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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________ to ________________
Commission file number 0-12938
INVACARE CORPORATION
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(Exact name of Registrant as specified in its charter)
Ohio 95-2680965
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
899 Cleveland Street, P. O. Box 4028, Elyria, Ohio 44036
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 329-6000
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Shares, without par value
--------------------------------
(Title of Class)
Rights to purchase Common Shares of Invacare, without par value
---------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports) and (2) has been subject
to the filing requirements for the past 90 days.
Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]
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As of February 21, 1995, 11,237,904 Common Shares and
3,300,698 Class B Common Shares were outstanding. At that date, the aggregate
market value of the 9,840,817 Common Shares of the Registrant held by
non-affiliates was $329,667,370 and the aggregate market value of the 1,724,042
Class B Common Shares of the Registrant held by non-affiliates was $57,755,407
While the Class B Common Shares are not listed for public trading on any
exchange or market system, shares of that class are convertible into Common
Shares at any time on a share-for-share basis. The market values indicated were
calculated based upon the last sale price of the Common Shares as reported by
the NASDAQ National Market System on February 21 1995 which was $33.50. For
purposes of this information, the 1,397,087 Common Shares and 1,576,656 Class B
Common Shares which were held by Executive Officers and Directors were deemed to
be the Common Shares and Class B Common Shares held by affiliates.
<TABLE>
<CAPTION>
Documents Incorporated By Reference
-----------------------------------
Part of Form 10-K Document Incorporated By Reference
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<S> <C>
Part III (Items 10, 11, Portions of the Registrant's
12 and 13) definitive Proxy Statement to be
used in connection with its 1995
Annual Meeting of Shareholders.
</TABLE>
Except as otherwise stated, the information contained in this
Annual Report on Form 10-K is as of December 31, 1994.
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PART I
Item 1. Business.
(a) General Development of Business.
Invacare is the leading home medical equipment manufacturer in the
world based upon its distribution channels, the breadth of its product line and
sales. The Company designs, manufactures and distributes an extensive line of
medical equipment for the home health care and extended care markets. The
Company's products include standard manual wheelchairs, motorized and
lightweight prescription wheelchairs, motorized scooters, patient aids, home
care beds, low air loss therapy products, home respiratory products and seating
and positioning products. Invacare continuously revises and expands its product
lines to meet changing market demands. The Company's products are sold
principally to over 10,000 home health care and medical equipment dealer
locations in the U.S., Canada and Europe, with the remainder of its sales being
primarily to government agencies and distributors. Invacare's products are sold
world-wide through its distribution network by its sales force, telemarketing
employees and the organizations of independent manufacturer's representatives.
During the past five years, the Company also has used its extensive dealer
network to distribute medical equipment and related supplies manufactured by
others.
The Company's objectives are:
* to lead the home medical equipment industry in product and
marketing innovations
* to offer the industry's broadest product line and
continually expand it
* to be the industry's lowest-cost manufacturer
* to provide the highest levels of customer service in the
industry
* to pursue world-class quality in every aspect of its
business.
When the Company was acquired in December 1979 by a group of investors,
including certain members of management and of the Board of Directors, it had
$19.5 million in net sales and a limited product line of standard wheelchairs
and patient aids. In 1994, Invacare had $411.1 million in net sales and
currently is one of the only companies in the industry which manufactures and
markets products in each of the following major home medical equipment
categories: power and manual wheelchairs, patient aids, home care beds, home
respiratory products, low air loss therapy products and seating and positioning
products.
The Company's executive offices are located at 899 Cleveland Street,
Elyria, Ohio and its telephone number is (216) 329-6000. In this report,
"Invacare" and the "Company" refer to Invacare Corporation and, unless the
context otherwise indicates, its consolidated subsidiaries.
(b) Financial Information About Industry Segments.
The Company operates predominantly in the home medical equipment
industry segment. For information relating to net sales, operating income,
identifiable assets and other information for this industry segment, see the
Consolidated Financial Statements of the Company.
(c) Narrative Description of Business
THE HOME MEDICAL EQUIPMENT INDUSTRY
DOMESTIC
The home medical equipment market includes home health care products,
physical rehabilitation products and other non-disposable products used for
recovery and long-term care of patients. The Company believes that the sales of
domestic home medical equipment products will continue to grow during the next
decade as a result of several factors, including:
Growth in population over age 65. The over 65 age group represents the
vast majority of home health care patients and continues to grow. In 1993, the
U.S. Census Bureau estimated that by the year 2000 approximately 35 million
people, 13% of the population in the U.S., will be over age 65. The growth of
this segment is expected to continue until the year 2010, when over 40 million
people in this group will still represent nearly 13% of the population.
Treatment trends. Many medical professionals and patients prefer home
health care over institutional care because, in many cases, greater patient
independence, increased patient responsibility and familiar surroundings are
conducive to improved treatment outcomes. Healthcare professionals and public
and private payors agree that home care is a cost effective, clinically
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appropriate alternative to facility-based care. Recent surveys show that
approximately 70% of adults would rather recover from accident or illness in
their home, while approximately 90% of the older population showed preference
for home based long term care.
Technological trends. Technological advances have made medical
equipment increasingly adaptable for use in the home while hospital procedures
often allow for earlier patient discharge. In addition, continuing medical
advances prolong the life of adults and children, thus increasing the demand for
home medical care equipment.
Healthcare cost containment trends. In 1993, it was estimated that
spending on health care in the U.S. surpassed $900 billion dollars, which
represented almost 14.5% of GNP. The rising cost of health care has caused many
payors of health care expenses to look for ways to contain costs. Home health
care continues to gain acceptance due to the technological and treatment trends
described above, as well as many health care payors altering their reimbursement
patterns to encourage home health care whenever appropriate, as studies have
shown that home health care is generally less costly than hospital or other
institutional treatment.
Society's acceptance of people with disabilities. People with
disabilities have increasingly been accepted into the mainstream of society.
This acceptance was further accelerated by the Americans with Disabilities Act
which became law in 1991, with the legislative intent of providing mainstream
opportunities to people with disabilities. The Americans with Disabilities Act
imposes requirements on certain components of society to make "reasonable
accommodations" to integrate people with disabilities into the community and the
workplace.
Distribution channels. The changing home health care market has opened
up new ways of reaching the end user. The distribution network for products has
expanded to include not only specialized home health care dealers and nursing
homes but also retail drug stores, surgical supply houses, rental dealers,
hospital and HMO-based stores, home health agencies, mass merchandisers and
direct sales to the home.
INTERNATIONAL
The Company believes that, while many of the market factors influencing
demand in the U.S. are also present in Europe -aging of the population,
technological trends and society's acceptance of people with disabilities - each
of the major national markets within Europe has distinctive characteristics.
Variations in product specifications, regulatory approvals, distribution
requirements and reimbursement policies require the Company to tailor its
approach to each market. Moreover, as a result of those differences, competition
generally varies from one market to another. The Company typically encounters
one or two strong competitors in each country, but no single competitor is
dominant outside the country in which its sales are concentrated. Management
believes that as the European markets become more homogeneous and the Company
continues to formalize its distribution channels, the Company can effectively
penetrate these markets.
PRODUCTS
DOMESTIC
Invacare manufactures and markets products in each of the following
major home medical equipment categories: power and manual wheelchairs, patient
aids, home care beds, low air loss therapy products, home respiratory products
and seating and positioning products.
Wheelchairs and other mobility products. Invacare manufacturers and
markets a complete line of standard and prescription wheelchairs for people with
chronic and temporary disabilities, older persons and people who are
convalescing. Both standard and prescription wheelchairs are designed to
accommodate the capabilities of the individual.
* Standard wheelchair lines - for use in the home or public places
(e.g. hospitals, nursing homes, airports) by people who are chronically
or temporarily disabled but do not require or qualify under medical
reimbursement programs for customization in terms of size, basic
performance characteristics, or frame modification. Examples of
Invacare's standard wheelchair lines, which are generally marketed
under the Invacare brand name, include its 4000 and Tracer(TM) lines.
* Prescription wheelchair lines - custom built for long-term use by one
individual based on specifications prescribed by a medical
professional. Prescription chairs can be either manual or power.
Invacare's prescription wheelchair model lines marketed under the
Action(TM) brand include the Action Storm Series(TM), Arrow(TM), 2000,
9000, Ranger(TM), Jaguar(TM), Action(TM) Superlites, Top End by
Action(TM), Rolls(TM) and Storm Series(TM). The Storm Series is a new
line comprised of versatile power chairs with advanced microprocessor
controls capable of accommodating a wide range of user capabilities.
<PAGE> 5
In addition, the Storm Series has incorporated a spring and shock
suspension with a smaller footprint to allow for increased performance
and maneuverability. Invacare manufactures a complete line of
ultralight, performance manual chairs in a wide range of aesthetic
designs intended for use by people with active lifestyles. The Action
Power Tiger(TM) is a power wheelchair for children, with tilt-in-space
features to improve posture, provide pressure relief, and enhance
seating and positioning. The Company's Jaguar models include power
pediatric wheelchairs. Top End by Action is a range of lightweight
sports and recreation manual products for use in activities such as
basketball, racing, skiing and tennis.
Retail prices of Invacare's chairs generally range from approximately
$350 for standard, manually operated chairs to approximately $8,220 for
advanced, power-driven, prescription chairs. In addition, the Company markets
wheelchair accessories, batteries and replacement parts.
Scooters. Invacare also manufactures and markets three- and
four-wheeled motorized scooters, including rear wheel drive models for outdoor
use and a front-wheel drive model for indoor use.
Patient aids. Invacare manufactures and distributes a full line of
patient aids. Principal product categories include ambulatory aids such as
crutches, canes, walkers and wheeled walkers; bath safety aids such as tub
transfer benches, shower chairs and grab bars; and patient care products such as
commodes, lift-out chairs, traction equipment, trapeze bars and foam products.
Home care beds. Invacare manufactures and distributes a wide variety of
manual, semi-electric and fully-electric hospital-type beds for home use under
the Mobilite(TM) brand name. Home care bed accessories include bed side rails
and mattresses.
Home respiratory products. Invacare manufactures and distributes home
respiratory products including oxygen concentrators, liquid oxygen systems,
nebulizer compressors, aspirators, portable compressed oxygen systems and
respiratory disposables. Invacare's home respiratory products are marketed
predominately under the Mobilaire(TM) brand name .
Seating and positioning products. Invacare manufactures and markets
seat cushions, back positioners and a variety of attachments used for comfort,
support, pressure relief and posture control. Seating products include the
Tarsys brand of electronic and mechanical tilting and reclining devices for use
on power wheelchairs.
Low air loss therapy products. Invacare manufactures and markets a
complete line of overlays and mattress replacement products, which use air
flotation to redistribute weight and move moisture away from patients who spend
a great deal of time in bed.
Institutional products. Invacare manufactures and markets a broad line
of products for use in nursing homes and other institutions, including overbed
tables, multi-position recliners, geriatric seating, patient lifts and slings.
Distributed products. Invacare distributes a line of personal medical
care products manufactured by others, including incontinence products,
sequential compression devices, bedding and support stockings.
Accessory Products. Invacare also manufactures and markets many
accessory products, including spare parts, wheelchair cushions, arm rests and
wheels. In some cases, Invacare's accessory items are built to be
interchangeable and can be used to replace parts on products manufactured by
others.
INTERNATIONAL
The Company's international operations consist primarily of
manufacturing, marketing and distribution operations in Western Europe, Canada,
and export sales activities through local distributors elsewhere in the world.
The Company had product sales in approximately 80 countries worldwide.
In both Europe and Canada, the Company manufactures a broad range of
homecare and rehabilitation equipment. Oxygen equipment and home care beds also
are sold in these markets.
Most wheelchair products sold in Europe are designed and manufactured
locally as market requirements are generally different from those in the United
States. A significant portion of wheelchair products sold in Canada is
manufactured in the United States.
Certain power wheelchair products sold in the United States are
adaptations of products originally designed for Europe.
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The Company manufactures both manual and power wheelchair products at
all three of its European facilities - Carters (J&A) Ltd. in the U.K., Poirier
S.A. in France, and Invacare Deutschland GmbH in Germany. Patient aids are
manufactured in the U.K. and France. Oxygen products are imported from Invacare
in the U.S.
In Canada, the Company sells from the full Invacare product line
manufactured in the U.S. The Company also sells standard wheelchairs and seating
and positioning products manufactured in Canada and certain patient aids
manufactured in Europe.
The Company has direct sales forces and distribution centers in the
U.K., France, Germany, Spain and Canada, and sells through distributors
elsewhere in Europe and around the world. In markets where the Company has its
own sales force, product sales are typically made through dealers of medical
equipment and, in certain markets, directly to Government authorities. In most
markets, Government health care and reimbursement policies play an important
role in determining the types of equipment sold and price levels for such
products.
WARRANTY
In general, Invacare's products are sold with limited warranties of up
to five years. Customers may also purchase extended warranties on certain
products. Electrical components are warranted for one year with patient lift
electronics carrying a two year warranty. Certain components of the Company's
prescription wheelchairs carry a lifetime warranty.
COMPETITION
The home medical equipment market is highly competitive, and Invacare's
products face significant competition from other well-established manufacturers.
The Company believes that its success in increasing market share is dependent on
providing value to the customer based on the quality, performance and price of
the Company's products, the range of products offered, the technical expertise
of the sales force, the effectiveness of the Company's distribution system, the
strength of the dealer and distributor network and the availability of prompt
and reliable service for its products. In the past, various manufacturers have
from time to time instituted severe price-cutting programs in an effort to gain
market share. There can be no assurance that any of the home medical equipment
manufacturers will not attempt to implement such aggressive pricing again.
In each of the Company's major product lines, both domestically and
internationally, there are a limited number of significant national competitors
and a number of regional and local providers. In some countries or in certain
product lines, the Company may face competition from other manufacturers that
have larger market shares, greater resources or other competitive advantages.
Invacare believes that it is the leading home medical equipment manufacturer
based on its distribution channels, breadth of its product line and sales.
MARKETING AND DISTRIBUTION
DOMESTIC
Sales and Marketing. Invacare's products are marketed in the United
States primarily to home health care and medical equipment dealers that in turn
sell or rent these products directly to the end user or to health care
institutions. Although the Company's primary customer is the dealer, the Company
also markets its products to medical professionals, including physical,
occupational and respiratory therapists, who refer their patients to dealers to
purchase specific types of home medical equipment. In some cases, Invacare sells
directly to government agencies such as the Department of Veterans Affairs or
the Department of Defense. The Company continues programs to generate greater
consumer awareness of Invacare and its products. The Company advertises in
magazines targeted to people with disabilities, sponsors a variety of wheelchair
activities for these consumers and supports charitable causes which benefit
users of its products.
Invacare's domestic sales and marketing organization consists of
in-house salespersons and telemarketing employees. Each of the Company's
domestic sales territory is coordinated by an area vice president. Product
managers and respiratory specialists are assigned to each region to assist in
the Company's sales and support of its respiratory product line. Each member of
the sales force is specially trained to sell Invacare's entire range of products
so that a dealer can order any Invacare product from one person. The
salespersons also provide training and servicing information to the dealers, as
well as brochures, point-of-sale display materials and similar advertising and
merchandising aids. In addition, Invacare advertises in home health care
journals and trade publications, and its representatives attend trade shows and
similar conventions to display its products to dealers, medical professionals
and others.
Many of the dealers who purchase products from Invacare are affiliated
with national firms or are part of large buying groups. Dealers that are part of
such groups make individual purchasing decisions and are invoiced directly by
the Company.
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Larger dealers and national accounts are able to qualify for volume discounts
under Invacare's Dealer Incentive Purchase Plan. No single customer accounted
for more than 6% of the Company's 1994 net sales. The Company's top ten
customers and buying groups accounted for approximately 27% of 1994 net sales.
The loss of business of one or more of these customers or buying groups may have
a significant impact on the Company.
Customer Service. The Company views its customer service activities as
strategically important in its efforts to achieve market leadership. The
Company's customer service strategy is directed at meeting the need of medical
equipment dealers and is specifically designed to focus on the dealer's
inventory management, equipment financing, training and administrative needs.
Invacare has made a significant investment in assisting dealers in
minimizing inventory requirements. For stock items, dealers can either pick up
orders at the nearest center or receive freight-free delivery (with minimum
order levels), generally within 48 hours of the Company's receipt of an order
for any standard product. This distribution system permits dealers to minimize
their inventory levels. As an additional service, Invacare manufactures
accessories, such as upholstery and arm rests for wheelchairs, that are
interchangeable with products of other manufacturers, thereby allowing dealers
to stock only one line of accessories.
The Company also maintains a network of four regional technical centers
where Invacare products can be repaired promptly by factory technicians.
Invacare has a network of 22 independent dealers that can provide factory
authorized service by training the service technicians of selected dealers. This
service network, when combined with the Company's distribution centers, enables
dealers to minimize spare parts inventory.
To further assist dealers in reducing their cash requirements for
inventory and rental equipment, the Company provides various financing options
for certain types of its products. In a typical term financing arrangement, the
Company sells the equipment on a financing contract to the dealer for periods
ranging from 6 months to four years. The Company also introduced a revolving
credit agreement to further aid dealer financing.
The Company devotes significant time and resources to train dealers,
rehabilitation therapists, and others in the sale, use, maintenance and repair
of its products. Expenditures for training are expected to increase as the
Company's product lines continue to expand and as certain products, such as
power wheelchairs, become more complex.
Invacare is continuing to develop programs to assist dealers in
reducing administrative costs. One such effort is to provide customers with
direct computer-to-computer links with the Company in order to provide on-line
order entry and order tracking to further expedite delivery, thereby reducing
the dealer's paperwork and inventory. During 1994, additional programming
enhancements were made which resulted in an increase in the number of customers
utilizing Electronic Data Interchange (EDI) and an increase in related EDI
sales.
INTERNATIONAL
The Company has direct sales forces and distribution centers in
wholly-owned subsidiaries in France, Germany, Spain, Sweden and the U.K. and
sells through distributors in the other countries in western Europe. Sales are
made either to government health agencies or to home health care dealers, who in
turn sell to government agencies or directly to end users, depending on local
market requirements.
In Canada, products are sold by the direct sales force of the Company's
wholly owned subsidiaries and are distributed through regional distribution
centers in British Columbia, Ontario and Quebec and health care dealers.
The Company also markets its products for export to other foreign
countries.
PRODUCT LIABILITY COSTS
Invacare and the home health care industry have experienced significant
increases in product liability insurance costs. Invacare supports its dealers in
defending product liability claims in an effort to hold down costs. The
Company's captive insurance company, formed in 1986, insures the first $2
million per claim of the Company's product liability exposure. The Company also
has additional layers of coverage insuring up to $38 million in annual aggregate
losses arising from individual losses that exceed $2 million. There can be no
assurance that Invacare's insurance will continue to be available at affordable
rates or will be adequate.
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PRODUCT DEVELOPMENT AND ENGINEERING
Invacare is engaged in continuous efforts to improve, expand and
broaden its existing product lines. During the past three years, new product
introductions included: major improvements in the power wheelchair line in terms
of electronics, functionality and aesthetics; new models of power wheelchairs;
new electronic controllers for power wheelchairs; new models of both composite
and aluminum frame ultralight wheelchairs; a comprehensive new line of
innovative seating and positioning products; a complete line of home respiratory
products, including nebulizers, compressors, flowmeters, aspirators, liquid
oxygen, oxygen analyzer, and respiratory disposables; The microAir(TM) low air
loss therapy mattress; Comfort + Plus(TM) Pressure Relief Foam products; and an
improved line of ambulatory and safety products.
In an effort to integrate sophisticated electronics into its product
lines, the Company's engineers work closely with university researchers,
rehabilitation centers and government agencies in the development of improved
specialized equipment for people with disabilities. Improvements in power
wheelchairs have included the Action Power's Easy Remote Programmer(TM) (ERP),
which is a palm-sized, hand-held remote control keypad designed to adjust chair
performance at the touch of a button. Requiring only limited dexterity to
operate and with very light finger pressure, an individual can scroll through
the menu of up to 11 pre-set control programs, make adjustments to more than two
dozen aspects of chair performance, or read and respond to one of 30
self-diagnostic codes. The ERP is the industry's first of its kind remote
control device for power wheelchairs and is available for every member of the
Action Power family of products. Additional improvements include the
introduction of the Action Mark IV Electronics, a power wheelchair controller
which is more intelligent, smoother, and easier to operate, yet as much as 60%
smaller than competitive controllers.
The Company's patient aids line was substantially improved with the
development of a new award winning walker that folds easily yet has a positive
lock-in when in the unfolded position.
In 1994, the European and Canadian operations introduced several new
products and continued to update existing products as necessary. Key
introductions and updates in 1994 included a new model of power wheelchair and
controls, electronic seating systems, patient aids and lifting equipment, as
well as new lines of manual wheelchairs. New product introductions continue to
play an important role in sustaining the Company's growth.
EMPLOYEES
As of December 31, 1994, the Company had approximately 3,300 employees.
MANUFACTURING AND SUPPLIERS
The Company's objective is to maintain its commitment to be the
lowest-cost manufacturer in its industry, as well as the highest-quality
producer. The Company believes that it is achieving this objective not only
through improved product design, but also by taking a number of steps to lower
manufacturing costs.
The Company has vertically integrated much of its manufacturing process
by fabricating, coating, plating and assembling many of the components of each
product. The Company designs and manufactures electronics for power wheelchairs,
from insertion of components into printed circuit boards to final assembly and
testing.
Invacare has focused on "value engineering" which reduces manufacturing
cost by eliminating product complexity and using common components. Value
engineering has been applied to all product introductions in the last three
years, including the latest generation of oxygen concentrators, electronic
controls, wheelchairs, patient lifts, beds and bath safety products.
Investments continue to be made in manufacturing automation. The
Company has initiated programs to reduce manufacturing lead times, shorten
production cycles, increase employee training, encourage employee involvement in
decision-making and improve manufacturing quality. Employee involvement teams
participate in engineering, production and processing strategies and employees
have been given responsibility for their own quality assurance.
The Company also has made substantial investments in its facilities in
order to increase productivity, lower costs and improve quality. Over the past
three years, Invacare has invested $41 million in capital improvements and
acquisitions of facilities. During 1994, the Company made two acquisitions which
have improved the Company's existing product lines as well as expanded European
distribution capabilities. Also in December, 1994 the Company acquired Beram AB,
a Swedish distributor. During 1993, the Company made three acquisitions which
complimented and enhanced the Company's existing product lines. During 1992, the
<PAGE> 9
Company purchased a manufacturing facility and its distribution center, both of
which were previously leased and also acquired the Cofipar/Poirier Group, which
is the largest manufacturer and distributor of wheelchairs and home medical
equipment in France.
The manufacturing operations for the Company's wheelchairs and
replacement parts, patient aids and home care hospital beds consist of a variety
of metal fabricating procedures, electronics production, coating, plating and
assembly operations. Manufacturing operations for the Company's oxygen
concentrators, nebulizer compressors, and electronic seating and positioning
products consist of both finishing and assembly. The Company purchases raw
materials, fabricated components and services from a variety of suppliers.
Invacare does not have any continuing contracts with its suppliers, but
considers its relationships with suppliers to be satisfactory and believes that
adequate alternative sources of supply are available.
GOVERNMENT REGULATION
The Company is directly affected by government regulation and
reimbursement policies in virtually every country in which it operates.
Government regulations and health care policy differ from country to country,
and within the U.S. and Canada, from state to state or province to province.
Changes in regulations and health care policy take place frequently and can
impact the size, growth potential, and profitability of products sold in each
market.
In the U.S. the growth of health care costs has increased at rates in
excess of the rate of inflation and as a percentage of GNP for more than four
decades. A number of efforts to control the federal deficit have impacted
reimbursement guidelines for government sponsored health care programs and often
changes in federal programs are imitated by private insurance companies.
Reimbursement guidelines in the home health care industry have a substantial
impact on the nature and type of equipment an end user can obtain and thus
affect the product mix, pricing and payment patterns of our dealers.
The changes brought on by the mid-term congressional elections provide
the Home Medical Equipment (HME) industry with many new challenges and
opportunities. Unlike a few years ago, most members of the new Congress now
believe that home health care is a clinically appropriate, cost effective
alternative to traditional facility-based health care. In 1994, changes were
made to the biggest domestic program affecting our industry, Medicare, where the
number of carriers was consolidated from 34 to 4. Cuts in Medicare are projected
at $250 to $400 billion over seven years. However, the new majority is serious
about reducing health care costs and is interested in cost effective
alternatives such as home care. The Company believes that the industry will soon
be in a position to take advantage of the inevitable changes to come for
publicly funded health care programs.
The Safe Medical Devices Act of 1990 and Medical Device Amendments of
1976 to the Federal Food, Drug and Cosmetics Act of 1938 (the "Act") provide for
regulation by the United States Food and Drug Administration (the "FDA") of the
manufacture and sale of medical devices. Under the Act, all medical devices are
classified as Class I, Class II or Class III devices. The Company's principal
products are designated as Class I or Class II devices. In general, Class I
devices must comply with labeling and recordkeeping requirements and are subject
to other general controls. In addition to general controls, certain Class II
devices may have to comply with performance standards when established by the
FDA. Manufacturers of all medical devices are subject to periodic inspections by
the FDA. Class III devices must receive pre-market approval from the FDA before
they can be commercially distributed in the United States. Furthermore, state,
local and foreign governments have adopted regulations relating to the
manufacture and marketing of health care products. The Company believes that it
is presently in material compliance with all applicable regulations promulgated
by FDA, for which the failure to comply would have a material adverse effect.
BACKLOG
The Company generally manufactures most of its product to meet near
term demands by shipping from stock or by building to order based on the
specialty nature of certain products. Therefore, the Company does not have
substantial backlog of orders of any particular products nor does it believe
that backlog is a significant factor for its business.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales.
For information relating to net sales, operating income and
identifiable assets of the Company's foreign and domestic operations, see
Business Segments in the Notes to the Consolidated Financial Statements of the
Company.
<PAGE> 10
Item 2. Properties.
The Company owns or leases its warehouses, offices and manufacturing
facilities and believes these facilities to be well-maintained, adequately
insured and suitable for their present and intended uses. Information concerning
certain of the leased facilities of the Company is set forth in Leases and
Commitments in the Notes to the Consolidated Financial Statements of the Company
and in the table below:
<TABLE>
<CAPTION>
Ownership Or
Square Expiration Renewal
Location Feet Date of Lease Options Use
- -------- ------ ------------- ------- ---
<S> <C> <C> <C> <C>
Elyria, Ohio
-Taylor Street 145,344 Own -- Manufacturing and offices
-Cleveland Street 226,998 September 1999 one (5 yr.) Manufacturing and offices
North Ridgeville, Ohio 139,200 Own -- Manufacturing, warehouses and offices
Sanford, Florida 113,034 Own -- Manufacturing and offices
Sanford, Florida 7,485 June 1995 one (1 yr.) Warehouse
Pinellas Park, Florida 12,000 June 1995 four (1 yr.) Wheelchair manufacturing and offices
Atlanta, Georgia 45,866 May 1997 none Warehouse
Cerritos, California 47,366 May 1996 none Warehouse
Sacramento, California 26,900 October 1997 none Wheelchair parts and accessories
manufacturing, warehouse and offices
Carol Stream, Illinois 38,400 July 1998 none Warehouse and sales office
Edison, New Jersey 32,207 November 1996 one (3 yr.) Warehouse and sales office
Carmel, New York 13,900 July 1998 none Manufacturing and offices
Grand Prairie, Texas 24,820 January 1999 none Warehouse
McAllen, Texas 12,000 March 1997 none Warehouse
Reynosa, Mexico 70,400 Own -- Wheelchair and patient aid
manufacturing and offices
Anthony, France 7,126 April 2000 one (3 yr.) Warehouse and offices
Fondettes, France 104,500 Own -- Manufacturing, warehouse and offices
Fondettes, France 86,000 November 2007 none Manufacturing
Pontoise, France 12,109 May 2000 two (3yr. & 6 yr.) Warehouse and sales office
Bad Oeynhausen, Germany 76,600 June 1998 one (3 yr.) Manufacturing, warehouse and offices
Askersund, Sweden 10,000 November 1998 one (1 yr.) Warehouse
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
Ownership Or
Square Expiration Renewal
Location Feet Date of Lease Options Use
- -------- ------ ------------- ------- ---
<S> <C> <C> <C> <C>
Bridgend, Wales 131,522 Own -- Wheelchair and patient aid
manufacturing and offices
Concord, Ontario 22,000 October 1995 none Manufacturing and offices
Kirkland, Quebec 26,500 December 1996 one (2 yr.) Warehouse
Mississauga, Ontario 81,004 January 2005 none Warehouse and offices
Mississauga, Ontario 30,829 February 1995 none Wheelchair manufacturing
Christchurch, New Zealand 48,178 April 1998 one (2 yr.) Manufacturing and offices
</TABLE>
Item 3. Legal Proceedings.
Invacare is a defendant in a number of product liability actions in
which various plaintiffs seek damages for injuries allegedly caused by defective
products. All these actions have been referred to the Company's insurance
carriers and are being vigorously contested. The primary carrier for the first
$2 million of insurance coverage per claim is a subsidiary of the Company which
was established in September 1986 to provide the first layer of product
liability insurance for the Company. The Company has additional layers of
coverage insuring up to $38 million in annual aggregate losses arising from
individual losses that exceed $2 million. Management does not believe that the
outcome of any of these actions will have a material adverse effect upon its
business or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant.*
The following table sets forth the names of the executive officers of
Invacare, each of whom serves at the pleasure of the Board of Directors, as well
as certain other information.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
A. Malachi Mixon, III 54 Chairman of the Board of Directors, President and Chief
Executive Officer
Gerald B. Blouch 48 Chief Operating Officer
Joseph B. Richey, II 58 President - Invacare Technologies & Invacare Senior Vice
President - Total Quality Management
Thomas R. Miklich 47 Chief Financial Officer, Corporate Secretary and Treasurer
Benoit Juranville 46 President - Invacare Europe
Richard A. Sayers II 43 Vice President - Human Resources
Vice President & General Manager - Aftermarket Parts
Louis F.J. Slangen 47 Senior Vice President - Sales & Marketing
M. Louis Tabickman 50 President - Invacare Canada, Vice President & General
Manager, Power Business Unit
</TABLE>
<PAGE> 12
A. Malachi Mixon, III has been President and Chief Executive Officer
and a Director of the Company since December 1979 and Chairman of the Board
since September 1983.
Gerald B. Blouch was named Chief Operating Officer in December 1994.
Previously, he was named President - Home Care Division in March, 1994 and has
been Chairman - Invacare International since December 1993. Mr. Blouch was
Senior Vice President - Homecare Division from September 1992 to March 1994. Mr.
Blouch was Chief Financial Officer from May 1990 to May 1993 and Treasurer from
March 1991 to May 1993. From 1985 through May 1990, Mr. Blouch was Chief
Financial Officer and Executive Vice President for Inacomp Computer Centers Inc.
Joseph B. Richey, II has been a Director since 1980 and in September
1992 was named President-Invacare Technologies and Senior Vice President - Total
Quality Management. Previously, Mr. Richey was Senior Vice President of Product
Development since July 1984, Senior Vice President and General Manager of North
American Operations since September 1989.
Thomas R. Miklich has been Chief Financial Officer and Treasurer since
May 1993 and in September 1993 was named Secretary. Previously Mr. Miklich was
Executive Vice President and Chief Financial Officer of Van Dorn Company from
1991 to 1993, and Chief Financial Officer of Sherwin-Williams Company from 1986
to 1991.
Benoit Juranville has been President - Invacare Europe since December
1993. Previously, Mr. Juranville was President of Poirier S.A. which was
purchased by Invacare in 1992. He was added to the company's Executive Committee
in December of 1994. From 1983 through 1992, Mr. Juranville was Chairman of the
Board and Managing Director of Poirier, S.A.
Richard A. Sayers II has been Vice President - Human Resources since
July 1991 and Vice President and General Manager - Aftermarkets Parts Division
since September 1992. From 1989 to July 1991, Mr. Sayers was Vice President of
Human Resources for the Steering Systems group of TRW Inc., a manufacturer of
automotive electronics and aerospace products and services.
Louis F. J. Slangen was named Senior Vice President - Sales & Marketing
in December 1994. Mr. Slangen was previously President - Rehab Division from
March 1994 to December 1994 and Vice President - Sales and Marketing since
September 1989. From September, 1992 to March, 1994, Mr. Slangen was also Vice
President and General Manager - Rehab Division.
M. Louis Tabickman was named Vice President & General Manager - Power
Business Unit in December 1994. Mr. Tabickman has been an officer since July
1985 and was named President - Invacare Canada in March, 1994. Previously, Mr.
Tabickman was Vice President and General Manager - Invacare Canada from
September 1992 to March 1994. Mr. Tabickman was Vice President and General
Manager of Service and Distribution from July 1985 until September 1992.
- ----------------
* The description of executive officers is included pursuant to
Instruction 3 to section (b) of Item 401 of Regulation S-K.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Invacare's Common Shares, without par value, are traded
over-the-counter in the NASDAQ National Market System under the symbol IVCR.
Ownership of the Company's Class B Common Shares cannot be transferred, except,
in general, to family members. Class B Common Shares may be converted into
Common Shares at any time on a share-for-share basis. The approximate number of
record holders of the Company's Common Shares and Class B Common Shares at
February 21, 1995 was 1,416 and 96, respectively. The closing sale price for the
Common Shares on February 21, 1995 as reported by NASDAQ, was $33.50. The prices
set forth below do not include retail markups, markdowns or commissions.
The range of high and low quarterly prices of the Common Shares in each
of the two most recent fiscal years are as follows:
<TABLE>
<CAPTION>
1994 1993
----------------- -----------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
December 31 $36.25 $27.25 $27.50 $22.25
September 30 31.75 26.75 26.25 22.00
June 30 29.00 25.25 25.75 21.25
March 31 29.50 25.75 27.75 23.00
</TABLE>
<PAGE> 13
During 1994, the Board of Directors for Invacare Corporation declared a
quarterly cash dividend of $.0125 per Common Share. For the year, $.0375
dividends were declared. For information regarding limitations on the payment
of dividends in the Company's loan and note agreements, see Long Term
Obligations in the Notes to the Consolidated Financial Statements of the
Company. The Common Shares are entitled to receive cash dividends at a rate of
at least 110% of cash dividends paid on the Class B Common Shares.
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
Net Sales $411,123 $365,457 $305,171 $263,181 $229,797
Net Earnings 26,377 22,110 17,739 14,128 7,610
Total Assets 337,465 286,367 262,412 162,349 138,338
Long-Term Obligations 102,747 90,351 78,648 31,795 51,506
Earnings per Share * 1.78 1.50 1.25 1.06 .65
Dividends per Common Share .0375 - - - -
</TABLE>
* As adjusted for the 2-for-1 split effected in the form of a 100% share
dividend in September 1991.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
1994 vs. 1993
Net Sales. Net sales for 1994 increased 12.5% over 1993 principally
based on increased unit volumes of the Company's major product lines,
particularly respiratory products, beds and superlite wheelchairs. 1994 sales
also reflect a full year of sales for the power wheelchair control system
business unit which was acquired in June, 1993. Domestic increases of 14.9% for
the year resulted primarily from increased unit volumes, including expanded
product offerings, as the pricing environment for most product lines remains
extremely competitive making it difficult to increase prices. Domestic net sales
include the products which are manufactured at the Company's facility in Mexico,
substantially all of which are sold to customers in the United States.
International sales for 1994 increased by 6.2% over 1993 principally as a result
of increased unit volumes and expanded product offerings. International sales
are generally transacted in the foreign currencies of the countries in which
they occur. The Company's 1994 international sales, as reported in dollars, were
reduced by 1.6% due to the relative strength of the dollar as compared to those
currencies.
Domestic
Rehab Products - Sales of Rehab products, which represent the Company's
prescription wheelchairs, seating and positioning products and superlite and
sports wheelchairs, increased 9.4% over 1993 levels. The successful introduction
during 1994 of the Storm series of power wheelchairs greatly contributed to
increased Rehab sales and helped to mitigate the effects of lower sales in the
manual wheelchair unit as a result of an aggressive competitive pricing
environment and to a lesser extent, tightening Medicare reimbursement
guidelines. Sales volume for the superlite product line remained strong in 1994
as a result of the 1993 introduction of the Action Patriot which is a
prescription manual wheelchair configured for both domestic and foreign
applications and the 1994 introduction of the Action Power Tiger, a pediatric
power wheelchair with tilt-in-space features.
Home Care Products - Home care sales increased 19.4% over 1993 levels
due to significant increases in the respiratory and bed product lines. Volume
increases for the respiratory lines were a result of the continuing success of
new products, such as the SensO2TM oxygen concentrator, and expanded product
offerings including the introduction of liquid oxygen systems. Respiratory
product sales increased 53.3% for the year. Bed unit volume showed favorable
trends during the year, with a shift in product mix to semi-electric beds from
manual beds, while improvements were also realized as a result of the Company's
first full year in the low air loss market.
<PAGE> 14
International
Canadian Division - Sales in U.S. dollars in Canada were down
approximately 4.8% mainly due to continuing strict government reimbursement
policies as a result of cost cutting measures necessitated by the ongoing
sluggish economy. The weak Canadian dollar reduced reported sales by 5.8%.
European Division - European sales increased approximately 8.6% over
1993, as a result of increased market focus, new and expanded product offerings
and the improving economy. The success of the Action 2000LT manual wheelchair,
the European version of the Action Patriot, and increased volume in patient aids
marketed under the OPALE name contributed significantly to the sales increase.
Significant competition, especially in power wheelchairs, played an important
role in limiting price increases. European currencies, when compared to the
dollar, negatively impacted European sales by less than 1%.
Gross Profit. Gross profit as a percentage of net sales was 32.4% in
1994 and 1993. The principal factor contributing to maintaining gross profit was
inflationary cost increases offset by increased manufacturing efficiencies
resulting from productivity improvements and capital expenditures to modernize
equipment and processes. Increasing volumes and the effect of style and design
changes made to major product groups contributed to margin to a lesser extent.
Pricing was not a factor as market conditions continue to be extremely
competitive.
Domestically, gross profit declined slightly in 1994 to 31.7% compared
to 32.5% in 1993. Improved inventory management and increased manufacturing
efficiency and productivity were offset by a shift in product mix and the
continued competitive pricing environment for most of our product categories.
The gross profit in Europe improved from 29.3% in 1993 to 30.3% in
1994. A focus on manufacturing process improvements coupled with the production
of the Action 2000LT in our European operations contributed to the increase. The
Canadian gross profit declined as a result of declining sales and the weak
Canadian dollar, however the consolidation of Canadian operations during the
later part of 1994 is expected to have a positive impact on gross margin in the
future
Selling , General and Administrative. Selling, general and
administrative expense as a percentage of net sales was 21.7% for 1994 compared
to 22.3% for 1993 as a result of a continuous focus on productivity and cost
containment. The 9.4% dollar increase was a result of spending required to
support increased sales volume and expanded operations, which relates
principally to increased wages, benefits and administrative costs associated
with a larger workforce.
Domestically, selling, general and administrative costs decreased as a
percent of sales from 22.0% in 1993 to 21.0% in 1994 due to cost containment
efforts. Actual spending increased, in part due to a full year effect of prior
year acquisitions which occurred mid year during 1993, and additional costs
incurred to complete the realignment of several operating units during 1994.
Canada's selling, general and administrative expense both in dollars
and as a percentage of sales declined as a result of ongoing cost containment
efforts and, to a smaller extent, due to the effects of foreign currency.
European selling, general and administrative expense increased slightly as a
percentage of sales mainly as a result of increased sales activity.
Interest. Interest income in 1994 increased 21.3% over 1993 primarily
as a result of increased financing income from the Company's financing
subsidiary as a result of greater installment loan volumes. Interest expense
decreased from 1993 as a result of lower borrowing costs offset somewhat by
increased borrowing levels. The increased borrowings was a result of the above
mentioned financing activity and the funding of acquisitions during 1994.
Income Taxes. The Company had an effective tax rate of 37.0% in 1994
compared to an effective rate of 34.0% in 1993 primarily because of the
aggregate impact of adoption of the liability method in 1993. See Income Taxes
in the Notes to Consolidated Financial Statements.
Research and Development. Research and development expenditures
increased 11.9% to $7.7 million in 1994 compared to $6.8 million in 1993. The
funding levels are a result of the Company's commitment to support aggressive
product development efforts in order to stay abreast of market requirements and
to deliver quality products to our customers. This continuing research and
development focus will enable the Company to maintain its product leadership
position thereby enhancing timely product launches while realizing greater
operating efficiencies.
<PAGE> 15
1993 Vs. 1992
Net Sales. Net sales for 1993 increased by 19.8% over 1992 principally
based on increased unit volumes of the Company's major product lines,
particularly respiratory products, prescription manual and standard wheelchairs.
Domestic increases of 18.3% for the year resulted primarily from increased unit
volumes, including expanded product offerings. The pricing impact on increased
sales was minimal during 1993 as a result of increasing competition in most of
the Company's product lines. Domestic net sales include the products which are
manufactured at the Company's facility in Mexico, substantially all of which are
sold to customers in the United States. International sales for 1993 increased
by 23.7% over 1992 principally as a result of increased unit volumes and
expanded product offerings coupled with the increase due to acquisitions and, to
a lesser extent, due to higher average selling prices. International sales are
generally transacted in the foreign currencies of the countries in which they
occur. The company's international sales, as reported in dollars, were reduced
by 10.1% due to the relative strength of the dollar as compared to those
currencies.
Domestic
Rehab Division - Sales of Rehab products, which represent the Company's
prescription wheelchairs, seating and positioning products and superlite and
sports wheelchairs, increased 24% over 1992 levels. Rehab unit volumes were
higher than 1992 levels for most base models, with acquisitions representing 26%
of the division's increase. Sales volume for major product lines remained strong
in 1993 and was enhanced by the introduction of the Action Patriot which is a
prescription manual superlite wheelchair configured for both domestic and
foreign applications.
Home Care Division - Home Care sales increased 13% over 1992 levels due
to significant increases in the respiratory line. Volume increases of 43% for
concentrators and 125% for Associated Respiratory Products along with the
introduction of new products, such as the Sens02, liquid oxygen, and side stream
nebulizer, contributed an increase of 27% to domestic net sales. The
introduction of the Tracer series and the increased volumes for standard
wheelchairs constituted 10% of the domestic net sales improvement. The
acquisition of Geomarine Systems, Inc. (low air loss therapy systems), also
contributed to the division's net sales growth. Improved pricing impacted the
growth in net sales to a lesser degree.
International
Canadian Division - Sales in U.S. dollars in Canada was down
approximately 5% mainly due to stricter government reimbursement policies as a
result of sweeping cost cutting policies and a recessionary economy. The weak
Canadian dollar reduced reported sales by 6% versus the U.S. dollar.
European Division - European sales increased approximately 44% over
1992, primarily as a result of the acquisition of Poirier at the end of 1992
and, to a lesser extent, the introduction of several new products. Tighter
reimbursement policies in Europe and a continuing weak European economy,
especially in Germany, caused overall demand to decline for many product lines,
mostly in manual wheelchairs, dampening anticipated sales growth. Significant
competition, especially in power wheelchairs, played an important role in
preventing price increases. In addition, weakening European currencies when
compared to the dollar negatively impacted European sales by 12%.
Gross Profit. Gross profit as a percentage of net sales was 32.4% in
1993 compared to 33.1% in 1992. The principal factors leading to the change in
1993 were higher average selling prices which were offset by increased
manufacturing costs, in part, resulting from style and functionality design
changes made to major product groups and a shift in product mix.
Domestically, gross profit declined slightly to 32.5% in 1993 from
32.9% in 1992. A slight increase was realized from higher average selling
prices, mainly in standard wheelchair, prescription manual wheelchair and bed
product lines, but was offset by higher fixed spending and the effect of product
mix. Fixed spending levels increased mainly due to the combining of certain
product line operations into a single facility during 1993. This resulted in
duplicate costs during the transition of moving these product lines to the new
facilities.
The gross profit in Europe remained relatively constant while Canadian
gross profit rose from 26.8% of net sales in 1992 to 31.4% of net sales in 1993.
This was due, in part, to reduced purchased material costs.
<PAGE> 16
Selling, General and Administrative. Selling, general and
administrative expense as a percentage of net sales was 22.3% for 1993 compared
to 24.1% for 1992. The 11.0% dollar increase was a result of expanded operations
and increased wages, benefits and administrative costs associated with a larger
workforce and greater net sales.
Domestically, selling, general and administrative costs decreased as a
percent of net sales (22.0% in 1993 compared to 23.9% in 1992). Actual spending
increased 9.1%, attributable, in part, to acquisitions. Also, additional sales
and marketing expenses were incurred to support new product introductions and to
provide continued focus on innovative consumer marketing programs.
Selling, general and administrative expense in Canada decreased both in
dollars and as a percentage of net sales in 1993 versus 1992 due to stricter
cost containment policies and, to a smaller extent, from the effect of foreign
currency exchange. European selling, general and administrative expense improved
from 23.9% of sales in 1992 to 22.9% in 1993. However, improvements were
dampened by additional goodwill amortization of $1.2 million as a result of the
Poirier acquisition.
Interest. Interest income in 1993 increased 14.2% over 1992 as a result
of increased financing income from the Company's financing subsidiary, primarily
from greater installment loan volumes. Interest expense increased from 1992,
principally due to higher outstanding borrowings, mainly as a result of the
purchase of Poirier. Additional interest expense of $3.5 million affected
European earnings before income tax, which declined from 2.9% of net sales in
1992 to .9% of net sales in 1993.
Income Taxes. The Company had an effective tax rate of 34.0% in 1993
compared to an effective rate of 35.6% in 1992 primarily because the increase of
1% in the federal statutory rate was reduced by increased tax credits and the
aggregate impact of the liability method. See Income Taxes in the Notes to
Consolidated Financial Statements.
The Company adopted Financial Accounting Standards Board Statement No.
109, "Accounting for Income Taxes" effective January 1, 1993. Under the new
rules, deferred taxes are recognized using the liability method, whereby tax
rates are applied to cumulative temporary differences based on when and how they
are expected to affect the tax return. Deferred tax assets and liabilities are
adjusted for tax rate changes.
Research and Development. Research and development expenditures
increased 30.3% to $6.8 million in 1993 compared to $5.3 million in 1992. The
higher funding level is a result of the formalization of the research and
development function in order to maintain the Company's philosophy in delivering
quality products to our customers and will result in timely product launches and
greater efficiencies.
Inflation
Although the Company cannot determine the precise effects of inflation,
management believes that inflation does continue to have an influence on the
cost of materials, salaries and benefits, utilities and outside services. The
Company attempts to minimize or offset the effects through increased sales
volume, capital expenditure programs designed to improve productivity,
alternative sourcing of material and other cost control measures. In 1994 and
1993, the Company was able to offset most of the impact of price increases from
suppliers by productivity improvements and other cost reduction activities.
Liquidity and Capital Resources
The Company continues to maintain an adequate liquidity position
through its unused bank lines of credit (see Long Term Obligations in the Notes
to Consolidated Financial Statements) and working capital management. The
Company maintains various bank lines to finance its world-wide operations. In
December of 1994, the Company completed a new $200 million multi-currency
long-term financing agreement which expires in December, 1999. The agreement
replaced a $40 million revolving credit agreement, a 160 million French franc
revolving credit agreement, and the multi-currency revolving credit agreements
of 2.5 million pounds sterling, 9 million deutschmarks, 20 million French francs
and 18 million New Zealand dollars. Additionally, the Company maintains various
other lines of credit including a $10 million demand line, a 10 million Canadian
dollar demand line, 12 million of deutschmark lines, 25 million of French franc
demand lines and 60 million peseta demand lines. The facilities have been and
will continue to be used to fund the Company's domestic and foreign working
capital, capital expenditures and acquisition requirements. As of December 31,
1994, the Company has approximately $170 million available under its lines of
credit.
<PAGE> 17
The Company's borrowing arrangements contain covenants with respect to
net worth, dividend payments, working capital, funded debt to capitalization,
interest coverage and leverage, as defined in the Company's bank agreements and
agreements with its note holders. The company is in compliance with all
covenant requirements.
Capital Expenditures
Although there are no material capital expenditure commitments
outstanding as of December, 31, 1994, the Company expects to invest in capital
projects at a rate equal to depreciation and amortization of capital. The
Company believes that its balances of cash and cash equivalents, together with
funds generated from operations and existing borrowing capabilities will be
sufficient to meet its operating cash requirements and fund required capital
expenditures in the foreseeable future.
Cash Flows
Cash flows provided by operating activities were $31.5 million in 1994
compared to $30.6 million in 1993. The improved 1994 operating cash flow was
provided principally by increased profitability and the increase in account
payables. The increase was offset by higher accounts receivable and inventory
required to support the increased sales volume. These factors resulted in the
slight increase in operating cash flows in 1994 when compared to 1993.
Cash flows required for investing activities decreased by 15.0% in 1994
when compared to 1993 mainly as a result of lower spending for property, plant
and equipment and acquisitions. The Company also purchased a manufacturing
facility which included the assumption of $1.4 million of indebtedness, that is
not reflected in cash flow activity. This decrease was partially offset by
increased activity in customers financing of sales by the Company's financing
unit as a result of increased bookings, which in part is due to increased sales
activity.
Cash provided by financing activities decreased to $4.2 million in 1994
compared to $16.2 million in 1993. This decrease resulted primarily from the
Company's having completed a $25 million private placement of senior notes in
February, 1993, the proceeds of which were used to pay down the revolving credit
facility and demand lines. The decrease was also a result of the decrease of our
foreign outstanding borrowings as a result of improved operations.
Dividend Policy
On May 23, 1994 the Board of Directors for Invacare Corporation
declared a quarterly cash dividend of $.0125 per Common Share, representing the
first dividend to be paid in Invacare's history and amounts to $.05 per common
share on an annual basis. For the year, $.0375 dividends were declared.
Item 8. Financial Statements and Supplementary Data.
Reference is made to the Report of Independent Auditors, Consolidated
Balance Sheet, Consolidated Statement of Earnings, Consolidated Statement of
Cash Flows, Notes to Consolidated Financial Statements and Financial Statement
Schedules which appear on pages FS-1 to FS-17 of this Annual Report on Form
10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by Item 10 as to the Directors of the Company
is incorporated herein by reference to the information set forth under the
caption "Election of Directors" in the Company's definitive Proxy Statement
for the 1995 Annual Meeting of Shareholders, since such Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days after
the end of the Company's fiscal year pursuant to Regulation 14A. Information
required by Item 10 as to the Executive Officers of the Company is included in
Part I of this Report on Form 10-K.
<PAGE> 18
Item 11. Executive Compensation.
The information required by Item 11 is incorporated by reference to the
information set forth under the caption "Compensation of Executive Officers and
Directors" in the Company's definitive Proxy Statement for the 1995 Annual
Meeting of Shareholders, since such Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
Company's fiscal year pursuant to Regulation 14A.
Item. 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by Item 12 is incorporated by reference to the
information set forth under the caption "Share Ownership of Principal Holders
and Management" in the Company's definitive Proxy Statement for the 1995 Annual
Meeting of Shareholders, since such Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
Company's fiscal year pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions.
The information required by Item 13 is incorporated by reference to the
information set forth under the caption "Certain Transactions" in the Company's
definitive Proxy Statement for the 1995 Annual Meeting of Shareholders, since
such Proxy Statement will be filed with the Securities and Exchange Commission
not later than 120 days after the end of the Company's fiscal year pursuant to
Regulation 14A.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Financial Statements
The following financial statements of the Company are included in Part
II, Item 8:
(a) 1. Financial Statements.
Consolidated Statement of Earnings - years ended December 31, 1994,
1993 and 1992
Consolidated Balance Sheet - December 31, 1994 and 1993
Consolidated Statement of Cash Flows - years ended December 31, 1994,
1993 and 1992
Consolidated Statement of Shareholders Equity - years ended December
31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules.
The following financial statement schedules of the Company are included
in Part II, Item 8:
Schedules
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted because they are not applicable
or not required, or because the required information is included in the
Consolidated Financial Statements or notes thereto.
(a) 3. Exhibits.
See Exhibit Index at page number I-18 of this Report on Form
10-K.
(b) Reports on Form 8-K.
None
<PAGE> 19
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized on March
23, 1995.
INVACARE CORPORATION
By /S/ A. Malachi Mixon, III
------------------------------------------------
A. Malachi Mixon, III Chairman of the Board of
Directors, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on March 23, 1995.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/S/ A. Malachi Mixon, III Chairman of the Board of Directors, President and
- -------------------------------- Chief Executive Officer (Principal Executive Officer)
A. Malachi Mixon, III
/S/ Thomas R. Miklich Chief Financial Officer, Secretary and Treasurer (Principal Financial and
- -------------------------------- Accounting Officer)
Thomas R. Miklich
/S/ Francis J. Callahan, Jr. Director
- --------------------------------
Francis J. Callahan, Jr.
/S/ Frank B. Carr Director
- --------------------------------
Frank B. Carr
/S/ Michael F. Delaney Director
- --------------------------------
Michael F. Delaney
/S/ Whitney Evans Director
- --------------------------------
Whitney Evans
/S/ Dan T. Moore, III Director
- --------------------------------
Dan T. Moore, III
/S/ E. Patrick Nalley Director
- --------------------------------
E. Patrick Nalley
/S/ Joseph B. Richey, II Director
- --------------------------------
Joseph B. Richey, II
/S/ William M. Weber Director
- --------------------------------
William M. Weber
</TABLE>
<PAGE> 20
INVACARE CORPORATION
Report on Form 10-K for the fiscal year ended December 31, 1994.
<TABLE>
<CAPTION>
Exhibit Index
-------------
Official Exhibit No. Description Sequential Page No.
- -------------------- ----------- -------------------
<S> <C> <C> <C>
3(a) - Amended and Restated Articles of Incorporation, as amended (A)
through May 29, 1987
3(b) - Code of Regulations, as amended on April 7, 1984 (B)
4(a) - Specimen Share Certificate for Common Shares, as revised (I)
4(b) - Specimen Share Certificate for Class B Common Shares (I)
4(c) - Rights agreement between Invacare Corporation and Rights Agent (H)
dated as of April 2, 1991
10(a) - Stock Option Plan, adopted in February 1984 (B)
10(b) - Amendment to Stock Option Plan, adopted in May 1987 (C)
10(c) - Amendment to Stock Option Plan, adopted in May 1988 (D)
10(d) - Amendment to Stock Option Plan, adopted in May 1991 (J)
10(f) - Lease Agreement dated December 28 1983, for the Sanford, Florida property (C)
10(h) - Assignment of Patent Application and License of Know-how dated (E)
January 14, 1981, and an amendment thereto dated October 12, 1981, with
respect to certain royalty payments to be made to the former owners of the
Company's home care bed subsidiary
10(l) - Interest Rate Swap Agreement dated as of July 6, 1989 (F)
10(m) - Amendment to lease agreement dated May 1, 1989, for the Sanford, Florida property (F)
10(p) - Form of Indemnity Agreement entered into by and between the Company (I)
and certain of its Directors and officers and Schedule of all such
Agreements with current Directors and officers
10(r) - Master Note, between Invacare Corporation and Sanwa Bank, Limited (K)
10(s) - Employees' Stock Bonus Trust and Plan as amended and restated effective (G) *
January 1, 1988 and as amended on April 13, 1988, April 3, 1990, and May 24, 1991.
10(t) - Profit Sharing and Savings Trust and Plan effective as of January 1, 1991 (G) *
and as amended on November 28, 1988, September 12, 1990, October 9, 1990,
and May 24, 1991.
10(u) - Agreement between Invacare Corporation and Weber, Wood, Medinger, Inc. (K)
10(v) - Real Property Purchase Agreement by and between Invacare Corporation and (O)
Taylor Street limited partnership.
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C> <C>
10(z) - Note Agreement dated February 1, 1993 among Invacare Corporation and five (Q)
purchasers of an aggregate of $25,000,000, 7.45% Senior Notes due February 1, 2003.
10(aa) - Amendments to Stock Option Plan adopted in May 1992. (N) *
10(ab) - 1992 Non-Employee Directors Stock Option Plan adopted in May 1992. (L)
10(ac) - Deferred Compensation Plan for Non-Employee Directors, adopted in May 1992. (M)
10(ad) - Shares Purchase and Contribution Agreement dated July 27, 1992. (P)
10(af) - Invacare Corporation 1994 Performance Plan approved January 28, 1994. (R) *
10(ag) - Real Property Purchase Agreement between Mobilite Building Corporation (a newly (S)
formed subsidiary of Invacare Corporation as of February 15, 1994) and I-M Associates,
LTD. dated February 28, 1994.
10(an) Loan Agreement dated as of December 20, 1994 among
Invacare Corporation and certain subsidiaries and NBD
Bank, N.A., as agent.
21 - Subsidiaries of the Company
23 - Consent of Independent Accountants
27 - Financial Data Schedule
99(a) - Executive Liability and Defense Coverage Insurance Policy (I)
99(b) Press Release of Invacare Corporation dated March 15, 1995 "Invacare Obtains
Contract to Provide Oxygen Concentrators to Homedco".
<FN>
* Management contract or compensatory plan or arrangement
(A) Reference is made to Exhibit A of the Company's Definitive Proxy
Statement used in connection with the Annual Meeting of Shareholders
held on May 28, 1987, which exhibit is incorporated herein by
reference.
(B) Reference is made to the appropriate exhibit of the Company's Report on
Form 10-K for the fiscal year ended December 31, 1984, which exhibit is
incorporated herein by reference.
(C) Reference is made to the appropriate exhibit of the Company's report on
Form 10-K for the fiscal year ended December 31, 1987, which exhibit is
incorporated herein by reference.
(D) Reference is made to Exhibit A of the Company's Definitive Proxy
Statement used in connection with the Annual Meeting of Shareholders
held on May 25, 1988, which exhibit is incorporated herein by
reference.
(E) Reference is made to the appropriate exhibit of the Company's Form 8
Amendment No. 1 (filed on September 23, 1987) to its Registration
Statement on Form 8-A (Reg. No. 0-12938, effective as of October 21,
1986), which exhibit is incorporated herein by reference.
(F) Reference is made to the appropriate exhibit of the Company's report on
Form 10-K for the fiscal year ended December 31, 1989, which exhibit is
incorporated herein by reference.
(G) Reference is made to the appropriate exhibit of the Company's report on
Form 10-K for the fiscal year ended December 31, 1990, as amended,
which is incorporated herein by reference.
(H) Reference is made to the appropriate exhibit of the Company's
Registration Statement on Form 8-A, filed with the Securities and
Exchange Commission on April 5, 1991, which exhibit is incorporated by
reference.
(I) Reference is made to the appropriate exhibit of the Company's
Registration Statement on Form S-3 (Reg. No. 33-40168), effective as of
April 26, 1991, which exhibit is incorporated herein by reference.
</TABLE>
<PAGE> 22
(J) Reference is made to Exhibit A of the Company's Definitive Proxy
Statement used in connection with the Annual Meeting of Shareholders
held on May 24, 1991, which exhibit is incorporated herein by
reference.
(K) Reference is made to the appropriate exhibit of the Company's report on
Form 10-K for the fiscal year ended December 31, 1991, as amended,
which is incorporated herein by reference.
(L) Reference is made to Exhibit A of the Company's Definitive Proxy
Statement used in connection with the Annual Meeting of Shareholders
held on May 27, 1992, which exhibit is incorporated by reference.
(M) Reference is made to Exhibit B of the Company's Definitive Proxy
Statement used in connection with the Annual Meeting of Shareholders
held on May 27, 1992, which exhibit is incorporated by reference.
(N) Reference is made to Exhibit C of the Company's Definitive Proxy
Statement used in connection with the Annual Meeting of Shareholders
held on May 27, 1992, which exhibit is incorporated by reference.
(O) Reference is made to the appropriate exhibit of the Company's report on
Form 10-Q for the quarter ended June 30, 1992, which is incorporated
herein by reference.
(P) Reference is made to Exhibit 2 of the Company's report on Form 8-K,
dated October 29, 1992, which is incorporated herein by reference.
(Q) Reference is made to the appropriate exhibit of the Company's report on
Form 10-K for the fiscal year ended December 31, 1992, which exhibit is
incorporated herein by reference.
(R) Reference is made to Exhibit A of the Company's Definitive Proxy
Statement used in connection with the Annual Meeting of Shareholders
held on May 23, 1994, which Exhibit is incorporated by reference.
(S) Reference is made to the appropriate Exhibit of the Company's report on
Form 10-K for the fiscal year ended December 31, 1993, which Exhibit is
incorporated herein by reference.
<PAGE> 23
REPORT OF INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
INVACARE CORPORATION
We have audited the accompanying consolidated balance sheet of Invacare
Corporation and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of earnings, cash flows, and shareholders equity for
each of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedule listed in the Index at Item 14 (a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Invacare Corporation and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Cleveland, Ohio
February 20, 1995
<PAGE> 24
CONSOLIDATED STATEMENT OF EARNINGS
INVACARE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
-------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C>
Net sales $411,123 $365,457 $305,171
Cost of products sold 278,041 246,953 204,092
-------- -------- --------
GROSS PROFIT 133,082 118,504 101,079
Selling, general and administrative expense 89,346 81,634 73,512
-------- -------- --------
INCOME FROM OPERATIONS 43,736 36,870 27,567
Interest income 6,373 5,255 4,601
Interest expense (8,232) (8,615) (4,610)
-------- -------- --------
EARNINGS BEFORE INCOME TAXES 41,877 33,510 27,558
Income taxes 15,500 11,400 9,819
-------- -------- --------
NET EARNINGS $ 26,377 $ 22,110 $ 17,739
======== ======== ========
NET EARNINGS PER SHARE $ 1.78 $ 1.50 $ 1.25
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 25
CONSOLIDATED BALANCE SHEET
INVACARE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
1994 1993
-------------------------
(In thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,359 $ 9,392
Marketable securities 3,044 4,155
Trade receivables, net 76,280 63,286
Installment receivables, net 33,723 26,173
Inventories 49,982 44,011
Deferred income taxes 3,444 3,590
Other current assets 5,959 5,584
-------- --------
TOTAL CURRENT ASSETS 179,791 156,191
OTHER ASSETS 28,840 17,341
PROPERTY AND EQUIPMENT, net 55,919 52,480
GOODWILL, net 72,915 60,355
-------- --------
TOTAL ASSETS $337,465 $286,367
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 29,882 $ 23,267
Accrued expenses 37,015 32,623
Accrued income taxes 3,225 4,508
Current maturities of long-term obligations 326 515
-------- --------
TOTAL CURRENT LIABILITIES 70,448 60,913
LONG-TERM OBLIGATIONS 102,747 90,351
DEFERRED INCOME TAXES 263 141
SHAREHOLDERS' EQUITY
Preferred shares (Authorized 300 shares; none outstanding)
Common shares (Authorized 50,000 shares; 11,145 and
10,383 issued in 1994 and 1993, respectively) 5,573 5,192
Class B Common shares (Authorized 12,000 shares;
3,534 and 4,168, issued and outstanding in
1994 and 1993, respectively) 1,767 2,084
Additional paid-in capital 63,671 61,709
Retained earnings 99,086 73,242
Adjustments to shareholders' equity (2,196) (3,570)
Treasury shares (151 and 144 shares in
1994 and 1993, respectively) (3,894) (3,695)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 164,007 134,962
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $337,465 $286,367
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 26
CONSOLIDATED STATEMENT OF CASH FLOWS
INVACARE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years Ended December 31
1994 1993 1992
---------------------------------------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 26,377 $ 22,110 $ 17,739
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 12,686 12,280 10,008
Provision for losses on trade and installment receivables 1,461 386 (1,065)
Provision for deferred income taxes 19 (775) 417
Contribution of stock to employee benefit plans 0 451 768
Changes in operating assets and liabilities:
(Increase)/decrease in trade receivables (10,248) 3,879 (7,811)
(Increase)/decrease in inventories (3,219) 4,204 (1,148)
(Increase)/decrease in other current assets (7) (1,673) 1,744
Increase/(decrease) in accounts payable 4,126 (9,046) 7,793
Increase/(decrease) in accrued expenses 319 (1,257) 3,399
-------- -------- --------
NET CASH PROVIDED
BY OPERATING ACTIVITIES 31,514 30,559 31,844
INVESTING ACTIVITIES
Purchases of property and equipment, net (10,881) (11,978) (14,796)
Proceeds from sale of property and equipment 60 17 327
Installment contracts written (49,492) (42,344) (33,024)
Payments received on installment contracts 33,012 29,908 27,744
Marketable securities purchased (350) (2,102) (3,065)
Marketable securities sold 1,440 480 2,255
Business acquisitions net of cash acquired (8,605) (11,693) (39,281)
Increase in other investments (4,143) (4,849) (2,621)
Other 832 (2,280) (829)
-------- -------- ---------
NET CASH (REQUIRED)
BY INVESTING ACTIVITIES (38,127) (44,841) (63,290)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and
long-term borrowings 26,128 92,345 99,250
Principal payments on revolving lines of credit,
long-term debt and capital lease obligations (23,442) (76,469) (60,853)
Proceeds from exercise of stock options 1,830 300 1,536
Payment of dividends (355) 0 0
Purchase of treasury shares 0 0 (569)
--------- --------- ---------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 4,161 16,176 39,364
Effect of exchange rate changes on cash 419 (683) (1,209)
-------- -------- ---------
Increase/(decrease) in cash and cash equivalents (2,033) 1,211 6,709
Cash and cash equivalents at beginning of year 9,392 8,181 1,472
-------- -------- --------
Cash and cash equivalents at end of year $ 7,359 $ 9,392 $ 8,181
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 27
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
INVACARE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Common Shares:
Balance at beginning of year 10,383 $ 5,192 10,007 $ 5,004 9,045 $4,522
Conversion of Class B Shares
to Common Shares 634 317 282 141 197 98
Issuance of shares for acquisition 561 281
Exercise of stock options 128 64 94 47 204 103
------ ------- ------ ------- ------ -------
Balance at end of year 11,145 $ 5,573 10,383 $ 5,192 10,007 $ 5,004
====== ======= ====== ======= ====== =======
Class B Common Shares:
Balance at beginning of year 4,168 $ 2,084 4,450 $ 2,225 4,647 $2,323
Conversion of Class B Shares
to Common Shares (634) (317) (282) (141) (197) (98)
------ ------- ------ ------- ------ -------
Balance at end of year 3,534 $ 1,767 4,168 $ 2,084 4,450 $ 2,225
====== ======= ====== ======= ====== =======
Additional Paid-In Capital:
Balance at beginning of year $61,709 $59,666 $45,728
Exercise of stock options 1,962 1,946 2,203
Contribution of Common Shares
to employee benefit plans 97 45
Issuance of shares for acquisition 11,690
------- ------- -------
Balance at end of year $63,671 $61,709 $59,666
======= ======= =======
Retained Earnings:
Balance at beginning of year $73,242 $51,132 $33,393
Net earnings 26,377 22,110 17,739
Dividend of $.0375 per share (533)
------- ------- -------
Balance at end of year $99,086 $73,242 $51,132
======= ======= =======
Adjustments to Shareholders' Equity
Balance at beginning of year $(3,570) $(1,671) $ 1,294
Foreign currency translation adjustment 2,044 (1,899) (2,965)
Marketable Securities holding loss, net of tax ( 670)
------- ------- -------
Balance at end of year $(2,196) $(3,570) $(1,671)
====== ======= =======
Treasury Shares:
Balance at beginning of year (144) $(3,695) (101) $(2,356) (28) $( 550)
Repurchase of treasury shares (7) (199) (61) (1,693) (108) (2,528)
Contribution of Common Shares
to employee benefit plans 18 354 35 722
------ ------- ------ ------- ------ -------
Balance at end of year (151) $(3,894) (144) $(3,695) (101) $(2,356)
======= ======= ====== ======= ====== =======
</TABLE>
See notes to consolidated financial statements.
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVACARE CORPORATION AND SUBSIDIARIES
December 31, 1994
ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of Invacare Corporation and its subsidiaries (the Company). Certain
foreign subsidiaries are consolidated using a November 30 fiscal year end. All
significant intercompany transactions are eliminated.
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the presentation used for the year ended
December 31, 1994.
Marketable Securities: Current marketable securities are stated at market value,
which approximates cost, and consist of short-term investments in repurchase
agreements, government securities and certificates of deposit. Marketable
securities with original maturities of less than three months are treated as
cash equivalents.
Effective January 1, 1994, the Company adopted Financial Accounting Standards
Board Statement No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115). The new standard requires the classification of the
Company's marketable securities. The Company's marketable securities and other
long term securities have been classified as available for sale where the
securities are carried at their fair value and net unrealized holding gains and
losses, net of tax, are carried as a component of shareholders' equity. This
new standard was adopted January 1, 1994 and the effect was not material.
Inventories: Inventories are stated at the lower of cost or market with cost
principally determined for domestic manufacturing inventories by the last-in,
first-out (LIFO) method and market based on the lower of replacement cost or
estimated net realizable value. Non-domestic inventories and domestic finished
products purchased for resale ($26,617,000 and $21,072,000 at December 31, 1994
and 1993, respectively) are stated at the lower of cost or market with cost
determined by the first-in, first-out (FIFO) method.
Property and Equipment: Property and equipment are stated on the basis of cost.
The Company principally uses the straight-line method of depreciation for
financial reporting purposes based on annual rates sufficient to amortize the
cost of the assets over their estimated useful lives. Accelerated methods of
depreciation are used for federal income tax purposes. Expenditures for
maintenance and repairs are charged to expense as incurred.
Estimated Liability for Future Warranty Cost: Certain of the Company's products
are covered by warranties against defects in material and workmanship for
periods up to five years from the date of sale to the customer. A non-renewable
warranty is offered on certain products for a maximum period of five years.
Components of certain products carry a lifetime warranty. A provision for
estimated warranty cost is recorded at the time of sale and is periodically
adjusted to reflect actual experience.
Research and Development: Research and development costs are expensed as
incurred. The Company's annual expenditures for product development and
engineering were approximately $7,651,000 in 1994, $6,840,000 in 1993 and
$5,251,000 in 1992.
Revenue Recognition: The Company recognizes revenue when product is shipped and
provides an appropriate allowance for estimated returns and adjustments.
Income Taxes: Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" (SFAS 109). SFAS 109 requires recognizing deferred taxes using the
liability method, whereby current enacted tax rates are applied to cumulative
temporary differences based on when and how they are expected to affect the tax
returns. As permitted under SFAS 109, the 1992 financial statements, which
utilized the deferred method, have not been restated.
Net Earnings Per Share: The weighted average number of shares outstanding used
in determining net earnings per share was 14,848,000 in 1994, 14,738,000 in
1993, and 14,237,000 in 1992. Common Shares, Class B Common Shares and the
effects of dilutive stock options are included in calculating the weighted
average shares outstanding.
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
INVACARE CORPORATION AND SUBSIDIARIES
ACCOUNTING POLICIES--Continued
Foreign Currency Translation: Substantially all of the assets and liabilities of
the Company's foreign subsidiaries are translated into U.S. dollars at year end
exchange rates. Revenues and expenses are translated at weighted average
exchange rates. Gains and losses resulting from translation are included in the
balance sheet "Adjustments to shareholders equity".
Goodwill: The excess of the aggregate purchase price over the fair value of net
assets acquired is amortized by use of the straight line method for periods from
20 to 40 years. The accumulated amortization was $4,418,000 and $2,523,000 at
December 31, 1994 and 1993, respectively. The carrying value of goodwill is
reviewed at each balance sheet date to determine whether goodwill has been
impaired. If this review indicates that goodwill will not be recoverable, as
determined based on the undiscounted cash flows of the entity acquired over the
remaining amortization period, the Company's carrying value of the goodwill
would be reduced by the estimated shortfall of cash flows at such time an
impairment in value of goodwill has occurred. Based on the Company's review as
of December 31, 1994, no impairment of goodwill was evident.
Interest Rate Swap Agreements: The Company is a party to interest rate swap
agreements with off-balance sheet risk which are entered into in the normal
course of business to reduce exposure to fluctuations in interest rates. The
agreements are with major financial institutions which are expected to fully
perform under the terms of the agreements thereby mitigating the credit risk
from the transactions. The agreements are contracts to exchange variable rate
payments with fixed rate payments over the life of the agreements without the
exchange of the underlying notional amounts. The notional amounts of such
agreements are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss. The amounts to be paid or
received under the interest rate swap agreements are accrued consistent with the
terms of the agreements and market interest rates.
RECEIVABLES
Trade receivables are net of allowances for doubtful accounts of $3,251,000 in
1994 and $2,555,000 in 1993.
Installment receivables as of December 31, 1994 and 1993 consist of the
following:
<TABLE>
<CAPTION>
1994 1993
---------------------------------- ---------------------------------
Long- Long-
Current Term Total Current Term Total
------- ---- ----- ------- ---- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Installment receivables $38,224 $15,537 $53,761 $30,378 $7,481 $37,859
Less:
Unearned interest (3,590) (1,021) (4,611) (3,049) (753) (3,802)
Allowance for doubtful accounts (911) (378) (1,289) (1,156) (382) (1,538)
-------- ------- ------- ------- ------ -------
$33,723 $14,138 $47,861 $26,173 $6,346 $32,519
======= ======= ======= ======= ====== =======
</TABLE>
In May 1993, the Financial Accounting Standards Board issued Statement No. 114
"Accounting by Creditors for Impairment of a Loan" (SFAS 114). SFAS 114 is
effective for fiscal years beginning after December 15, 1994. The Company will
be required to adopt SFAS 114 effective January 1, 1995. The new standard
requires that impaired loans within the scope of SFAS 114 be measured based on
the present value of expected future cash flows discounted at the loan's
effective interest rate. The Company does not expect this standard to materially
impact its financial condition or results of operations.
<PAGE> 30
INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31
1994 1993
-------------------------
(In thousands)
<S> <C> <C>
Raw materials $17,272 $12,290
Work in process 9,093 12,770
Finished goods 23,617 18,951
------- -------
$49,982 $44,011
======= =======
</TABLE>
Current cost exceeds the LIFO value of inventories by approximately $777,000 and
$612,000 at December 31, 1994 and 1993, respectively.
PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31
1994 1993
-----------------------
(In thousands)
<S> <C> <C>
Land, buildings and improvements $ 26,442 $ 22,636
Machinery and equipment 72,815 66,190
Furniture and fixtures 7,478 6,984
Leasehold improvements 5,696 4,283
-------- --------
112,431 100,093
Less allowance for depreciation 56,512 47,613
-------- --------
$ 55,919 $52,480
======== =======
</TABLE>
CURRENT LIABILITIES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31
1994 1993
------------------------
(In thousands)
<S> <C> <C>
Accrued salaries and wages $12,882 $10,333
Accrued warranty cost 4,554 3,539
Accrued product liability reserves 3,604 3,488
Other accrued items 15,975 15,263
------- -------
$37,015 $32,623
======= =======
</TABLE>
ACQUISITIONS
In August 1994, the Company purchased all the outstanding shares of Rehadap
S.A., a Spanish marketer and distributor of precision wheelchairs and other
rehab products for people with disabilities. In November 1994, the Company
purchased all the outstanding shares of Genus Medical, Inc., a manufacturer of
power positioning seating systems for motorized wheelchairs, and electric three
and four wheeled scooters. These transactions have been accounted for by the
purchase method of accounting and the proforma effects are not material.
In March 1993, the Company purchased the assets of Top End, a manufacturer of
specialty products for sports and recreational use for people with physical
disabilities. The Company acquired for cash all the shares of Dynamic Controls
Limited, a manufacturer of control systems for power drive wheelchairs in June
1993, and in July 1993 acquired Geomarine Systems, Inc., a manufacturer of low
air loss therapy systems. These transactions have been accounted for by the
purchase method of accounting and the proforma effects are not material.
In October 1992, the Company purchased all of the outstanding shares of the
Cofipar/Poirier Group ("Poirier"), for approximately $57,341,000 which included
561,000 Common Shares valued at approximately $11,971,000 as of the date of
acquisition. Poirier manufactures and distributes wheelchairs and home medical
products in France and other European Economic Community countries. The
acquisition has been accounted for by the purchase method of accounting. The
excess of the aggregate purchase price over the fair market value of net assets
acquired approximated $51,850,000 and is being amortized over 40 years.
The operating results of all acquisitions are included in the Company's
consolidated results of operations from the date of acquisition.
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
INVACARE CORPORATION AND SUBSIDIARIES
LEASES AND COMMITMENTS
The Company leases a substantial portion of its facilities, transportation
equipment, data processing equipment and certain other equipment. These leases
have terms of up to 10 years and provide for renewal options. Generally, the
Company is required to pay taxes and normal expenses of operating the facilities
and equipment. As of December 31, 1994, the Company is committed under
non-cancelable operating leases which have initial or remaining terms in excess
of one year and expire on various dates through 2005. Lease expenses were
approximately $4,548,000 in 1994, $4,867,000 in 1993, and $4,680,000 in 1992.
Future minimum operating lease commitments as of December 31, 1994, including
minimum payments described in the Related Party Transactions Note, are as
follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
(In thousands)
<S> <C>
1995 $3,974
1996 2,836
1997 2,036
1998 1,307
1999 909
Thereafter 2,361
-------
Total Future Minimum
Lease Payments $13,423
=======
</TABLE>
The amount of buildings and equipment capitalized in connection with capital
leases was $3,551,000 and $5,006,000 at December 31, 1994 and 1993,
respectively. At December 31, 1994 and 1993, accumulated amortization was
$1,107,000 and $2,316,000, respectively.
RETIREMENT AND BENEFIT PLANS
Substantially all full-time salaried and hourly domestic employees are included
in two profit sharing plans sponsored by the Company. The Company's
contributions to the domestic plans are based on an annual resolution of the
Board of Directors and the Company has no requirement to make a contribution.
The contributions can either be in the form of cash to the Profit Sharing Plan
or in the form of cash or Common Shares to the Employee Stock Bonus Trust and
Plan. Cash contributions to the Employee Stock Bonus Trust are used to purchase
the Company's Common Shares on the open market. Contribution expense for 1994,
1993 and 1992 was $1,455,000, $930,000 and $1,704,000, respectively.
During 1994, the Company contributed $1,400,000 to its Voluntary Employee
Benefit Association (VEBA). The VEBA trust was created during 1990 to provide
for the payment of self-funded employee health benefits for current employees.
No VEBA contributions were made in 1993 and 1992.
During 1992, the Company adopted Statement of Financial Accounting Standards No.
106 "Employers' Accounting for Post Retirement Benefits Other Than Pensions".
The Company has no formal post retirement benefits plans other than the profit
sharing plans referred to above and the adoption of the Statement had no
material impact on the Company's financial position.
In November 1992, the Financial Accounting Standards Board issued Statement No.
112 "Accounting for Postemployment Benefits" (SFAS 112). SFAS 112 requires
accounting for benefits to former and inactive employees after employment but
before retirement. This new standard was adopted January 1, 1994 and the effect
is not material to the Company's financial condition or results of operations.
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
INVACARE CORPORATION AND SUBSIDIARIES
SHAREHOLDERS' EQUITY TRANSACTIONS
At December 31, 1994, the Company had 50,000,000 authorized Common Shares,
without par value, and 12,000,000 authorized Class B Common Shares, without par
value. In general, the Class B Common Shares and the Common Shares have
identical rights, terms and conditions and vote together as a single class on
most issues, except that the Class B Common Shares have ten votes per share,
carry a 10% lower cash dividend rate and, in general, can only be transferred to
family members. Holders of Class B Common Shares are entitled to convert their
shares into Common Shares at any time on a share-for-share basis.
As of December 31, 1994, the Company had 300,000 shares of Serial Preferred
Shares authorized, none of which were issued or outstanding. Serial Preferred
Shares are entitled to one vote per share.
The Company's Stock Option Plan (the "1984 Plan") was adopted in 1984 and
expired February 28, 1994. The 1984 Plan, as amended, provided for the issuance
of up to 2,000,000 of the Company's Common Shares in connection with stock
options granted under the plan. No further grants will be made under the
1984 Plan.
During 1994, the Board of Directors adopted and the Shareholders approved the
1994 Performance Plan (the "1994 Plan") The 1994 Plan provides for the issuance
of up to 1,000,000 Common Shares in connection with stock options and other
awards granted under the plan. The 1994 Plan allows the Compensation Committee
to grant incentive stock options, non-qualified stock options, stock
appreciation rights, and stock awards (including the use of restricted stock).
The Committee has the authority to determine the employees that will receive
awards, the amount of the awards and the other terms and conditions of the
awards. Payments of the stock appreciation rights may be made in cash, Common
Shares or a combination thereof. There were no stock appreciation rights
outstanding at December 31, 1994. As of December 31, 1994 the Committee, under
the 1994 Plan, has granted all non-qualified stock options at 100% of the fair
market value on the date of grant and for a term of ten years.
The 1984 and 1994 Plans have provisions for the cashless exercise of options.
Under these provisions the Company acquired 7,135 treasury shares for $199,000
in 1994, 61,611 treasury shares for $1,693,000 in 1993 and 80,521 treasury
shares for $1,959,000 in 1992.
As of December 31, 1994, an aggregate of 13,949,240 shares were reserved for
conversion of Class B Common Shares, future rights (as defined below) and
exercise and future grant of options.
The following summarizes the stock option transactions under the 1984 Plan and
the 1994 Plan for 1994, 1993, and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------------------
<S> <C> <C> <C>
Options outstanding at January 1 1,174,924 1,087,701 998,556
Granted 171,000 187,700 330,351
Exercised (127,557) (94,002) (203,730)
Cancelled (39,715) (6,475) (37,476)
---------- ---------- ----------
Options outstanding at December 31 1,178,652 1,174,924 1,087,701
========== ========== ==========
Options price range at December 31 $ 3.13 $ 3.13 $ $3.13
to to to
$ 30.25 $ 28.00 $ 28.00
Options exercisable at December 31 676,271 548,477 431,091
========== ========== ==========
Options available for grant at
December 31 922,250 208,054 389,279
========== ========== ==========
</TABLE>
On April 2, 1991, the Company adopted a Rights Plan whereby each holder of a
Common Share and Class B Common Share received one purchase right (the "Rights")
for each share owned. Under certain conditions, each Right may be exercised to
purchase one-half of one Common Share at a price of $25 per one-half share. The
Rights may only be exercised 10 days after a third party has acquired 30% or
more of the Company's outstanding voting power or 10 days after a third party
commences a tender offer for 30%
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
INVACARE CORPORATION AND SUBSIDIARIES
or more of the voting power (an "Acquiring Party"). In addition, if an Acquiring
Party merges with the Company and the Company's Common Shares are not changed or
exchanged, or if an Acquiring Party engages in one of a number of self-dealing
transactions, each holder of a Right (other than the Acquiring Party) will have
the right to receive that number of Common Shares or similar securities of the
resulting entity having a market value equal to two times the exercise price of
the Right. The Company may redeem the Rights at a price of $.005 per right at
any time prior to 10 days following a public announcement that an Acquiring
Party has acquired beneficial ownership of 30% or more of the Company's
outstanding voting power, and in certain other circumstances as approved by the
Board of Directors. Coincident with adoption of the Plan, the Company redeemed
Rights outstanding under a prior plan at the price of $.005 per Right.
LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
Long-term obligations consist of the following: December 31
1994 1993
--------------------------
(In thousands)
<S> <C> <C>
$25 million senior notes at 7.45%, matures in February 2003 $ 25,000 $25,000
Revolving credit agreement ($200 million multi-currency) at 1/4 to 62,345 -
1% above local interbank offered rates, expires December 1999
Revolving credit agreement (160 million French francs) at 1/2 - 26,841
to 1 1/4% above the LIBOR French franc rate, replaced
December 1994 with $200 million revolving credit agreement
Revolving credit agreement (2.5 million pounds sterling, 20 - 18,916
million French francs, 9 million deutschmarks and 18 million
New Zealand dollars), at rates 1/2 to 1 1/4% above local interbank
offered rates, replaced December 1994 with $200 million
revolving credit agreement
Notes payable to banks under credit facilities 3,900 9,184
Notes and mortgages payable, secured by buildings and equipment 4,903 3,762
Capitalized lease obligations 2,445 2,690
Other 4,480 4,473
-------- -------
103,073 90,866
Less current maturities 326 515
-------- -------
$102,747 $90,351
======== =======
</TABLE>
In February 1993, the Company completed a private placement of $25 million in
senior notes at 7.45% which contain covenants similar to the revolving credit
agreement described below. At December 31, 1994, $47,300,000 of retained
earnings is available for dividends. The notes are due in 2003 and require
principal payments of $3.6 million per year beginning in 1997. The proceeds from
the notes were used to pay down revolving credit agreements and other demand
lines.
During 1994, the Company entered into a $200 million long-term credit agreement
as described above. The borrowing rates are determined based on the leverage
ratios of the Company, as defined in the agreement and range from 1/4 to 1%
above the various interbank offered rates. The agreement requires the Company to
maintain certain conditions with respect to net worth, funded debt to
capitalization and interest coverage as defined per the agreement.
Notes payable to banks under credit facilities consist of borrowings under
various arrangements by the Company and its foreign subsidiaries and consists of
a $10 million demand line, a 10 million Canadian dollar demand line, 12
million deutschmark lines, 25 million of French franc lines and 60 million
peseta demand lines. Borrowings under these lines are considered long-term to
the extent that unused borrowing capacity is available under the $200 million
revolving credit agreement. Interest on amounts
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
INVACARE CORPORATION AND SUBSIDIARIES
LONG-TERM OBLIGATIONS--Continued
borrowed under the various credit facilities is at the respective bank's base
rate or an interbank offered rate. Certain borrowings from foreign banks are
secured by the assets of foreign subsidiaries or by guarantees of the Company.
In March 1993, the Company fixed the interest rate on 100 million of the
outstanding French franc debt through two interest rate swap agreements. Each
agreement is for 50 million French francs. The effect of the swap is to exchange
short term floating interest rates for a fixed rate of 7.48% for a five year
term in one agreement and 7.81% for a three-year term in the other agreement. As
of December 31, 1994 and 1993 the weighted average variable interest rate on the
French franc debt was 7.2% and 11.6%, respectively.
In July 1989, the Company entered into a seven-year interest rate swap agreement
which effectively fixed the interest rate on $5 million of the Company's various
variable rate borrowings at 8.89% under revolving credit agreements and notes
payable to banks under credit facilities. The weighted average variable interest
rate on the debt was 6.8% and 8.8% as of December 31, 1994 and 1993,
respectively.
The secured promissory notes financed the purchase of certain buildings and
equipment which secure the notes. The notes bear interest at rates from 4.8% to
11.0% and mature through 2004.
The capital leases at December 31, 1994 are principally for a manufacturing
facility and computer systems, with payments due through 2007.
The aggregate minimum combined maturities of long-term obligations are
approximately $326,000 in 1995, $1,228,000 in 1996, $4,848,000 in 1997,
$4,803,000 in 1998, $73,828,000 in 1999, and $18,040,000 thereafter. Interest
paid on borrowings was $6,625,000, $7,665,000 and $4,242,000 in 1994, 1993 and
1992, respectively.
INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by SFAS
109 (see "Accounting Policies" note).
Earnings before income taxes consisted of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------------------
(In thousands)
<S> <C> <C> <C>
Domestic $38,871 $31,505 $25,138
Foreign 3,006 2,005 2,420
------- ------ -------
$41,877 $33,510 $27,558
======= ======= =======
</TABLE>
The Company has provided for income taxes as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------------
Deferred
Liability Method Method
------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $12,115 $ 8,675 $6,870
State 2,580 2,075 1,411
Foreign 1,170 1,425 1,121
------- ------- ------
15,865 12,175 9,402
Deferred:
Federal (635) (25) 417
Foreign 270 (750) 0
------- ------- ------
(365) (775) 417
------- ------- ------
$15,500 $11,400 $9,819
======= ======= ======
</TABLE>
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
INVACARE CORPORATION AND SUBSIDIARIES
INCOME TAXES--Continued
At December 31, 1994, the Company has available indefinite foreign tax loss
carryforwards of $2,250,000.
The Company made income tax payments of $16,606,000, $12,264,000, and $7,891,000
during the years ended December 31, 1994, 1993 and 1992, respectively.
A reconciliation to the effective income tax rate from the federal statutory
rate follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------
Deferred
Liability Method Method
-------------------- --------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 34.0%
State and local income taxes, net of
federal income tax benefit 4.0 4.0 3.4
Tax credits (2.0) (2.3) (1.3)
Other, net 0.0 (2.7) ( .5)
---- ---- -----
Effective income tax rate 37.0% 34.0% 35.6%
==== ==== ====
</TABLE>
Significant components of deferred income tax assets and liabilities at December
31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
Current deferred income tax assets (net): 1994 1993
---- ----
(In thousands)
<S> <C> <C>
Bad Debt $1,017 $ 904
Warranty 972 833
Inventory 356 111
Other accrued expenses and valuation reserves 826 719
State and local taxes 1,031 890
Loss carryforward 142 400
Other, net (900) (267)
------ ------
3,444 3,590
Long-term deferred income tax liabilities (net):
Depreciation (1,745) (1,815)
Loss carryforward 490 490
Other, net 992 1,184
------ -----
(263) (141)
------ ------
Net deferred income taxes $3,181 $3,449
====== ======
</TABLE>
The tax effect of certain differences between financial earnings and taxable
earnings is as follows for the year ended December 31, 1992:
<TABLE>
<CAPTION>
1992
----
(In thousands)
<S> <C>
Inventory $202
Depreciation (233)
Accrued expenses and valuation reserves 181
Other, net 267
----
$417
</TABLE> ====
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
INVACARE CORPORATION AND SUBSIDIARIES
RELATED PARTY TRANSACTIONS
The Company leased a facility from a partnership (I-M Associates, Ltd.,
"Partnership") comprised of certain officers, directors and shareholders of the
Company. The General Partner of the Partnership is also a director and chairman
of the Company. In March 1994, the Company, through a newly formed subsidiary,
exercised its option to acquire the entire facility (land and building) for $3.8
million. As part of the purchase, the Company assumed approximately $1.4 million
in indebtedness of industrial development revenue bonds issued by the Sanford
Airport Authority. The purchase price was based upon an independent appraisal of
the fair market value of the facility. Lease payments during 1994, 1993 and 1992
were $98,000, $544,000 and $530,000, respectively.
In 1988, the Company entered into a 12-1/2 year lease, for the construction of a
distribution facility. A general partner of the partnership which owned the
facility is a director of the Company. During 1992, the Company purchased the
facility from the partnership for $4.1 million. As part of the purchase, the
Company assumed the $2.8 million mortgage on the property. The purchase price
was based on an independent appraisal. Lease payments during 1992 were $211,000.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
(In thousands, except per share data)
1994 March 31 June 30 September 30 December 31
------------------------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $87,902 $98,894 $108,977 $115,350
Gross profit 26,577 31,499 35,740 39,266
Earnings before income taxes 5,790 9,890 11,867 14,330
Net earnings 3,650 6,230 7,477 9,020
Net earnings per share .25 .42 .50 .61
<CAPTION>
1993 March 31 June 30 September 30 December 31
------------------------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $78,768 $90,305 $95,684 $100,700
Gross profit 25,349 29,030 30,685 33,440
Earnings before income taxes 4,556 7,872 9,432 11,650
Net earnings 3,182 5,243 6,131 7,554
Net earnings per share .22 .36 .42 .51
</TABLE>
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
INVACARE CORPORATION AND SUBSIDIARIES
BUSINESS SEGMENTS
The company operates in one business segment, home medical equipment. Geographic
information for each of the three years ended December 31 is as follows:
<TABLE>
<CAPTION>
Total
Domestic Europe Other Foreign Total
-------- ------ ----- ------- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
1994
Net sales $304,890 $89,559 $16,674 $106,233 $411,123
Earnings before income taxes 38,710 3,020 147 3,167 41,877
Assets 224,984 101,812 10,669 112,481 337,465
Liabilities 106,042 57,845 9,571 67,416 173,458
1993
Net Sales $265,453 $82,482 $17,522 $100,004 $365,457
Earnings before income taxes 31,619 772 1,119 1,891 33,510
Assets 187,759 87,946 10,662 98,608 286,367
Liabilities 86,184 57,921 7,300 65,221 151,405
1992
Net sales $224,349 $61,143 $19,679 $ 80,822 $305,171
Earnings before income taxes 25,636 1,761 161 1,922 27,558
Assets 151,735 101,958 8,719 110,677 262,412
Liabilities 93,364 47,860 7,188 55,048 148,412
</TABLE>
The operations of the Company's Mexican facility are treated as Domestic for
segment reporting purposes. Substantially all of the products manufactured at
this Mexican facility are sold to customers located in the United States.
Eliminated from above net sales for 1994, 1993 and 1992 were $23,224,000,
$14,151,000, and $15,450,000, respectively, of sales by Domestic subsidiaries to
Foreign subsidiaries and $1,306,000, $1,606,000, and $1,256,000, respectively,
of sales by Foreign subsidiaries to Domestic subsidiaries. Sales between
geographic areas are based on the costs to manufacture plus a reasonable profit
element.
CONCENTRATION OF CREDIT RISK
The Company manufactures and distributes durable medical equipment and supplies
to the home health care and extended care markets. The Company performs credit
evaluations of its customers' financial condition and on a case by case basis
may require a security position in the form of UCC filings, purchase money
security interests and/or personal guarantees. Substantially all of the
Company's receivables are due from home health care and medical equipment
dealers located throughout the United States, Canada, and Europe. A significant
portion of products sold to dealers, both foreign and domestic, are ultimately
funded through government reimbursement programs such as Medicare and Medicaid.
As a consequence, changes in these programs can have an adverse impact on dealer
liquidity and profitability. Credit losses are provided for in the financial
statements and consistently have been within management's expectations.
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
INVACARE CORPORATION AND SUBSIDIARIES
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash, cash equivalents and marketable securities: The carrying amount
reported in the balance sheet for cash, cash equivalents and marketable
securities approximates its fair value.
Installment receivables: The carrying amount reported in the balance
sheet for installment receivables approximates its fair value. The
portfolio contains receivables with terms less than three years and the
majority due in less than one year. The interest rates associated with
these receivables have not varied significantly over the past three
years. Management believes that after consideration of the credit risk,
the net book value of the installment receivables approximates market
value.
Long-term obligations: The carrying amounts of the Company's borrowings
under its long-term revolving credit agreements approximate their fair
value. Fair values for the Company's senior notes are based on pricing
models using current assumptions.
Interest Rate Swaps: Fair values for the Company's interest rate swaps
are based on pricing models or formulas using current assumptions.
The carrying amounts and fair values of the Company's financial
instruments at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
-------- ----- -------- -----
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 7,359 $ 7,359 $ 9,392 $ 9,392
Marketable securities $ 3,044 $ 3,044 $ 4,155 $ 4,155
Installment receivables $ 47,861 $ 47,861 $32,519 $32,519
Long-term obligations $103,073 $102,634 $90,866 $91,816
Interest rate swaps (fair value liability) - $ 62 - $ 1,700
</TABLE>
<PAGE> 39
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
INVACARE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL.E
------ ------ ------ ------ -----
ADDITIONS
---------
(1) (2)
Balance Charged Charged To Balance
At To Other At
Beginning Cost And Accounts Deductions- End Of
Description Of Period Expenses Describe Describe Period
----------- --------- -------- ---------- ----------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
- ----------------------------
Deducted from asset accounts --
Allowance for doubtful
accounts $4,093 $2,804 $ 159(C) $2,516(A) $4,540
Inventory obsolescence
reserve 4,114 1,692 53(C) 2,368(B) 3,491
Product warranty liability 3,539 3,560 112(C) 2,657(B) 4,554
YEAR ENDED DECEMBER 31, 1993
- ----------------------------
Deducted from asset accounts --
Allowance for doubtful
accounts $3,841 $2,490 $ 21(C) $2,259(A) $4,093
Inventory obsolescence
reserve 3,736 1,244 $1,253(C) 2,119(B) 4,114
Product warranty liability 2,957 2,530 521(C) 2,469(B) 3,539
YEAR ENDED DECEMBER 31, 1992
- ----------------------------
Deducted from asset accounts --
Allowance for doubtful
accounts $4,599 $ 486 $ 364(C) $1,608(A) $3,841
Inventory obsolescence
reserve 2,973 2,202 240(C) 1,679(B) 3,736
Product warranty liability 2,527 2,497 150(C) 2,217(B) 2,957
</TABLE>
NOTE (A)--Uncollectible accounts written off, net of recoveries.
NOTE (B)--Amounts written off or payments incurred.
NOTE (C)--Amounts recorded due to acquisition of subsidiaries.
<PAGE> 1
EXHIBIT 10(AN)
INVACARE CORPORATION
AND CERTAIN BORROWING SUBSIDIARIES
LOAN AGREEMENT
dated as of December 20, 1994
__________________________________________
THE BANKS NAMED HEREIN
and
NBD BANK, N.A., as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C>
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Definitions . . . . . . . . . . . . . . . . . 1
1.2 Other Definitions; Rules of
Construction . . . . . . . . . . . . . . . . . . . 15
II. THE COMMITMENTS AND THE ADVANCES . . . . . . . . . . . . . . . . . 15
2.1 Commitment of the Banks . . . . . . . . . . . . . . . 15
2.2 Bid-Option Loans . . . . . . . . . . . . . . . . . . 18
2.3 Effect on Commitments . . . . . . . . . . . . . . . . 21
2.4 Termination and Reduction of
Commitments . . . . . . . . . . . . . . . . . . . 21
2.5 Fees . . . . . . . . . . . . . . . . . . . . . . . . 22
2.6 Disbursement of Syndicated Advances . . . . . . . . . 23
2.7 Conditions for First Disbursement . . . . . . . . . . 26
2.8 Further Conditions for Disbursement . . . . . . . . . 27
2.9 Subsequent Elections as to Borrowings. . . . . . . . 28
2.10 Limitation of Requests and Elections . . . . . . . . 28
2.11 Minimum Amounts; Limitation on
Number of Borrowings . . . . . . . . . . . . . . . 29
2.12 Treasury Manager . . . . . . . . . . . . . . . . . . 29
III. PAYMENTS AND PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . 29
3.1 Principal Payments . . . . . . . . . . . . . . . . . 29
3.2 Interest Payments . . . . . . . . . . . . . . . . . . 31
3.3 Payment Method . . . . . . . . . . . . . . . . . . . 32
3.4 No Setoff or Deduction . . . . . . . . . . . . . . . 33
3.5 Payment on Non-Business Day;
Payment Computations . . . . . . . . . . . . . . . 34
3.6 Additional Costs . . . . . . . . . . . . . . . . . . 34
3.7 Illegality and Impossibility . . . . . . . . . . . . 36
3.8 Indemnification . . . . . . . . . . . . . . . . . . . 36
</TABLE>
-i-
<PAGE> 3
****** WARNING: TABLE EXCEEDS 132 ******
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C>
IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 37
4.1 Corporate Existence and Power . . . . . . . . . . . . 37
4.2 Corporate Authority . . . . . . . . . . . . . . . . . 37
4.3 Binding Effect . . . . . . . . . . . . . . . . . . . 37
4.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . 37
4.5 Litigation . . . . . . . . . . . . . . . . . . . . . 38
4.6 Financial Condition . . . . . . . . . . . . . . . . . 38
4.7 Use of Loans . . . . . . . . . . . . . . . . . . . . 38
4.8 Consents, Etc. . . . . . . . . . . . . . . . . . . . 38
4.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 39
4.10 Title to Properties . . . . . . . . . . . . . . . . . 39
4.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . 39
4.12 Environmental and Safety Matters . . . . . . . . . . 39
4.13 No Material Adverse Change . . . . . . . . . . . . . 40
V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.1 Affirmative Covenants . . . . . . . . . . . . . . . . 40
(a) Preservation of Corporate
Existence, Etc. . . . . . . . . . . . . . . 40
(b) Compliance with Laws, Etc. . . . . . . . . . . 41
(c) Maintenance of Properties;
Insurance . . . . . . . . . . . . . . . . . 41
(d) Reporting Requirements . . . . . . . . . . . . 41
(e) Accounting; Access to
Records, Books, Etc. . . . . . . . . . . . 43
(f) Stamp Taxes . . . . . . . . . . . . . . . . . 43
(g) Further Assurances . . . . . . . . . . . . . . 43
5.2 Negative Covenants . . . . . . . . . . . . . . . . . . 43
(a) Interest Coverage Ratio . . . . . . . . . . . 43
(b) Net Worth . . . . . . . . . . . . . . . . . . 43
(c) Funded Debt to Total Capitalization . . . . . 44
(d) Liens . . . . . . . . . . . . . . . . . . . . 44
(e) Merger; Etc. . . . . . . . . . . . . . . . . . 45
(f) Disposition of Assets, Etc. . . . . . . . . . 45
(g) Nature of Business . . . . . . . . . . . . . . 45
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C> <C>
VI. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.1 Events of Default . . . . . . . . . . . . . . . . . . . 45
6.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . 48
VII. THE AGENT AND THE BANKS . . . . . . . . . . . . . . . . . . . . . . . 49
7.1 Appointment and Authorization . . . . . . . . . . . . . 49
7.2 Agent and Affiliates . . . . . . . . . . . . . . . . . 49
7.3 Scope of Agent's Duties . . . . . . . . . . . . . . . . 49
7.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . 50
7.5 Default . . . . . . . . . . . . . . . . . . . . . . . 50
7.6 Liability of Agent . . . . . . . . . . . . . . . . . . 50
7.7 Nonreliance on Agent and
Other Banks . . . . . . . . . . . . . . . . . . . . 50
7.8 Indemnification . . . . . . . . . . . . . . . . . . . . 51
7.9 Resignation of Agent . . . . . . . . . . . . . . . . . 51
7.10 Sharing of Payments . . . . . . . . . . . . . . . . . . 52
7.11 Local Custom . . . . . . . . . . . . . . . . . . . . . 53
VIII. MISCELLANEOUS 53
8.1 Amendments, Etc. . . . . . . . . . . . . . . . . . . . 53
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . 53
8.3 No Waiver By Conduct; Remedies
Cumulative . . . . . . . . . . . . . . . . . . . . . 54
8.4 Reliance on and Survival of
Various Provisions . . . . . . . . . . . . . . . . . 54
8.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . 55
8.6 Successors and Assigns . . . . . . . . . . . . . . . . 55
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . 58
8.8 Governing Law; Consent to Jurisdiction . . . . . . . . 58
8.9 Table of Contents and Headings . . . . . . . . . . . . 58
8.10 Construction of Certain Provisions . . . . . . . . . . 58
8.11 Integration and Severability . . . . . . . . . . . . . 59
8.12 Independence of Covenants . . . . . . . . . . . . . . . 59
8.13 Interest Rate Limitation . . . . . . . . . . . . . . . 59
8.14 Confidentiality . . . . . . . . . . . . . . . . . . . . 59
8.15 Waiver of Jury Trial . . . . . . . . . . . . . . . . . 60
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<Option>
Article Page
------- ----
<S> <C> <C> <C>
EXHIBITS
--------
Exhibit A . . . . . . . . . . Bid-Option Note
Exhibit B . . . . . . . . . . Designation of new Borrowing Subsidiary
Exhibit C . . . . . . . . . . Guaranty
Exhibit D . . . . . . . . . . Swing Line Note
Exhibit E . . . . . . . . . . Syndicated Note
Exhibit F . . . . . . . . . . Bid-Option Quote Request
Exhibit G . . . . . . . . . . Invitation for Bid-Option Quotes
Exhibit H . . . . . . . . . . Bid-Option Quote
Exhibit I . . . . . . . . . . Request for Syndicated Advance
Exhibit J . . . . . . . . . . Form of Legal Opinion
Exhibit K . . . . . . . . . . Request for Continuation or Conversion
of Revolving Credit Loan
Exhibit L . . . . . . . . . . Assignment and Acceptance
SCHEDULES
Schedule 1.1(a) . . . . . . . Borrowing Subsidiaries
Schedule 1.1(b) . . . . . . . OECD Countries
Schedule 4.4 . . . . . . . . Subsidiaries
Schedule 4.5 . . . . . . . . Litigation
Schedule 4.12 . . . . . . . . Environmental Matters
Schedule 5.2 . . . . . . . . Liens
</TABLE>
-iv-
<PAGE> 6
THIS LOAN AGREEMENT, dated as of December 20, 1994 (as amended
or modified from time to time, this "Agreement"), is by and among INVACARE
CORPORATION, an Ohio corporation (the "Company"), each of the Subsidiaries of
the Company designated in Section 1.1 as a Borrowing Subsidiary (individually,
a "Borrowing Subsidiary" and collectively, the "Borrowing Subsidiaries") (the
Company and the Borrowing Subsidiaries may each be referred to as a "Borrower"
and, collectively, as the "Borrowers"), Invacare Corporation, as treasury
manager for the Borrowers (the "Treasury Manager") and the Banks set forth on
the signature pages hereof (collectively, the "Banks" and individually, a
"Bank") and NBD BANK, N.A., a national banking association, as agent for the
Banks (in such capacity, the "Agent").
INTRODUCTION
The Borrowers desire to obtain a revolving credit facility,
including letters of credit, in the aggregate principal amount of $200,000,000
(or the equivalent thereof in any other Permitted Currency), in order to
provide funds for their general corporate purposes, and the Banks are willing
to establish such a credit facility in favor of the Borrowers on the terms and
conditions herein set forth.
In consideration of the premises and of the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Certain Definitions. As used herein the following
terms shall have the following respective meanings:
"Advance" shall mean any Loan and any Letter of Credit Advance.
"Affiliate" when used with respect to any person shall mean
any other person which, directly or indirectly, controls or is controlled by or
is under common control with such person. For purposes of this definition
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), with respect to any person, shall mean
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities or by contract or otherwise.
"Applicable Lending Office" shall mean, with respect to any
Advance made by any Bank or with respect to such Bank's Commitment, the office
of such Bank or of any Affiliate of such Bank located at the address specified
as the applicable lending office for such Bank set forth next to the name of
such Bank in the signature pages hereof or any other office or Affiliate of
such Bank or of any Affiliate of such Bank hereafter selected and notified to
the Company and the Agent by such Bank. Unless the Agent shall notify the
Treasury Manager otherwise, the
<PAGE> 7
Applicable Lending Office of the Agent shall be: (a) with respect to all
Advances denominated in Dollars, the principal office of the Agent in Detroit,
Michigan; (b) with respect to Advances denominated in CAD, the main office of
NBD Bank, Canada in Toronto, Ontario; (c) with respect to all Advances
denominated in AUD or NZD, the branch of NBD in Adelaide, Australia and (d) with
respect to all other Advances, the branch of the Agent in London, England.
"Applicable Margin" shall mean with respect to any Floating
Rate Loan, Interbank Offered Rate Loan, S/L/C fee and commitment fees, as the
case may be, the applicable percentage set forth in the applicable table below
as adjusted on the date on which the financial statements and compliance
certificate required pursuant to Section 5.1(d) are delivered to the Banks and
shall remain in effect until the next change to be effected pursuant to this
definition, provided, that, if any financial statements referred to above are
not delivered within the time period specified above, then, until the financial
statements are delivered, the ratio of Funded Debt to Total Capitalization as
of the end of the fiscal quarter that would have been covered thereby shall for
the purposes of this definition be deemed to be greater than 0.6 to 1.0:
APPLICABLE MARGIN
<TABLE>
<CAPTION>
Funded Debt to Floating Interbank S/L/C Fee Tranche A Tranche B
Total Capital- Rate Offered Commit- Commit-
ization Loan Rate Loan ment Fee ment Fee
<S> <C> <C> <C> <C> <C>
Less than 0.00% 0.25% 0.25% 0.10% 0.10%
0.25:1.0
Greater than 0.00% 0.35% 0.35% 0.15% 0.125%
or equal to
0.25:1.0 but
less than
0.40:1.0
Greater than 0.00% 0.375% 0.375% 0.175% 0.125%
or equal to
0.40:1.0 but
less than
0.50:1.0
Greater than 0.00% 0.50% 0.50% 0.225% 0.15%
or equal to
0.50:1.0 but
less than -
0.60:1.0
</TABLE>
-2-
<PAGE> 8
<TABLE>
<S> <C> <C> <C> <C> <C>
Greater than 0.00% 1.00% 1.00% 0.25% 0.25%
or equal to
0.60:1.0
</TABLE>
"AUD" shall mean Australian Dollars.
"Australian Domestic Rate" shall mean, with respect to any
Interbank Interest Period, the per annum interest rate which is determined by
the Agent by taking the average bid rate quoted on the page numbered "BBSY" of
the Reuters Monitor System at or about 10:00 a.m. (Adelaide time) two (2)
Business Days prior to the first day of such Interbank Interest Period for not
less than five Australian trading banks (selected by the Agent in its sole
discretion and appearing on that page and so quoting) as being the mean buying
rate for a Bill having a tenor equal to such Interbank Interest Period,
eliminating the highest and the lowest mean rates and taking the average of the
remaining mean rates, provided that, if in respect of any Interbank Interest
Period less than five Australian trading banks have quoted rates on the page
numbered "BBSY" of the Reuters Monitor System, the rate shall be calculated as
in the manner set forth above by taking the rates otherwise quoted by five
Australian trading banks upon application by the Agent for a Bill of the same
tenor.
"Bankers Acceptances" shall mean bills of exchange within the
meaning of the Bills of Exchange Act (Canada), denominated in CAD, drawn by
Canadian business corporations of credit standing comparably to the Borrowers
and accepted by NBD Bank, Canada.
"Bank Obligations" shall mean all indebtedness, obligations
and liabilities, whether now owing or hereafter arising, direct, indirect,
contingent or otherwise, of the Borrowers to the Agent or any Bank pursuant to
the Loan Documents.
"Bid-Option Auction" shall mean a solicitation of Bid-Option
Quotes setting forth Bid-Option Rates pursuant to Section 2.2(b).
"Bid-Option Interest Period" shall mean with respect to each
Bid-Option Borrowing, the period commencing on the date of such Borrowing and
ending on the date elected by the Treasury Manager in the applicable Bid-Option
Quote Request, which date shall be not more than 60 days after the date of such
Bid-Option Loan; provided that:
(i) any such Interest Period that would otherwise
end on a day that is not a Business Day shall be extended to
the next succeeding Business day; and
(ii) no such Interest Period that would end after
the Termination Date shall be permitted.
-3-
<PAGE> 9
"Bid-Option Loan" shall mean a Loan which is made by a Bank
pursuant to a Bid-Option Auction.
"Bid-Option Note" shall mean a promissory note of the
Borrowers in substantially the form of Exhibit A hereto evidencing the
obligation of the Borrowers to repay Bid-Option Loans, as amended or modified
from time to time and together with any promissory note or notes issued in
exchange or replacement therefor.
"Bid-Option Percentage" shall mean, with respect to any Bank,
the percentage of the aggregate outstanding principal amount of the Bid-Option
Loans of all the Banks represented by the outstanding principal amount of the
Bid-Option Loans of such Bank.
"Bid-Option Quote" shall mean an offer by a Bank to make a
Bid-Option Loan in accordance with Section 2.2(d).
"Bid-Option Quote Request" shall have the meaning ascribed
thereto in Section 2.2(b).
"Bid-Option Rate" shall mean, with respect to any Bid-Option
Loan, the Bid-Option Rate, as defined in Section 2.2(d)(ii)(E), that is offered
for such Loan.
"Bill" shall mean a bill of exchange as defined in the
Australian Bills of Exchange Act 1909, as amended, or any successor act or
code, but shall not include a check.
"Borrowing" shall mean the aggregation of Advances made to any
Borrower, or continuations and conversions of such Advances, made pursuant to
Article II on a single date and for a single Interest Period. A Borrowing may
be referred to for purposes of this Agreement by reference to the type of Loan
comprising the relating Borrowing, e.g., a "Floating Rate Borrowing" if such
Loans are Floating Rate Loans, an "Interbank Offered Rate Borrowing" if such
Loans are Interbank Offered Rate Loans or a "Bid- Option Borrowing" if such
Loans are Bid-Option Loans. Floating Rate Borrowings and Fixed Rate Syndicated
Borrowings may be similarly collectively referred to as "Syndicated
Borrowings".
"Borrowing Subsidiary" shall mean each of the Subsidiaries of
the Company set forth on Schedule 1.1(a) on the Effective Date together with
any other Subsidiary of the Company upon request by the Company to the Agent
for designation of such Subsidiary as a "Borrowing Subsidiary" hereunder so
long as (a) the Company guarantees the obligations of such new Borrowing
Subsidiary pursuant to the terms of the Guaranty, (b) such new Borrowing
Subsidiary delivers Notes executed in favor of each Bank and (c) the Company
and such new Borrowing Subsidiary execute an agreement in the form of Exhibit B
hereto.
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which (a) the Agent is not open to the public for carrying on
substantially all of its banking functions or (b) if such reference relates to
the date for payment or purchase of any amount
-4-
<PAGE> 10
denominated in any currency other than Dollars, banks are not generally open to
the public for carrying on substantially all of their banking functions in the
principal financial center of the country issuing such currency.
"CAD" shall mean Canadian Dollars.
"Canadian Domestic Rate" shall mean, with respect to any
Interbank Interest Period, the per annum interest rate which is determined by
the Agent in accordance with the following formula (such sum to be rounded
upward, if necessary, to the nearest whole multiple of 1/16th of 1%):
1 = 1 (-) z
- - ---
x y 365
where: "x" is the Canadian Domestic Rate;
"y" is the discount rate (express as a decimal) quoted
by NBD Bank, Canada at its main office in Toronto at 10:00 a.m. (Toronto time)
two (2) Business Day's prior to the first day of such Interbank Interest Period
as the discount rate at which NBD Bank, Canada would purchase Bankers
Acceptances having a tenor and aggregate face principal amount the same as such
Interbank Interest Period applicable to, and the principal amount of, the
relevant Interbank Offered Rate Advance requested by the Borrowers; and
"z" is the duration in days of such Interbank Interest
Period.
"Capital Lease" of any person shall mean any lease which, in
accordance with generally accepted accounting principles, is capitalized on the
books of such person.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations thereunder.
"C/L/C" shall mean any commercial letter of credit issued by
the Agent hereunder.
"Commitment" shall mean, with respect to each Bank, the
commitment of each such Bank to make Syndicated Loans and to participate in
Letter of Credit Advances made through the Agent pursuant to Section 2.1, in
amounts not exceeding in aggregate principal amount outstanding at any time the
respective commitment amount for each such Bank set forth next to the name of
each such Bank in the signature pages hereof, as such amounts may be reduced
from time to time pursuant to Section 2.4. The Commitment of each Bank shall
be composed of the "Tranche A Commitment" and the "Tranche B Commitment".
"Consolidated" or "consolidated" shall mean, when used with
reference to any financial term in this Agreement, the aggregate for the
Company and its consolidated Subsidiaries of the amounts signified by such term
for all such persons determined on a consolidated basis in accordance with
generally accepted accounting principles.
-5-
<PAGE> 11
"Contingent Liabilities" of any person shall mean, as of any
date, all obligations of such person or of others for which such person is
contingently liable, as obligor, guarantor, surety or in any other capacity,
or in respect of which obligations such person assures a creditor against loss
or agrees to take any action to prevent any such loss (other than endorsements
of negotiable instruments for collection in the ordinary course of business),
including without limitation all reimbursement obligations of such person in
respect of any letters of credit, surety bonds or similar obligations and all
obligations of such person to advance funds to, or to purchase assets, property
or services from, any other person in order to maintain the financial condition
of such other person.
"Cumulative Net Income" of any person shall mean, as of any
date, the net income (after deduction for income and other taxes of such person
determined by reference to income or profits of such person) for the period
commencing on the specified date through the end of the most recently completed
fiscal year of such person (but without reduction for any net loss incurred for
any fiscal year during such period), taken as one accounting period, all as
determined in accordance with generally accepted accounting principles.
"Default" shall mean any of the events or conditions described
in Section 6.1 which might become an Event of Default with notice or lapse of
time or both.
"Designated Borrower" shall mean, in relation to any Advance,
the Borrower nominated by the Treasury Manager as the Designated Borrower in
the request for such Advance.
"Dollar Equivalent" shall mean, with respect to each Loan, the
sum in Dollars resulting from the conversion of the amount of such Loan from
the Permitted Currency in which such Loan is denominated into Dollars at the
most favorable spot exchange rate determined by the Agent to be available to it
for the purchase of such Permitted Currency with Dollars at approximately 11:00
a.m. local time of the Applicable Lending Office on the date any Loan is
disbursed or rolled over, or on such other date as a determination of the
Dollar Equivalent is made, which rate shall be substantially representative of
the market rate.
"Dollars" and "$" shall mean the lawful money of the United
States of America.
"EBIT" shall mean, with respect to any person, for any period,
the sum of (a) operating net income or loss plus (b) all amounts deducted in
determining such operating net income or loss on account of (i) Interest
Expense and (ii) taxes based on or measured by income, all as determined in
accordance with generally accepted accounting principles.
"Effective Date" shall mean the effective date specified in
the final paragraph of this Agreement.
"Environmental Laws" at any date shall mean all provisions of
law, statute, ordinances, rules, regulations, judgments, writs, injunctions,
decrees, orders, awards and standards which are applicable to any Borrower or
any Subsidiary and promulgated by the government of
-6-
<PAGE> 12
the United States of America or any foreign government or by any state,
province, municipality or other political subdivision thereof or therein or by
any court, agency, instrumentality, regulatory authority or commission of any
of the foregoing concerning the protection of, or regulating the discharge of
substances into, the environment.
"Equivalent" of an amount of one currency (the "first
currency") denominated in another currency (the "second currency"), as of any
date of determination, shall mean the amount of the second currency which could
be purchased with the amount of the first currency at the most favorable spot
exchange rate quoted by the Agent at approximately 11:00 a.m. local time of the
Applicable Lending Office on such date, which rate shall be substantially
representative of the market rate.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations thereunder.
"ERISA Affiliate" shall mean, with respect to any person, any
trade or business (whether or not incorporated) which, together with such
person or any Subsidiary of such person, would be treated as a single employer
under Section 414 of the Code.
"Event of Default" shall mean any of the events or conditions
described in Section 6.1.
"Federal Funds Rate" shall mean the per annum rate that is
equal to the per annum rate established and announced by the Agent from time to
time as the opening federal funds rate paid or payable by the Agent in its
regional federal funds market for overnight borrowings from other banks; as
conclusively determined by the Agent, absent manifest error, such rate to be
rounded up, if necessary, to the nearest whole multiple of one one-hundredth of
one percent (1/100 of 1%), which Federal Funds Rate shall change simultaneously
with any change in such announced rates.
"Fixed Rate Loan" shall mean any Fixed Rate Syndicated Loan or
Bid-Option Loan.
"Fixed Rate Syndicated Loan" means any Negotiated Rate Loan,
Term Loan or Interbank Offered Rate Loan.
"Floating Rate" shall mean the per annum rate equal to the
greater of (i) the Prime Rate in effect from time to time, or (ii) the sum of
one-half of one percent (1/2 of 1%) per annum plus the Federal Funds Rate in
effect from time to time; which Floating Rate shall change simultaneously with
any change in such Prime Rate or Federal Funds Rate, as the case may be.
"Floating Rate Loan" shall mean any Syndicated Loan which
bears interest at the Floating Rate.
-7-
<PAGE> 13
"Funded Debt" of any person shall mean all Indebtedness that
would, in accordance with generally accepted accounting principles, constitute
long term debt, including (a) any Indebtedness with a maturity of longer than
one year after the creation of such Indebtedness, (b) any Indebtedness
outstanding under a revolving credit or similar agreement (and any renewal or
extension thereof) providing for borrowings which constitute long term debt;
provided, however, that all Indebtedness outstanding under this Agreement shall
be deemed "Funded Debt" at all times regardless of the proper classification
under generally accepted accounting principles, (c) any Capital Lease and (d)
any guarantee with respect to Funded Debt of another person to the extent the
indebtedness or obligations guaranteed are not included in the liabilities of
the Company and its Subsidiaries determined on a consolidated basis as of the
date of the last balance sheet required to be furnished to the Banks pursuant
to Section 5.1(d)(ii) or 5.1(d)(iii) of this Agreement.
"generally accepted accounting principles" shall mean
generally accepted accounting principles in effect from time to time and
applied on a basis consistent with that reflected in the financial statements
referred to in Section 4.6, unless any change in generally accepted accounting
principles from those in effect on the Effective Date materially impacts the
calculation of the covenants set forth in Sections 5.2(a), (b) and (c).
"Guaranty" shall mean the guaranty entered into by the Company
for the benefit of the Agent and the Banks pursuant to this Agreement in the
form of Exhibit C hereto, as amended or modified from time to time.
"Indebtedness" shall mean (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price of property
or services, except for trade accounts payable arising in the ordinary course
of business that are not more than 90 days past due or as are reasonably being
contested, (iv) obligations as lessee under leases which have been in
accordance with generally accepted accounting principles, recorded as Capital
Leases, (v) obligations to purchase property or services if payment is required
regardless of whether such property is delivered or services are performed
(generally called "take or pay" contracts), but such obligations shall only be
included in an amount equal to the difference between the amount of the
required payment and the value to the Company or a Subsidiary of the Company of
the goods or services required to be delivered in connection with such required
payment, (vi) obligations in respect of currency or interest rate swaps or
comparable transactions valued at the maximum termination payment payable by
the obligor, other than any such contracts entered into as hedges against
Indebtedness of the kinds referred to in clauses (i) and (ii) above, (vii) any
obligation of any Person other than the Company or its Subsidiaries, if such
obligation is secured by any lien on the property of the Company or any of its
Subsidiaries, provided that, the amount of any such Indebtedness shall be
limited to the greater of the then book value or fair market value of the
property securing any such lien, (viii) guaranties in respect of indebtedness
or obligations of other Persons of the kinds referred to in clauses (i) through
(vii) above, to the extent the indebtedness or obligations guaranteed are not
included in the liabilities of the Company and its Subsidiaries determined on a
consolidated basis as of the date of the last balance sheet required to be
furnished to the Banks
-8-
<PAGE> 14
pursuant to Section 5.1(d)(ii) or 5.1(d)(iii) of this Agreement, and (ix)
liabilities in respect of unfunded vested benefits under plans covered by Title
IV of ERISA.
"Interbank Offered Rate" applicable to any Interbank Interest
Period means, the per annum rate that is equal to the sum of:
(a) the Applicable Margin, plus
(b) other than an Interbank Offered Rate Loan
denominated in CAD and described in clause (ii) below, an Interbank Offered
Rate Loan denominated in AUD and described in clause (iii) below or an
Interbank Offered Rate Loan denominated in NZD and described in clause (iv)
below, (i) the rate per annum obtained by dividing (A) the per annum rate of
interest at which deposits in the Permitted Currency in which such Interbank
Offered Rate Loan is to be denominated for such Interbank Interest Period and
in an aggregate amount comparable to the amount of the related Interbank
Offered Rate Loan to be made by the Agent in its capacity as a Bank hereunder
are offered to the Agent by other prime banks in the applicable interbank
market selected by the Agent in its reasonable discretion, at approximately
11:00 a.m. local time of the Applicable Lending Office, on the second Interbank
Business Day prior to the first day of such Interbank Interest Period by (B) an
amount equal to one minus the stated maximum rate (expressed as a decimal) of
all reserve requirements including, without limitation, any marginal,
emergency, supplemental, special or other reserves, that is specified on the
first day of such Interbank Interest Period by the Board of Governors of the
Federal Reserve System (or any successor agency thereto) or the relevant fiscal
or monetary authority for determining the maximum reserve requirement with
respect to eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board) maintained by a member bank of such
System;all as conclusively determined by the Agent, absent manifest error, such
sum to be rounded up, if necessary, to the nearest whole multiple of one
one-hundredth of one percent (1/100 of 1%) or (ii) in the case of any Interbank
Offered Rate Loans denominated in CAD, the Canadian Domestic Rate or (iii) in
the case of any Interbank Offered Rate Loans denominated in AUD, the Australian
Domestic Rate or (iv) in the case of any Interbank Offered Rate Loan
denominated in NZD, the New Zealand Domestic Rate; which Interbank Offered Rate
shall change simultaneously with any change in the Applicable Margin.
"Interbank Business Day" shall mean, with respect to any
Interbank Offered Rate Loan, a day which is both a Business Day and a day on
which dealings in Dollar deposits or the relevant Permitted Currency are
carried out in the relevant interbank market.
"Interbank Interest Period" shall mean, with respect to any
Interbank Offered Rate Loan, the period commencing on the day such Interbank
Offered Rate Loan is made or converted to an Interbank Offered Rate Loan and
ending on the date one, two, three or six months thereafter, as any Borrower
may elect under Section 2.6 or 2.9, and each subsequent period commencing on
the last day of the immediately preceding Interbank Interest Period and ending
on the date one, two, three or six months thereafter, as any Borrower may elect
under Section 2.6 or 2.9, provided, however, that (a) any Interbank Interest
Period which commences on the
-9-
<PAGE> 15
last Interbank Business Day of a calendar month (or on any day for which there
is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Interbank Business Day of the appropriate
subsequent calendar month, (b) each Interbank Interest Period which would
otherwise end on a day which is not an Interbank Business Day shall end on the
next succeeding Interbank Business Day or, if such next succeeding Interbank
Business Day falls in the next succeeding calendar month, on the next preceding
Interbank Business Day, and (c) no Interbank Interest Period which would end
after the Termination Date shall be permitted.
"Interbank Offered Rate Loan" shall mean any Loan which bears
interest at the Interbank Offered Rate.
"Interest Expense" of any person shall mean, for any period,
all interest paid or payable by such person during such period.
"Interest Coverage Ratio" shall mean, as of any date, the
ratio of (a) Consolidated EBIT as calculated for the four most recently ended
consecutive fiscal quarters of the Company to (b) Consolidated Interest Expense
as calculated for the same four fiscal quarters.
"Interest Payment Date" shall mean (a) with respect to any
Negotiated Rate Loan, Interbank Offered Rate Loan or Bid-Option Loan, the last
day of each Interest Period with respect to such Negotiated Rate Loan,
Interbank Offered Rate Loan or Bid- Option Loan and, in the case of any
Interest Period exceeding three months, those days that occur during such
Interest Period at intervals of three months after the first day of such
Interest Period, and (b) in all other cases, within five (5) days of receipt of
an invoice containing a computation of interest due, which invoice shall be
prepared as of the last Business Day of each March, June, September and
December occurring after the date hereof, commencing with the first such
Business Day occurring after the date of this Agreement.
"Interest Period" shall mean any Negotiated Interest Period,
Interbank Interest Period or Bid-Option Interest Period.
"Invitation for Bid-Option Quotes" shall mean an invitation
for Bid-Option Quotes in the form referred to in Section 2.2(c).
"Letter of Credit" shall mean an S/L/C or C/L/C issued by the
Agent on behalf of the Banks for the account of any Borrower under an
application and related documentation acceptable to the Agent requiring, among
other things, immediate reimbursement by such Borrower to the Agent in respect
of all drafts or other demand for payment honored thereunder and all expenses
paid or incurred by the Agent relative thereto.
"Letter of Credit Advance" shall mean any issuance of a Letter
of Credit under Section 2.6 made pursuant to Section 2.1 in which each Bank
acquires a pro rata risk participation (based on such Bank's Commitment)
pursuant to Section 2.6(e).
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"Lien" shall mean any pledge, assignment, deed of trust,
hypothecation, mortgage, security interest, conditional sale or title retaining
contract, financing statement filing, or any other type of lien, charge,
encumbrance or other similar claim or right.
"Loan" shall mean any Syndicated Loan, any Swing Line Loan or
any Bid-Option Loan, as the context may require.
"Loan Documents" shall mean this Agreement, the Notes, the
Letter of Credit Documents, the Guaranty and any other agreement, instrument or
document executed at any time in connection with this Agreement.
"Maturity Date" shall mean, with respect to each Term Loan, a
date agreed upon between the Borrowers and the Agent on which such Term Loan
shall be paid in full; provided, that, no Maturity Date after the Termination
Date shall be permitted.
"Multiemployer Plan" shall mean any "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA or Section 414(f) of the Code.
"NBD" shall mean NBD Bank, N.A., a national banking
association.
"Negotiated Interest Period" shall mean, with respect to any
Negotiated Rate Loan, the period commencing on the day such Negotiated Rate
Loan is made or converted to a Negotiated Rate Loan and ending on the date
agreed upon among the Borrowers and the Agent at the time such Negotiated Rate
Loan is made, and each subsequent period commencing on the last day of the
immediately preceding Negotiated Interest Period and ending on the date agreed
upon among the Borrowers and the Agent at the time such Negotiated Rate Loan is
elected to be continued as a Negotiated Rate Loan by the Borrowers under
Section 2.9, provided no Negotiated Interest Period which would end after the
Termination Date shall be permitted.
"Negotiated Rate" shall mean, with respect to any Negotiated
Rate Loan, the rate per annum agreed upon between the Borrowers and the Agent
at the time such Negotiated Rate Loan is made.
"Negotiated Rate Loan" shall mean any Loan which bears
interest at the Negotiated Rate.
"Net Worth" of any person shall mean, as of any date, the
amount of any preferred stock, paid in capital and similar equity accounts plus
(or minus in the case of a deficit) the capital surplus and retained earnings
of such person and the amount of any foreign currency translation adjustment
account shown as a capital account of such person minus treasury stock.
"NZD" shall mean New Zealand Dollars.
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"New Zealand Domestic Rate" shall mean, with respect to any
Interbank Interest Period, the per annum interest rate which is determined by
the Agent by taking the average bid rate quoted on the page numbered "BKBM" of
the Reuters Monitor System at or about 10:45 a.m. (Wellington time) two (2)
Business Days prior to the first day of such Interbank Interest Period for not
less than five New Zealand trading banks (selected by the Agent in its sole
discretion and appearing on that page and so quoting) as being the mean buying
rate for a Bill having a tenor equal to such Interbank Interest Period,
eliminating the highest and the lowest mean rates and taking the average of the
remaining mean rates, provided that, if in respect of any Interbank Interest
Period less than five New Zealand trading banks have quoted rates on the page
numbered "BKBM" of the Reuters Monitor System, the rate shall be calculated as
in the manner set forth above by taking the rates otherwise quoted by five New
Zealand trading banks upon application by the Agent for a Bill of the same
tenor.
"Notes" shall mean the Syndicated Notes, the Bid-Option Notes
and the Swing Line Note; "Note" shall mean any Syndicated Note, any Bid-Option
Note or any Swing Line Note.
"Notice of Bid-Option Loan" shall have the meaning set forth
in Section 2.2(f).
"Original Dollar Amount" shall mean, with respect to any Loan,
the Equivalent in Dollars of the original principal amount of such Loan
specified in the related request therefor given by any Borrower pursuant to
Section 2.6 (a) as such amount is reduced by payments of principal made in
respect of such Loan in Dollars (or the Dollar Equivalent thereof in the case
of a payment made in a Permitted Currency other than Dollars) and (b) as such
amount is adjusted pursuant to Section 3.1(d).
"Overdue Rate" shall mean (a) in respect of principal of
Floating Rate Loans, a rate per annum that is equal to the sum of two percent
(2%) per annum plus the Floating Rate, (b) in respect of principal of Fixed
Rate Loans, a rate per annum that is equal to the sum of two percent (2%) per
annum plus the per annum rate in effect thereon until the end of the then
current Interest Period for such Loan and, thereafter, a rate per annum that is
equal to the sum of two percent (2%) per annum plus, with respect to Loans
denominated in Dollars, the Floating Rate and, with respect to Loans
denominated in any other Permitted Currency, the relevant market rate for such
Permitted Currency, and (c) in respect of other amounts payable by any Borrower
hereunder (other than interest), a per annum rate that is equal to the sum of
two percent (2%) per annum plus the Floating Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Permitted Currency" shall mean Dollars and any currency which
is freely transferable and convertible into Dollars and is issued by an OECD
country (as such designation shall change from time to time) or any other
currency approved by the Agent. A list of all
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OECD countries as of the Effective Date is set forth in Schedule 1.1(b), which
Schedule shall be updated, if necessary, by the Agent on each anniversary of
the Effective Date.
"Permitted Liens" shall mean Liens permitted by Section 5.2(d)
hereof.
"Person" or "person" shall include an individual, a
corporation, a limited liability company, an association, a partnership, a
trust or estate, a joint stock company, an unincorporated organization, a joint
venture, a trade or business (whether or not incorporated), a government
(foreign or domestic) and any agency or political subdivision thereof, or any
other entity.
"Plan" shall mean, with respect to any person, any pension
plan (other than a Multiemployer Plan) subject to Title IV of ERISA or to the
minimum funding standards of Section 412 of the Code which has been established
or maintained by such person, any Subsidiary of such person or any ERISA
Affiliate, or by any other person if such person, any Subsidiary of such person
or any ERISA Affiliate could have liability with respect to such pension plan.
"Prime Rate" shall mean the per annum rate announced by the
Agent from time to time as its "prime rate" (it being acknowledged that such
announced rate may not necessarily be the lowest rate charged by the Agent to
any of its customers), which Prime Rate shall change simultaneously with any
change in such announced rate.
"Prohibited Transaction" shall mean any non-exempt transaction
involving any Plan which is proscribed by Section 406 of ERISA or Section 4975
of the Code.
"Reportable Event" shall mean a reportable event as described
in Section 4043(b) of ERISA including those events as to which the thirty (30)
day notice period is waived under Part 2615 of the regulations promulgated by
the PBGC under ERISA.
"Required Banks" shall mean Banks holding not less than
sixty-six and two thirds percent of the aggregate principal amount of the
Syndicated Advances then outstanding (or sixty-six and two thirds percent of
the Commitments if no Syndicated Advances are then outstanding).
"Revolving Credit Advance" shall mean any Revolving Credit
Loan, any Letter of Credit Advance and any Swing Line Loan.
"Revolving Credit Loan" shall mean any Borrowing under Section
2.6 evidenced by the Syndicated Notes and made pursuant to Section 2.1(a).
"Short Term Borrowings" shall mean all Indebtedness for
borrowed money with an original maturity less than one year, other than the
Advances.
"S/L/C" shall mean any standby letter of credit issued by the
Agent hereunder.
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"Subsidiary" of any person shall mean any other person
(whether now existing or hereafter organized or acquired) in which (other than
directors' qualifying shares required by law) at least a majority of the
securities or other ownership interests of each class having ordinary voting
power or analogous right (other than securities or other ownership interests
which have such power or right only by reason of the happening of a
contingency), at the time as of which any determination is being made, are
owned, beneficially and of record, by such person or by one or more of the
other Subsidiaries of such person or by any combination thereof. Unless
otherwise specified, reference to "Subsidiary" shall mean a Subsidiary of the
Company.
"Subordinated Debt" of any person shall mean, as of any date,
that Indebtedness of such person for borrowed money which is expressly
subordinate and junior in the right of payment to the Advances of such person
to the Banks in manner and by agreement satisfactory in form and substance to
the Required Banks, which consent and agreement may not be unreasonably
withheld.
"Swing Line Facility" shall have the meaning specified in
Section 2.1(c).
"Swing Line Loan" shall mean any borrowing under Section 2.6
evidenced by a Swing Line Note and made pursuant to Section 2.1(c).
"Swing Line Note" means the promissory note of the Company
payable to the order of the Agent, in substantially the form annexed hereto as
Exhibit D, as amended or modified from time to time and together with any
promissory note or notes issued in exchange or replacement therefor.
"Syndicated Advance" shall mean any Syndicated Loan or any
Letter of Credit Advance.
"Syndicated Loan" shall mean any Revolving Credit Loan or any
Term Loan.
"Syndicated Note" shall mean any promissory note of the
Borrowers evidencing the Syndicated Loans in substantially the form annexed
hereto as Exhibit E, as amended or modified from time to time and together with
any promissory note or notes issued in exchange or replacement therefor.
"Term Loan" shall mean any borrowing under Section 2.6
evidenced by the Syndicated Notes and made pursuant to Section 2.1.
"Term Loan Fixed Rate" shall mean the per annum fixed rate of
interest established by the Agent for each Term Loan, such rate to be based on
(a) the cost of funds as determined by the Agent at the time the applicable
Term Loan is funded (taking into account any cross-currency or other hedges or
swap costs, whether in the interbank swap market or otherwise, recognized or
incurred by the Agent in funding the applicable Term Loan but without any
premium), with calculation of such cost of funds to be provided by the Agent in
reasonable detail
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upon request of the Company to the Agent plus (ii) the Applicable Margin
applicable to Interbank Offered Rate Loans.
"Termination Date" shall mean the earlier to occur of (a)
December 20, 1999 or such later date to which the Termination Date is extended
pursuant to Section 2.1(e) and (b) the date on which the Commitment shall be
terminated pursuant to Section 2.4 or 6.2.
"Total Capitalization" of any person shall mean the sum of Net
Worth of such person and Funded Debt of such person.
"Treasury Manager" includes any Affiliate of the Company
appointed in writing by the Company and the Borrowers as Treasury Manager under
this Agreement in the place of the person named above, and which is accepted by
the Agent for that purpose.
"Unfunded Benefit Liabilities" shall mean, with respect to any
Plan as of any date, the amount of the unfunded benefit liabilities determined
in accordance with Section 4001(a)(18) of ERISA.
1.2 Other Definitions; Rules of Construction. As used
herein, the terms "Agent", "Banks", "Company", "Borrowing Subsidiary",
"Borrowing Subsidiaries" and "this Agreement" shall have the respective
meanings ascribed thereto in the introductory paragraph of this Agreement.
Such terms, together with the other terms defined in Section 1.1, shall include
both the singular and the plural forms thereof and shall be construed
accordingly. All computations required hereunder and all financial terms used
herein shall be made or construed in accordance with generally accepted
accounting principles unless such principles are inconsistent with the express
requirements of this Agreement. Use of the terms "herein", "hereof", and
"hereunder" shall be deemed references to this Agreement in its entirety and
not to the Section or clause in which such term appears. References to
"Sections" and "subsections" shall be to Sections and subsections,
respectively, of this Agreement unless otherwise specifically provided.
ARTICLE II.
THE COMMITMENTS AND THE ADVANCES
2.1 Commitments of the Banks.
(a) Revolving Credit Advances. Each Bank agrees,
for itself only, subject to the terms and conditions of this Agreement, to make
Revolving Credit Loans to the Borrowers pursuant to Section 2.6 and to
participate in Letter of Credit Advances to the Borrowers pursuant to Section
2.6, from time to time from and including the Effective Date to but excluding
the Termination Date, not to exceed in aggregate principal amount at any time
outstanding the amount determined pursuant to Section 2.1(d). On the date of
each Advance, the Dollar Equivalent on such date of all Advances, including the
Advances to be made or requested on such date, shall not exceed the aggregate
Commitments.
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(b) Term Loans. Each Bank agrees, for itself
only, subject to the terms and conditions of this Agreement to make Term Loans
to the Borrowers pursuant to Section 2.6, from time to time from and including
the Effective Date to but excluding the Termination Date, which Term Loans (i)
shall be in a minimum amount of $5,000,000 and in integral multiples thereof
and (ii) shall result in the Commitments being automatically reduced by the
amount of each Term Loan as set forth in Section 2.4.
(c) Swing Line Loan. (i) The Treasury Manager
may request the Agent to make, and the Agent may, in its sole discretion
provided that the requirements of Section 2.8 are complied with by the
Borrowers at the time of such request, make, Swing Line Loans to the Borrowers
from time to time on any Business Day during the period from the Effective Date
until the Termination Date in an aggregate principal amount not to exceed at
any date the lesser of (A) $15,000,000 (the "Swing Line Facility") and (B) the
aggregate of the unused portions of the Revolving Credit Commitments of the
Banks as of such date. Each Bank's Revolving Credit Commitment shall be deemed
utilized by an amount equal to such Bank's pro rata share (based on such Bank's
Revolving Credit Commitment) of each Swing Line Loan for purposes of
determining the amount of Revolving Credit Advances required to be made by such
Bank, but no Bank's Revolving Credit Commitment, other than NBD's, shall be
deemed utilized for purposes of determining commitment fees under Section
2.5(a). Swing Line Loans shall bear interest at the Interbank Offered Rate or
the Negotiated Rate, as the Borrowers may elect hereunder. Within the limits
of the Swing Line Facility, so long as the Agent, in its sole discretion,
elects to make Swing Line Loans, the Borrowers may borrow and reborrow under
this Section 2.1(c)(i).
(ii) The Agent may at any time in its
sole and absolute discretion require that any Swing Line Loan be refunded by a
Revolving Credit Loan which is an Interbank Offered Rate Loan in the same
Permitted Currency in which such Swing Line Loan is denominated, and upon
notice thereof by the Agent to the Company and the Banks, the Borrowers shall
be deemed to have requested a Revolving Credit Loan bearing interest at the
Interbank Offered Rate in an amount equal to the amount of any such Swing Line
Loan in the same Permitted Currency in which such Swing Line Loan is
denominated, and such Revolving Credit Loan shall be made to refund such Swing
Line Loan. Each Bank shall be absolutely and unconditionally obligated (except
as set forth in Section 2.1(c)(i)) to fund its pro rata share (based on such
Bank's Commitment) of such Revolving Credit Loan and such obligation shall not
be affected by any circumstance, including, without limitation, (i) any
set-off, counterclaim, recoupment, defense or other right which such Bank or
the Company or any of its Subsidiaries may have against the Agent, any Borrower
or any of their respective Subsidiaries or anyone else for any reason
whatsoever; (ii) the occurrence or continuance of a Default or an Event of
Default; (iii) any adverse change in the condition (financial or otherwise) of
any Borrower or any of its Subsidiaries; (iv) any breach of this Agreement by
any Borrower or any of their respective Subsidiaries or any other Bank; or (v)
any other circumstance, happening or event whatsoever, whether or not similar
to any of the foregoing (including any Borrower's failure to satisfy any
conditions contained in Article II or any other provision of this Agreement).
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(d) Limitation on Amount of Advances.
Notwithstanding anything in this Agreement to the contrary, the aggregate
principal amount of the Revolving Credit Advances made by any Bank at any time
outstanding shall not exceed the amount of its respective Commitment as of the
date any such Advance is made, provided, however, that the aggregate principal
amount of Letter of Credit Advances outstanding at any time shall not exceed
$10,000,000. The Revolving Credit Commitment of each Bank shall be composed of
the Tranche A Commitment and the Tranche B Commitment. The Tranche A
Commitment shall be activated automatically on the Effective Date. The Tranche
B Commitment shall be activated upon the Borrowers providing notice to the
Agent of its request for activation of the Tranche B Commitment, which notice
shall specify the amount of the Tranche B Commitment to be activated, which
shall be in a minimum amount of $5,000,000 and in integral multiples of
$1,000,000 and the effective date of such activation. Activation of such
Commitment shall be effective upon the Company providing the Agent and the
Banks: (i) a certification by the chief financial officer of the Company,
indicating expected compliance with Sections 5.2(a), (b) and (c), after taking
such Borrowings, if any, into effect, and (ii) payment of the activation fee
set forth in Section 2.5(c). Any activated portion of the Tranche B Commitment
shall, from the date of such activation, become a part of the Tranche A
Commitment.
(e) Extensions. The Banks shall consider annual
requests for the extension of the Termination Date. The Company shall deliver
a notice in writing to the Agent on or before September 30 of each year in the
event the Company chooses not to extend the Termination Date. The Agent shall
provide notice to each of the Banks within 5 Business Days after September 30
of each year as to whether the Agent has or has not received such election by
the Company not to extend the Termination Date. Each of the Banks agrees to
provide notice in writing to the Agent of its agreement or refusal to extend
such Termination Date on or before October 30 of each year; provided, however,
that the failure of any Bank to so communicate its agreement or refusal shall
be deemed to be such Bank's refusal to so extend the Termination Date. The
determination to extend or not to extend the Termination Date shall be given or
withheld by each Bank in its absolute and sole discretion and any such
agreement or refusal once given shall not be revocable by any Bank prior to the
then applicable Termination Date. No extension of the Termination Date shall
in any event be effective until the Agent shall have received agreements to so
extend from each of the Banks; provided, however, that if any Bank refuses to
extend the Termination Date, the Agent shall provide notice to the Company and
(i) the Revolving Credit Commitment of each Bank shall remain unchanged and the
Total Commitment and the Percentage of Total Commitments shall be modified
accordingly or (ii) additional lenders, as selected by the Company, shall be
added to the Agreement.
(f) Non-Pro Rata Loans. (i) Notwithstanding
anything contained herein to the contrary, each of the Borrowers, the Banks and
the Agent agree that a Bank shall not fund its pro rata portion of any Loan if
such Bank cannot make such Loan free of withholding taxes so long as one or
more Banks is able to make such Loan free of withholding taxes. The non-pro
rata funding of such Loans shall not affect the pro rata share of the aggregate
amount of Advances outstanding at any time. For purposes of determining the
commitment fees under Section 2.5(a), such Loans shall be considered usage of
the Commitment of the Bank or Banks
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funding such Loan and shall not be considered usage of the Commitment of the
non-funding Bank or Banks.
(ii) Any funding Bank under Section
2.1(f) above may at any time in its sole discretion require that the
non-funding Bank or Banks fund each of their pro rata portion of the Loans
herein described. Each non-funding Bank shall be absolutely and
unconditionally obligated to fund its pro rata share (based on such Bank's
Commitment) of such Loan and such obligation shall not be affected by any
circumstance, including, without limitation (A) any set-off, counterclaim,
recoupment, defense or other right which such Bank or the Company or any of its
Subsidiaries may have against the Agent, any Borrower or any of their
respective Subsidiaries or anyone else for any reason whatsoever; (B) the
occurrence or continuance of a Default or an Event of Default; (C) any adverse
change in the condition (financial or otherwise) of any Borrower or any of its
Subsidiaries; (D) any breach of this Agreement by any Borrower or any of their
respective Subsidiaries or any other Bank; or (E) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing
(including any Borrower's failure to satisfy any conditions contained in
Article II or any other provision of this Agreement). Any Bank which requires
payments from any Borrower pursuant to Section 3.4 with respect to its making
of any Loan described in this Section 2.1(f) may be replaced by the Company in
its sole discretion.
2.2 Bid-Option Loans.
(a) The Bid-Option. From the Effective Date to
but excluding the Termination Date, the Treasury Manager may, as set forth in
this Section 2.2, request the Banks to make offers to make Bid-Option Loans to
a Designated Borrower. Each Bank may, but shall have no obligation to, make
such offers and such Designated Borrower may, but shall have no obligation to,
accept any such offers, in the manner set forth in this Section 2.2;
furthermore, each Bank may limit the aggregate amount of Bid- Option Loans when
quoting rates for more than one Bid-Option Interest Period in any Bid-Option
Quote, provided that such limitation shall not be less than the minimum amounts
required hereunder for Bid-Option Loans and the Designated Borrower may choose
among the Bid-Option Loans if such limitation is imposed; provided, that the
aggregate outstanding principal amount of Bid-Option Loans shall not at any
time exceed the lower of (i) the excess of (A) the aggregate amount of the
Commitments over (B) the sum of the aggregate outstanding principal amount of
Syndicated Advances or (ii) forty percent (40%) of the aggregate amount of the
Commitments (as the same may be reduced in accordance with the terms of this
Agreement);
(b) Bid-Option Quote Request. When the Treasury
Manager wishes to request offers to make Bid-Option Loans under this Section
2.2, it shall transmit to the Agent by telex or telecopy a Bid-Option Quote
Request substantially in the form of Exhibit F hereto so as to be received no
later than 11:00 a.m. Detroit time on the Business Day next preceding the date
of the Loan proposed therein specifying:
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(A) the proposed date of the Bid-Option
Loan, which shall be a Business Day;
(B) the Designated Borrower;
(C) the aggregate amount of such
Bid-Option Loan, which shall be a minimum of $5,000,000 or a larger multiple of
$1,000,000; and
(D) the duration of the Interest Period
applicable thereto, subject to the provisions of the definition of Interest
Period.
A Borrower may request offers to make Bid-Option Loans for more than one
Bid-Option Interest Period in a single Bid-Option Quote Request.
(c) Invitation for Bid-Option Quotes. Promptly
upon receipt of a Bid-Option Quote Request, the Agent shall send to the Banks
by telecopy (or telephone promptly confirmed by telecopy) an Invitation for
Bid-Option Quotes substantially in the form of Exhibit G hereto, which shall
constitute an invitation by the Treasury Manager and the Designated Borrower to
each Bank to submit Bid-Option Quotes offering to make the Bid-Option Loans to
which such Bid-Option Quote Request relates in accordance with this Section
2.2.
(d) Submission and Contents of Bid-Option Quotes.
(i) Each Bank may submit a Bid-Option Quote containing an offer or offers to
make Bid-Option Loans in response to any Invitation for Bid-Option Quotes.
Each Bid-Option Quote must comply with the requirements of this subsection (d)
and must be submitted to the Agent by telecopy (or by telephone promptly
confirmed by telecopy) at its office referred to in Section 8.2 not later than
10:00 a.m. Detroit time on the proposed date of the Borrowing; provided that
Bid-Option Quotes submitted by the Agent (or any Affiliate of the Agent) in the
capacity of a Bank may be submitted, and may only be submitted, if the Agent or
such Affiliate notifies the Borrower of the terms of the offer or offers
contained therein not later than 9:45 a.m. Detroit time on the proposed date of
such Borrowing. Subject to Article VI, any Bid- Option Quote so made shall be
irrevocable except with the written consent of the Agent given on the
instructions of the Treasury Manager.
(ii) Each Bid-Option Quote shall be in
substantially the form of Exhibit H hereto, but may be submitted to the Agent
by telephone with prompt confirmation by delivery to the Agent of such written
Bid-Option Quote, and shall in any case specify:
(A) the proposed date of the
Borrowing;
(B) the principal amount of the
Bid-Option Loan for which each such offer is being made, which principal amount
(x) must be in a minimum of $5,000,000 or a larger multiple of $1,000,000, and
(y) may not exceed the principal amount of the Bid-Option Loans for which
offers were requested;
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(C) the Interest Period(s) for
which each such Bid-Option Rate is offered;
(D) the rate of interest per annum
(rounded to the nearest 1/100 of 1%) (the "Bid- Option Rate") offered for each
such Bid-Option Loan;
(E) the identity of the quoting
Bank.
(iii) Any Bid-Option Quote shall be
disregarded if it:
(A) is not substantially in the
form of Exhibit H hereto (or is not submitted by telephone to the Agent with
prompt written confirmation to follow) or does not specify all of the
information required by clause (ii) of this subsection (d);
(B) contains qualifying,
conditional or similar language;
(C) proposes terms other than or in
addition to those set forth in the applicable Invitation for Bid-Option Quotes;
or
(D) arrives after the time set
forth in Section 2.2(d)(i);
provided that a Bid-Option Quote shall not be disregarded pursuant to clause
(B) or (C) above solely because it contains an indication that an allocation
that might otherwise be made to it pursuant to Section 2.2(g) would be
unacceptable. The Agent shall notify the Treasury Manager of any disregarded
Bid-Option Quote.
(e) Notice to Borrower. The Agent shall promptly
notify the Treasury Manager of the terms of any Bid- Option Quote submitted by
a Bank that is in accordance with Section 2.2(d). Any Bid-Option Quote not
made in accordance with Section 2.2(d) shall be disregarded by the Agent. The
Agent's notice to the Treasury Manager shall specify (i) the aggregate
principal amount of Bid-Option Loans for which offers have been received for
each Bid-Option Interest Period specified in the related Bid-Option Quote
Request, and (ii) the respective principal amounts and respective Bid-Option
Rates so offered.
(f) Acceptance and Notice by Borrower. Not later
than 11:00 a.m. Detroit time on the proposed date of a Borrowing, the Treasury
Manager shall notify the Agent of the Designated Borrower's acceptance or
non-acceptance of the offers so notified to it pursuant to subsection (e) of
this Section and the Agent shall, promptly upon receiving such notice from the
Treasury Manager, notify each Bank whose Bid-Option Quote has been accepted.
In the case of acceptance, such notice (a "Notice of Bid-Option Loan") shall
specify the aggregate principal amount of offers for the applicable Interest
Period(s) that have been accepted. The Borrower may accept any Bid-Option
Quote in whole or in part; provided that:
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(i) the aggregate principal amount of
each Bid-Option Loan may not exceed the applicable amount set forth in the
related Bid-Option Quote Request for the applicable Bid-Option Interest Period;
(ii) the principal amount of each
Bid-Option Loan must be $5,000,000 or a larger multiple of $1,000,000;
(iii) acceptance of offers may only be
made on the basis of ascending Bid-Option Rates; and
(iv) the Borrower may not accept any
offer that is described in Section 2.2(d)(iii) or that otherwise fails to
comply with the requirements of this Agreement.
(g) Allocation by Agent. If offers are made by
two or more Banks with the same Bid-Option Rates for a greater aggregate
principal amount than the amount in respect of which offers are accepted for
the related Interest Period, the principal amount of Bid-Option Loans in
respect of which such offers are accepted shall be allocated by the Agent among
such Banks as nearly as possible (in such multiples, not greater than $100,000,
as the Agent may deem appropriate) in proportion to the aggregate principal
amount of such offers. Determinations by the Agent of the amounts of
Bid-Option Loans shall be conclusive in the absence of manifest error.
2.3 Effect on Commitments. Notwithstanding anything in
this Agreement to the contrary, the sum of the aggregate outstanding principal
amount of all Revolving Credit Loans plus, all Letter of Credit Advances (being
the maximum amount available to be drawn under the related Letters of Credit
plus the amount of any draws under Letters of Credit that have not been
reimbursed) plus, all Bid-Option Loans plus, all Swing Line Loans shall not at
any time exceed the aggregate amount of the Commitments of all Banks. Each
Bank's obligation to make its pro rata portion of any subsequently requested
Revolving Credit Loan or Letter of Credit Advance shall not be affected by the
making by such Bank of a Bid-Option Loan, and the Bank which has outstanding
Bid-Option Loans may be obligated to exceed its Commitment, provided, that, Bid
Option Loans made by any Bank shall be deemed usage of such Bank's Revolving
Credit Commitment for purposes of determining commitment fees under Section
2.5(a), and provided, further, that, as stated above, the aggregate principal
amount of all Revolving Credit Loans, all Letters of Credit Advances, all Swing
Line Loans and all Bid-Option Loans shall not at any time exceed the aggregate
amount of the Commitments of all Banks.
2.4 Termination and Reduction of Commitments. (a) (i)
The Company shall have the right to terminate or reduce the Commitments at any
time and from time to time at its option, provided that (A) the Treasury
Manager shall give five days' prior written notice of such termination or
reduction to the Agent (with sufficient executed copies for each Bank)
specifying the amount and effective date thereof, (B) each partial reduction of
the Commitments shall be in a minimum amount of $5,000,000 and in integral
multiples of $1,000,000 and shall reduce the Commitments of all of the Banks
proportionately in accordance with the respective commitment
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amounts for each such Bank set forth in the signature pages hereof next to the
name of each such Bank, (C) no such termination or reduction shall be permitted
with respect to any portion of the Commitments as to which a request for a
Borrowing pursuant to Section 2.6 is then pending and (D) the Commitments may
not be terminated if any Loans are then outstanding and may not be reduced
below the principal amount of Loans then outstanding.
(ii) The Commitments then outstanding
shall automatically be reduced by an amount equal to each Term Loan made
pursuant to Section 2.6.
The Commitments or any portion thereof terminated or reduced pursuant to this
Section 2.4(a), whether optional or mandatory, may not be reinstated. The
Borrowers shall immediately prepay the Loans to the extent they exceed the
reduced aggregate Commitments pursuant hereto, and any reduction hereunder
shall reduce the Commitment amount of each Bank proportionately in accordance
with the respective Commitment amounts for each such Bank set forth on the
signature pages hereof next to the name of each such Bank.
(b) For purposes of this Agreement, a Letter of
Credit Advance (i) shall be deemed outstanding in an amount equal to the sum of
the maximum amount available to be drawn under the related Letter of Credit on
or after the date of determination and on or before the stated expiry date
thereof plus the amount of any draws under such Letter of Credit that have not
been reimbursed and (ii) shall be deemed outstanding at all times on and before
such stated expiry date or such earlier date on which all amounts available to
be drawn under such Letter of Credit have been fully drawn, and thereafter
until all related reimbursement obligations have been paid. Upon each payment
made by the Agent in respect of any draft or other demand for payment under any
Letter of Credit, the amount of any Letter of Credit Advance outstanding
immediately prior to such payment shall be automatically reduced by the amount
of each Revolving Credit Loan deemed advanced in respect of the related
reimbursement obligation of the Borrower.
2.5 Fees. (a) The Company agrees to pay to the Banks a
commitment fee on the daily average unused amount of the Commitments, for the
period from the Effective Date to but excluding the Termination Date, at a rate
equal to (i) in the case of the Tranche A Commitment, the Applicable Margin for
the Tranche A Commitment and (ii) in the case of the Tranche B Commitment, the
Applicable Margin for the Tranche B Commitment. Accrued commitment fees shall
be payable quarterly in arrears in Dollars within five (5) days of receipt of
an invoice containing a computation of commitment fees due, which invoice shall
be prepared as of the last Business Day of each March, June, September and
December, commencing on the first such Business Day occurring after the date of
this Agreement, and on the Termination Date.
(b) The Borrowers agree to pay (i) with respect to
S/L/Cs, a fee to the Banks computed at the Applicable Margin on the maximum
amount available to be drawn from time to time under such S/L/C for the period
from and including the date of issuance of such S/L/C to and including the
stated expiry date of such S/L/C, which fee shall be paid annually in advance
at the time such S/L/C is issued or amended, a portion of which the Agent shall
retain
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for its own account to be negotiated between the Agent and the Banks at the
time of the initial request of a Letter of Credit Advance, and (ii) with
respect to C/L/Cs, a fee to the Banks to be negotiated at the time of issuance
between the Agent and the Borrower requesting such C/L/C, which fees shall be
paid at each time as any C/L/C is presented or drawn upon, in whole or in part.
Such fees are nonrefundable and the Borrowers shall not be entitled to any
rebate of any portion thereof if such Letter of Credit does not remain
outstanding through its stated expiry date or for any other reason. The
Borrowers further agree to pay to the Agent, on demand, such other customary
and reasonable administrative fees, charges and expenses of the Agent in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued in accordance with a schedule of fees provided by the Agent to the
Borrowers.
(c) In addition to the commitment fees payable
pursuant to Section 2.5(a), the Borrowers agree to pay to the Banks an
activation fee in an amount equal to the average difference between the
Applicable Margin for Tranche A Commitment and the Applicable Margin for the
Tranche B Commitment on the amount of the activated portion and the Borrowers
also agree to pay to the Banks an amount equal to the average difference
between the Applicable Margin for the Tranche A Commitment and the Applicable
Margin for the Tranche B Commitment during the period 90 days prior to the
activation date on the activated portion, which fee shall be calculated for the
period from and including 90 days prior to the activation date to and including
the activation date.
(d) The Borrowers agrees to pay to the Agent an
agency fee for its services as Agent under this Agreement in such amounts as
may from time to time be agreed upon by the Borrowers and the Agent.
2.6 Disbursement of Syndicated Advances. (a) Except with
respect to Swing Line Loans, the Treasury Manager shall give the Agent notice
of its request for each Syndicated Advance in substantially the form of Exhibit
I hereto at the principal office of the Agent and at the Applicable Lending
Office of the Agent with respect to such Advance not later than 10:00 a.m.
local time of the Applicable Lending Office (i) three Interbank Business Days
prior to the date such Advance is requested to be made if such Borrowing is to
be made as an Interbank Offered Rate Syndicated Borrowing or as a Term Loan,
and (ii) three Business Days prior to the date any Letter of Credit Advance is
requested to be made and (iii) on the date such Syndicated Loan is requested to
be made if such Syndicated Loan is to be made as a Negotiated Rate Syndicated
Borrowing or a Floating Rate Syndicated Borrowing, which notice shall specify
the Designated Borrower for which such Advance is requested, whether an
Interbank Offered Rate Loan, Term Loan, Negotiated Rate Loan, Floating Rate
Loan or a Letter of Credit Advance is requested and, in the case of each
requested Fixed Rate Syndicated Loan, the Interest Period to be initially
applicable to such Loan and the Permitted Currency in which such Loan is to be
denominated. With respect to Swing Line Loans, the Treasury Manager shall
give the Agent notice of its request for each Swing Line Loan in substantially
the form of Exhibit I hereto at the principal office of the Agent and at the
Applicable Lending Office of the Agent with respect to
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<PAGE> 29
such Advance not later than 1:00 p.m. local time of the Applicable Lending
Office on the same Business Day any Swing Line Loan is requested to be made
which notice shall specify the Designated Borrower for which such Swing Line
Loan is requested. The Agent, on the same day any such notice is given, shall
provide notice of such requested Syndicated Loan to each Bank (which notice
shall be provided by 2:00 p.m. local time of the Applicable Lending Office with
respect to Floating Rate Loans or Negotiated Rate Loans). Subject to the terms
and conditions of this Agreement, the proceeds of each such requested
Syndicated Loan shall be made available to the Designated Borrower requesting
such Loan by depositing the proceeds thereof, in immediately available, freely
transferable cleared funds, in the case of any Syndicated Loan denominated in
Dollars in an account maintained and designated by such Borrower, and, in all
other cases, in an account maintained and designated by such Borrower at a bank
acceptable to the Agent in the principal financial center of the country
issuing the Permitted Currency in which such Loan is denominated or in such
other place specified by the Agent. Subject to the terms and conditions of
this Agreement, the Agent shall, on the date any Letter of Credit Advance is
requested to be made, issue the related Letter of Credit on behalf of the Banks
for the account of the Designated Borrower requesting such Letter of Credit.
Notwithstanding anything herein to the contrary, the Agent may decline to issue
any requested Letter of Credit on the basis that the beneficiary, the purpose
of issuance or the terms or the conditions of drawing are unacceptable to it in
its discretion.
(b) Each Bank, on the date any Syndicated Loan is
requested to be made, shall make its pro rata share of such Syndicated Loan
available in immediately available, freely transferable cleared funds for
disbursement to the Designated Borrower requesting such Loan pursuant to the
terms and conditions of this Agreement, in the case of any Syndicated Loan
denominated in Dollars, at the principal office of the Agent and, in all other
cases, to the account of the Agent at its designated branch or correspondent
bank in the country issuing such Permitted Currency in which such Loan is
denominated or at such other place specified by the Agent. Unless the Agent
shall have received notice from any Bank prior to the date such Syndicated Loan
is requested to be made under this Section 2.6 that such Bank will not make
available to the Agent such Bank's pro rata portion of such Loan, the Agent may
assume that such Bank has made such portion available to the Agent on the date
such Loan is requested to be made in accordance with this Section 2.6. If and
to the extent such Bank shall not have so made such pro rata portion available
to the Agent, the Agent may (but shall not be obligated to) make such amount
available to such Designated Borrower, and such Bank agrees to pay to the Agent
forthwith on demand such amount together with interest thereon, for each day
from the date such amount is made available to such Designated Borrower by the
Agent until the date such amount is repaid to the Agent, at a rate per annum
equal to the Federal Funds Rate or the relevant market rate with respect to
Permitted Currencies other than Dollars then in effect. If such Bank shall pay
such amount to the Agent together with interest, such amount so paid shall
constitute a Syndicated Loan by such Bank as part of the related Borrowing for
purposes of this Agreement. The failure of any Bank to make its pro rata
portion of any such Borrowing available to the Agent shall not relieve any
other Bank of its obligation to make available its pro rata portion of such
Loan on the date such Loan is requested to be made, but no Bank shall be
responsible for
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failure of any other Bank to make such pro rata portion available to the Agent
on the date of any such Loan.
(c) All Syndicated Loans made under this Section 2.6
shall be evidenced by the Syndicated Notes and all Swing Line Loans made under
this Section 2.6 shall be evidenced by the Swing Line Note, and all such Loans
shall be due and payable and bear interest as provided in Article III. Each
Bank is hereby authorized by the Borrowers to record on the schedule attached
to the Notes, or in its books and records, the date, amount and type of each
Loan and the duration of the related Interest Period (if applicable), the
amount of each payment or prepayment of principal thereon, and the other
information provided for on such schedule, which schedule or books and records,
as the case may be, shall constitute prima facie evidence of the information so
recorded, provided, however, that failure of any Bank to record, or any error
in recording, any such information shall not relieve the Borrowers of their
obligation to repay the outstanding principal amount of the Loans, all accrued
interest thereon and other amounts payable with respect thereto in accordance
with the terms of the Notes and this Agreement. Subject to the terms and
conditions of this Agreement, each Borrower may borrow Revolving Credit Loans
under this Section 2.6, prepay Revolving Credit Loans pursuant to Section 3.1
and reborrow Revolving Credit Loans but not Term Loans under this Section 2.6.
(d) All Bid-Option Loans shall be disbursed
directly by the Bank making such Bid-Option Loan to the Designated Borrower by
1:30 p.m. Detroit time on the date such Bid-Option Loan is requested to be made
via wire transfer in immediately available funds to NBD Bank, N.A., 611
Woodward Avenue, Detroit, Michigan 48226, ABA Number 072000326, Attention:
Agency Administration, Reference: Invacare Bid-Option, confirm to Agency
Administration, Catherine Boles, Facsimile No. (313) 225- ____ or as otherwise
directed by the Borrowers.
(e) Nothing in this Agreement shall be construed to
require or authorize any Bank to issue any Letter of Credit, it being
recognized that the Agent has the sole obligation under this Agreement to issue
Letters of Credit on behalf of the Banks, and the Commitment of each Bank with
respect to Letter of Credit Advances is expressly conditioned upon the Agent's
performance of such obligations. Upon such issuance by the Agent, each Bank
shall automatically acquire a pro rata risk participation interest in such
Letter of Credit Advance based on the amount of its respective Commitment. If
the Agent shall honor a draft or other demand for payment presented or made
under any Letter of Credit, the Agent shall provide notice thereof to each Bank
on the date such draft or demand is honored unless a Borrower shall have
satisfied its reimbursement obligation by payment to the Agent on such date.
Each Bank, on such date, shall make its pro rata share of the amount paid by
the Agent available in immediately available funds at the principal office of
the Agent for the account of the Agent. If and to the extent such Bank shall
not have made such pro rata portion available to the Agent, such Bank and the
Borrowers severally agree to pay to the Agent forthwith on demand such amount
together with interest thereon, for each day from the date such amount was paid
by the Agent until such amount is so made available to the Agent at a per annum
rate equal to the Federal Funds Rate or the relevant market rate with respect
to Permitted Currencies other than Dollars. If such Bank
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<PAGE> 31
shall pay such amount to the Agent together with such interest, such amount so
paid shall constitute a Revolving Credit Loan by such Bank as part of the
Revolving Credit Borrowing disbursed in respect of the reimbursement obligation
of the Company for purposes of this Agreement. The failure of any Bank to make
its pro rata portion of any such amount paid by the Agent available to the
Agent shall not relieve any other Bank of its obligation to make available its
pro rata portion of such amount, but no Bank shall be responsible for failure
of any other Bank to make such pro rata portion available to the Agent.
2.7 Conditions for First Disbursement. The obligation of
each Bank to make its first Advance hereunder is subject to receipt by each
Bank and the Agent of the following documents and completion of the following
matters, in form and substance reasonably satisfactory to each Bank and the
Agent:
(a) Charter Documents. Certificates of recent
date of the appropriate authority or official of the Company's state of
incorporation listing all charter documents of the Company, on file in that
office and certifying as to the good standing and corporate existence of the
Company, together with copies of such charter documents of the Company,
certified as of a recent date by such authority or official and certified as
true and correct as of the Effective Date by a duly authorized officer of the
Company;
(b) By-Laws and Corporate Authorizations. Copies
of the by-laws of the Company together with all authorizing resolutions and
evidence of other corporate action taken by the Company to authorize the
execution, delivery and performance by the Company of this Agreement, the
Guaranty and the Notes and the consummation by the Company of the transactions
contemplated hereby, certified as true and correct as of the Effective Date by
a duly authorized officer of the Company;
(c) Incumbency Certificate. Certificates of
incumbency of each Borrower containing, and attesting to the genuineness of,
the signatures of those officers authorized to act on behalf of such Borrower
in connection with this Agreement and the Notes and the consummation by such
Borrower of the transactions contemplated hereby, certified as true and correct
as of the Effective Date by a duly authorized officer of each Borrower;
(d) Notes. The Notes, duly executed on behalf of
the Borrowers, for each Bank;
(e) Guaranty. The Guaranty duly executed by the
Company for the Banks;
(f) Legal Opinion. The favorable written opinion
of Thomas R. Miklich, Principal Legal Officer for the Company in the form of
Exhibit J attached hereto;
(g) Consents, Approvals, Etc. Copies of all
governmental and nongovernmental consents, approvals, authorizations,
declarations, registrations or filings, if any,
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<PAGE> 32
required on the part of the Company in connection with the execution, delivery
and performance of this Agreement, the Guaranty and the Notes or the
transactions contemplated hereby or as a condition to the legality, validity or
enforceability of this Agreement and the Notes, certified as true and correct
and in full force and effect as of the Effective Date by a duly authorized
officer of the Company, or, if none are required, a certificate of such officer
to that effect; and
(h) Payment and Termination of Existing Revolving
Credit Arrangements. Simultaneous with or promptly after the first Advance
hereunder, a copy of the notification from the Company terminating the
commitments under each of the following agreements: (i) Credit Agreement dated
as of January 26, 1993 among the Company, the banks named therein and National
City Bank, as agent; (ii) Credit Agreement dated as of January 26, 1993 among
Invacare France S.A.R.L., the Company, the banks named therein and Society
National Bank, as agent; and (iii) Amended and Restated Loan Agreement dated as
of January 26, 1993 among the Company, certain of its subsidiaries and NBD
Bank, N.A.
2.8 Further Conditions for Disbursement. The obligation
of each Bank to make any Advance (including its first Advance), or any
continuation or conversion under Section 2.9, is further subject to the
satisfaction of the following conditions precedent:
(a) The representations and warranties contained
in Article IV hereof and in any other Loan Document shall be true and correct
in all material respects on and as of the date such Advance is made, continued
or converted (both before and after such Advance is made, continued or
converted) as if such representations and warranties were made on and as of
such date; and
(b) No Event of Default and no Default shall
exist or shall have occurred and be continuing on the date such Advance is
made, continued or converted (whether before or after such Advance is made,
continued or converted);
(c) Prior to the issuance of the initial Letter
of Credit Advance, the Borrowers, the Agent and the Banks shall have entered
into an agreement containing terms and conditions regarding Letters of Credit,
which agreement shall be mutually satisfactory to all parties thereto.
(d) In the case of any Letter of Credit Advance,
the Borrower requesting such Letter of Credit Advance shall have delivered to
the Agent an application for the related Letter of Credit and other related
documentation requested by and acceptable to the Agent appropriately completed
and duly executed on behalf of such Borrower.
Each Borrower shall be deemed to have made a representation and warranty to the
Banks at the time of the making of, and the continuation or conversion of, each
Advance to the effects set forth in clauses (a) and (b) of this Section 2.8.
For purposes of this Section 2.8, the representations and warranties contained
in Section 4.6 hereof shall be deemed made with respect to the most recent
financial statements delivered pursuant to Section 5.1(d)(ii) and (iii).
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<PAGE> 33
2.9 Subsequent Elections as to Borrowings. The Treasury
Manager may elect (a) to continue a Fixed Rate Syndicated Borrowing of one
type, or a portion thereof, as a Fixed Rate Syndicated Borrowing of the then
existing type, or (b) may elect to convert a Fixed Rate Syndicated Borrowing,
or a portion thereof, to a Borrowing of another type or (c) elect to convert a
Floating Rate Borrowing, or a portion thereof, to a Fixed Rate Syndicated
Borrowing, or (d) elect to convert a Syndicated Loan denominated in a Permitted
Currency to a Syndicated Loan denominated in another Permitted Currency, in
each case by giving notice thereof to the Agent in substantially the form of
Exhibit K hereto at the principal office of the Agent and at the Applicable
Lending Office of the Agent with respect to such Loan not later than 10:00 a.m.
local time of the Applicable Lending Office (i) three Interbank Business Days
prior to the date any such continuation of or conversion to a Interbank Offered
Rate Syndicated Borrowing is to be effective and (ii) the date such
continuation or conversion is to be effective in all other cases, provided that
an outstanding Fixed Rate Syndicated Borrowing may only be converted on the
last day of the then current Interest Period with respect to such Borrowing,
and provided, further, if a continuation of a Borrowing as, or a conversion of
a Borrowing to, a Fixed Rate Syndicated Borrowing is requested, such notice
shall also specify the Interest Period to be applicable thereto upon such
continuation or conversion. The Agent, on the day any such notice is given,
shall provide notice of such election to the Banks. If the Treasury Manager
shall not timely deliver such a notice with respect to any outstanding Fixed
Rate Syndicated Borrowing, the Borrower shall be deemed to have elected to
convert such Fixed Rate Syndicated Borrowing to a Floating Rate Borrowing on
the last day of the then current Interest Period with respect to such
Borrowing.
2.10 Limitation of Requests and Elections.
Notwithstanding any other provision of this Agreement to the contrary, if, upon
receiving a request for a Fixed Rate Syndicated Borrowing pursuant to Section
2.6, or a request for a continuation of a Fixed Rate Syndicated Borrowing as a
Fixed Rate Syndicated Borrowing of the then existing type, or a request for
conversion of a Fixed Rate Syndicated Borrowing of one type to a Fixed Rate
Syndicated Borrowing of another type, or a request for a conversion of a
Floating Rate Borrowing to a Fixed Rate Syndicated Borrowing pursuant to
Section 2.9, (a) in the case of any Interbank Offered Rate Borrowing, deposits
in the relevant Permitted Currency for periods comparable to the Interest
Period elected by the Borrower are not available to any Bank in the relevant
interbank or secondary market and such Bank has provided to the Agent and the
Borrowers a certificate prepared in good faith to that effect, or (b) any Bank
reasonably determines that the Interbank Offered Rate will not adequately and
fairly reflect the cost to such Bank of making, funding or maintaining the
related Interbank Offered Rate Syndicated Loan and such Bank has provided to
the Agent and the Borrowers a certificate prepared in good faith to that
effect, or (c) by reason of national or international financial, political or
economic conditions or by reason of any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in effect, or the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by any Bank
with any directive of such authority (whether or not having the force of law),
including without limitation exchange controls, it is impracticable, unlawful
or impossible for any Bank (i) to make or fund the relevant Fixed Rate
Syndicated Borrowing or (ii) to continue such Fixed Rate Syndicated Borrowing
as a Fixed
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<PAGE> 34
Rate Syndicated Borrowing of the then existing type or (iii) to convert a Loan
to such a Fixed Rate Syndicated Loan, and such Bank has provided to the Agent
and the Borrowers a certificate prepared in good faith to that effect, then the
Borrowers shall not be entitled, so long as such circumstances continue, to
request a Fixed Rate Syndicated Borrowing of the affected type pursuant to
Section 2.6 or a continuation of or conversion to a Fixed Rate Syndicated
Borrowing of the affected type pursuant to Section 2.9. In the event that such
circumstances no longer exist, the Banks shall again honor requests, subject to
this Agreement, for Fixed Rate Syndicated Borrowings of the affected type
pursuant to Section 2.6, and requests for continuations of and conversions to
Fixed Rate Syndicated Borrowings of the affected type pursuant to Section 2.9.
2.11 Minimum Amounts; Limitation on Number of Borrowings.
Except for (a) Borrowings and conversions thereof which exhaust the entire
remaining amount of the Commitments, and (b) conversions or payments required
pursuant to Section 3.1(b) or Section 3.7, each Syndicated Loan and each
continuation or conversion pursuant to Section 2.9 and each prepayment thereof
shall be in a minimum amount of $1,000,000 and in integral multiples of
$500,000 and each Letter of Credit shall be in a minimum amount of $250,000.
Notwithstanding anything herein to the contrary, the Borrowers shall not be
permitted to request (a) that any Syndicated Loan be denominated in any
currency other than a Permitted Currency or (b) that any Syndicated Loan other
than a Interbank Offered Rate Loan or a Term Loan be denominated in a currency
other than Dollars.
2.12 Treasury Manager. Each Borrower authorizes the
Treasury Manager to act as its manager in making requests and in carrying out
as its manager and on its behalf all other functions conferred on the Treasury
Manager under this Agreement and all other ancillary functions. Each Borrower
further agrees that the Treasury Manager may nominate any Borrower as the
Designated Borrower, and agrees that the Advances allocated to it, and all
other acts carried out by the Treasury Manager falling within its authority,
shall be conclusive and binding on it and all parties. Neither any Bank nor
the Agent is or shall be deemed to be concerted as to the Treasury Manager's
compliance or otherwise with instructions from any Borrower. The content of
each request and every other notice delivered by the Treasury Manager shall be
irrevocable, and the Agent and the Banks shall be entitled to rely fully on
their content.
ARTICLE III.
PAYMENTS AND PREPAYMENTS
3.1 Principal Payments. (a) Unless earlier payment is
required under this Agreement, (i) the Borrowers shall pay to the Banks on the
Termination Date the entire outstanding principal amount of the Revolving
Credit Loans and (ii) the Borrowers shall pay to the Banks the outstanding
principal amount of each Term Loan on the Maturity Date of each such Term Loan.
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<PAGE> 35
(b) Unless earlier payment is required under this
Agreement, the Borrowers shall, on the maturity date of any Bid-Option Loan,
pay to the Bank of such Bid-Option Loan the outstanding principal amount of
such Loan.
(c) The Borrowers may at any time and from time
to time prepay all or a portion of the Loans without premium or penalty in the
case of Revolving Credit Loans, provided that (i) a Borrower may not prepay any
portion of any Loan as to which an election for continuation of or conversion
to a Fixed Rate Syndicated Loan is pending pursuant to Section 2.9, and (ii)
unless earlier payment is required under this Agreement or unless Borrower pays
all amounts required pursuant to Section 3.8, any Fixed Rate Syndicated Loan or
Bid-Option Loan may only be prepaid on the last day of the then current
Interest Period with respect to such Loan and (iii) such prepayment shall only
be permitted if the Treasury Manager shall have given notice thereof on the
Business Day of such prepayment with respect to prepayment of Floating Rate
Loans and Negotiated Rate Loans, not less than three Interbank Business Days'
notice thereof with respect to prepayment of Interbank Offered Rate Loans and
not less than three Business Days' notice thereof with respect to prepayment of
any Term Loan, such notice specifying the Loan or portion thereof to be so
prepaid and shall have paid to the Banks, together with such prepayment of
principal, all accrued interest to the date of payment on such Loan or portion
thereof so prepaid and all amounts owing to the Banks under Section 3.8 in
connection with such prepayment. Upon the giving of such notice, the aggregate
principal amount of such Loan or portion thereof so specified in such notice,
together with such accrued interest and other amounts, shall become due and
payable on the specified date.
(d) If, pursuant to Section 2.9, a Borrowing, or
portion thereof, is continued or converted, such Borrowing or portion thereof
shall be repaid on the last day of the related Interest Period in the Permitted
Currency in which such Borrowing is then denominated and (i) in the case of any
conversion, the Agent shall readvance to the Borrower making such request the
Equivalent of the Original Dollar Amount of the Borrowing or portion thereof as
has been so repaid by the Borrower in the Permitted Currency requested pursuant
to Section 2.7, and (ii) in the case of any continuation when the aggregate
outstanding amount of Syndicated Advances exceeds 90% of the aggregate
Commitments, the Agent shall readvance to the Borrower the same amount of such
Permitted Currency as has been so repaid. The Agent shall provide notice to
the Company of the activation of clause (ii) above. For purposes of effecting
the repayment required by this Section 3.1(c), the Agent shall apply the
proceeds of such readvance toward the repayment of such Borrowing or portion
thereof on the last day of the related Interest Period. In the case of any
conversion, the Agent shall be deemed to have applied the proceeds of such
Advance toward the purchase of the Permitted Currency to be repaid and to have
applied the proceeds of such purchase toward such repayment. If after any such
application there shall remain owing an amount of the Permitted Currency due to
the Agent, for the benefit of the Banks, or if an excess of such Permitted
Currency shall result, such Borrower shall pay to the Banks, or the Banks shall
pay to such Borrower the amount of such deficiency or such excess. In the case
of any continuation described in clause (ii) above, on the last day of such
Interest Period, the Original Dollar Amount of such Borrowing or portion
thereof shall be adjusted to the amount in Dollars resulting from the
conversion of the amount of such Permitted
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Currency so readvanced to Dollars determined as of the second Business Day
preceding such day. On the date of each such conversion or continuation, if
the Dollar Equivalent on such date of all Advances, including the Advances
being continued or converted, exceeds the aggregate Commitments of the Banks,
the Borrower shall take the following actions in the following order until such
excess of the Dollar Equivalent of all Advances over the aggregate Commitments
of the Banks is eliminated: (a) on such date, first, reduce or withdraw any
pending request for a new Advance in Dollars to be made on such date, second,
repay in Dollars any Floating Rate Loan denominated in Dollars then
outstanding, and third, reduce the amount of, or repay, in the Permitted
Currency in which such Borrowing is denominated, any Advance which the Borrower
has requested to be converted or continued on such date, and (b) on the last
day of each Interbank Interest Period ending thereafter, reduce the amount of,
or repay in the Permitted Currency in which such Borrowing is denominated, any
Advance which the Borrower has requested to be converted or continued on such
last day.
3.2 Interest Payments. The Borrowers shall pay interest
to the Banks on the unpaid principal amount of each Loan (other than Bid-Option
Loans, for which the interest shall be payable directly to the Bank of such
Bid-Option Loan as described in clause (b) below), for the period commencing on
the date such Loan is made until such Loan is paid in full, on each Interest
Payment Date and at maturity (whether at stated maturity, by acceleration or
otherwise), and thereafter on demand, at the following rates per annum:
(a) With respect to Syndicated Loans:
(i) During such periods that such Loan
is a Floating Rate Loan, the Floating Rate.
(ii) During such periods that such Loan
is a Negotiated Rate Loan, the Negotiated Rate.
(iii) During such periods that such Loan
is an Interbank Offered Rate Loan, the Interbank Offered Rate applicable to
such Loan for each related Interbank Interest Period.
(b) With respect to Bid-Option Loans, the
Bid-Option Rate quoted for such Loan by the Bank making such Loan.
(c) With respect to Term Loans, the Term Loan
Fixed Rate quoted for such Term Loan by the Agent.
(d) With respect to Swing Line Loans:
(i) During such periods that such Loan
is an Interbank Offered Rate Loan, the Interbank Offered Rate.
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(ii) During such periods that such Loan
is a Negotiated Rate Loan, the Negotiated Rate Loan.
Notwithstanding the foregoing paragraphs (a) through (d), the Borrowers shall
pay interest on demand at the Overdue Rate on the outstanding principal amount
of any Loan and any other amount payable by the Borrowers hereunder (other than
interest) on and after an Event of Default.
3.3 Payment Method. (a) All payments to be made by the
Borrowers hereunder will be made to the Agent for the account of the Banks (i)
in the case of principal and interest on any Loan, in the Permitted Currency in
which such Loan is denominated and (ii) in all other cases, in the otherwise
specified or relevant currency, and in all cases in immediately available,
freely transferable, cleared funds, in the case of any payment to be made in
Dollars, not later than 2:00 p.m. at the place for payment on the date on which
such payment shall be come due and, in all other cases, on the date on which
such payment shall become due, (x) in the case of principal and interest on any
Loan denominated in a Permitted Currency other than Dollars, by credit to the
account of the Agent at its designated branch or correspondent bank in the
country issuing the relevant Permitted Currency or in such other place
specified by the Agent with respect to such Loan pursuant to Section 2.6(b),
and (y) in all other cases to the Agent at the address of its principal office
specified in Section 8.2. Payments to be made in Dollars received after 2:00
p.m. at the place for payment shall be deemed to be payments made prior to 2:00
p.m. at the place for payment on the next succeeding Business Day. Each
Borrower hereby authorizes the Agent to charge its account with the Agent in
order to cause timely payment of amounts due hereunder to be made (subject to
sufficient funds being available in such account for that purpose).
(b) At the time of making each such payment, a
Borrower shall, subject to the other terms and conditions of this Agreement,
specify to the Agent that Borrowing or other obligation of the Borrowers
hereunder to which such payment is to be applied. In the event that a Borrower
fails to so specify the relevant obligation or if an Event of Default shall
have occurred and be continuing, the Agent may apply such payments as it may
determine in its sole discretion to obligations of the Borrowers to the Banks
arising under this Agreement.
(c) On the day such payments are deemed received,
the Agent shall promptly remit to the Banks their pro rata shares of such
payments in immediately available funds, (i) in the case of payments of
principal and interest on any Borrowing denominated in a Permitted Currency
other than Dollars, at an account maintained and designated by each Bank at a
bank in the principal financial center of the country issuing the Permitted
Currency in which such Borrowing is denominated or in such other place
specified by the Agent and agreed to by the Banks and (ii) in all other cases,
to the Banks at their respective address in the United States specified for
notices pursuant to Section 8.2. Such pro rata shares shall be determined with
respect to each such Bank, (i) in the case of payments of principal and
interest on any Borrowing, by the ratio which the outstanding principal balance
of its Loan included in such Borrowing bears to the outstanding principal
balance of the Loans of all of the Banks included in such Borrowing
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and (ii) in the case of fees paid pursuant to Section 2.5 and other amounts
payable hereunder (other than the Agent's fees payable pursuant to Section
2.5(d) and amounts payable to any Bank under Section 2.6 or 3.6) by the ratio
which the Commitment of such Bank bears to the Commitments of all the Banks.
(d) This Agreement arises in the context of an
international transaction, and the specification of payment in a specific
currency at a specific place pursuant to this Agreement is of the essence.
Such specified currency shall be the currency of account and payment under this
Agreement. The obligations of the Borrowers hereunder shall not be discharged
by an amount paid in any other currency or at another place, whether pursuant
to a judgment or otherwise, to the extent that the amount so paid, on prompt
conversion into the applicable currency and transfer to the Banks under normal
banking procedure, does not yield the amount of such currency due under this
Agreement. In the event that any payment, whether pursuant to a judgment or
otherwise, upon conversion and transfer, does not result in payment of the
amount of such currency due under this Agreement, the Banks shall have an
independent cause of action against the Borrowers for the currency deficit.
(e) If for purposes of obtaining judgment in any
court it becomes necessary to convert any currency due hereunder into any other
currency, the Borrowers will pay such additional amount, if any, as may be
necessary to ensure that the amount paid in respect of such judgment is the
amount in such other currency which, when converted at the Agent's spot rate of
exchange prevailing on the date of payment, would yield the same amount of the
currency due hereunder. Any amount due from the Borrowers under this Section
3.3(e) will be due as a separate debt and shall not be affected by judgment
being obtained for any other sum due under or in respect of this Agreement.
3.4 No Setoff or Deduction. (a) All such payments shall
be made free and clear of any present or future taxes or withholdings and
without any set-off or counter claim or any restriction or condition or
deduction whatsoever. The Designated Borrower shall indemnify the Bank and
each Bank against any taxes or charges (other than on net overall income) which
may be claimed from it in respect of the Advances or any of them or any sum
payable by the Borrowers or any of them hereunder and against any costs,
charges and expenses or liabilities in respect of such claim and such indemnity
shall survive the termination of the Commitments.
(b) If at any time any Borrower is required by
law or by any directive or order of any court of competent jurisdiction to make
any deduction or withholding of whatsoever nature from any payment due under
this Agreement or any of the Loan Documents, such Borrower will ensure that the
same does not exceed the minimum liability therefor and will (a) pay to any
Bank on request such additional amount as such Bank certifies will result in
the net amount received by it after all deductions being equal to the full
amount which would have been receivable had there been no deduction or
withholding and (b) pay forthwith to the relevant authorities the full amount
of the deduction or withholding and deliver to the Agent such an official
receipt, certificate or other proof evidencing the amount paid in respect of
such deduction
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or withholding. Any additional amount paid under this sub-clause shall not be
treated as interest but as agreed compensation.
(c) If any payment by any Borrower is made to or
for the account of any Bank after deduction for or on account of tax, and
additional payments are made by the Designated Borrower then, if any Bank shall
receive or be granted a credit against or remission for such tax, such Bank
shall, to the extent that it can do so without prejudice to the retention of
the amount of such credit or remission, reimburse to the Designated Borrower
such amount as such Bank shall, in its absolute opinion, have concluded to be
attributable to the relevant tax or deduction or withholding. Nothing herein
contained shall interfere with the right of any Bank to arrange its affairs in
whatever manner it thinks fit and, in particular, the Banks shall not be under
any obligation to claim relief from its corporation profits or similar tax
liability in respect of such tax in priority to any other claims, reliefs,
credits or deductions available to it nor oblige any Bank to disclose any
information relating to its tax affairs. Such reimbursement shall be made as
soon as reasonably practical upon such Bank certifying that the amount of such
credit or remission has been received by it.
3.5 Payment on Non-Business Day; Payment Computations.
Except as otherwise provided in this Agreement to the contrary, whenever any
installment of principal of, or interest on, any Loan or any other amount due
hereunder becomes due and payable on a day which is not a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day and, in
the case of any installment of principal, interest shall be payable thereon at
the rate per annum determined in accordance with this Agreement during such
extension. Computations of interest and other amounts due under this Agreement
shall be made on the basis of a year of 360 days, 365 or 366 days, as
determined by custom and practice in the relevant market, for the actual number
of days elapsed, including the first day but excluding the last day of the
relevant period.
3.6 Additional Costs. (a) In the event that any
applicable law, treaty, rule or regulation (whether domestic or foreign) now or
hereafter in effect and whether or not presently applicable to any Bank or the
Agent, or any interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof, or
compliance by any Bank or the Agent with any directive of any such authority
(whether or not having the force of law), shall (i) affect the basis of
taxation of payments to any Bank or the Agent of any amounts payable by any
Borrower under this Agreement (other than taxes imposed on the overall net
income of the Bank or the Agent, by the jurisdiction, or by any political
subdivision or taxing authority of any such jurisdiction, in which any Bank or
the Agent, as the case may be, has its principal office), or (ii) shall impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by
any Bank or the Agent, as the case may be, or (iii) shall impose any other
condition with respect to this Agreement, the Commitments, the Notes or the
Advances, and the result of any of the foregoing is to increase the cost to any
Bank or the Agent, as the case may be, of making, funding or maintaining any
Fixed Rate Loan or to reduce the amount of any sum receivable by any Bank or
the Agent, thereon, then the Borrowers shall pay to such Bank or the Agent, as
the
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<PAGE> 40
case may be, from time to time, upon request by such Bank (with a copy of such
request to be provided to the Agent) or the Agent, additional amounts
sufficient to compensate such Bank or the Agent, as the case may be, for such
increased cost or reduced sum receivable to the extent, in the case of any
Fixed Rate Loan, such Bank or the Agent, as the case may be, is not compensated
therefor in the computation of the interest rate applicable to such Fixed Rate
Loan. Each Bank or the Agent, as the case may be, seeking compensation
hereunder shall deliver to the Borrowers a statement setting forth (i) such
increased cost or reduced sum receivable as such Bank or the Agent, as the case
may be, has calculated in good faith, (ii) a description of the event giving
rise thereto, (iii) a calculation in reasonable detail of the amounts requested
and (iv) a statement that such Bank or the Agent, as the case may be, has not
allocated to its Commitment, Borrowings or outstanding Loans a proportionately
greater amount than is attributable to each of its other credit extensions that
are affected similarly by compliance by such Bank or the Agent, as the case may
be, whether or not such Bank or the Agent, as the case may be, allocates any
portion of such amount to such other commitments or credit extensions. Such
statement as to the amount of such increased cost or reduced sum receivable,
prepared in good faith and in reasonable detail by such Bank or the Agent, as
the case may be, and submitted by such Bank or the Agent, as the case may be,
to the Borrowers, shall be conclusive and binding for all purposes absent
manifest error in computation.
(b) In the event that any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or hereafter in effect and
whether or not presently applicable to any Bank or the Agent, but applicable to
banks or financial institutions generally, or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Bank or the
Agent with any directive of any such authority (whether or not having the force
of law), including any risk-based capital guidelines, affects the amount of
capital required or expected to be maintained by such Bank or the Agent (or any
corporation controlling such Bank or the Agent) and such Bank or the Agent, as
the case may be, determines that the amount of such capital is increased by or
based upon the existence of such Bank's or the Agent's obligations hereunder
and such increase has the effect of reducing the rate of return on such Bank's
or the Agent's (or such controlling corporation's) capital as a consequence of
such obligations hereunder to a level below that which such Bank or the Agent
(or such controlling corporation) could have achieved but for such
circumstances (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Bank or the Agent to be material, then
the Borrowers shall pay to such Bank or the Agent, as the case may be, from
time to time, upon request by such Bank (with a copy of such request to be
provided to the Agent) or the Agent, additional amounts sufficient to
compensate such Bank or the Agent (or such controlling corporation) for any
reduced rate of return which such Bank or the Agent reasonably determines to be
allocable to the existence of such Bank's or the Agent's obligations hereunder.
Each Bank or the Agent, as the case may be, seeking compensation hereunder
shall deliver to the Borrowers a statement setting forth (i) such increased
cost or reduced sum receivable as such Bank or the Agent, as the case may be,
has calculated in good faith, (ii) a description of the event giving rise
thereto, (iii) a calculation in reasonable detail of the amounts requested and
(iv) a statement that such Bank or the Agent, as the case may be, has not
allocated to its Commitment, Borrowings or outstanding Loans a
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<PAGE> 41
proportionately greater amount than is attributable to each of its other credit
extensions that are affected similarly by compliance by such Bank or the Agent,
as the case may be, whether or not such Bank or the Agent, as the case may be,
allocates any portion of such amount to such other commitments or credit
extensions. Such statement as to the amount of such compensation, prepared in
good faith and in reasonable detail by such Bank or the Agent, as the case may
be, and submitted by such Bank or the Agent to the Borrowers, shall be
conclusive and binding for all purposes absent manifest error in computation.
3.7 Illegality and Impossibility. In the event that any
applicable law, treaty, rule or regulation (whether domestic or foreign) now or
hereafter in effect and whether or not presently applicable to any Bank, or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by any Bank
with any directive of such authority (whether or not having the force of law),
including without limitation exchange controls, shall make it unlawful or
impossible for any Bank to maintain any Fixed Rate Loan under this Agreement or
shall make it impracticable, unlawful or impossible for, or shall in any way
limit or impair the ability of, any Borrower to make or any Bank to receive any
payment under this Agreement at the place specified for payment hereunder, or
to freely convert any amount paid into Dollars at market rates of exchange or
to transfer any amount paid or so converted to the address of its principal
office specified in Section 8.2, the Borrowers shall upon receipt of notice
thereof from such Bank, repay in full the then outstanding principal amount of
each Fixed Rate Loan so affected, together with all accrued interest thereon to
the date of payment and all amounts owing to such Bank under Section 3.8, (a)
on the last day of the then current Interest Period applicable to such Loan if
such Bank may lawfully continue to maintain such Loan to such day, or (b)
immediately if such Bank may not continue to maintain such Loan to such day.
3.8 Indemnification. If any Borrower makes any payment
of principal with respect to any Loan on any other date than the last day of an
Interest Period applicable thereto, (whether pursuant to Section 3.7 or Section
6.2 or otherwise), or if any Borrower fails to borrow any Loan after notice has
been given to the Banks in accordance with Section 2.6, the Borrowers shall
reimburse each Bank on demand for any resulting net loss or expense incurred by
each such Bank after giving credit for any earnings or other quantifiable
financial benefit to such Bank from such Bank's investment or other amounts
prepaid or not reborrowed, including without limitation any loss incurred in
obtaining, liquidating or employing deposits from third parties, whether or not
such Bank shall have funded or committed to fund such Loan. A statement as to
the amount of such loss or expense, prepared in good faith and in reasonable
detail by such Bank and submitted by such Bank to the Borrowers, shall be
conclusive and binding for all purposes absent manifest error in computation,
provided that before delivery of such statement, each Bank shall use reasonable
efforts in accordance with its normal practices and procedures to reduce
amounts payable under this Section. Calculation of all amounts payable to such
Bank under this Section 3.8 shall be made as though such Bank shall have
actually funded or committed to fund the relevant Loan through the purchase of
an underlying deposit in an amount equal to the amount of such Loan and having
a maturity comparable to the related Interest Period; provided, however,
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that such Bank may fund any Loan in any manner it sees fit and the foregoing
assumption shall be utilized only for the purpose of calculation of amounts
payable under this Section 3.8.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to the Agent and the
Banks that:
4.1 Corporate Existence and Power. Each Borrower is a
Person duly organized, validly existing and in good standing under the laws of
the state or other political subdivision of its jurisdiction of incorporation
or organization, as the case may be, and is duly qualified to do business, and
is in good standing, in all additional jurisdictions where such qualification
is necessary under applicable law, except where the failure to be so qualified
would not have a material adverse effect on the business and financial
condition of the Company and its Subsidiaries taken as a whole. Each Borrower
has all requisite corporate power to own or lease the properties used in its
business and to carry on its business as now being conducted and as proposed to
be conducted, and to execute and deliver the Loan Documents to which it is a
party and to engage in the transactions contemplated by the Loan Documents.
4.2 Corporate Authority. The execution, delivery and
performance by each Borrower of the Loan Documents to which it is a party have
been duly authorized by all necessary corporate action and are not in
contravention of any material law, rule or regulation, or any judgment, decree,
writ, injunction, order or award of any arbitrator, court or governmental
authority, or of the terms of such Borrower's charter or by-laws, or of any
material contract or undertaking to which the Borrower is a party or by which
the Borrower or its property is bound or affected and do not result in the
imposition of any Lien except for Permitted Liens.
4.3 Binding Effect. The Loan Documents when delivered
hereunder will be, legal, valid and binding obligations of each Borrower party
thereto enforceable against each Borrower in accordance with their respective
terms; except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
and except that the remedy of specific performance and injunctive and other
forms of equitable relief are subject to equitable defenses and to the
discretion of the court before which any proceedings may be brought.
4.4 Subsidiaries. Schedule 4.4 hereto correctly sets
forth the corporate name, jurisdiction of incorporation and ownership of each
Subsidiary of the Company. Each Subsidiary and each corporation becoming a
Subsidiary of the Company after the date hereof is and will be a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is and will be duly qualified to do business
in each additional jurisdiction where such qualification is or may be necessary
under applicable law, except where the failure to be so qualified would not
have a material adverse effect on the business or financial condition of the
Company and its Subsidiaries taken as a whole.
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4.5 Litigation. Except as set forth in Schedule 4.5
hereto, there is no action, suit or proceeding pending or, to the best of each
Borrower's knowledge, threatened against or affecting any Borrower or any of
their respective Subsidiaries before or by any court, governmental authority or
arbitrator, which if adversely decided would result, either individually or
collectively, in any material adverse change in the business, properties,
operations or financial condition of the Company and its Subsidiaries taken as
a whole or in any material adverse effect on the legality, validity or
enforceability of any Loan Document and, to the best of the Company's
knowledge, there is no basis for any such action, suit or proceeding.
4.6 Financial Condition. The consolidated balance sheet
of the Company and its Subsidiaries and the consolidated statements of income
and cash flow of the Company and its Subsidiaries for the fiscal year ended
December 31, 1993 and reported on by Ernst & Young, independent certified
public accountants, and the interim consolidated statements of income, retained
earnings and cash flow of the Company and its Subsidiaries as of or for the
nine-month period ended September 30, 1994, copies of which have been furnished
to the Banks, fairly present, and the financial statements of the Company and
its Subsidiaries delivered pursuant to Section 5.1(d) will fairly present the
consolidated financial position of the Company and its Subsidiaries as at the
respective dates thereof, and the consolidated results of operations of the
Company and its Subsidiaries for the respective periods indicated, all in
accordance with generally accepted accounting principles consistently applied
(subject, in the case of said interim statements, to normal year-end
adjustments). There has been no material adverse change in the financial
condition of the Company and its Subsidiaries taken as a whole since December
31, 1993. There is no material Contingent Liability of the Company that is not
reflected in such financial statements or in the notes thereto.
4.7 Use of Loans. Each Borrower will use the proceeds of
the Loans for its general corporate purposes, including repayment of certain
existing revolving credits. No Borrower nor any of their respective
Subsidiaries extends or maintains, in the ordinary course of business, credit
for the purpose, whether immediate, incidental, or ultimate, of buying or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
Loan will be used for the purpose, whether immediate, incidental, or ultimate,
of buying or carrying any such margin stock or maintaining or extending credit
to others for such purpose. After applying the proceeds of each Loan, such
margin stock will not constitute more than 25% of the value of the assets
(either of any Borrower alone or of the Borrowers and their respective
Subsidiaries on a consolidated basis) that are subject to any provisions of
this Agreement that may cause the Loans to be deemed secured, directly or
indirectly, by margin stock.
4.8 Consents, Etc. Except for such consents, approvals,
authorizations, declarations, registrations or filings delivered by the Company
pursuant to Section 2.7(g), if any, each of which is in full force and effect,
no consent, approval or authorization of or declaration, registration or filing
with any governmental authority or any nongovernmental person, including
without limitation any creditor, lessor or stockholder of any Borrower, is
required on the part of any Borrower in connection with the execution, delivery
and performance of the Loan Documents
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or the transactions contemplated hereby or as a condition to the legality,
validity or enforceability of the Loan Documents.
4.9 Taxes. The Company has filed all material tax
returns (federal, state and local) required to be filed and have paid all taxes
shown thereon to be due, including interest and penalties, or have established
adequate financial reserves on their respective books and records for payment
thereof except where the failure to file such returns, pay such taxes or
establish such reserves would not have a material adverse effect on the Company
and its Subsidiaries, taken as a whole.
4.10 Title to Properties. Except as otherwise disclosed
in the latest balance sheet delivered pursuant to this Agreement, the Company
or one or more of its Subsidiaries have good and marketable fee simple title to
all of the real property to the best of the Company's knowledge absent manifest
error, and a valid and indefeasible ownership interest in all of the other
properties and assets reflected in said balance sheet or subsequently acquired
by the Company or any such Subsidiary material to the business or financial
condition of the Company and its Subsidiaries taken as a whole, except for
title defects that do not have a material adverse effect. All of such
properties and assets are free and clear of any Lien, except for Permitted
Liens.
4.11 ERISA. The Borrowers, their respective Subsidiaries,
their ERISA Affiliates and their respective Plans are in substantial compliance
in all material respects with those provisions of ERISA and of the Code which
are applicable with respect to any Plan. No Prohibited Transaction and no
Reportable Event has occurred with respect to any such Plan which would cause
an Event of Default. No Borrower, any of their respective Subsidiaries nor any
of their ERISA Affiliates is an employer with respect to any Multiemployer
Plan. The Borrowers, their respective Subsidiaries and their ERISA Affiliates
have met the minimum funding requirements under ERISA and the Code with respect
to each of their respective Plans, if any, and have not incurred any liability
to the PBGC, other than premiums which are not yet due and payable. The
execution, delivery and performance of the Loan Documents does not constitute a
Prohibited Transaction. There is no material unfunded benefit liability,
determined in accordance with Section 4001(a)(18) of ERISA, with respect to any
Plan of any Borrower, their respective Subsidiaries or their ERISA Affiliates.
4.12 Environmental and Safety Matters. Except as
disclosed on Schedule 4.12, each Borrower and each Subsidiary of each Borrower
is in substantial compliance with all material federal, state and local laws,
ordinances and regulations relating to safety and industrial hygiene or to the
environmental condition, including without limitation all material
Environmental Laws in jurisdictions in which any Borrower or any such
Subsidiary owns or operates, or has owned or operated, a facility or site, or
arranges or has arranged for disposal or treatment of hazardous substances,
solid waste, or other wastes, accepts or has accepted for transport any
hazardous substances, solid wastes or other wastes or holds or has held any
interest in real property or otherwise. Except as disclosed on Schedule 4.12,
no written demand, claim, notice, suit, suit in equity, action, administrative
action, investigation or inquiry whether brought by any governmental authority,
private person or otherwise, arising under, relating to or in connection
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<PAGE> 45
with any Environmental Laws is pending or, to the best of each Borrower's
knowledge, threatened against any Borrower or any such Subsidiary, any real
property in which any Borrower or any such Subsidiary holds or has held an
interest or any past or present operation of any Borrower or any such
Subsidiary which would have a material adverse effect on the Company and its
Subsidiaries, taken as a whole. Neither any Borrower nor any Subsidiary of any
Borrower (a) is the subject of any federal or state investigation evaluating
whether any remedial action is needed to respond to a release of any toxic
substances, radioactive materials, hazardous wastes or related materials into
the environment, or (b) has received any notice of any toxic substances,
radioactive materials, hazardous waste or related materials in, or upon any of
its properties in violation of any Environmental Laws. As to such matters
disclosed on Schedule 4.12, none will have a material adverse effect on the
financial condition or business of the Company and its Subsidiaries taken as a
whole. Except as set forth on Schedule 4.12, to the best of each Borrower's
knowledge, no release, threatened release or disposal of hazardous waste, solid
waste or other wastes is occurring or has occurred on, under or to any real
property in which any Borrower or any of their respective Subsidiaries holds
any interest or performs any of its operations, in violation of any
Environmental Law.
4.13 No Material Adverse Change. Neither the Company nor
any of its Subsidiaries has received any notice, citation or communication of
the nature referred to in Section 5.1(d)(i), except in respect of such matters
as have been or are being remediated in all material respects or are being
contested or remediated in good faith, and, in the case of any such matter
being so contested or remediated, and as of the date of this Agreement,
adequate provision for all material costs of any remediation is reflected in
the financial statements referred to in Section 4.6 of this Agreement, and in
respect of any such notice, citation or communication received after the date
of this Agreement, will be reflected in the subsequent financial statements
furnished to the Agent and the Banks pursuant to Sections 5.1(d)(ii) and
5.1(d)(iii).
ARTICLE V.
COVENANTS
5.1 Affirmative Covenants. Each Borrower covenants and
agrees that, until the Termination Date and thereafter until irrevocable
payment in full of the principal of and accrued interest on the Notes and the
performance of all other obligations of the Borrowers under this Agreement,
unless the Required Banks shall otherwise consent in writing, it shall, and
shall cause each of its Subsidiaries to:
(a) Preservation of Corporate Existence, Etc. Do
or cause to be done all things necessary to preserve, renew and keep in full
force and effect its legal existence, except to the extent permitted by Section
5.2(h), and its qualification as a foreign corporation in good standing in each
jurisdiction in which such qualification is necessary under applicable law,
other than where failure to so qualify will not have a material adverse effect
on the Company and its Subsidiaries taken as a whole.
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(b) Compliance with Laws, Etc. Comply in all
material respects with all applicable laws, rules, regulations and orders of
any governmental authority, whether federal, state, local or foreign (including
without limitation ERISA, the Code and Environmental Laws), in effect from time
to time; and pay and discharge promptly when due all taxes, assessments and
governmental charges or levies imposed upon it or upon its income, revenues or
property, before the same shall become delinquent or in default, as well as all
lawful claims for labor, materials and supplies or otherwise, which, if unpaid,
might give rise to Liens upon such properties or any portion thereof, except to
the extent that payment of any of the foregoing is then being contested in good
faith by appropriate legal proceedings, and except where failure to comply
would not have a material adverse effect on the Company and its Subsidiaries
taken as a whole.
(c) Maintenance of Properties; Insurance.
Maintain, preserve and protect all property that is material to the conduct of
the business of any Borrower or any of their respective Subsidiaries and keep
such property in good repair, working order and condition and from time to time
make, or cause to be made all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted at all times in
accordance with customary and prudent business practices for similar
businesses; and, maintain in full force and effect insurance with responsible
and reputable insurance companies or associations in such amounts, on such
terms and covering such risks, as is usually carried by companies engaged in
similar businesses and owning similar properties similarly situated and
maintain in full force and effect public liability insurance, insurance against
claims for personal injury or death or property damage occurring in connection
with any of its activities or any properties owned, occupied or controlled by
it, in such amount as it shall reasonably deem necessary.
(d) Reporting Requirements. Furnish to the Banks
and the Agent the following:
(i) Promptly and in any event within
five calendar days after becoming aware of the occurrence of (A) any Event of
Default or Default, or (B) the commencement of any material litigation against,
by or affecting any Borrower or any of their respective Subsidiaries which the
Company would be required to report to the Securities and Exchange Commission,
a statement of the chief financial officer of the Company setting forth details
of such Event of Default or Default or such litigation and the action which
such Borrower or such Subsidiary, as the case may be, has taken and proposes to
take with respect thereto;
(ii) As soon as available and in any
event within 50 days after the end of each of the first three fiscal quarters
of each fiscal year of the Company, the consolidated balance sheet of the
Company and its Subsidiaries as of the end of such quarter, and the related
consolidated statements of income and cash flow for the period commencing at
the end of the previous fiscal year and ending with the end of such quarter,
setting forth in each case in comparative form the corresponding figures for
the corresponding date or period of the preceding fiscal year, all in
reasonable detail and duly certified (subject to normal year-end adjustments)
by the chief financial officer of the Company as having been prepared in
accordance
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with generally accepted accounting principles, together with a certificate of
the chief financial officer of the Company stating (A) that no Event of Default
or Default has occurred and is continuing or, if an Event of Default or Default
has occurred and is continuing, a statement setting forth the details thereof
and the action which the Company has taken and proposes to take with respect
thereto, and (B) that a computation (which computation shall accompany such
certificate and shall be in reasonable detail) showing compliance with Section
5.2(a), (b) and (c) hereof is in conformity with the terms of this Agreement;
(iii) As soon as available and in any
event within 90 days after the end of each fiscal year of the Company, a copy
of the consolidated balance sheet of the Company and its Subsidiaries as of the
end of such fiscal year and the related consolidated statements of income and
cash flow of the Company and its Subsidiaries for such fiscal year, with a
customary audit report of Ernst & Young, or other independent certified public
accountants selected by the Company and acceptable to the Required Banks,
without qualifications unacceptable to the Required Banks, together with (A)
either (I) a written statement of the accountants that is making the
examination necessary for their report or opinion they obtained no knowledge of
the occurrence of any Default or Event of Default under this Agreement or (II)
if they know of any Default or Event of Default, their written disclosure of
its nature and status, provided that, the accountants shall not be liable
directly or indirectly to anyone for any failure to obtain knowledge of any
Default or Event of Default under this Agreement, and (B) a certificate of the
chief financial officer of the Company stating (I) that no Event of Default or
Default has occurred and is continuing or, if an Event of Default or Default
has occurred and is continuing, a statement setting forth the details thereof
and the action which the Company has taken and proposes to take with respect
thereto, and (II) that a computation (which computation shall accompany such
certificate and shall be in reasonable detail) showing compliance with Section
5.2(a), (b) and (c) hereof is in conformity with the terms of this Agreement;
(iv) Promptly after the sending or filing
thereof, copies of all reports, proxy statements and financial statements which
the Company sends to or files with any of their respective security holders or
any securities exchange or the Securities and Exchange Commission or any
successor agency thereof;
(v) Promptly and in any event within 10
calendar days after receiving or becoming aware thereof (A) a copy of any
notice of intent to terminate any Plan of any Borrower, their respective
Subsidiaries or any ERISA Affiliate filed with the PBGC, (B) a statement of the
chief financial officer of such Borrower setting forth the details of the
occurrence of any Reportable Event with respect to any such Plan, (C) a copy of
any notice that any Borrower, any of their respective Subsidiaries or any ERISA
Affiliate may receive from the PBGC relating to the intention of the PBGC to
terminate any such Plan or to appoint a trustee to administer any such Plan, or
(D) a copy of any notice of failure to make a required installment or other
payment within the meaning of Section 412(n) of the Code or Section 302(f) of
ERISA with respect to any such Plan; and
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(vi) Promptly, such other information
respecting the business, properties, operations or condition, financial or
otherwise, of any Borrower or any of their respective Subsidiaries as any Bank
or the Agent may from time to time reasonably request.
(e) Accounting; Access to Records, Books, Etc.
Maintain a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
accordance with generally accepted accounting principles and to comply with the
requirements of this Agreement and, on and after an Event of Default, at any
reasonable time and from time to time with prior notice to the Company, permit
any Bank or the Agent or any agents or representatives thereof to examine and
make copies of and abstracts from the records and books of account of, and
visit the properties of, the Borrowers and their respective Subsidiaries, and
to discuss the affairs, finances and accounts of the Borrowers and their
respective Subsidiaries with their respective directors, officers, employees
and independent auditors, provided that representatives of the Company selected
by the Company are present during any such visit or discussion, and by this
provision the Company does hereby authorize such persons to discuss such
affairs, finances and accounts with any Bank or the Agent subject to the above
terms and conditions.
(f) Stamp Taxes. The Company will pay all stamp
taxes and similar taxes, if any, including interest and penalties, if any,
payable in respect of the Notes. The efficacy of this subsection shall survive
the payment in full of the Notes.
(g) Further Assurances. Will execute and deliver
within 30 days after request therefor by the Required Banks or the Agent, all
further instruments and documents and take all further action that may be
necessary, in order to give effect to, and to aid in the exercise and
enforcement of the rights and remedies of the Banks and the Agent under, this
Agreement and the Notes. In addition, the Company agrees to deliver to the
Agent and the Banks on each anniversary of the Effective Date supplements to
Schedule 4.4 listing any Subsidiary not listed in Schedule 4.4 hereto.
5.2 Negative Covenants. Until the Termination Date and
thereafter until irrevocable payment in full of the principal of and accrued
interest on the Notes and the performance of all other obligations of each
Borrower under this Agreement, the Company agrees that, unless the Required
Banks shall otherwise consent in writing it shall not:
(a) Interest Coverage Ratio. Permit or suffer
the Interest Coverage Ratio to be less than (i) during any quarter in which the
ratio of Consolidated Funded Debt of the Company and its Subsidiaries to
Consolidated Total Capitalization of the Company and its Subsidiaries is
greater than 0.60 to 1.00 but less than 0.65 to 1.00, 2.50 to 1.0 and (ii) at
all other times, 3.0 to 1.0; in each case calculated as of the end of each
fiscal quarter for the four immediately preceding fiscal quarters.
(b) Net Worth. Permit or suffer Consolidated Net
Worth of the Company and its Subsidiaries at any time to be less than
$125,000,000 plus 50% of Cumulative
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Consolidated Net Income of the Company and its Subsidiaries for each fiscal
year of the Company commencing with the fiscal year ending December 31, 1995.
(c) Funded Debt to Total Capitalization. Permit
or suffer the ratio of Consolidated Funded Debt of the Company and its
Subsidiaries to Consolidated Total Capitalization of the Company and its
Subsidiaries to exceed .65 to 1.0.
(d) Liens. Create, incur or suffer to exist any
Lien on any of the assets, rights, revenues or property, real, personal or
mixed, tangible or intangible, whether now owned or hereafter acquired, of the
Company or any of its Subsidiaries, other than:
(i) Liens for taxes not delinquent or
for taxes being contested in good faith by appropriate proceedings and as to
which adequate financial reserves have been established on its books and
records;
(ii) Liens (other than any Lien imposed
by ERISA) created and maintained in the ordinary course of business which are
not material in the aggregate, and which would not have a material adverse
effect on the business or operations of the Company and its Subsidiaries taken
as a whole and which constitute (A) pledges or deposits under worker's
compensation laws, unemployment insurance laws or similar legislation, (B) good
faith deposits in connection with bids, tenders, contracts or leases to which
the Company or any of its Subsidiaries is a party for a purpose other than
borrowing money or obtaining credit, including rent security deposits, (C)
liens imposed by law, such as those of carriers, warehousemen and mechanics, if
payment of the obligation secured thereby is not yet due, (D) Liens securing
taxes, assessments or other governmental charges or levies not yet subject to
penalties for nonpayment, and (E) pledges or deposits to secure public or
statutory obligations of the Company or any of its Subsidiaries, or surety,
customs or appeal bonds to which the Company or any of its Subsidiaries is a
party;
(iii) Liens affecting real property which
constitute minor survey exceptions or defects or irregularities in title, minor
encumbrances, easements or reservations of, or rights of others for, rights of
way, sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of such real property,
provided that all of the foregoing, in the aggregate, do not at any time
materially detract from the value of said properties or materially impair their
use in the operation of the businesses of the Company and its Subsidiaries
taken as a whole;
(iv) Liens existing on the date hereof
upon the same terms as the date hereof, but no extensions, renewals and
replacements thereof shall be permitted, with each existing Lien securing
Indebtedness in excess of $5,000,000 described in Schedule 5.2 hereto;
(v) Liens granted by any Subsidiary in
favor of the Company or any other Subsidiary;
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(vi) The interest or title of a lessor
under any lease otherwise permitted under this Agreement with respect to the
property subject to such lease to the extent performance of the obligations of
the Company or its Subsidiary thereunder is not delinquent; and
(vii) Liens, other than Liens described in
clauses (i) through (vi) above, securing Indebtedness in an aggregate amount
not to exceed 10% of Consolidated Net Worth.
(e) Merger; Etc. Merge or consolidate or
amalgamate with any other person or take any other action having a similar
effect, provided, however, (i) a Subsidiary of the Company may merge with the
Company, provided that the Company shall be the surviving corporation, (ii) a
Subsidiary of the Company may merge or consolidate with another Subsidiary of
the Company and (iii) this Section 5.2(e) shall not prohibit any merger if the
Company shall be the surviving or continuing corporation and, immediately after
such merger, no Default or Event of Default shall exist or shall have occurred
and be continuing and, prior to the consummation of such merger.
(f) Disposition of Assets; Etc. Sell, lease,
license, transfer, assign or otherwise dispose of all or a substantial portion
of its business, assets, rights, revenues or property, real, personal or mixed,
tangible or intangible, whether in one or a series of transactions, other than
inventory sold in the ordinary course of business upon customary credit terms
and sales of scrap or obsolete material or equipment, provided, however, that
this Section 5.2(f) shall not prohibit (i) any sale of the receivable portfolio
of Invalease Corporation, a wholly-owned Subsidiary of the Company or (ii) any
such sale, lease, license, transfer, assignment or other disposition if the
aggregate book value (disregarding any write-downs of such book value other
than ordinary depreciation and amortization) of all of the business, assets,
rights, revenues and property disposed of after the date of this Agreement
shall be less than 33% of the Consolidated Net Worth of the Company and its
Subsidiaries, and if immediately after such transaction, no Default or Event of
Default shall exist or shall have occurred and be continuing.
(g) Nature of Business. Engage in any business
if, as a result, the general nature of the business, taken on a consolidated
basis, which would then be engaged in by the Company and its Subsidiaries would
be substantially changed from the general nature of the business engaged in by
the Company and its Subsidiaries on the date of this Agreement which is the
manufacture, sale or lease of home medical and extended care equipment and
related products.
ARTICLE VI.
DEFAULT
6.1 Events of Default. The occurrence of any one of the
following events or conditions shall be deemed an "Event of Default" hereunder
unless waived by the Required Banks pursuant to Section 8.1:
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(a) Nonpayment of Principal. Any Borrower shall
fail to pay when due any principal of the Notes and such failure shall remain
unremedied for five days; or
(b) Nonpayment of Interest. Any Borrower shall
fail to pay when due any interest or any fees or any other amount payable
hereunder and such failure shall remain unremedied for five days; or
(c) Misrepresentation. Any representation or
warranty made by any Borrower in Article IV hereof, any other Loan Document or
any other certificate, report, financial statement or other document furnished
by or on behalf of any Borrower in connection with this Agreement shall prove
to have been incorrect in any material respect when made or deemed made; or
(d) Certain Covenants. Any Borrower shall fail
to perform or observe any term, covenant or agreement contained in Section
5.2(a), (e) or (f) hereof; or
(e) Other Defaults. Any Borrower shall fail to
perform or observe any other term, covenant or agreement contained in this
Agreement or any other Loan Document, and any such failure shall remain
unremedied for 30 calendar days; or
(f) Cross Default. Any Borrower or any of their
respective Subsidiaries shall fail to pay any part of the principal of, the
premium, if any, or the interest on, or any other payment of money due under
any of its Indebtedness (other than Indebtedness hereunder), beyond any period
of grace provided with respect thereto, which individually or together with
other such Indebtedness as to which any such failure exists has an aggregate
outstanding principal amount in excess of $5,000,000; or any Borrower or any of
their respective Subsidiaries shall fail to perform or observe any other term,
covenant or agreement contained in any agreement, document or instrument
evidencing or securing any such Indebtedness having such aggregate outstanding
principal amount, or under which any such Indebtedness was issued or created,
beyond any period of grace, if any, provided with respect thereto and such
Borrower or such Subsidiary has been notified by the creditor of such default;
and the effect of any such failure is either (i) to cause, or permit the
holders of such Indebtedness (or a trustee on behalf of such holders) to cause,
any payment of such Indebtedness to become due prior to its due date or (ii) to
permit the holders of such Indebtedness (or a trustee on behalf of such
holders) to elect a majority of the board of directors of the Company; or
(g) Judgments. One or more judgments or orders
shall be rendered against or shall affect any Borrower or any of their
respective Subsidiaries which causes or could cause a material adverse change
in the financial condition of the Company and its Subsidiaries taken as a whole
or which does or could have a material adverse effect on the legality, validity
or enforceability of any Loan Document, and either (i) such judgment or order
shall have remained unsatisfied or uninsured for a period of 21 days and such
Borrower or such Subsidiary shall not have taken action necessary to stay
enforcement thereof by reason of pending appeal or otherwise, prior to the
expiration of the applicable period of limitations for taking such action
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or, if such action shall have been taken, a final order denying such stay shall
have been rendered, or (ii) enforcement proceedings shall have been commenced
by any creditor upon any such judgment or order; or
(h) ERISA. The occurrence of a Reportable Event
that results in or could result in material liability of any Borrower, any
Subsidiary of any Borrower or their ERISA Affiliates to the PBGC or to any Plan
and such Reportable Event is not corrected within thirty (30) days after the
occurrence thereof; or the occurrence of any Reportable Event which could
constitute grounds for termination of any Plan of any Borrower, their
respective Subsidiaries or their ERISA Affiliates by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer any such Plan and such Reportable Event is not corrected within
thirty (30) days after the occurrence thereof; or the filing by any Borrower,
any Subsidiary of any Borrower or any of their ERISA Affiliates of a notice of
intent to terminate a Plan or the institution of other proceedings to terminate
a Plan; or any Borrower, any Subsidiary of any Borrower or any of their ERISA
Affiliates shall fail to pay when due any material liability to the PBGC or to
a Plan; or the PBGC shall have instituted proceedings to terminate, or to cause
a trustee to be appointed to administer, any Plan of any Borrower, their
respective Subsidiaries or their ERISA Affiliates; or any person engages in a
Prohibited Transaction with respect to any Plan which results in or could
result in material liability of the any Borrower, any Subsidiary of any
Borrower, any of their ERISA Affiliates, any Plan of any Borrower, their
respective Subsidiaries or their ERISA Affiliates or fiduciary of any such
Plan; or failure by any Borrower, any Subsidiary of any Borrower or any of
their ERISA Affiliates to make a required installment or other payment to any
Plan within the meaning of Section 302(f) of ERISA or Section 412(n) of the
Code that results in or could result in liability of any Borrower, any
Subsidiary of any Borrower or any of their ERISA Affiliates to the PBGC or any
Plan; or the withdrawal of any Borrower, any of their respective Subsidiaries
or any of their ERISA Affiliates from a Plan during a plan year in which it was
a "substantial employer" as defined in Section 4001(9a)(2) of ERISA; or any
Borrower, any of their respective Subsidiaries or any of their ERISA Affiliates
becomes an employer with respect to any Multiemployer Plan without the prior
written consent of the Required Banks; or
(i) Insolvency, Etc. Any Borrower shall be
dissolved or liquidated (or any judgment, order or decree therefor shall be
entered), or shall generally not pay its debts as they become due, or shall
admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors, or shall institute, or there
shall be instituted against any Borrower, any proceeding or case seeking to
adjudicate it a bankrupt or insolvent or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief or protection of debtors or seeking the entry of an
order for relief, or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its assets, rights,
revenues or property, and, if such proceeding is instituted against any
Borrower and is being contested by such Borrower in good faith by appropriate
proceedings, such proceeding shall remain undismissed or unstayed for a period
of 60 days; or any Borrower shall take any action (corporate or other) to
authorize or further any of the actions described above in this
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subsection; provided, however, that none of the foregoing acts or occurrences
in this Section 6.1(i) with respect to any Borrowing Subsidiary shall
constitute an Event of Default so long as there are no Advances outstanding to
such Borrowing Subsidiary at the time of such act or occurrence, provided,
that, the Commitment of the Banks to such Borrowing Subsidiary shall
automatically terminate without notice; or
(j) Change of Control. The Company shall
experience a Change of Control. For purposes of this Section 6.1(j), a "Change
of Control" shall occur if during any twelve-month period (i) any person or
group of persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended) shall have acquired beneficial ownership
(within the meaning of Rule 13D-3 promulgated by the Securities and Exchange
Commission under said Act) of 50% or more in voting power of the voting shares
of the Company that were outstanding as of the date of this Agreement and (ii)
a majority of the board of directors of the Company shall cease for any reason
to consist of individuals who as of a date twelve months prior to any date
compliance herewith is determined were directors of the Company.
6.2 Remedies. (a) Upon the occurrence and during the
continuance of any Event of Default, the Agent may and, upon being directed to
do so by the Required Banks, shall by notice to the Company (i) terminate the
Commitments or (ii) declare the outstanding principal of, and accrued interest
on, the Notes and all other amounts owing under this Agreement to be
immediately due and payable, or (iii) demand immediate delivery of cash
collateral, and the Borrowers agree to deliver such cash collateral upon
demand, in an amount equal to the maximum amount that may be available to be
drawn at any time prior to the stated expiry of all outstanding Letters of
Credit, or any one or more of the foregoing, whereupon the Commitments shall
terminate forthwith and all such amounts, including cash collateral, shall
become immediately due and payable, provided that in the case of any event or
condition described in Section 6.1(i) with respect to any Borrower, the
Commitments shall automatically terminate forthwith and all such amounts,
including cash collateral, shall automatically become immediately due and
payable without notice; in all cases without demand, presentment, protest,
diligence, notice of dishonor or other formality, all of which are hereby
expressly waived. Such cash collateral delivered in respect of outstanding
Letters of Credit shall be deposited in a special cash collateral account to be
held by the Agent as collateral security for the payment and performance of the
Borrowers' obligations under this Agreement to the Banks and the Agent.
(b) The Agent may and, upon being directed to do
so by the Required Banks, shall, in addition to the remedies provided in
Section 6.2(a), exercise and enforce any and all other rights and remedies
available to it or the Banks, whether arising under this Agreement, the Notes
or under applicable law, in any manner deemed appropriate by the Agent,
including suit in equity, action at law, or other appropriate proceedings,
whether for the specific performance (to the extent permitted by law) of any
covenant or agreement contained in this Agreement or in the Notes or in aid of
the exercise of any power granted in this Agreement or the Notes.
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(c) Upon the occurrence and during the
continuance of any Event of Default, each Bank may at any time and from time to
time exercise any of its rights of set off or bankers lien that it may possess
by common law or statute without prior notice to the Borrowers, provided that
each Bank may also set off against any deposit whether or not it is then
matured. Each Bank agrees to promptly notify the Company after any such setoff
and application, provided that the failure to give such notice shall not effect
the validity of such setoff and application. The rights of such Bank under
this Section 6.2(c) are in addition to other rights and remedies which such
Bank may have.
ARTICLE VII.
THE AGENT AND THE BANKS
7.1 Appointment and Authorization. Each Bank hereby
irrevocably appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the Notes as
are delegated to the Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto. The provisions of this
Article VII are solely for the benefit of the Agent and the Banks, and the
Borrowers shall not have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this
Agreement, the Agent shall act solely as agent of the Banks and does not assume
and shall not be deemed to have assumed any obligation towards or relationship
of agency or trust with or for the Borrowers.
7.2 Agent and Affiliates. NBD Bank, N.A. in its capacity
as a Bank hereunder shall have the same rights and powers hereunder as any
other Bank and may exercise or refrain from exercising the same as though it
were not the Agent. NBD Bank, N.A. and its affiliates may (without having to
account therefor to any Bank) accept deposits from, lend money to, and
generally engage in any kind of banking, trust, financial advisory or other
business with any Borrower or any Subsidiary of any Borrower as if it were not
acting as Agent hereunder, and may accept fees and other consideration therefor
without having to account for the same to the Banks.
7.3 Scope of Agent's Duties. The Agent shall have no
duties or responsibilities except those expressly set forth herein, and shall
not, by reason of this Agreement, have a fiduciary relationship with any Bank,
and no implied covenants, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or shall otherwise exist against the Agent.
As to any matters not expressly provided for by this Agreement (including,
without limitation, collection and enforcement actions under the Notes), the
Agent shall not be required to exercise any discretion or take any action, but
the Agent shall take such action or omit to take any action pursuant to the
written instructions of the Required Banks and may request instructions from
the Required Banks. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, pursuant to the written instructions of the
Required Banks, which instructions and any action or omission pursuant thereto
shall be binding upon all of the Banks; provided, however, that the Agent shall
not be required to act or omit to act if, in the judgment
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of the Agent, such action or omission may expose the Agent to personal
liability or is contrary to this Agreement, the Notes or applicable law.
7.4 Reliance by Agent. The Agent shall be entitled to
rely upon any certificate, notice, document or other communication (including
any cable, telegram, telex, facsimile transmission or oral communication)
believed by it to be genuine and correct and to have been sent or given by or
on behalf of a proper person. The Agent may treat the payee of any Note as the
holder thereof unless and until the Agent receives written notice of the
assignment thereof pursuant to the terms of this Agreement signed by such payee
and the Agent receives the written agreement of the assignee that such assignee
is bound hereby to the same extent as if it had been an original party hereto.
The Agent may employ agents (including without limitation collateral agents)
and may consult with legal counsel (who may be counsel for the Borrowers),
independent public accountants and other experts selected by it and shall not
be liable to the Banks, except as to money or property received by it or its
authorized agents, for the negligence or misconduct of any such agent selected
by it with reasonable care or for any action taken or omitted to be taken by it
in good faith in accordance with the advice of such counsel, accountants or
experts.
7.5 Default. The Agent shall not be deemed to have
knowledge of the occurrence of any Default or Event of Default, unless the
Agent has received written notice from a Bank or a Borrower specifying such
Default or Event of Default and stating that such notice is a "Notice of
Default". In the event that the Agent receives such a notice, the Agent shall
give written notice thereof to the Banks.
7.6 Liability of Agent. Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable to the Banks for any
action taken or not taken by it or them in connection herewith with the consent
or at the request of the Required Banks or in the absence of its or their own
gross negligence or willful misconduct. Neither the Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any recital, statement, warranty
or representation contained in this Agreement or any Note or any Guaranty, or
in any certificate, report, financial statement or other document furnished in
connection with this Agreement, (ii) the performance or observance of any of
the covenants or agreements of any Borrower or any Guarantor, (iii) the
satisfaction of any condition specified in Article II hereof, or (iv) the
validity, effectiveness, legal enforceability, value or genuineness of this
Agreement or the Notes or any collateral subject thereto or any other
instrument or document furnished in connection herewith.
7.7 Nonreliance on Agent and Other Banks. Each Bank
acknowledges and agrees that it has, independently and without reliance on the
Agent or any other Bank, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrowers and decision
to enter into this Agreement and that it will, independently and without
reliance upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decision in taking or not taking action under this Agreement. The
Agent shall not be required
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to keep itself informed as to the performance or observance by any Borrower or
any Guarantor of this Agreement, the Notes or any other documents referred to
or provided for herein or to inspect the properties or books of any Borrower or
any Guarantor and, except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Bank with any information concerning the affairs, financial condition or
business of the Borrowers or any of their respective Subsidiaries which may
come into the possession of the Agent or any of its affiliates.
7.8 Indemnification. The Banks agree to indemnify the
Agent (to the extent not reimbursed by the Borrowers, but without limiting any
obligation of the Borrowers to make such reimbursement), ratably according to
the respective principal amounts of the Advances then outstanding made by each
of them (or if no Advances are at the time outstanding, ratably according to
the respective amounts of their Commitments), from and against any and all
claims, damages, losses, liabilities, costs or expenses of any kind or nature
whatsoever (including, without limitation, fees and disbursements of counsel)
which may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or the transactions contemplated
hereby or any action taken or omitted by the Agent under this Agreement,
provided, however, that no Bank shall be liable for any portion of such
claims, damages, losses, liabilities, costs or expenses resulting from the
Agent's gross negligence or willful misconduct. Without limitation of the
foregoing, each Bank agrees to reimburse the Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including without limitation fees
and expenses of counsel) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Agent is not reimbursed for such expenses by the
Borrowers, but without limiting the obligation of the Borrowers to make such
reimbursement. Each Bank agrees to reimburse the Agent promptly upon demand
for its ratable share of any amounts owing to the Agent by the Banks pursuant
to this Section. If the indemnity furnished to the Agent under this Section
shall, in the judgment of the Agent, be insufficient or become impaired, the
Agent may call for additional indemnity from the Banks and cease, or not
commence, to take any action until such additional indemnity is furnished.
7.9 Resignation of Agent. The Agent may resign as such
at any time upon thirty days' prior written notice to the Borrowers and the
Banks. In the event of any such resignation, the Company shall, by an
instrument in writing delivered to the Banks and the Agent, appoint a
successor, which shall be a Bank or any other commercial bank organized under
the laws of the United States or any State thereof and having a combined
capital and surplus of at least $500,000,000. If a successor is not so
appointed or does not accept such appointment before the Agent's resignation
becomes effective, the resigning Agent may appoint a temporary successor to act
until such appointment by the Company is made and accepted any successor to the
Agent shall execute and deliver to the Borrowers and the Banks an instrument
accepting such appointment and thereupon such successor Agent, without further
act, deed, conveyance or transfer shall become vested with all of the
properties, rights, interests, powers, authorities and
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obligations of its predecessor hereunder with like effect as if originally
named as Agent hereunder. Upon request of such successor Agent, the Borrowers
and the resigning Agent shall execute and deliver such instruments of
conveyance, assignment and further assurance and do such other things as may
reasonably be required for more fully and certainly vesting and confirming in
such successor Agent all such properties, rights, interests, powers,
authorities and obligations. The provisions of this Article VII shall
thereafter remain effective for such resigning Agent with respect to any
actions taken or omitted to be taken by such Agent while acting as the Agent
hereunder.
7.10 Sharing of Payments. The Banks agree among
themselves that, in the event that any Bank shall obtain payment in respect of
any Advance or any other obligation owing to the Banks under this Agreement
through the exercise of a right of set-off, banker's lien, counterclaim or
otherwise in excess of its ratable share of payments received by all of the
Banks on account of the Advances and other obligations (or if no Advances are
outstanding, ratably according to the respective amounts of the Commitments),
such Bank shall promptly purchase from the other Banks participations in such
Advances and other obligations in such amounts, and make such other adjustments
from time to time, as shall be equitable to the end that all of the Banks share
such payment in accordance with such ratable shares. The Banks further agree
among themselves that if payment to a Bank obtained by such Bank through the
exercise of a right of set-off, banker's lien, counterclaim or otherwise as
aforesaid shall be rescinded or must otherwise be restored, each Bank which
shall have shared the benefit of such payment shall, by repurchase of
participations theretofore sold, return its share of that benefit to each Bank
whose payment shall have been rescinded or otherwise restored. The Borrowers
agree that any Bank so purchasing such a participation may, to the fullest
extent permitted by law, exercise all rights of payment, including set-off,
banker's lien or counterclaim, with respect to such participation as fully as
if such Bank were a holder of such Advance or other obligation in the amount of
such participation. The Banks further agree among themselves that, in the event
that amounts received by the Banks and the Agent hereunder are insufficient to
pay all such obligations or insufficient to pay all such obligations when due,
the fees and other amounts owing to the Agent in such capacity shall be paid
therefrom before payment of obligations owing to the Banks under this
Agreement, other than agency fees payable pursuant to Section 2.5(d) of this
Agreement which shall be paid on a pro rata basis with amounts owing to the
Banks. Except as otherwise expressly provided in this Agreement, if any Bank
or the Agent shall fail to remit to the Agent or any other Bank an amount
payable by such Bank or the Agent to the Agent or such other Bank pursuant to
this Agreement on the date when such amount is due, such payments shall be made
together with interest thereon for each date from the date such amount is due
until the date such amount is paid to the Agent or such other Bank at a rate
per annum equal to the rate at which borrowings are available to the payee in
its overnight federal funds market. It is further understood and agreed among
the Banks and the Agent that if the Agent or any Bank shall engage in any other
transactions with any Borrower and shall have the benefit of any collateral or
security therefor which does not expressly secure the obligations arising under
this Agreement except by virtue of a so-called dragnet clause or comparable
provision, the Agent or such Bank shall be entitled to apply any proceeds of
such collateral or security first in respect of the obligations arising in
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connection with such other transaction before application to the obligations
arising under this Agreement.
7.11 Local Custom. Notwithstanding anything herein to the
contrary, if requested by the Required Banks, all Loans made hereunder shall be
made in compliance with local market custom and legal practice as determined
solely by the Bank, whether or not such custom and legal practices have the
force of law.
ARTICLE IX.
MISCELLANEOUS
8.1 Amendments, Etc. (a) No amendment, modification,
termination or waiver of any provision of this Agreement nor any consent to any
departure therefrom shall be effective unless the same shall be in writing and
signed by the Borrowers and the Required Banks and, to the extent any rights or
duties of the Agent may be affected thereby, the Agent, provided, however, that
no such amendment, modification, termination, waiver or consent shall, without
the consent of the Agent and all of the Banks, (i) authorize or permit the
extension of time for, or any reduction of the amount of, any payment of the
principal of, or interest on, the Notes or any Letter of Credit reimbursement
obligation, or any fees or other amount payable hereunder, (ii) amend or
terminate the respective Commitment of any Bank set forth on the signature
pages hereof or modify the provisions of this Section regarding the taking of
any action under this Section or the provisions of Section 7.10 or the
definition of Required Banks or (iii) amend or modify the Guaranty (other than
any amendment solely for the purpose of adding or deleting a Borrowing
Subsidiary) or provide for the release or discharge of the Company's
obligations under the Guaranty.
(b) Any such amendment, waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
(c) Notwithstanding anything herein to the
contrary, no Bank that is in default of any of its obligations, covenants or
agreements under this Agreement shall be entitled to vote (whether to consent
or to withhold its consent) with respect to any amendment, modification,
termination or waiver of any provision of this Agreement or any departure
therefrom or any direction from the Banks to the Agent, and, for purposes of
determining the Required Banks at any time when any Bank is in default under
this Agreement, the Commitments and Advances of such defaulting Banks shall be
disregarded.
8.2 Notices. (a) Except as otherwise provided in Section
8.2(c) hereof, all notices and other communications hereunder shall be in
writing and shall be delivered or sent to the Borrowers in case of the Treasury
Manager at 899 Cleveland Street, P.O. Box 4028, Elyria, Ohio 44036, Attention:
Chief Financial Officer, Facsimile No. (216) 366-9672, and to the Agent and the
Banks at the respective addresses and numbers for notices set forth on the
signatures pages hereof, or to such other address as may be designated by any
Borrower, the Agent or any Bank by notice to the other parties hereto. All
notices and other communications shall be deemed
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to have been given at the time of actual delivery thereof to such address, or
if sent by certified or registered mail, postage prepaid, to such address, on
the third day after the date of mailing, or if deposited prepaid with Federal
Express or other nationally recognized overnight delivery service prior to the
deadline for next day delivery, on the Business Day next following such
deposit, provided, however, that notices to the Agent shall not be effective
until received.
(b) Notices by the Treasury Manager or a Borrower
to the Agent with respect to terminations or reductions of the Commitments
pursuant to Section 2.4, requests for Advances pursuant to Section 2.6,
requests for continuations or conversions of Loans pursuant to Section 2.9 and
notices of prepayment pursuant to Section 3.1 shall be irrevocable and binding
on the Borrowers.
(c) Any notice to be given by the Treasury
Manager or a Borrower to the Agent pursuant to Sections 2.6 or 2.9 and any
notice to be given by the Agent or any Bank hereunder, may be given by
telephone, and all such notices given by the Treasury Manager or a Borrower
must be immediately confirmed in writing in the manner provided in Section
8.2(a). Any such notice given by telephone shall be deemed effective upon
receipt thereof by the party to whom such notice is to be given.
8.3 No Waiver By Conduct; Remedies Cumulative. No course
of dealing on the part of the Agent or any Bank, nor any delay or failure on
the part of the Agent or any Bank in exercising any right, power or privilege
hereunder shall operate as a waiver of such right, power or privilege or
otherwise prejudice the Agent's or such Bank's rights and remedies hereunder;
nor shall any single or partial exercise thereof preclude any further exercise
thereof or the exercise of any other right, power or privilege. No right or
remedy conferred upon or reserved to the Agent or any Bank under this Agreement
or the Notes or any Guaranty is intended to be exclusive of any other right or
remedy, and every right and remedy shall be cumulative, except as limited by
this Agreement, and in addition to every other right or remedy granted
thereunder or now or hereafter existing under any applicable law. Every right
and remedy granted by this Agreement or the Notes or any Guaranty or by
applicable law to the Agent or any Bank may be exercised from time to time and
as often as may be deemed expedient by the Agent or any Bank and, unless
contrary to the express provisions of this Agreement or the Notes or such
Guaranty, irrespective of the occurrence or continuance of any Default or
Event of Default.
8.4 Reliance on and Survival of Various Provisions. All
terms, covenants, agreements, representations and warranties of any Borrower or
any Guarantor made herein, in any Guaranty or in any certificate, report,
financial statement or other document furnished by or on behalf of any Borrower
or any Guarantor in connection with this Agreement shall be deemed to be
material and to have been relied upon by the Banks, notwithstanding any
investigation heretofore or hereafter made by any Bank or on such Bank's
behalf, and those covenants and agreements of the Borrowers set forth in
Sections 3.6, 3.8 and 8.5 hereof shall survive the repayment in full of the
Advances and the termination of the Commitments for a period of one year from
such repayment or termination.
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8.5 Expenses. The Company agrees to pay, or reimburse
the Agent for the payment of, on demand, (a) the reasonable fees, without
premium, and expenses of counsel to the Agent, including without limitation the
reasonable fees and expenses of Dickinson, Wright, Moon, Van Dusen & Freeman as
agreed upon with the Company in connection with the preparation, execution,
delivery and administration of the Loan Documents and the consummation of the
transactions contemplated hereby, and in connection with advising the Agent as
to its rights and responsibilities with respect thereto, and in connection with
any amendments, waivers or consents in connection therewith, and (b) all stamp
and other taxes and fees payable or determined to be payable in connection with
the execution, delivery, filing or recording of this Agreement, the Notes and
the consummation of the transactions contemplated hereby, and any and all
liabilities with respect to or resulting from any delay in paying or omitting
to pay such taxes or fees, and (c) all reasonable costs and expenses of the
Agent (including without limitation reasonable fees and expenses of counsel,
which counsel shall be acceptable to the Required Banks, including without
limitation counsel who are employees of the Agent, and whether incurred through
negotiations, legal proceedings or otherwise) in connection with any Default or
Event of Default or the enforcement of, or the exercise or preservation of any
rights under the Loan Documents or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement and (d)
all reasonable costs and expenses of the Agent and the Banks (including
reasonable fees and expenses of counsel) in connection with any action or
proceeding relating to a court order, injunction or other process or decree
restraining or seeking to restrain the Agent from paying any amount under, or
otherwise relating in any way to, any Letter of Credit and any and all costs
and expenses which any of them may incur relative to any payment under any
Letter of Credit.
8.6 Successors and Assigns. (a) This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no Borrower may, without the
prior consent of the Banks, assign its rights or obligations hereunder or under
the Notes and the Banks shall not be obligated to make any Loan hereunder to
any entity other than the Borrowers.
(b) Any Bank may, without the prior consent of
the Company sell to any financial institution or institutions, and such
financial institution or institutions may further sell, a participation
interest (undivided or divided) in, the Loans and such Bank's rights and
benefits under this Agreement and the Notes, and to the extent of that
participation interest such participant or participants shall have the same
rights and benefits against the Borrowers under Section 3.6, 3.8 and 6.2(c) as
it or they would have had if such participant or participants were the Bank
making the Loans to the Borrowers hereunder, provided, however, that (i) such
Bank's obligations under this Agreement shall remain unmodified and fully
effective and enforceable against such Bank, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) such Bank shall remain the holder of its Notes for all
purposes of this Agreement, (iv) the Borrowers, the Agent and the other Banks
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement, and (v) such Bank
shall not grant to its participant any rights to consent
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or withhold consent to any action taken by such Bank or the Agent under this
Agreement other than action requiring the consent of all of the Banks
hereunder.
(c) The Agent from time to time in its sole
discretion may appoint agents for the purpose of servicing and administering
this Agreement and the transactions contemplated hereby and enforcing or
exercising any rights or remedies of the Agent provided under this Agreement,
the Notes or otherwise. In furtherance of such agency, the Agent may from time
to time direct that the Borrowers provide notices, reports and other documents
contemplated by this Agreement (or duplicates thereof) to such agent. Each
Borrower hereby consents to the appointment of such agent and agrees to provide
all such notices, reports and other documents and to otherwise deal with such
agent acting on behalf of the Agent in the same manner as would be required if
dealing with the Agent itself.
(d) Each Bank may, with the prior consent of the
Company (which consent may be withheld in the sole discretion of the Company)
and the Agent, assign to one or more banks or other entities all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Loans owing to it and the
Note or Notes held by it); provided, however, that (i) each such assignment
shall be of a uniform, and not a varying, percentage of all rights and
obligations, (ii) except in the case of an assignment of all of a Bank's rights
and obligations under this Agreement, (A) the amount of the Commitment of the
assigning Bank being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to such assignment)
shall in no event be less than $5,000,000, and in integral multiples of
$1,000,000 thereafter, or such lesser amount as the Company and the Agent may
consent to and (B) after giving effect to each such assignment, the amount of
the Commitment of the assigning Bank shall in no event be less than $3,000,000,
(iii) the parties to each such assignment shall execute and deliver to the
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance in the form of Exhibit L hereto (an "Assignment and Acceptance"),
together with any Note or Notes subject to such assignment and a processing and
recordation fee of $3,000, and (iv) any Bank may without the consent of the
Company or the Agent, and without paying any fee, assign or sell a
participation interest to any Affiliate of such Bank that is a bank or
financial institution all or a portion of its rights and obligations under this
Agreement. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Bank hereunder and (y) the
Bank assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of the remaining
portion of an assigning Bank's rights and obligations under this Agreement,
such Bank shall cease to be a party hereto).
(e) By executing and delivering an Assignment and
Acceptance, the Bank assignor thereunder and the assignee thereunder confirm to
and agree with each other and
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the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any
Borrower or the performance or observance by any Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.6 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Bank or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under this Agreement as are delegated to the Agent by the terms hereof,
together with such powers and discretion as are reasonably incidental thereto;
and (vi) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Agreement are required
to be performed by it as a Bank.
(f) The Agent shall maintain at its address
designated on the signature pages hereof a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation
of the names and addresses of the Banks and the Commitment of, and principal
amount of the Loans owing to, each Bank from time to time (the "Register").
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Company, the Borrowing Subsidiaries, the Agent
and the Banks may treat each person whose name is recorded in the Register as a
Bank hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Company or any Bank at any reasonable time and
from time to time upon reasonable prior notice.
(g) Upon its receipt of an Assignment and
Acceptance executed by an assigning Bank and an assignee, together with any
Note or Notes subject to such assignment, the Agent shall, if such Assignment
and Acceptance has been completed, (i) accept such Assignment and Acceptance,
(ii) record the information contained therein in the Register and (iii) give
prompt notice thereof to the Company. Within five Business Days after its
receipt of such notice, the Borrowers, at their own expense, shall execute and
deliver to the Agent in exchange for the surrendered Note or Notes a new Note
to the order of such assignee in an amount equal to the Commitment assumed by
it pursuant to such Assignment and Acceptance and, if the assigning Bank has
retained a Commitment hereunder, a new Note to the order of the assigning Bank
in an amount equal to the Commitment retained by it hereunder. Such new Note
or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of Exhibit L hereto.
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(h) No Borrower shall be liable for any costs or
expenses of any Bank in effectuating any participation or assignment under this
Section 8.6.
(i) The Banks may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 8.6, disclose to the assignee or participant or proposed assignee
or participant any information relating to the Borrowers.
(j) Notwithstanding any other provision set forth
in this Agreement, any Bank may at any time create a security interest in, or
assign, all or any portion of its rights under this Agreement (including,
without limitation, the Loans owing to it and the Note or Notes held by it) in
favor of any Federal Reserve Bank in accordance with Regulation A of the Board
of Governors of the Federal Reserve System; provided that such creation of a
security interest or assignment shall not release such Bank from its
obligations under this Agreement.
8.7 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
8.8 Governing Law; Consent to Jurisdiction. This
Agreement is a contract made under, and shall be governed by and construed in
accordance with, the law of the State of Michigan applicable to contracts made
and to be performed entirely within such State and without giving effect to
choice of law principles of such State. Each Borrower further agrees that any
legal action or proceeding with respect to this Agreement or the Notes or the
transactions contemplated hereby shall be brought in any court of the State of
Michigan, or in any court of the United States of America sitting in Michigan,
and each Borrower hereby irrevocably submits to and accepts generally and
unconditionally the jurisdiction of those courts with respect to its person and
property, and irrevocably appoints Calfee, Halter & Griswold, whose address is
1800 Society Building, Cleveland, Ohio 44114, as its agent for service of
process and irrevocably consents to the service of process in connection with
any such action or proceeding by personal delivery to such agent or to the
Borrowers or by the mailing thereof by registered or certified mail, postage
prepaid to the Borrowers at the address set forth in Section 8.2. Nothing in
this paragraph shall affect the right of the Banks and the Agent to serve
process in any other manner permitted by law or limit the right of the Banks or
the Agent to bring any such action or proceeding against the Borrowers or
property in the courts of any other jurisdiction. Each Borrower hereby
irrevocably waives any objection to the laying of venue of any such suit or
proceeding in the above described courts.
8.9 Table of Contents and Headings. The table of
contents and the headings of the various subdivisions hereof are for the
convenience of reference only and shall in no way modify any of the terms or
provisions hereof.
8.10 Construction of Certain Provisions. If any provision
of this Agreement refers to any action to be taken by any person, or which such
person is prohibited from taking,
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such provision shall be applicable whether such action is taken directly or
indirectly by such person, whether or not expressly specified in such
provision.
8.11 Integration and Severability. This Agreement and the
Notes embody the entire agreement and understanding between the Borrowers and
the Agent and the Banks, and supersede all prior agreements and understandings,
relating to the subject matter hereof. In case any one or more of the
obligations of any Borrower under this Agreement or the Notes shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining obligations of such Borrower and the other
Borrowers shall not in any way be affected or impaired thereby, and such
invalidity, illegality or unenforceability in one jurisdiction shall not affect
the validity, legality or enforceability of the obligations of the Borrowers
under this Agreement or the Notes in any other jurisdiction.
8.12 Independence of Covenants. All covenants hereunder
shall be given independent effect so that if a particular action or condition
is not permitted by any such covenant, the fact that it would be permitted by
an exception to, or would be otherwise within the limitations of, another
covenant shall not avoid the occurrence of a Default or an Event of Default if
such action is taken or such condition exists.
8.13 Interest Rate Limitation. Notwithstanding any
provisions of this Agreement or the Notes, in no event shall the amount of
interest paid or agreed to be paid by any Borrower exceed an amount computed at
the highest rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Agreement or the
Notes at the time performance of such provision shall be due, shall involve
exceeding the interest rate limitation validly prescribed by law which a court
of competent jurisdiction may deem applicable hereto, then, ipso facto, the
obligations to be fulfilled shall be reduced to an amount computed at the
highest rate of interest permissible under applicable law, and if for any
reason whatsoever any Bank shall ever receive as interest an amount which would
be deemed unlawful under such applicable law such interest shall be
automatically applied to the payment of principal of such Bank's Advances
outstanding hereunder (whether or not then due and payable) and not to the
payment of interest, or shall be refunded to the Borrowers if such principal
and all other obligations of the Borrowers to such Bank have been paid in full.
8.14 Confidentiality. The Banks and the Agent shall hold
all confidential information obtained pursuant to the requirements of this
Agreement which has been identified as such by the Company in accordance with
their customary procedures for handling confidential information of this nature
and in accordance with safe and sound banking practices and in any event may
make disclosure to its examiners, affiliates, outside auditors, counsel and
other professional advisors in connection with this Agreement or as reasonably
required by any bona fide transferee or participant in connection with the
contemplated transfer of any Note or participation therein or as required or
requested by any governmental agency or representative thereof or pursuant to
legal process. Without limiting the foregoing, it is expressly understood that
such confidential information shall not include information which, at the time
of disclosure is in the public domain or, which after disclosure, becomes part
of the public domain or
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information which is obtained by any Bank or the Agent prior to the time of
disclosure and identification by the Company under this Section, or information
received by any Bank or the Agent from a third party. Nothing in this Section
or otherwise shall prohibit any Bank or the Agent from disclosing any
confidential information to the other Banks or the Agent or render any of them
liable in connection with any such disclosure.
8.15 Waiver of Jury Trial. The Borrowers, the Banks and
the Agent, after consulting or having had the opportunity to consult with
counsel, knowingly, voluntarily and intentionally waive any right either of
them may have to a trial by jury in any litigation based upon or arising out of
this Agreement or any other Loan Document or any of the transactions
contemplated by this Agreement or any course of conduct, dealing, statements
(whether oral or written) or actions of any of them. Neither any Borrower, any
Bank nor the Agent shall seek to consolidate, by counterclaim or otherwise, any
such action in which a jury trial has been waived with any other action in
which a jury trial cannot be or has not been waived. These provisions shall
not be deemed to have been modified in any respect or relinquished by any party
hereto except by a written instrument executed by such party.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered on the 20th day of December, 1994,
which shall be the Effective Date of this Agreement, notwithstanding the day
and year first above written.
INVACARE CORPORATION
By: _____________________________
Its: Chief Financial Officer
___________________________
INVACARE INTERNATIONAL CORPORATION
By: _____________________________
Its: Secretary
___________________________
CARTERS (J&A) LIMITED
By: _____________________________
Its: Treasurer
___________________________
INVACARE (DEUTSCHLAND) GmbH
By: _____________________________
Its: POA for Al Richter, General Manager
___________________________
INVACARE FRANCE S.A.R.L.
By: _____________________________
Its: Gerant
___________________________
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<PAGE> 67
ETABLISSEMENTS POIRIER, S.A.
By: _____________________________
Its: President
___________________________
CANADIAN WHEELCHAIR MFG. LIMITED
By: _____________________________
Its: President
___________________________
INVACARE CANADA INC.
By: _____________________________
Its: President
___________________________
QUANTRIX CONSULTANTS LIMITED
By: _____________________________
Its: Director
___________________________
DYNAMIC CONTROLS LIMITED
By: _____________________________
Its: Director
___________________________
GENUS MEDICAL INC.
By: _____________________________
Its: Secretary/Treasurer
___________________________
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<PAGE> 68
REHADAP S.A.
By: _____________________________
Its: President
___________________________
Address for Notices: NBD BANK, N.A., as a Bank
and as Agent
611 Woodward Avenue By: _____________________________
Detroit, Michigan 48226
Attention: Midwest Banking Division Its: ___________________________
Vice President
Facsimile No.: (313) 225-1671
Telephone No.: (313) 225-2259
Commitment Amount: $50,000,000
(comprised of a Tranche A Commitment
of $31,250,000 and a Tranche B
Commitment of $18,750,000)
Initial Percentage of
Total Commitments: 25%
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<PAGE> 69
REHADAP S.A.
By: _____________________________
Its:
___________________________
Address for Notices: NBD BANK, N.A., as a Bank
and as Agent
611 Woodward Avenue By: /s/ Winifred, S. M.
Detroit, Michigan 48226 _____________________________
Attention: Midwest Banking Division Its: Vice-President
Vice President ___________________________
Facsimile No.: (313) 225-1671
Telephone No.: (313) 225-2259
Commitment Amount: $50,000,000
(comprised of a Tranche A Commitment
of $31,250,000 and a Tranche B
Commitment of $18,750,000)
Initial Percentage of
Total Commitments: 25%
-63-
<PAGE> 70
Address for Notices: NATIONAL CITY BANK
1900 E. 9th, 10th Floor By: _____________________________
Cleveland, Ohio 44114
Attention: Michael Burns Its: VICE PRESIDENT
__________________________
Facsimile No.: (216) 575-9396
Telephone No.: (216) 575-9401
Commitment Amount: $50,000,000
(comprised of a Tranche A Commitment
of $31,250,000 and a Tranche B
Commitment of $18,750,000)
Initial Percentage of
Total Commitments: 25%
Address for Notices: SOCIETY NATIONAL BANK
127 Public Square, 6th Floor By: _____________________________
Cleveland, Ohio 44114-1306
Attention: Richard Pohle Its: __________________________
Facsimile No.: (216) 689-4981
Telephone No.: (216) 689-4446
Commitment Amount: $50,000,000
(comprised of a Tranche A Commitment
of $31,250,000 and a Tranche B
Commitment of $18,750,000)
Initial Percentage of
Total Commitments: 25%
-64-
<PAGE> 71
Address for Notices: NATIONAL CITY BANK
1900 E. 9th, 10th Floor By: _____________________________
Cleveland, Ohio 44114
Attention: Michael Burns Its: __________________________
Facsimile No.: (216) 575-9396
Telephone No.: (216) 575-9401
Commitment Amount: $50,000,000
(comprised of a Tranche A Commitment
of $31,250,000 and a Tranche B
Commitment of $18,750,000)
Initial Percentage of
Total Commitments: 25%
Address for Notices: SOCIETY NATIONAL BANK
127 Public Square, 6th Floor By: _____________________________
Cleveland, Ohio 44114-1306
Attention: Richard Pohle Its: Vice President
__________________________
Facsimile No.: (216) 689-4981
Telephone No.: (216) 689-4446
Commitment Amount: $50,000,000
(comprised of a Tranche A Commitment
of $31,250,000 and a Tranche B
Commitment of $18,750,000)
Initial Percentage of
Total Commitments: 25%
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<PAGE> 72
Address for Notices: SOCIETE GENERALE
181 W. Madison, Suite 3400 By: _____________________________
Chicago, Illinois 60602
Attention: _____________________ Vice President
Its: __________________________
Facsimile No.: (312) 578-5099
Telephone No.: (312) 578-5005
Commitment Amount: $17,500,000
(comprised of a Tranche A Commitment
of $10,937,500 and a Tranche B
Commitment of $6,562,500)
Initial Percentage of
Total Commitments: 8.75%
Address for Notices: SUNBANK, NATIONAL ASSOCIATION
200 S. Orange Avenue By: _____________________________
Orlando, Florida 32801
Attention: Carol Doyle Its: __________________________
Facsimile No.: (407) 237-6894
Telephone No.: (407) 237-4333
Commitment Amount: $17,500,000
(comprised of a Tranche A Commitment
of $10,937,500 and a Tranche B
Commitment of $6,562,500)
Initial Percentage of
Total Commitments: 8.75%
-65-
<PAGE> 73
Address for Notices: SOCIETE GENERALE
181 W. Madison, Suite 3400 By: _____________________________
Chicago, Illinois 60602
Attention: _____________________ Its: __________________________
Facsimile No.: (312) 578-5099
Telephone No.: (312) 578-5005
Commitment Amount: $17,500,000
(comprised of a Tranche A Commitment
of $10,937,500 and a Tranche B
Commitment of $6,562,500)
Initial Percentage of
Total Commitments: 8.75%
Address for Notices: SUNBANK, NATIONAL ASSOCIATION
200 S. Orange Avenue By: _____________________________
Orlando, Florida 32801
Attention: Carol Doyle First Vice President
Its: __________________________
Facsimile No.: (407) 237-6894
Telephone No.: (407) 237-4333
Commitment Amount: $17,500,000
(comprised of a Tranche A Commitment
of $10,937,500 and a Tranche B
Commitment of $6,562,500)
Initial Percentage of
Total Commitments: 8.75%
-65-
<PAGE> 74
Address for Notices: ABN AMRO BANK N.V.
1 PPG Place, Suite 2950 By: _____________________________
Pittsburgh, Pennsylvania 15222-5400
Attention: Greg Amoroso Vice President Group V.P.
Its: __________________________
Facsimile No.: (412) 566-2266
Telephone No.: (412) 566-0983
Commitment Amount: $15,000,000
(comprised of a Tranche A Commitment
of $9,375,000 and a Tranche B
Commitment of $5,625,000)
Initial Percentage of
Total Commitments: 7.50%
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<PAGE> 75
EXHIBIT A
BID-OPTION NOTE
December __, 1994
Detroit, Michigan
For value received, _________________________, a ______________
corporation (the "Borrower"), promises to pay to the order of
___________________________________ (the "Bank"), the unpaid principal amount
of each Bid-Option Loan made by the Bank to the Company pursuant to the Loan
Agreement referred to below, on the last day of the Interest Period relating to
such Loan. The Borrower further promises to pay interest on the aggregate
unpaid principal amount of such Bid-Option Loans on the dates and at the rates
negotiated as provided in the Loan Agreement. All such payments of principal
and interest with respect to Bid-Option Loans shall be made in Dollars in
immediately available funds at the Agent's principal office in Detroit,
Michigan.
Presentment, demand for payment, notice of non-payment, protest and
further notice or demand of any kind in connection with this Bid-Option Note are
hereby expressly waived by the Borrower and each endorser or guarantor hereof.
This Bid-Option Note evidences one or more Bid-Option Loans made under
the Loan Agreement, dated as of December __, 1994, as amended, supplemented or
otherwise modified from time to time (the "Loan Agreement"), by and among the
Borrower, certain other Borrowers designated therein from time to time, the
banks (including the Bank) party thereto and NBD Bank, N.A., as Agent, to which
reference is hereby made for a statement of the circumstances under which this
Bid-Option Note is subject to prepayment and under which its due date may be
accelerated. Capitalized terms used but not defined in this Bid-Option Note
shall have the respective meanings ascribed thereto in the Loan Agreement.
This Bid-Option Note is made under, and shall be governed by and
construed in accordance with, the laws of the State of Michigan applicable to
contracts made and to be performed entirely within such State and without
giving effect to choice of law principles of such State.
________________________________________
By: ____________________________________
Its: _______________________________
<PAGE> 76
EXHIBIT B
AGREEMENT
Reference is made to the Loan Agreement dated as of December __, 1994
(as now or hereafter amended or modified from time to time, the "Loan
Agreement") among INVACARE CORPORATION, an Ohio corporation (the "Company"),
certain borrowing subsidiaries designated therein from time to time (the
"Borrowing Subsidiaries, and collectively with the Company, the "Borrowing
Subsidiaries"), the banks named therein (the "Banks") and NBD BANK, N.A., as
agent for the Banks (the "Agent"). Terms defined in the Loan Agreement are
used herein with the same meaning.
1. __________________, a ___________ corporation (the "New
Borrowing Subsidiary") has decided to become a Borrowing Subsidiary under the
Loan Agreement, with its address for notice as described next to its signature
below. The New Borrowing Subsidiary (i) confirms that it has received a copy
of the Loan Agreement, together with copies of documents and information as it
has deemed appropriate to make its own decision to enter into this Agreement;
(ii) agrees that it will perform in accordance with all of the obligations and
comply with all of the cvovenants that by the terms of the Loan Agreement and
the other Loan Documents are required to be performed by or complied with by it
as a Borrowing Subsidiary; (iii) confirms that the representations and
warranties contained in Article IV of the Loan Agreement and in any other Loan
Agreement applicable to a Borrowing Subsidiary are true and correct as of the
date hereof as to the New Borrowing Subsidiary and (iv) authorizes Invacare
Corporation, as Treasury Manager, to act as its manager under the Loan
Agreement pursuant to Section 2.12 of the Loan Agreement.
2. Upon execution and delivery of this Agreement to the Agent
together with all other items required pursuant to paragraph 3, the New
Borrowing Subsidiary shall be a party to the Loan Agreement and have the rights
and obligations of a Borrowing Subsidiary thereunder.
3. This Agreement shall not become effective and the New Borrowing
Subsidiary shall not become a Borrowing Subsidiary under the Loan Agreement
until receipt by the Agent of the following documents and completion of the
following matters, in form and substance reasonably satisfactory to the Agent:
(a) A certificate of incumbency of the Company and the New
Borrowing Subsidiary containing, and attesting to the genuineness of, the
signatures of those officers authorized to act on behalf of the New Borrowing
Subsidiary in connection with this Agreement, the Loan Agreement and the Notes
and on behalf of the Company in connection with this Agreement and the
consummation by the New Borrowing Subsidiary and the Company of the
transactions contemplated herein, certified as true and correct as of the
effective date of this
<PAGE> 77
Agreement by a duly authorized officer of the New Borrowing Subsidiary
and the Company, respectively;and
(b) The Notes, duly executed on behalf of the New
Borrowing Subsidiary, for each Bank;
4. The Company (a) fully consents to the New Borrowing Subsidiary
becoming a Borrowing Subsidiary; (b) agrees that the Guaranty with respect to
the indebtedness, obligations and liabilities of the Borrowing Subsidiaries
dated as of December 20, 1994 in favor of the Agent and the Banks is ratified
and confirmed and shall remain in full force and effect; and (c) confirms that
all indebtedness, obligations and liabilities of the Borrowing Subsidiaries,
including the New Borrowing Subsidiary, are guaranteed by the Guaranty.
5. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Michigan.
6. This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
7. Upon delivery of this executed Agreement to the Agent, the
Agent shall deliver a copy of this Agreement to each Bank, together with the
original Notes payable to each such Bank.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officer thereunto duly authorized as of
the day and year first above written.
______________________________
______________________________ [NEW BORROWING SUBSIDIARY]
______________________________
Attention: ___________________ By:______________________________________
Facsimile No. (___) ___-____
Its:_____________________________________
INVACARE CORPORATION
By:______________________________________
Its:_____________________________________
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<PAGE> 78
NBD BANK, N.A., as Agent
By: _____________________________________
Its: __________________________________
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<PAGE> 79
EXHIBIT C
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of December 20, 1994 (this
"Guaranty") made by INVACARE CORPORATION, an Ohio corporation (the "Guarantor"),
in favor of the banks which are parties to the Loan Agreement hereinafter
defined (the "Banks") and NBD BANK, N.A., a national banking association, as
agent (in such capacity, the "Agent") for such Banks under the Loan Agreement.
W I T N E S S E T H:
A. The Guarantor and certain subsidiaries of the
Guarantor set forth on Schedule A hereto (the "Subsidiaries"), have entered into
a Loan Agreement, dated as of even date herewith (as amended or modified from
time to time, the "Loan Agreement") with the Agent and the Banks, pursuant to
which the Banks have agreed to make Advances to the Subsidiaries and, in their
sole discretion, other subsidiaries of the Guarantor (such subsidiaries and the
Subsidiaries being collectively referred to herein as the "Borrowing
Subsidiaries"), subject to the terms and conditions of the Loan Agreement; and
B. As a condition to the obligation of the Banks under
the Loan Agreement, the Guarantor is required to fully and unconditionally
guarantee, among other things, the Advances and other obligations of the
Borrowing Subsidiaries;
NOW, THEREFORE, as an inducement to the Banks to enter into the
transactions contemplated by the Loan Agreement, the Guarantor agrees with the
Banks and the Agent as follows:
1. Guarantee of Obligations. (a) The Guarantor
hereby (i) guarantees, as principal obligor and not as surety only, to the
Banks the prompt payment of the principal of and any and all accrued and unpaid
interest (including interest which otherwise may cease to accrue by operation
of any insolvency law, rule, regulation or interpretation thereof) on (x) the
Advances made to any of the Borrowing Subsidiaries, (y) reimbursement of all
amounts due to the Banks upon issuance of letters of credit for the benefit of
any of the Borrowing Subsidiaries, and (z) all other loans or advances by any
Bank to any of the Borrowing Subsidiaries, or other obligations of any of the
Borrowing Subsidiaries to the Agent and the Banks, including without limitation
foreign exchange loans and advances which are not made pursuant to the terms of
the Loan Agreement, all when due, whether by scheduled maturity, acceleration or
otherwise, all in accordance with the terms of the Loan Agreement or such other
documents or instruments evidencing such loans, advances or obligations (the
"Other Loan Documents"), and any and all other amounts which may be payable by
any of the Borrowing Subsidiaries to any Bank or the Agent in connection with or
pursuant to the Loan Agreement and the Other Loan Documents, including, without
limitation, default interest, indemnification payments and all reasonable costs
<PAGE> 80
and expenses incurred by the Banks and the Agent in connection with enforcing
any obligations of the Borrowing Subsidiaries thereunder, including without
limitation the reasonable fees and disbursements of counsel, (ii) guarantees
the prompt and punctual performance and observance of each and every term,
covenant or agreement contained in the Loan Agreement and the Other Loan
Documents to be performed or observed on the part of any of the Borrowing
Subsidiaries, and (iii) agrees to make prompt payment, on demand, of any and
all reasonable costs and expenses incurred by the Banks or the Agent in
connection with enforcing the obligations of the Guarantor hereunder,
including, without limitation, the reasonable fees and disbursements of counsel
(all of the foregoing being collectively referred to as the "Guaranteed
Obligations", and the Loan Agreement and the Other Loan Documents are sometimes
collectively referred to as the "Loan Agreements").
(b) If for any reason any duty, agreement or
obligation of any of the Borrowing Subsidiaries contained in the Loan
Agreements shall not be performed or observed by the relevant Borrowing
Subsidiary as provided therein, or if any amount payable under or in connection
with the Loangreements shall not be paid in full when the same becomes due and
payable, the Guarantor undertakes to perform or cause to be performed promptly
each of such duties, agreements and obligations and to pay forthwith each such
amount to the Agent for the account of the Banks regardless of any defense or
setoff or counterclaim which any of the Borrowing Subsidiaries may have or
assert, and regardless of any other condition or contingency.
(c) The date and amount of advances of principal
made by the Banks in respect of the Loans made to the Borrowing Subsidiaries
and the aggregate principal amount thereof and accrued interest thereon shown
upon the books and records of each respective Bank and in any certificate
delivered by any Bank to the Guarantor in respect thereof, shall be prima
facie evidence of the principal amount and accrued interest owing and unpaid
on such Loans. The failure to record any such information on such books and
records shall not, however, limit or otherwise affect the obligations of any
of the Borrowing Subsidiaries to repay the principal amount of such Loans
together with accrued interest thereon or the obligations of the Guarantor
hereunder with respect thereto.
2. Nature of Guaranty. This Guaranty is an
absolute and unconditional and irrevocable guaranty of payment and not a
guaranty of collection and is wholly independent of and in addition to other
rights and remedies of the Banks and the Agent and is not contingent upon the
pursuit by the Banks and the Agent of any such rights and remedies, such
pursuit being hereby waived by the Guarantor.
3. Waivers and Other Agreements. The Guarantor
hereby unconditionally (a) waives any requirement that the Banks or the Agent,
upon the occurrence of an "Event of Default" (as defined in the Loan Agreement)
or an event of default under any of the Other Loan
<PAGE> 81
Documents by any of the Borrowing Subsidiaries, first make demand upon, or seek
to enforce remedies against, any or all of the Borrowing Subsidiaries before
demanding payment under or seeking to enforce this Guaranty, (b) covenants that
this Guaranty will not be discharged except by complete performance of all
obligations of the Borrowing Subsidiaries contained in the Loan Agreements, (c)
agrees that this Guaranty shall remain in full force and effect without regard
to, and shall not be affected or impaired, without limitation, by any
invalidity, irregularity or unenforceability in whole or in part of the Loan
Agreements, or any limitation on the liability of any of the Borrowing
Subsidiaries thereunder, or any limitation on the method or terms of payment
thereunder which may now or hereafter be caused or imposed in any manner
whatsoever, (d) waives diligence, presentment and protest with respect to, and
any notice of default or dishonor in the payment of any amount at any time
payable by any of the Borrowing Subsidiaries under or in connection with the
Loan Agreements, and further waives any requirement of notice of acceptance of,
or other formality relating to, this Guaranty and (e) agrees that the
Guaranteed Obligations shall include any amounts paid by any of the Borrowing
Subsidiaries to any Bank or the Agent which may be required to be returned to
any of the Borrowing Subsidiaries, or to its representative or to a trustee,
custodian or receiver for any of the Borrowing Subsidiaries.
4. Obligations Absolute. The obligations,
covenants, agreements and duties of the Guarantor under this Guaranty shall not
be released, affected or impaired by any of the following whether or not
undertaken with notice to or consent of the Guarantor: (a) any assignment or
transfer, in whole or in part, of the Loans made to the Borrowing Subsidiaries
or the Loan Agreements although made without notice to or consent of the
Guarantor, or (b) any waiver by any Bank or the Agent, or by any other person,
of the performance or observance by any of the Borrowing Subsidiaries of any of
the agreements, covenants, terms or conditions contained in the Loan
Agreements, or (c) any indulgence in or the extension of the time for payment
by any of the Borrowing Subsidiaries of any amounts payable under or in
connection with the Loan Agreements, or of the time for performance by any of
the Borrowing Subsidiaries of any other obligations under or arising out of the
Loan Agreements, or the extension or renewal thereof, or (d) the modification,
amendment or waiver (whether material or otherwise) of any duty, agreement or
obligation of any of the Borrowing Subsidiaries set forth in the Loan
Agreements (the modification, amendment or waiver from time to time of the Loan
Agreements being expressly authorized without further notice to or consent of
the Guarantor), or (e) the voluntary or involuntary liquidation, sale or other
disposition of all or substantially all of the assets of any of the Borrowing
Subsidiaries, or any receivership, insolvency, bankruptcy, reorganization, or
other similar proceedings, affecting any of the Borrowing Subsidiaries or any
of their assets, or (f) the merger or consolidation of any of the Borrowing
Subsidiaries or the Guarantor with any other person, or (g) the release or
discharge of any of the Borrowing Subsidiaries or the Guarantor from the
performance or observance of any agreement, covenant, term or condition
contained in the Loan Agreements, by operation of law, or (h) any other cause
GUARANTY AGREEMENT
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<PAGE> 82
whether similar or dissimilar to the foregoing which would release, affect or
impair the obligations, covenants, agreements or duties of the Guarantor
hereunder.
5. Foreign Currency. This Guaranty arises in the
context of an international transaction, and the specification of payment in
foreign currency to the Agent and the Banks pursuant to the Loan Agreement is
of the essence. The foreign currency shall be the currency of account and
payment under the Loan Agreements. The obligation of the Guarantor shall not
be discharged by an amount paid in any other currency or at another place,
whether pursuant to a judgment or otherwise, to the extent that the amount so
paid, on prompt conversion into the foreign currency and transfer to the Agent
and the Banks under normal banking procedure, does not yield the amount of
foreign currency due under this Guaranty. In the event that any payment,
whether pursuant to a judgment or otherwise, upon conversion and transfer, does
not result in payment of the amount of foreign currency due under this
Guaranty, the Agent and the Banks shall have an independent cause of action
against the Guarantor for the foreign currency deficiency.
6. Events of Default. The occurrence of any
"Event of Default" (as defined in the Loan Agreement) shall be deemed an "event
of default" hereunder unless waived by the Banks pursuant to paragraph 8.
7. Remedies. Upon the occurrence and during the
continuance of such event of default, the Agent may, and upon being directed to
do so by the Required Banks, shall enforce its rights either by suit in equity,
or by action at law, or by other appropriate proceedings, whether for the
specific performance (to the extent permitted by law) of any covenant or
agreement contained in this Guaranty or in aid of the exercise of any power
granted in this Guaranty and may enforce payment under this Guaranty and any of
its other rights available at law or in equity.
8. Amendments, Etc. This Guaranty may be amended
from time to time and any provision hereof may be waived in accordance with the
requirements of Section 8.1 of the Loan Agreement. No amendment or waiver of
any provision of this Guaranty nor consent to any departure by the Guarantor
therefrom shall be effective unless the same shall be in writing and signed by
the Required Banks or all of the Banks, as the case may be, and, to the extent
any rights or duties of the Agent may be affected, the Agent, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
9. Notices. All notices and other communications
hereunder shall be in writing and made in accordance with Section 8.2 of the
Loan Agreement.
GUARANTY AGREEMENT
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<PAGE> 83
10. Conduct No Waiver; Remedies Cumulative. The
obligations of the Guarantor under this Guaranty are continuing obligations and
a fresh cause of action shall arise in respect of each event of default
hereunder. No course of dealing on the part of any Bank or the Agent, nor any
delay or failure on the part of any Bank or the Agent in exercising any right,
power or privilege hereunder shall operate as a waiver of such right, power or
privilege or otherwise prejudice any Bank or the Agent's rights and remedies
hereunder; nor shall any single or partial exercise thereof preclude any
further exercise thereof or the exercise of any other right, power or
privilege. No right or remedy conferred upon or reserved to the Banks or the
Agent under this Guaranty is intended to be exclusive of any other right or
remedy, and every right and remedy shall be cumulative and in addition to
every other right or remedy given hereunder or now or hereafter existing under
any applicable law. Every right and remedy given by this Guaranty or by
applicable law to the Banks or the Agent may be exercised from time to time
and as often as may be deemed expedient by them.
11. Reliance on and Survival of Various
Provisions. All terms, covenants, agreements, representations and
warranties of the Guarantor made herein or in any certificate or other document
delivered pursuant hereto shall be deemed to be material and to have been
relied upon by the Banks or the Agent, notwithstanding any investigation
heretofore or hereafter made by the Banks or the Agent or on their behalf.
12. No Investigation by the Banks or the Agent. The
Guarantor hereby waives unconditionally any obligation which, in the absence of
such provision, the Banks or the Agent might otherwise have to investigate or to
assure that there has been compliance with the law of any jurisdiction with
respect to the Guaranteed Obligations recognizing that, to save both time and
expense, the Guarantor has requested that the Banks and the Agent not undertake
such investigation. The Guarantor hereby expressly confirms that the
obligations of the Guarantor hereunder shall remain in full force and effect
without regard to compliance or noncompliance with any such law and
irrespective of any investigation or knowledge of any Bank or the Agent of any
such law.
13. Governing Law. This Guaranty is a contract
made under, and the rights and obligations of the parties hereunder, shall be
governed by and construed in accordance with, the laws of the State of Michigan
applicable to contracts to be made and to be performed entirely with such State
without regard to the choice of law principles of such State.
14. Headings. The headings of the various
subdivisions hereof are for convenience of reference only and shall in no way
modify any of its terms or provisions hereof.
15. Construction of Certain Provisions. If any
provision of this Guaranty refers to any action to be taken by any person, or
which such person is prohibited from taking, such
GUARANTY AGREEMENT
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<PAGE> 84
provision shall be applicable whether such action is taken directly or
indirectly by such person, whether or not expressly specified in such
provision.
16. Integration and Severability. This Guaranty
embodies the entire agreement and understanding between the Guarantor, the
Banks and the Agent, and supersedes all prior all agreements and understandings,
relating to the subject matter hereof. In any case one or more of the
obligations of the Guarantor under this Guaranty shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining obligations of the Guarantor shall not in any way be affected or
impaired thereby, and such invalidity, illegality or unenforceability in one
jurisdiction shall not affect the validity, legality or enforceability of the
obligations of the Guarantor under this Guaranty in any other jurisdiction.
17. Indemnity. As a separate, additional and
continuing obligation, the Guarantor unconditionally and irrevocably undertakes
and agrees with the Banks and the Agent that, should the Guaranteed Obligations
not be recoverable from the Guarantor under paragraph 1 for any reason
whatsoever (including, without limitation, by reason of any provision of the
Loan Agreement or any other agreement or instrument executed in connection
therewith being or becoming void, unenforceable, or otherwise invalid under any
applicable law) then, notwithstanding any knowledge thereof by any Bank or the
Agent at any time, the Guarantor as sole, original and independent obligor,
upon demand by the Agent, will make payment to the Agent for the account of the
Banks and the Agent of the Guaranteed Obligations by way of a full indemnity
in such currency and otherwise in such manner as is provided in the Loan
Agreement or such other agreement or instrument, as the case may be.
18. Subordination, Subrogation, Etc. The
Guarantor agrees that any present or future indebtedness, obligations or
liabilities of any Borrowing Subsidiary to the Guarantor shall be fully
subordinate and junior in right and priority of payment to any present or
future indebtedness, obligations or liabilities of any Borrowing Subsidiary to
the Banks and the Agent, and the Guarantor shall not exercise any right of
subrogation, reimbursement or indemnity whatsoever nor any right of recourse to
security for the debts and obligations of any Borrowing Subsidiary, until all
of the Guaranteed Obligations have been paid in full and are not subject to any
right of revocation or rescission.
19. Jurisdiction and Venue. The Guarantor agrees
that any legal action or proceeding with respect to this Guaranty or the Loan
Agreement or the transactions contemplated thereby may be brought only in any
court in the State of Michigan, or any court of the United States of America
sitting in the State of Michigan, and the Guarantor hereby submits to and
accepts generally and unconditionally the jurisdiction of those courts with
respect to its person and property, and irrevocably consents to the service of
process in connection with any such action or proceeding by personal delivery
to the Guarantor or by mailing thereof by registered or certified mail, postage
prepaid, to the Guarantor at its address as provided by it from time to
GUARANTY AGREEMENT
-6-
<PAGE> 85
time under the Loan Agreements. Nothing in this paragraph shall affect the
right of the Agent or any Bank to serve process in any other manner permitted
by
law or limit the right of the Agent or any Bank to bring any such action or
proceeding against the Guarantor or its property in the courts of any other
jurisdiction. The Guarantor hereby irrevocably waives any objection to the
laying of venue of any such suit or proceeding in the above-described courts.
20. Waiver of Jury Trial. The Agent, the Banks
and the Guarantor, after consulting or having had the opportunity to consult
with counsel, knowingly, voluntarily and intentionally waive any right any of
them may have to a trial by jury in any litigation based upon or arising out of
this Guaranty or any related instrument or agreement or any of the transactions
contemplated by this Guaranty. Neither the Agent, any Bank nor the Guarantor
shall seek to consolidate, by counterclaim or otherwise, any such action in
which a jury trial has been waived with any other action in which a jury trial
cannot be or has not been waived. These provisions shall not be deemed to have
been modified in any respect or relinquished by the Agent, any Bank or the
Guarantor except by a written instrument executed by all of them.
21. Inapplicability of Surety Provisions. The
parties hereby agree that the Guarantor is not a surety within the meaning of
Section 1341.03 of the Ohio Revised Code.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be duly executed and delivered as of this ___ day of December, 1994.
INVACARE CORPORATION
By: _____________________________________
Its: _________________________________
GUARANTY AGREEMENT
-7-
<PAGE> 86
The undersigned hereby executes this Guaranty for the purpose of accepting it
and agreeing to paragraph 20 hereof.
NBD BANK, N.A., as Agent
By: _______________________________
Its: ___________________________
Dated: December , 1994
GUARANTY AGREEMENT
-8-
<PAGE> 87
EXHIBIT D
SWING LINE NOTE
December __, 1994 Detroit, Michigan
FOR VALUE RECEIVED, ________________________, a __________
corporation (the "Borrower"), promises to pay to the order of NBD Bank, N.A., a
national banking association (the "Bank"), at the place and in the currency and
manner designated in the Loan Agreement referred to below and in immediately
available funds, the unpaid principal amount of Swing Line Loans as is recorded
in the books and records of the Bank, on the Termination Date; and to pay
interest on the unpaid principal balance hereof from time to time outstanding,
in like money and funds, for the period from the date hereof until the Swing
Line Loans evidenced hereby shall be paid in full, at the rates per annum and
on the dates provided in the Loan Agreement referred to below.
The Bank is hereby authorized by the Borrower to record on its
books and records, the date, currency, amount and type of each Swing Line Loan,
the duration of the related Interest Period (if applicable), the amount of each
payment or prepayment of principal thereon and the other information provided
for on such schedule, which schedule or such books and records, as the case may
be, shall constitute prima facie evidence of the information so recorded,
provided, however, that any failure by the Bank to record any
such information shall not relieve the Borrower of its obligation to repay the
outstanding principal amount of such Swing Line Loans, all accrued interest
thereon and any amount payable with respect thereto in accordance with the
terms of this Swing Line Note and the Loan Agreement.
The Borrower and each endorser or guarantor hereof waives
demand, presentment, protest, diligence, notice of dishonor and any other
formality in connection with this Swing Line Note. Should the indebtedness
evidenced by this Swing Line Note or any part thereof be collected in any
proceeding or be placed in the hands of attorneys for collection, the Borrower
agrees to pay, in addition to the principal, interest and other sums due and
payable hereon, all costs of collecting this Swing Line Note, including
attorneys' fees and expenses.
This Swing Line Note evidences one or more Swing Line Loans
made under a Loan Agreement, dated as of December __, 1994 (as amended or
modified from time to time, the "Loan Agreement"), by and among Invacare
Corporation, an Ohio corporation (the "Company"), the Borrowing Subsidiaries
designated therein from time to time (collectively with
SWING LINE NOTE
-1-
<PAGE> 88
the Company, the "Borrowers"), the banks (including the Bank) named
therein and NBD Bank, N.A., as agent for the banks, to which reference is
hereby made for a statement of the circumstances under which this Swing Line
Note is subject to prepayment and under which its due date may be accelerated
and for a description of the collateral and security securing this Swing Line
Note. Capitalized terms used but not defined in this Swing Line Note shall have
the respective meanings assigned to them in the Loan Agreement.
This Swing Line Note is made under, and shall be governed by
and construed in accordance with, the laws of the State of Michigan in the same
manner applicable to contracts made and to be performed entirely within such
State and without giving effect to choice of law principles of such State.
_____________________________________
By:__________________________________
Its:______________________________
SWING LINE NOTE
- 2 -
<PAGE> 89
EXHIBIT E
SYNDICATED NOTE
December __,1994 Detroit, Michigan
FOR VALUE RECEIVED, ____________________, a ____________
corporation (the "Borrower"), hereby promises to pay to the order of
_________________________, a ________________ (the "Bank"), at the place and
currency and manner designated in the Loan Agreement referred to below and in
immediately available funds, the unpaid principal amount of all Syndicated
Loans as is recorded in the books and records of the Bank, on, with respect to
Revolving Credit Loans, the Termination Date and, with respect to Term Loans,
the Maturity Date; and to pay interest on the unpaid principal balance hereof
from time to time outstanding, in like money and funds, for the period from the
date hereof until the Syndicated Loans evidenced hereby shall be paid in full,
at the rates per annum and on the dates provided in the Loan Agreement referred
to below.
The Bank is hereby authorized by the Borrower to record on its
books and records, the date, currency, amount and type of each Syndicated Loan,
the duration of the related Interest Period (if applicable), the amount of each
payment or prepayment of principal thereon and the other information provided
for in such books and records, which such books and records shall constitute
prima facie evidence of the information so recorded, provided,
however, that any failure by the Bank to record any such information
shall not relieve the Borrower of its obligation to repay the outstanding
principal amount of such Syndicated Loans, all accrued interest thereon and any
amount payable with respect thereto in accordance with the terms of this
Syndicated Note and the Loan Agreement.
The Borrower and each endorser or guarantor hereof waives
demand, presentment, protest, diligence, notice of dishonor and any other
formality in connection with this Syndicated Note. Should the indebtedness
evidenced by this Syndicated Note or any part thereof be collected in any
proceeding or be placed in the hands of attorneys for collection, the Borrower
agrees to pay, in addition to the principal, interest and other sums due and
payable hereon, all costs of collecting this Syndicated Note, including
attorneys' fees and expenses (including without limitation allocated costs and
expenses of attorneys who are employees of the Bank).
This Syndicated Note evidences one or more Syndicated Loans
made under a Loan Agreement, dated as of December __, 1994 (as amended or
modified from time to time, the "Loan Agreement"), by and among Invacare
Corporation, an Ohio corporation (the "Company"), certain Borrowing
Subsidiaries designated therein from time to time (collectively with the
Company, the "Borrowers"), the banks (including the Bank) named therein and NBD
Bank, N.A., as agent for the banks, to which reference is hereby made for a
statement of the circumstances
<PAGE> 90
under which this Syndicated Note is subject to prepayment and
under which its due date may be accelerated. Capitalized terms used but not
defined in this Syndicated Note shall have the respective meanings assigned to
them in the Loan Agreement.
This Syndicated Note is made under, and shall be governed by
and construed in accordance with, the laws of the State of Michigan in the same
manner applicable to contracts made and to be performed entirely within such
State and without giving effect to choice of law principles of such State.
_____________________________________
By:__________________________________
Its:_________________________________
SYNDICATED NOTE
-2-
<PAGE> 91
EXHIBIT F
BID-OPTION QUOTE REQUEST
[Date]
NBD Bank, N.A.,
as Agent for the Banks
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Midwest Banking Division
Invacare Corporation (the "Treasury Manager") on behalf of the Borrowers
referred to below, hereby requests offers to make Bid-Option Loans comprising
the Bid-Option Borrowing(s) described below pursuant to Section 2.2(b) of the
Loan Agreement, dated as of December 20, 1994, as amended, supplemented or
otherwise modified (the "Loan Agreement"), by and among INVACARE CORPORATION,
an Ohio corporation (the "Company"), certain Borrowing Subsidiaries designated
therein from time to time (collectively with the Comipany, the "Borrowers"),
the Banks and NBD Bank, N.A., as Agent. Capitalized terms used but not defined
herein shall have the respective meanings ascribed thereto in the Loan
Agreement.
Date of Bid-Option Borrowing(s): ________, 19__
Designated Borrower: _____________________
Aggregate Amount of each Bid-Option Borrowing: (a) _______________*
(b) ______________
(c) ______________
Interest Period: (a) ______________**
(b) ______________
(c) ______________
INVACARE CORPORATION
By:_______________________________________
Its:___________________________________
*Must be (a) $5,000,000 or a larger multiple of $1,000,000.
**Must comply with the definition of the term "Bid-Option Interest Period."
<PAGE> 92
EXHIBIT G
INVITATION FOR BID-OPTION QUOTES
[Date]
To: [Name of Bank]
Attention: ____________________
Reference is made to the Loan Agreement, dated as of December 20, 1994, as
amended, supplemented or otherwise modified (the "Loan Agreement"), by and
among
INVACARE CORPORATION, an Ohio corporation (the "Company") certain Borrowing
Subsidiaries designated therein from time to time (collectively with the
Company, the "Borrowers"), the Banks and NBD Bank, N.A., as Agent. Capitalized
terms used but not defined herein shall have the respective meanings ascribed
thereto in the Loan Agreement.
Pursuant to Section 2.2(c) of the Loan Agreement, NBD Bank, N.A., as
Agent, is pleased on behalf of the Borrowers to invite you to submit Bid-Option
Quotes to the Borrowers for the Bid-Option Borrowing(s) described below.
Date of Bid-Option Borrowing(s): ________, 19__
Designated Borrower: ____________________
<TABLE>
<CAPTION>
Aggregate Amount of Each
Bid-Option Borrowing: Interest Period:
________________________ _________________
<S><C> <C><C>
(a) ____________________ (a) ________________
(b) ____________________ (b) ________________
(c) ____________________ (c) ________________
</TABLE>
Please respond to this invitation by no later than 9:00 a.m.
(Detroit time) on _________________, 19__.*
NBD BANK, N.A., as Agent
By: ______________________________________
Its: _________________________________
* Insert date of Bid-Option Borrowing
<PAGE> 93
EXHIBIT H
BID-OPTION QUOTE
[Date]
NBD Bank, N.A., as Agent
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Midwest Banking Division
Reference is made to the Loan Agreement, dated as of December 20, 1994,
as amended, supplemented or otherwise modified (the "Loan Agreement"), by and
among INVACARE CORPORATION, an Ohio corporation (the "Company"), certain
Borrowing Subsidiaries designated therein from time to time (collectively with
the Company, the "Borrowers"), the Banks and NBD Bank, N.A., as Agent.
Capitalized terms used but not defined herein shall have the respective
meanings ascribed thereto in the Loan Agreement.
In response to your Invitation for Bid-Option Quotes dated _____, 19__,
_________________________ (the "Bank"), hereby makes the following offer[s] to
make [a] Bid-Option Loan[s]:
1. Quoting Bank: ____________________________
Contact Person: _________________________
2. Date of proposed Borrowing: __________, 19__*
3. Quotes:
<PAGE> 94
<TABLE>
<CAPTION>
Principal Bid-Option Interest
Amount** Rate*** Period ****
-------- ------- -----------
<S> <C> <C> <C>
(a) _________ ___________ ___________
(b) _________ ___________ ___________
(c) _________ ___________ ___________
</TABLE>
4. The aggregate amount of Bid-Option Loans which may be accepted by
the Borrowers pursuant to this Bid-Option Quote shall not exceed $_____________.
The Bank acknowledges and agrees that this Bid-Option Quote (a) is
irrevocable and (b), subject to the terms and conditions of the Loan Agreement,
obligates it to make a Bid-Option Loan for which any quote is accepted, in
whole or in part.
[Name of Bank]
By: ______________________________________
Its: _________________________________
* As specified in the related Invitation for Bid-Option Quotes.
** The principal amount (a) must be $5,000,000 or a larger multiple of
$1,000,000 and (b) may not exceed the aggregate amount of the related
Bid-Option Borrowing specified in the related Invitation for Bid-Option
Quotes.
*** Specify rate of interest per annum (rounded up to the nearest 1/100th
of 1%) or applicable margin, which may be positive or negative,
expressed as a percentage (rounded up to the nearest 1/100th of 1%), as
the case may be.
**** As specified in the related Invitation for Bid-Option Quotes.
<PAGE> 95
EXHIBIT I
REQUEST FOR SYNDICATED ADVANCE
To each Bank party to
the referenced Loan Agreement
c/o NBD Bank, N.A., as Agent for the Banks
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Midwest Banking Division
Invacare Corporation, (the "Treasury Manager"), on behalf of
the Borrowers referred to below, hereby requests a [insert Revolving Credit
Loan, Term Loan or Letter of Credit Advance] pursuant to Section 2.6 of the
Loan Agreement, dated as of December 20, 1994 (as amended or modified from time
to time, the "Loan Agreement"), among Invacare Corporation, an Ohio corporation
(the "Company"), the Borrowing Subsidiaries designated from time to time
(collectively with the Company, the "Borrowers"), the Banks referenced therein
and you, as Agent for the Banks.
[A [Term][Revolving Credit] Loan is requested to be made in the
amount of _________ (specify amount of Dollars or the relevant Permitted
Currency), to be made on ____________, 19___ for the account of ____________
(specify Designated Borrower) and evidenced by the Borrowers' Syndicated Notes.
Such Loan shall be a [insert Interbank Offered Rate Syndicated Loan, Negotiated
Rate Loan or Floating Rate Loan] and the initial Interest Period, if such
requested Loan is a Fixed Rate Syndicated Loan, shall be [insert permitted
Interest Period].]
[Such Letter of Credit Advance shall be made by the issuance by
the Agent of its Letter of Credit for the account of ____________ (specify
Designated Borrower) in the maximum stated amount of $___________ to and for
the benefit of ________________ with a stated expiry date of _________________,
199__, and containing the further terms and conditions set forth in the
attached letter of credit application to the Agent.]
In support of this request, the Treasury Manager, on behalf of
the Borrowers, hereby represents and warrants to the Agent and the Banks that:
1. The representations and warranties contained in
Article IV of the Credit Agreement are true and correct in all material
respects on and as of the date hereof, and will be true and correct in all
material respects on the date such Advance is made (both before and after such
Advance is made), as if such representations and warranties were made on and as
of such dates.
<PAGE> 96
2. No Event of Default or Default has occurred and is
continuing or will exist on the date such Advance is made and such Advance
shall not cause an Event of Default or Default.
Acceptance of the proceeds of such Advance by the Designated Borrower shall be
deemed to be a further representation and warranty by the Borrowers that the
representations and warranties made herein are true and correct in all material
respects at the time such proceeds are disbursed.
Capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Loan Agreement.
INVACARE CORPORATION
By: ______________________________________
Its: _____________________________________
Dated: ________________, 199_
REQUEST FOR SYNDICATED ADVANCE
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<PAGE> 97
EXHIBIT J
OPINION OF COUNSEL
[Letterhead of Counsel to the Company]
December __, 1994
NBD Bank, N.A.
National City Bank
Society National Bank
Societe Generale
SunBank, National Association
ABN Amro Bank, N.A.
NBD Bank, N.A., as Agent
c/o NBD Bank, N.A., as Agent
611 Woodward Avenue
Detroit, Michigan 48226
Ladies and Gentlemen:
We refer to the Loan Agreement dated as of December 20, 1994 (the
"Loan Agreement") by and among Invacare Corporation, an Ohio corporation (the
"Company"), certain subsidiaries designated as borrowing subsidiaries therein
(the "Borrowing Subsidiaries" and, collectively with the Company, the
"Borrowers"), the banks parties thereto (the "Banks") and NBD Bank, N.A., a
national banking association, as agent for the Banks (in such capacity, the
"Agent"). We have been requested by the Company to give our opinion pursuant to
Section 2.7(f) of the Loan Agreement and, for purposes of this opinion, the
terms used in this opinion, which are not defined herein, shall have the
respective meanings set forth in the Loan Agreement.
We have examined the following documents and instruments: (i) the Loan
Agreement, (ii) the Notes, (iii) the Guaranty and (iv) other documents relating
to the transactions contemplated by the Loan Agreement (collectively, items (i)
through (iv) are referred to as the "Loan Documents"). We have also examined
and relied upon certified copies of the Company's articles of incorporation,
by-laws and board of directors resolutions authorizing the Company's
participation in the transactions contemplated by the Loan Agreement. We have
also copies of all such documents and records of the Company and all such other
documents and records, and have made such investigations of law, as we have
deemed necessary and relevant as a basis for our opinion. With respect to
material factual matters not independently established by us, we have relied
upon certificates of officers of the Company, which reliance we deemed
appropriate in the circumstances.
<PAGE> 98
December __, 1994
Page 2
Based upon the foregoing, it is our opinion that:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Ohio, and is duly qualified
to do business, and is in good standing, in all additional jurisdictions where
such qualification is necessary under applicable law, except where the failure
to so qualify to be so would not have a material adverse effect on the business
and financial condition of the Company and its Subsidiaries taken as a whole.
The Company has all requisite corporate power to own or lease the properties
used in its business and to carry on its business as now being conducted. The
Company has all requisite corporate power to execute and deliver the Loan
Documents and to engage in the transactions contemplated by the Loan Documents.
2. The execution, delivery and performance by the Company of the
Loan Documents have been duly authorized by all necessary corporate action and
are not in contravention of any law, rule or regulation, or any judgment,
decree, writ, injunction, order or award of any arbitrator, court or
governmental authority, or of the terms of the Company's charter or by-laws, or
of any material contract or undertaking to which the Company is a party or by
which the Company or its property may be bound or affected, and will not result
in the imposition of any Lien except for Permitted Liens.
3. The Loan Documents are the legal, valid and binding obligations
of the Company enforceable against the Company in accordance with their
respective terms.
4. Schedule 4.4 of the Loan Agreement correctly sets forth the
corporate name, jurisdiction of incorporation and ownership of each Subsidiary
of the Company.
5. To the best of our knowledge and except as set forth in
Schedule 4.5 of the Loan Agreement, there is no action, suit or proceeding
pending or threatened against or affecting the Company or any of its
Subsidiaries before or by any court, governmental authority or arbitrator,
which if adversely decided might result, either individually or collectively,
in any material adverse change in the business, properties, operations or
financial condition of the Company or any of its Subsidiaries taken as a whole
or in any material adverse effect on the legality, validity or enforceability
of any Loan Agreement and, to the best of the Company's knowledge, there is no
basis for any such action, suit or proceeding.
6. No consent, approval or authorization of or declaration,
registration or filing with any governmental authority or any nongovernmental
person or entity, including without limitation any creditor, lessor or
stockholder of the Company or any of its Subsidiaries, is required on the part
of the Company or any Subsidiary in connection with the execution, delivery and
performance of the Loan Documents or the transactions contemplated thereby or
as a condition to the legality, validity or enforceability of the Loan
Documents.
<PAGE> 99
December __, 1994
Page 3
This opinion is subject to the qualifications that the enforcement of
the rights and remedies set forth in the Loan Documents are subject to the
effect of applicable bankruptcy, insolvency and other similar laws affecting
the enforcement of creditors' rights generally, and general principles of
equity, whether applied in a proceeding at law or in equity.
Very truly yours,
<PAGE> 100
EXHIBIT K
REQUEST FOR CONTINUATION OR
CONVERSION OF SYNDICATED LOAN
[Date]
To each Bank party to
the referenced Loan Agreement
c/o NBD Bank, N.A.,
as Agent for the Banks
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Midwest Banking Division
Invacare Corporation, (the "Treasury Manager") on behalf of the
Borrowers referred to below, hereby requests that ____________ (specify amount
of Dollars or relevant Permitted Currency) of the principal amount of the
Syndicated Loan originally made on ____________, 19__, which Syndicated Loan is
currently a [insert type of Loan], be continued as or converted to, as the case
may be, a [insert type of Loan requested] denominated in _____________ (specify
Dollars or relevant Permitted Currency) on ______________, 19__. If such Loan
is requested to be converted to an Interbank Offered Rate Syndicated Loan or a
Negotiated Rate Loan, the Borrower hereby elects an Interest Period for such
Loan of [insert permitted Interest Period].
In support of this request, the Treasury Manager, on behalf of the
Borrowers, hereby represents and warrants to the Agent and the Banks that:
1. The representations and warranties contained in Article IV of
the Loan Agreement are true and correct in all material respects on and as of
the date hereof, and will be true and correct in all material respects on the
date such Loan is [continued][converted] (both before and after such Loan is
[continued][converted]), as if such representations and warranties were made on
and as of such dates.
2. No Event of Default or Default has occurred and is continuing
or will exist on the date such [Loan][Advance] is [continued][converted]
(whether before or after such Loan is [continued][converted]).
Acceptance of the proceeds of such [continued][converted] Loan by the
Designated Borrower shall be deemed to be a further representation and warranty
that the representations and
<PAGE> 101
warranties made herein are true and correct in all
material respects at the time of such [continuation] [conversion].
Capitalized terms used but not defined herein shall have the
respective meanings assigned to them in the Loan Agreement, dated as of
December 20, 1994 among Invacare Corporation, an Ohio corporation (the
"Company"), the Borrowing Subsidiaries designated therein from time to time
(collectively with the Company, the "Borrowers"), the banks named therein and
you as agent for the banks.
INVACARE CORPORATION
By: _____________________________
Its: ________________________
REQUEST FOR CONTINUATION OR
CONVERSION OF SYNDICATED LOAN
-2-
<PAGE> 102
EXHIBIT L
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Loan Agreement dated as of December
__, 1994 (the "Loan Agreement") among Invacare Corporation, an Ohio corporation
(the "Company"), certain Borrowing Subsidiaries designated therein from time to
time (collectively with the Company, the "Borrowers"), the banks named therein
(the "Banks") and NBD BANK, N.A., as agent for the Banks (the "Agent"). Terms
defined in the Loan Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1
agree as follows:
1. The Assignor hereby sells and assigns (without
recourse) to the Assignee, and the Assignee hereby purchases and assumes from
the Assignor, an interest in and to the Assignor's rights and obligations under
the Loan Agreement as of the date hereof equal to the percentage interest
specified on Schedule 1 of all outstanding rights and obligations under the
Loan Agreement. After giving effect to such sale and assignment, the Assignee's
Commitments and the amounts of the Advances owing to the Assignee will be as
set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is
the legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Loan Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Agreement or any other instrument
or document furnished pursuant thereto; (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Borrower or the performance or observance by any Borrower of any of its
obligations under the Loan Agreement or any other instrument or document
furnished pursuant thereto; and (iv) attaches the Note or Notes held by the
Assignor and requests that the Agent exchange such Note or Notes for a new Note
or Notes payable to the order of the Assignee in an amount equal to the
Commitments assumed by the Assignee pursuant hereto and the Assignor in an
amount equal to the Commitments retained by the Assignor under the Loan
Agreement, respectively, as specified on Schedule 1.
3. The Assignee (i) confirms that it has received a copy
of the Loan Agreement, together with copies of the financial statements
referred to in Section 4.6 thereof and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Agreement; (iii) appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers and discretion under the
Loan Agreement as are delegated to the Agent by the terms thereof,
<PAGE> 103
together with such powers and discretion as are reasonably incidental
thereto; (iv) agrees that it will perform in accordance with their terms of all
of the obligations that by the terms of the Loan Agreement are required to be
performed by it as a Bank; and (v) if the Assignee is organized under the laws
of a jurisdiction outside the United States, attaches the forms prescribed by
the Internal Revenue Service of the United States certifying as to the
Assignee's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Loan Agreement and the Notes or such other documents as are necessary to
indicate that all such payments are subject to such taxes at a rate reduced by
an applicable tax treaty.
4. Following the execution of this Assignment and
Acceptance, it will be delivered to the Agent for acceptance and recording by
the Agent. The effective date for this Assignment and Acceptance (the
"Effective Date") shall be the date of acceptance hereof by the Agent, unless
otherwise specified on Schedule 1.
5. Upon such acceptance and recording by the Agent, as of
the Effective Date, (i) the Assignee shall be a party to the Loan Agreement
and, to the extent provided in this Assignment and Acceptance, have the rights
and obligations of a Bank thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Agreement.
6. Upon such acceptance and recording by the Agent, from
and after the Effective Date, the Agent shall make all payments under the Loan
Agreement and the Notes in respect of the interest assigned hereby (including,
without limitation, all payments of principal, interest and commitment fees
with respect thereto) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Loan Agreement and the Notes for
periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by,
and construed in accordance with, the laws of the State of Michigan.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of Schedule 1 to this Assignment and
Acceptance by telecopier shall be effective as delivery of a manually executed
counterpart of this Assignment and Acceptance.
ASSIGNMENT AND ACCEPTANCE
-2-
<PAGE> 104
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
[ASSIGNOR]
BY:_______________________________________
ITS:___________________________________
[ASSIGNEE]
_________________________________________
BY:______________________________________
ITS:__________________________________
ASSIGNMENT AND ACCEPTANCE
-3-
<PAGE> 105
SCHEDULE 1.1(a)
BORROWING SUBSIDIARIES
- -------------------------------------------------------------------------------
As of December __, 1994
Borrower
Invacare International Corporation
Carters (J&A) Limited
Invacare (Deutschland) GmbH
Invacare France S.A.R.L.
Etablissements Poirier, S.A.
Canadian Wheelchair Mfg. Limited
Invacare Canada Inc.
Quantrix Consultants Limited
Dynamic Controls Limited
Genus Medical Inc.
Rehadap S.A.
<PAGE> 106
SCHEDULE 1.1(b)
Member Countries of the Organization for
Economic Cooperation and Development
as of the Effective Date
Austria
Belgium
Canada
Denmark
France
Germany
Greece
Iceland
Italy
Ireland
Luxembourg
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Japan
Finland
Australia
New Zealand
<PAGE> 107
SCHEDULE 4.4
SUBSIDIARIES
As of: December 20, 1994
<TABLE>
<CAPTION>
JURISDICTION OF % OF VOTING STOCK
NAME OF SUBSIDIARY INCORPORATION OWNED
- ------------------ ------------- -----
<S> <C> <C>
Invacare Respiratory Corp. Ohio 100%
Canyon Products Corporation Ohio 100%
Inva-Lease Corporation Ohio 100%
Invacare International Corporation Ohio 100%
Invacare Holdings Corporation Ohio 100%
Mobilite Corporation Florida 100%
Mobilite Building Corporation Florida 100%
Mobilite Corporation Missouri 100%
Invatection Insurance company, Inc. Vermont 100%
Invamex, S.A. de C.V. Mexico 100%
Invacare Trading Company, Inc. Virgin Islands 100%
Carters (J&A) Limited United Kingdom 100%
Invacare (Deutschland) GmbH Germany 100%
Invacare France S.A.R.L. France 100%
Cofipar S.A. France 100%
SCI Des Hautes Rochos France 100%
SCI Des Roches France 100%
Etablissements Poirier, S.A. France 100%
POK-Rollstuhle GmbH Germany 100%
Poirier (UK) Limited England 100%
Poirier Holdings, Inc. Delaware 100%
Canadian Wheelchair Mfg. Limited Ontario 100%
Invacare Canada Inc. Ontario 100%
Option 5 Inc. Ontario 100%
Quantrix Consultants Limited New Zealand 100%
Dynamic Controls Limited New Zealand 100%
Controls Dynamic Limited United Kingdom 100%
Action Benelux N.V. Belgium 100%
Rehadap S.A. Spain 100%
Genus Medical Inc. Ontario 100%
Genus Medical Products USA Inc. New York 100%
Tarsys Engineering Incorporated Ontario 100%
IMS Trading Corporation Ontario 100%
</TABLE>
<PAGE> 108
SCHEDULE 4.5
LITIGATION
________________________________________________________________________________
As of: December 20, 1994
None
<PAGE> 109
SCHEDULE 4.12
ENVIRONMENTAL AND SAFETY MATTERS
________________________________________________________________________________
As of: December 20, 1994
None
<PAGE> 110
SCHEDULE 5.2
LIENS
________________________________________________________________________________
As of: December 20, 1994
None
<PAGE> 1
EXHIBIT 10(AO)
FOR IMMEDIATE RELEASE INVACARE CONTACTS:
Media Inquiries:
Kathy Obert of Edward Howard & Co.
(216) 781-2400
Investor Inquiries:
Tom Miklich of Invacare Corporation
(216) 329-6111
or
HOMEDCO CONTACT:
Suki Shattuck of Homedco
(714) 755-5600, ext. 252
INVACARE OBTAINS CONTRACT
TO PROVIDE OXYGEN CONCENTRATORS TO HOMEDCO
Agreement Represents Largest in Company History
ELYRIA, Ohio, March 15, 1995 - Invacare Corporation, (NASDAQ:IVCR), the world's
leading manufacturer and distributor of home medical equipment, today announced
that it has been awarded a multi-year contract to be the primary supplier of
oxygen concentrators to Homedco Group Inc. (NASDAQ:HOME), a leading provider of
home health care services with 240 branch locations in 45 states. The contract
is the largest ever received in Invacare's history.
A. Malachi Mixon, III chairman, president and chief executive officer of
Invacare Corporation, said that the company and Homedco have enjoyed an
excellent partnership relationship for many years. Invacare is already
Homedco's principal supplier of other home medical equipment products, such as
patient aids, standard wheelchairs and home care beds.
"Needless to say, we are delighted with the continuing confidence that
Homedco has placed in Invacare," Mixon said. "It is especially gratifying to
be selected as the oxygen concentrator provider to a great company like
Homedco."
(more)
<PAGE> 2
A number of quality manufacturers were considered for the Homedco
oxygen concentrator contract. Jeremy M. Jones, chairman and chief executive
officer of Homedco said that Invacare's Mobilaire oxygen concentrators were
voted by Homedco's field operations as the product with the overall best
combination of quality, performance, reliability and service. Oxygen
concentrators remove nitrogen from room air to deliver a higher purity of
oxygen to home respiratory patients.
Invacare Corporation, based in Elyria, Ohio, is the world's leading
manufacturer and distributor of home medical equipment. The company has plants
in the U.S., Canada, Mexico, New Zealand, Germany, France, and the United
Kingdom. Products are distributed worldwide through more than 10,000 dealer
locations. Invacare had sales of $411.1 million for its fiscal year ended
December 31, 1994.
Homedco Group Inc., based in Fountain Valley, California, is a leading
integrated provider of home health care services, offering home respiratory
therapy, home infusion therapy, and home medical equipment. Earlier this
month, Homedco and Abbey Healthcare Group (NASDAQ:ABBY) announced a merger
which, when completed, will result in the nation's largest fully integrated
provider of home care goods and services. Homedco had revenues of $523.5
million for its fiscal year ended September 30, 1994.
# # #
<PAGE> 1
EXHIBIT 21
1. Canyon Products Corporation, an Ohio corporation and wholly owned
subsidiary.*
2. Carters (J & A) Ltd., an English corporation and wholly owned
subsidiary of Invacare Holdings Corporation, except for one share
registered in the name of Mr. Kevin Crumpler as nominee for Invacare
Holdings Corporation.
3. Invacare Canada Inc., an Ontario corporation and wholly owned
subsidiary.
4. Canadian Wheelchair Mfg. Limited, an Ontario corporation and wholly
owned subsidiary.
5. Invacare Deutschland GmbH, a German corporation and wholly owned
subsidiary.
6. Invacare France S.A.R.L., a French corporation and wholly owned
subsidiary.
7. Invacare Holdings Corporation, an Ohio corporation and wholly owned
subsidiary.
8. Invacare International Corporation, an Ohio corporation and wholly
owned subsidiary.
9. Invacare Respiratory Corporation, an Ohio corporation and wholly owned
subsidiary.
10. Invacare Trading Company, Inc., a United States Territory of the
Virgin Islands corporation and wholly owned subsidiary.
11. Invamex, S.A. de C.V., a Mexican corporation and wholly owned
subsidiary.
12. Invalease Corporation, an Ohio corporation and wholly owned
subsidiary.
13. Invatection Insurance Company, a Vermont corporation and wholly owned
subsidiary.
14. Mobilife Corporation, a Missouri corporation and wholly owned
subsidiary.
15. Mobilite Corporation, a Florida corporation and wholly owned
subsidiary.
16. Option 5 Inc., a Quebec corporation and wholly owned subsidiary.
17. Canadian Posture and Seating Centre (1988) Inc., a Canada corporation
and wholly owned subsidiary.
18. Hovis Medical Limited, a Canada corporation and wholly owned
subsidiary.
19. Etablissements Poirier S.A., a French corporation and wholly owned
subsidiary.
20. Cofipar S.A., a French corporation and wholly owned subsidiary.
21. POK - Rollstuhle GmbH, a German corporation and wholly owned
subsidiary.
22. Poirier (UK) Ltd., an English corporation and wholly owned subsidiary.
23. Poirier Holdings Inc., a Delaware corporation and wholly owned
subsidiary.
24. Dynamic Controls Ltd., a New Zealand corporation and wholly owned
subsidiary.
25. Quantrix Consultants Ltd., a New Zealand corporation and wholly owned
subsidiary.
26. Controls Dynamic Ltd., an English corporation and wholly owned
subsidiary.
<PAGE> 2
27. Geomarine Systems Inc., a New York corporation and
wholly owned subsidiary.
28. Sci Des Hautes Roches, a French partnership and wholly owned
subsidiary.
29. Sci Des Roches, a French partnership and wholly owned subsidiary.
30. Rehadap, S.A., a Spanish corporation and wholly owned subsidiary.
31. Genus Medical, Inc., a Canadian corporation and wholly owned
subsidiary.
32. Beram, AB, a Swedish corporation and wholly owned subsidiary.
- ---------------
* "Wholly owned subsidiary" refers to indirect, as well as direct,
wholly owned subsidiaries.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the (i) Registration Statements
(Forms S-8, No. 33-24619 dated October 10, 1988 and No. 33-45993 dated February
24, 1992) pertaining to the Invacare Corporation Corporation Stock Option Plan,
and (ii) Registration Statement (Form S-3, No. 33-57967) and related
prospectus, of our report dated February 20, 1995, with respect to the
consolidated financial statements and schedule of Invacare Corporation and
subsidiaries included in the Annual Report (Form 10-K) for the year ended
December 31, 1994.
ERNST & YOUNG LLP
Cleveland, Ohio
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 7,359
<SECURITIES> 3,044
<RECEIVABLES> 79,531
<ALLOWANCES> 3,251
<INVENTORY> 49,982
<CURRENT-ASSETS> 179,791
<PP&E> 112,431
<DEPRECIATION> (56,512)
<TOTAL-ASSETS> 337,465
<CURRENT-LIABILITIES> 70,448
<BONDS> 0
<COMMON> 7,340
0
0
<OTHER-SE> 156,667
<TOTAL-LIABILITY-AND-EQUITY> 337,465
<SALES> 411,123
<TOTAL-REVENUES> 411,123
<CGS> 278,041
<TOTAL-COSTS> 278,041
<OTHER-EXPENSES> 89,346
<LOSS-PROVISION> 2,804
<INTEREST-EXPENSE> 1,859
<INCOME-PRETAX> 41,877
<INCOME-TAX> 15,500
<INCOME-CONTINUING> 26,377
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,377
<EPS-PRIMARY> 1.78
<EPS-DILUTED> 1.78
</TABLE>
