<PAGE>

                                                                   Exhibit 10.16

                                                                  EXECUTION COPY

                      AMENDMENT NO.3 TO CREDIT AGREEMENT

                                   This AMENDMENT NO.3 TO CREDIT AGREEMENT is
                              made and entered into as of June 17, 1999, by and
                              among HUDSON RESPIRATORY CARE INC., a California
                              corporation (the "Borrower"), RIVER HOLDING CORP.,
                              a Delaware corporation ("Holding") and the
                              Required Lenders (as defined in Article I of the
                              Credit Agreement).

                                   RECITALS

     A.  The Borrower, Holding, the Lenders (as defined in Article I of the
Credit Agreement), Salomon Brothers Inc, as Arranger, Advisor and Syndication
Agent, and Bankers Trust Company, as Administrative Agent and Collateral Agent,
entered into a Credit Agreement dated as of April 7, 1998 (as amended and
otherwise modified to the date hereof, the "Credit Agreement").  Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
them in the Credit Agreement.

     B.  The Borrower has advised the Lenders that it wishes to engage in the
transactions described in Exhibit A to this Amendment.

     C.  The Borrower requested certain changes to the Credit Agreement, and has
agreed to certain changes to other provisions of the Credit Agreement to permit
such transactions.

     D.  The Required Lenders are willing to so amend the Credit Agreement on
the terms and conditions set forth herein.

     E.  The Borrower, Holding and the Required Lenders are entering this
Amendment pursuant to Section 9.08(b) of the Credit Agreement.

                                  AGREEMENTS

     In consideration of the foregoing Recitals, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrower, Holding and the Required Lenders agree as follows:

     1.  Annex 4. The Credit Agreement is amended by adding Exhibit A to this
Amendment as Annex 4 to the Credit Agreement.

     2.  Definitions. (a)  The following definitions are inserted in Section
1.01 of the Credit Agreement in alphabetical order:

          "Designated Capital Investment" means any equity Investment in Holding
     (other than the Investments described in Annex 4), the proceeds of which
     are invested by Holding in the Borrower in the form of equity, with respect
     to which the Borrower has notified the Administrative Agent in advance in
     writing that the proceeds of such investment are to be invested or loaned
     by the Borrower to Swedish Acquisitionco, US Holdco or Euro Holdco.

          "Euro Holdco" is defined in Annex 4.

          "Gibeck AB" is defined in Annex 4.

          "Gibeck AB Acquisition" is defined in Annex 4.

          "Gibeck Family" is defined in Annex 4.
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          "Swedish Acquisitionco" is defined in Annex 4.

          "US Holdco" is defined in Annex 4.

     (b)  The following definitions are amended in their entirety to read:

          "Asset Disposition" means any sale, lease, transfer, issuance or other
     disposition (or series of related sales, leases, transfers, issuances or
     dispositions) by Holding, the Borrower or any Restricted Subsidiary,
     including any disposition by means of a merger, consolidation or similar
     transaction (each referred to for the purposes of this definition as a
     "disposition"), of (a) any shares of Capital Stock of a Restricted
     Subsidiary (other than directors' qualifying shares) or (b) any other
     Assets of the Borrower or any Restricted Subsidiary outside of the ordinary
     course of business of the Borrower or such Restricted Subsidiary (other
     than, in the case of clauses (a) and (b) above, (i) any disposition by a
     Restricted Subsidiary to the Borrower or by the Borrower or a Restricted
     Subsidiary to a wholly owned Restricted Subsidiary, (ii) any disposition
     effected in compliance with Section 6.04). "Asset Disposition" shall not
     include (i) any Sale/Leaseback Transaction, (ii) the Investments by the
     Borrower in Swedish Acquisitionco, US Holdco and Euro Holdco as described
     in Annex 4, or (iii) so long as no Default or Event of Default has occurred
     and is continuing, the making of an Investment by the Borrower in Swedish
     Acquisitionco, US Holdco and Euro Holdco with the proceeds of any
     Designated Capital Investment.

          "Capital Expenditures" means capital expenditures of the Borrower and
     its Restricted Subsidiaries determined in accordance with GAAP.

          "Equity Issuance" means the issuance by Holding or  the Borrower of
     any equity interests therein, or the issuance or sale by Holding or the
     Borrower of any instrument or obligation convertible into or exchangeable
     for, or giving any person any right, option or warrant to acquire from
     Holding or the Borrower any equity interests therein or any such
     convertible or exchangeable instrument or obligation, but excluding (i) the
     Excluded Shares, (ii) the issuance of shares of the Borrower to Holding
     pursuant to the Gibeck AB Acquisition, and (iii) the issuance of shares by
     Holding pursuant to the Gibeck AB Acquisition.

          "Prepayment Event" means any Incurrence of Debt of the Borrower or any
     Restricted Subsidiary, any Equity Issuance (other than the issuance of
     shares of the Borrower to Holding or of Holding in connection with the
     Gibeck AB Acquisition), any Restricted Asset Disposition, any Restricted
     Sale/Leaseback Transaction, any Casualty or any Condemnation.

          "Pro Forma Debt/Pro Forma EBITDA Ratio" means, as of any date with
     respect to the Borrower and its consolidated Restricted Subsidiaries, (a)
     the total amount of Debt of the Borrower and its consolidated Restricted
     Subsidiaries as of such date (after giving effect to any Debt assumed or
     Incurred in connection with a proposed acquisition), to (b) Pro Forma
     EBITDA of the Borrower and its consolidated Restricted Subsidiaries for the
     four most recently completed fiscal quarters for which financial statements
     are available.

          "Unrestricted Subsidiary" means (i) any Subsidiary of the Borrower
     that at the time of determination shall be designated an Unrestricted
     Subsidiary by the Board of Directors of the Borrower in the manner provided
     below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of
     Directors of the Borrower may designate any Subsidiary of the Borrower
     (including any newly acquired or newly formed Subsidiary

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     of the Borrower) to be an Unrestricted Subsidiary; provided, however, that
     at the time of such designation and in the case of clauses (A) and (B), at
     all times thereafter

               (A) neither such Subsidiary nor any of its Subsidiaries owns any
          Capital Stock or Indebtedness of, or owns or holds any Lien on any
          property of, the Borrower or any Restricted Subsidiary of the
          Borrower; and

               (B) except to the extent permitted under Section 6.03(c)(iii)(B),
          neither Holding, the Borrower nor any Restricted Subsidiary has
          Guaranteed any Indebtedness or other obligation of such Subsidiary to
          be so designated, and no Indebtedness of such Subsidiary to be
          designated shall constitute Indebtedness of Holding, the Borrower or
          any Restricted Subsidiary; and

               (C) except in the case of Swedish Acquisitionco, US Holdco or
          Euro Holdco and any of their Subsidiaries, the Subsidiary to be so
          designated has total consolidated assets of $1,000 or less.

     (c) The introductory language of the definition of Pro Forma EBITDA is
amended to read as follows:

         "Pro Forma EBITDA" means, with respect to the Borrower and its
     consolidated Restricted Subsidiaries for the most recently completed period
     of four fiscal quarters for which financial statements are available,
     EBITDA on a consolidated basis after giving effect to:

     3.  Financial Statements, Reports, etc. (a) Each reference in Section
5.04(a), (b) and (c) to "Subsidiaries" shall be amended to be a reference to
"Restricted Subsidiaries".

     (b) Section 5.04(e) of the Credit Agreement is amended in its entirety to
read:

          (e)  not later than January 31 of each year, (i) copies of the
     Borrower's annual consolidated budget for the Borrower and its consolidated
     Restricted Subsidiaries for the current fiscal year, in the form presented
     by management to the Borrower's Board of Directors; and (ii) copies of the
     Borrower's consolidated financial projections for the Borrower and its
     consolidated Restricted Subsidiaries for the current fiscal year and the
     next 3 fiscal years prepared in a manner consistent with the financial
     projections delivered to the Syndication Agent in connection with the
     closing of this Agreement;

     (c) Section 5.04 of the Credit Agreement is amended by deleting the word
"and" at the end of clause (f), changing clause (g) to clause (h), and inserting
a new clause (g) as follows:

          (g) (i) within 30 days after the end of each fiscal month of Gibeck AB
     (other than the last month of a fiscal quarter) copies of the consolidated
     profit and loss statement of Gibeck AB and its consolidated Subsidiaries in
     the form in which such statement is required to be delivered any non-
     Affiliate lender to Gibeck AB, or if such statement is not required to be
     delivered to any such lender, as prepared for internal use by Gibeck AB in
     a manner consistent with prior practice;  (ii) within 45 days after then
     end of each fiscal quarter of Gibeck AB (other than the last quarter of a
     fiscal year), copies of the consolidated profit and loss statement, balance
     sheet and statement of cash flows of Gibeck AB and its consolidated
     Subsidiaries, all certified by one of its Financial Officers as fairly
     presenting the financial condition and results of operations of Gibeck AB
     and its consolidated Subsidiaries on a consolidated basis in accordance
     with GAAP consistently applied, subject to the absence of footnotes and
     normal year-end audit adjustments; and (iii) within 90 days after then end
     of each fiscal year of Gibeck AB, copies of the consolidated profit and
     loss statement, balance sheet and statement of cash flows of Gibeck AB and
     its consolidated Subsidiaries, all certified by one of its Financial
     Officers as fairly presenting the financial condition and results of
     operations of Gibeck AB and its consolidated Subsidiaries on a consolidated
     basis in accordance with GAAP consistently applied, subject to the absence
     of footnotes and normal year-end audit adjustments; and

     4.  Indebtedness. Section 6.01 of the Credit Agreement is amended by
deleting the word "and" at the end of clause (j), deleting the period at the end
of clause (k) and substituting a semicolon and the word "and", and inserting a
new clause (i) as follows:

          (i)  Indebtedness represented by Guarantees constituting Investments
     permitted by Section 6.03(c)(iii)(B);

     5.  Investments, Loans and Advances. Section 6.03(c) of the Credit
Agreement is amended in its entirety to read:

          (c)  (i) Investments in Unrestricted Subsidiaries (other than US
     Holdco, Euro Holdco and Swedish Acquisitionco and their Subsidiaries) not
     to exceed $20,000 in the aggregate at any one time;

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          (ii)  so long as US Holdco, Euro Holdco and Swedish Acquisitionco are
     Unrestricted Subsidiaries, the Investment by the Borrower in US Holdco,
     Euro Holdco or Swedish Acquisitionco and their Subsidiaries to be made as
     part of the Gibeck AB Acquisition as described in Item 7 of Annex 4; and

          (iii) so long as US Holdco, Euro Holdco and Swedish Acquisitionco are
     Unrestricted Subsidiaries, additional Investments by the Borrower in US
     Holdco, Euro Holdco or Swedish Acquisitionco not to exceed in the aggregate
     (A) the proceeds of any Designated Capital Investments received by the
     Borrower from Holding, plus (B) $2,000,000 at any time;

     6.  Dividends and Distributions; Restrictions on Ability of Subsidiaries to
Pay Dividends. Section 6.05 of the Credit Agreement is amended by deleting the
word "and" at the end of clause (a)(v), deleting the period at the end of clause
(a)(vi) and substituting a semicolon and the word "and", and inserting a new
clause (a)(vii) as follows:

          (vii) To the extent that the tender offer referred to in Item 6 of
     Annex 4 is not consummated, and provided that no Default or Event of
     Default has occurred and is continuing,

               (A) to the extent that the Borrower has received as a return of
          capital or dividend any portion of the Investment by the Borrower in
          US Holdco, Euro Holdco or Swedish Acquisitionco described in Item 7 of
          Annex 4 (or the Borrower does not make the Investment described in
          Item 7 of Annex 4), the Borrower may pay as a return of capital or
          dividend such amount (less the amount of any costs and expenses
          incurred by the Borrower in connection with the transactions described
          in Annex 4) to Holding; and

               (B) to the extent that Holding has received a return of capital
          or dividend pursuant to clause (A), Holding may pay such amount as a
          dividend or return of capital to Freeman Spogli.

     7.  Transactions with Affiliates. Section 6.06 of the Credit Agreement is
amended by deleting the word "or" at the end of clause (c), deleting the period
at the end of clause (d) and substituting a semicolon and the word "or", and
inserting a new clause (e) as follows:

         (e) the Investment by the Borrower in US Holdco, Euro Holdco and
     Swedish Acquisitionco in connection with the Gibeck AB Acquisition and
     Investments by the Borrower in US Holdco, Euro Holdco and Swedish
     Acquisitionco permitted by Section 6.03(c)(iii).

     8.  Consummation of the Gibeck AB Acquisition.  The Borrower agrees not to
consummate the Gibeck AB Acquisition, if after giving effect thereto, any
Default or Event of Default would have resulted therefrom.

     9.  Binding Effect and Effectiveness.  This Amendment may be executed in as
many counterparts as may be convenient and shall become binding when the
Borrower, Holding and the Required Lenders have each executed and delivered at
least one counterpart, and shall become effective when the capital contributions
described in clauses 1 through 4 of Exhibit A shall have been made.

     10. Governing Law.  This Amendment shall be a contract made under and
governed by the laws of the State of New York, without regard to the conflicts
of law provisions thereof.

     11. Reference to Credit Agreement.  Except as amended hereby, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects.  On and after the effectiveness of the amendment to
the Credit Agreement accomplished hereby, each reference in the Credit
Agreement, to "this Agreement", "hereunder", "hereof", "herein" or words of like
import, and each reference to the Credit Agreement shall be deemed a reference
to the Credit Agreement, as amended hereby, as the case may be.

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers as of the date first above written.


                              HUDSON RESPIRATORY CARE INC.,

                              by  /s/ Jay R. Ogram
                                -----------------------
                              Name:   Jay R. Ogram
                              Title:  CFO


                              RIVER HOLDING CORP.,

                              by  /s/ Jay R. Ogram
                                ----------------------
                              Name:   Jay R. Ogram
                              Title:  CFO


                              Acknowledged by:

                              BANKERS TRUST COMPANY, as Administrative Agent and
                              Collateral Agent

                              by  /s/ Mary Jo Jolly
                                -------------------------
                              Name:   Mary Jo Jolly
                              Title:  Assistant Vice President


                              SALOMON BROTHERS INC, as Arranger, Advisor and
                              Syndication Agent,

                              by  /s/ David J. Wirdnam
                                ---------------------------
                              Name:   David J. Wirdnam
                              Title:  Director
<PAGE>

                              LENDERS
                              -------

                              BANKERS TRUST COMPANY,

                              by  /s/ Mary Jo Jolly
                                ----------------------
                              Name:   Mary Jo Jolly
                              Title:  Assistant Vice President


                              CITICORP USA, INC.,

                              by  /s/ Timothy L. Freeman
                                --------------------------
                              Name:   Timothy L. Freeman
                              Title:  Managing Director/SCO


                              BANK OF AMERICA NATIONAL TRUST AND SAVINGS
                              ASSOCIATION,

                              by  /s/ Helen Wilson
                                ---------------------
                              Name:   Helen Wilson
                              Title:  Vice President


                              BANK OF TOKYO-MITSUBISHI TRUST COMPANY,

                              by  /s/ Nicholas Campbell
                                ---------------------------
                              Name:   Nicholas Campbell
                              Title:  Vice President


                              BHF-BANK AKTIENGESELLSCHAFT,

                              by  /s/ Dan Dobrjanskyj
                                -------------------------
                              Name:   Dan Dobrjanskyj
                              Title:  Assistant Vice President

                              by  /s/ P. Marsh
                                -------------------
                              Name:   P. Marsh
                              Title:  AT
<PAGE>

                              BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE,
                              INC.,

                              by   /s/ Greg Roux
                                 --------------------------
                              Name:  Greg Roux
                              Title: Vice President


                              by   /s/ Jack R. Bertges
                                 --------------------------
                              Name:  Jack R. Bertges
                              Title: Senior Vice President


                              WELLS FARGO BANK, N.A.,

                              by   /s/ [ILLEGIBLE]
                                 --------------------------
                              Name:
                              Title:


                              ROYAL BANK OF CANADA,

                              by   /s/ John Crawford
                                 --------------------------
                              Name:   John Crawford
                              Title:  Senior Manager


                              SOCIETE GENERALE,

                              by  /s/ Maureen E. Kelly
                                --------------------------
                              Name:   Maureen E. Kelly
                              Title:  Director


                              IMPERIAL BANK,

                              by  /s/ Ray Vadalma
                                ---------------------
                              Name:   Ray Vadalma
                              Title:  Senior Vice President


                              NATIONSBANK, N.A., as successor to NationsBank of
                              Texas, N.A.,

                              by  /s/ Lucyna Nixon
                                -----------------------
                              Name:  Lucyna Nixon
                              Title: Vice President