Invacare 2014 Annual Report Download - page 120

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INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-50
The New Credit Agreement provides the Company and the other Borrowers with the ability to borrow up to an aggregate
principal amount of $100 million under a senior secured revolving credit, letter of credit and swing line loan facility (the “Credit
Facility”). The aggregate borrowing availability under the Credit Facility is determined based on a borrowing base formula set
forth in the New Credit Agreement and summarized below.
The New Credit Agreement contains customary representations, warranties and covenants; however it does not contain
financial covenants that would require the Company to not exceed a maximum leverage ratio or to maintain a minimum interest
coverage ratio similar to those under the Company’s Prior Credit Agreement (as defined below).
Under the New Credit Agreement, the aggregate usage under the Credit Facility may not exceed an amount equal to the sum
of (a) 85% of eligible domestic accounts receivable plus (b) the lesser of (i) 70% of eligible domestic inventory and eligible foreign
in-transit inventory and (ii) 85% of the net orderly liquidation value of eligible domestic inventory and eligible foreign in-transit
inventory (not to exceed $4,000,000), plus (c) the lesser of (i) 85% of the net orderly liquidation value of domestic eligible machinery
and equipment and (ii) $2,924,000 (subject to reduction as provided in the New Credit Agreement) , plus (d) 85% of eligible
Canadian accounts receivable, plus (e) the lesser of (i) 70% of eligible Canadian inventory and (ii) 85% of the net orderly liquidation
value of eligible Canadian inventory, less (f) swing loans outstanding under the Credit Facility, less (g) letters of credit issued and
undrawn under the Credit Facility, less (h) a $10,000,000 minimum availability reserve, less (i) other reserves required by the
Administrative Agent, and in each case subject to the definitions and limitations in the New Credit Agreement.
Up to $25,000,000 of the Credit Facility will be available for issuance of letters of credit, which amount is subject to an
initial $10,000,000 sublimit under the terms of the New Credit Agreement.
The aggregate principal amount of the Credit Facility may be increased by up to $25,000,000 to the extent requested by the
Company and agreed to by any Lender or new financial institution approved by the Administrative Agent.
Interest will accrue on outstanding indebtedness under the New Credit Agreement at the LIBOR rate, plus a margin ranging
from 2.25% to 2.75%, or at the alternate base rate, plus a margin ranging from 1.25% to 1.75%, as selected by the Company. The
margin that will apply for the first six months of the Credit Facility is 2.75% for LIBOR rate loans and 1.75% for alternate base
rate (Prime) loans, and after the first six months will be adjusted quarterly based on utilization. Borrowings under the Credit Facility
are subject to commitment fees of 0.25% or 0.375% per year, depending on utilization.
The Credit Facility is secured by substantially all of the Company’s domestic and Canadian assets, other than real estate.
Exceptions to the operating covenants in the New Credit Agreement provide the Company with flexibility to, among other
things, enter into or undertake certain sale/leaseback transactions, dispositions of assets, additional credit facilities, sales of
receivables, additional indebtedness and intercompany indebtedness, all subject to limitations set forth in the New Credit Agreement.
The New Credit Agreement also contains a covenant requiring the Company to maintain undrawn availability under the Credit
Facility of not less than (i) 11.25% of the maximum amount that may be drawn under the Credit Facility for five (5) consecutive
business days, or (ii) $10,000,000 on any business day.
The New Credit Agreement contains customary default provisions, with certain grace periods and exceptions, which provide
that events of default that include, among other things, failure to pay amounts due, breach of covenants, representations or warranties,
bankruptcy, the occurrence of a material adverse effect, exclusion from any medical reimbursement program, and an interruption
of any material manufacturing facilities for more than 10 consecutive days.
The proceeds of the Credit Facility were used to repay and terminate the Company’s Prior Credit Agreement, which was
scheduled to mature in October 2015.