adverse to the best
interests of the combined entities (an "Adverse Regulatory Condition
Notice").
6.7. All Reasonable Best Efforts. Subject to the terms and
conditions herein provided, each of the parties agrees to use all
reasonable best efforts to take, or cause to be taken, and to do, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement and the Merger Agreement,
including, without limitation, using reasonable efforts to diligently
pursue and obtain the regulatory clearances and approvals referred to in
Section 2.1(b) hereof (including responding to any requests or second
requests for information in connection therewith) and to lift or rescind
any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the Merger; provided, however,
that nothing contained herein shall require Respironics to agree to any
Regulatory Condition or Requirement which Respironics in its reasonable
business judgment considers to be materially adverse to the best
interests of the combined entities. Each party agrees to use all
reasonable efforts to fulfill, or cause to be fulfilled, all conditions
provided hereunder to the obligations of the other party to consummate
the Merger; provided that nothing contained herein shall obligate a party
or any of its directors or officers to breach their fiduciary obligations
owed to the shareholders of such party. Each party will, and will cause
its subsidiaries to, use its reasonable best efforts to obtain all
consents of third parties required in connection with this Agreement or
the transactions contemplated hereby under any other contract or
agreement of such party or its subsidiaries.
6.8. Healthdyne Acquisition Proposals. Healthdyne agrees that
neither it nor any of its officers, directors, employees, agents or
representatives (including, without limitation, any investment banker,
attorney or accountant retained by any of them) shall initiate, solicit
or encourage, directly or indirectly, any inquiries or the making of any
proposal or offer with respect to a merger, consolidation or similar
transaction involving, or any purchase of any substantial portion of the
assets or any substantial portion of the equity securities of Healthdyne
or any Healthdyne Subsidiary (any such proposal or offer being
hereinafter referred to as a "Healthdyne Acquisition Proposal");
provided, however, that (i) Healthdyne may furnish or cause to be
furnished information concerning Healthdyne and its business, properties
or assets to a third party, (ii) Healthdyne may engage in unsolicited
discussions or negotiations with a third party, (iii) following receipt
of a Healthdyne Acquisition Proposal, Healthdyne may take and disclose to
its stockholders a position contemplated by Rule 14e-2 or Rule 14d-9
under the Exchange Act or otherwise make a disclosure to Healthdyne's
stockholders and/or (iv) following receipt of a Healthdyne Acquisition
Proposal, Healthdyne's Board of Directors may fail to make, withdraw or
modify its recommendation referred to in Section 6.3, but in each case
referred to in the foregoing clauses (i), (ii) and (iv), only to the
extent that the Board of Directors of Healthdyne shall determine on the
basis of advice from outside counsel that such action is necessary in
order for the Board of Directors to act in a manner consistent with its
fiduciary obligations under applicable law. Healthdyne will take the
necessary steps to inform the appropriate individuals or entities
referred to in the first sentence hereof of the obligations undertaken in
this Section 6.8. For purposes of this Section 6.8, a Healthdyne
Acquisition Proposal shall include any proposal or arrangement whether
oral or in writing, providing for, requiring, or having the effect of
requiring Healthdyne to, or contemplating that Healthdyne would, abandon,
terminate or fail to consummate the Merger or any of the other
transactions contemplated under this Agreement. In the event that
Healthdyne shall receive a Healthdyne Acquisition Proposal or take any
action described in clause (i) or (ii) above, Healthdyne shall promptly
inform Respironics of the material details of such Healthdyne Acquisition
Proposal and/or its actions in response thereto or its actions described
in clauses (i) and (ii) and shall thereafter keep Respironics reasonably
and promptly informed of all material facts and material circumstances
relating to said Healthdyne Acquisition Proposal and Healthdyne's actions
relating thereto (for purposes of this sentence, Healthdyne's actions
shall include the actions of its advisors, agents and representatives).
Healthdyne is not currently in discussions with any third party in
connection with a transaction covered by this Section 6.8.
6.9. Transactions Involving Respironics. (a) Subject to Sections
6.9(b), 7.3(g) and 7.6(b)(ii) hereof, Respironics shall not enter into
any agreement (a "Section 6.9(a) Agreement") for a merger, consolidation
or share exchange with or into any other person in which the capital
stock of Respironics is changed, exchanged or converted into any other
security or form of consideration, unless the surviving or resulting
corporation or ultimate parent shall have agreed in writing to be bound
by the terms of this Agreement and the Merger Agreement. At least seven
(7) days prior to the execution and delivery by Respironics of a Section
6.9(a) Agreement, Respironics shall notify (a "Section 6.9(a) Notice")
Healthdyne of Respironics' intention to enter into such Section 6.9(a)
Agreement. The Section 6.9(a) Notice shall include the name of the other
party thereto and the material terms and conditions of the transaction
contemplated thereby, and Respironics shall use its reasonable best
efforts to provide to Healthdyne such other information concerning the
proposed transaction as Healthdyne shall reasonably request, subject to
the execution of a customary confidentiality agreement. Not later than
the fifth business day following delivery of the Section 6.9(a) Notice by
Respironics, Healthdyne shall inform Respironics in writing of whether or
not Healthdyne intends to exercise its right to terminate this Agreement
pursuant to Section 7.3(g) hereof if Respironics were to enter into the
proposed Section 6.9(a) Agreement (a "Healthdyne Section 6.9(a) Statement
of Intention"). If the Healthdyne Section 6.9(a) Statement of Intention
shall state that Healthdyne does not intend to exercise its right to
terminate this Agreement if Respironics were to enter into the proposed
Section 6.9(a) Agreement, then Healthdyne shall be deemed to have waived
its right to terminate this Agreement pursuant to Section 7.3(g) hereof
if Respironics enters into such Section 6.9(a) Agreement. Healthdyne
acknowledges that Respironics will be relying on the statement of
intention set forth in the Healthdyne Section 6.9(a) Statement of
Intention and Healthdyne agrees that it shall be bound by the statement
of intention set forth therein. Nothing contained in this Agreement or in
any Section 6.9(a) Notice or Healthdyne Section 6.9(a) Statement of
Intention shall obligate Respironics to enter into a Section 6.9(a)
Agreement. In the event that under the terms of any Section 6.9(a)
Agreement the outstanding Respironics Common Stock is converted into or
exchanged for other securities of any person, cash or other property, the
terms of this Agreement and the Merger Agreement shall be appropriately
amended so that the shareholders of Healthdyne shall receive in the
Merger, for each share of Healthdyne Common Stock, the consideration per
share received by the holders of Respironics Common Stock in such
transaction multiplied by the Exchange Ratio (as appropriately adjusted
to reflect such event), provided that fractional shares or fractional
units of other securities or property may be paid in cash based on the
closing sale price of the Respironics Common Stock as reported on the
NASD NMS on the last trading day prior to the closing date of such
transaction. It is understood that the condition contained in Section
2.2(h) shall not prevent Respironics from entering into any Section
6.9(a) Agreement, but Healthdyne shall not be required to amend or waive
the condition set forth in Section 2.3(f). Respironics shall obtain the
consent of Healthdyne, which consent shall not unreasonably be withheld,
before entering into an agreement for any such transaction which would
result in the acquisition by Respironics of a business for which
Respironics would be required under Rule 3-05(b)(2) of SEC Regulation S-X
to include separate financial statements in a registration statement of
Respironics under the Securities Act. Respironics is not currently in
discussions with any third party in connection with a transaction covered
by this Section 6.9(a).
(b) Respironics agrees that neither it nor any of its officers,
directors, employees, agents or representatives (including, without
limitation, any investment banker, attorney or accountant retained by any
of them) shall initiate, solicit or encourage, directly or indirectly,
any inquiries or proposal or offer with respect to a merger,
consolidation or similar transaction involving, or any purchase of any
substantial portion of the assets or any substantial portion of the
equity securities of Respironics or any Respironics Subsidiary (any such
proposal or offer being hereinafter referred to as a "Respironics
Acquisition Proposal"); provided, however, that (i) Respironics may
furnish or cause to be furnished information concerning Respironics and
its business, properties or assets to a third party, (ii) Respironics may
engage in unsolicited discussions or negotiations with a third party,
(iii) following receipt of a Respironics Acquisition Proposal,
Respironics may take and disclose to its stockholders a position
contemplated by Rule 14e-2 or Rule 14d-9 under the Exchange Act or
otherwise make a disclosure to Respironics' stockholders and/or (iv)
following receipt of a Respironics Acquisition Proposal, Respironics'
Board of Directors may fail to make, withdraw or modify its
recommendation referred to in Section 6.3, but in each case referred to
in the foregoing clauses (i), (ii) and (iv), only to the extent that the
Board of Directors of Respironics shall determine on the basis of advice
from outside counsel that such action is necessary in order for the Board
of Directors to act in a manner consistent with its fiduciary obligations
under applicable law. Respironics will take the necessary steps to inform
the appropriate individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 6.9(b). For purposes
of this Section 6.9(b), a Respironics Acquisition Proposal shall include
any proposal or arrangement whether oral or in writing, providing for,
requiring, or having the effect of requiring Respironics to, or
contemplating that Respironics would, abandon, terminate or fail to
consummate the Merger or any of the other transactions contemplated under
this Agreement. In the event that Respironics shall receive a Respironics
Acquisition Proposal or take any action described in clause (i) or (ii)
above, Respironics shall promptly inform Healthdyne of the material
details of such Respironics Acquisition Proposal and/or its actions in
response thereto or its actions described in clauses (i) and (ii) and
shall thereafter keep Healthdyne reasonably and promptly informed of all
material facts and material circumstances relating to said Respironics
Acquisition Proposal and Respironics' actions relating thereto (for
purposes of this sentence, Respironics' actions shall include the actions
of its advisors, agents and representatives).
6.10. Access and Information. Pending the Effective Time,
Healthdyne and Respironics will each afford the other party and its
authorized representatives reasonable access during normal business hours
to its properties, books and records and personnel and those of its
subsidiaries and will furnish promptly to the other party such financial
and operating data and other information relating to its and its
subsidiaries' business, assets and personnel as the other party may
reasonably request. All such information shall remain subject to the
Confidentiality Agreements between Healthdyne and Respironics dated July
19, 1997, the Confidentiality and Secrecy Agreement for Discussion of
Business Arrangement dated June 6, 1997 between Respironics, MiCRA and
David Eisenstadt and the Confidentiality and Secrecy Agreement for
Discussion of Business Arrangement dated September 21, 1997 between
Healthdyne, Respironics, MiCRA, Skadden, Arps, Slate, Meagher & Flom LLP,
Reed Smith Shaw & McClay LLP and Troutman Sanders LLP (the
"Confidentiality Agreements").
ARTICLE VII
AMENDMENT, WAIVER AND TERMINATION
7.1. Amendment. Subject to applicable law, this Agreement or the
Merger Agreement may be amended in any respect by an instrument in
writing signed by an authorized officer of each of the parties, whether
before or after the Shareholders' Meetings, except that no such amendment
after the Healthdyne Shareholders' Meeting shall affect the rate of
exchange of Healthdyne Common Stock for Respironics Common Stock provided
in the Merger Agreement or change the form of such consideration or to
affect the tax-free nature of the transaction.
7.2. Waiver. Respironics or Healthdyne may (i) extend the time
for performance of any of the obligations of the other party, (ii) waive
any inaccuracies in the representations and warranties of the other
party, (iii) waive compliance by the other party with any of its
covenants or agreements contained herein or in the Merger Agreement and
(iv) waive the fulfillment of any condition to its obligations hereunder
other than those set forth in Section 2.1 hereof, all of the foregoing to
the fullest extent permitted by law. No such extension or waiver shall be
effective unless contained in a writing signed by an authorized officer
of the party against which it is asserted.
7.3. Termination. Notwithstanding prior approval by the
shareholders of Healthdyne or Respironics, this Agreement may be
terminated and the Merger abandoned:
(a) by mutual written consent of each of the parties
hereto at any time prior to the Effective Time; or
(b) by Healthdyne or Respironics in the event of a
material breach of a representation and warranty or covenant of
the other party contained herein which would give rise to a
failure of a condition to Closing, which breach, if curable, has
not been cured within 10 days after written notice of such breach
is given to the breaching party by the party electing to
terminate; or
(c) by Healthdyne or Respironics at any time after the
shareholders of Healthdyne or Respironics shall fail to approve
this Agreement and the Merger Agreement, in the case of
Healthdyne, or the issuance of shares of Respironics Common Stock
pursuant to the Merger, in the case of Respironics, in a vote
taken at a meeting duly convened for that purpose, provided that
the party electing to terminate shall have performed its
obligations under Section 6.3 hereof; or
(d) (i) by Healthdyne or Respironics at any time after a
final judicial or regulatory determination (as to which all
periods for appeal have expired and no appeal shall be pending)
denying any regulatory clearance and/or approval required for the
Merger or (ii) by Respironics at any time after Respironics
delivers to Healthdyne an Adverse Regulatory Condition Notice; or
(e) by Healthdyne or Respironics at any time after the
date which is six (6) months after the date hereof in the event
of failure to satisfy any of the conditions to the obligations of
the party electing to terminate, if such failure occurred despite
the good faith effort of such party to perform all agreements and
covenants and to satisfy all conditions required to be performed
or satisfied by it; or
(f) by Healthdyne if Healthdyne's Board of Directors shall
have approved a Healthdyne Acquisition Proposal after
determining, upon the basis of advice of outside counsel that
such action is necessary in order for the Board of Directors to
act in a manner consistent with its fiduciary obligation under
applicable law; or
(g) by Healthdyne if Healthdyne shall have delivered, in
response to a Section 6.9(a) Notice, a Healthdyne Section 6.9(a)
Statement of Intention in which Healthdyne shall have indicated
its intention to terminate this Agreement pursuant to this
Section 7.3(g) if Respironics were to enter into the Section
6.9(a) Agreement referred to in such Section 6.9(a) Notice and
Respironics shall have entered into such Section 6.9(a) Agreement
within eighteen (18) months after delivery of the Healthdyne
Section 6.9(a) Statement of Intention; or
(h) by Respironics if Respironics' Board of Directors
shall have approved a Respironics Acquisition Proposal after
determining, upon the basis of advice of outside counsel that
such action is necessary in order for the Board of Directors to
act in a manner consistent with its fiduciary obligation under
applicable law; or
(i) by Healthdyne or Respironics within two (2) business
days of the Determination Date if, on the Determination Date, the
weighted average closing price of the Respironics Common Stock as
reported on the NASD NMS for the period consisting of 20
consecutive trading days ending on the trading day prior to the
Determination Date, in each case as reported in The Wall Street
Journal, is less than $20.00.
As used herein, "Determination Date" shall mean the business day
which is three (3) business days after the date on which the conditions
set forth in Sections 2.1(a) and 2.1(b) have been satisfied or three (3)
business days prior to the Closing Date. Termination pursuant to
subparagraphs (b) through (i) of this Section 7.3 shall be effected by
written notice provided by the terminating party in accordance with
Section 8.6 hereof.
7.4. Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.3, this Agreement and the Merger
Agreement shall forthwith become void, and there shall be no liability on
the part of either party or their respective officers or directors except
(i) as set forth in Sections 7.5, 7.6, 7.7, 8.2, 8.7 and 8.8 hereof or
(ii) in the event of a willful breach of this Agreement.
7.5. Respironics Fee. (a) Healthdyne hereby agrees to pay
Respironics, subject to the terms and conditions of this Section 7.5,
upon the occurrence of the events specified in this Section, a fee (the
"Respironics Fee") of $12,000,000.
(b) Respironics shall be entitled to payment of the Respironics
Fee if:
(i) The Board of Directors of Healthdyne shall fail to
recommend, or withdraw, modify or change its recommendation
referred to in Section 6.3 hereof in a manner adverse to
Respironics or shall have resolved to do any of the foregoing;
(ii) Healthdyne shall terminate this Agreement pursuant to
Section 7.3(f) hereof;
(iii) Healthdyne shall execute and deliver a definitive
agreement for, or Healthdyne's Board of Directors shall approve,
a Healthdyne Business Combination (as hereinafter defined) within
eighteen (18) months following the termination of this Agreement
if such termination is by Respironics pursuant to Section 7.3(b)
hereof;
(iv) Healthdyne shall execute and deliver a definitive
agreement for, or Healthdyne's Board of Directors shall approve,
a Healthdyne Business Combination within eighteen (18) months
following the termination of this Agreement if such termination
is by Respironics or Healthdyne pursuant to Section 7.3(c) hereof
after the shareholders of Healthdyne shall have failed to approve
this Agreement and the Merger Agreement and prior to such
termination either (A) Healthdyne or the shareholders of
Healthdyne shall have received an offer or proposal from any
person or group of persons (other than Respironics or any
Respironics Subsidiary) to enter into a Healthdyne Business
Combination or (B) any person or group of persons (other than
Respironics or any Respironics Subsidiary) shall have purchased,
after the date hereof and prior to such termination, securities
which, when added to the securities already owned by such person
or group, represent 10% or more of the voting power of Healthdyne
and such person or group of persons shall have failed to deliver
a written agreement of the type described in Section 6.4(b)
hereof; or
(v) Healthdyne shall execute and deliver a definitive
agreement for, or Healthdyne's Board of Directors shall approve,
a Healthdyne Business Combination within eighteen (18) months
following the termination of this Agreement in accordance with
its terms and Healthdyne's Board of Directors shall have failed
to call its Shareholders Meeting after a determination, based on
advice of outside counsel, that such action was required in order
to act in a manner consistent with its fiduciary obligations
under applicable law.
As used herein, "Healthdyne Business Combination" shall mean (i) a merger
or consolidation, or any similar transaction, involving Healthdyne or any
Significant Healthdyne Subsidiary, (ii) a purchase, lease or other
acquisition of all or substantially all of the assets of Healthdyne or
any Significant Healthdyne Subsidiary or (iii) a purchase or other
acquisition (including by way or merger, consolidation, share exchange or
otherwise) of securities representing 35% or more of the voting power of
Healthdyne or any Significant Healthdyne Subsidiary (other than, in the
case of the transfer of securities of any Significant Healthdyne
Subsidiary, transfers between Healthdyne and/or one or more Healthdyne
Subsidiaries). "Significant Healthdyne Subsidiary" shall mean each
Healthdyne Subsidiary which in the most recent fiscal year of Healthdyne
accounted for more than 35% of the consolidated assets of Healthdyne and
the Healthdyne Subsidiaries or which accounted for more than 35% of the
consolidated income of Healthdyne and the Healthdyne Subsidiaries for
each of the most recent three fiscal years of Healthdyne; provided,
however, that with respect to Healthdyne Subsidiaries created or acquired
after the date hereof, if thereafter such entity, in a fiscal year,
accounts for more than 35% of the consolidated assets of Healthdyne and
the Healthdyne Subsidiaries in such fiscal year or accounts for more than
(x) 35% of the consolidated income of Healthdyne and the Healthdyne
Subsidiaries in the year of creation or acquisition, (y) 35% of the
consolidated income of Healthdyne and the Healthdyne Subsidiaries for
each of the two most recent fiscal years in the two years following
creation or acquisition and (z) thereafter, 35% of the consolidated
income of Healthdyne and the Healthdyne Subsidiaries for each of the most
recent three fiscal years, it shall be deemed to be a Significant
Healthdyne Subsidiary for such fiscal year.
(c) The Respironics Fee shall be payable in immediately available
funds within five (5) business days after the occurrence of the event
giving rise to such payment.
7.6. Healthdyne Fee. (a) Respironics hereby agrees to pay
Healthdyne, subject to the terms and conditions of this Section 7.6, upon
the occurrence of the events specified in this Section, a fee (the
"Healthdyne Fee") of $12,000,000.
(b) Healthdyne shall be entitled to payment of the Healthdyne Fee
if:
(i) The Board of Directors of Respironics shall fail to
recommend, or withdraw, modify or change its recommendation
referred to in Section 6.3 hereof in a manner adverse to
Healthdyne or shall have resolved to do any of the foregoing;
(ii) Healthdyne shall terminate this Agreement pursuant to
Section 7.3(g) hereof;
(iii) Respironics shall terminate this Agreement pursuant
to Section 7.3(h) hereof;
(iv) Respironics shall execute and deliver a definitive
agreement for, or Respironics' Board of Directors shall approve,
a Respironics Business Combination (as hereinafter defined)
within eighteen (18) months following the termination of this
Agreement if such termination is by Healthdyne pursuant to
Section 7.3(b) hereof;
(v) Respironics shall execute and deliver a definitive
agreement for, or Respironics' Board of Directors shall approve,
a Respironics Business Combination within eighteen (18) months
following the termination of this Agreement if such termination
is by Healthdyne or Respironics pursuant to Section 7.3(c) hereof
after the shareholders of Respironics shall have failed to
approve this Agreement and the Merger Agreement and prior to such
termination either (A) Respironics or the shareholders of
Respironics shall have received an offer or proposal from any
person or group of persons (other than Healthdyne or any
Healthdyne Subsidiary) to enter into a Respironics Business
Combination or (B) any person or group of persons (other than
Healthdyne or any Healthdyne Subsidiary) shall have purchased,
after the date hereof and prior to such termination, securities
which, when added to the securities already owned by such person
or group represent 10% or more of the voting power of Respironics
and such person or group of persons shall have failed to deliver
a written agreement of the type described in Section 6.4(b)
hereof; or
(v) Respironics shall execute and deliver a definitive
agreement for, or Respironics' Board of Directors shall approve,
a Respironics Business Combination within eighteen (18) months
following the termination of this Agreement in accordance with
its terms and Respironics' Board of Directors shall have failed
to call its Shareholders Meeting after a determination, based on
advice of outside counsel, that such action was required in order
to act in a manner consistent with its fiduciary obligations
under applicable law.
As used herein, "Respironics Business Combination" shall mean (i) a
merger or consolidation, or any similar transaction, involving
Respironics or any Significant Respironics Subsidiary, (ii) a purchase,
lease or other acquisition of all or a substantial portion of the assets
of Respironics or any Significant Respironics Subsidiary or (iii) a
purchase or other acquisition (including by way or merger, consolidation,
share exchange or otherwise) of securities representing 35% or more of
the voting power of Respironics or any Significant Respironics Subsidiary
(other than, in the case of any transfer of any Significant Respironics
Subsidiary, transfers between Respironics and/or one or more Respironics
Subsidiaries). "Significant Respironics Subsidiary" shall mean each
Respironics Subsidiary which in the most recent fiscal year of
Respironics accounted for more than 35% of the consolidated assets of
Respironics and the Respironics Subsidiaries or which accounted for more
than 35% of the consolidated income of Respironics and the Respironics
Subsidiaries for each of the most recent three fiscal years of
Respironics; provided, however, that with respect to Respironics
Subsidiaries created or acquired after the date hereof, if thereafter
such entity, in a fiscal year, accounts for more than 35% of the
consolidated assets of Respironics and the Respironics Subsidiaries in
such fiscal year or accounts for more than (x) 35% of the consolidated
income of the Borrower and its Subsidiaries in the year of creation or
acquisition, (y) 35% of the consolidated income of Respironics and the
Respironics Subsidiaries for each of the two most recent fiscal years in
the two years following creation or acquisition and (z) thereafter, 35%
of the consolidated income of Respironics and the Respironics
Subsidiaries for each of the most recent three fiscal years, it shall be
deemed to be a Significant Respironics Subsidiary for such fiscal year
(c) The Healthdyne Fee shall be payable in immediately available
funds within five (5) business days after the occurrence of the event
giving rise to such payment.
7.7. Arbitration of Disputes Regarding Adverse Regulatory
Condition Notice.n Notice
(a) If (i) Respironics delivers to Healthdyne an Adverse
Regulatory Condition Notice, (ii) Healthdyne exercising reasonable
business judgment notifies Respironics within five (5) business days of
delivery of such Notice that Healthdyne believes that the applicable
Regulatory Condition or Requirement would not have been materially
adverse to the best interests of the combined entities and (iii) this
Agreement shall be terminated by Respironics pursuant to Section
7.3(d)(ii) hereof, then Healthdyne shall have the right, by giving
written notice to Respironics within three (3) business days of such
termination (a "Notice of Dispute") to have the issue (the "Issue") of
whether the applicable Regulatory Condition or Requirement would have
been materially adverse to the best interests of the combined entities
submitted to binding arbitration ("Binding Arbitration") pursuant to the
procedures set forth in this Section 7.7 and, to the extent not
inconsistent with Section 7.7, pursuant to the Commercial Arbitration
Rules of the American Arbitration Association (as amended from time to
time, the "AAA Rules"). Binding Arbitration shall be the sole means of
resolving any Issue.
(b) The arbitrator ("Arbitrator") for any Binding Arbitration of
the Issue shall be a partner or principal in a "Big Six" accounting firm
not retained by Healthdyne or Respironics reasonably acceptable to
Healthdyne and Respironics (or, if the parties cannot agree, drawn by lot
if necessary from the "Big Six" accounting firms not retained by
Healthdyne or Respironics). Healthdyne's Notice of Dispute shall be
timely made (as specified above) and shall set forth the nature of the
Issue. A copy of the Notice of Dispute shall also be given to the
American Arbitration Association as required by the AAA Rules.
(c) Binding Arbitration of the Issue shall be commenced within
ten (10) business days of the delivery of the Notice of Dispute to the
Arbitrator. The Arbitrator shall render a written decision on the Issue
within thirty (30) days of completion of the arbitration proceedings.
(d) If the Arbitrator determines that (i) the applicable
Regulatory Conditions or Requirement would not have been materially
adverse to the best interest of the combined entities and (ii) Healthdyne
has suffered or sustained significant damages as a result of Respironics'
Adverse Regulatory Condition Notice and termination of this Agreement by
Respironics pursuant to Section 7.3(d)(ii), then Respironics shall pay to
Healthdyne $12,000,000, it being understood that such significant damages
need not equal $12,000,000 to trigger such payment. Any such payment
shall be Healthdyne's sole and exclusive remedy with respect to the
Issue, the Adverse Regulatory Condition Notice and termination of this
Agreement by Respironics pursuant to Section 7.3(b)(ii) hereof.
(e) The decision of the Arbitrator with respect to the Issue
shall be conclusive, final and binding on Healthdyne and Respironics and
shall be enforceable in any court having jurisdiction over a proceeding
brought to seek such enforcement.
(f) All fees, costs and expenses of the Arbitrator shall be borne
by the party which does not prevail on the Issue in the Binding
Arbitration. Each party shall bear its own fees, costs and expenses in
connection with the Binding Arbitration.
(g) Nothing contained in this Section 7.7 shall restrict the
ability of Respironics to terminate this Agreement pursuant to Section
7.3(d)(ii).
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1. Closing and Effective Time. The closing of the transactions
contemplated by this Agreement and the Merger Agreement (the "Closing")
shall take place at the offices of Reed Smith Shaw & McClay LLP, 435
Sixth Avenue, Pittsburgh, Pennsylvania at 10:00 a.m., local time, on the
third business day following the fulfillment of all conditions set forth
in Section 2.1 hereof, or at such other place, time and date as the
parties shall agree. Subject to the fulfillment or waiver at or prior to
the Closing of all other conditions to its obligations to consummate the
Merger, each party shall execute and deliver for filing with the
Secretary of State of the State of Georgia a Certificate of Merger
specifying that the Merger shall become effective at the close of
business on the date of the Closing or at such other time and date as the
parties shall agree (the "Effective Time") and containing such other
information as is required by the GBCC.
8.2. Confidentiality. Each party hereto shall cause all
information obtained by it or its subsidiaries or representatives from
the other party and its subsidiaries and representatives under or in
connection with this Agreement or the negotiation hereof to be treated as
confidential information subject to the terms, conditions and
restrictions set forth in the Confidentiality Agreements and the letter
dated September 21, 1997 relating to certain litigation between
Healthdyne and Respironics.
8.3. Entire Agreement. This Agreement, together with the Merger
Agreement and any other agreements signed between the parties on the date
hereof, sets forth the entire understanding of the parties with respect
to the subject matter hereof and supersedes all previous agreements or
understandings between the parties with respect thereto.
8.4. Counterparts; Headings. This Agreement may be executed in
several counterparts, and by the parties hereto on separate counterparts,
each of which will constitute an original. The headings and captions
contained herein are for reference purposes only and do not constitute a
part hereof.
8.5. Further Assurances. Each party will execute and deliver such
instruments and take such other actions as the other party hereto may
reasonably request in order to carry out the intent and purposes hereof
and of the Merger Agreement.
8.6. Communications. All notices and other communications
hereunder shall be in writing and will be deemed to have been given if
delivered by hand or express carrier, telecopied with acknowledgment of
receipt, or mailed by first-class or by registered or certified mail,
postage prepaid, addressed as follows:
If to Respironics or Merger Subsidiary:
Respironics, Inc.
1501 Ardmore Boulevard
Pittsburgh, Pennsylvania 15221
Attention: Steven P. Fulton, Esquire
Telecopier: 412-473-5021
With a copy to:
Reed Smith Shaw & McClay LLP
James H. Reed Building
435 Sixth Avenue
Pittsburgh, PA 15219-1886
Attention: Arlie R. Nogay, Esquire
Telecopier: 412-288-3063
If to Healthdyne:
Healthdyne Technologies, Inc.
1225 Kennestone Circle
Marietta, GA 30066
Attention: Leslie R. Jones, Esquire
Telecopier: 770-429-2978
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Blaine V. Fogg, Esquire
Telecopy: 212-735-2000
and
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: James L. Smith III, Esquire
Telecopy: 404-885-3900
or at such other address or addresses as may hereafter be furnished by
the addressee party. All such notices and other communications shall be
deemed to have been duly given as follows: when delivered by hand, if
personally delivered; five business days after being deposited in the
mail, postage prepaid, if delivered by mail; when receipt acknowledged,
if telecopied; and the next business day after being delivered to an
overnight delivery service.
8.7. Expenses. Each party shall pay its own expenses incident to
preparing for, entering into and carrying out this Agreement and to the
consummation of the Merger, including fees of its accountants, attorneys
and investment advisors, except that it is agreed that (i) each party
shall pay the cost of printing and mailing the final Proxy
Statement/Prospectus and other proxy materials to the shareholders of
such party and (ii) the cost of printing and filing the Registration
Statement and any blue sky materials and the costs of preparing and
filing the applications for the regulatory clearances and/or approvals
referred to in Section 2.1(b) hereof are expenses of Respironics.
8.8. Brokers. Respironics and Healthdyne each represents and
warrants that except as disclosed in the Respironics Disclosure Letter
and Healthdyne Disclosure Letter, respectively, neither it nor any of its
subsidiaries is obligated to pay any brokerage commissions, finder's fees
or other like payments in connection with the transactions contemplated
hereby. Each party agrees to pay or discharge, and to indemnify and hold
the other and its subsidiaries harmless from and against, any and all
claims or liabilities for brokerage commissions, finder's fees and other
like payments incurred by such party or its subsidiaries in connection
with the transactions contemplated hereby.
8.9. Survival. The representations and warranties of the parties
contained herein or in any document, schedule or certificate delivered in
connection herewith will not survive the Closing and Effective Time but
will expire with and be terminated and extinguished by the consummation
of the Merger contemplated hereby.
8.10. Successors and Assigns; No Third Party Beneficiaries.
Neither this Agreement nor the Merger Agreement, nor any of the rights or
obligations of the parties hereunder or thereunder, may be assigned by
either party, whether by operation of law or otherwise, without the prior
written consent of the other party. Subject to the preceding sentence,
this Agreement and the Merger Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. Except as provided in Sections 9.1 and
9.2 hereof, this Agreement is not intended to confer any right or benefit
upon any person other than the parties hereto, and no provision hereof
shall be enforceable other than by the parties hereto and their
successors and permitted assigns.
8.11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
without regard to principles of conflicts of laws thereof, except as to
matters governed by the GBCC.
ARTICLE IX
POST-EFFECTIVE TIME COVENANTS
9.1. Indemnification of Healthdyne Directors and Officers.
(a) From and after the Effective Time, Respironics shall
indemnify, defend and hold harmless any person who is now, or has been at
any time prior to the date hereof, or who becomes prior to the Effective
Time of the Merger, an officer or director (the "Indemnified Party") of
Healthdyne or any Healthdyne Subsidiary against all losses, claims,
damages, liabilities, costs and expenses (including reasonable attorney's
fees and expenses), judgments, fines, losses, and amounts paid in
settlement in connection with any actual or threatened action, suit,
claim, proceeding or investigation (each a "Claim") to the extent that
any such Claim is based on, or arises out of, (i) the fact that such
person is or was a director or officer of Healthdyne or any Healthdyne
subsidiary or is or was serving at the request of Healthdyne or any
Healthdyne Subsidiary as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (ii) this
Agreement, or any of the transactions contemplated hereby, in each case
to the extent that any such Claim pertains to any matter or fact arising,
existing, or occurring prior to or at the Effective Time of the Merger,
regardless of whether such Claim is asserted or claimed prior to, at or
after the Effective Time of the Merger, to the full extent permitted
under the GBCC or Healthdyne's Articles of Incorporation, By-laws or
indemnification agreements in effect at the date hereof, including
provisions relating to advancement of expenses incurred in the defense of
any action or suit. Without limiting the foregoing, in the event any
Indemnified party becomes involved in any capacity in any Claim, then
from and after the Effective Time of the Merger Respironics shall,
periodically advance to such Indemnified Party its legal and other
expenses (including the cost of any investigation and preparation
incurred in connection therewith), subject to the provision by such
Indemnified Party of a written affirmation in accordance with GBCC
Section 14-2-853.
(b) Respironics and Healthdyne agree that all rights to
indemnification and all limitations of liability existing in favor of the
Indemnified Party as provided in Healthdyne's Articles of Incorporation
and By-laws as in effect as of the date hereof shall survive the Merger
and shall continue in full force and effect, without any amendment
thereto, for a period of six years from the Effective Time of the Merger
to the extent such rights are consistent with the GBCC; provided that, in
the event any claim or claims are asserted or made within such six year
period, all rights to indemnification in respect of any such claim or
claims shall continue until disposition of any and all such claims;
provided further, that any determination required to be made with respect
to whether an Indemnified Party's conduct complies with the standards set
forth under the GBCC, Healthdyne's Articles of Incorporation or By-laws,
as the case may be, shall be made by independent legal counsel in
accordance with the GBCC and the indemnification agreements and; provided
further, that nothing in this Section 9.1 shall impair any rights or
obligations of any present or former directors or officers of Healthdyne.
(c) In the event Respironics or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation
or merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary to effectuate the purposes of this Section 9.1, proper
provision shall be made so that the successors and assigns of Respironics
assume the obligations set forth in this Section 9.1, and none of the
actions described in clauses (i) or (ii) shall be taken until such
provision is made.
(d) Respironics shall maintain Healthdyne's existing officers'
and directors' liability insurance policy ("D&O Insurance") for a period
of not less than six years after the Effective Time of the Merger;
provided, that Respironics may substitute therefor policies of
substantially similar coverage and amounts containing terms no less
advantageous to such former directors and officers; provided, further, if
the existing D&O Insurance expires or is cancelled during such period,
Respironics will use its best efforts to obtain substantially similar D&O
Insurance.
9.2. Healthdyne Stock Option Option.
(a) At the Effective Time, each Healthdyne Option under the
Healthdyne Option Plans, whether vested or unvested, shall be deemed to
constitute an option (a "Substitute Option") to acquire, on the same
terms and conditions as were applicable under such Healthdyne Option
(which Substitute Option has become vested and exercisable in accordance
with its terms and the terms of the applicable Healthdyne Option Plan),
the same number of shares of Respironics Common Stock as the holder of
such Healthdyne Option would have been entitled to receive pursuant to
the Merger had such holder exercised such option in full immediately
prior to the Effective Time (rounded down to the nearest whole number),
at a price per share (rounded up to the nearest whole cent) equal to (y)
the aggregate exercise price for the Shares otherwise purchasable
pursuant to such Healthdyne Option divided by (z) the number of full
shares of Respironics Common Stock deemed purchasable pursuant to such
Healthdyne Option in accordance with the foregoing; provided, however,
that in the case of any Healthdyne Option to which Section 422 of the
Code applies, the option price, the number of shares purchasable pursuant
to such option and the terms and conditions of exercise of such option
shall be determined in accordance with the foregoing, subject to such
adjustments as are necessary in order to satisfy the requirements of
Section 424(a) of the Code. At or prior to the Effective Time,
Respironics shall make all necessary arrangements with respect to the
Healthdyne Option Plans to permit the assumption of the unexercised
Healthdyne Options by Respironics pursuant to this Section 9.2.
(b) Each holder of a Healthdyne Option outstanding immediately
prior to the Effective Time pursuant to any Healthdyne Option Plan which
shall not be exercisable at the Effective Time or which will expire prior
to the expiration of the Restricted Period or as to which Substitute
Options or shares of Respironics Common Stock issuable pursuant to
Substitute Options could not be registered on Form S-8 (an "Unexercisable
Option") who surrenders such Unexercisable Option to Healthdyne prior to
the Effective Time for cancellation in connection with the Merger shall
be entitled to receive in the Merger the number of shares of Respironics
Common Stock, decreased to the nearest whole share, having an aggregate
market value at the Effective Time equal to the value of such
Unexercisable Option, as determined pursuant to the terms of a stock
option exchange agreement to be entered into at the time of such
surrender among such holder, Healthdyne and Respironics (the "Stock
Option Exchange Agreement"). Respironics shall register under the
Securities Act on the Registration Statement filed in connection with the
Merger all shares of Respironics Common Stock issuable pursuant to the
Stock Option Exchange Agreements.
(c) Respironics shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Respironics Common
Stock for delivery upon exercise of Healthdyne Options. Immediately
following the Effective Time of the Merger, Respironics shall file a
registration statement on Form S-8 or another appropriate form with
respect to the shares of Respironics Common Stock subject to such options
and shall use its reasonable best efforts to maintain the effectiveness
of such registration statement or registration statements (and maintain
the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, where applicable,
Respironics shall administer Healthdyne Option Plan in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act to the extent
Healthdyne Option Plans complied with such rule prior to the Merger.
(d) At or prior to the Closing, Respironics and Healthdyne will
enter into Consulting Agreements with the persons listed on Appendix E
hereto (the "Consulting Agreements"), the form of which shall be
reasonably satisfactory to Respironics. The Consulting Agreements (x)
will be for a term of six (6) months, (y) will provide that the
Consultant will provide Respironics and Healthdyne various consulting
services, as may be requested from time to time during such six (6) month
period not to exceed five hours per week, to assist Respironics and
Healthdyne in the integration of Healthdyne and its business with
Respironics following the Merger, and (z) will provide for compensation
to the Consultant based on the Consultant's normal and customary hourly
rate in connection with the consulting services requested to be performed
by Respironics or Healthdyne, together with reimbursement to the
Consultant of actual out-of-pocket expenses incurred by the Consultant in
performing the consulting services.
9.3. Respironics Benefit Plans. (a) As soon as administratively
practicable following the Merger, Respironics shall take appropriate
actions so that employees of Healthdyne and the Healthdyne Subsidiaries
who become employees of Respironics or remain employees of Healthdyne or
a Healthdyne Subsidiary shall be entitled to participate in generally
applicable Respironics Employee Benefit Plans on the same basis as other
similarly situated employees of Respironics and the Respironics
Subsidiaries. Prior service of such employees with Healthdyne or a
Healthdyne Subsidiary (including service with predecessor entities to the
extent recognized under analogous Healthdyne Employee Benefit Plans)
shall be counted in determining eligibility to participate in such plans
and for purposes of vesting of benefits. Respironics shall use reasonable
best efforts to waive (i) any preexisting condition restriction which was
waived under the terms of analogous Healthdyne Employee Benefit Plan
immediately prior to the Effective Time or (ii) waiting period limitation
which would otherwise be applicable to a Healthdyne employee on or after
the Effective Time to the extent such Healthdyne employee had satisfied
any similar waiting period limitation under an analogous Healthdyne
Employee Benefit Plan prior to the Effective Time.
(b) After consummation of the Merger, Respironics shall have the
right to amend or terminate any Healthdyne Employee Benefit Plan or
combine any Healthdyne Employee Benefit Plan with a plan offered by
Respironics or any Respironics Subsidiary, provided that such amendment,
termination or combination is accomplished in accordance with the terms
of the applicable plan(s) and all applicable laws.
(c) Respironics shall honor, and shall cause the Surviving
Corporation to honor, without modification, the terms and provisions of
the Indemnification Agreements, the Non-Competition Agreements (except as
modified or terminated as contemplated hereby in connection with the
Employment Agreements referred to in Section 2.2(f) hereof), the
Split-Dollar Life Insurance Agreements and the Retirement Benefit Award
Agreements in effect as of the date hereof, in each case between
Healthdyne and the employees or directors of Healthdyne identified on
Appendix F hereto. Respironics hereby acknowledges that the Merger will
constitute a "Change of Control" for purposes of such Agreements, and
agrees to abide by the provisions of any such Agreement which relate to a
Change of Control, including the accelerated vesting and/or payment of
benefits. Nothing contained herein shall prevent Respironics or the
Surviving Corporation from terminating or ceasing payments under such
Agreements to the extent permitted by the terms and provisions thereof
except as prohibited by Section 9.1 hereof.
9.4. Transition Team. Upon the execution and delivery of this
Agreement, Respironics and Healthdyne will establish a team consisting of
employees from both entities for the purpose of integrating the two
entities (the "Transition Team"). The Chief Executive Officer of
Respironics, Dennis S. Meteny, will lead the Transition Team and the
following persons will be members of the Transition Team: Craig B.
Reynolds, Robert D. Crouch, Daniel J. Bevevino and John L. Miclot. The
Transition Team will choose one or more consultants to assist it in
meeting its objective. The objective of the Transition Team will be to
ensure that a proper process is in place and is used for integrating the
two organizations and structuring the combined company. Mr. Meteny will
provide progress reports to the Board of Directors of Respironics and Mr.
Reynolds will provide progress reports to Healthdyne. Following
consummation of the Merger, Mr. Meteny will provide progress reports to
the Board of Directors of Respironics and the Transition Team will remain
in place for such period as shall be deemed necessary by the Board of
Directors of Respironics.
9.5. Nominees to Respironics Board.
(a) As of the Effective Time, the Board of Directors of
Respironics shall increase the size of Respironics Board of Directors by
three persons and shall appoint Parker H. Petit (Class of 1998), J. Terry
Dewberry (Class of 1999) and Craig B. Reynolds (Class of 2000) to fill
the vacancies created thereby (the "Healthdyne Continuing Directors"). In
connection with the election of Directors to be held at the Annual
Meeting of the shareholders of Respironics to be held in November 1998
and at any adjournment or postponement thereof, the Nominating Committee
of the Board of Directors of Respironics shall nominate for reelection to
the Class of 2001 of the Respironics Board of Directors Mr. Petit. If any
of the Healthdyne Continuing Directors shall be unwilling or unable to
serve as a Director as of the Effective Time or shall cease to serve as
members of the Respironics Board of Directors during his initial term by
reason of resignation, removal, death or disability, or if Mr. Petit
shall be unwilling or unable to be nominated for reelection to the
Respironics Board of Directors at the 1998 Annual Meeting of
Shareholders, the Healthdyne Continuing Directors shall be entitled to
designate the person to be nominated in such person's stead, subject to
reasonable approval of such person by the Respironics Directors.
(b) At the Effective Time, Mr. Petit shall be appointed to the
Nominating Committee of the Respironics Board of Directors.
9.6. Stipulation Regarding Litigation. Contemporaneously with the
execution and delivery of this Agreement, Respironics and Healthdyne
shall enter into a Stipulation in the form of Appendix G hereto in the
matter pending in the United States District Court for the Western
District of Pennsylvania captioned Respironics, Inc. v. Healthdyne
Technologies, Inc., C.A. No. 97-1156 (Judge Lancaster).
9.7. Directors and Officers Letters. As soon as practicable and
in any event within one (1) week of the date hereof, Healthdyne and
Respironics shall use their best efforts to cause each of their
respective directors and executive officers who have not done so as of
the date of this Agreement to execute the letter attached hereto as
Appendices H and I, respectively.
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed this Agreement as of the day and
year first above written.
[CORPORATE SEAL]
Attest: HEALTHDYNE TECHNOLOGIES, INC.
/s/ Leslie R. Jones By /s/ Craig B. Reynolds
_______________________________ _____________________________
Leslie R. Jones Craig B. Reynolds
Secretary President and CEO
[CORPORATE SEAL]
Attest: RESPIRONICS, INC.
/s/ Dorita A. Pishko By /s/ Dennis S. Meteny
_______________________________ ____________________________
Dorita A. Pishko, Dennis S. Meteny
Secretary President and CEO
[CORPORATE SEAL]
Attest: RIGA, INC.
/s/ Dorita A. Pishko By /s/ Dennis S. Meteny
________________________________ ____________________________
Dorita A. Pishko Dennis S. Meteny
Secretary President
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT dated as of November 10, 1997 by and among RIGA,
INC., a Georgia corporation ("Merger Subsidiary"), Healthdyne
Technologies, Inc., a Georgia corporation ("Healthdyne"), and
Respironics, Inc., a Delaware corporation ("Respironics")
W I T N E S S E T H:
WHEREAS, Merger Subsidiary, Healthdyne and Respironics have
entered into an Agreement and Plan of Reorganization of even date
herewith (the "Reorganization Agreement") which provides, among other
things, for the merger of Merger Subsidiary with and into Healthdyne (the
"Merger");
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein and in the Reorganization Agreement, and for the purpose
of stating the method, terms and conditions of the Merger, including the
rights of the shareholders of Healthdyne, and such other details and
provisions as are deemed desirable, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. The Merger. Subject to the terms and conditions of this
Agreement and the Reorganization Agreement, and in accordance with the
laws of the State of Georgia, at the Effective Time (as defined in
Section 8.1 of the Reorganization Agreement) Merger Subsidiary shall be
merged with and into Healthdyne, which shall be the surviving corporation
(the "Surviving Corporation").
2. Articles of Incorporation and By-Laws. Upon the Merger
becoming effective, the Articles of Incorporation and By-Laws of Merger
Subsidiary as in effect immediately prior to the Effective Time shall be
the Articles of Incorporation and By-Laws, respectively, of the Surviving
Corporation; provided, that such Articles or By-Laws shall be modified,
if necessary, to conform to the obligations of Respironics pursuant to
Section 9.1 of the Reorganization Agreement with respect to the
provisions relating to indemnification and limitation of liability.
3. Board of Directors and Officers. Upon the Merger becoming
effective, the Board of Directors of the Surviving Corporation shall
consist of Dennis S. Meteny, Daniel J. Bevevino and Steven P. Fulton and
the Officers shall consist of the persons listed on Schedule I hereto.
4. Conversion of Healthdyne Shares. (a) Subject to the provisions
of Section 5 hereof with respect to the payment of fractional shares in
cash, upon the Merger becoming effective, each share of Common Stock, par
value $0.01 per share, of Healthdyne ("Healthdyne Common Stock") shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become a right to receive such number (the
"Exchange Ratio") of shares of Common Stock, par value $0.01 per share,
of Respironics ("Respironics Common Stock") determined by dividing $24.00
by the Transaction Share Price (as hereinafter defined). No change will
be made by reason of the Merger in the shares of Respironics Common Stock
outstanding immediately prior to the Effective Time.
(b) "Transaction Share Price" shall mean the weighted average of
the closing prices of the Respironics Common Stock as reported on the
National Market System ("NMS") of the National Association of Securities
Dealers, Inc. ("NASD") for a period consisting of 20 consecutive trading
days ending on the third trading day prior to the Closing Date, in each
case as reported in The Wall Street Journal; provided, that if such
weighted average closing sales price is less than $26.03 per share of
Respironics Common Stock, then the Transaction Share Price shall be
$26.03 per share; and, provided further, that if such weighted average
closing sales price is greater than $31.03 per share of Respironics
Common Stock, then the Transaction Share Price shall be $31.03.
5. Surrender and Exchange of Healthdyne Certificates; No
Fractional Shares. (a) As promptly as practicable after the Effective
Time but in any event within seven (7) business days, Respironics shall
cause to be sent to each person who immediately prior to the Effective
Time was a holder of record of Healthdyne Common Stock transmittal
materials and instructions for surrendering certificates for Healthdyne
Common Stock ("Old Certificates") in exchange for a certificate or
certificates for the number of whole shares of Respironics Common Stock
to which such person is entitled under Section 4 hereof.
(b) No certificates for fractional shares of Respironics Common
Stock shall be issued in connection with the Merger. In lieu thereof,
Respironics shall issue to any holder of Healthdyne Common Stock
certificates otherwise entitled to a fractional share, upon surrender of
such certificates in accordance with the instructions furnished by
Respironics, a check for an amount of cash equal to the fraction of a
share of Respironics Common Stock represented by the certificates so
surrendered multiplied by the closing sale price of the Respironics
Common Stock as reported on the NASD NMS on the last trading day prior to
the Closing Date, as reported in The Wall Street Journal.
(c) After the Effective Time, there shall be no transfer on the
stock transfer books of Healthdyne or Respironics of shares of Healthdyne
Common Stock. If Old Certificates are presented for transfer after the
Effective Time, they shall be canceled and certificates representing
whole shares of Respironics Common Stock (and a check in lieu of any
fractional share) shall be issued in exchange therefor as provided
herein.
(d) At or prior to the Effective Time, Respironics shall deposit
with a bank or trust company selected by Respironics and reasonably
acceptable to Healthdyne (the "Exchange Agent"), for the benefit of the
holders of the certificates of Healthdyne Common Stock, for exchange in
accordance with the terms of this Section 5, certificates representing
the shares of Respironics Common Stock and the cash in lieu of fractional
shares to be issued pursuant to Section 4 hereof and paid pursuant to
Section 5(b) hereof in exchange for outstanding shares of Healthdyne
Common Stock.
6. Conversion of Merger Subsidiary Shares. Upon the Merger
becoming effective, each share of Common Stock, par value $0.01 per
share, of Merger Subsidiary ("Merger Subsidiary Common Stock") shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become a right to receive one (1) share of
Common Stock, par value $0.01 per share, of the Surviving Corporation.
7. Termination and Amendment. Notwithstanding prior approval by
the shareholders of Healthdyne, Merger Subsidiary or Respironics, this
Agreement shall be terminated and the Merger shall be abandoned in the
event that prior to the Effective Time the Reorganization Agreement is
terminated as provided therein. Notwithstanding prior approval by the
shareholders of Healthdyne, Merger Subsidiary or Respironics, this
Agreement may be amended in any respect in the manner and subject only to
the limitations set forth in Section 7.1 of the Reorganization Agreement.
8 Counterparts; Headings. This Agreement may be executed in
several counterparts, and by the parties hereto on separate counterparts,
each of which will constitute an original. The headings and captions
contained herein are for reference purposes only and do not constitute a
part hereof.
9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed this Agreement as of the day and
year first above written.
[CORPORATE SEAL]
Attest: HEALTHDYNE TECHNOLOGIES, INC.
/s/ Leslie R. Jones By /s/ Craig B. Reynolds
___________________________ ______________________________
Leslie R. Jones Craig B. Reynolds
Secretary President and CEO
[CORPORATE SEAL]
Attest: RIGA, INC.
/s/ Dorita A. Pishko By /s/ Dennis S. Meteny
___________________________ ______________________________
Dorita A. Pishko Dennis S. Meteny
Secretary President
[CORPORATE SEAL]
Attest: RESPIRONICS, INC.
/s/ Dorita A. Pishko By /s/ Dennis S. Meteny
____________________________ _____________________________
Dorita A. Pishko Dennis S. Meteny
Secretary President and CEO
APPENDIX B
[Individuals to Enter Into Employment Agreements]
1. Craig B. Reynolds
2. John L. Miclot
3. Robert E. Tucker
4. Jeffrey North
APPENDIX C
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of November , 1997, by and between
RESPIRONICS, INC., a Delaware corporation (the "Company"), Healthdyne
Technologies, Inc., a Georgia Corporation ("Healthdyne") and [NAME OF
EXECUTIVE] ("Executive"). This Employment Agreement will be null and
void in its entirety if the Company's currently contemplated acquisition
of Healthdyne does not occur. Furthermore, if future benefits provided
to [OFFICE] (other than base salary) become more favorable than those
contained herein, Executive will receive the benefit of those changes.
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of the design,
development, manufacture, marketing and sale principally of respiratory
and other medical equipment;
WHEREAS, Executive has been employed by Healthdyne and will be
employed by the Company after the Company acquires Healthdyne (the
"Merger");
WHEREAS, Healthdyne and Executive agree that their
Non-Competition Agreement will become null and void in all respects
effective upon the Closing of the Merger (the "Closing Date"), so that
no "Change of Control" occurs for purposes of said Non-Competition
Agreement, in consideration of the acquisition and Executive's
employment with the Company;
WHEREAS, Healthdyne and Executive further agree that neither
Healthdyne nor the Company will owe Executive any monies as a result of
Executive's change in employment from Healthdyne to the Company other
than as expressly set forth or referred to herein;
WHEREAS, Executive possesses valuable knowledge and skills that
will contribute to the successful operation of the Company's business;
WHEREAS, the Company and Executive have agreed to execute and
deliver this Agreement in consideration, among other things, of (i) the
access Executive will have to confidential or proprietary information of
the Company, (ii) the access Executive will have to confidential or
proprietary information to be acquired hereafter by the Company, and
(iii) Executive's receipt of compensation from time to time by the
Company; and
WHEREAS, the Company desires to retain the services of
Executive, and Executive is willing to accept employment with the
Company, upon the terms contained in the attached offer letter and
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, intending to be legally bound, the Company
agrees to employ Executive, and Executive hereby agrees to be employed
by the Company, upon the following terms and conditions:
ARTICLE I
EMPLOYMENT
1.01. Office. Effective at the Closing Date, Executive will be
employed as Vice President, New Product Development of the Company,
having such duties and responsibilities as are commensurate with such
position and title. Executive shall report to the Senior Vice President,
New Product Development of the Company and shall also perform such other
duties unrelated to his title and position as may be mutually agreed
upon by Executive and the Company. In such capacity or capacities
Executive shall use his best energies or abilities in the performance of
his duties hereunder and as prescribed in the By-Laws of the Company.
1.02. Term. Subject to the terms and provisions of Article II
hereof, Executive shall be employed by the Company for a period of three
years (the "Term"), commencing on the Closing Date. Subject to the terms
and provisions of Article II hereof, the Term shall automatically be
extended for an additional year unless, not less than ninety (90) days
prior to the expiration of the then-current first year of the Term,
either Executive or the Company shall advise the other that the Term
will not be further extended. "Term" shall also include any extensions
or renewals of the original Term.
1.03. Base Salary. After March 1, 1998, compensation shall be
paid to Executive by the Company at the rate of $ per annum (the "Base
Salary"), payable bi-weekly. The Base Salary to be paid to Executive may
be adjusted upward by the Board of Directors of the Company at any time
(but not less frequently than annually) based upon Executive's
contribution to the success of the Company and on such other factors as
the Board of Directors of the Company shall deem appropriate.
Executive's first annual review shall occur in November 1998 with any
resulting salary increase becoming effective in February 1999.
1.04. Executive Benefits. At all times during the Term,
Executive shall have the right to participate in and receive benefits
under and in accordance with the then-current provisions of all
incentive, profit sharing, retirement, stock option or purchase plans,
life, health and accident insurance, hospitalization and other incentive
and benefit plans or programs (except for any such plan in which
Executive may not participate pursuant to the terms of such plan or
Executive's geographic location) which the Company may at any time or
from time to time have in effect for executive employees of the Company
or its subsidiaries, Executive's participation to be on a basis
commensurate with other executive employees considering their respective
responsibilities and compensation. Prior service of Executive with
Healthdyne or a Healthdyne Subsidiary (including service with
predecessor entities to the extent recognized under analogous Healthdyne
benefit plans) shall be counted in determining eligibility to
participate in Company plans and for purposes of vesting. Executive
shall also be entitled to be reimbursed for all reasonable expenses
incurred by him in the performance of his duties hereunder. For the
period from January 1, 1998 through the Closing Date, Executive shall be
entitled to a pro rata normal and customary bonus from Healthdyne's
bonus plan in accordance with the terms of that plan as of the date
hereof. Also, the Company will pay Executive for all accrued, but
unpaid, vacation pay due Executive by Healthdyne through the Closing
Date.
1.05. Principal Place of Business. The headquarters and
principal place of business of the Company is located in Pittsburgh,
Pennsylvania. For Executive's convenience, Executive's principal place
of business will be in Marietta, Georgia, and he will reside within a
reasonable distance thereof.
ARTICLE II
TERMINATION
2.01. Illness, Incapacity. If, during the Term of Executive's
employment hereunder, the Board of Directors of the Company shall
determine that Executive shall be prevented from effectively performing
all his duties hereunder by reason of illness or disability, confirmed
by a physician mutually acceptable to Executive and the Company, and
such failure so to perform shall have continued for a period of not less
than six months, then the Company may, by written notice to Executive,
terminate Executive's employment hereunder effective at any time after
such six month period. Upon delivery to Executive of such notice,
together with payment of any salary accrued and unpaid under Section
1.03 hereof, Executive's employment and all obligations of the Company
under Article I (except any obligation for vested benefits) hereof shall
forthwith terminate. The obligations of Executive under Articles III and
IV per Sections 4.02, 4.04, 4.06 and 4.07 hereof shall continue
notwithstanding termination of Executive's employment pursuant to this
Section 2.01.
2.02. Death. If Executive dies during the Term of his
employment hereunder, Executive's employment hereunder shall terminate
and all obligations of the Company hereunder, other than any obligations
with respect to the payment of accrued, unpaid salary and vested
benefits, shall terminate.
2.03. Company Termination. (a) For Cause. In the event that, in
the reasonable judgment of the Board of Directors of the Company after a
meeting at which Executive is given reasonable notice and afforded an
opportunity to attend, be heard and be accompanied by a lawyer,
Executive shall have (a) been guilty of any act of dishonesty material
with respect to the Company, (b) been convicted of a crime involving
moral turpitude, (c) intentionally disregarded the material provisions
of this Agreement or d) intentionally disregarded express instructions
of the Board of Directors of the Company with respect to material
matters of policy continuing (in the case of clause (d)) for a period of
not less than thirty (30) days after notice of such disregard, the
Company may terminate this Agreement effective at such date as it shall
specify in a written notice to Executive. Any such termination by the
Company shall be deemed to be termination "for cause". Upon delivery to
Executive of such notice of termination, together with payment of any
salary accrued and unpaid under Section 1.03 hereof and vested benefits
for which the Company is obligated, Executive's employment and all
obligations of the Company under Article I hereof shall forthwith
terminate. The obligations of Executive under Articles III and IV hereof
shall continue notwithstanding termination of Executive's employment
pursuant to this Section 2.03(a).
(b) Without Cause. Executive's employment hereunder may be
terminated at any time by the Company without cause if the Board of
Directors of the Company, by resolution duly adopted by the Board, so
determines. Except as set forth in Section 2.05 hereof, all obligations
of the Company under Article I cease upon termination. The obligations
of Executive under Articles III and IV hereof shall continue
notwithstanding termination of Executive's employment pursuant to this
Section 2.03(b).
2.04. Executive Termination. (a) Executive agrees to give the
Company ninety (90) days prior written notice of the termination of his
employment with the Company. Simultaneously with such notice, Executive
shall inform the Company in writing as to his employment plans following
the termination of his employment with the Company. In the event
Executive has terminated his employment with the Company because there
has been: (i) a material downgrading in Executive's duties, titles or
responsibilities for the Company, (ii) a change in Executive's principal
place of business to a location not within 30 miles of its present
location, (iii) any significant and prolonged increase in the traveling
requirements applicable to the discharge of Executive's
responsibilities, (iv) any breach of the Company of its duties or
obligations pursuant to this Agreement which has not been cured within
thirty (30) days after notice of such breach, (v) any failure of any
successors to the Company after a Change of Control (as defined herein)
to assume the obligations of the Company hereunder, (vi) if the Company
imposes as a condition to any renewal or extension of this Agreement any
adverse change in any material term or provision of this Agreement or
(vii) any other significant material adverse change in working
conditions, responsibilities or prestige, Executive shall be entitled to
the compensation provided for in Section 2.05 upon such termination.
(b) In the event Executive has terminated his employment for
other reasons, Executive will receive nothing if he terminates within 18
months of the Closing Date or he terminates more than 24 months after
the Closing Date. Executive will receive W-2 wages (averaged over the
past three years), Company-paid health insurance continuation, and car
allowance continuation for 12 months if he terminates between 18 and 24
months after the Closing Date upon 30 days notice. Any such payment
under this section will constitute the sole and complete amount owed to
Executive under this Agreement and he shall be entitled to no other
payments under this Agreement which may have been otherwise due.
(c) All obligations of the Company under Article I shall cease
upon termination, except for the payment of any salary accrued and
unpaid under Section 1.03 hereof other than vested benefits. The
obligations of Executive under Articles III and IV hereof shall continue
notwithstanding termination of Executive's employment pursuant to this
Section 2.04.
2.05. Termination Payments - Discharge Without Cause. If the
Company terminates Executive's employment without cause pursuant to
Section 2.03(b), Executive shall for the greater of two years or the
balance of the Term be entitled to W-2 wages (averaged over the past
three years), Company-paid health insurance continuation, and car
allowance continuation.
2.06. Termination Payments - After Certain Changes of Control.
(a) If Executive or the Company (except pursuant to Section 2.03(a)
hereof) terminates this Agreement during the Term upon or after the
occurrence of a Business Combination not approved by a majority of
Disinterested Directors then in office, as those terms are defined in
Article Ninth of the Company's Certificate of Incorporation, Executive
shall be paid an amount equal to three times Executive's average W-2
wages over the past three years, such payment to be made in a lump sum
within sixty (60) days of termination. Executive also shall be entitled
to Company-paid health insurance continuation and car allowance
continuation for three (3) years.
(b) As used herein a "Change of Control" shall be deemed to
have occurred if (a) there shall be consummated (i) any consolidation or
merger of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of the Company's
common stock would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the Company's
common stock immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after
the merger, or (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (b) the stockholders
of the Company approve any plan or proposal for the liquidation or
dissolution of the Company, or (c) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), shall become the beneficial owner (within
the meaning of Rule 13d-3 under the Exchange Act) of 30% of the
Company's outstanding common stock, or (d) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the entire Board of Directors of the Company shall cease for
any reason to constitute a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new
director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period;
provided, however, that, in the absence of a majority vote of the
directors to the contrary, the sale, lease, exchange or other
disposition (in one transaction or a series of related transactions) of
less than 70% of the total fair market value of all of the assets of the
Company immediately prior to such transaction or transactions shall not
be deemed to be a Change in Control and provided further that the
transaction or transactions which involve the sale, lease, exchange or
other disposition of 70% or more of the total fair market value of all
of the assets of the Company immediately prior to such transaction or
transactions shall be deemed to be a Change in Control even if approved
by the Board of Directors of the Company.
2.07. Termination Payments - Taxes The parties hereto agree
that the Termination Payments are reasonable compensation in
consideration of the Executive's adherence to the terms of Article IV
hereof. Neither party shall contest the payment of such benefits as
constituting an "excess parachute payment" within the meaning of Section
280G(b)(I) of the Internal Revenue Code of 1986, as amended (the
"Code"). In the event that Executive becomes entitled to the Termination
Payments and Executive becomes subject to the tax imposed by Section
4999 of the Code (the "Excise Tax") as a result of the Compensation
Payments and any other benefits or payments required to be taken into
account under Code Section 280G(b)(2)("Parachute Payments"), the Company
shall pay to Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by Executive, after deduction of any
Excise Tax on the Parachute Payments and any Federal, state and local
income tax and Excise Tax upon the payment provided for by this
paragraph, shall be equal to the Parachute Payments determined prior to
the application of this paragraph. For purposes of determining the
amount of the Parachute Payments, no payments or benefits shall be
included if, in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to Executive, such payments or
benefits (in whole or in part) do not constitute Parachute Payments, or
such payments (in whole or in part) represent reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4)
of the Code. The value of any non-cash benefits or any deferred payment
or benefit shall be determined by the Company's independent auditors.
For purposes of determining the amount of the Gross-Up-Payment,
Executive shall be deemed to pay Federal income taxes at the highest
marginal rate of Federal income taxation in the calendar year in which
the Gross-Up-Payment is to be made and state and local income taxes at
the highest marginal rates of taxation in the state and locality of
Executive's residence on the date of termination, net of the maximum
reduction in Federal income taxes which could be obtained from deduction
of such state and local taxes. In the event that the Excise Tax payable
by Executive is subsequently determined to be less than the amount taken
into account hereunder at the time of termination of Executive's
employment, Executive shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined the portion
of the Gross-Up Payment attributable to such reduction plus interest on
the amount of such repayment at the rate provided for in Section
1274(b)(2)(B) of the Code ("Repayment Amount"). In the event that the
Excise Tax payable by Executive is determined to exceed the amount taken
into account thereunder at the time of the termination of Executive's
employment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such
excess (plus any interest payable with respect to such excess) at the
time that the amount of such excess is finally determined ("Additional
Gross-up"). The obligation to pay any Repayment Amount or Additional
Gross-up shall remain in effect under this Agreement for the entire
period during which the Executive remains liable for the Excise Tax,
including the period during which any applicable statute of limitation
remains open.
ARTICLE III
EXECUTIVE'S ACKNOWLEDGMENTS
Executive recognizes and acknowledges that in the course of
Executive's employment by the Company: (a) he will be privy to certain
confidential and proprietary information which constitutes trade secrets
as defined in the Uniform Trade Secrets Act and as adopted by the
various states (the "Act"); and (b) he will be privy to certain other
confidential and/or proprietary information that may not constitute
trade secrets as defined in the Act.
Executive acknowledges that the Company must protect both above
kinds of information from disclosure or misappropriation, and Executive
further acknowledges that the processes, machines, technical
documentation, computer programs, customer lists, business plans,
marketing plans and techniques, pricing data, financial data, marketing
programs, customer files, financial institution files, technical
expertise and know how, and other information and trade secrets, whether
as defined in the Act or which may lie beyond it (collectively the
"Property"), which have been or will be provided to Executive by the
Company, are unique, confidential and proprietary Property of the
Company and by the provision of such Property to Executive, the Company
is not conveying any ownership or other interest to Executive. Executive
acknowledges that such confidential and proprietary information derives
independent, actual, and potential commercial value from not being
generally, readily ascertainable through independent development and is
the subject of efforts by the Company that are reasonable under the
circumstances to maintain its secrecy. Property shall not include any
information that is in the public domain, so long as such information is
not in the public domain as a result of any action or inaction by
Executive which would constitute a violation of this Agreement or the
Company's policies with respect to such Property. Executive agrees to
hold in trust and confidence for the Company and to not to disclose to
any third party, without prior written consent of the Company, said
Property and information, whether it is tangible or intangible.
Executive further agrees not to use any such confidential information or
trade secrets to his/her personal benefit or for the benefit of any
third party.
Executive further acknowledges that for purposes of
interpreting Articles III and IV of this Employment Agreement, covenants
and obligations of Executive with respect to the Company apply equally
with respect to its affiliates. Executive also acknowledges that
Property belongs to the Company and agrees to return to the Company all
such information and Property which is tangible upon the termination of
the Employment.
Executive acknowledges that the use, misappropriation, or
disclosure of the Property would constitute a breach of trust and could
cause irreparable injury to the Company, and it is essential to the
protection of the Company's good will and to the maintenance of the
Company's competitive position that the Property be kept secret and that
Executive not disclose the Property to others or use the property to
Executive's own advantage or the advantage of others.
Executive further recognizes and understands that his duties at
the Company may include the preparation of materials, including written
or graphic materials, and that any such materials conceived or written
by him shall be done as "work made for hire" as defined and used in the
Copyright Act of 1976, 17 USC ss. 1 et seq. In the event of publication
of such materials, Executive understands that since the work is a "work
made for hire", the Company will solely retain and own all rights in
said materials, including right of copyright, and that the Company may,
at its discretion, on a case-by-case basis, grant Executive by-line
credit on such materials as the Company may deem appropriate.
ARTICLE IV
EXECUTIVE'S COVENANTS AND AGREEMENTS
4.01. Non-Disclosure of Property. Executive agrees to hold and
safeguard the Property in trust for the Company, its successors and
assigns and agrees that he shall not, without the prior written consent
of the Company, misappropriate or disclose or make available to anyone
for use outside the Company's organization at any time, either during
his employment with the Company or subsequent to the termination of his
employment with the Company for any reason, including without limitation
termination by the Company for cause or without cause, any confidential
information that constitutes trade secrets, whether or not developed by
Executive, except as required in the performance of Executive's duties
to the Company. Executive and the Company agree that Executive's
obligations under the above non-disclosure provision as it relates to
confidential information that does not constitute trade secrets shall
apply for a period of three (3) years following the termination of the
Executive.
4.02. Disclosure of Works and Inventions/Assignment of Patents
and Other Rights. (a) Executive shall disclose promptly to the Company
or its nominee any and all works, inventions, discoveries and
improvements authored, conceived or made by Executive during the period
of employment and related to the business or activities of the Company,
and hereby assigns and agrees to assign all his interest therein to the
Company or its nominee. Whenever requested to do so by the Company,
Executive shall execute any and all applications, assignments or other
instruments which the Company shall deem necessary to apply for and
obtain Letters Patent or Copyrights of the United States or any foreign
country or to otherwise protect the Company's interest therein. Such
obligations shall continue beyond the termination of employment with
respect to works, inventions, discoveries and improvements authored,
conceived or made by Executive during the period of employment, and
shall be binding upon Executive's assigns, executors, administrators and
other legal representatives.
(b) Executive agrees that in the event of publication by
Executive of written or graphic materials the Company will retain and
own all rights in said materials, including right of copyright.
4.03. Duties. Executive agrees to devote his best efforts full
time to the performance of his duties for the Company, to give proper
time and attention to furthering the Company's business, and to comply
in all material respects with all rules, regulations and instruments
established or issued by the Company and made known to Executive.
Executive further agrees that during the term of this Agreement,
Executive shall not, directly or indirectly, engage in any business
which would detract from Executive's ability to apply his best efforts
to the performance of his duties hereunder. Executive also agrees that
he shall not usurp any corporate opportunities of the Company.
4.04. Return of Materials. Upon the termination of Executive's
employment with the Company for any reason, including without limitation
termination by the Company for cause or without cause, Executive shall
promptly deliver to the Company all correspondence, drawings,
blueprints, manuals, letters, notes, notebooks, reports, flow-charts,
programs, proposals and any documents concerning the Company's customers
or concerning products or processes used by the Company and, without
limiting the foregoing, will promptly deliver to the Company any and all
other documents or materials containing or constituting Property.
4.05. Restrictions on Competition. Executive acknowledges that
as Vice President, New Product Development, he will be a "high impact"
person in the Company's business who is in possession of selective and
specialized skills, learning abilities, supplier and customer contacts,
and supplier and customer information as a result of his relationship
with the Company, and agrees that the Company has a substantial business
interest in the covenant described below. Executive further acknowledges
that he is involved at the highest level in the development of
improvements and innovations in existing products and new products, and
works directly with the Senior Vice President for New Product
Development, and thereby has regular and significant contact with
customers and suppliers of the Company nationally and internationally,
and that he has access to and responsibility for trade secret and
confidential information pertaining to the business of the Company, its
products, and plans. In recognition of that status, Executive covenants
and agrees that during the period of Executive's employment hereunder
plus a period of two years (or such longer period, not in excess of
three years, to the extent termination payments are paid to Executive
pursuant to ss. 2.04, 2.05 or 2.06 for a period in excess of two years)
following the termination of Executive's employment, including without
limitation termination by the Company for cause or without cause
(excepting a termination pursuant to Section 2.01 and also excepting an
Executive termination under 2.04(b) for which the non compete is
coextensive with the length of payments herein for which this
non-competition period is one (1) year), Executive shall not, in the
United States of America engage, directly or indirectly, whether as
principal or as agent, officer, director, employee, consultant,
shareholder (other than as a shareholder owning up to 5% of the
outstanding stock of any company whose stock is publicly traded and
listed on a national securities exchange or included in NASDAQ), alone
or in association with any other person, corporation or other entity, in
any Competing Business. For purposes of this Agreement, the term
"Competing Business" shall mean and include any person, corporation or
other entity which develops, manufactures, sells, markets or attempts to
develop, manufacture, sell or market any product or services which are
included in the following categories: ventilation, sleep therapy or
diagnostics, oxygen delivery, oximetry, patient interface, any new
products commercialized by the Company during Executive's employment, or
any product which on the date of termination of Executive's employment
hereunder is actively in the concept or development stage with
significant committed ongoing financial resources; provided, however,
that for purposes of determining what constitutes a Competing Business
there shall not be included (x) any product or service of any entity
which product or service Executive determines is not material to the
business or prospects of the Company and which product or service the
Company's Board, having been requested to do so by Executive, also so
determines; the parties agree that any product which has been marketed
in the United States for five years and has not achieved a five percent
revenue level for the Company is not material for purposes of this
provision; or (y) any product or service of any entity so long as the
Executive and such entity can demonstrate to the reasonable satisfaction
of the Company that Executive is and will continue to be effectively
isolated from, and not participate in the development, manufacture, sale
or marketing of, such product or service, but only so long as Executive
is effectively so isolated and does not so participate. To trigger this
provision, the Executive and entity must perform the following: (i) the
Executive must provide the Company with a letter pledging that he will
abide by this Agreement, and (ii) the prospective/new employer must
provide a letter acknowledging that it is aware of the Executive's
obligations hereunder, it recognizes that those obligations are material
to the Company and that the Company believes that violation of those
obligations will cause the Company irreparable harm. The letter also
must contain a pledge by the new/prospective employer that it will abide
by those obligations. In the event the employment of Executive
terminates at the conclusion of the Term before Executive obtains the
age of 65 and because the Company has elected not to further extend the
Term pursuant to ss. 1.02, then the provisions of this ss. 4.05 and
ss.'s 4.06 and 4.07 shall not be applicable after the conclusion of the
Term unless the Company advises Executive at least six months prior to
conclusion of the Term that it will continue to pay the Base Salary in
effect at conclusion of the Term for such two-year period or such
shorter portion thereof as the Company may specify (which specification
shall foreshorten such two-year period accordingly) and the Company pays
such amounts during such two-year or shorter period.
4.06. Non-Solicitation of Customers and Suppliers. Executive
agrees that during his employment with the Company he shall not,
directly or indirectly, solicit the trade of, or trade with, any
customer, prospective customer, supplier, or prospective supplier of the
Company for any business purpose other than for the benefit of the
Company, with respect to any products competitive with those of the
Company. Executive further agrees that for two years following
termination of his employment with the Company, including without
limitation termination by the Company for cause or without cause,
Executive shall not, directly or indirectly, solicit the trade of, or
trade with, any customers or suppliers of the Company with respect to
any products competitive with those of the Company.
4.07. Non-Solicitation of Employees. Executive agrees that,
during his employment with the Company and for two years following
termination of Executive's employment with the Company, including
without limitation termination by the Company for cause or without
cause, Executive shall not, directly or indirectly, solicit or induce,
or attempt to solicit or induce, any employee of the Company to leave
the Company for any reason whatsoever, or hire any employee of the
Company without permission from the Company.
ARTICLE V
EXECUTIVE'S REPRESENTATIONS AND WARRANTIES
5.01. No Prior Agreements. Executive represents and warrants
that he is not a party to or otherwise subject to or bound by the terms
of any contract, agreement or understanding which in any manner would
limit or otherwise affect his ability perform his obligations hereunder,
including without limitation any contract, agreement or understanding
containing terms and provisions similar in any manner to those contained
in Article IV hereof. Executive further represents and warrants that his
employment with the Company will not require him to disclose or use any
confidential information belonging to prior employers or other persons
or entities other than Healthdyne.
5.02. Executive's Abilities. Executive acknowledges that it
would cause the Company serious and irreparable injury and cost if
Executive were to use his ability and knowledge in competition with the
Company or to otherwise breach the obligations contained in Article IV.
5.03. Remedies. In the event of a breach by Executive of the
terms of this Agreement, the Company shall be entitled, if it shall so
elect, to institute legal proceedings to obtain damages for any such
breach, or to enforce the specific performance of this Agreement by
Executive and to enjoin Executive from any further violation of this
Agreement and to exercise such remedies cumulatively or in conjunction
with all other rights and remedies provided by law. Executive
acknowledges, however, that the remedies at law for any breach by him of
the provisions of this Agreement may be inadequate and that the Company
shall be entitled to injunctive relief against him in the event of any
breach.
ARTICLE VI
MISCELLANEOUS
6.01. Authorization to Modify Restrictions. It is the intention
of the parties that the provisions of Article IV hereof shall be
enforceable to the fullest extent permissible under applicable law, but
that the unenforceability (or modification to conform to such law) of
any provision or provisions hereof shall not render unenforceable, or
impair, the remainder thereof. If any provision or provisions hereof
shall be deemed invalid or unenforceable, either in whole or in part,
this Agreement shall be deemed amended to delete or modify, as
necessary, the offending provision or provisions and to alter the bounds
thereof in order to render it valid and enforceable.
6.02. Entire Agreement. This Agreement along with the offer
letter represent the entire agreement of the parties with respect to the
employment of Executive by the Company and may be amended only by a
writing signed by each of them.
6.03. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
6.04. Consent to Jurisdiction; Venue. Executive hereby
irrevocably submits to the personal jurisdiction of the United States
District Court for the Western District of Pennsylvania or the Court of
Common Pleas of Allegheny County, Pennsylvania in any action or
proceeding arising out of or relating to this Agreement that cannot be
finally resolved by arbitration pursuant to Section 6.05 hereof (and for
enforcement of any such arbitration decision), and Executive hereby
irrevocably agrees that all claims in respect of any such action or
proceeding may be heard and determined in either such court. Executive
hereby irrevocably waives any objection which he now or hereafter may
have to the laying of venue of any action or proceeding arising out of
or relating to this Agreement brought in the United States District
Court for the Western District of Pennsylvania or the Court of Common
Pleas of Allegheny County, Pennsylvania and any objection on the ground
that any such action or proceeding in either of such Courts has been
brought in an inconvenient forum. Nothing in this Section 6.04 shall
affect the right of the Company to bring any action or proceeding
against Executive or his property in the courts of other jurisdictions
where the Executive resides or has his principal place of business or
where such property is located.
6.05. Arbitration. Unless the party seeking relief is seeking
relief not available through arbitration hereunder (see Section 6.04),
any dispute related to this Agreement shall be referred to arbitration
by three arbitrators selected from a list of arbitrators affiliated with
American Arbitration Association ("AAA") who are familiar with executive
employment matters, with one arbitrator being selected by the Company,
one arbitrator being selected by Executive, and the third arbitrator
being selected jointly by the two arbitrators selected by the Company
and by Executive. The decision of a majority of the arbitrators shall
constitute the arbitral decision. The arbitration hereunder, shall be
conducted pursuant to the rules and procedures of AAA then in effect and
otherwise in such manner as the arbitrator or arbitrators shall
determine and shall be conducted in Pittsburgh, Pennsylvania. All
parties shall cooperate with each other to expedite the arbitration
process as much as possible so that the dispute can be resolved as
quickly as possible and with as little cost as possible. The arbitral
decision shall be final, binding and conclusive on the parties and may
be entered, if necessary, in a court of competent jurisdiction with the
same force and effect as a final and binding judgment. The arbitrators
shall further be authorized to allocate or assess the costs of
arbitration, including attorneys' fees, between the respective parties.
If the arbitrators do not award costs and expenses, then each party
shall bear its own costs and expenses, including attorneys' fees, and
the cost of the arbitration shall be paid by the party whose position in
the arbitration does not prevail.
6.06. Agreement Binding. The obligations of Executive under
this Agreement shall continue after the termination of his employment
with the Company for any reason, with or without cause, and shall be
binding on his heirs, executors, legal representatives and assigns and
shall inure to the benefit of any successors and assigns of the Company.
6.07. Counterparts, Section Headings. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to
be an original, but all of which together shall constitute one and the
same instrument. The section headings of this Agreement are for
convenience of reference only and shall not affect the construction or
interpretation of any of the provisions hereof.
6.08. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have
been duly given if (a) hand delivered or (b) mailed, registered mail,
first class postage paid, return receipt requested, or (c) sent via
overnight delivery service or courier, delivery acknowledgment
requested, or (d) via any other delivery service with proof of delivery:
if to the Company:
Respironics, Inc.
1501 Ardmore Boulevard
Pittsburgh, PA 15221-4401
Attn: President
if to Executive, at the address set forth on the signature page
hereof or to such other address or to such other person as either party
hereto shall have last designated by notice to the other party.
6.09. Attorneys Fees. The Company shall pay, or reimburse
Executive for reasonable attorneys fees incurred by Executive in
connection with the negotiation of this Agreement.
Executive acknowledges that he has read and understands the
foregoing provisions and that such provisions are reasonable and
enforceable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed the day and year first above
written.
Witness: [NAME OF EXECUTIVE]
_______________________ _____________________________________
Address: ____________________________
____________________________
____________________________
Attest:
RESPIRONICS, INC.
________________________ By: __________________________________
Secretary
Title: _______________________________
[Corporate Seal]
HEALTHDYNE TECHNOLOGIES, INC.
By: __________________________________
Title: _______________________________
[Corporate Seal]
SUPPLEMENTAL EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of November , by and between
RESPIRONICS, INC., a Delaware corporation (the "Company"), and [NAME OF
EXECUTIVE] ("Executive").
W I T N E S S E T H:
WHEREAS, Executive possesses valuable knowledge and skills that
will contribute to the successful operation of the Company's business;
WHEREAS, the Company and Executive have agreed to execute and
deliver this Agreement in consideration, among other things, of (i) the
access Executive will have to confidential or proprietary information of
the Company, (ii) the access Executive will have to confidential or
proprietary information to be acquired hereafter by the Company, and
(iii) the willingness of the Company to grant stock options to Executive
on or about the commencement of his employment.
NOW, THEREFORE, intending to be legally bound and in
consideration of the stock options made available by Company to
Executive, the Company and Executive agree as follows.
ARTICLE I
EXECUTIVE'S ACKNOWLEDGMENTS
Executive recognizes and acknowledges that in the course of
Executive's employment by the Company: (a) he will be privy to certain
confidential and proprietary information which constitutes trade secrets
as defined in the Uniform Trade Secrets Act and as adopted by the
various states (the "Act"); and (b) he will be privy to certain other
confidential and/or proprietary information that may not constitute
trade secrets as defined in the Act.
Executive acknowledges that the Company must protect both above
kinds of information from disclosure or misappropriation, and Executive
further acknowledges that the processes, machines, technical
documentation, computer programs, customer lists, business plans,
marketing plans and techniques, pricing data, financial data, marketing
programs, customer files, financial institution files, technical
expertise and know how, and other information and trade secrets, whether
as defined in the Act or which may lie beyond it (collectively the
"Property"), which have been or will be provided to Executive by the
Company, are unique, confidential and proprietary Property of the
Company and by the provision of such Property to Executive, the Company
is not conveying any ownership or other interest to Executive. Executive
acknowledges that such confidential and proprietary information derives
independent, actual, and potential commercial value from not being
generally, readily ascertainable through independent development and is
the subject of efforts by the Company that are reasonable under the
circumstances to maintain its secrecy. Property shall not include any
information that is in the public domain, so long as such information is
not in the public domain as a result of any action or inaction by
Executive which would constitute a violation of this Agreement or the
Company's policies with respect to such Property. Executive agrees to
hold in trust and confidence for the Company and to not to disclose to
any third party, without prior written consent of the Company, said
Property and information, whether it is tangible or intangible.
Executive further agrees not to use any such confidential information or
trade secrets to his/her personal benefit or for the benefit of any
third party.
Executive further acknowledges that for purposes of
interpreting Articles I and II of this Agreement, covenants and
obligations of Executive with respect to the Company apply equally with
respect to its affiliates. Executive also acknowledges that Property
belongs to the Company and agrees to return to the Company all such
information and Property which is tangible upon the termination of the
Employment.
Executive acknowledges that the use, misappropriation, or
disclosure of the Property would constitute a breach of trust and could
cause irreparable injury to the Company, and it is essential to the
protection of the Company's good will and to the maintenance of the
Company's competitive position that the Property be kept secret and that
Executive not disclose the Property to others or use the property to
Executive's own advantage or the advantage of others.
Executive further recognizes and understands that his duties at
the Company may include the preparation of materials, including written
or graphic materials, and that any such materials conceived or written
by him shall be done as "work made for hire" as defined and used in the
Copyright Act of 1976, 17 USC ss. 1 et seq. In the event of publication
of such materials, Executive understands that since the work is a "work
made for hire", the Company will solely retain and own all rights in
said materials, including right of copyright, and that the Company may,
at its discretion, on a case-by-case basis, grant Executive by-line
credit on such materials as the Company may deem appropriate.
ARTICLE II
EXECUTIVE'S COVENANTS AND AGREEMENTS
2.01. Non-Disclosure of Property. Executive agrees to hold and
safeguard the Property in trust for the Company, its successors and
assigns and agrees that he shall not, without the prior written consent
of the Company, misappropriate or disclose or make available to anyone
for use outside the Company's organization at any time, either during
his employment with the Company or subsequent to the termination of his
employment with the Company for any reason, including without limitation
termination by the Company for cause or without cause, any confidential
information that constitutes trade secrets, whether or not developed by
Executive, except as required in the performance of Executive's duties
to the Company. Executive and the Company agree that Executive's
obligations under the above non-disclosure provision as it relates to
confidential information that does not constitute trade secrets shall
apply for a period of three (3) years following the termination of the
Executive.
2.02. Disclosure of Works and Inventions/Assignment of Patents
and Other Rights. (a) Executive shall disclose promptly to the Company
or its nominee any and all works, inventions, discoveries and
improvements authored, conceived or made by Executive during the period
of employment and related to the business or activities of the Company,
and hereby assigns and agrees to assign all his interest therein to the
Company or its nominee. Whenever requested to do so by the Company,
Executive shall execute any and all applications, assignments or other
instruments which the Company shall deem necessary to apply for and
obtain Letters Patent or Copyrights of the United States or any foreign
country or to otherwise protect the Company's interest therein. Such
obligations shall continue beyond the termination of employment with
respect to works, inventions, discoveries and improvements authored,
conceived or made by Executive during the period of employment, and
shall be binding upon Executive's assigns, executors, administrators and
other legal representatives.
(b) Executive agrees that in the event of publication by
Executive of written or graphic materials the Company will retain and
own all rights in said materials, including right of copyright.
2.03. Duties. Executive agrees to devote his best efforts full
time to the performance of his duties for the Company, to give proper
time and attention to furthering the Company's business, and to comply
in all material respects with all rules, regulations and instruments
established or issued by the Company and made known to Executive.
Executive further agrees that during the term of this Agreement,
Executive shall not, directly or indirectly, engage in any business
which would detract from Executive's ability to apply his best efforts
to the performance of his duties hereunder. Executive also agrees that
he shall not usurp any corporate opportunities of the Company.
2.04. Return of Materials. Upon the termination of Executive's
employment with the Company for any reason, including without limitation
termination by the Company for cause or without cause, Executive shall
promptly deliver to the Company all correspondence, drawings,
blueprints, manuals, letters, notes, notebooks, reports, flow-charts,
programs, proposals and any documents concerning the Company's customers
or concerning products or processes used by the Company and, without
limiting the foregoing, will promptly deliver to the Company any and all
other documents or materials containing or constituting Property.
2.05. Non-Solicitation of Employees. Executive agrees that,
during his employment with the Company and for two years following
termination of Executive's employment with the Company, including
without limitation termination by the Company for cause or without
cause, Executive shall not, directly or indirectly, solicit or induce,
or attempt to solicit or induce, any employee of the Company to leave
the Company for any reason whatsoever, or hire any employee of the
Company without permission from the Company.
ARTICLE III
EXECUTIVE'S REPRESENTATIONS AND WARRANTIES
3.01. No Prior Agreements. Executive represents and warrants
that he is not a party to or otherwise subject to or bound by the terms
of any contract, agreement or understanding which in any manner would
limit or otherwise affect his ability perform his obligations hereunder,
including without limitation any contract, agreement or understanding
containing terms and provisions similar in any manner to those contained
in Article II hereof. Executive further represents and warrants that his
employment with the Company will not require him to disclose or use any
confidential information belonging to prior employers or other persons
or entities other than Healthdyne.
3.02. Remedies. In the event of a breach by Executive of the
terms of this Agreement, the Company shall be entitled, if it shall so
elect, to institute legal proceedings to obtain damages for any such
breach, or to enforce the specific performance of this Agreement by
Executive and to enjoin Executive from any further violation of this
Agreement and to exercise such remedies cumulatively or in conjunction
with all other rights and remedies provided by law. Executive
acknowledges, however, that the remedies at law for any breach by him of
the provisions of this Agreement may be inadequate and that the Company
shall be entitled to injunctive relief against him in the event of any
breach.
ARTICLE IV
MISCELLANEOUS
4.01. Authorization to Modify Restrictions. It is the intention
of the parties that the provisions of Article II hereof shall be
enforceable to the fullest extent permissible under applicable law, but
that the unenforceability (or modification to conform to such law) of
any provision or provisions hereof shall not render unenforceable, or
impair, the remainder thereof. If any provision or provisions hereof
shall be deemed invalid or unenforceable, either in whole or in part,
this Agreement shall be deemed amended to delete or modify, as
necessary, the offending provision or provisions and to alter the bounds
thereof in order to render it valid and enforceable.
4.02. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
4.03. Consent to Jurisdiction; Venue. Executive hereby
irrevocably submits to the personal jurisdiction of the United States
District Court for the Western District of Pennsylvania or the Court of
Common Pleas of Allegheny County, Pennsylvania any action or proceeding
arising out of or relating to this Agreement that cannot be finally
resolved by arbitration pursuant to Section 4.04 hereof (and for
enforcement of any such arbitration decision), and Executive hereby
irrevocably agrees that all claims in respect of any such action or
proceeding may be heard and determined in either such court. Executive
hereby irrevocably waives any objection which he now or hereafter may
have to the laying of venue of any action or proceeding arising out of
or relating to this Agreement brought in the United States District
Court for the Western District of Pennsylvania or the Court of Common
Pleas of Allegheny County, Pennsylvania and any objection on the ground
that any such action or proceeding in either of such Courts has been
brought in an inconvenient forum. Nothing in this Section 4.03 shall
affect the right of the Company to bring any action or proceeding
against Executive or his property in the courts of other jurisdictions
where the Executive resides or has his principal place of business or
where such property is located.
4.04. Arbitration. Unless the party seeking relief is seeking
relief not available through arbitration hereunder (see Section 4.03),
any dispute related to this Agreement shall be referred to arbitration
by three arbitrators selected from a list of arbitrators affiliated with
American Arbitration Association ("AAA") who are familiar with executive
employment matters, with one arbitrator being selected by the Company,
one arbitrator being selected by Executive, and the third arbitrator
being selected jointly by the two arbitrators selected by the Company
and by Executive. The decision of a majority of the arbitrators shall
constitute the arbitral decision. The arbitration hereunder, shall be
conducted pursuant to the rules and procedures of AAA then in effect and
otherwise in such manner as the arbitrator or arbitrators shall
determine and shall be conducted in Pittsburgh, Pennsylvania. All
parties shall cooperate with each other to expedite the arbitration
process as much as possible so that the dispute can be resolved as
quickly as possible and with as little cost as possible. The arbitral
decision shall be final, binding and conclusive on the parties and may
be entered, if necessary, in a court of competent jurisdiction with the
same force and effect as a final and binding judgment. The arbitrators
shall further be authorized to allocate or assess the costs of
arbitration, including attorneys' fees, between the respective parties.
If the arbitrators do not award costs and expenses, then each party
shall bear its own costs and expenses, including attorneys' fees, and
the cost of the arbitration shall be paid by the party whose position in
the arbitration does not prevail.
4.05. Agreement Binding. The obligations of Executive under
this Agreement shall continue after the termination of his employment
with the Company for any reason, with or without cause, and shall be
binding on his heirs, executors, legal representatives and assigns and
shall inure to the benefit of any successors and assigns of the Company.
4.06. Counterparts, Section Headings. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to
be an original, but all of which together shall constitute one and the
same instrument. The section headings of this Agreement are for
convenience of reference only and shall not affect the construction or
interpretation of any of the provisions hereof.
4.07. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have
been duly given if (a) hand delivered or (b) mailed, registered mail,
first class postage paid, return receipt requested, or (c) sent via
overnight delivery service or courier, delivery acknowledgment
requested, or (d) via any other delivery service with proof of delivery:
if to the Company:
Respironics, Inc.
1501 Ardmore Boulevard
Pittsburgh, PA 15221-4401
Attn: President
if to Executive, at the address set forth on the signature page
hereof or to such other address or to such other person as either party
hereto shall have last designated by notice to the other party.
Executive acknowledges that he has read and understands the
foregoing provisions and that such provisions are reasonable and
enforceable. IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed the day and year first
above written.
Witness: [NAME OF EXECUTIVE]
____________________________ _______________________________________
Address: ______________________________
______________________________
______________________________
Attest
RESPIRONICS, INC.
_____________________________ By: ___________________________________
Secretary
Title: ________________________________
Appendix D
November 10, 1997
Craig B. Reynolds
President and CEO
Healthdyne Technologies, Inc.
1225 Kennestone Circle
Marietta, GA 30066
Dennis S. Meteny
President and CEO
Respironics, Inc.
1501 Ardmore Blvd.
Pittsburgh, PA 15221-4401
Re: Corporate Services Agreement and
Tradename License Agreement
Gentlemen:
Reference is made to that certain Corporate Services Agreement
dated April 21, 1995 (the "Matria Services Agreement") between Matria
Healthcare, Inc. ("Matria") and Healthdyne Technologies, Inc.
("Healthdyne") and that certain Tradename License Agreement dated April
21, 1995 (the "Matria License Agreement" and, together with the Matria
Services Agreement, the "Matria Agreements") between Matria and
Healthdyne.
1. PURPOSE OF LETTER. The purpose of this letter is to confirm
our agreement to amend the terms of the Matria Agreements in the manner
described herein, effective at the Effective Time of the Merger (each as
defined in the Agreement and Plan of Reorganization dated as of November
10, 1997 (the "Reorganization Agreement") by and among Respironics, Inc.
("Respironics"), RIGA, Inc. and Healthdyne). Matria understands that
execution of this letter agreement is a material inducement for
Respironics to enter into the Reorganization Agreement.
2. EFFECTIVE DATE OF AGREEMENTS IN THIS LETTER. The amendments
to the Matria Agreements set forth in this letter shall become effective
at the Effective Time. This letter will terminate and be of no further
force and effect upon termination of the Reorganization Agreement in
accordance with its terms. Prior to the earlier of (i) the Effective Time
and (ii) termination of the Reorganization Agreement in accordance with
its terms, Matria shall not amend or terminate either of the Matria
Agreements without the prior written consent of Respironics or take any
actions under or with respect to the Matria Agreements inconsistent with
the terms and purposes of this letter.
3. WAIVER OF RIGHTS IN CONNECTION WITH THE MERGER AND UPON A
CHANGE OF CONTROL. Matria waives any rights it may have to terminate the
Matria Agreements in connection with or as a result of the Merger,
including without limitation the right to terminate the Matria License
Agreement as a result of a Change of Control (as defined in the Matria
License Agreement).
4. AMENDMENTS TO MATRIA SERVICES AGREEMENT. The term of the
Matria Services Agreement shall be extended until 12 months after the
Effective Time of the Merger, after which it may be terminated upon 6
months prior written notice. The fees and charges payable to Matria under
the Matria Services Agreement for any services provided on or after the
Effective Time of the Merger shall be as provided in the Matria Services
Agreement. The type of services to be provided by Matria under the Matria
Services Agreement shall be limited to the types of services provided as
of the date hereof.
5. AMENDMENTS TO MATRIA LICENSE AGREEMENT. The license granted
to Healthdyne under the Matria License Agreement shall be exclusive with
respect to respiratory and cardiopulmonary medical devices, except for
existing uses by Matria of the Mark, as defined in the Matria License
Agreement, as of the date of this letter. The duration of the license
granted under the Matria License Agreement shall be perpetual. Matria
shall grant to Healthdyne a right of first refusal to purchase the Mark
in the event that Matria shall determine to sell or terminate use of the
Mark or permit the Mark to lapse. Nothing contained herein shall limit
use of the Mark by Healthdyne Information Enterprises, Inc. ("HIE") in
accordance with the terms of HIE's existing license agreement with
Matria.
6. AMENDMENTS REGARDING TERMINATION RIGHTS. Matria shall not
terminate either of the Matria Agreements other than in the case of a
breach by Healthdyne that has not been cured within 30 days of notice
adequately describing such breach.
Please acknowledge your agreement with the foregoing by signing
this letter in the space provided below and returning it to the
undersigned. This letter may be signed in counterparts and upon
facsimiles, but all such counterparts and facsimiles shall constitute one
and the same agreement.
MATRIA HEALTHCARE, INC.
By: /s/ Parker H. Petit
--------------------
Title: Chairman
Acknowledged and agreed this
10th day of November, 1997
HEALTHDYNE TECHNOLOGIES, INC.
By: /s/ Craig B. Reynolds
--------------------------
Title: CEO
RESPIRONICS, INC.
By: /s/ Steven P. Fulton
---------------------------
Title: Vice President &
General Counsel
APPENDIX E
[Individuals to Sign Consulting Agreements]
1. Leslie Jones
2. Wayne Boylston
3. Paul Yokubinas
APPENDIX F
[Directors and Officers Whose Agreements Will Be
Honored After Effective Time]
Retirement Benefit Awards
1. Wayne Boylston
2. Joseph Cairo
3. George Cavagnaro
4. Andrew Coe
5. Arie Cohen
6. Leslie Jones
7. John Miclot
8. Jeff North
9. Vincent Persano
10. Craig Reynolds
11. Gerry Richardson
12. John Servidio
13. Robert Tucker
14. Steve Combs
Non-Competition Agreements
1. Wayne Boylston
2. Leslie Jones
3. John Miclot
4. Jeff North
5. Craig Reynolds
6. Robert Tucker
7. Arie Cohen
Split Dollar Life Insurance Agreements
1. Wayne Boylston
2. Joseph Cairo
3. George Cavagnaro
4. Andrew Coe
5. Arie Cohen
6. Leslie Jones
7. John Miclot
8. Jeff North
9. Vincent Persano
10. Craig Reynolds
11. Gerry Richardson
12. John Servidio
13. Robert Tucker
Appendix G
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
RESPIRONICS, INC., )
)
Plaintiff, )
) Civil Action No. 97-1156
v. )
) Judge Lancaster
HEALTHDYNE TECHNOLOGIES, INC. )
)
Defendant. )
STIPULATION AND [PROPOSED] ORDER
Plaintiff Respironics, Inc. ("Respironics") and Defendant
Healthdyne Technologies, Inc. ("Healthdyne") (collectively "the parties")
hereby AGREE and STIPULATE as follows:
WHEREAS, on November 11, 1997 Respironics and Healthdyne
announced that they had entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement"), pursuant to which
Healthdyne will become a wholly owned subsidiary of Respironics.
Therefore, assuming that the transaction is completed, the lawsuit will
be resolved.
WHEREAS, the transaction is subject to customary conditions,
including regulatory approval, and it is expected to take several months
for Respironics and Healthdyne to complete the transaction.
THE PARTIES HEREBY STIPULATE THAT for purposes of judicial
economy, the parties agree to stay this lawsuit and to take no further
action with respect thereto pending consummation or termination of the
transaction. If the transaction is completed, this lawsuit will be
dismissed. If the transaction is not completed and the Reorganization
Agreement is terminated for any reason, the parties hereby stipulate that
the stay shall be lifted as of the date of termination of the
Reorganization Agreement. During the period of the stay, damages, if any,
shall continue to accrue. The parties stipulate that the stay shall have
no adverse impact on either party's claims, defense or other issues
involved in this action, including, but not limited to, irreparable harm,
or licensing considerations. In the event the transaction is not
consummated, the respective parties' positions (with the exception of
damages) shall be as they were as of the date of this stipulation, and
shall be so deemed by the Court.
Frederick H. Colen George E. Faines
Pa. I.D. 21833 Pa. I.D.
Douglas E. Cameron Elizabeth L. Rabenold
Pa. I.D. 41644 Pa. I.D. 58039
Gene A. Tabachnick
Pa. I.D. 73032 THORP, REED & ARMSTRONG
Barry J. Coyne One Riverfront Center
Pa. I.D. 77007 Pittsburgh, PA 15222
(412) 394-7711
REED SMITH SHAW & MCCLAY LLP
Mellon Square Of Counsel:
435 Sixth Avenue Douglas D. Salyers
Pittsburgh, PA 15219-1886 John M. Bowler
(412) 288-4164/4104/3258/7211 Julia M. Gonzalez
TROUTMAN SANDERS LLP
Counsel for Plaintiff Suite 5200, NationsBank Plaza
Respironics, Inc. 600 Peachtree Street, N.E.
Atlanta, GA 30308-2216
(404) 885-3000
Counsel for Defendant
Healthdyne Technologies, Inc.
IT IS SO ORDERED.
BY: _________________________, J.
Judge Gary L. Lancaster
APPENDIX H
Healthdyne Technologies, Inc.
1225 Kennestone Circle
Marietta, GA 30066
November , 1997
Respironics, Inc.
1501 Ardmore Boulevard
Pittsburgh, PA 15221
Gentlemen:
The undersigned understands that Respironics, Inc.
("Respironics") is about to enter into an Agreement and Plan of
Reorganization and an Agreement and Plan of Merger (collectively, the
"Merger Agreements") with Healthdyne Technologies, Inc. ("Healthdyne")
and RIGA, Inc. ("Merger Subsidiary"). The Merger Agreements provide for
the merger of Merger Subsidiary into Healthdyne (the "Merger") and the
conversion of outstanding shares of Healthdyne Common Stock into
Respironics Common Stock in accordance with the formula therein set
forth.
In order to induce Respironics to enter into the Merger
Agreements, and intending to be legally bound hereby, the undersigned
represents, warrants and agrees that at the Healthdyne Shareholders'
Meeting contemplated by Section 6.3 of the Agreement and Plan of
Reorganization and any adjournment or postponement thereof the
undersigned will, in person or by proxy, vote or cause to be voted in
favor of the Merger Agreements and the Merger the shares of Healthdyne
Common Stock beneficially owned by the undersigned individually or, to
the extent of the undersigned's proportionate voting interest, jointly
with other persons, as well as (to the extent of the undersigned's
proportionate voting interest) any other shares of Healthdyne Common
Stock over which the undersigned may hereafter acquire beneficial
ownership in such capacities (collectively, the "Shares"). The
undersigned further agrees that he will use his best efforts to cause any
other shares of Healthdyne Common Stock over which he has or shares
voting power to be voted in favor of the Merger Agreements and the
Merger.
The undersigned further represents, warrants and agrees that
until the earlier of (i) the consummation of the Merger or (ii) the
termination of the Merger Agreements in accordance with their terms, the
undersigned will not, directly or indirectly:
(a) vote any of the Shares, or cause or permit any of the
Shares to be voted, in favor of any other merger, consolidation,
plan of liquidation, sale of assets, reclassification or other
transaction involving Healthdyne or any of its subsidiaries which
would have the effect of any person other than Respironics or an
affiliate acquiring control over Healthdyne, any of its
subsidiaries or any substantial portion of the assets of
Healthdyne or any of its subsidiaries. As used herein, the term
"control" means (i) the ability to direct the voting of 35% or
more of the outstanding voting securities of a person having
ordinary voting power in the election of directors or in the
election of any other body having similar functions or (ii) the
ability to direct the management and policies of a person,
whether through ownership of securities, through any contract,
arrangement or understanding or otherwise.
(b) sell or otherwise transfer any of the Shares, or cause
or permit any of the Shares to be sold or otherwise transferred
(i) pursuant to any tender offer, exchange offer or similar
proposal made by any person other than Respironics or an
affiliate, (ii) to any person seeking to obtain control of
Healthdyne, any of its subsidiaries or any substantial portion of
the assets of Healthdyne or any of its subsidiaries or to any
other person (other than Respironics or an affiliate) under
circumstances where such sale or transfer may reasonably be
expected to assist a person seeking to obtain such control or
(iii) for the principal purpose of avoiding the obligations of
the undersigned under this agreement.
It is understood and agreed that this agreement relates solely to
the capacity of the undersigned as a shareholder or other beneficial
owner of the Shares and is not in any way intended to affect the exercise
by the undersigned of the undersigned's responsibilities as a director or
officer of Healthdyne or any of its subsidiaries. This agreement will
terminate upon the earlier of consummation of the Merger of the
termination of the Merger Agreements in accordance with their terms.
Very truly yours,
___________________________
Accepted and Agreed to:
RESPIRONICS, INC.
By ________________________
Title _____________________
Date: November ____, 1997
APPENDIX I
Respironics, Inc.
1501 Ardmore Blvd.
Pittsburgh, PA 15221
November 8, 1997
Healthdyne Technologies, Inc.
1225 Kennestone Circle
Marietta, GA 30066
Gentlemen:
The undersigned understands that Respironics, Inc.
("Respironics") is about to enter into an Agreement and Plan of
Reorganization and an Agreement and Plan of Merger (collectively, the
"Merger Agreements") with Healthdyne Technologies, Inc. ("Healthdyne")
and RIGA, Inc. ("Merger Subsidiary"). The Merger Agreements provide for
the merger of Merger Subsidiary into Healthdyne (the "Merger") and the
conversion of outstanding shares of Healthdyne Common Stock into
Respironics Common Stock in accordance with the formula therein set
forth.
In order to induce Healthdyne to enter into the Merger
Agreements, and intending to be legally bound hereby, the undersigned
represents, warrants and agrees that at the Respironics Shareholders'
Meeting contemplated by Section 6.3 of the Agreement and Plan of
Reorganization and any adjournment thereof the undersigned will, in
person or by proxy, vote or cause to be voted in favor of the Merger
Agreements and the Merger the shares of Respironics Common Stock
beneficially owned by the undersigned individually or, to the extent of
the undersigned's proportionate voting interest, jointly with other
persons, as well as (to the extent of the undersigned's proportionate
voting interest) any other shares of Respironics Common Stock over which
the undersigned may hereafter acquire beneficial ownership in such
capacities (collectively, the "Shares"). The undersigned further agrees
that he will use his best efforts to cause any other shares of
Respironics Common Stock over which he has or shares voting power to be
voted in favor of the Merger Agreements and the Merger.
The undersigned further represents, warrants and agrees that
until the earlier of (i) the consummation of the Merger or (ii) the
termination of the Merger Agreements in accordance with their terms, the
undersigned will not, directly or indirectly:
(a) vote any of the Shares, or cause or permit any of the
Shares to be voted, in favor of any other merger, consolidation,
plan of liquidation, sale of assets, reclassification or other
transaction involving Respironics or any of its subsidiaries
which would have the effect of any person acquiring control over
Respironics, any of its subsidiaries or any substantial portion
of the assets of Respironics or any of its subsidiaries. As used
herein, the term "control" means (i) the ability to direct the
voting of 35% or more of the outstanding voting securities of a
person having ordinary voting power in the election of directors
or in the election of any other body having similar functions or
(ii) the ability to direct the management and policies of a
person, whether through ownership of securities, through any
contract, arrangement or understanding or otherwise.
(b) sell or otherwise transfer any of the Shares, or cause
or permit any of the Shares to be sold or otherwise transferred
(i) pursuant to any tender offer, exchange offer or similar
proposal made by any person other than Respironics or an
affiliate, (ii) to any person seeking to obtain control of
Respironics, any of its subsidiaries or any substantial portion
of the assets of Respironics or any of its subsidiaries or to any
other person under circumstances where such sale or transfer may
reasonably be expected to assist a person seeking to obtain such
control or (iii) for the principal purpose of avoiding the
obligations of the undersigned under this agreement.
It is understood and agreed that this agreement relates solely to
the capacity of the undersigned as a shareholder or other beneficial
owner of the Shares and is not in any way intended to affect the exercise
by the undersigned of the undersigned's responsibilities as a director or
officer of Respironics or any of its subsidiaries. This agreement will
terminate upon the earlier of consummation of the Merger or the
termination of the Merger Agreement in accordance with their terms.
Very truly yours,
____________________________
Accepted and Agreed to:
Healthdyne Technologies, Inc.
By ____________________________
Title _________________________
Date: November ____, 1997
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, effective as of November 10, 1997,
to the Rights Agreement, dated as of May 22, 1995,
between Healthdyne Technologies, Inc., a Georgia
corporation (the "Company"), and SunTrust Bank, Atlanta,
a Georgia, banking corporation, as Rights Agent (the
"Rights Agent"), as amended (the "Rights Agreement").
WHEREAS, the Company and the Rights Agent
entered into the Rights Agreement specifying the terms of
the Rights (as defined therein); and
WHEREAS, the Company and the Rights Agent
desire to amend the Rights Agreement in accordance with
Section 26 of the Rights Agreement;
NOW THEREFORE, in consideration of the premises
and mutual agreements set forth in the Rights Agreement
and this Amendment, the parties hereby agree as follows:
1. Section 1(a) is amended by adding the following
at the end of said Section:
; provided, however, that neither
Respironics, Inc., a Delaware corporation
("Respironics"), nor RIGA, Inc., a Georgia
corporation and wholly-owned subsidiary of
Respironics ("Sub"), shall be deemed to be an
Acquiring Person by virtue of (x) the execution
of the Agreement and Plan of Reorganization,
dated as of November 10, 1997, and the related
Agreement and Plan of Merger (collectively, the
"Merger Agreement," which term shall include
any amendments thereto) by and among the
Company, Respironics and Sub, or (y) the
consummation of any of the transactions
contemplated thereby.
2. Section 1(n)is amended by adding the following
at the end of said Section:
Notwithstanding anything to the contrary
contained in this Agreement, the transactions
contemplated by the Merger Agreement shall not
constitute a Triggering Event or an event
described in Section 11(a)(ii) or Section
13(a).
3. Section 23 is amended by adding the following at
the end of said Section:
(d) Notwithstanding any other provision of
this Agreement, upon consummation of the merger
of Sub with and into the Company pursuant to,
and in accordance with, the terms of the Merger
Agreement, all Rights shall expire.
4. The term "Agreement" as used in the Rights
Agreement shall be deemed to refer to the Rights
Agreement as amended hereby.
5. The foregoing amendment shall be effective as of
the date first above written, and, except as set forth
herein, the Rights Agreement shall remain in full force
and effect and shall be otherwise unaffected hereby.
6. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed this 10th day of
November, 1997.
HEALTHDYNE TECHNOLOGIES, INC.
By ____________________________
Name:
Title:
SUNTRUST BANK, ATLANTA
By ____________________________
Name:
Title:
RESPIRONICS
PRESS RELEASE
Contact: Daniel J. Bevevino M. Wayne Boylston
Respironics, Inc. Healthdyne Technologies, Inc.
Vice President & CFO Vice President & CFO
412-733-0235 770-499-1212
Media Contacts: Sam Ostrow
Ostrow & Partners, Inc.
203-328-3018
Dorita A. Pishko
Respironics, Inc.
412-733-0209
RESPIRONICS AND HEALTHDYNE TECHNOLOGIES ANNOUNCE
DEFINITIVE AGREEMENT TO MERGE
PITTSBURGH, PA and MARIETTA, GA, November 11, 1997--The
Board of Directors of Respironics, Inc. (NASDAQ/NMS Symbol: RESP)
and Healthdyne Technologies, Inc. (NASDAQ/NMS Symbol: HDTC)
announced today that they have unanimously approved a definitive
agreement to merge, forming an international respiratory company
with revenues of $350 million. Under the terms of the agreement,
holders of Healthdyne Technologies common stock will receive
Respironics common stock equivalent to $24.00 per share for each
Healthdyne Technologies share held. The transaction is valued at
approximately $370 million including the assumption of
approximately $33 million in debt. The transaction is expected
to be accounted for as a pooling-of-interests and to be treated
as a tax-free exchange. It is subject to approval by the
shareholders of both companies, regulatory approval and other
customary closing conditions. Completion is expected during the
first quarter of calendar 1998, which is Respironics' third
fiscal quarter.
Dennis S. Meteny, president and chief executive officer
of Respironics, said that the impact of the merger on the
company's results will be accretive in the first full fiscal year
of the merger. Respironics also will incur one-time charges and
related adjustments that will approximate $25-30 million in the
quarter of closing, representing transaction costs and other one-
time charges related to the merger, Mr. Meteny added.
Healthdyne Technologies is a leading designer,
manufacturer and marketer of technologically advanced medical
devices for use in the home, hospital and alternative clinical
settings. The company's major products lines include monitoring
devices for newborns, diagnostic and therapeutic devices for
obstructive sleep apnea and a variety of products for the
treatment of respiratory disorders, including asthma management
and non invasive ventilation devices.
Healthdyne Technologies is headquartered in Marietta,
Georgia and employs over 550 individuals at the company's five
locations. The company's products are distributed worldwide
through a network of specialty sales forces and manufacturers'
representatives selling to homecare and hospital dealers. The
company's sales for the twelve months ending September 30, 1997,
totaled $146 million.
"We expect the combining of our two organizations to
produce numerous benefits for customers and shareholders of both
companies," Mr. Meteny stated. "Together, the two organizations
represent a significant critical mass in an industry where
distribution coverage, reach and product breadth count
substantially," he said. "Additionally Respironics' internal new
product development capability, combined with Healthdyne
Technologies' expertise in product development, licensing and
product acquisition, will position the combined company for rapid
business expansion." Craig B. Reynolds, president and chief
executive officer of Healthdyne Technologies, described the
merging of the two companies as "providing a path to realizing
the full potential of two strong business organizations. From
Healthdyne Technologies' perspective, we view this agreement as a
milestone event which materially advances the capacity of both
organizations to service the large and growing marketplace for
our products."
Parker H. Petit, Healthdyne Technologies' Chairman,
stated that, "This is an exciting combination of two premiere
technology companies, and I am sure that our shareholders will be
enthusiastic." Additionally, Gerald E. McGinnis, Respironics'
Chairman, commented, "Our customers stand to benefit greatly form
this combination of two powerful teams of excellent people, and
when our customers are happy our shareholders are happy."
Mr. Meteny will remain president and chief executive
officer of the combined organization and Mr. Reynolds, Healthdyne
Technologies' current president and chief executive officer, will
join Respironics' senior management team and board of directors.
In addition, Mr. Petit and J. Terry Dewberry will be joining the
board of the combined companies which will be led by Mr.
McGinnis.
Respironics is a leading manufacturer of therapy
products for obstructive sleep apnea and portable ventilation as
well as patient interface. The company employs over 1,500
individuals worldwide and has manufacturing locations in several
domestic and international locations. Respironics pioneered
products for obstructive sleep apnea and bi-level ventilation.
The company was awarded the American Association for Respiratory
Care's annual Zenith Award for quality of products and service
recently for the third time in the past four years.
Additionally, the November 3, 1997 issue of Forbes magazine
includes Respironics in the publication's annual list of "The
Best 200 Small Companies in America."
BT Alex Brown Incorporated and Cowen & Co. acted as
financial advisors to Respironics and Healthdyne Technologies,
respectively. Reed Smith Shaw & McClay LLP served as outside
counsel for Respironics. Healthdyne Technologies was represented
by Skadden, Arps, Slate, Meagher & Flom LLP and Troutman Sanders
LLP.
This press release contains forward-looking statements
which are subject to change. Actual results may differ
materially from those described in any forward-looking
statements. Additional information on potential factors that
could affect the respective companies financial results is
included in their reports filed with the SEC, including their
reports on Form 10-K, 8-K and 10-Q.
For additional information on Respironics' and
Healthdyne Technologies' products and activities, look on the
companies' home pages located on the World Wide Web at
WWW.RESPIRONICS.COM and WWW.HEALTHDYNE.COM
