Item 1.01. Entry into a Material Definitive Agreement.
On August 22, 2022, Invacare Corporation (the “Company”) entered into a Cooperation Agreement (the “Cooperation Agreement”) with Azurite Management LLC, Steven H. Rosen, Crawford United Corporation, Edward F. Crawford and Matthew V. Crawford (collectively, “Azurite”). Azurite currently owns approximately 10.3% of the Company’s outstanding common shares.
On August 22, 2022, two directors of the Company resigned from the board of directors of the Company (the “Board”) and, pursuant to the Cooperation Agreement, and subject to the conditions set forth therein, the Board appointed Steven H. Rosen and Ambassador Edward F. Crawford to serve as directors of the Company (each, a “Designee” and, together, the “Designees”) and certain Board committees, all as further described in Item 5.02 herein. The Company also agreed that, subject to the conditions set forth in the Cooperation Agreement, the Board will nominate each Designee for election to the Board at the Company’s 2023 Annual Meeting of Shareholders (the “2023 Annual Meeting”). If, prior to the Expiration Date (as defined below), a Designee is unable or unwilling to serve, resigns, is removed, or otherwise ceases to be a director, then Azurite shall designate a replacement director who is reasonably acceptable to the Board.
In addition, the Company has agreed to form a Strategy and Operational Improvement Committee of the Board (the “Strategy Committee”), which will be comprised of five (5) members, including the Designees, until at least the Expiration Date, subject to certain exceptions. The Strategy Committee will adopt a charter, which will provide, among other things, that the responsibilities of the Strategy Committee will include: (i) conducting a comprehensive review and evaluation of the current corporate strategies of the Company; (ii) assisting and advising the Board on corporate strategies and strategic alternatives; and (iii) from time to time as it determines appropriate, making recommendations to the Board regarding actions to be considered in furtherance of the Strategy Committee’s purpose. The Board will form the Strategy Committee no later than August 23, 2022. The Company also shall not (i) increase the size of the Board to more than ten (10) directors or (ii) classify the Board without the prior written consent of Azurite.
The foregoing obligations of the Company will terminate with respect to both Designees if Azurite and its affiliates collectively do not own at least 3,946,558 shares of the Common Stock of the Company, being the current number of Common Shares beneficially owned by them as of the date of this Agreement. Unless otherwise provided in the Cooperation Agreement, the obligations of the Company described above will terminate (i) the day after the Company’s 2024 Annual Meeting of Shareholders or (ii) such earlier time as the Company’s obligations terminate with respect to both Designees as described above (the “Expiration Date”).
Under the Cooperation Agreement, at any meeting of the shareholders held during the Cooperation Period, Azurite has agreed to vote or cause to be voted, all of the Company’s common shares that Azurite or its controlling or controlled affiliates has the right to vote (i) in favor of directors nominated and recommended by the Board, (ii) against any shareholder nominations for directors that are not approved and recommended by the Board, (iii) against any proposals or resolutions to remove any member of the Board and (iv) and in accordance with the Board’s recommendation on all other proposals or business except with respect to an Extraordinary Transaction (as defined below), subject to certain limited exceptions.
Pursuant to the Cooperation Agreement, Azurite is subject to certain standstill provisions (the “Standstill”) during the Cooperation Period, which prohibit Azurite from, among other things, (i) offering to acquire, agreeing to acquire or acquiring rights to acquire, directly or indirectly, any voting securities of the Company which would result in the ownership or control of, or other beneficial ownership interest, in excess of 19.9% of the then-outstanding common shares (the “Ownership Threshold”); (ii) (A) calling or seeking to call, alone or in concert with others, a meeting of the Company’s shareholders, (B) seeking, alone or in concert with others, election or appointment to, or representation on, the Board or nominate or
propose the nomination of, or recommend the nomination of, any candidate to the Board, except as provided in the Cooperation Agreement, (C) seeking, alone or in concert with others, the removal of any member of the Board or (D) conducting a referendum of shareholders of the Company; (iii) making a request for any shareholder list or other books and records of the Company or any of its subsidiaries; (iv) making any public proposal, public announcement or public request with respect to, (A) any change in the number, terms or identity of directors of the Company or the filling of any vacancies on the Board other than as provided in the Cooperation Agreement, (B) any change in the business, capitalization, capital allocation policy or dividend policy of the Company or sale, spinoff, splitoff or other similar separation of one or more business units, (C) any other change to the Board or the Company’s management or corporate or governance structure, (D) any waiver, amendment or modification to the Company’s organizational documents, (E) causing the common shares to be delisted from, or to cease to be authorized to be quoted on, any securities exchange, or (F) causing the common shares to become eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; (v) engaging in any solicitation of proxies with respect to the election or removal of directors of the Company or any other matter or proposal relating to the Company or becoming a participant in any such solicitation of proxies; (vi) making or submitting to the Company or any of its affiliates any proposal for, or offer of (with or without conditions), either alone or in concert with others, any tender offer, exchange offer, merger, consolidation, acquisition, sale of all or substantially all assets or sale, spinoff, splitoff or other similar separation of one or more business units, business combination, recapitalization, restructuring, liquidation, dissolution or similar extraordinary transaction involving the Company (including its subsidiaries and joint ventures or any of their respective securities or assets) (each, an “Extraordinary Transaction”) either publicly or in a manner that would reasonably require public disclosure by the Company or Azurite; (vii) forming, joining or acting in concert with any “group” as defined in Section 13(d)(3) of the Exchange Act, with respect to any voting securities of the Company, other than solely with affiliates of Azurite; (viii) entering into a voting trust, arrangement or agreement with respect to any voting securities of the Company, or subjecting any voting securities to any voting trust, arrangement or agreement, subject to certain exceptions; (ix) engaging in any short sale or any purchase, sale, or grant of any option, warrant, convertible security, or other similar right with respect to any security that derives any significant part of its value from a decline in the market price of any of the securities of the Company and would result in Azurite ceasing to have a “net long position” in the Company equivalent to its percentage beneficial ownership of the voting power of the then outstanding common shares; (x) selling, offering, or agreeing to sell, all or substantially all, voting rights decoupled from the underlying common shares; (xi) instituting, soliciting or joining as a party in any litigation or other proceeding against the Company or any of its subsidiaries or any of its or their respective current or former directors or officers; (xii) entering into any negotiations, agreements, or understandings with any third party to take any action that Azurite is prohibited from taking pursuant to the Standstill; or (xiii) making any request or submitting any proposal to amend or waive the terms of the Cooperation Agreement, in each case publicly or which would reasonably be expected to result in a public announcement or disclosure of such request or proposal.
Azurite’s obligations under the Standstill terminate upon the earliest of the following: (i) the delivery of notice by Azurite at any time after the one year anniversary date of the Cooperation Agreement, that the Designees have resigned from the Board and all of their other respective positions with the Company and that Azurite is terminating the Cooperation Period, (ii) any uncured material breach by the Company of its obligations with respect to the appointment and nomination of the Designees or replacement directors designated by Azurite, formation of the Strategy Committee and size and structure of the Board; (iii) the Company’s entry into (x) a definitive written agreement with respect to any Extraordinary Transaction that, if consummated, would result in the acquisition by any person or group of more than 50% of the voting securities of the Company or assets having an aggregate value exceeding 50% of the aggregate enterprise value of the Company or (y) one or more definitive written agreements providing for a transaction or series of related transactions which would in the aggregate result in the Company issuing to one or more third parties at least 19.9% of the common shares outstanding immediately prior to such issuance(s) during the Cooperation Period (provided that securities issued as consideration for (or in connection with) the acquisition of the assets, securities and/or business(es) of
another person by the Company or one or more of its subsidiaries or upon exercise or conversion of currently outstanding options or convertible securities of the Company shall not be counted toward this clause (y)); and (iv) the commencement of any tender or exchange offer (by any person or group other than Azurite or their affiliates) which, if consummated, would constitute an Extraordinary Transaction that would result in the acquisition by any person or group of more than 50% of the voting securities of the Company, where the Company files with the SEC a Schedule 14D-9 (or amendment thereto) that does not recommend that its shareholders reject such tender or exchange offer.
Each of the parties also agreed to mutual non-disparagement obligations until (i) the Expiration Date or (ii) such earlier time as the restrictions in the Standstill terminate (jointly referred to as the “Cooperation Period” provided that the Cooperation Period shall not end earlier than the first anniversary of the date of the Cooperation Agreement. Azurite’s obligations under the Cooperation Agreement terminate at the end of the Cooperation Period. The Company’s obligations under the Cooperation Agreement terminate on the Expiration Date.
The foregoing description of terms and conditions of the Cooperation Agreement is qualified in its entirety by reference to the full text of the Cooperation Agreement, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 and incorporated herein by reference.