<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
INVACARE CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
[INVACARE LOGO]
One Invacare Way
Elyria, OH 44035
April 17, 1998
To the Shareholders of
INVACARE CORPORATION:
This year's Annual Meeting of Shareholders will be held at 10:00 A.M.
(EDT), on Thursday, May 28, 1998, at the Lorain County Community College,
Stocker Center, 1005 North Abbe Road, Elyria, Ohio. We will be reporting on your
Company's activities and you will have an opportunity to ask questions about our
operations.
We hope that you are planning to attend the Annual Meeting personally and
we look forward to seeing you. WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON,
THE RETURN OF THE ENCLOSED PROXY AS SOON AS POSSIBLE WOULD BE GREATLY
APPRECIATED AND WILL ENSURE THAT YOUR SHARES WILL BE REPRESENTED AT THE ANNUAL
MEETING. IF YOU DO ATTEND THE ANNUAL MEETING, YOU MAY, OF COURSE, WITHDRAW YOUR
PROXY SHOULD YOU WISH TO VOTE IN PERSON.
On behalf of the Board of Directors and management of Invacare Corporation,
I would like to thank you for your continued support and confidence.
Sincerely yours,
/s/ A. Malachi Mixon, III
A. MALACHI MIXON, III
Chairman and Chief
Executive Officer
<PAGE> 3
INVACARE CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Invacare
Corporation (the "Company") will be held at the Lorain County Community College,
Stocker Center, 1005 North Abbe Road, Elyria, Ohio on Thursday, May 28, 1998, at
10:00 A.M. (EDT), for the following purposes:
1. To elect four Directors, to the class whose three-year term of office
will expire in 2001;
2. To approve and adopt an amendment to the Invacare Corporation 1994
Performance Plan to increase the number of Common Shares reserved for
issuance thereunder from 2,000,000 to 3,500,000; and
3. To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
Holders of Common Shares and Class B Common Shares of record as of the
close of business on Wednesday, April 1, 1998 are entitled to receive notice of
and vote at the Annual Meeting. It is important that your shares be represented
at the Annual Meeting. For that reason, we ask that you promptly sign, date and
mail the enclosed Proxy card in the return envelope provided. Shareholders who
attend the Annual Meeting may revoke their Proxy and vote in person.
By order of the Board of Directors,
THOMAS R. MIKLICH
Secretary
April 17, 1998
<PAGE> 4
INVACARE CORPORATION
PROXY STATEMENT
MAILED ON OR ABOUT APRIL 17, 1998
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 28, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Invacare Corporation (hereinafter called
"Invacare" or the "Company") for use at the Annual Meeting of Shareholders of
the Company to be held on May 28, 1998 and any adjournments thereof. The time,
place and purpose of the Annual Meeting are stated in the Notice of Annual
Meeting of Shareholders which accompanies this Proxy Statement. The expense of
soliciting Proxies, including the cost of preparing, assembling and mailing the
Notice, Proxy Statement and Proxy, will be borne by the Company. In addition to
solicitation of Proxies by mail, solicitation may be made personally and by
telephone, and the Company may pay persons holding shares for others their
expenses for sending proxy materials to their principals. No solicitation will
be made other than by Directors, officers and employees of the Company.
Any person giving a Proxy pursuant to this solicitation may revoke it. The
General Corporation Law of Ohio provides that, unless otherwise provided in the
Proxy, a shareholder, without affecting any vote previously taken, may revoke a
Proxy not otherwise revoked by giving notice to the Company in writing or in
open meeting. All validly executed Proxies received by the Board of Directors of
the Company pursuant to this solicitation will be voted at the Annual Meeting,
and the directions contained in such Proxies will be followed in each instance.
If no directions are given, the Proxy will be voted "FOR" the election of the
four nominees listed in the Proxy and "FOR" the approval and adoption of the
amendment to the Invacare Corporation 1994 Performance Plan.
VOTING RIGHTS
At the close of business on April 1, 1998, the Company had 28,436,436
Common Shares, without par value ("Common Shares"), and 1,433,107 Class B Common
Shares, without par value ("Class B Common Shares"), outstanding and entitled to
vote. The holders of the outstanding Common Shares as of April 1, 1998 will be
entitled to one vote for each share held by them and the holders of the
outstanding Class B Common Shares as of April 1, 1998 will be entitled to ten
votes for each share held by them. Except as otherwise provided by the Company's
Amended and Restated Articles of Incorporation or required by law, holders of
Common Shares and Class B Common Shares will at all times vote on all matters
(including the election of Directors) together as one class. Pursuant to the
Company's Amended and Restated Articles of Incorporation, no holder of shares of
any class has cumulative voting rights in the election of Directors. Only
shareholders of record at the close of business on April 1, 1998 are entitled to
notice of and to vote at the Annual Meeting.
1
<PAGE> 5
SHARE OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
Share ownership of certain beneficial owners. The following table sets
forth, as of February 27, 1998, the share ownership of each person or group
known by the Company to beneficially own more than 5% of the total voting power
of either class of shares of the Company:
<TABLE>
<CAPTION>
CLASS B
COMMON SHARES COMMON SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED*
---------------------- ---------------------- PERCENTAGE
NAME AND BUSINESS ADDRESS NUMBER NUMBER OF TOTAL
OF BENEFICIAL OWNER OF SHARES PERCENTAGE OF SHARES PERCENTAGE VOTING POWER
- --------------------------------------- --------- ---------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
A. Malachi Mixon, III (1).............. 915,765 3.1% 703,912 49.1% 17.6%
One Invacare Way
Elyria, Ohio 44035
Joseph B. Richey, II (2)............... 774,738 2.7% 376,262 26.3% 10.0%
One Invacare Way
Elyria, Ohio 44035
Invacare Corporation Employees'
Stock Bonus Trust and Plan (3)......... 675,865 2.4% 261,746 18.3% 7.3%
One Invacare Way
Elyria, Ohio 44035
AXA Assurances I.A.R.D.
Mutuelle (4)(5)........................ 2,205,682 7.7% -- -- 5.1%
21, rue de Chateaudun
75009 Paris France
Stein Roe & Farnham
Incorporated (4)(6).................... 1,519,844 5.3% -- -- 3.4%
One South Wacker Drive
Chicago, Illinois 60606-4685
</TABLE>
- ---------------
* Pursuant to the Company's Amended and Restated Articles of Incorporation, (i)
all holders of Class B Common Shares are entitled to convert any or all of
their Class B Common Shares to Common Shares at any time, on a share-for-share
basis, and (ii) the Company may not issue any additional Class B Common Shares
unless such issuance is in connection with share dividends on or share splits
of Class B Common Shares.
(1) Mr. Mixon is Chairman of the Board of Directors and Chief Executive Officer
of the Company. The Common Shares beneficially owned by Mr. Mixon include
538,370 Common Shares which may be acquired upon the exercise of stock
options during the 60 days following February 27, 1998. For purposes of
calculating the percentage of outstanding Common Shares beneficially owned
by Mr. Mixon and his percentage of total voting power, the Common Shares
which he had the right to acquire during that period by exercise of stock
options are deemed to be outstanding. The number of shares shown as
beneficially owned by Mr. Mixon include 10,690 Common Shares held in the
name of Roundwood Capital L.L.P., which represent his ownership interest in
Roundwood Capital L.L.P. The number of shares shown as beneficially owned by
Mr. Mixon does not include 461,829 Common Shares which have been transferred
into two family trusts. The number of shares shown as beneficially owned by
Mr. Mixon does not include 251,376 Common Shares which have been transferred
into two trusts for the benefit of his two children. Mr. Mixon disclaims
beneficial ownership of such shares.
(2) Mr. Richey is President-Invacare Technologies and Senior Vice
President-Total Quality Management and is a Director of the Company. The
Common Shares beneficially owned by Mr. Richey include 299,090 Common Shares
which may be acquired upon the exercise of stock options during the 60 days
following February 27, 1998. For purposes of calculating the percentage of
outstanding Common Shares beneficially owned by Mr. Richey and his
percentage of total voting power, the Common Shares which he had the right
to acquire during that period by exercise of stock options are deemed to be
outstanding.
(3) The Invacare Corporation Stock Bonus Trust and Plan is an employee benefit
plan established and operated as a trust for the benefit of the Company's
employees. The Charles Schwab Trust Company is the trustee of the Invacare
Corporation Stock Bonus Plan, with Invacare Corporation as Administrator of
the Plan. As such, the shares held by the Plan are voted at the Company's
direction.
(4) The number of Common Shares beneficially owned is based upon a Schedule 13G
filed for share ownership as of December 31, 1997.
(5) The Schedule 13G was filed by the Equitable Companies Incorporated
(Equitable Companies); AXA-UAP, which beneficially owns a majority interest
in Equitable Companies; and the Mutuelles AXA, as a group
2
<PAGE> 6
which beneficially owns a majority interest in AXA-UAP. The Common Shares
reported are held by Equitable Companies acting as a parent holding company
with respect to the holdings by its following subsidiaries: Alliance Capital
Management L.P., an Investment Adviser, has sole voting power with respect
to 1,374,633 shares of the 2,089,443 Common Shares held, and sole
dispositive power with respect to all 2,089,443 Common Shares held.
Donaldson, Lufkin & Jenrette Securities Corporation, an Investment Adviser
and Broker-Dealer, has no voting power and shared dispositive power with
respect to 22,978 of the Common Shares held. Wood, Struthers & Winthrop
Management Corp., an Investment Adviser, has sole voting power with respect
to 37,000 shares of the 93,261 Common Shares held and sole dispositive power
with respect to all 93,261 Common Shares held.
(6) The Schedule 13G was filed by Stein Roe & Farnham Incorporated, an
Investment Adviser, which has sole voting power with respect 76,750 shares
of the 1,519,844 Common Shares held and sole dispositive power with respect
to all 1,519,844 Common Shares held.
Share ownership of management. The following table sets forth as of
February 27, 1998, the share ownership of all Directors, each of the Named
Executive Officers (as defined below) and of all Directors and executive
officers as a group:
<TABLE>
<CAPTION>
CLASS B
COMMON SHARES COMMON SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED**
---------------------- ---------------------- PERCENTAGE
NUMBER NUMBER OF TOTAL
NAME OF BENEFICIAL OWNER OF SHARES PERCENTAGE OF SHARES PERCENTAGE VOTING POWER
------------------------ --------- ---------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Gerald B. Blouch (4).................. 233,190 * -- -- *
Francis J. Callahan................... 254,690 * -- -- *
Frank B. Carr......................... 99,700 * -- -- *
Michael F. Delaney.................... 11,000 * -- -- *
Whitney Evans......................... 44,320 * -- -- *
Bernadine P. Healy.................... 6,961 * -- -- *
Thomas R. Miklich (4)................. 92,850 * -- -- *
A. Malachi Mixon, III (1)............. 915,765 3.1% 703,912 49.1% 17.6%
Dan T. Moore, III..................... 566,520 2.0% -- -- 1.3%
E. P. Nalley (3)...................... 206,054 * -- -- *
Joseph B. Richey, II (2).............. 774,738 2.7% 376,262 26.3% 10.0%
Louis F.J. Slangen (4)................ 159,335 * -- -- *
William M. Weber...................... 292,690 1.0% -- -- *
All executive officers and Directors
as a group (20 persons)(4).......... 3,963,170 13.1% 1,080,174 75.4% 32.7%
</TABLE>
- ---------------
* Less than 1% of outstanding shares of such class.
** Pursuant to the Company's Amended and Restated Articles of Incorporation, (i)
all holders of Class B Common Shares are entitled to convert any or all of
their Class B Common Shares to Common Shares at any time, on a
share-for-share basis, and (ii) the Company may not issue any additional
Class B Common Shares unless such issuance is in connection with share
dividends on or share splits of Class B Common Shares.
(1) See Footnote 1 to the preceding table.
(2) See Footnote 2 to the preceding table.
(3) Mr. Nalley is a Director of the Company. All of the Common Shares listed as
beneficially owned by Mr. Nalley are owned by trusts for the benefit of Mr.
Nalley.
(4) The Common Shares beneficially owned by the Company's executive officers and
Directors as a group include 1,479,901 Common Shares which may be acquired
upon the exercise of stock options during the 60 days following February 27,
1998. For purposes of calculating the percentage of outstanding Common
Shares beneficially owned by the Company's executive officers and Directors
as a group and their percentage of total voting power, Common Shares which
they had the right to acquire during said period by exercise of stock
options are deemed to be outstanding. The number of Common Shares that may
be acquired during such period by the exercise of stock options for the
noted individuals is as follows: Mr. Blouch, 211,190 shares; Mr. Miklich,
74,950 shares; and Mr. Slangen, 134,415 shares.
3
<PAGE> 7
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and Directors and persons who own 10%
or more of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "Commission"). Executive officers,
Directors and beneficial holders of more than 10% of the Company's Common Stock
are required by Commission regulations to furnish the Company with copies of all
Forms 3, 4 and 5 that they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its executive officers, Directors and
beneficial holders of more than 10% of the Company's Common Stock complied with
all filing requirements applicable to them with respect to transactions during
the fiscal year ended December 31, 1997, except for the inadvertent failure to
file a Form 3 within ten days of becoming an executive officer by Larry E.
Steward. This information was included in his year-end Form 5.
ELECTION OF DIRECTORS
The number of Directors of the Company is now currently fixed at eleven.
The members of the Company's Board of Directors are divided into three classes
with a term of office of three years, with the term of one class expiring each
year. At the Annual Meeting, four Directors will be elected to serve a
three-year term until the Annual Meeting in 2001 or until their successors have
been elected and qualified. Under Ohio law and the Company's Amended and
Restated Articles of Incorporation, the individuals receiving the greatest
number of votes cast at the Annual Meeting will be elected as Directors of the
Company. Accordingly, assuming a quorum exists, abstentions and broker non-
votes will have no effect on the election of Directors.
The Proxy holders named in the accompanying Proxy or their substitutes will
vote such Proxy at the Annual Meeting or any adjournments thereof "FOR" the
election of the four nominees for Director as named below, unless the
shareholder provides instruction by marking the appropriate space on the Proxy,
that authority to vote is withheld. Each of the nominees, is presently a
Director of the Company and has indicated their willingness to serve as a
Director if elected. If any nominee should become unavailable for election
(which contingency is not now contemplated or foreseen), it is intended that the
shares represented by the Proxy will be voted for such substitute nominee as may
be named by the Board of Directors. In no event will the accompanying Proxy be
voted for more than four nominees or for persons other than those named below
and any such substitute nominee for any of them.
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Gerald B. Blouch..................... 51 President, Chief Operating Officer and a Director
Francis J. Callahan (2)(3)........... 74 Director
Dan T. Moore, III (1)(3)............. 58 Director
Joseph B. Richey, II................. 61 President - Invacare Technologies, Senior Vice
President - Total Quality Management and a
Director
</TABLE>
4
<PAGE> 8
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<S> <C> <C>
A. Malachi Mixon, III (3)(4)(5)...... 57 Chairman and Chief Executive Officer
Frank B. Carr (1)(4)(5).............. 70 Director
Michael F. Delaney (4)(5)............ 49 Director
Whitney Evans (2)(4)(6).............. 61 Director
Dr. Bernadine P. Healy (2)(5)........ 53 Director
E.P. Nalley (1)(4)(6)................ 78 Director
William M. Weber (1)(2)(6)........... 58 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating Committee.
(4) Member of the Investment Committee.
(5) Term as Director expires in 1999.
(6) Term as Director expires in 2000.
Gerald B. Blouch was appointed President and elected as a Director of the
Company by the Board of Directors, pursuant to Article III, Section 2(c) of the
Company's Amended Code of Regulations, in November 1996. Mr. Blouch has been
Chief Operating Officer since December 1994 and Chairman-Invacare International
since December 1993. Previously Mr. Blouch was President-Homecare Division from
March 1994 to December 1994 and Senior Vice President-Homecare Division from
September 1992 to March 1994. Mr. Blouch served as Chief Financial Officer from
May 1990 to May 1993 and Treasurer from March 1991 to May 1993.
Francis J. Callahan has been a Director since 1980. From 1980 to the
present, Mr. Callahan has been President of Crawford Fitting Company, Cleveland,
Ohio a manufacturer of tube fittings and valves. Mr. Callahan also serves as a
Trustee of The Cleveland Clinic Foundation, Cleveland, Ohio.
Dan T. Moore, III has been a Director since 1980. Since 1993, Mr. Moore has
served as President of Perfect Impression, Cleveland, Ohio, a manufacturer of a
polymer footbed that molds to the exact contours of the foot using a brief
microwave heating system. Since 1993, Mr. Moore has served as Managing Partner
of Whiskey Island Partners, which is developing a marina complex on 35 acres of
land on Cleveland's Lakefront. Since March 1993, Mr. Moore has been Chairman and
Treasurer of Advanced Ceramics Corporation, a closely-held manufacturer of
industrial ceramic products. From 1979 to the present, Mr. Moore has been
President of Dan T. Moore Co., Cleveland, Ohio. Since 1988, Mr. Moore has also
served as President of Soundwich, Inc., Cleveland, Ohio, a closely-held company
that produces polymers for damping sheet metal engine components and since 1985
has served as President of Flow Polymers, Inc., a manufacturer of homogenizing
aids for rubber tire compounds.
Joseph B. Richey, II has been a Director since 1980 and in 1992 was named
President-Invacare Technologies and Senior Vice President-Total Quality
Management. Previously Mr. Richey was Senior Vice President-Product Development
from 1984 to 1992, Senior Vice President and General Manager-North American
Operations from September 1989 to September 1992. Mr. Richey also serves as a
Director of Steris Corporation, Cleveland, Ohio, a NASDAQ listed manufacturer
and distributor of medical sterilizing equipment, a Director of Royal Appliance
Manufacturing Co., Cleveland, Ohio, a New York Stock Exchange listed
manufacturer of vacuum cleaners, a Director of Unique Mobility Inc., Golden,
Colorado an American Stock Exchange listed engineering concern and manufacturer
of high efficiency permanent magnet motors and electronic controls, and a
Director of NeuroControl Corporation, Cleveland, Ohio, a privately held company,
which develops and markets electromedical stimulation systems restoring function
to paralyzed limbs and muscles.
5
<PAGE> 9
A. Malachi Mixon, III has been Chief Executive Officer since 1979 and
Chairman of the Board since 1983. Mr. Mixon has been a Director of the Company
since 1979 and also served as President until 1996, when Gerald B. Blouch, the
Company's Chief Operating Officer was elected President by the Company's Board
of Directors. Mr. Mixon serves as a Director of The Lamson & Sessions Co.,
Cleveland, Ohio, a New York Stock Exchange listed company and a supplier of
engineered thermoplastic products, The Sherwin-Williams Company, Cleveland,
Ohio, a New York Stock Exchange listed company and a manufacturer and
distributor of coatings and related products, and NCS HealthCare, Inc., a NASDAQ
listed company and a provider of pharmacy services to long term care
institutions. Mr. Mixon also serves as Chairman of the Board of Trustees of The
Cleveland Clinic Foundation, Cleveland, Ohio, one of the world's leading
academic medical centers.
Frank B. Carr has been a Director since 1982. From 1983 to 1996, Mr. Carr
was a Managing Director of McDonald & Company Securities, Inc., Cleveland, Ohio,
an investment banking and brokerage firm, and a partner in its predecessor firm
(McDonald & Company) since 1968. Mr. Carr also serves as a Director of Brush
Wellman Inc., Cleveland, Ohio, a New York Stock Exchange listed company and a
producer of engineered materials containing beryllium, and Preformed Line
Products Company, Cleveland, Ohio, a supplier of supports and connectors for
electric power and communications lines.
Michael F. Delaney has been a Director since 1986. From 1983 to the
present, Mr. Delaney has been the Associate Director of Development of the
Paralyzed Veterans of America, Washington, D.C.
Whitney Evans has been a Director since 1980. From 1980 to the present, Mr.
Evans has been a private investor. From 1983 to 1997, Mr. Evans was an officer
and a Director of Pine Tree Investments, Inc., Cleveland, Ohio, a business and a
real estate investment firm. From 1989 to 1995, Mr. Evans served as the
President of Harmony Group, Sonoma, California, a consultant to non-profit
organizations.
Dr. Bernadine P. Healy has been a Director since 1996. From 1995 to the
present, Dr. Healy has been the Dean and Professor of Medicine of the College of
Medicine and Public Health of The Ohio State University, Columbus, Ohio. From
1994 to 1995, Dr. Healy served as Director of Health and Science Policy at The
Cleveland Clinic Foundation, Cleveland, Ohio; and from 1991 to 1993, she served
as Director of the National Institutes of Health in Bethesda, Maryland. From
1985 to 1991, Dr. Healy served as the Chairman of the Research Institute of The
Cleveland Clinic Foundation, Cleveland, Ohio. Dr. Healy is a Trustee of the
Battelle Memorial Institute in Columbus, Ohio. Dr. Healy also serves as a
Director of Medtronic, Inc., a New York Stock Exchange listed company and
producer of cardiac pacemakers and National City Corporation, Cleveland, Ohio,
since 1997, also a New York Stock Exchange listed company and a bank holding
company. Dr. Healy has been a Medical Contributor for CBS News.
E. P. Nalley has been a Director since 1983. From 1987 to 1991 when he
retired, Mr. Nalley was the Company's Senior Vice President-Sales and Assistant
to the President. Mr. Nalley is now a private investor. Mr. Nalley also serves
as a Director of Royal Appliance Manufacturing Co., Cleveland, Ohio, a New York
Stock Exchange listed manufacturer of vacuum cleaners.
William M. Weber has been a Director since 1988. In 1994, Mr. Weber became
President of Roundcap L.L.C. and a principal of Roundwood Capital L.L.P., a
partnership that invests in public and private companies. From 1968 to 1994, Mr.
Weber was President of Weber, Wood, Medinger, Inc., Cleveland, Ohio, a
commercial real estate brokerage and consulting firm.
INFORMATION REGARDING MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during the fiscal year ended
December 31, 1997. The Board of Directors has an Audit Committee, a Compensation
Committee, a Nominating Committee and an Investment Committee. The Audit
Committee reviews the activities of the Company's independent and internal
auditors and various company policies and practices. The Audit Committee
6
<PAGE> 10
met twice during the last fiscal year. The Compensation Committee approves the
grant of stock options and reviews and determines the compensation of certain
key executives. The Compensation Committee met one time during the last fiscal
year. The Nominating Committee recommends candidates for election as Directors
of the Company and will consider all qualified nominees recommended by
shareholders. Such recommendations should be sent to Francis J. Callahan,
Chairman of the Nominating Committee, Invacare Corporation, One Invacare Way,
P.O. Box 4028, Elyria, Ohio 44036-2125. The Nominating Committee did not meet
during 1997. The Investment Committee, which met one time during 1997, monitors
the status of investments by the Company's Profit Sharing Plan and investments
made by the Company's captive insurance subsidiary. During the last fiscal year,
each Director attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors held during the period he served as a
Director and (ii) the total number of meetings held by Committees of the Board
on which he served.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for reviewing the Company's existing and proposed executive
compensation plans and making determinations regarding the contents of these
plans and the awards to be made thereunder. The current members of the Committee
are Whitney Evans, Francis J. Callahan, Jr., Dr. Bernadine P. Healy and William
M. Weber, all of whom are non-employee Directors of the Company.
Set forth below is a discussion of the Company's compensation philosophy,
together with a discussion of the factors considered by the Committee in
determining the 1997 compensation of the Company's executive officers named in
this Proxy Statement.
The Committee has determined, as a performance-driven business, that the
Company should reward outstanding financial results with commensurate
compensation. The Committee's strategy for carrying out this philosophy is to
link both annual and long-term executive compensation with the Company's
financial and operating performance. The Committee also recognizes the
importance of maintaining compensation at competitive levels in order to attract
and retain talented executives.
In order to gauge the competitiveness of the Company's executive
compensation levels, the Committee receives market data from an independent
consulting firm regarding executive compensation paid by other companies having
similar annual revenues, as well as larger employers with which the company must
compete for talent ("Comparable Employers"). The Committee relies on its
independent consultant to identify a representative group of potentially
competitive employers. In determining the group of Comparable Employers, the
independent consultant assembled market data on companies having similar
projected revenues, with particular emphasis on durable goods manufacturers. In
addition, larger employers are surveyed as the Committee believes they are also
significant competitors for executive talent. Thus, the Committee and its
independent consultant believe the Company's most direct competitors for
executive talent are not necessarily the companies that would be included in the
peer group established to compare shareholder returns. Accordingly, the
Comparable Employers are not necessarily the same as the peer group utilized in
the Comparison of Five-Year Cumulative Total Return graph included in this Proxy
Statement.
The Committee also utilizes recommendations from the consulting firm on
various facets of the Company's executive compensation program. In general, base
salaries are established at market median levels for comparable positions but an
opportunity for significantly higher compensation is provided through annual
cash bonuses. These opportunities are dependent upon material year-to-year
improvement in earnings before income tax. In addition, long-term compensation
is awarded exclusively in the form of stock options in order to provide key
executives with significant financial benefits, to the extent that shareholder
value is similarly enhanced.
Annual Base Salary. Because the Company has determined to link overall
compensation with financial performance, the base salary ranges for its
executives are targeted on an annual basis at approximately the 50th percentile
of ranges established by Comparable Employers for executives
7
<PAGE> 11
having similar responsibilities. The Committee receives annual survey
information from the independent consultant and also reviews annual
recommendations from the Chief Executive Officer ("CEO") in order to establish
appropriate salary levels for each of the executive officers (other than the
CEO). The Committee takes into account whether each executive met key objectives
in both financial and operating categories, as well as potential future
contributions. A determination is also made as to whether the base salary
provides an appropriate reward and incentive for the executive to sustain and
enhance the Company's long-term superior performance. Important financial
performance objectives (some of which may not be applicable to all executives)
include net sales, income from operations, cost controls, earnings before income
tax and return on assets. Operating objectives vary for each executive and may
change from year-to-year. Financial and operating objectives are considered
subjectively in the aggregate and are not specifically weighted in assessing
performance. Increases in 1997 base salaries were based on the subjective
judgment of the Committee taking into account the CEO's comments regarding each
executive's achievement of applicable 1996 operating and financial objectives
and the targeted salary ranges as determined by the market study received from
the independent consultant. Resulting base salaries for the Company's executives
(including the CEO) were at or near the targeted range.
In determining the CEO's base salary for 1997, the Committee took into
account the survey results regarding a 50th percentile salary range of chief
executive officers at Comparable Employers and the financial performance
objectives described above. The Committee noted that key acquisition activity
occurred in the United States, Europe, and Australia, during 1996 under the
CEO's leadership. These acquisitions allowed the Company to grow market share
and extend current product lines, complement existing businesses, utilize its
distribution strength and expand its geographic presence. The CEO is the leading
industry spokesperson on behalf of the home medical equipment industry putting
Invacare in a position to help shape public policy instead of being forced to
react to change in policy. Substantial progress was also made in meeting the
Company's long-term strategic objectives that are set by management and reviewed
by the Board each year. It is the Committee's opinion that these objectives are
a key to the ongoing success of the Company. They also reflect the CEO's strong
understanding of the industry and what is required to continue to sustain
superior financial and operating performance. The Committee also believes that
the CEO has instituted actions that keep the Company's strategic direction in
line with the ever-changing marketplace in which the company operates.
Annual Cash Bonus. Consistent with its philosophy that executive
compensation should be linked with the Company's financial performance, the
Committee has determined that annual total cash compensation (salary plus bonus)
should be targeted at the 75th market percentile of Comparable Employers when
the Company meets commensurately challenging financial goals, as previously
outlined, in addition to subjective factors as the Committee deems appropriate.
With the assistance of the independent consultant, the Committee has
determined (and annually reviews) the appropriate bonus targets for each
executive officer (as a percentage of his or her salary) so that annual total
cash compensation for such executive officer will reach the 75th market
percentile if targeted earnings before income tax objectives are achieved, but
with unlimited potential. During this process, the Committee may also determine
that an executive's performance (taking into account the same factors discussed
above with respect to base salary) and level of responsibilities warrant a
change in the bonus target percentage from the market norm.
Each year, the Committee considers the recommendation from the CEO
regarding the appropriate target for that year's earnings before income tax at
which target bonuses will be earned. Under normal conditions, no bonuses are
payable if earnings before income tax and unusual items does not improve over
the prior year and bonuses increase on a linear basis if earnings before income
tax exceeds the targeted level. Targeted earnings before income tax and unusual
items is generally set at a level which the Committee believes is challenging
but achievable.
The CEO's annual cash bonus was targeted to approximate the 75th percentile
of total cash compensation paid to chief executive officers by Comparable
Employers if the Committee's
8
<PAGE> 12
earnings before income tax objective is achieved. In determining the level of
total cash compensation to be targeted for the CEO in 1997, the Committee took
into account the same factors and events described above under the Annual Base
Salary. Actual earnings before income tax, excluding the effect of a
non-recurring and unusual charge, improved over 1996 levels. The total cash
compensation paid for 1997, including bonus, were below the targeted 75th market
percentile as determined by the Committee as the results were not up to the
targeted level set at the beginning of the year.
Survey data from the independent consultant shows annual executive bonuses
as a percent of net income at target levels remain competitive with Comparable
Employers.
Long-Term Compensation Program. The Company's long-term compensation plan
is based exclusively on the award of stock options. Total long-term compensation
is targeted at approximately the 75th percentile for long-term compensation by
Comparable Employers but with unlimited potential. Stock options generally are
issued as non-qualified options under the Invacare Corporation 1994 Performance
Plan and granted at market price, vest in accordance with a schedule established
by the Committee and expire after ten (10) years.
Each year, the Committee determines the appropriate percentage of each
executive's salary which should be targeted as long-term compensation. The
targeted percentage of salary and the number of options proposed for each
executive officer may also be affected by the factors previously described in
establishing base salaries. The number of options granted to each executive
officer is determined based upon the previously agreed upon target level for
long-term compensation and upon the projected value of options as reflected by a
valuation formula recommended by the independent consultant. The number of
options granted to each executive in 1997 was based on the subjective judgment
of the Committee, taking into account the CEO's comments regarding the
executive's achievement of the applicable 1996 operating and financial
objectives (as described above under Annual Base Salary) and the targeted range
for long-term compensation. No particular weight was assigned to any one
operating or financial objective. Outstanding options held by an executive
officer are generally not considered when the Committee determines the number of
new options to be granted. Utilizing the valuation formula recommended by the
Company's independent consultant, options granted to the Company's executives
(including the CEO) resulted in a value of long-term compensation at or near the
targeted range for each executive.
The Committee awarded options to the CEO in 1997 based upon the foregoing
targets and formula and taking into account the same factors and events utilized
in establishing the CEO's base salary for the year.
Other Matters. The Committee believes that all long-term compensation
awarded to key executives in 1997 is "performance-based" and, therefore, will be
deductible notwithstanding Section 162(m) of the Internal Revenue Code of 1986.
However, the Committee has not adopted a policy with respect to whether all
future long-term or other compensation will satisfy the requirements of Section
162(m). The Committee intends to make a determination with respect to this issue
on an annual basis.
The Compensation Committee of the
Board of Directors of Invacare
Corporation
Whitney Evans, Chairman
Francis J. Callahan
Dr. Bernadine P. Healy
William M. Weber
9
<PAGE> 13
SHAREHOLDER RETURN PERFORMANCE GRAPHS
The following graph compares the yearly cumulative total return on the
Company's Common Shares against the yearly cumulative total return of the
companies listed on the Standard & Poor's 500 Stock Index and a Peer Group of
companies selected on a line-of-business basis.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG INVACARE CORPORATION, S&P 500 INDEX AND
LINE-OF-BUSINESS PEER GROUP*
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) INVACARE S&P 500 PEER GROUP
<S> <C> <C> <C>
1992 100 100 100
1993 113 109 109
1994 141 111 99
1995 209 153 67
1996 227 187 66
1997 180 249 75
</TABLE>
* Sunrise Medical Inc. (SMD); Everest & Jennings International Ltd. (EJ) was
acquired by Graham-Field Health Products, Inc. (GFI) in the fourth quarter of
1996. Everest & Jennings International Ltd. shareholders received .35 common
shares of Graham-Field Health Products, Inc. for each Everest & Jennings
International Ltd. common share owned. For purposes of the above graph, the
return for Everest & Jennings International Ltd. within the peer group for the
period November 27, 1996 to December 31, 1997 was calculated with the return
of Graham-Field Health Products, Inc. at the conversion rate noted above.
(Note: Nellcor Puritan Bennett Inc. was acquired by Mallinckrodt Inc. in June of
1997 in an all cash transaction, and is no longer considered in the same
industry or line of business and therefore is no longer included in the peer
group, for purposes of the above performance graph.)
The above graph assumes $100 invested on December 31, 1992 in the Common Shares
of Invacare Corporation, S&P 500 Index and the respective Line-of-Business Peer
Group, including reinvestment of dividends through December 31, 1997.
10
<PAGE> 14
COMPENSATION OF EXECUTIVE OFFICERS
The table below shows information for the three years ended December 31,
1997 concerning the annual and long-term compensation for services in all
capacities to the Company of the Chief Executive Officer and the four other most
highly compensated executive officers of the Company (the "Named Executive
Officers") for the year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- ----------------------
OTHER ALL OTHER
ANNUAL SECURITIES COMPEN-
NAME AND SALARY(1) BONUS(1) COMPEN- UNDERLYING SATION(2)
PRINCIPAL POSITION YEAR ($) ($) SATION($) OPTIONS(#) ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A. Malachi Mixon, III 1997 605,050 455,000 -- 127,600 76,741
Chairman and Chief 1996 540,000 513,000 -- 81,000 74,924
Executive Officer 1995 481,000 734,487 -- 73,400 52,489
Gerald B. Blouch 1997 370,000 245,000 -- 70,000 102,116
President and 1996 320,000 272,000 -- 38,400 103,847
Chief Operating Officer 1995 280,000 337,680 -- 34,200 89,769
Joseph B. Richey, II 1997 285,000 176,000 -- 41,000 82,529
President-Invacare 1996 270,000 203,000 -- 24,300 89,336
Technologies and Senior 1995 255,000 307,530 -- 23,400 91,171
Vice President-Total Quality Management
Thomas R. Miklich, 1997 265,000 159,000 -- 50,000 58,773
Chief Financial Officer, 1996 240,000 180,000 -- 21,600 60,583
General Counsel, Treasurer 1995 215,000 259,290 -- 19,800 53,355
and Corporate Secretary
Louis F.J. Slangen 1997 230,000 116,000 -- 20,500 57,555
Senior Vice President- 1996 211,000 132,000 -- 12,700 58,775
Sales & Marketing 1995 196,000 196,980 -- 12,000 57,441
</TABLE>
- ---------------
(1) Salary and Bonus amounts for 1996 may include amounts deferred under the
401(k) feature of the Company's Profit Sharing Plan or the non-qualified
401(k) Plus Benefit Equalization Plan.
(2) The amounts disclosed in this column include: (a) Company contributions in
the amount of $3,200 for each of Messrs. Mixon, Blouch, Richey, Miklich and
Slangen under the Company's 401(k) plan, a defined contribution plan; (b)
Company contributions in the amounts of $17,694, $9,100, $5,850, $5,115 and
$3,720 for Messrs. Mixon, Blouch, Richey, Miklich and Slangen, respectively,
under the Company's 401(k) Plus Benefit Equalization Plan, a defined
contribution plan; (c) Company contributions in the amounts of $6,400, for
each of Messrs. Mixon, Blouch, Richey, Miklich and Slangen, under the
Company's Profit Sharing Plan, a defined contribution plan; (d) Company
contributions in the amounts of $35,389, $18,200, $11,700, $10,230 and
$7,440 for Messrs. Mixon, Blouch, Richey, Miklich and Slangen, respectively,
under the Company's Profit Sharing Benefit Equalization Plan, a defined
contribution plan; (e) the payment of premiums on group term life insurance
policy of $6,328, $2,798, $4,464, $1,959, $1,788 for Messrs. Mixon, Blouch,
Richey, Miklich and Slangen, respectively; (f) the dollar value of
compensatory split-dollar life insurance benefits, under the Company's
Executive Life Insurance Plan, in the amounts of $53,971, $48,887, $27,441
and $31,770 for Messrs. Blouch, Richey, Miklich and Slangen, respectively.
Mr. Mixon is not covered by a split-dollar life insurance benefit; (g)
payments by the Company, related to premiums under the Company's Executive
Disability Income Plan, in the amounts of $8,447, $2,028, $4,428 and $3,237
for Messrs. Blouch, Richey, Miklich and Slangen, respectively. Mr. Mixon
does not participate in the Company's Executive Disability Income Plan; and
(h) payment by the Company for the premium of a disability insurance policy
for Mr. Mixon in 1997 amounted to $7,730.
11
<PAGE> 15
COMPENSATION OF DIRECTORS
The Company paid all Directors who were not employees ("Non-employee
Directors") a $14,000 annual retainer plus $2,000 per Board meeting attended.
Further, Non-employee Directors are eligible to participate in a Deferred
Compensation Plan adopted in 1992, pursuant to which they may elect to defer
receipt of the compensation payable by the Company for their services as a
Director, and if such compensation is elected by the Director in the form of
Common Shares, the Company will deposit an additional 25% of such deferred
compensation into the applicable trust. None of the Non-employee Directors had
an effective election to defer 1997 compensation. In addition, the Non-employee
Directors were eligible for a bonus of $4,000 based on profit objectives for
1997 and a greater amount if the objectives were exceeded. Based on 1997
operating results, each of the Non-employee Directors have been paid $1,100 as
profit (excluding the non-recurring unusual charge) improved over 1996, but the
target level at the beginning of the year was not achieved. For 1998, the
Non-employee Directors are eligible to receive a bonus of $4,000, if certain
profit objectives are met. The bonus amount can be increased if those objectives
are exceeded.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows, as to the Named Executive Officers, the stock
options granted in 1997 under the Invacare Corporation 1994 Performance Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES % OF AT ASSUMED ANNUAL RATES
UNDERLYING TOTAL OPTIONS OF SHARE PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(1)
GRANTED(2) EMPLOYEES PRICE(3) EXPIRATION ---------------------------
NAME (#) IN FISCAL YEAR ($ PER SHARE) DATE 5%($) 10%($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A. Malachi Mixon, III... 127,600 21.9% 25.13 2/20/07 2,016,000 5,109,000
Gerald B. Blouch........ 70,000 12.0% 25.13 2/20/07 1,106,000 2,803,000
Joseph B. Richey, II.... 41,000 7.0% 25.13 2/20/07 648,000 1,642,000
Thomas R. Miklich....... 50,000 8.6% 25.13 2/20/07 790,000 2,002,000
Louis F.J. Slangen...... 20,500 3.5% 25.13 2/20/07 324,000 821,000
All Shareholders (4).... N/A N/A N/A N/A 468,200,000 1,176,000,000
</TABLE>
- ---------------
(1) Potential Realizable Value is based on assumed annual growth rates for the
term of the option. The assumed rates of 5% and 10% are set by the
Securities and Exchange Commission and are not intended to be a forecast of
the Company's Common Share price. There is no assurance that the value
realized will be at or near the value estimated in the Potential Realizable
Value applied to value the stock options. Actual gains, if any, on stock
options exercised are dependent on the actual performance of the stock.
(2) Options become exercisable on March 31, over four years at a rate of 25% per
year, commencing in 1998.
(3) The exercise price is equal to the fair market value of the Company's Common
Shares on the date of grant.
(4) The potential gain realizable by all shareholders (based on 28,488,077
Common Shares and 1,441,567 Class B Common Shares outstanding at the
exercise price of $25.13 per share as of the grant date of February 20,
1997) at 5% and 10% assumed annual rates over a term of 10 years is provided
as a comparison to the potential gain realizable by the Named Executive
Officers at the same assumed annual rates of appreciation in share value
over the same 10-year term. The value of a Common Share would appreciate to
approximately $41.00 and $65.00 per share at the assumed 5% and 10% annual
growth rates, respectively.
Each of the options issued under the Stock Option Plans includes a
provision which provides that the option shall become immediately exercisable
(notwithstanding any vesting schedule
12
<PAGE> 16
otherwise contained in the option) upon the commencement of a tender for the
Company's Common Shares or at any time within 90 days prior to a dissolution,
liquidation or certain mergers or consolidations of the Company. Upon the
occurrence of such a merger or consolidation, the option shall be subject to
such adjustment or amendment as the Compensation Committee of the Board of
Directors deems appropriate and equitable. Under the terms of the Stock Option
Plans, the Committee may also grant reload options under such circumstances as
it deems appropriate.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The table below shows information with respect to options exercised by, and
the value of unexercised options under the Stock Option Plans for, the Named
Executive Officers.
AGGREGATED OPTION EXERCISES IN 1997 AND OPTION VALUE AT YEAR-END 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
NUMBER OF UNDERLYING UNEXERCISED MONEY OPTIONS AT
SHARES VALUE OPTIONS AT 12/31/97(#) 12/31/97(2)($)
ACQUIRED ON REALIZED --------------------------- -----------------------------
NAME EXERCISE(#) (1)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. Malachi Mixon, III....... 48,000 1,047,000 455,720 237,200 6,095,309 270,006
Gerald B. Blouch............ 20,000 378,000 170,190 121,250 1,981,077 123,356
Joseph B. Richey, II........ None -- 271,465 76,375 4,074,621 98,494
Thomas R. Miklich........... None -- 47,900 80,300 333,750 80,100
Louis F.J. Slangen.......... 40,000 825,623 118,915 40,225 1,477,968 61,575
</TABLE>
- ---------------
(1) Represents the difference between the option exercise price and the closing
price of the Common Shares on the NASDAQ National Market System on the date
of exercise.
(2) The "Value of Unexercised In-the-Money Options at 12/31/97" is equal to the
difference between the option exercise price and the closing price of $21.75
of a Common Share on the NASDAQ National Market System on December 31, 1997.
PENSION PLANS
The Company has established a Supplemental Executive Retirement Plan for
all executive officers to supplement other savings plans offered by the Company
to provide a specific level of replacement compensation for retirement. The
annual benefit is a single-life annuity in an amount equal to a portion of final
earnings (maximum is 50% at 15 years of service). This annual benefit is reduced
by the annual value of the Company contributions to the qualified Profit Sharing
Plan, Company contributions to the nonqualified 401(k) Plus and Profit Sharing
Equalization Plans, and one-half of the annual Social Security benefit. The plan
is a nonqualified plan and therefore the benefits accrued under this plan are
subject to the claims of the Company's general creditors in the event of
bankruptcy. The benefits will be paid (i) from an irrevocable grantor trust
funded from the Company's general funds or (ii) directly by the Company from
general funds.
13
<PAGE> 17
The following table reflects the estimated annual single-life annuity
payment, without reductions for applicable offsets, payable to a participant
retiring in 1997 at age 65.
PENSION TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE (2)
---------------------------
REMUNERATION (1) 5 10 15
- ---------------------------- ------- ------- -------
<S> <C> <C> <C>
200,000................... 33,333 66,667 100,000
300,000................... 50,000 100,000 150,000
400,000................... 66,667 133,333 200,000
500,000................... 83,333 166,667 250,000
600,000................... 100,000 200,000 300,000
700,000................... 116,667 233,333 350,000
800,000................... 133,333 266,667 400,000
900,000................... 150,000 300,000 450,000
1,000,000................... 166,667 333,333 500,000
1,100,000................... 183,333 366,667 550,000
1,200,000................... 200,000 400,000 600,000
</TABLE>
- ---------------
(1) Remuneration for purposes of calculating pension benefit based on final base
salary and target bonus.
(2) The pension benefits represent annual single-life annuity values subject to
reduction by applicable offsets (as described above). For purposes of
estimating a pension benefit as of December 31, 1997, the current years of
service credited for the Named Executive Officers are 17, 8, 13, 5 and 10
years for Messrs. Mixon, Blouch, Richey, Miklich and Slangen, respectively.
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
Severance Pay Agreements. To ensure continuity and the continued
dedication of key executives during any period of uncertainty caused by the
possible threat of a takeover, the Company has entered into severance pay
agreements with certain key executives, including each of the Named Executive
Officers. In the event there is a Change of Control (as that term is defined in
the agreements) of the Company and the employment of the contracting executive
terminates under certain conditions described in the agreements at any time
during the three year period following a Change of Control of the Company, the
executive will receive an agreed upon amount of severance pay.
For all of the Named Executive Officers, the severance pay agreements
provide that upon termination for any reason other than death, Disability, by
the Company for Cause or by the executive for other than Good Reason (as such
terms are defined in the agreements), the executive will receive, in addition to
accrued salary, bonus and vacation pay: (a) a lump sum cash amount equal to
three times annual base salary plus the executive's target bonus; (b) continued
participation in the Company's employee welfare benefit plans and other benefit
arrangements for a period of three years following termination; and (c) 401(k),
401(k) Plus, profit sharing and retirement benefits so that the total retirement
benefits received will be equal to the retirement benefits which would have been
received had such executive's employment with the Company continued during the
three year period following termination.
The salary and other benefits provided by the severance pay agreements will
be payable from the Company's general funds. The Company has agreed to indemnify
such executives for any legal expense incurred in the enforcement of their
rights under the severance pay agreements.
14
<PAGE> 18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors during
1997 were Whitney Evans, Francis J. Callahan, Jr., Dr. Bernadine P. Healy and
William M. Weber.
During 1997, the Company purchased travel services from a third party
private aircraft charter company. One of the aircrafts available to be used by
the charter company is owned by Messrs. Mixon, Richey and Callahan. The Company
paid approximately $542,000 to the charter company for use of the aircraft owned
by Messrs. Mixon, Richey and Callahan. Invacare believes that the prices and
terms charged are no less favorable than those which could be obtained from
unrelated parties.
As of February, 1997, certain executives were indebted to the company based
on loans approved by the compensation committee pursuant to its executive
compensation philosophy and the Company's overall compensation program. The
loans are for a term of four years and bear interest at the rate of 6%
compounded annually. Loans have been made to Messrs. Mixon, Blouch, Richey,
Miklich and Slangen, in the amounts of $320,000, $100,000, $125,000, $110,000
and $80,000, respectively. No loans have been made subsequently.
PROPOSAL TO ADOPT AN AMENDMENT TO
THE INVACARE CORPORATION 1994 PERFORMANCE PLAN
As of April 1, 1998, options to purchase up to an aggregate of 1,915,825 of
the Company's Common Shares (123,991 of which had been exercised as of that
date) have been granted under the Company's 1994 Performance Plan (the "1994
Plan") out of the 2,000,000, adjusted for the 2-for-1 stock split effected in
the form of a 100% share dividend in October 1995, that had been reserved for
issuance. Hence, only 84,175 Common Shares remain available for future grants.
The Compensation Committee of the Board of Directors, therefore, recommended to
the Board of Directors that the Plan be amended to increase by One Million Five
Hundred Thousand (1,500,000) the maximum number of Common Shares available for
distribution under the 1994 Plan in order to enable the Company to continue to
provide an essential benefit to its key management personnel. Accordingly, the
Board of Directors adopted, on January 30, 1998, subject to shareholder
approval, an amendment to the 1994 Plan (the "Amendment") to amend the 1994 Plan
as set forth above, and shareholders are being asked to approve the increase of
1,500,000 additional Common Shares to be available for future grants under the
1994 Plan.
The Board of Directors believes that it is desirable to encourage key
employees and non-employee Directors of the Company and its subsidiaries to
acquire a proprietary interest in the Company or to increase such proprietary
interest as they may already hold, thereby increasing the incentive of key
employees and non-employee Directors to promote the interest of the Company and
its shareholders. For this reason, the Board of Directors adopted the Amendment
to the 1994 Plan. In addition, with the Company's strategic growth plan and
acquisition activity it is imperative that the Company have available incentives
to attract and retain key management talent. Accordingly, the Board of Directors
and management believe the approval of the Amendment to the 1994 Plan is in the
best interest of the Company and recommend that shareholders vote in favor of
the proposal.
The affirmative votes cast by the holders of a majority of the Common
Shares and Class B Common Shares, voting as one class, present in person or by
proxy at the meeting, is required for the adoption of the Amendment to the 1994
Plan. Thus, shareholders who vote to abstain will in effect be voting against
the proposal. Brokers who hold Common Shares as nominees will not have
discretionary authority to vote such shares if they have not received voting
instructions from the beneficial owners. Broker non-votes, however, are not
counted as present and entitled to vote for determining whether this proposal
has been approved and have no effect on its outcome.
THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE AMENDMENT TO THE
INVACARE CORPORATION 1994 PERFORMANCE PLAN.
15
<PAGE> 19
The following is a summary of the material features of the 1994 Plan.
GENERAL
The 1994 Plan provides for the issuance of stock options, stock
appreciation rights, restricted stock, cash and/or other performance or
stock-based awards. The 1994 Plan is administered by the Compensation Committee
(the "Committee") of the Board of Directors, a standing committee comprised
entirely of Non-employee Directors. Under the 1994 Plan, the Committee has broad
discretion to fashion the terms of awards in order to provide the Company's
employees with stock-based incentives that are appropriate under the
circumstances. As approved by the Company's Board, all employees of Invacare and
its subsidiaries, in addition to Invacare's Non-employee Directors, are eligible
to be selected by the Committee for participation in the 1994 Plan. Prior to the
Amendment, Invacare's Non-employee Directors were not eligible to participate in
the 1994 Plan.
Common Shares Underlying Awards. Currently, the aggregate number of Common
Shares that may be subject to awards, including stock options, granted under the
1994 Plan is 2,000,000 Common Shares, subject to certain adjustments. Upon the
shareholders' approval of the Amendment to the 1994 Plan, 3,500,000 Common
Shares may be subject to awards. Class B Common Shares are not issuable under
the 1994 Plan. Common Shares issued under the Plan may be either newly-issued
shares or treasury shares. The assumption of obligations in respect of awards
granted by an organization acquired by the Company, or the grant of awards under
the 1994 Plan in substitution for any such awards, will not reduce the number of
Common Shares available in any fiscal year for the grant of awards under the
1994 Plan.
Common Shares subject to an award that is forfeited, terminated or canceled
without having been exercised (other than shares subject to a stock option that
are canceled upon the exercise of a related stock appreciation right) will
generally be available again for grant under the 1994 Plan, without reducing the
number of Common Shares available in any fiscal year for grant of awards under
the 1994 Plan.
In the event of recapitalization, stock dividend, stock split, distribution
to shareholders (other than cash dividends) or similar transaction, the
Committee can adjust, in any manner that it deems equitable, the number and
class of shares that may be issued under the 1994 Plan and the number and class
of shares, and the exercise price, applicable to outstanding awards.
Grant of Awards. Awards may be granted singly or in combination or tandem
with other awards. Awards also may be granted in replacement of other awards
granted by the Company. If a participant pays all or part of the exercise price
or taxes associated with an award by the transfer of Common Shares or the
surrender of all or part of an award (including the award being exercised), the
Committee may, in its discretion, grant a new award to replace the award or
Common Shares that were transferred or surrendered. The Company may also assume
awards granted by an organization acquired by the Company or may grant awards in
replacement of any such awards.
New Benefits under the 1994 Plan. The benefits that will be received by
participants under the Amendment to the 1994 Plan or that would have been
received under the Amendment to the 1994 Plan if it had been in effect in 1997,
are not currently determinable because awards under the 1994 Plan are made at
the discretion of the Committee.
Certain Limits on Grant of Stock Options or Stock Appreciation Rights. The
1994 Plan provides that the maximum aggregate number of Common Shares (i) for
which stock options may be granted and (ii) with respect to which stock
appreciation rights may be granted, to any particular participant during any
calendar year during the term of the 1994 Plan is 200,000 Common Shares, subject
to adjustment in accordance with Section 4(c) of the 1994 Plan.
Payment of Exercise Price. The exercise price of a stock option (other than
an incentive stock option), stock purchase right, and any other stock award for
which the Committee has established an exercise price may be paid in cash, by
the transfer of Common Shares, by the surrender of all or part of an award
(including the award being exercised), or by a combination of these methods, as
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and to the extent permitted by the Committee. The exercise price of an incentive
stock option may be paid in cash, by the transfer of Common Shares or by a
combination of these methods, as and to the extent permitted by the Committee at
the time of grant, but may not be paid by the surrender of an award. Prior to
the payment of an award, Invacare may withhold, or require a participant to
remit to the Company, an amount of cash sufficient to pay any federal, state,
and local taxes associated with an award (other than an incentive stock option)
by the transfer of Common Shares, by the surrender of all or part of an award
(including the award being exercised), or by a combination of cash and/or one of
these methods. The Committee may prescribe any other method of paying the
exercise price that is determined to be consistent with applicable law and the
purpose of the 1994 Plan.
Termination of Awards. The Committee may cancel any awards if the
participant, without the Company's prior written consent, (i) renders services
for an organization, or engages in a business, that is (in the judgment of the
Committee) in competition with the Company or (ii) discloses to anyone outside
of Invacare, or uses for any purpose other than Invacare's business, any
confidential information relating to the Company.
Change in Control. In the event of a change in control of the Company, as
defined in the 1994 Plan, unless the Board of Directors determines otherwise,
(i)all outstanding stock options and stock appreciation rights will become fully
exercisable, (ii) all restrictions and conditions applicable to restricted stock
and other awards exercisable for Common Shares will be deemed to have been
satisfied and (iii) all cash awards shall be released and/or deemed to have been
fully earned. Any other determination by the Board of Directors that is made
after the occurrence of the change in control will not be effective unless a
majority of the Directors then in office are "continuing directors" and the
determination is approved by a majority of the "continuing directors." For this
purpose, "continuing directors" are Directors who were in office prior to the
change in control or were recommended or elected to succeed "continuing
directors" by a majority of the "continuing directors" then in office.
Federal Income Tax Consequences of Awards. The anticipated income tax
treatment, under current provisions of the Code, of the grant and exercise of
awards is as follows:
Incentive Stock Options. In general, a participant will not recognize
taxable income at the time an incentive stock option is granted or exercised
provided the participant has served the Company at all times from the date of
grant until the date three months before the date of exercise (one year in the
case of permanent disability). However, the excess of the fair market value of
the Common Shares acquired upon exercise of the incentive stock option over the
exercise price is an item of tax preference for purposes of the alternative
minimum tax. If an employee exercises an incentive stock option without
satisfying the employment requirement, the income tax treatment will be the same
as that for a non-qualified stock option, described below. Upon disposition of
the common Shares acquired upon exercise of an incentive stock option, capital
gain or capital loss will be recognized in an amount equal to the difference
between the sales price and the exercise price, provided that the participant
has not disposed of the Common Shares within two years of the date of grant or
within one year from the date of exercise (a "Disqualifying Disposition"). If
the participant disposes of the shares in a Disqualifying Disposition, the
participant will recognize ordinary income at the time of the Disqualifying
Disposition to the extent of the difference between the exercise price and the
lesser of the fair market value of the shares on the date the incentive stock
option is exercised or the amount realized in the Disqualifying Disposition. Any
remaining gain or loss is treated as a capital gain or capital loss.
The Company is not entitled to a tax deduction either upon the exercise of
an incentive stock option or upon the disposition of the Common Shares acquired
thereby, except to the extent that the participant recognizes ordinary income in
a Disqualifying Disposition and subject to the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code").
Non-Qualified Stock Options. In general, a participant will not recognize
taxable income at the time a stock option that does not qualify as an incentive
stock option (a "Non-qualified Stock
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<PAGE> 21
Option") is granted. An amount equal to the difference between the exercise
price and the fair market value, on the date of exercise, of the Common Shares
acquired upon exercise of the Non-qualified Stock Option will be included in the
participant's ordinary income in the taxable year in which the Non-qualified
Stock Option is exercised. Upon disposition of the Common Shares acquired upon
exercise of the Non-qualified Stock Option, appreciation or depreciation from
the tax basis of the shares acquired after the date of exercise will be treated
as either capital gain or capital loss.
Subject to the applicable provisions of the Code, the Company generally
will be entitled to a tax deduction in the amount of the ordinary income
realized by the participant in the year the Non-qualified Stock Option is
exercised. Although the Committee has discretion to grant Non-qualified Stock
Options with exercise prices above or below fair market value on the date of
grant, it appears, based on proposed Internal Revenue Service regulations (the
"Proposed IRS Regulations"), that the compensation realized by a Named Executive
Officer upon exercise of a Non-qualified Stock Option granted by the Committee
with an exercise price equal to or greater than the fair market value of the
underlying shares on the date of grant will be deductible by the Company
notwithstanding the deductibility limitations under Section 162(m) of the Code.
Any amounts includable as ordinary income to a participant in respect of a
Non-qualified Stock Option will be subject to applicable withholding for federal
income and employment taxes.
Stock Appreciation Rights. The grant of stock appreciation rights will have
no immediate tax consequences to the Company or the participant receiving the
grant. In general, the amount of compensation that will be realized by a
participant upon exercise of a stock appreciation right is equal to the
difference between the grant date valuation of the Common Shares underlying the
Stock appreciation right and the fair market value of the stock or cash received
on the date of exercise. Although the Committee has discretion to grant stock
appreciation rights at prices above or below fair market value on the date of
grant, it appears, based on the Proposed IRS Regulations, that the compensation
realized by a Named Executive Officer upon exercise of a stock appreciation
right that was granted by the Committee at or above fair market value of the
underlying shares on the date of grant, will be deductible by the Company
notwithstanding the deductibility limitations under Section 162(m) of the Code.
The amount received by the participant upon the exercise of the stock
appreciation rights will be included in the participant's ordinary income in the
taxable year in which the stock appreciation rights are exercised. Subject to
the applicable provisions of the Code, the Company generally will be entitled to
a deduction in the same amount in that year.
Restricted Stock. Unless a participant makes an election under Section
83(b) of the Code, the participant will recognize no income, and the Company
will be entitled to no deduction at the time restricted stock is awarded to the
participant. When the restrictions on restricted stock lapse or are otherwise
removed, the participant will recognize compensation income equal to the excess
of the fair market value of the restricted stock on the date the restrictions
lapse or are otherwise removed over the amount, if any, paid by the participant
for the restricted stock, and generally, the Company will be entitled to a
deduction in the same amount if it satisfies applicable withholding requirements
and subject to the other applicable withholding requirements and subject to the
other applicable provisions of the Code, including the possible limitations
under Section 162(m) of the Code. Dividends paid on restricted stock during any
restriction period will, unless the participant has made an election under
Section 83(b) of the Code, constitute compensation income to the participant
receiving the dividends, and the Company generally will be entitled to a
deduction in the same amount. Upon disposition of Common Shares after the
restrictions lapse or are otherwise removed, any gain or loss realized by a
participant will be treated as short-term or long-term capital gain or loss
depending upon the period of time between the disposition and the earlier lapse
or removal of the restrictions on those Common Shares.
If a participant files an election under Section 83(b) of the Code with the
Internal Revenue Service within 30 days after the grant of restricted stock, the
participant will, on the date of the grant, recognize compensation income equal
to the excess of the fair market value of the Common Shares on that date over
the price paid for those Common Shares, and the Company generally will be
18
<PAGE> 22
entitled to a deduction in the same amount if it satisfies applicable
withholding requirements and subject to the other applicable provisions of the
Code. Dividends paid on the stock thereafter will be treated as dividends for
tax purposes, includable in the gross income of the participant and not
deductible by the Company. Any gain or loss recognized by the participant on a
disposition of restricted stock which was the subject of a Section 83(b)
election, other than on a redemption by the Company, will be capital gain or
loss. However, if the disposition is a forfeiture by the participant or
redemption by the Company at the initial price of the restricted stock, the
disposition may constitute a "forfeiture" within the meaning of Section 83(b),
in which event the participant would not be entitled to deduct any loss which
otherwise would have been allowable. The potential for a nondeductible
forfeiture loss on the forfeiture of restricted property is a risk that a
participant assumes by making a Section 83(b) election.
Stock Equivalent Units. The grant of stock equivalent units will not have
any immediate tax consequences to the participant receiving the stock equivalent
units or to the Company. In general, at the time the Company pays any amount to
the participant with respect to the stock equivalent units, the participant will
recognize compensation income equal to the amount of that payment, and the
Company will be entitled to a deduction in that amount, subject to the other
applicable provisions of the Code, including the possible limitations under
Section 162(m).
The discussion set forth above does not purport to be a complete analysis
of all potential tax consequences relevant to recipients of awards under the
1994 Plan or the Company or to describe tax consequences based on particular
circumstances. It is based on United States federal income tax law and
interpretational authorities as of the date of this Proxy Statement, which are
subject to change at any time. The discussion does not address state or local
income tax consequences for taxpayers who are not subject to taxation in the
United States.
Amendment, Effective Date, and Termination of the 1994 Plan. The Board of
Directors may amend, suspend, or terminate the 1994 Plan at any time.
Shareholder approval for any such amendment is required if the amendment results
in:
1. an increase, subject to certain exceptions, in the maximum number of
Common Shares that may be subject to awards granted under the 1994 Plan;
2. a change that would cause any incentive stock option granted under the
1994 Plan not to qualify as an incentive stock option under the Internal
Revenue Code of 1986, as amended (the "Code"); or
3. any change that would eliminate the exemption from the "short-swing
profits" rules currently available to the 1994 Plan and to awards
granted under the 1994 Plan.
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected the firm of Ernst &
Young L.L.P., independent public accountants, to examine and audit the annual
financial statements of the Company and its subsidiaries for the fiscal year
ending December 31, 1998. Representatives of Ernst & Young L.L.P. are expected
to be present at the Annual Meeting and they will have an opportunity to make a
statement should they so desire. In addition, they will also be available to
respond to appropriate questions from shareholders.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those stated in the Notice of Annual Meeting of
Shareholders. However, if other matters properly come before the Annual Meeting,
it is the intention of the persons named in the accompanying Proxy to vote in
accordance with their best judgment on such matters in the absence of
instructions to the contrary. Any shareholder who wishes to submit a proposal
for inclusion in the proxy material to be distributed by the Company in
connection with its Annual Meeting of
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<PAGE> 23
Shareholders to be held in 1999 must do so no later than December 11, 1998. To
be eligible for inclusion in the 1999 Proxy material of the Company, proposals
must conform to the requirements set forth in Regulation 14A under the Exchange
Act.
Upon the receipt of a written request from any shareholder, the
Company will mail, at no charge to the shareholder, a copy of the
Company's 1997 Annual Report on Form 10-K, including the financial
statements and schedules required to be filed with the Securities and
Exchange Commission pursuant to Rule 13a-1 under the Exchange Act, for
the Company's most recent fiscal year. Written requests for such
Report should be directed to:
Shareholder Relations Department
Invacare Corporation
One Invacare Way, P.O. Box 4028
Elyria, Ohio 44036-2125
You are urged to sign and return your Proxy promptly in the enclosed return
envelope to make certain your shares will be voted at the Annual Meeting.
By order of the Board of Directors
THOMAS R. MIKLICH,
Secretary
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DETACH CARD
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INVACARE CORPORATION
PROXY FOR COMMON SHARES AND CLASS B COMMON SHARES
ANNUAL MEETING OF SHAREHOLDERS -- MAY 28, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints A. MALACHI MIXON, III, WHITNEY EVANS and
JOSEPH B. RICHEY, II, and each of them, as Proxy holders and attorneys, with
full power of substitution, to appear and vote all the Common Shares and Class B
Common Shares of INVACARE CORPORATION, which the undersigned shall be entitled
to vote at the Annual Meeting of Shareholders of the Company, to be held at the
Lorain County Community College, Stocker Center, 1005 North Abbe Road, Elyria,
Ohio on Thursday, May 28, 1998 at 10:00 A.M. (EDT) and at any adjournments
thereof, hereby revoking any and all Proxies heretofore given, and (ii)
authorizes and directs said Proxy holders to vote all the Common Shares and
Class B Common Shares of the Company represented by this Proxy as follows, WITH
THE UNDERSTANDING THAT IF NO DIRECTIONS ARE GIVEN BELOW, SAID SHARES WILL BE
VOTED "FOR" THE ELECTION OF THE FOUR DIRECTORS NOMINATED BY THE BOARD OF
DIRECTORS AND "FOR" PROPOSAL 2 SET FORTH BELOW.
<TABLE>
<S> <C>
(1) ELECTION OF DIRECTORS.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to vote for all nominees listed
(except as marked to the contrary below)
</TABLE>
GERALD B. BLOUCH, FRANCIS J. CALLAHAN, DAN T. MOORE, III, JOSEPH B. RICHEY, II
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME ON THE FOLLOWING LINE.)
- --------------------------------------------------------------------------------
(Continued and to be signed on other side)
<PAGE> 25
DETACH CARD
- --------------------------------------------------------------------------------
(Proxy -- continued from other side)
<TABLE>
<S> <C> <C>
(2) PROPOSAL to approve and adopt an amendment to the Invacare Corporation 1994 Performance Plan to increase the number of
Common Shares reserved for issuance thereunder from 2,000,000 to 3,500,000.
[ ] FOR the Proposal [ ] AGAINST the Proposal [ ] ABSTAIN from the Proposal
(3) In their discretion to act on any other matters which may properly come before the Annual Meeting.
</TABLE>
Dated , 1998
---------------------------
Your signature to the Proxy
form should be exactly the
same as the name imprinted
hereon. Persons signing as
executors, administrators,
trustees or in similar
capacities should so
indicate. For joint
accounts, the name of each
joint owner must be signed.
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE.
