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INVACARE CORPORATION
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
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[GRAPHIC OMITTED][GRAPHIC OMITTED]
Invacare Corporation
One Invacare Way
Elyria, Ohio 44035
April 8, 2004
To the Shareholders of
Invacare Corporation:
This year's Annual Meeting of Shareholders will be held at 10:00 A.M.
(EDT), on Wednesday, May 26, 2004, at the Lorain County Community College,
Spitzer Conference Center, Grand Room, 1005 North Abbe Road, Elyria, Ohio. We
will be reporting on Invacare's activities and you will have an opportunity to
ask questions about its 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,
- - - - - - - - - - - -
A. Malachi Mixon, III
Chairman and Chief
Executive Officer
[GRAPHIC OMITTED][GRAPHIC OMITTED]
Invacare Corporation
Notice of Annual Meeting of Shareholders
To Be Held On May 26, 2004
The Annual Meeting of Shareholders of Invacare Corporation will be held at
the Lorain County Community College, Spitzer Conference Center, Grand Room, 1005
North Abbe Road, Elyria, Ohio on Wednesday, May 26, 2004, at 10:00 A.M. (EDT),
for the following purposes:
1. To elect four directors to the class whose three-year term will expire
in 2007;
2. To ratify the appointment of Ernst & Young LLP as our independent
auditors for our 2004 fiscal year; and
3. To transact any other business as may properly come before the annual
meeting.
Holders of common shares and Class B common shares of record as of the
close of business on Tuesday, April 1, 2004 are entitled to 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,
Douglas A. Neary
Secretary
April 8, 2004
[GRAPHIC OMITTED][GRAPHIC OMITTED]
Invacare Corporation
--------------------
Proxy Statement
For the Annual Meeting of Shareholders
May 26, 2004
--------------------------------------
Why am I receiving these materials?
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Invacare for use at the Annual Meeting of
Shareholders to be held on May 26, 2004 and any adjournments or postponements
that may occur. The time, place and purposes of the annual meeting are set forth
in the Notice of Annual Meeting of Shareholders, which accompanies this proxy
statement. This proxy statement is being mailed to shareholders on or about
April 8, 2004.
Who is paying for this proxy solicitation?
We will pay the expense of soliciting proxies, including the cost of
preparing, assembling and mailing the notice, proxy statement and proxy. In
addition to solicitation of proxies by mail, our directors, officers or
employees, without additional compensation, may make solicitation personally and
by telephone. We may also reimburse brokerage firms, banks and other agents for
the cost of forwarding proxy materials to beneficial owners.
Who is entitled to vote?
Only shareholders of record at the close of business on April 1, 2004, the
record date for the meeting are entitled to receive notice of and to vote at the
annual meeting. On this record date, there were 30,145,714 common shares and
1,112,023 Class B common shares outstanding and entitled to vote.
How many votes do I have?
On each matter to be voted on, you have one vote for each outstanding
common share you own as of April 1, 2004 and ten votes for each outstanding
Class B common share you own as of April 1, 2004.
How do I vote?
If you are a shareholder of record, you can vote in person at the annual
meeting or you can vote by signing and mailing in your proxy card in the
enclosed envelope. If you are a shareholder of record, the proxy holders will
vote your shares based on your directions.
If you sign and return your proxy card, but do not properly direct how your
shares should be voted on a proposal, the proxy holders will vote "FOR"
proposals 1 and 2 and will use their discretion on any other proposals and other
matters that may be brought before the annual meeting.
If you hold common shares through a broker or nominee, you may vote in
person at the annual meeting only if you have obtained a signed proxy from your
broker or nominee giving you the right to vote your shares.
How do I vote my common shares held in the Invacare Retirement Savings Plan?
If you are a participant in the Invacare Retirement Savings Plan, the blue
lined proxy card should be used to vote the number of common shares that you are
entitled to vote under the plan. If you do not vote timely, your shares will not
be counted.
What are the voting recommendations of the Board of Directors?
Our Board of Directors recommends that you vote:
o "For" the election of the four directors to the class whose three-year
term will expire in 2007; and
o "For" ratifying the appointment of Ernst & Young LLP as our
independent auditors for our 2004 fiscal year.
What vote is required to approve each proposal?
Except as otherwise provided by Invacare's amended and restated articles of
incorporation, code of regulations 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. No holder of shares of any class
has cumulative voting rights in the election of directors.
o Election of Directors (Proposal No. 1). The nominees receiving the
greatest number of votes will be elected. A proxy card marked
"Withhold Authority" with respect to the election of one or more
directors will not be voted with respect to the director or directors
indicated. Abstentions and broker non-votes will have no effect on the
election of directors.
o Ratification of Auditors (Proposal No. 2). Ratification of the
appointment of Ernst & Young LLP as our independent auditors requires
the affirmative vote of a majority of the votes cast. A proxy card
marked as "Abstain" with respect to the ratification of the
appointment of Ernst & Young LLP will not be voted, although it will
be counted for purposes of determining the amount of shares entitled
to vote. Accordingly, if you "Abstain" from voting, it will have the
same effect as an "Against" vote. Broker non-votes will have no effect
on the ratification.
What constitutes a quorum?
A quorum of shareholders will be present at the annual meeting if at least
a majority of the aggregate voting power of common shares and Class B common
shares outstanding on the record date are represented, in person or by proxy, at
the annual meeting. On the record date, 41,265,944 votes were outstanding;
therefore, shareholders representing at least 20,632,973 votes will be required
to establish a quorum. Abstentions and broker non-votes will be counted towards
the quorum requirement.
Can I revoke or change my vote after I submit a proxy?
Yes. You can revoke your proxy or change your vote at any time before the
proxy is exercised at the annual meeting. This can be done by either submitting
another properly completed proxy card with a later date, sending a written
notice to our Secretary, or you may attend the annual meeting and vote in
person. You should be aware that simply attending the annual meeting will not
automatically revoke your previously submitted proxy, rather you must notify an
Invacare representative at the annual meeting of your desire to revoke your
proxy and vote in person.
ELECTION OF DIRECTORS
(Proposal No. 1)
At the annual meeting, four directors will be elected to serve a three-year
term until the annual meeting in 2007 or until their successors have been
elected and qualified. Each of the nominees is presently a director and has
indicated their willingness to serve another term as a director if elected. If
any nominee should become unavailable for election, which is not currently
expected, it is intended that the shares represented by the proxy will be voted
for any substitute nominee(s) 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 substitute nominee for any of them.
Nominees for Terms Expiring in 2007
Gerald B. Blouch, 57, has been President and a director of Invacare since
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 of Invacare from May 1990 to May 1993 and Treasurer
of Invacare from March 1991 to May 1993. Mr. Blouch is also a director of
NeuroControl Corporation, Cleveland, Ohio, a privately held company, which
develops and markets electromedical stimulation systems for stroke patients.
John R. Kasich, 51, has been a director since 2001. Mr. Kasich is a
Managing Director of Lehman Brothers' investment banking group. He spent 18
years as a member of the House of Representatives of the United States Congress,
and served as head of the House Budget Committee from 1995 to 2000. He was the
chief architect of the Balanced Budget Act of 1997, which eliminated the federal
budget deficits. As a committee chairman, he was the House's top negotiator with
the White House over details of the plan, setting spending limits for all
federal government agencies and cutting taxes. Mr. Kasich serves as a director
of Instinet Group Inc. (NasdaqNM), New York, New York, an electronic agency
securities broker, and Worthington Industries, Inc. (NYSE), Columbus, Ohio, a
diversified steel processor that focuses on steel processing and metals-related
businesses. Mr. Kasich is also host of "Heartland" on the Fox News Channel.
Dan T. Moore, III, 64, has been a director since 1980. Mr. Moore has been
President of Dan T. Moore Co. since 1979 and is Chairman of two advanced
materials manufacturing companies: Soundwich, Inc. since 1988 and Flow Polymers,
Inc. since 1985. He has been a director of Hawk Corporation (AMEX), Cleveland,
Ohio, a supplier of friction products for brakes, clutches, and transmissions
used in aerospace, industrial and specialty applications, since 1989 and is a
director of Park-Ohio Industries Inc., a wholly owned subsidiary of Park-Ohio
Holdings Corp (Nasdaq), Cleveland, Ohio, a provider of supply chain logistics
and a manufacturer of engineered products. Mr. Moore is also a Trustee of the
Cleveland Clinic Foundation.
Joseph B. Richey, II, 67, has been a director since 1980. Mr. Richey has
been President-Invacare Technologies and Senior Vice President-Electronic and
Design Engineering since 1992. Previously, Mr. Richey was Senior Vice
President-Product Development from 1984 to 1992, and 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 (NYSE), Cleveland,
Ohio, a manufacturer and distributor of medical sterilizing equipment, Chairman
of the Board of Directors and CEO of NeuroControl Corporation, Cleveland, Ohio,
a privately held company, which develops and markets electromedical stimulation
systems for stroke patients, is a member of the Board of Trustees for Case
Western Reserve University and The Cleveland Clinic Foundation.
Invacare's Board of Directors recommends that shareholders vote "FOR" the
election of the four directors to the class whose three-year term will expire
in 2007.
Directors Whose Terms Will Expire in 2006
James C. Boland, 64, has been a director since 1998. Mr. Boland served as
President and Chief Executive Officer of CAVS/Gund Arena Company (the Cleveland
Cavaliers, a professional team, and Gund Arena) from January 1998 to December
31, 2002, at which time he became Vice-Chairman of the company. Before his
retirement from Ernst & Young LLP in 1998, Mr. Boland served for 22 years as a
partner of Ernst & Young in various roles, including Vice Chairman and Regional
Managing Partner, as well as a member of the firm's Management Committee from
1988 to 1996, and as Vice Chairman of National Accounts from 1997 to his
retirement. Mr. Boland is a director of The Sherwin-Williams Company (NYSE),
Cleveland, Ohio, a manufacturer and distributor of coatings and related
products, The Goodyear Tire & Rubber Company (NYSE), Akron, Ohio, one of the
world's leading manufacturers of tires and rubber products, International Steel
Group, Inc. (NYSE), Cleveland, Ohio, a manufacturer and distributor of
diversified steel products, and is a Trustee of Bluecoats, Inc. and The Harvard
Business School Club of Cleveland.
Whitney Evans, 67, has been a director since 1980. From 1980 to the
present, Mr. Evans has been a private investor. From 1998 to 2000, Mr. Evans was
a director of Victory Technology, Inc. and was Chairman of its Board of
Directors. Victory Technology, Inc. was an Internet based distance learning
company based in Sonoma, California. From 1983 to 1997, Mr. Evans was an officer
and a director of Pine Tree Investments, Inc., Cleveland, Ohio, a business and
real estate investment firm.
William M. Weber, 64, has been a director since 1988. In 1994, Mr. Weber
became President of Roundcap L.L.C. and a principal of Roundwood Capital 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.
Directors Whose Terms Will Expire in 2005
Michael F. Delaney, 54, has been a director since 1986. Since 1983, Mr.
Delaney has been the Associate Director of Development of the Paralyzed Veterans
of America, Washington, D.C. In October 2003, Mr. Delaney's title changed to
Development Officer, Corporate Marketing.
C. Martin Harris, M.D., 47, has been a director since being elected by the
Board of Directors in January 2003. Since 1996, Dr. Harris has been the Chief
Information Officer and Chairman of the Information Technology Division of The
Cleveland Clinic Foundation in Cleveland, Ohio and a Staff Physician for The
Cleveland Clinic Hospital and The Cleveland Clinic Foundation Department of
General Internal Medicine. Additionally since 2000, he has been Executive
Director of e-Cleveland Clinic, a series of e-health clinical programs offered
over the Internet. Nationally, Dr. Harris serves as the Chairman of the National
Health Information Infrastructure (NHII) Task Force of the Healthcare
Information and Management Systems Society (HIMSS), the largest information and
management systems society in the world. He is also the Chairman of the
Foundation Board for the e-Health Initiative, a public policy and advocacy group
that encourages the interoperability of information technology in healthcare.
Dr. Harris is a director of CareScience, Inc. (Nasdaq), Philadelphia,
Pennsylvania, a provider of care management services.
Bernadine P. Healy, M.D., 58, has been a director since 1996. Dr. Healy has
been a Medical and Health Columnist for U.S. News & World Report since October
2002. She has served on The President's Council of Advisors on Science and
Technology (PCAST) since 2001, and was appointed to the Ohio Commission to
Reform Medicaid in 2003. Dr. Healy was President and CEO, American Red Cross
from September 1999 to December 2001. From 1995 to August 1999, Dr. Healy served
as 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 Ashland,
Inc. (NYSE), Covington, Kentucky, a company in specialized petroleum products;
The Progressive Corporation (NYSE), Cleveland, Ohio, an automobile insurance
company; and National City Corporation (NYSE), Cleveland, Ohio, a financial
holding company with assets over $100 billion, providing a full range of banking
and financial services. Dr. Healy also has been a Medical Contributor for CBS
News.
A. Malachi Mixon, III, 62, has been a director since 1979. Mr. Mixon has
been Chief Executive Officer since 1979 and Chairman of the Board since 1983 and
also served as President until 1996, when Gerald B. Blouch, Chief Operating
Officer, was elected President. Mr. Mixon serves as a director of The Lamson &
Sessions Co. (NYSE), Cleveland, Ohio, a supplier of engineered thermoplastic
products, and The Sherwin-Williams Company (NYSE), Cleveland, Ohio, a
manufacturer and distributor of coatings and related products. 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.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal No. 2)
The Audit Committee has appointed Ernst & Young LLP to continue as our
independent auditors to audit our financial statements for the year ended
December 31, 2004. The Audit Committee and the Board of Directors are asking you
to approve this appointment. During the year ended December 31, 2003, Ernst &
Young LLP served as our principal auditors and provided tax and other services.
See "Independent Auditors." Representatives of Ernst & Young LLP are expected to
be present at the annual meeting and will have an opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
Invacare's Board of Directors recommends that shareholders vote "FOR" the
ratification and appointment of Ernst & Young LLP as our independent auditors.
SHARE OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
Who are the largest holders of Invacare's outstanding common shares and total
voting power?
The following table shows, as of February 27, 2004, the share ownership of
each person or group known by Invacare to beneficially own more than 5% of
either class of shares of Invacare:
Class B
Common Shares Common Shares
Beneficially owned Beneficially owned*
---------------------- ---------------------
Percentage of
Number Number total voting power
Name and business address of of beneficially
of beneficial owner Shares Percentage shares Percentage owned
------------------------------ ------ ---------- ------ ---------- -----
A. Malachi Mixon, III 2,187,297 6.8% 703,912 63.3% 21.4%
One Invacare Way,
Elyria, Ohio 44035 (1)
Joseph B. Richey, II 822,219 2.6% 376,262 33.8% 10.9%
One Invacare Way,
Elyria, Ohio 44035 (2)
Ariel Capital Management, Inc. 6,712,387 21.7% - - 16.0%
200 E. Randolph Dr, Suite 2900,
Chicago, IL 60601 (3)(4)
FMR Corp. 1,926,600 6.2% - - 4.6%
82 Devonshire Street,
Boston, MA 02109 (3)(5)
AXA Financial, Inc. 1,904,712 6.2% - - 4.5%
1290 Avenue of the Americas
New York, NY 10104 (3)(6)
* 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. In addition, Invacare may not issue any additional
Class B common shares unless the issuance is in connection with share
dividends on, or share splits of, Class B common shares.
(1) Includes 1,109,325 common shares that may be acquired upon the exercise of
stock options during the 60 days following February 27, 2004. For purposes
of calculating the percentage of outstanding common shares beneficially
owned by Mr. Mixon and his percentage of total shares beneficially owned,
the common shares which he had the right to acquire during that period by
exercise of stock options are considered to be outstanding. The number of
shares shown as beneficially owned by Mr. Mixon also includes (i) 18,410
common shares owned by the trustee for Invacare Retirement Savings Plan,
(ii) 206,336 common shares owned of record by Mr. Mixon's spouse, (iii)
27,316 common shares owned by Roundwood Capital, L.P., a limited
partnership of which Mr. Mixon is a managing member of its general partner,
(iv) 24,576 common shares owned by the trustee for a 1997 grantor retained
annuity trust created by Mr. Mixon, (v) 24,577 common shares owned by the
trustee for a 1997 grantor retained annuity trust created by Mr. Mixon's
spouse, (vi) 127,812 common shares owned by the trustee for a 2003 grantor
retained annuity trust created by Mr. Mixon, and (vii) 127,812 common
shares owned by the trustee for a 2003 grantor retained annuity trust
created by Mr. Mixon's spouse. The reporting person disclaims beneficial
ownership of the shares held by the grantor retained annuity trusts created
by the reporting person's spouse. Mr. Mixon disclaims beneficial ownership
of those shares.
(2) Includes 181,600 common shares, which may be acquired upon the exercise of
stock options during the 60 days following February 27, 2004. For purposes
of calculating the percentage of outstanding common shares beneficially
owned by Mr. Richey and his percentage of total shares beneficially owned,
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 number of common shares beneficially owned is based upon a Schedule 13G
filed by the holder to reflect share ownership as of December 31, 2003.
(4) The Schedule 13G was filed by Ariel Capital Management, Inc., which has
sole voting power with respect to 5,642,075 of the 6,712,387 common shares
held, and sole dispositive power with respect to 6,710,767 of the 6,712,387
common shares held.
(5) The Schedule 13G was filed by FMR Corp., which has sole voting power with
respect to 51,000 of the 1,926,600 common shares held, and sole dispositive
power with respect to all 1,926,600 of the common shares held.
(6) The Schedule 13G was filed by AXA Financial, Inc., which has sole voting
power with respect to 1,254,785 of the 1,904,712 common shares held, and
sole dispositive power with respect to 804,412 of the 1,904,712 common
shares held.
How much common shares and total voting power is held by Invacare's directors
and executive officers?
The following table sets forth, as of February 27, 2004, the share
ownership of all directors, each of the five highest paying executive officers
and all directors and executive officers as a group:
Common Shares Class B Common Shares
beneficially owned beneficially owned**
---------------------- ----------------------
Percentage of
total voting power
Number Number beneficially
Name of beneficial owner of shares Percentage of shares Percentage owned
------------------------ --------- ---------- --------- ---------- -----
Gerald B. Blouch (3).................. 521,912 1.7% - - 1.2%
James C. Boland (3)................... 32,561 * - - *
Michael F. Delaney (3)................ 16,566 * - - *
Whitney Evans (3)..................... 40,990 * - - *
C. Martin Harris, M.D. (3)............ 4,836 * - - *
Bernadine P. Healy, M.D. (3)......... 35,748 * - - *
John R. Kasich (3).................... 16,973 * - - *
A. Malachi Mixon, III (1)............. 2,187,297 6.8% 703,912 63.3% 21.4%
Dan T. Moore, III (3)................. 176,283 * - - *
Joseph B. Richey, II (2).............. 822,219 2.6% 376,262 33.8% 10.9%
Louis F.J. Slangen (3)................ 136,047 * - - *
Gregory C. Thompson (3)............... 30,222 * - - *
William M. Weber (3).................. 89,713 * - - *
All executive officers and Directors
as a group (17 persons) (3)........... 4,174,987 12.7% 1,080,174 97.1% 34.0%
* Less than 1%.
** 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. In addition, Invacare may not issue any additional
Class B common shares unless the 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) The common shares beneficially owned by Invacare's executive officers and
directors as a group include an aggregate of 2,021,557 common shares, which
may be acquired upon the exercise of stock options during the 60 days
following February 27, 2004. For purposes of calculating the percentage of
outstanding common shares beneficially owned by each of Invacare's
executive officers and directors, and all of them as a group, and their
percentage of total shares beneficially owned, common shares which they had
the right to acquire by exercise of stock options within 60 days of
February 27, 2004, are considered to be outstanding. The number of common
shares that may be acquired by the exercise of such stock options for the
noted individuals is as follows: Mr. Blouch, 425,725 shares; Mr. Boland,
31,561 shares; Mr. Delaney, 5,566 shares; Mr. Evans, 13,799 shares; Dr.
Harris, 4,836 shares; Dr. Healy, 30,748 shares; Mr. Kasich, 16,973 shares;
Mr. Moore, 16,024 shares; Mr. Slangen, 104,800 shares; Mr. Thompson, 20,500
shares; and Mr. Weber, 3,750 shares.
Section 16(a) Beneficial Ownership Reporting Compliance
The rules of the SEC require us to disclose late filings of reports of
stock ownership, and changes in stock ownership, by our directors and executive
officers. To the best of Invacare's knowledge, all of the filings were made on a
timely basis in 2003, except for the twelve monthly purchases of 6,497 phantom
common shares by Mr. Richey during 2003 pursuant to a right to defer
compensation under the 401(k) Benefit Equalization Plus Plan, all of which were
reported on a Form 5, dated December 31, 2003; and the sale of 15,000 common
shares on January 23, 2002 and the gifting of 150 common shares on December 27,
2002 by William M. Weber, all of which were reported on a Form 5, dated December
31, 2003.
CORPORATE GOVERNANCE
How many times did the Board meet in 2003?
The Board of Directors held four meetings during the fiscal year ended
December 31, 2003. Each director attended at least 75% of the aggregate of (1)
the total number of meetings of the Board of Directors held during the period he
or she served as a director and (2) the total number of meetings held by
committees of the Board on which he or she served, except for Dr. Harris who
attended two-thirds of the Investment Committee meetings. Board members are
expected to attend Invacare's annual meeting of shareholders, and each director
attended last year's annual shareholder meeting. The independent directors meet
in executive sessions after the end of each of the regularly scheduled Board
meetings. The chairpersons of the four standing committees of the Board will
rotate presiding over such sessions.
Who are the current members of the different Board committees?
----------------------------------------------------------------------------------------------------------------
Compensation,
Audit Management Development and Nominating Investment
Director Committee Corporate Governance Committee Committee Committee
---------------------------- --------- ------------------------------ ---------- ----------
Gerald B. Blouch
James C. Boland * **
Michael F. Delaney *
Whitney Evans * **
C. Martin Harris, M.D. *
Bernadine P. Healy, M.D. * **
John R. Kasich *
A. Malachi Mixon, III
Dan T. Moore, III * *
Joseph B. Richey, II
William M. Weber ** * *
----------------------------------------------------------------------------------------------------------------
* Member
** Chairperson
What are the principal functions of the Board committees?
The Board has an Audit Committee; a Compensation, Management Development
and Corporate Governance Committee; a Nominating Committee; and an Investment
Committee.
Audit Committee. The Audit Committee assists the Board in monitoring (i)
Invacare's compliance with legal and regulatory requirements, (ii) the integrity
of Invacare's financial statements, and (iii) the independence, performance and
qualifications of Invacare's internal and independent auditors. The specific
functions and responsibilities of the Audit Committee are set forth in the Audit
Committee Charter adopted by the Board of Directors, a copy of which is attached
to this proxy statement as Appendix A and is available at www.invacare.com by
clicking on the link for Investor Relations. The Audit Committee met eight times
during 2003.
Our Board has determined that each member of the Audit Committee satisfies
the current independence standards of the New York Stock Exchange listing
standards and Section 10A(m)(3) of the Securities Exchange Act of 1934, as
amended. The Board also has determined that each of James C. Boland and William
M. Weber qualify as an "audit committee financial expert" as that term is
defined in Item 401(h) of Regulation S-K. As audit committee financial experts,
each of Messrs. Boland and Weber satisfy the New York Stock Exchange accounting
and financial management expertise requirements.
Compensation, Management Development and Corporate Governance Committee.
The Compensation, Management Development and Corporate Governance Committee
assists the Board in developing and implementing (i) executive compensation
programs that are fair and equitable and that are effective in the recruitment,
retention and motivation of executive talent required to successfully meet
Invacare's strategic objectives, (ii) a management succession plan that meets
Invacare's present and future needs, and (iii) Invacare's corporate governance
policies and guidelines. Each of the current members of the Compensation,
Management Development and Corporate Governance Committee is independent within
the meaning of the New York Stock Exchange listing standards and Invacare's
Corporate Governance Guidelines. The Board of Directors has adopted a charter
for the Compensation, Management Development and Corporate Governance Committee,
which is available at www.invacare.com by clicking on the link for Investor
Relations. The Committee met three times during 2003.
Nominating Committee. The Nominating Committee assists the Board in
identifying and recommending individuals qualified to become directors and will
consider all qualified nominees recommended by shareholders. William M. Weber
replaced A. Malachi Mixon, III as a member in March 2004. Each of the current
members of the Nominating Committee is independent within the meaning of the New
York Stock Exchange listing standards and Invacare's Corporate Governance
Guidelines. The Board of Directors has adopted a charter for the Nominating
Committee, which is available at www.invacare.com by clicking on the link for
Investor Relations. The Nominating Committee met once during 2003.
Investment Committee. The Investment Committee assists the Board in
monitoring the investments of the Invacare Retirement Savings Plan and other
plans designated by the Board or the Investment Committee. Each of the current
members of the Investment Committee is independent within the meaning of the New
York Stock Exchange listing standards and Invacare's Corporate Governance
Guidelines. The Board of Directors has adopted a charter for the Investment
Committee, which is available at www.invacare.com by clicking on the link for
Investor Relations. The Investment Committee met three times during 2003.
How does the Board determine whether non-employee directors are independent?
The Board examined the transactions and relationships between Invacare and
its affiliates and each of the directors, any of their immediate family members
and their affiliates. Based on this review, the Board affirmatively determined
that each of the non-employee directors are independent and do not have any
direct or indirect material relationship with Invacare pursuant to the
categorical standards set forth in Invacare's Corporate Governance Guidelines.
The Corporate Governance Guidelines adopted by the Board, which is available at
www.invacare.com by clicking on the link for Investor Relations, meet or exceed
the independence requirements set forth in the New York Stock Exchange listing
standards
How are proposed director nominees identified, evaluated and recommended for
nomination?
The Nominating Committee will seek candidates for an open director position
by soliciting suggestions from Committee members, the Chairman of the Board,
incumbent directors, senior management or others. The Committee also may retain
a third-party executive search firm to identify candidates from time to time.
Additionally, the Committee will consider any unsolicited recommendation for a
potential candidate to the Board from Committee members, the Chairman of the
Board, other Board members, management and shareholders. The Committee will
accept shareholder recommendations regarding potential candidates for the Board,
provided that shareholders send their recommendations to the Chairperson of the
Committee, c/o Executive Officers, Invacare Corporation, One Invacare Way,
Elyria, Ohio 44036, with the following information:
o The name and contact information for the candidate;
o A brief biographical description of the candidate, including his or
her employment for at least the last five years, educational history,
and a statement that describes the candidate's qualifications to serve
as a director;
o A statement describing any relationship between the candidate and the
nominating shareholder, and between the candidate and any employee,
director, customer, supplier, vendor or competitor of Invacare; and
o The candidate's signed consent to be a candidate and to serve as a
director if nominated and elected, including being named in Invacare's
proxy statement.
Once the Nominating Committee has identified a prospective candidate, the
Committee makes a determination whether to conduct a full evaluation of the
candidate. This initial determination is based primarily on the Board's need to
fill a vacancy or desire to expand the size of the Board as well as the
likelihood that the candidate can meet the Nominating Committee's evaluation
criteria set forth below, as well as compliance with all other legal and
regulatory requirements. The Nominating Committee will rely on public
information about a candidate, personal knowledge of any committee or Board
member or member of management regarding the candidate, as well as any
information submitted to the Committee by the person recommending a candidate
for consideration. The Nominating Committee, after consultation with the
Chairman of the Board, will decide whether additional consideration of the
candidate is warranted.
If additional consideration is warranted, the Nominating Committee may
request the candidate to complete a questionnaire that seeks additional
information about the candidate's independence, qualifications, experience and
other information that may assist the Committee in evaluating the candidate. The
Committee may interview the candidate in person or by telephone and also may ask
the candidate to meet with senior management. The Committee then evaluates the
candidate against the standards and qualifications set out in the Nominating
Committee's charter. Additionally, the Nominating Committee shall consider other
relevant factors as it deems appropriate (including independence issues and
familial or related party relationships).
Before nominating an existing director for re-election at an annual
meeting, the Committee will consider:
o The director's value to the Board; and
o Whether the director's re-election would be consistent with Invacare's
governance guidelines.
After completing the Nominating Committee's evaluation of new candidates or
existing directors whose term is expiring, if the Committee believes the
candidate would be a valuable addition to the Board or the existing director is
a valued member of the Board, then the Nominating Committee will make a
recommendation to the full Board that such candidate or existing director should
be nominated by the Board. The Board will be responsible for making the final
determination regarding prospective nominees after considering the
recommendation of the Committee.
How can shareholders communicate with the Board?
Shareholders may communicate their concerns directly to the entire Board or
specifically to non-management directors of the Board. Such communications may
be confidential or anonymous, if so designated, and may be submitted in writing
to the following address: Shareholder Communication, c/o Executive Offices,
Invacare Corporation, One Invacare Way, Elyria, Ohio 44036. The status of all
outstanding concerns addressed to the entire Board or only to non-management
directors will be reported to the Chairman of the Board or to the chair of the
Audit Committee, respectively, on a quarterly basis.
How are directors compensated?
Non-employee directors are paid a $30,000 annual retainer, $2,000 per Board
meeting attended and $1,500 per committee meeting attended, or $2,000 per
committee meeting for the committee chairperson. If a committee meets via
teleconference, they receive half of the normal committee attendance fee. The
Chairman of the Audit Committee receives an additional retainer of $20,000 per
year.
Directors are eligible to defer compensation payable by Invacare for their
services as a director under the Invacare Corporation 1994 Performance Plan. Mr.
Boland deferred $41,000, Mr. Delaney deferred $3,600, Mr. Evans deferred
$19,500, Dr. Healy deferred $37,500 and Mr. Kasich deferred $36,000 of their
2003 compensation and as a result each was issued stock options at a 25%
discount based on the 1994 Plan. In addition, all non-employee directors
received stock option grants to acquire up to 2,000 shares vesting over a
four-year term.
Certain Relationships and Related Transactions
During 2003, Invacare 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 Mr. Mixon and Mr. Richey. Invacare paid
approximately $413,000 to the charter company for use of the aircraft owned by
Mr. Mixon and Mr. Richey. Invacare believes that the prices and terms charged
are no less favorable than those, which could be obtained from unrelated
parties.
Invacare has an investment in NeuroControl Corporation, a privately held
company that develops and markets electromedical stimulation systems for stroke
patients in Cleveland, Ohio. Invacare loaned an additional $1,625,000 to
NeuroControl in 2003. Mr. Richey is the Chairman of the Board and Chief
Executive Officer, Mr. Blouch serves as a director and various directors and
executive officers have minority equity investments in NeuroControl.
AUDIT COMMITTEE AND RELATED MATTERS
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent the Company
specifically incorporates this Report by reference therein.
Report of the Audit Committee
The Audit Committee assists the Board of Directors in its oversight and
monitoring of:
o the Company's compliance with legal and regulatory requirements;
o the integrity of the Company's financial statements; and
o the independence, performance and qualifications of the Company's
internal and independent auditors.
The Audit Committee's activities are governed by a written charter adopted
by the Board of Directors which is attached to this proxy statement as Appendix
A and is available on the Company's website (www.invacare.com) by clicking on
the link for Investor Relations.
Each member of the Audit Committee satisfies the independence requirements
set forth in the New York Stock Exchange listing standards and Rule 10A-3 of the
Securities Exchange Act of 1934, as amended.
Management has the primary responsibility for the Company's financial
statements and the reporting process, including the system of internal
disclosure and controls. Ernst & Young LLP, the Company's independent auditors
for 2003, audited the annual financial statements prepared by management and
expressed an opinion on the conformity of those financial statements with
accounting principles generally accepted in the United States.
As part of its oversight responsibilities, the Audit Committee met and held
discussions with management, with Ernst & Young LLP and with
PricewaterhouseCoopers LLP. Management represented to the Audit Committee that
the Company's financial statements were prepared in accordance with accounting
principles generally accepted in the United States, and the Audit Committee
reviewed and discussed the audited financial statements with management and
Ernst & Young LLP, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of specific
judgments and the clarity of disclosures in the financial statements. The Audit
Committee also discussed with Ernst & Young LLP such other matters as are
required to be discussed with the Audit Committee by Statement on Auditing
Standards No. 61, as amended by Statement on Auditing Standards No. 90,
(Communication with Audit Committees).
In addition, Ernst & Young LLP provided to the Audit Committee the written
disclosures and letter required by Independence Standards Board Standard No. 1
(Independence Discussions With Audit Committees), related to the auditors'
independence. The Audit Committee discussed with Ernst & Young LLP their
independence from the Company and its management and considered the
compatibility of non-audit services with the auditors' independence.
In December 2002, management established an internal audit function for the
Company. The Company engaged PricewaterhouseCoopers LLP to conduct internal
audit services and report its analyses, findings and recommendations directly to
the Audit Committee. The Audit Committee met with PricewaterhouseCoopers LLP and
Ernst & Young LLP, with and without management present, to discuss their
examinations, their continuing evaluation of the Company's internal and
disclosure controls and the overall quality of the Company's internal procedures
and controls over financial reporting.
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors, and the Board of Directors has approved,
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2003 for filing with the Securities
and Exchange Commission.
The Audit Committee has appointed Ernst & Young LLP as the Company's
independent auditors for its 2004 fiscal year and the Company is seeking
ratification for such appointment at the 2004 Annual Meeting of Shareholders.
AUDIT COMMITTEE
William M. Weber, Chairman
James C. Boland
Dan T. Moore, III
Independent Auditors
The Audit Committee and the Board of Directors have selected Ernst & Young
LLP to continue as independent auditors to audit the financial statements of
Invacare for the fiscal year ending December 31, 2004. The Audit Committee is
asking you to approve this appointment. Fees for services rendered by Ernst &
Young L.L.P. were:
2003 2002
--------- ---------
Audit Fees $1,399,000 $1,043,000
Audit-Related Fees 89,000 47,000
Tax Fees
Tax Compliance Services 538,000 382,000
Tax Advisory Services 614,000 785,000
--------- ---------
1,152,000 1,167,000
All Other Fees
- -
--------- ---------
Total $2,640,000 $2,257,000
========== ==========
Audit Fees. Fees for audit services include fees associated with the audit
of our annual financial statements and review of quarterly statements, including
statutory audits required domestically and internationally. Audit fees also
include fees associated with consents, assistance with and review of documents
filed with the SEC; other services in connection with statutory and regulatory
filings or engagements, as well as accounting consultations billed as audit
consultations and other accounting and financial reporting consultation and
research work necessary to comply with generally accepted auditing standards.
Audit-Related Fees. Audit-related services principally include accounting
consultations, audits in connection with proposed or completed acquisitions, and
advisory and assistance with implementation of Sarbanes-Oxley Act Section 404
internal control reporting requirements.
Tax Fees. Fees for tax services include tax compliance, tax advice and tax
planning.
Pre-Approval Policies and Procedures
The Audit Committee has adopted a policy that requires advance approval for
all audit, audit-related, tax services, and other services performed by the
independent auditor. The policy provides for pre-approval by the Audit Committee
of specifically defined audit and non-audit services. Unless the specific
service has been previously pre-approved with respect to that year, the Audit
Committee must approve the permitted service before the independent auditor is
engaged to perform it. The Audit Committee has delegated to the Chairperson of
the Audit Committee authority to approve certain permitted services, provided
that the Chairperson reports any such decisions to the Audit Committee at its
next scheduled meeting.
EXECUTIVE COMPENSATION
The following Report on Executive Compensation and the performance graph
included elsewhere in this proxy statement do not constitute soliciting material
and should not be deemed filed or incorporated by reference into any other
Company filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent the Company specifically
incorporates this Report or the performance graph by reference therein.
Report of the Compensation, Management Development and
Corporate Governance Committee on Executive Compensation
The Compensation, Management Development and Corporate Governance Committee
of the Board of Directors 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 pursuant to such plans.
Each of the current members of the Committee meets the definitions of (i)
"independent" within the meaning of the New York Stock Exchange listing
standards, (ii) a "non-employee director" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, and (iii) an
"outside director" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended.
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 2003 compensation of the Company's Chief Executive Officer and
other executive officers.
The Committee has determined that the Company, as a performance-driven
business, should reward outstanding financial results with superior
compensation. The Committee's strategy for carrying out this philosophy is to
attempt to link executive compensation with the Company's financial performance,
while including stock ownership as a key part of executive compensation. 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. The Committee relies on its independent consultant to
identify a representative group of potentially competitive employers. In
determining this group of surveyed 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 that 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. The data is then reviewed and
adjusted for the scope of the position within the Company as compared to the
equivalent responsibilities of the survey data.
The Committee also considers 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 per share. In addition, long-term compensation is
awarded in the form of stock options, restricted stock grants or in other forms
deemed appropriate by the Committee in order to provide key executives with
competitive financial benefits, to the extent that shareholder value is
enhanced.
Annual Base Salary. Since 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 surveyed employers for executives having similar
responsibilities. The Committee receives annual survey information from the
independent consultant and also reviews annual recommendations from the 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, as well as consideration of potential future contributions.
A determination also is 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,
earnings per share, return on assets and return on net assets employed.
Operating objectives vary for each executive and typically 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 2003 base salaries were based on the subjective judgment of the
Committee taking into account the CEO's input regarding each executive's
achievement of applicable 2002 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, generally were slightly above the targeted range.
In determining the CEO's base salary for 2003, the Committee took into
account the survey results regarding a 50th percentile salary range of chief
executive officers at comparable employers, as well as the financial performance
objectives described above. The Committee noted that, under the CEO's
leadership, key manufacturing consolidation occurred in the United States,
Europe, and Australia in the past few years. For instance, in order to compete
with cheap foreign imports, the Company recently accelerated various initiatives
(including internal manufacturing capabilities) to source certain standard
products in China. These activities have allowed the Company to grow market
share and extend current product lines, complement existing businesses, utilize
its distribution strength, streamline operations and expand its geographic
presence. Additionally, the CEO has backed a strong commitment to reenergize the
Company's research and development activities. As a direct benefit of this
increased commitment, the Company successfully introduced a number of new and/or
improved products into the marketplace in 2003. The CEO continued his role as
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 policy changes. Progress also was 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. This
includes his leadership role in identifying strategic initiatives that need to
be accelerated to keep the Company competitive and recognizing the costs and
benefits associated with these initiatives. The Committee noted that the CEO's
continuing commitment to enhance the Company's brand recognition with several
initiatives, including the multi-faceted program featuring Arnold Palmer as the
Company's spokesperson. Additionally, the CEO has assumed a proactive role in
addressing corporate governance issues presented by the Sarbanes-Oxley Act of
2002 and the newly revised New York Stock Exchange listing standards. These
accomplishments and consideration of potential future contributions resulted in
the CEO's base salary at the targeted 50th percentile salary range.
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 surveyed 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 or slightly exceed the
75th market percentile if targeted earnings per share objectives are achieved,
but with unlimited potential. During this process, the Committee also may
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 per share at which
target bonuses will be earned. Under normal conditions, no bonuses are payable
if earnings per share before unusual or non-recurring charges does not improve
over the prior year and bonuses increase on a linear basis if earnings per share
exceeds the targeted level. Targeted earnings per share before unusual items is
generally set at a level which the Committee believes is challenging but
achievable, and when achieved, the executives are deserving of compensation at
the 75th market percentile. Net sales and earnings per share reached new records
in 2003 and internal targets established for the year were exceeded. As a
result, bonuses were paid to the key executives for 2003 and the total cash
compensation paid for 2003 was slightly above the targeted 75th market
percentile as determined by the Committee.
The CEO's annual cash bonus was targeted to approximate the 75th percentile
of total cash compensation paid to chief executive officers by surveyed
employers if the Company's earnings per share objective set by the Committee was
achieved. In determining the level of total cash compensation to be targeted for
the CEO in 2003, the Committee took into account the same factors and events
described above under "Annual Base Salary." The CEO received a cash bonus for
2003 of 100% of his base salary because of the Company's record performance and
given that the internal targets were achieved.
Survey data from the independent consultant indicates that the Company's
annual executive bonuses as a percent of net income at target levels remain
competitive with comparable employers with comparable performance.
Long-Term Compensation Program. The Company's long-term compensation
program is based on the award of stock options and selective restricted stock
awards, as well as other forms of stock and performance-based incentives deemed
appropriate by the Committee. Total long-term compensation is targeted at
approximately the 75th percentile for long-term compensation by surveyed
employers but with unlimited potential based on the performance of Invacare's
stock. Stock options generally are issued as non-qualified options under the
Invacare Corporation 2003 Performance Plan, are granted at market price, vest in
accordance with a schedule established by the Committee (generally over four
years) and expire after ten 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 stock compensation proposed for each
executive officer also may be affected by the factors previously described in
establishing base salaries. The stock compensation 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 the stock compensation as
reflected by a valuation formula recommended by the independent consultant. The
stock compensation granted to each executive in 2003 was based on the subjective
judgment of the Committee, taking into account the CEO's comments regarding the
executive's achievement of the applicable 2002 objectives (as described above
under "Annual Base Salary") and the targeted range for long-term compensation.
No particular weight was assigned to any one objective. Outstanding stock
compensation held by an executive officer is generally not considered when the
Committee determines the new stock compensation to be granted. Utilizing the
valuation formula recommended by the Company's independent consultant, the stock
compensation 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 stock compensation to the CEO in 2003 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.
The Company made stock compensation grants (either in the form of stock
options or restricted stock) in March and August of 2003 with respect to
long-term compensation payable with respect to 2003.
In March 2000, the Committee approved a special stock option grant to the
CEO. The grant vests over four years depending upon the completion of specific
goals related to succession planning. During 2003, the Committee determined that
the established goals had been met to allow the third year's vesting.
Other Matters. Section 162(m) of the Internal Revenue Code generally
provides that certain compensation in excess of $1 million per year paid to a
public company's chief executive officer and any of its four other highest paid
executive officers is not deductible to the company unless the compensation
qualifies for an exception. Section 162(m) provides an exception to the
deductibility limit for performance-based compensation if certain procedural
requirements, including shareholder approval of the material terms of the
performance goal, are satisfied. The Committee believes that grants of stock
options under the Company's long-term compensation plans qualify for full
deductibility under Section 162(m). Restricted stock grants and certain cash
bonus awards paid to key executive officers may not qualify for the exception
for performance-based compensation. At this time, based upon the Company's
current compensation structure, the Committee believes that it is in the best
interests of the Company and its shareholders for the Committee to retain
flexibility in awarding incentive compensation in the form of restricted stock
grants and cash bonus awards that may not qualify for the exception for
performance-based compensation. The Committee will continue to review and
evaluate, as necessary, the impact of Section 162(m) on the Company and intends
to make a determination with respect to this issue on an annual basis.
COMPENSATION, MANAGEMENT DEVELOPMENT AND
CORPORATE GOVERNANCE COMMITTEE
James C. Boland, Chairman
Whitney Evans
Bernadine P. Healy, M.D.
William M. Weber
Summary Compensation Table
The table below shows the annual and long-term compensation for services in
all capacities to Invacare of the Chief Executive Officer and the four other
most highly compensated executive officers of Invacare.
-------------------------------- ------------------------------------------- -----------------------------------------
Annual Compensation Long-Term Compensation
-------------------------------- ------------------------------------------- -----------------------------------------
Other
Annual Restricted All Other
Compen- Securities Stock Compen-
Name and Salary Bonus sation ($) Underlying Awards ($) sation ($)
Principal Position Year ($) ($) (1) Options (#) (2) (3)
-------------------------------- ------- ---------- ---------- ------------- ------------- -------------- ------------
-------------------------------- ------- ---------- ---------- ------------- ------------- -------------- ------------
A. Malachi Mixon, III 2003 948,000 948,000 16,078 137,900 455,907 635,102
Chairman and Chief 2002 903,000 - 15,590 122,400 430,124 366,471
Executive Officer 2001 860,000 - - 112,800 461,198 379,913
Gerald B. Blouch 2003 585,833 557,650 11,244 58,700 282,213 45,187
President and 2002 559,000 - 39,504 55,000 266,072 117,284
Chief Operating Officer 2001 532,000 - - 50,600 284,544 141,168
Joseph B. Richey, II 2003 369,000 276,750 14,273 15,400 - 26,368
President-Invacare 2002 355,000 - 43,587 17,000 - 42,660
Technologies and Senior 2001 341,000 - - 15,800 - 60,043
Vice President-Electronic
& Design Engineering
Louis F.J. Slangen 2003 327,600 245,700 31,910 21,500 - 24,720
Senior Vice President - 2002 315,000 - 11,572 21,800 84,650 63,649
Sales and Marketing 2001 300,000 - - 20,000 - 69,921
Gregory C. Thompson, 2003 315,000 236,250 57,529 28,800 159,038 69,012
Senior Vice President & 2002 78,500 - - 82,000 150,420 263
Chief Financial Officer
-------------------------------- ------- ---------- ---------- ------------- ------------- -------------- ------------
(1) Amount for Mr. Thompson includes $47,387 in moving expenses.
(2) As described under "Compensation, Management Development and Corporate
Governance Committee Report on Executive Compensation," Invacare granted
28,894 restricted stock awards on March 12, 2003 that related to special
long-term compensation. The awards of 14,683 shares to Mr. Mixon, 9,089
shares to Mr. Blouch and 5,122 shares to Mr. Thompson vest 25% annually,
beginning March 31, 2004, and dividends accrue based on the total shares
awarded as of the date granted. The value of the restricted awards is equal
to the amounts disclosed above and is based on the stock price on the date
of grant. At the end of last year, restricted stock awards held were:
30,045 for Mr. Mixon, 18,582 for Mr. Blouch, 2,500 for Mr. Slangen and
8,572 for Mr. Thompson.
(3) Includes: (a) Invacare contributions in the amount of $12,000 for Mr.
Mixon, Mr. Blouch, Mr. Richey, Mr. Slangen and Mr. Thompson under the
Invacare Retirement Savings Plan, a defined contribution plan; (b) Invacare
contributions of: $44,430 for Mr. Mixon, $19,941 for Mr. Blouch, $10,000
for Mr. Richey, $7,530 for Mr. Slangen and $2,300 for Mr. Thompson, under
Invacare's 401(k) Plus Benefit Equalization Plan, a defined contribution
plan; (c) the dollar value of compensatory life insurance benefits, under
Invacare's Executive Life Insurance Plan, in the amounts of $4,799 for Mr.
Blouch, $2,340 for Mr. Richey, $1,953 for Mr. Slangen and $54,712 for Mr.
Thompson (Mr. Mixon is not covered by a split-dollar life insurance
benefit); (d) payments by Invacare, related to premiums under Invacare's
Executive Disability Income Plan, in the amounts of $8,447 for Mr. Blouch,
$2,028 for Mr. Richey and $3,237 for Mr. Slangen, (Mr. Mixon and Mr.
Thompson do not participate in Invacare's Executive Disability Income
Plan); (e) payment by Invacare for the premium of a life insurance policy
for Mr. Mixon amounting to $3,564; (f) payment by Invacare for the premium
of a disability insurance policy for Mr. Mixon amounting to $7,730; (g)
vested portion of Invacare's one-time contribution for Mr. Mixon for his
non-participation in the Executive Life Insurance Plan since its inception
equal to $567,378.
Equity Compensation Plan Information
The following table provides information as of December 31, 2003 about our
common shares that may be issued upon the exercise of options, warrants and
rights granted under all of our existing equity compensation plans, including
the Invacare Corporation 2003 Performance Plan, the Invacare Corporation 1994
Performance Plan and the 1992 Non-Employee Directors Stock Option Plan.
------------------------------------ ------------------------ --------------------- --------------------------------
Number of securities Weighted-average Number of securities remaining
to be issued upon exercise price of available for future issuance
exercise of outstanding under equity compensation
outstanding options, options, warrants plans (excluding securities
Plan Category warrants and rights and rights reflected in column(a))
(a) (b) (c)
------------------------------------ ------------------------ --------------------- --------------------------------
Equity compensation plans approved
by security holders 4,518,890 $27.34 1,670,600 (1)
------------------------------------ ------------------------ --------------------- --------------------------------
Equity compensation plans not
approved by security holders 17,271 (2) -- --
------------------------------------ ------------------------ --------------------- --------------------------------
Total 4,536,161 $27.34 1,670,600
------------------------------------ ------------------------ --------------------- --------------------------------
(1) Represents shares available under the Invacare Corporation 2003 Performance
Plan except for 21,800 common shares remaining available under the Invacare
Corporation 1994 Performance Plan, which can be granted at an exercise
price less than market value. The Invacare Corporation 2003 Performance
Plan allows for the granting of no more than 300,000 shares at an exercise
price of zero and no more than 200,000 shares at an exercise price of not
less than 75% of the market value on the date the option is granted.
(2) Represents phantom share units in the Invacare Corporation 401(k) Plus
Benefit Equalization Plan.
The Invacare Corporation 401(k) Plus Benefit Equalization Plan, created in
March of 1994, is a non-qualified contributory savings plan for highly
compensated associates. The program is offered to allow participants to defer
compensation above the amount allowed in the Invacare Retirement Savings Plan,
our qualified retirement plan, and provides the ability for additional pre-tax
savings opportunities.
In addition to individual deferrals, Invacare provides a matching
contribution and a quarterly contribution. The 401(k) Plus Plan works in tandem
with the Invacare Retirement Savings Plan, in that funds may be transferred to
the qualified plan on an annual basis, as determined by IRS limitations.
Participants may allocate contributions among an array of funds, including
Invacare common shares, representing a full range of risk/return profiles.
The earnings in the deferral accounts are based on the net earnings of the
underlying fund. Thus participant accounts are credited with hypothetical
appreciation, depreciation and dividends. Participants do not have any direct
interest or ownership of the funds. Participant's contributions are always 100%
vested in the plan and employer contributions vest according to a 5 year
graduated scale. All distributions from the plan are in the form of cash.
Option Grants In Last Fiscal Year
The following table shows, for the Chief Executive Officer and the four
other most highly compensated executive officers, the stock options granted in
2003, which were granted under the Invacare Corporation 1994 and 2003
Performance Plans.
----------------------------------------------------------------------------------- ------------------------------------
Individual Grants
-----------------------------------------------------------------------------------
Number % of Total
of Options Exercise
Securities Granted to Price Potential Realizable Value
Underlying Employees (2) at Assumed Annual Rates
Options in Fiscal ($ per Expiration of Share Price Appreciation
Name Granted (1)(#) Year Share) Date for Option Term (3)
-------------------------- --------------- ------------- ----------- ------------- -------------------------------------
-------------------------- --------------- ------------- ----------- ------------- -------------------------------------
5% ($) 10%($)
-------------------------- --------------- ------------- ----------- ------------- -------------------------------------
A. Malachi Mixon, III 137,900 21.0% 37.70 8/20/13 3,270,000 8,286,000
Gerald B. Blouch 58,700 8.9% 37.70 8/20/13 1,392,000 3,527,000
Joseph B. Richey, II 15,400 2.3% 37.70 8/20/13 365,000 925,000
Louis F.J. Slangen 21,500 3.3% 37.70 8/20/13 510,000 1,292,000
Gregory C. Thompson 28,800 4.4% 37.70 8/20/13 683,000 1,730,000
All Shareholders (4) N/A N/A N/A N/A 724,200,000 1,874,200,000
-------------------------- --------------- ------------- ----------- ------------- ---------------- -- -----------------
(1) Options become 100% exercisable on September 30, 2007 and vest over four
years at a rate of 25% per year, commencing in 2004.
(2) The exercise price is equal to the fair market value of Invacare's common
shares as of the date of grant.
(3) Potential Realizable Value is based on assumed annual growth rates for the
10-year term of the option. The assumed rates of 5% and 10% are set by the
SEC and are not intended to be a forecast of Invacare's common share price
and are not necessarily indicative of the actual values, which may be
realized by the above executive officers or shareholders. Actual gains, if
any, on stock options exercised are dependent on the actual performance of
the stock.
(4) The potential gain realizable by all shareholders (based on 29,968,913
common shares and 1,112,023 Class B common shares outstanding at the
exercise price of $37.70 per share as of the grant date of August 20, 2003)
at 5% and 10% assumed annual growth rates over a term of 10 years is
provided as a comparison to the potential gain realizable by each of the
above 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 $61.00 per share at an assumed 5% annual
growth rate and would appreciate to approximately $98.00 at an assumed 10%
annual growth rate.
Each of the options issued under Invacare's stock option plans includes a
provision which provides that the option shall become immediately exercisable,
unless stated otherwise in the option agreements, upon the commencement of a
tender offer for Invacare's common shares or at any time within 90 days before a
dissolution, liquidation or certain mergers or consolidations of Invacare. Upon
the occurrence of the merger or consolidation, the option may be adjusted or
amended as the Compensation, Management Development and Corporate Governance
Committee of the Board of Directors deems appropriate and equitable. Under the
terms of Invacare's stock option plans, the Committee also may grant reload
options under any circumstances as it deems appropriate.
Option Exercises And Year-End Value Table
The table below shows information with respect to options exercised by, and
the value of unexercised options under Invacare's stock option plans for the
Chief Executive Officer and the four other most highly compensated executive
officers.
--------------------------------------------------------------------------------------------------------------------
Aggregated Option Exercises in 2003 and Option Value at Year-End 2003
--------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised In-the-
Number of Underlying Unexercised Money Options at
Shares Value Options at 12/31/03 (#) 12/31/03 (2) ($)
Acquired on Realized ------------------------- ----------------------------
Name Exercise (#) (1) ($) Exercisable Unexercisable Exercisable Unexercisable
-------------------------- --------------- ------------ ------------ ------------- ----------- ----------------
A. Malachi Mixon, III 48,600 1,335,771 1,109,325 383,925 18,570,345 2,716,918
Gerald B. Blouch 41,000 958,435 425,725 241,075 7,078,246 2,428,805
Joseph B. Richey, II 22,400 424,592 203,400 41,300 3,653,296 226,045
Louis F.J. Slangen - - 128,800 53,100 2,036,857 271,051
Gregory C. Thompson - - 20,500 90,300 157,235 548,601
--------------------------- ------------- -------------- ------------ ------------- ----------- ----------------
(1) Represents the difference between the option exercise price and the
closing price of the common shares on the NYSE on the date of
exercise.
(2) The "Value of Unexercised In-the-Money Options at 12/31/03" is equal
to the difference between the option exercise price and the closing
price of $40.37 of a common share on the NYSE on December 31, 2003.
Pension Plans
We have established a Supplemental Executive Retirement Plan (SERP) for
certain executive officers to supplement other savings plans offered by Invacare
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. The maximum benefit is 50% at 15 years of service. This annual benefit
is reduced by the annual value of Invacare contributions to the qualified
Invacare Retirement Savings Plan, Invacare contributions to the nonqualified
Invacare Corporation 401(k) Plus Benefit Equalization Plan, and one-half of the
annual Social Security benefit plus other offsets.
This plan is a nonqualified plan and thus, the benefits accrued under this
plan are subject to the claims of our general creditors if Invacare were to file
for bankruptcy. The benefits will be paid (1) from an irrevocable grantor trust
funded from our general funds or (2) directly from our general funds.
The following table reflects the estimated annual single-life annuity
payment, without reductions for applicable offsets, payable to a participant
retiring in 2003 at age 65.
Pension Table
---------------------------- ---------------------------------------
Years of Service (2)(3)(4)
------------ ------------- ------------
Remuneration (1) 5 10 15
---------------------------- ------------ ------------- ------------
$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
---------------------------- ------------ ------------- ------------
(1) Remuneration for purposes of calculating pension benefit based on
final base salary and target bonus.
(2) These pension benefits represent annual single-life annuity values. As
of December 31, 2003, the current years of service credited are 23 for
Mr. Mixon, 14 for Mr. Blouch, 19 for Mr. Richey, 16 for Mr. Slangen
and 6 for Mr. Thompson.
(3) Mr. Blouch and Mr. Slangen were granted the maximum level (50%) of
replacement compensation in recognition of valuable service to
Invacare.
(4) Mr. Mixon's offset will be waived for successful management succession
planning and to recognize past contributions to Invacare.
Employment, Severance and Change in Control Agreements
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, Invacare has entered into severance pay agreements with key
executives, including each of our five highest compensated officers. In the
event there is a change of control of Invacare and a key executive is terminated
without cause or resigns for good reason (as those terms are defined) during the
three year period following a change of control under the conditions set forth
in the agreements, the executive will receive, in addition to accrued salary,
bonus and vacation pay, the following:
(1) a lump sum severance benefit equal to three times annual base salary
plus the executive's target bonus less any retention bonus paid to the
executive for being employed on the first anniversary after a change
in control;
(2) continued participation in Invacare's employee welfare benefit plans,
certain perquisites and other benefit arrangements for a period of
three years following termination or resignation; and
(3) 401(k), 401(k) Plus, profit sharing and retirement benefits (including
under the SERP) so that the total retirement benefits received will be
equal to the retirement benefits which would have been received had
the executive's employment with Invacare continued, assuming maximum
compensation and contributions, during the three year period following
termination; and an additional amount which will offset, on an
after-tax basis, the effect of any excise tax which the executive is
subject to under Section 4999 of the Internal Revenue Code relating to
his receipt of "excess parachute payments."
The salary and other benefits provided by the severance pay agreements will
be payable from Invacare's general funds. Invacare has agreed to reimburse the
executives for any legal expense incurred in the enforcement of their rights
under the severance pay agreements.
In October 2002, Invacare entered into a separate severance protection
agreement with Mr. Blouch as an additional incentive to retain and motivate him
as a key employee. The agreement provides that upon Mr. Blouch's termination by
Invacare other than for cause or good reason, Mr. Blouch shall be entitled to
the following amounts and benefits:
(1) compensation equal to three times the amount of his then applicable
annual base salary to be paid in three equal annual installments;
(2) 75% of his target bonus for the year in which employment ends to be
paid in three equal annual installments;
(3) any then-outstanding stock option grant or award shall immediately
vest in full as of the date of termination of employment, unless
stated otherwise in the option agreement; and
(4) the exercise period of any unexercised stock option shall be extended
until the earlier of two years after the date of termination of
employment or expiration of the option, unless stated otherwise in the
option agreement. In addition, Mr. Blouch may exercise any options by
means of a cashless exercise program, so long as (a) the program is
legally allowed, and (b) Invacare is not required to recognize
additional compensation expense as a result of the exercise. This
agreement has been filed as Exhibit 10(o) to our 2003 Annual Report on
Form 10-K.
Other Arrangements. Each of our five highest compensated executive officers
are included in the Invacare Retirement Savings Plan. Invacare makes matching
cash contributions up to 66.7% of employees' contributions up to a maximum of 3%
of such employee's compensation, makes quarterly contributions based upon 4% of
qualified wages and may make discretionary contributions to the domestic plans
based on an annual resolution by the Board. As described previously, Invacare
sponsors a non-qualified 401(k) Plus Benefit Equalization Plan covering our
executive officers, which provides for employee elective deferrals and company
retirement deferrals so that the total retirement deferrals equal amounts that
would have been contributed to Invacare's principal retirement plans if it were
not for limitations imposed by income tax regulations. Furthermore, Invacare
sponsors a non-qualified defined benefit Supplemental Executive Retirement Plan
(SERP) for such executive officers. The SERP is a non-qualified plan that
provides retirement income to supplement income available from Invacare's
qualified plans and to supplement the 401(k) Plus Plan, as further described
above under "Pension Plans." The target retirement benefit under the SERP is 50%
of final compensation, excluding certain enumerated offsets. The SERP also
provides a change of control benefit that accelerates vesting and service ratios
to allow maximum benefits to SERP participants, subject to certain offsets set
forth in the SERP.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation, Management Development and
Corporate Governance Committee of the Board of Directors are James C. Boland,
Whitney Evans, Bernadine P. Healy, M.D. and William M. Weber. There were no
Compensation, Management Development and Corporate Governance Committee
interlocks or insider participation activities in 2003.
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the yearly cumulative total return on
Invacare's common shares against the yearly cumulative total return of the
companies listed on the Standard & Poor's 500 Stock Index, the Russell 2000
Stock Index and the S&P Supercomposite Health Care Equipment & Supplies Index
(S&P Healthcare Index*).
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Invacare 100 84 143 141 140 169
S&P 500 100 119 107 94 72 92
Russell 2000 100 120 114 116 91 133
S&P Healthcare Index 100 94 135 131 113 149
[GRAPHIC OMITTED]
* The S&P Supercomposite Health Care Equipment & Supplies Index is a
capitalization-weighted average index comprised of health care companies in
the S&P 1500 Index. This index contains companies that are affected by many
of the same health care trends as Invacare.
The above graph assumes $100 invested on December 31, 1998 in the common
shares of Invacare Corporation, S&P 500 Index, Russell 2000 Index and the S&P
Supercomposite Health Care Equipment & Supplies Index, including reinvestment of
dividends, through December 31, 2003.
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 based
on their best judgment on any other matters unless instructed to do otherwise.
Any shareholder who wishes to submit a proposal for inclusion in the proxy
material to be distributed by Invacare in connection with its annual meeting of
shareholders to be held in 2005 must do so no later than December 9, 2004. To be
eligible for inclusion in our 2005 proxy material, proposals must conform to the
requirements of Regulation 14A under the Securities Exchange Act of 1934, as
amended.
Unless we receive a notice of a shareholder proposal to be brought before
the 2005 annual meeting by February 22, 2005, then Invacare may vote all proxies
in their discretion with respect to any shareholder proposal properly brought
before such annual meeting.
Upon the receipt of a written request from any shareholder, Invacare
will mail, at no charge to the shareholder, a copy of Invacare's 2003
Annual Report on Form 10-K, including the financial statements and
schedules required to be filed with the Securities and Exchange
Commission ,for Invacare's most recent fiscal year. Written requests
for any Reports 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,
Douglas A. Neary
Secretary
Appendix A
[GRAPHIC OMITTED][GRAPHIC OMITTED]
INVACARE CORPORATION
Charter of the Audit Committee of the Board of Directors
(As Adopted March 11, 2004)
Mission
The Audit Committee (the "Committee") shall assist the Board of Directors
(the "Board") of Invacare Corporation (the "Company") in monitoring (i) the
Company's compliance with legal and regulatory requirements, (ii) the integrity
of the Company's financial statements, and (iii) the independence, performance
and qualifications of the Company's internal and independent auditors.
The Committee shall prepare the report or other information required by the
rules of the Securities and Exchange Commission (the "SEC") or by other
applicable laws, rules or regulations to be included in the Company's annual
proxy statement.
Membership
The Committee members shall be appointed by the Board. The Committee shall
be comprised of at least three (3) members. Each member of the Committee shall
meet the then-applicable New York Stock Exchange independence and financial
literacy requirements and other relevant laws, rules or regulations, in each
case, when, as and to the extent applicable to the Company. Additionally, at
least one Committee member, as determined by the Board, must be an "audit
committee financial expert" as defined by the SEC.
The Committee members shall serve at the pleasure of the Board, until they
resign, are replaced or until their successors are elected. A Committee
Chairperson shall be elected annually by the Board. A quorum shall consist of a
majority of the members of the Committee.
If a Committee member simultaneously serves on the audit committee of more
than three publicly-traded companies, then, in each case, the Board must
determine that such simultaneous service would not impair the ability of such
member to effectively serve on the Committee. Such determination shall be
disclosed in the Company's annual proxy statement.
Meetings
The Committee shall meet as often as it determines to be necessary or
appropriate. The Chairperson shall preside at each meeting and, in the absence
of the Chairperson, one of the other members of the Committee shall be
designated as the acting chair of the meeting.
All meetings of the Committee shall be held pursuant to the Code of
Regulations of the Company with regard to notice and waiver thereof, and written
minutes of each meeting, in the form approved by the Committee or its
Chairperson, shall be duly filed in the Company records. Members of the
Committee may participate in any meeting of the Committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
Any action which may be taken at a meeting of the Committee may be taken
without a meeting if authorized by a writing or writings signed unanimously by
all of the members of the Committee. The Committee may request any officer of
the Company, or any representative of the Company's advisors, to attend all or a
portion of any Committee meeting or to meet with any member or representative of
the Committee.
Responsibilities and Authority
General Responsibilities and Authority
1. The Committee shall hold at least four (4) regular meetings per year,
timed to allow for review of quarterly financial results. The Committee shall
hold as many total meetings per year as its members feel are appropriate to
fulfill the Committee's responsibilities. Periodically, the Committee also shall
meet separately with each of management, the internal auditors and the
independent auditors.
2. The Committee shall report regularly to the Board, including on issues
related to the quality or integrity of financial statements and related portions
of periodic reports filed with the SEC, legal and regulatory compliance and
performance, and independence and qualifications of internal and independent
auditors.
3. The Committee shall have direct access to, and complete and open
communication with, the Company's senior management and internal and independent
auditors. The Company's independent auditors shall report directly to the
Committee and be ultimately accountable to the Board and the Committee.
4. The Committee shall have the sole authority and responsibility to
select, evaluate, retain and where appropriate, terminate the independent
auditors. The Committee shall be responsible for all oversight of the
independent auditors, including the resolution of disagreements between
management and the independent auditors. The Committee shall consult with
management in the discharge of its duties, but shall not delegate such duties to
management.
5. The Committee shall pre-approve all audit, review or attest engagements
and all permitted non-audit services provided by the Company's independent
auditors, subject to certain de minimus exceptions provided by law or
regulation, and subject to the pre-approval policies and procedures, if any, for
permitted non-audit services, which shall be disclosed in applicable Company
filings made with the SEC. The authority to pre-approve audit, review and attest
engagements and permitted non-audit services may be delegated to one or more
independent Committee members, so long as such delegee presents his or her
discussions at each scheduled meeting of the Committee.
6. The Committee shall establish procedures for the receipt, retention and
treatment of complaints regarding accounting, internal accounting controls or
auditing matters and the confidential, anonymous submission by employees of
concerns regarding questionable accounting or auditing matters.
7. The Committee shall have the authority, without seeking approval from
the Board, to retain and authorize the compensation of special legal, accounting
or other advisors (including, for example, investment bankers or financial
analysts), as it deems necessary, to assist in fulfilling its responsibilities
and discharging its duties.
8. The Company shall provide appropriate funding, as determined by the
Committee, for payment of compensation to the independent auditors for the
purpose of their rendering or issuing an audit report or performing other audit,
review or attest services, and to any advisors employed by the Committee, as
well as ordinary administrative expenses of the Committee.
9. The Committee shall annually review the Committee's own performance. The
Committee also shall periodically review and assess the adequacy of this Charter
and recommend any appropriate changes to this Charter to the Board.
Specific Responsibilities and Authority
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or
determine that the Company's financial statements and disclosures are complete
and accurate or are in accordance with generally accepted accounting principles
("GAAP") and applicable rules and regulations. These are the responsibilities of
management and the independent auditors. The Committee's responsibility is one
of oversight. The following will be the common recurring activities of the
Committee in carrying out its oversight function. These activities are set forth
as a guide with the understanding that the Committee may diverge from this guide
as it deems necessary or appropriate under the circumstances to the extent
permitted by applicable laws, rules or regulations.
Financial Statements and Disclosure Matters
1. Review and discuss with management and the independent auditors the
Company's annual audited financial statements and related significant financial
reporting matters, including Management Discussion & Analysis, and judgments and
estimates made in preparing such financial statements. Discuss the quality of
the Company's significant accounting policies and estimates and clarity of
disclosures. Recommend to the Board the acceptance and inclusion of the annual
audited financial statements in the Company's Annual Report on Form 10-K, based
on its review and discussions of the audited financial statements required
hereby, its discussion with the independent auditors of the matters required to
be discussed by Statement on Auditing Standards 61, "Communications with Audit
Committees," and its review and discussion of the auditor's statement on its
independence from, and relationships with, the Company as required by
Independence Standards Board Standard No. 1.
2. Review and discuss with management and the independent auditors the
Company's quarterly financial statements and Management Discussion & Analysis
prior to the filing of its Form 10-Q, including the results of the independent
auditors' reviews of the quarterly financial statements.
3. Review and discuss with management the Company's earnings press
releases, including the use of "pro forma" or "adjusted" non-GAAP information,
as well as financial information and earnings guidance provided to analysts and
rating agencies. (This discussion may be done generally, i.e., discussion of the
types of information to be disclosed and the type of presentations to be made,
and the Committee need not discuss each earnings release in advance or each
instance in which the Company may provide earnings guidelines.)
4. Discuss with management the Company's guidelines and policies to govern
the process of risk assessment and risk management, including major financial
risk exposures and the steps management has taken to monitor and control such
exposures.
5. Review and discuss with the Company's chief legal officer legal
disclosure and legal matters that have a material impact on the financial
statements and policies, including annual or bi-annual review of letters to
management or the independent auditors from counsel to the Company that were
solicited in connection with the preparation of the Company's audited financial
statements.
6. Review and discuss with management and the independent auditors any
correspondence with regulators or governmental agencies which raises material
issues regarding the Company's financial statements or accounting policies.
7. Review and discuss with the independent auditors any audit problems or
difficulties and management's response thereto, including (a) restrictions on
the scope of the auditors' activities, (b) access to requested information, (c)
significant disagreements with management, (d) adjustments noted by auditors but
not taken by management, (e) communications between the independent audit team
and its national office relating to significant auditing or accounting issues
encountered in its work for the Company, (f) management or internal control
letters issued or proposed to be issued, and (g) responsibilities, budget and
staffing of the internal audit function.
8. Review and discuss, including with management and the independent
auditors, as appropriate, major issues regarding accounting principles and
financial statement presentations, including any significant changes in the
Company's selection of accounting policies or application of accounting
principles, and major issues as to the adequacy of the Company's internal
controls and any special audit steps adopted in light of material control
deficiencies.
9. Review and discuss, including with management and the independent
auditors, as appropriate, the effect of regulatory and accounting initiatives,
as well as off-balance sheet structures on the financial statements of the
Company.
10. Review and discuss, including with management and the independent
auditors, as appropriate, the Company's internal audit staff or outsourced
internal audit function, including: (i) purpose, authority and organizational
reporting lines; (ii) annual audit plan, budget and staffing; and (iii)
concurrence in the appointment, compensation, and rotation of the senior
internal audit staff personnel or outsourced internal auditor; and (iv) the
Company's internal system of audit and financial controls and the results of
internal audits.
Oversight of the Company's Relationship with the Independent Auditors
1. Obtain and review a report from the independent auditors at least
annually regarding (a) the auditor's internal quality-control procedures, (b)
any material issues raised by the most recent quality-control review, or peer
review, of the auditors, or by inquiry or investigation by governmental or
professional authorities within the preceding five (5) years respecting one or
more independent audits carried out by the auditors, (c) any steps taken to deal
with any such issues and (d) in order to assess the auditor's independence, all
relationships between the auditors and the Company.
2. Discuss with the independent auditors the independent auditors'
independence and any relationships or services that may impact the objectivity
and independence of the independent auditors. Consider the compatibility of any
non-audit services provided by the independent auditors with that firm's
independence. Recommend that the Board take appropriate action in response to
the independent auditors' report to satisfy itself of the independent auditors'
independence.
3. Obtain and review timely reports from the independent auditors regarding
(i) all critical accounting policies and practices to be used, (ii) all
alternative treatments within GAAP of policies and practices related to material
items that have been discussed with management, ramifications of the use of such
alternatives, and the treatment preferred by the independent auditors and (iii)
other material written communications between the independent auditors and
management, such as any management letter or schedule of unadjusted differences.
4. The Committee's evaluation of the independent auditors shall include an
evaluation of the experience and qualifications of the senior members of the
independent auditors' team, including the lead partner. This evaluation should
take into account the opinions of management and the internal auditors. The
Committee also shall ensure that the lead partner and the concurring partner of
the independent auditor are replaced at least once every five years and other
applicable partners working on the Company's account are rotated periodically in
compliance with all applicable laws, rules and regulations.
5. The Committee shall review and present its conclusions regarding
independent auditor qualifications, independence and performance (and, if
applicable, its conclusions regarding auditor rotation) to the Board at least
annually.
Company Personnel
1. The Committee shall establish hiring policies for the Company's hiring
of employees or former employees of the independent auditors who were engaged on
the Company's account (including past and present members of the audit
engagement team) and ensure that all such hiring policies comply with all
applicable laws, rules and regulations. The Committee shall consider how such
policies affect the auditors' independence.
2. The Committee shall review the appointment and replacement of the
Company's senior internal auditing executive, to the extent the Company employs
its own personnel to fulfill that function.
Annual Review
The Committee shall annually review and evaluate its own performance in
carrying out its responsibilities hereunder.
INVACARE CORPORATION
PROXY FOR COMMON SHARES AND CLASS B COMMON SHARES
Annual Meeting of Shareholders --- May 26, 2004
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby (i) appoints A. MALACHI MIXON, III, WHITNEY EVANS
and WILLIAM M. WEBER, 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, Spitzer Conference Center, Grand Room, 1005
North Abbe Road, Elyria, Ohio on Wednesday, May 26, 2004 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" each of the other proposals.
(1) ELECTION of Directors each to serve a three year term ending in 2007.
( ) FOR all nominees listed (except as ( ) WITHHOLD AUTHORITY to vote
marked to the contrary below) for all nominees listed
Gerald B. Blouch, John R. Kasich, Dan T. Moore, III and Joseph B. Richey, II
(2) PROPOSAL to ratify appointment of Ernst & Young LLP as Invacare's
independent auditors.
( ) FOR the Proposal ( ) AGAINST the Proposal ( ) ABSTAIN from the Proposal
(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)
(Proxy --- continued from other side)
(3) In their discretion to act on any other matters which may properly
come before the Annual Meeting.
Dated
____________________________ , 2004
------------------------------------------------------------
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.
INVACARE CORPORATION
COMMON SHARES AND CLASS B COMMON SHARES
VOTING INSTRUCTION CARD
Annual Meeting of Shareholders --- May 26, 2004
This Card is solicited on behalf of the trustees of the
Invacare Retirement Savings Plan
The undersigned hereby instructs the trustees of the Invacare Retirement
Savings Plan to vote the Common Shares and Class B Common Shares of INVACARE
CORPORATION which he or she is entitled to vote as a participant in an employee
benefit plan which may be funded by the Invacare Retirement Savings Plan at the
Annual Meeting of Shareholders of the Company, to be held at the Lorain County
Community College, Spitzer Conference Center, Grand Room, 1005 North Abbe Road,
Elyria, Ohio on Wednesday, May 26, 2004 at 10:00 A.M. (EDT) and at any
adjournments thereof. The undersigned authorizes and directs the trustees of the
Invacare Retirement Savings Plan to vote all the Common Shares and Class B
Common Shares of the Company represented by this Card 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" each of the other proposals.
(1) ELECTION of Directors each to serve a three year term ending in 2007.
( ) FOR all nominees listed (except as ( ) WITHHOLD AUTHORITY to vote for
marked to the contrary below) all nominees listed
Gerald B. Blouch, John R. Kasich, Dan T. Moore, III and Joseph B. Richey, II
(2) PROPOSAL to ratify appointment of Ernst & Young LLP as Invacare's
independent auditors.
( ) FOR the Proposal ( ) AGAINST the Proposal ( ) ABSTAIN from the Proposal
(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)
(Proxy --- continued from other side)
(3) In their discretion to act on any other matters which may properly
come before the Annual Meeting.
Dated
____________________________ , 2004
------------------------------------------------------------
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.