Exhibit 11(b)(1)
December 30, 1996
Invacare Corporation
000 Xxxxxxxxx Xxxxxx
P.O. Box 4028
Elyria, Ohio 44036-2125
Attention: Xxxxxx X. Xxxxxxx
Ladies and Gentlemen:
Invacare Corporation (the "Borrower") has requested senior credit
facilities (the "Facilities") to be provided to the Borrower in the aggregate
principal amount of $200,000,000 (the "Aggregate Commitment") to finance the
acquisition (the "Acquisition") of all of the stock of a public company
previously identified by the Borrower to us (the "Seller"). The Acquisition
will be accomplished through a cash tender offer (the "Tender Offer") by a
wholly owned subsidiary of the Borrower ("AcquisitionCo") for not less than a
majority of the shares of the Seller (on a fully diluted basis). The Tender
Offer will be in an aggregate amount consistent with the total cost of the
Acquisition previously disclosed by the Borrower to us and consistent with the
terms previously disclosed to us.
The commitment of NBD (the "Agent") hereunder is contingent upon the
consummation of the Acquisition and the Tender Offer upon terms and conditions
reasonably satisfactory to the Agent, the Agent's satisfactory review of all
agreements and documents executed or filed in connection therewith, the
Acquisition and the Tender Offer, the structure of the Borrower and
AcquisitionCo and its other subsidiaries before and after the Acquisition, and
the legal, accounting and tax aspects of the Acquisition and the Tender Offer
being satisfactory to Agent and Arranger and its counsel, the total amounts of
the Facilities or any other funds of the Borrower which are being used to
consummate the Acquisition, directly or indirectly, being consistent with the
amounts previously disclosed by the Borrower to the Agent and Arranger, the
Borrower amending the covenants, pricing and other appropriate terms in its
other credit facilities with the Agent, in a manner satisfactory to the Agent,
to those described in the attached Term Sheet (as defined below) and the other
terms and conditions set forth in this letter and the attached Term Sheet. The
Term Sheet and this Commitment Letter are intended as an outline only and do not
purport to summarize all of the terms, conditions, covenants, representations,
warranties and other provisions which will be contained in definitive legal
documentation for the transaction which is the subject of this Commitment
Letter.
NBD Bank is pleased to provide you with a financing commitment for, and to
agree to act as administrative agent bank (the "Agent") in connection with, the
entire amount of the Facilities on the terms and conditions set forth in the
term sheet attached hereto ("Term Sheet") and subject to the conditions set
forth in this letter. First Chicago Capital Markets, Inc. (the "Arranger"), an
affiliate of the Agent, is pleased to provide you with its undertaking to
syndicate all or a portion of the Facilities to a syndicate of lenders
(collectively, including NBD Bank, the "Lenders"). While the Agent's agreement
herein is to provide the entire amount of the Facilities on a fully underwritten
basis, the Arranger reserves the right to syndicate all or a portion of the
Facilities to additional Lenders with a corresponding reduction in the Agent's
commitment.
In the event that any information relating to conditions or events not
previously disclosed to either Agent or Arranger or relating to new information
or additional developments concerning conditions or events previously disclosed
which may have a material adverse effect on the condition, assets, properties,
business or prospects of the Borrower and its subsidiaries or the Seller, or any
conditions set forth in definitive financing documentation are not satisfied,
either may, in its sole discretion, suggest alternative financing amounts or
structures that ensure
Sheet no. 2
adequate protection for the Lenders or decline to participate in the proposed
financing. The Agent and the Arranger and officers and employees of each of the
Agent and Arranger will have the right to share information received from the
Borrower, the Seller and their respective affiliates, agents, officers, and
employees.
The Borrower agrees to (i) reimburse Agent and Arranger for all out-of-
pocket expenses (including the fees of outside counsel and time charges for
inside counsel) incurred in connection with this Commitment Letter, the
transactions contemplated thereby and Agent's and Arranger's on-going due
diligence therewith, including without limitation travel expenses and costs
incurred in connection with the preparation, negotiation, execution,
administration, syndication, and enforcement of any document relating to this
transaction and its role hereunder, (ii) indemnify and hold harmless the Agent,
Arranger, Lenders and their respective officers, employees, agents and directors
(collectively, the "Indemnified Persons") against any and all losses, claims,
damages, or liabilities of every kind whatsoever to which the Indemnified
Persons may become subject in connection in any way with the transactions
(including without limitation the Acquisition and the providing of the
Facilities) which are the subject of this Commitment Letter, including without
limitation expenses incurred in connection with investigating or defending
against any liability or action whether or not a party thereto, except to the
extent any of the foregoing is found in a final judgment by a court of competent
jurisdiction to have arisen solely from such Xxxxxx's gross negligence or
willful misconduct: and (iii) assert no claim against any Indemnified Persons
seeking consequential damages on any theory of liability in connection in any
way with the transaction which is the subject of this Commitment Letter. The
obligations described in this paragraph are independent of all other obligations
hereunder and under the Loan Documents, shall survive the expiration, revocation
or termination of this Commitment Letter, and shall be payable whether or not
the financing transactions contemplated by this Commitment Letter shall close.
Agent's and Xxxxxxxx's respective obligations under this Commitment Letter are
enforceable solely by the party signing this Commitment Letter and may not be
relied upon by any other person. IF THIS COMMITMENT LETTER, THE TERM SHEET, THE
AGENT FEE LETTER, OR ANY ACT, OMISSION OR EVENT DESCRIBED IN THIS PARAGRAPH
BECOMES THE SUBJECT OF A DISPUTE, THE PARTIES HERETO EACH HEREBY WAIVE TRIAL BY
JURY.
This Agent's commitment and the Arranger's undertaking is subject to, among
other conditions (i) the preparation, execution, and delivery of a mutually
acceptable credit agreement ("Credit Agreement") and other loan documents
(collectively, the "Loan Documents") incorporating, without limitation,
substantially the terms and the conditions outlined herein and in the Term
Sheet; (ii) Agent's and Arranger's respective determination that (a) there is an
absence of a material adverse change in the business, condition (financial or
otherwise), operations, performance, properties, or prospects of the Borrower,
the Seller or any of their material subsidiaries from December 31, 1995 or
otherwise from that disclosed in publicly filed financial statements of the
Seller; and (b) there is an absence of any material adverse change prior to
closing in primary and secondary loan syndication markets or capital markets
generally.
Arranger will manage all aspects of the syndication, including, without
limitation, decisions as to the selection of institutions to be approached and
when they will be approached, when their commitments will be accepted, which
institutions will participate, the allocations of
Sheet no. 3
the commitments among the Lenders and the amount and distribution of the fees
discussed herein among the Lenders, all in consultation with the Borrower.
Upon Arranger's acceptance of any such commitment from a Lender, Agent shall
be relieved of its commitment to fund such amount. To assist Arranger in its
syndication efforts, the Borrower shall, and shall cause its subsidiaries to:
(a) provide and to cause its advisors to provide Arranger upon request with
all information deemed reasonably necessary by it to complete successfully
the syndication, including, without limitation, all information and
projections prepared by Borrower or on Borrower's behalf relating to the
transactions contemplated hereby; (b) cause the management of the Borrower to
actively participate in, both the preparation of an information package
regarding the operations and prospects of the Borrower and the presentation
of the information to prospective Lenders; and (c) not to make any statement
publicly about the Commitment or the Facilities which might negatively affect
Arranger's ability to syndicate the Facilities. The Agent and the Arranger
acknowledge that, as Seller is a public corporation, under certain
circumstances the only available information may be public information.
Please indicate your acceptance of this commitment by the Agent and
undertaking by the Arranger in the space indicated below and return a copy of
this letter so executed to the Agent. This commitment and undertaking will
expire at 5:00 p.m. (Detroit time) January 2, 1997 unless on or prior to such
time the Agent shall have received a copy of this letter executed by the
Borrower together with the fee required under paragraph 1(a) of the Agent's Fee
Letter of even date herewith (the "Fee Letter"). Notwithstanding timely
acceptance of the commitment pursuant to the preceding sentence, the commitment
will automatically terminate unless definitive Loan Documents are executed on or
before February 28, 1997. By its acceptance hereof, the Borrower agrees to pay
the Agent and the Arranger the fees described in the Fee Letter. This
commitment replaces and supersedes any previous commitment relating to the
transactions described in this letter.
By accepting delivery of this Commitment Letter, the Fee Letter and the
Term Sheet, the Borrower hereby agrees that, prior to executing this
Commitment Letter, the Borrower will not disclose either expressly or
impliedly, without the Agent's and the Arranger's prior written consent, to
any person any of the terms of this Commitment Letter, the Fee Letter or Term
Sheet, or the fact that this Commitment Letter, the Fee Letter or Term Sheet
or the financing proposal represented thereby exists except that the Borrower
may disclose any of the foregoing to any employee or attorney of the Borrower
to whom, in each case, it is necessary to disclose such information so long
as any such employee or attorney is directed to observe this confidentiality
obligation. Upon the Borrower's execution of this Commitment Letter, the
Borrower may make public disclosure of the existence and the amount of the
commitment, and the Borrower may file a copy of this Commitment Letter (but
not the Fee Letter) or make such other disclosures if such disclosure is
required by law, but may not make any other disclosure. If the Borrower does
not accept this commitment, the Borrower is to immediately return this
Commitment Letter, the Fee Letter and the Term Sheet (and all copies of the
foregoing) to the Agent. The Borrower authorizes each of the Agent and the
Arranger to answer inquiries from financial media with respect to the
Facilities.
Sheet no. 4
This Commitment Letter and Term Sheet supersede any and all prior versions
thereof. This Commitment Letter shall be governed by the internal laws of the
State of Michigan, and may only be amended by a writing signed by all parties
hereto.
Very truly yours,
NBD BANK,
individually and as Agent
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------
Title: First Vice President
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FIRST CHICAGO CAPITAL MARKETS, INC.,
as Arranger
By: /s/ Xxxxx Xxxxx
--------------------------------
Title: Managing Director
-----------------------------
Accepted and agreed:
INVACARE CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------
Title: CFO
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Date: 1/2/97
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CONFIDENTIAL INVACARE CORPORATION
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PROPOSED SUMMARY TERM SHEET
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BORROWER: Invacare Corporation ("Invacare" or the
"Company"), or a wholly owned subsidiary
of Invacare reasonably acceptable to the
Agent and fully guaranteed by Invacare.
AGENT: NBD Bank ("NBD" or the "Agent").
ARRANGER: First Chicago Capital Markets, Inc.
("FCCM" or the "Arranger").
TYPE OF FACILITIES:
REVOLVING CREDIT: $200,000,000 Two Year Unsecured
Revolving Credit.
PARTICIPANTS: NBD Bank ("NBD") and other banks to be
selected by FCCM, NBD and the Company.
The share of each Participant to be
mutually determined by FCCM, NBC and the
Company.
USE OF PROCEEDS: Finance the acquisition (the
"Acquisition") of a public company
previously identified to the Agent (the
"Seller"). The Acquisition will include
a tender offer (the "Tender Offer") by a
subsidiary of Invacare for a minimum of
51% of the stock of the Seller (on a
fully diluted basis). A certain amount
of the proceeds, in an amount
acceptable to the Agent, may also be
used for other acquisitions and working
capital.
AVAILABILITY
REVOLVING CREDIT: Immediately upon signing of the Credit
Agreement and satisfaction of the
conditions thereunder.
CONFIDENTIAL INVACARE CORPORATION
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MATURITIES:
REVOLVING CREDIT: Two years from date of first funding,
with maturity not later than
October 31, 1999.
PRICING: At the Borrower's Option:
PRIME: The higher of 50 basis points over the
Federal Funds Rate or NBD's Prime Rate
as it exists from time to time, plus the
Applicable Margin. Minimum draws of
$500,000.
LIBOR: Adjusted(1) LIBOR plus the Applicable
Margin (1, 2, 3, and 6 month options).
Minimum draws of $1,000,000.
FIXED: Negotiated fixed rates as available, and
mutually agreed.
FOOTNOTES:
(1) Adjusted for maximum Federal Reserve
Board reserve requirements.
APPLICABLE MARGIN: The Applicable Margin is based upon the
following matrix:
Applicable Margin
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Funded Debt All-in
to Total Cap Prime LIBOR Facility Fee Drawn
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68-58* 0.00 45 bps 20 bps 65 bps
57-50 0.00 30 bps 15 bps 45 bps
49-40 0.00 25 bps 12.5 bps 37.5 bps
Less than 40 0.00 18.5 bps 9 bps 27.5 bps
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*INITIAL PRICING LEVEL.
PREPAYMENT: Prepayment of LIBOR and fixed rate loans
would be subject to appropriate
prepayment indemnities.
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NBD/FCCM -2- December 30, 1996
CONFIDENTIAL INVACARE CORPORATION
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FEES:
UNDERWRITING AND AGENT'S FEES: Per fee letter.
FACILITY FEE: Per annum fee, payable quarterly in
arrears, on the entire facility amount,
as described above.
LEGAL FEES: All reasonable legal fees of Agent's
counsel for the account of the Borrower.
CAPITAL ADEQUACY: Language will be incorporated into the
Facility Agreement requiring that the
Borrower compensate the Participants for
any change in capital requirements or
laws that would have the effect of
reducing the Bank's yields.
INTEREST PAYMENTS: At the end of each applicable Interest
Period or quarterly, if earlier.
INTEREST PERIODS: Interest Periods may be of 1, 2, 3, or 6
months or such other period as may be
agreed to by the Banks.
DOCUMENTATION: The Facility will be subject to a Credit
Agreement, acceptable to all parties and
containing terms and conditions
customary for such a Facility. These
terms and conditions will include
without limitation:
- representations and warranties.
- undertakings including provision
of financial information under
agreed accounting principles;
negative pledge, etc.
- provision for increased costs
(including capital adequacy) and
indemnifications to Participants.
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NBD/FCCM -3- December 30, 1996
CONFIDENTIAL INVACARE CORPORATION
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- transferability, which will
include Xxxxx' right to assign
subject to Xxxxxxxx's (which may
not be unreasonably withheld and
may not be withheld during a
default) and Agent's consent and
subparticipate without consent,
subject to limitations.
FINANCIAL COVENANTS: Customary in credit agreements of this
nature, with respect to the Borrower and
its Subsidiaries, including but not
limited to:
INTEREST COVERAGE: The Company will at all times maintain
Interest Coverage not less than 3.00 to
1.00 on a four quarter trailing basis;
except when Funded Debt to Total
Capitalization is between 58% and 68%,
at which point Interest Coverage shall
not be less than 2.25:1.0.
FUNDED DEBT TO The Company will at all times maintain a
TOTAL CAPITALIZATION: ratio of Funded Debt to Total
Capitalization not to exceed 68%,
decreasing to 65% on a date not later
than nine months after the initial
funding, but not prior to 12/31/97.
NET WORTH: The Company will at all times maintain
Net Worth at not less than $200,000,000,
increasing annually by 50% of Net
Income, commencing not later than 9
months from initial funding, but not
prior to 12/31/97, and at fiscal year
end thereafter.
All financial covenants tested on a
consolidated basis, effective upon first
funding under the Credit Agreement and
calculated in accordance with U.S. GAAP
unless otherwise noted.
NEGATIVE PLEDGE Customary negative covenants for a
COVENANTS: senior note senior note financing,
including but not limited to:
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NBD/FCCM -4- December 30, 1996
CONFIDENTIAL INVACARE CORPORATION
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(1) negative pledge and sale of assets
and negative negative pledge,
subject to appropriate basket and
permitted sales and exceptions, if
required, for compliance with
Regulations U and G;
(2) Sale of installment contracts
permitted, with limitations;
(3) merger and consolidation
limitations;
(4) other restrictions (subject to
exceptions, as appropriate, to be
negotiated) on investments,
transactions with affiliates,
indebtedness and contingent
liabilities, changes in line of
business, and prepayment or
modification of other debt and
liabilities.
NON-FINANCIAL Customary non-financial covenants for a
COVENANTS: senior bank financing. Additionally,
(a) as soon as reasonably possible after
completion of the Tender Offer the
Company will merge (the "Merger") the
Seller and the subsidiary it formed to
acquire the Seller and (b) guaranties of
the Company's present and future
significant subsidiaries will be
required, provided that the guaranty of
the Seller will not be required until
after the Merger.
REPORTING REQUIREMENTS: Customary in credit agreements of this
nature, including but not limited to
the following:
(1) Annual audited financial
statements, 10K, consolidating and
annual report within 90 days of
each fiscal year end.
(2) Quarterly 10Q financial statements
within 50 days of each quarter
end.
(3) Quarterly compliance certificates
signed by a corporate officer.
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NBD/FCCM -5- December 30, 1996
CONFIDENTIAL INVACARE CORPORATION
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GOVERNING LAW: The Credit Agreement will be governed by
the laws of the State of Michigan.
COUNSEL TO THE AGENT BANK: Xxxxxxxxx, Xxxxxx, Moon, Xxx Xxxxx &
Xxxxxxx.
EVENTS OF DEFAULT: Customary in credit agreements of this
nature, including but not limited to the
following:
(1) Failure to pay principal when due;
failure to pay interest or fees
within five days of the due date.
(2) Failure to meet covenants (with
grace periods, where appropriate).
(3) Representations or warranties
false in any material respect when
made.
(4) Cross default to other debt of
the Borrower and its Subsidiaries
which is triggered by an event
which causes acceleration thereof
or permits holders thereof to
accelerate their debt.
(5) Change of ownership or control.
(6) other usual defaults with respect
to the Borrower and Subsidiaries,
including but not limited to
insolvency, bankruptcy, ERISA, and
judgment defaults.
CONDITIONS PRECEDENT: Customary conditions precedent to each
advance, including without limitation
the following:
(1) Completion of satisfactory loan
documentation.
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NBD/FCCM -6- December 30, 1996
CONFIDENTIAL INVACARE CORPORATION
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(2) No material adverse change prior
to closing.
(3) Satisfaction of all conditions
described in the commitment letter
issued in connection with this
proposed summary term sheet,
compliance with all laws and
regulations, satisfactory review
of all agreements, documents and
transactions executed, filed or
delivered in connection with, or
otherwise relating to, the
Acquisition and the Tender Offer
and receipt of all legal opinions
requested by the Agent.
DEFINITIONS:
INTEREST COVERAGE: The ratio of Earnings, subject to
appropriate reductions, before Interest
and Taxes to Interest Expense.
FUNDED DEBT: The sum of all debt and similar
liabilities classified as long term,
including but not limited to debt for
borrowed money, capital leases, letters
of credit and guaranties for any of the
foregoing.
NET WORTH: Shall mean the sum of Stockholder's
Common Equity, Preferred Stock and
Minority Interest, less Treasury stock.
TOTAL CAPITALIZATION: The sum of Net Worth and Funded Debt.
All other defined terms are according to GAAP and acceptable to the Agent.
December 30, 1996
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NBD/FCCM -7- December 30, 1996
