<PAGE>
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997
-----------------------------------
Commission File Number 0-12938
------------------------------
Invacare Corporation
--------------------
(Exact name of registrant as specified in its charter)
Ohio 95-2680965
- - ------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
899 Cleveland Street, P.O. Box 4028, Elyria, Ohio 44036
-------------------------------------------------------
(Address of principal executive offices)
(216) 329-6000
---------------------------------------------------
(Registrant's telephone number, including area code)
N/A
------------
(Former name, former address and former fiscal year, if change since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12 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 such filing
requirements for the past 90 days. Yes X No____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
As of August 11, 1997 the company had 28,123,922 Common Shares and 1,441,467
Class B Common Shares outstanding.
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2
INVACARE CORPORATION
INDEX
Part I. FINANCIAL INFORMATION: Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet -
June 30, 1997 and December 31, 1996.........................3
Condensed Consolidated Statement of Earnings -
Three and Six Months Ended June 30, 1997 and 1996...........4
Condensed Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1997 and 1996.....................5
Notes to Condensed Consolidated Financial
Statements - June 30, 1997..................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...............7
Part II. OTHER INFORMATION:
Item 4. Results of Votes of Security Holders................................12
Item 6. Exhibits and Reports on Form 8-K....................................12
SIGNATURES...................................................................12
<PAGE>
3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet - (unaudited)
June 30, December 31,
1997 1996
ASSETS (In thousands)
- - ------ --------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 6,303 $ 4,431
Marketable securities 2,786 3,569
Trade receivables, net 104,910 105,432
Installment receivables, net 56,015 51,995
Inventories 72,147 78,934
Deferred income taxes 7,186 7,181
Other current assets 7,655 7,178
--------- ---------
TOTAL CURRENT ASSETS 257,002 258,720
OTHER ASSETS 63,256 49,459
PROPERTY AND EQUIPMENT, NET 83,286 77,830
GOODWILL, NET 119,270 123,619
--------- ---------
TOTAL ASSETS $522,814 $509,628
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
- - ------------------------------------
Accounts payable $ 43,916 $ 40,723
Accrued expenses 44,160 50,900
Accrued income taxes 1,582 1,563
Current maturities of long-term obligations 4,825 4,582
---------- ---------
TOTAL CURRENT LIABILITIES 94,483 97,768
LONG-TERM OBLIGATIONS 171,732 173,263
DEFERRED INCOME TAXES 1,427 0
SHAREHOLDERS' EQUITY
Preferred shares 0 0
Common shares 7,139 7,103
Class B common shares 360 360
Additional paid-in-capital 72,839 71,143
Retained earnings 184,064 167,561
Adjustment to shareholders' equity (2,007) (833)
Treasury shares (7,223) (6,737)
----------- ---------
TOTAL SHAREHOLDERS' EQUITY 255,172 238,597
----------- ---------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $522,814 $509,628
=========== =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
4
<TABLE>
<CAPTION>
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Earnings - (unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(In thousands, except per share data)
----------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $164,992 $159,169 $316,516 $293,630
Cost of products sold 113,504 107,814 220,810 200,648
-------------------------- ------------------------
GROSS PROFIT 51,488 51,355 95,706 92,982
Selling, general and administrative expenses 34,216 34,664 65,909 66,062
--------------------------- ------------------------
INCOME FROM OPERATIONS 17,272 16,691 29,797 26,920
Net interest income (expense) (855) (793) (1,550) (1,085)
--------------------------- -------------------------
EARNINGS BEFORE INCOME TAXES 16,417 15,898 28,247 25,835
Income taxes 6,400 6,200 11,010 10,075
---------------------------- -------------------------
NET EARNINGS $ 10,017 $ 9,698 $ 17,237 $ 15,760
=========================== =========================
NET EARNINGS PER SHARE $ .33 $ .32 $ .57 $ .52
=========================== ========================
DIVIDEND DECLARED PER COMMON SHARE $ .0125 $ .0125 $ .0250 $ .0250
=========================== ========================
WEIGHTED AVERAGE SHARES OUTSTANDING 30,301 30,327 30,356 30,351
=========================== ========================
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
5
<TABLE>
<CAPTION>
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows - (unaudited)
Six Months Ended
June 30,
1997 1996
---- ----
OPERATING ACTIVITIES (In thousands)
<S> <C> <C>
Net earnings $17,237 $15,760
Adjustments to reconcile net earnings to
net cash required by operating activities:
Depreciation and amortization 9,122 9,235
Provision for losses on receivables 1,503 397
Provision for deferred income taxes (416) (386)
Provision for other deferred liabilities 1,780 1,430
Changes in operating assets and liabilities:
Trade receivables (1,324) 843
Inventories 5,424 (9,798)
Other current assets (689) 82
Accounts payable 3,786 5,528
Accrued expenses (6,790) (7,610)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 29,633 15,481
INVESTING ACTIVITIES
Purchases of property and equipment (14,114) (9,374)
Proceeds from sale of property and equipment 259 42
Installment sales contracts written (40,000) (31,384)
Payments received on installment sales contracts 33,430 21,504
Marketable securities purchased (3,212) (660)
Marketable securities sold 3,975 175
Increase in other investments (523) (2,441)
Increase in other long term assets (4,427) (2,657)
Business acquisitions, net of cash acquired (1,938) (23,830)
Other (2,183) (3,263)
-------- --------
NET CASH REQUIRED BY INVESTING ACTIVITIES (28,733) (51,888)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and long-term borrowings 18,284 53,403
Principal payments on revolving lines of credit, long-term debt
and capital lease obligations (18,055) (16,672)
Proceeds from exercise of stock options 1,609 2,081
Dividends paid (734) (727)
Purchase of treasury stock 0 (2,250)
-------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,104 35,835
Effect of exchange rate changes on cash (132) (284)
--------- ---------
Increase (decrease) in cash and cash equivalents 1,872 (856)
Cash and cash equivalents at beginning of period 4,431 4,132
-------- ---------
Cash and cash equivalents at end of period $ 6,303 $ 3,276
======== =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
6
INVACARE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Nature of Operations -- Invacare Corporation and its subsidiaries (the
"company") is the leading home medical equipment manufacturer in the world based
on 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 and
institutional beds, low air loss therapy products, home respiratory, ambulatory
infusion pumps and seating and positioning products.
Principles of Consolidation -- In the opinion of the company, the accompanying
unaudited condensed consolidated financial statements are prepared in accordance
with generally accepted accounting principles which require management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results may differ from these estimates. The accompanying
financial statements include all adjustments, which were of a normal recurring
nature, necessary to present fairly the financial position of the company as of
June 30, 1997 and December 31, 1996, and the results of its operations for the
three and six months ended June 30, 1997 and 1996 and changes in its cash flows
for the six months ended June 30, 1997 and 1996. The results of operations for
the three and six months ended June 30, 1997, are not necessarily indicative of
the results to be expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements contained in the company's annual financial statements and notes.
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the presentation used for the period ended
June 30, 1997.
Earnings Per Share of Common Stock -- In February 1997, the Financial Accounting
Standards Board issued SFAS No. 128 "Earnings Per Share." The new standard
applies to entities with publicly held common stock and requires a dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures. In addition, disclosure of the
reconciliation of the numerator and denominator used in the computation of
diluted EPS is required. Primary EPS will be simplified and replaced by basic
EPS, which is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Fully
diluted EPS has not been changed significantly and will be renamed diluted EPS.
The standard is effective for financial statements issued for periods after
December 15, 1997, and requires restatement of all prior EPS data presented.
Application of the standard is expected to cause an increase in reported basic
EPS over amounts reported as primary EPS, however the company has not yet
determined the impact of this standard on the consolidated financial statements.
<PAGE>
7
Statement of Cash Flows -- The company made payments (in thousands) of :
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
-------------------------------
<S> <C> <C>
Interest $5,349 $4,532
Income Taxes 11,823 13,238
</TABLE>
Inventories -- Inventories consist of the following components (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------------------------
<S> <C> <C>
Raw materials $ 20,392 $ 25,137
Work in process 9,909 12,022
Finished goods 41,846 41,775
---------- --------
$ 72,147 $ 78,934
========== ========
</TABLE>
The inventory determination under the LIFO method can only be made at the end of
each fiscal year based on the inventory levels and cost at that point,
therefore, interim LIFO determinations are based on management's estimates of
expected year-end inventory levels and costs.
Property and Equipment -- Property and equipment consist of the following (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------------------------
<S> <C> <C>
Land, buildings and improvements $ 34,747 $ 35,779
Machinery and equipment 114,593 104,297
Furniture and fixtures 11,187 10,693
Leasehold improvements 7,540 7,330
--------- ---------
168,067 158,099
Less allowance for depreciation (84,781) (80,269)
--------- ---------
$ 83,286 $ 77,830
========= =========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended June 30, 1997 increased by 3.7% over the
same period a year ago, which was negatively impacted by 1.8% as a result of the
strong dollar versus major European currencies. For the first half, sales
increased 7.8% with foreign currency having a negative impact of 1.5%. Sales for
the three and six months ended June 30, 1997 were also negatively impacted by
reduced sales to the Company's largest customer. The reduction in sales to this
customer impacted reported sales growth by approximately 4.0% for both the
quarter and year to date.
<PAGE>
8
Power, personal care and therapeutic support posted the largest increases
principally due to higher unit volumes. The volume increases were offset by the
effects of a continuing competitive pricing environment for most of our product
lines.
North American Operations
Rehab Products Group. Sales of the Rehab Products Group, which consists of the
power wheelchairs, custom manual wheelchairs and seating and positioning
business units, increased 14.0%. Growth was primarily a result of volume
increases in both the low end and high end power chairs, while base average
selling prices were maintained. For the first half, Rehab group sales maintained
an average 14.0% increase.
Standard Products Group. Sales of the Standard Products Group, which consists of
the manual wheelchairs, patient transport, personal care beds, low air loss
therapy, Invacare Health Care Furnishings and retail business units, increased
4.8%, including an impact of 1.5% which resulted from the acquisition of
Silcraft, a bathing equipment and patient lift manufacturer. The personal care
and low air loss therapy product lines each posted sales increases with personal
care sales showing significant volume gains. Sales increases continued to be
dampened by a reduction in purchases from a major customer and an ongoing
competitive pricing environment which impacted sales dollar growth, especially
in the standard wheelchairs and bed product lines. For the first half, Standard
Products Group sales increased 11.5% with 6.9% of the increase related to
acquisitions.
Respiratory Products Group. Sales of the Respiratory Products Group, which
consists of the oxygen concentrator, liquid oxygen, aerosol therapy and
associated respiratory products business units, declined approximately 1.0% for
the quarter and first six months ended June 30, 1997. The quarter and first half
results were impacted by volume decreases, particularly for oxygen
concentrators, as a result of lower purchases by a major customer and the
uncertainty surrounding proposed governmental budget cuts. The volume decreases
were offset by continued growth in aerosol therapy, new product introductions
and stronger independent distributor sales.
Subsequent to the quarter end, the Balanced Budget Act of 1997 was passed
in August finalizing a 25% cut for oxygen reimbursement effective January 1,
1998 with an additional 5% effective January 1, 1999.
Other. Other, consisting primarily of the company's Canadian, Australian and New
Zealand operations, aftermarket parts business and ambulatory infusion pumps had
a 17.7% sales increase with acquisitions accounting for 15.8%. The acquisitions
included Production Research Co. and Rollerchair. For the first six months sales
for this group increased 22.4% with 16.5% coming from acquisitions.
<PAGE>
9
European Operations
European sales were flat with the prior year, excluding the negative impact of
8.3% from foreign currency translation. In the first half, sales for Europe
increased 1.3% excluding the negative impact of 7.3% from foreign currency.
Acquisitions accounted for .9% of the increase. Sales continue to be negatively
impacted by European refurbishment and governmental reimbursement trends,
especially in Germany and France.
GROSS PROFIT
Gross profit as a percentage of net sales for the three and six month periods
ending June 30, 1997 was 31.2% and 30.2%, respectively, compared to 32.3% and
31.7% for the same periods last year. Margins for North American operations
declined only slightly despite an intensifying pricing environment. This was
achieved primarily through continued productivity improvements. European gross
margins decreased as a result of lower volume, overall price declines and the
strong dollar offset to some extent by productivity enhancements, material cost
management and other cost containment initiatives.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expense as a percentage of net sales for the
three and six months ending June 30, 1997 was 20.7% and 20.8%, respectively,
compared to 21.8% and 22.5% in the same periods a year ago. The overall dollar
decrease was $448,000, (1.3%) for the quarter and $153,000, (less than 1%) for
the six months, despite acquisitions which contributed 3.0% and 5.2% in spending
for the same periods. Aggressive cost reduction activities in all areas of the
business contributed to the reduction in selling, general and administrative
expenses as a percent to sales.
North American selling, general and administrative costs as a percent to sales
declined as cost reduction programs resulted in a slower growth rate of costs to
sales for the quarter. European operations' selling, general and administrative
expenses, as a percentage of sales also continue to decrease as a result of
specific cost containment initiatives that began in 1996.
INTEREST
Interest income in the three and six months ended June 30, 1997 were flat with
the same periods a year ago as increased installment loan volumes were offset by
a slight decline in the portfolio's effective rate. For the first six months,
interest expense increased over the same period a year ago due to higher average
outstanding borrowings in the first quarter of 1997.
INCOME TAXES
The company had an effective tax rate of 39.0% for the three and six months
ended June 30, 1997, compared to 39.0% in the same periods a year ago.
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10
LIQUIDITY AND CAPITAL RESOURCES
The company's reported overall level of long-term obligations decreased
$2,000,000 to $172,000,000 for the six months ended June 30, 1997, mainly as a
result of the impact on foreign currency translation on the amount of debt
reported in dollars. The company continues to maintain an adequate liquidity
position to fund its working capital and capital requirements through its cash
flow from operations and its bank lines. As of June 30, 1997, the company had
approximately $313,000,000, which includes the recently amended $225,000,000
facility designated to fund the acquisition of Healthdyne Technologies, Inc.
(see Acquisition section for further discussion) available under its lines of
credit. Pursuant to the most restrictive covenant of its debt arrangements the
company could borrow an additional $381,000,000.
In May, 1997, the company fixed the interest rate on $15,000,000 of its U.S.
dollar borrowings through two interest rate swap agreements. Each agreement is
for $7,500,000 U.S. dollars. The effect of the swaps is to exchange a short-term
floating interest rate for a fixed rate of 6.1800% and 6.2850% respectively. The
first swap agreement has a two year term of expiration and is extendible at the
counterparty's option for an additional two years. The second swap agreement has
a three year term of expiration.
The company's financing arrangements require it to maintain certain conditions
with respect to net worth, working capital, funded debt to capitalization and
interest coverage as defined. The company is in compliance with all of the
conditions.
CAPITAL EXPENDITURES
There were no material capital expenditure commitments outstanding as of June
30, 1997. The company estimates that capital investments for 1997 will
approximate $35-$40 million. The increase in spending is due principally to the
construction of a new corporate headquarters building and the continuing
implementation of a worldwide facilities plan. The company believes that its
balances of cash and cash equivalents, together with funds generated from
operations and existing borrowing facilities will be sufficient to meet its
operating cash requirements and fund required capital expenditures for the
foreseeable future.
ACQUISITIONS
In January, 1997 the company commenced a cash tender offer for all of the
outstanding shares of common stock of Healthdyne Technologies, Inc. The
company's most recent offer expired August 1, 1997. Prior to the expiration of
the offer, the company held approximately 4.8% of Healthdyne's outstanding
stock. The company has subsequently sold all but 1,000 shares of the common
stock of Healthdyne Technologies. The gain on the sale of the Healthdyne shares
will be offset by the costs associated with the Healthdyne tender offer
initiative and is not expected to have a material impact on reported results for
the third quarter of 1997.
<PAGE>
11
In May, 1997 the company acquired for cash the stock of Silcraft Corporation, a
manufacturer of bathing equipment and patient lifts. Silcraft will become part
of the company's patient transport business unit in its standard products group.
CASH FLOWS
Cash flows provided by operating activities were $29.6 million for the first
half of 1997 compared to $15.5 million in 1996. The primary sources of improved
1997 cash flows provided by operating activities were increased net income and
decreased inventory levels as a result of continued focus on inventory
management.
Cash flows required for investing activities decreased by $23.2 million for the
first half of 1997 when compared to 1996 mainly as a result of reduced
acquisition activity during the first half of 1997 and increased payments
received on installment sales contracts.
Cash flows provided by financing activities decreased to $1.1 million for the
first half of 1997 as compared to the $35.8 million required in 1996. The
decrease in cash provided by financing activities was primarily a result of a
reduction in net proceeds from long-term borrowings which were used to fund
acquisitions in the prior year.
The effect of foreign currency translation may result in amounts being shown for
cash flows in the Consolidated Statement of Cash Flows that are different from
the changes reflected in the respective balance sheet captions.
DIVIDEND POLICY
On May 15, 1997, the Board of Directors for Invacare Corporation declared a
quarterly cash dividend of $.0125 per Common Share to shareholders of record as
of July 1, 1997, to be paid on July 15, 1997. At the current rate, the cash
dividend will amount to $.05 per Common Share on an annual basis.
<PAGE>
12
Item 4. Results of Votes of Security Holders
On May 21, 1997, the company held its 1997 Annual Meeting of Shareholders
to act on a proposal to elect a class of Directors.
Whitney Evans, E.P. Nalley and William M. Weber were re-elected for a three
year term of office expiring in 2000, with 38,293,964, 38,294,580 and 38,303,568
affirmative votes,respectively, (90 percent of the total voting power). The
candidates had 68,266, 67,650 and 58,661 votes withheld, respectively, (.1
percent of the total voting power).
Item 6. Exhibits and Reports on Form 8-K
A Exhibits:
Official Exhibit No.
27 Financial Data Schedule
10(as) First Amendment to the loan agreement among Invacare
Corporation and certain subsidiaries and NBD Bank, as
agent and Keybank National Association as co-agent
dated June 27, 1997.
B Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVACARE CORPORATION
By: /S/ Thomas R. Miklich
-------------------------
Thomas R. Miklich
Chief Financial Officer
Date: August 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,303
<SECURITIES> 2,786
<RECEIVABLES> 110,037
<ALLOWANCES> (5,127)
<INVENTORY> 72,147
<CURRENT-ASSETS> 257,002
<PP&E> 168,067
<DEPRECIATION> (84,781)
<TOTAL-ASSETS> 522,814
<CURRENT-LIABILITIES> 94,483
<BONDS> 0
0
0
<COMMON> 7,499
<OTHER-SE> 247,673
<TOTAL-LIABILITY-AND-EQUITY> 522,814
<SALES> 164,992
<TOTAL-REVENUES> 164,992
<CGS> 113,504
<TOTAL-COSTS> 113,504
<OTHER-EXPENSES> 34,216
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 855
<INCOME-PRETAX> 16,417
<INCOME-TAX> 6,400
<INCOME-CONTINUING> 10,017
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,017
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
<PAGE>
1
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT, dated as of June 27,
1997 (this "Amendment"), is among INVACARE CORPORATION, an Ohio corporation (the
"Company"), each of the Subsidiaries of the Company designated under the Loan
Agreement (as described below) as a Borrowing Subsidiary (the "Borrowing
Subsidiaries" and together with the Company, the "Borrowers" and each a
"Borrower"), the banks set forth on the signature pages hereof (collectively,
the "Banks") and NBD BANK, a Michigan banking corporation, as agent for the
Banks (in such capacity, the "Agent").
RECITALS
A. The Borrower, the Agent and the Banks are parties to a Loan
Agreement, dated as of February 27, 1997, as amended by a letter dated April 4,
1997 (as now and hereafter amended, the "Loan Agreement"), pursuant to which the
Banks agreed, subject to the terms and conditions thereof, to extend credit to
the Borrower.
B. The Borrower desires to amend the Loan Agreement and
the Agent and the Banks are willing to do so strictly in accordance with the
terms hereof.
TERMS
In consideration of the premises and of the mutual agreements
herein contained, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in
Article III hereof, the Loan Agreement shall be amended as follows:
1.1. The reference in the first paragraph of the "Introduction" to
"$200,000,000" shall be deleted and "$225,000,000" shall be inserted in place
thereof.
1.2 The definition of "Guarantor" in Section 1.1 shall be amended by adding
the following language at the end thereof: "and, provided, further, that
Invatection Insurance Company, Inc. shall not be required to be a Guarantor or
execute a Guaranty".
1.3 Section 5.1(d) shall be amended by redesignating clause (viii) as
clause (ix) and adding a new clause (viii) to read as follows:
(viii) As soon as available and within 90
days after the end of the fiscal year of Invatection
Insurance Company, Inc., a copy of the balance sheet of
Invatection Insurance Company, Inc. as of the end of such
fiscal year and the related statements of income and cash
flow of Invatection Insurance Company, Inc. for such fiscal
year, all in reasonable detail and duly certified (subject to
normal year-end adjustments) by the chief financial officer
of the Company;
<PAGE>
2
1.4 The "Commitment Amount" set forth in the signature block of
each Bank shall be amended by deleting the "Commitment Amount" set forth next to
the name of each Bank and inserting in place thereof the amount set forth below
next to the name of such Bank:
Commitment Amount
The First National Bank of Chicago $33,750,000
KeyBank National Association $33,750,000
Sun Trust Bank, Central Florida $22,500,000
National City Bank $19,687,500
Societe Generale, Chicago Branch $19,687,500
Wachovia Bank of Georgia, NA $19,125,000
PNC Bank, NA $19,125,000
Commerzbank, Aktiengesellschaftt,
Chicago Branch $19,125,000
The Sanwa Bank, Limited, Chicago Branch $19,125,000
The Bank of New York $19,125,000
ARTICLE II. REPRESENTATIONS. The Borrower represents and warrants to the
Agent and the Banks that:
2.1 The execution, delivery and performance of this Amendment
and the New Notes are within its powers, have been duly authorized and are not
in contravention with any law, of the terms of its Articles of Incorporation or
By-laws, or any undertaking to which it is a party or by which it is bound.
2.2 This Amendment is, and the New Notes when delivered
hereunder will be, the legal, valid and binding obligations of the Borrower
enforceable against it in accordance with the respective terms hereof.
2.3 After giving effect to the amendments herein contained,
the representations and warranties contained in Article IV of the Loan Agreement
are true on and as of the date hereof with the same force and effect as if made
on and as of the date hereof.
2.4 No Event of Default or any event or condition which might
become an Event of Default with notice or lapse of time, or both, exists or has
occurred and is continuing on the date hereof.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become
effective until each of the following has been satisfied:
3.1 This Amendment shall be signed by the Borrower, the Agent
and the Banks.
3.2 The Borrower shall have executed and delivered to each
Bank a new Revolving Credit Note (the "New Notes") reflecting each Bank's
increased Commitment pursuant to Section 1.2 of this Amendment.
<PAGE>
3
ARTICLE IV. MISCELLANEOUS.
4.1 Invatection Insurance Company, Inc. ("Invatection") is
hereby released from all of its obligations and liabilities under the
Subsidiary Guaranty Agreement dated as of February 27, 1997 made by
Invatection in favor of the Banks and the Agent.
4.2 References in the Loan Agreement or in any note,
certificate, instrument or other document to the "Loan Agreement" shall be
deemed to be references to the Loan Agreement as amended hereby and as further
amended from time to time.
4.3 The Borrower agrees to pay and to save the Agent harmless
for the payment of all costs and expenses arising in connection with this
Amendment, including the reasonable fees of counsel to the Agent in connection
with preparing this Amendment and the related documents.
4.4 The Borrower acknowledges and agrees that the Agent and
the Banks have fully performed all of their obligations under all documents
executed in connection with the Loan Agreement and all actions taken by the
Agent and the Banks are reasonable and appropriate under the circumstances and
within their rights under the Loan Agreement and all other documents executed in
connection therewith and otherwise available. The Borrower represents and
warrants that it is not aware of any claims or causes of action against the
Agent or any Bank, any participant lender or any of their successors or assigns.
4.5 Except as expressly amended hereby, the Borrower agrees
that the Loan Agreement, the Notes, the Security Documents and all other
documents and agreements executed by the Borrower in connection with the Loan
Agreement in favor of the Agent or any Bank are ratified and confirmed and shall
remain in full force and effect and that it has no set off, counterclaim or
defense with respect to any of the foregoing. Terms used but not defined herein
shall have the respective meanings ascribed thereto in the Loan Agreement.
4.6 This Amendment may be signed upon any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have
caused this Amendment to be executed and delivered as of June 27, 1997.
INVACARE CORPORATION
By: /S/ Thomas R. Miklich
Its Chief Financial Officer
NBD BANK, as Agent
By: /S/ Winifred S. Pinet
Its First Vice President
<PAGE>
4
THE FIRST NATIONAL BANK OF CHICAGO
By: /S/ Winifred S. Pinet
Its First Vice President
KEYBANK NATIONAL ASSOCIATION,
as Co-Agent and as a Bank
By: /S/ Thomas J. Purcell
Its Vice President
SUN TRUST BANK, CENTRAL FLORIDA, N.A.
By: /S/ Janet P. Sammons
Its Vice President
NATIONAL CITY BANK
By: /S/ Michael P. McCuen
Its Vice President
SOCIETE GENERALE, CHICAGO BRANCH
By: /S/ Joseph A. Philbin
Its Vice President
WACHOVIA BANK OF GEORGIA, NA
By: /S/ Holger B. Ebert
Its Vice President
PNC BANK, NA
By: /S/ Bryon A. Pike
Its Vice President
<PAGE>
5
COMMERZBANK AKTIENGESELLSCHAFT,
CHICAGO BRANCH
By: /S/ J. Timothy Shortly
/S/ William Binder
Its Senior Vice President
Vice President
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By: /S/ James P. Byrnes
Its First Vice President
THE BANK OF NEW YORK
By: /S/ Edward Dougherty III
Its Vice President