One Invacare Way
Elyria, OH 44035
April 11, 2002
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 22, 2002, at the Lorain County Community College,
Spitzer Conference Center, Grand Room, 1005 North Abbe Road, Elyria, Ohio. We
will be reporting on your Company's activities and you will have an opportunity
to ask questions about our operations.
We hope that you are planning to attend the Annual Meeting personally and
we look forward to seeing you. Whether or not you expect to attend in person,
the return of the enclosed Proxy as soon as possible would be greatly
appreciated and will ensure that your shares will be represented at the Annual
Meeting. If you do attend the Annual Meeting, you may, of course, withdraw your
Proxy should you wish to vote in person.
On behalf of the Board of Directors and management of Invacare Corporation,
I would like to thank you for your continued support and confidence.
Sincerely yours,
/S/ A. Malachi Mixon, III
------------------------
A. Malachi Mixon, III
Chairman and Chief
Executive Officer
INVACARE CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 2002
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Invacare
Corporation (the "Company") will be held at the Lorain County Community College,
Spitzer Conference Center, Grand Room, 1005 North Abbe Road, Elyria, Ohio on
Wednesday, May 22, 2002, at 10:00 A.M. (EDT), for the following purposes:
1. To elect three Directors, to the class whose three-year term of office
will expire in 2005 and
2. To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
Holders of Common Shares and Class B Common Shares of record as of the
close of business on Monday, April 1, 2002 are entitled to receive notice of and
vote at the Annual Meeting. It is important that your shares be represented at
the Annual Meeting. For that reason, we ask that you promptly sign, date and
mail the enclosed Proxy card in the return envelope provided. Shareholders who
attend the Annual Meeting may revoke their Proxy and vote in person.
By order of the Board of Directors,
/S/ Thomas R. Miklich
---------------------
Thomas R. Miklich
Secretary
April 11, 2002
INVACARE CORPORATION
PROXY STATEMENT
Mailed on or about April 11, 2002
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 22, 2002
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Invacare Corporation ("Invacare" or the
"Company") for use at the Annual Meeting of Shareholders of the Company to be
held on May 22, 2002 and any adjournments or postponements thereof. The time,
place and purposes of the Annual Meeting are stated in the Notice of Annual
Meeting of Shareholders, which accompanies this Proxy Statement. The expense of
soliciting Proxies, including the cost of preparing, assembling and mailing the
Notice, Proxy Statement and Proxy, will be borne by the Company. In addition to
solicitation of Proxies by mail, solicitation may be made by the Company's
Directors, officers or employees, without additional compensation, personally
and by telephone, and the Company may pay persons holding shares for others
their expenses for sending proxy materials to their principals. No solicitation
will be made other than by Directors, officers and employees of the Company.
Any person giving a Proxy pursuant to this solicitation may revoke it. The
General Corporation Law of Ohio provides that, unless otherwise provided in the
Proxy, a shareholder, without affecting any vote previously taken, may revoke a
Proxy not otherwise revoked by giving notice to the Company in writing or in
open meeting. All validly executed Proxies received by the Board of Directors of
the Company pursuant to this solicitation will be voted at the Annual Meeting,
and the directions contained in such Proxies will be followed in each instance.
If no directions are given, the Proxy will be voted "FOR" the election of the
three nominees listed in the Proxy.
VOTING RIGHTS
At the close of business on April 1, 2002, the Company had 29,717,974
Common Shares, without par value ("Common Shares"), and 1,112,187 Class B Common
Shares, without par value ("Class B Common Shares"), outstanding and entitled to
vote. The holders of the outstanding Common Shares as of April 1, 2002 will be
entitled to one vote for each share held by them, and the holders of the
outstanding Class B Common Shares as of April 1, 2002 will be entitled to ten
votes for each share held by them. Except as otherwise provided by the Company's
Amended and Restated Articles of Incorporation (the "Articles") or required by
law, holders of Common Shares and Class B Common Shares will at all times vote
on all matters, including the election of Directors, together as one class.
Pursuant to the Articles, no holder of shares of any class has cumulative voting
rights in the election of Directors. Only shareholders of record at the close of
business on April 1, 2002 are entitled to notice of and to vote at the Annual
Meeting.
1
SHARE OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
Share ownership of certain beneficial owners. The following table sets
forth, as of February 28, 2002, the share ownership of each person or group
known by the Company to beneficially own more than 5% of either class of shares
of the Company:
Class B
Common Shares Common Shares
beneficially owned beneficially owned*
---------------------- --------------------
Number Number Percentage
Name and business address Of of of total
of beneficial owner Shares Percentage shares Percentage voting power
--------------------------------- ------ ---------- ------ ---------- ------------
A. Malachi Mixon, III (1) 1,472,286 4.8% 703,912 63.3% 19.7%
One Invacare Way, Elyria, Ohio 44035
Joseph B. Richey, II (2) 713,308 2.4% 376,262 33.8% 10.3%
One Invacare Way, Elyria, Ohio 44035
Invacare Corporation Employees' 1,091,772 3.6% - - 2.5%
Stock Bonus Trust and Plan (3)
One Invacare Way, Elyria, Ohio 44035
Ariel Capital Management, Inc. 4,729,650 15.8% - - 10.9%
200 E. Randolph Dr, Suite 2900, Chicago, IL
60601 (4)(5)
FMR Corp. 2,056,890 6.9% - - 4.8%
82 Devonshire Street, Boston, MA 02109 (4)(6)
________
* Pursuant to the Articles, (i) all holders of Class B Common Shares are
entitled to convert any or all of their Class B Common Shares to Common
Shares at any time, on a share-for-share basis, and (ii) the Company may
not issue any additional Class B Common Shares unless such issuance is in
connection with share dividends on, or share splits of, Class B Common
Shares.
(1) Mr. Mixon is Chairman of the Board of Directors and Chief Executive
Officer of the Company. The Common Shares beneficially owned by Mr. Mixon
include 801,118 Common Shares which may be acquired upon the exercise of
stock options during the 60 days following February 28, 2002. For purposes
of calculating the percentage of outstanding Common Shares beneficially
owned by Mr. Mixon and his percentage of total voting power, the Common
Shares which he had the right to acquire during that period by exercise of
stock options are deemed to be outstanding. The number of shares shown as
beneficially owned by Mr. Mixon also includes 5,840 Common Shares held in
the name of Roundwood Capital L.L.P., which represent his ownership
interest in Roundwood Capital L.L.P. The number of shares shown as
beneficially owned by Mr. Mixon does not include 143,185 Common Shares
which have been transferred into two family trusts. The number of shares
shown as beneficially owned by Mr. Mixon also does not include 188,532
Common Shares which have been transferred into two trusts for the benefit
of his two adult children. Mr. Mixon disclaims beneficial ownership of such
shares.
(2) Mr. Richey is President-Invacare Technologies, Senior Vice
President-Electronic and Design Engineering and a Director of the Company.
The Common Shares beneficially owned by Mr. Richey include 185,000 Common
Shares which may be acquired upon the exercise of stock options during the
60 days following February 28, 2002. For purposes of calculating the
percentage of outstanding Common Shares beneficially owned by Mr. Richey
and his percentage of total voting power, the Common Shares which he had
the right to acquire during that period by exercise of stock options are
deemed to be outstanding.
2
(3) The Invacare Corporation Employees' Stock Bonus Trust and Plan (the
"Plan") is an employee benefit plan established and operated as a trust for
the benefit of the Company's employees. Fidelity Investments is the trustee
of the Plan, with Invacare Corporation as Administrator of the Plan. As
such, the shares held by the Plan are voted at the Company's direction.
(4) The number of Common Shares beneficially owned is based upon a Schedule
13G filed to reflect share ownership as of December 31, 2001.
(5) The Schedule 13G was filed by Ariel Capital Management, Inc., which has
sole voting power with respect to 4,469,300 of the 4,729,650 Common Shares
held, and sole dispositive power with respect to all 4,729,650 of the
Common Shares held.
(6) The Schedule 13G was filed FMR Corp., which has sole voting power with
respect to 1,000 of the 2,056,890 Common Shares held, and sole dispositive
power with respect to all 2,056,890 of the Common Shares held.
Share ownership of management. The following table sets forth, as of
February 28, 2002, the share ownership of all Directors, each of the Named
Executive Officers (as defined below) and all Directors and executive officers
as a group:
Common Shares Class B Common Shares
beneficially owned beneficially owned**
---------------------- ----------------------- Percentage
Number Number of total
Name of beneficial owner of shares Percentage of shares Percentage voting power
------------------------ --------- ---------- --------- ---------- ------------
Gerald B. Blouch (4)..................... 379,923 1.3% - - *
James C. Boland (4)...................... 21,084 * - - *
Frank B. Carr (4)........................ 88,127 * - - *
Michael F. Delaney (4)................... 13,477 * - - *
Whitney Evans (4)........................ 38,731 * - - *
Bernadine P. Healy (4)................... 24,626 * - - *
John R. Kasich (4)....................... 4,304 * - - *
Thomas R. Miklich (4).................... 59,606 * - - *
A. Malachi Mixon, III (1)................1,472,286 4.8% 703,912 63.3% 19.7%
Dan T. Moore, III (4).................... 231,652 * - - *
E. P. Nalley (3)(4)...................... 84,310 * - - *
Joseph B. Richey, II (2)................. 713,308 2.4% 376,262 33.8% 10.3%
Louis F.J. Slangen(4).................... 110,320 * - - *
William M. Weber(4)...................... 92,867 * - - *
All executive officers and Directors
as a group(20 persons)(4)................3,529,681 11.1% 1,080,174 97.1% 33.1%
* Less than 1%.
** Pursuant to the Articles, (i) all holders of Class B Common Shares are
entitled to convert any or all of their Class B Common Shares to Common
Shares at any time, on a share-for-share basis, and (ii) the Company may
not issue any additional Class B Common Shares unless such issuance is in
connection with share dividends on, or share splits of, Class B Common
Shares.
(1) See Footnote 1 to the preceding table.
(2) See Footnote 2 to the preceding table.
(3) Mr. Nalley is a Director of the Company. Of the Common Shares listed as
beneficially owned by Mr. Nalley, 83,560 are owned by trusts for the benefit of
Mr. Nalley.
(4) The Common Shares beneficially owned by the Company's executive officers and
Directors as a group include an aggregate of 1,708,850 Common Shares which may
be acquired upon the exercise of stock options during the 60 days following
February 28, 2002. For purposes of calculating the percentage of outstanding
3
Common Shares beneficially owned by the Company's executive officers and
Directors as a group and their percentage of total voting power, Common Shares
which they had the right to acquire during said period by exercise of stock
options are deemed to be outstanding. The number of Common Shares that may be
acquired during such period by the exercise of stock options for the noted
individuals is as follows: Mr. Blouch, 344,250 shares; Mr. Boland, 20,084
shares; Mr. Carr, 4,167 shares; Mr. Delaney, 2,477 shares; Mr. Evans, 7,272
shares; Dr. Healy, 19,626 shares; Mr. Kasich, 4,304 shares; Mr. Miklich, 47,963
shares; Mr. Moore, 11,589 shares; Mr. Nalley, 750 shares; Mr. Slangen, 85,400
shares; and Mr. Weber, 1,500 shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and Directors and persons who own 10%
or more of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "Commission"). Executive officers,
Directors and beneficial holders of more than 10% of the Company's Common Shares
are required by the Commission regulations to furnish the Company with copies of
all Forms 3, 4 and 5 that they file.
Based solely upon the Company's review of the copies of such forms it has
received, the Company believes that all of its executive officers, Directors and
beneficial holders of more than 10% of the Company's Common Shares complied with
all filing requirements applicable to them with respect to transactions during
the fiscal year ended December 31, 2001, except (i) the acquisition of 26,840
Commons Shares and disposal of 13,705 Commons Shares on July 20, 2001 by Gerald
B. Blouch, which was reported on a Form 4 dated September 6, 2001 (ii) the
acquisition of 139,075 Commons Shares and disposal of 19,180 Common Shares on
August 30, 2001 by Thomas R. Miklich, which was reported on a Form 4 dated
October 5, 2001 (iii) the disposal of 3,000 and 10,400 Commons Shares on April
6, 2001 and April 9, 2001 respectively by Dan T. Moore, which was reported on a
Form 4 dated January 8, 2002 (iv) the disposal of 52,016 Commons Shares on March
20, 2001 by E.P. Nalley, which was reported on a Form 5 dated February 6, 2002
(v) the acquisition and disposal of 2,000 Common Shares on April 25, 2001 by
Michael A. Perry, which was reported on a Form 5 dated February 5, 2002 (vi) the
acquisition of 20,800 Commons Shares and disposal of 10,008 Common Shares on
February 22, 2001 by Joseph B. Richey, which was reported on a Form 4 dated
April 4, 2001 and (vii) the disposal of 24,400 Common Shares on May 16, 2000 by
Louis F.J. Slangen, which was reported on a Form 4 dated October 9, 2001.
ELECTION OF DIRECTORS
Under the Company's Code of Regulations, as amended, the authorized number
of Directors of the Company shall be not less than five, nor more than fifteen.
The members of the Company's Board of Directors are divided into three classes
with a term of office of three years, with the term of one class expiring each
year. The size of the Board is currently fixed at twelve, with one vacancy in
the class whose term of office expires in 2004 as a result of the retirement of
Frank B. Carr. At the Annual Meeting, three Directors will be elected to serve a
three-year term until the Annual Meeting in 2005 or until their successors have
been elected and qualified. Under Ohio law and the Articles, the individuals
receiving the greatest number of votes cast at the Annual Meeting will be
elected as Directors of the Company. Accordingly, assuming a quorum exists,
abstentions and broker non-votes will have no effect on the election of
Directors. Holders of shares entitling them to exercise a majority of the voting
power of the Company, present in person or by proxy at the Annual Meeting, will
constitute a quorum for such meetings.
The Proxy holders named in the accompanying Proxy or their substitutes will
vote such Proxy at the Annual Meeting or any adjournments thereof "FOR" the
election of the three nominees for Director as named below, unless the
shareholder provides instruction by marking the appropriate space on the Proxy
that authority to vote is withheld. Each of the nominees, is presently a
4
Director of the Company and has indicated his willingness to serve as a Director
if elected. If any nominee should become unavailable for election (which
contingency is not now contemplated or foreseen), it is intended that the shares
represented by the Proxy will be voted for such substitute nominee as may be
named by the Board of Directors. In no event will the accompanying Proxy be
voted for more than three nominees or for persons other than those named below
and any such substitute nominee for any of them.
Nominees for Election
Name Age Position with the Company
---- --- -------------------------
A. Malachi Mixon, III (3)(4) 61 Chairman, Chief Executive Officer
and a Director
Michael F. Delaney (4) 53 Director
Dr. Bernadine P. Healy (2)(3) 57 Director
Directors Continuing in Office
James C. Boland (2)(5) 62 Director
Whitney Evans (2)(4)(5) 65 Director
E.P. Nalley (4)(5) 82 Director
William M. Weber (1)(2)(5) 62 Director
Gerald B. Blouch (6) 55 President, Chief Operating Officer
and a Director
John R. Kasich (4)(6) 49 Director
Dan T. Moore, III (1)(3)(6) 62 Director
Joseph B. Richey, II (6) 65 President - Invacare Technologies,
Senior Vice President - Electronic
and Design Engineering and a
Director
----------
(1) Member of the Audit Committee.
(2) Member of the Compensation , Management
Development and Corporate Governance Committee.
(3) Member of the Nominating Committee.
(4) Member of the Investment Committee.
(5) Term as Director expires in 2003.
(6) Term as Director expires in 2004.
A. Malachi Mixon, III has been Chief Executive Officer since 1979 and
Chairman of the Board since 1983. Mr. Mixon has been a Director of the Company
since 1979 and also served as President until 1996, when Gerald B. Blouch, the
Company's Chief Operating Officer, was elected President by the Company's Board
of Directors. Mr. Mixon serves as a Director of The Lamson & Sessions Co.
(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.
Michael F. Delaney has been a Director since 1986. From 1983 to the
present, Mr. Delaney has been the Associate Director of Development of the
Paralyzed Veterans of America, Washington, D.C.
Dr. Bernadine P. Healy has been a Director since 1996. 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.
5
Healy is a Trustee of the Battelle Memorial Institute in Columbus, Ohio. Dr.
Healy also serves as a Director of Medtronic, Inc. (NYSE), a producer of cardiac
pacemakers; MBNA Corp, Wilmington, Delaware, a bank and credit card company; and
Ashland, Inc. (NYSE), Covington, Kentucky, a company in specialized petroleum
products. Dr. Healy also has been a Medical Contributor for CBS News.
James C. Boland has been a Director since 1998. Mr. Boland has served as
President and Chief Executive Officer of CAVS/Gund Arena Company (the Cleveland
Cavaliers and the Cleveland Rockers professional teams and Gund Arena) since
January 1998. Prior to his retirement from Ernst & Young 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, and is a Trustee of Leadership Cleveland, the
Great Lakes Science Center, Bluecoats, Inc. and The 50 Club of Cleveland.
Whitney Evans 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 the 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.
E. P. Nalley has been a Director since 1983. From 1987 to 1991 when he
retired, Mr. Nalley was the Company's Senior Vice President - Sales and
Assistant to the President. Mr. Nalley is now a private investor. Mr. Nalley
also serves as a Director of Royal Appliance Manufacturing Co. (NYSE),
Cleveland, Ohio, a manufacturer of vacuum cleaners.
William M. Weber has been a Director since 1988. In 1994, Mr. Weber became
President of Roundcap L.L.C. and a principal of Roundwood Capital L.L.P., a
partnership that invests in public and private companies. From 1968 to 1994, Mr.
Weber was President of Weber, Wood, Medinger, Inc., Cleveland, Ohio, a
commercial real estate brokerage and consulting firm.
Gerald B. Blouch has been President and a Director of the Company 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 the Company from May 1990 to May 1993 and
Treasurer of the Company from March 1991 to May 1993.
John R. Kasich has been a Director since 2001. Mr. Kasich is the 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 also has been a Contributor on the Fox News Channel.
Dan T. Moore, III has been a Director since 1980. Mr. Moore is President of
Dan T. Moore Co. since 1979 and is Chairman of three advanced materials
manufacturing companies: Advanced Ceramics since 1993, Soundwich, Inc. since
1988, and Flow Polymers, Inc. since 1985. He has been a Director of U.S.
Enrichment Corporation (NYSE) since 1998 and Hawk Corporation (NYSE) since 1989.
Mr. Moore is also a Trustee of the Cleveland Clinic Foundation.
Joseph B. Richey, II has been a Director since 1980, and in 1992 was named
President-Invacare Technologies and Senior Vice President-Electronic and Design
Engineering. Previously, Mr. Richey was Senior Vice President-Product
Development from 1984 to 1992, and Senior Vice President and General
6
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, a Director of
Royal Appliance Manufacturing Co. (NYSE), Cleveland, Ohio, a manufacturer of
vacuum cleaners, a Director of Unique Mobility Inc. (AMEX), Golden, Colorado, an
engineering concern and manufacturer of high efficiency permanent magnet motors
and electronic controls, and 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.
INFORMATION REGARDING MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during the fiscal year ended
December 31, 2001. The Board of Directors has an Audit Committee, a Compensation
Committee, a Nominating Committee and an Investment Committee. The Audit
Committee reviews the activities of the Company's independent and internal
auditors and various company policies and practices. The members of the Audit
Committee are Frank B. Carr, Dan T. Moore, III and William M. Weber. Each of the
members of the Audit Committee satisfies the independence and financial literacy
requirements of the New York Stock Exchange. The Audit Committee met three times
during the last fiscal year. The Compensation, Management Development and
Corporate Governance Committee approves the grant of stock options and reviews
and determines the compensation of certain key executives. The Committee met
twice during the last fiscal year. The Nominating Committee recommends
candidates for election as Directors of the Company and will consider all
qualified nominees recommended by shareholders. Such recommendations should be
sent to Bernadine P. Healy, Chairman of the Nominating Committee, Invacare
Corporation, One Invacare Way, P.O. Box 4028, Elyria, Ohio 44036-2125. The
Nominating Committee did not meet during the last fiscal year. The Investment
Committee, which met once during 2001, monitors the status of investments by the
Company's Profit Sharing Plan and investments made by the Company's captive
insurance subsidiary. During the last fiscal year, each Director attended at
least 75%, with the exception of Whitney Evans who attended 67%, of the
aggregate of (i) the total number of meetings of the Board of Directors held
during the period he or she served as a Director and (ii) the total number of
meetings held by Committees of the Board on which he or she served.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for reviewing the Company's existing and proposed executive
compensation plans and making determinations regarding the contents of these
plans and the awards to be made there under. The current members of the
Committee are James C. Boland (Chairman), Whitney Evans, Jr., Dr. Bernadine P.
Healy and William M. Weber, all of whom are non-employee Directors of the
Company.
Set forth below is a discussion of the Company's compensation philosophy,
together with a discussion of the factors considered by the Committee in
determining the 2001 compensation of the Company's Named Executive Officers.
The Committee has determined, as a performance-driven business, that the
Company should reward outstanding financial results with commensurate
compensation. The Committee's strategy for carrying out this philosophy is to
link both annual and long-term executive compensation with the Company's
financial and operating performance. The Committee also recognizes the
importance of maintaining compensation at competitive levels in order to attract
and retain talented executives.
In order to gauge the competitiveness of the Company's executive
compensation levels, the Committee receives market data from an independent
consulting firm regarding executive compensation paid by other companies having
similar annual revenues, as well as larger employers with which the Company must
compete for talent ("Comparable Employers"). The Committee relies on its
independent consultant to identify a representative group of potentially
competitive employers. In determining the group of Comparable Employers, the
independent consultant assembled market data on companies having similar
7
projected revenues, with particular emphasis on durable goods manufacturers. In
addition, larger employers are surveyed, as the Committee believes they are also
significant competitors for executive talent. Thus, the Committee and its
independent consultant believe the Company's most direct competitors for
executive talent are not necessarily the companies that would be included in the
peer group established to compare shareholder returns. The data is then reviewed
and adjusted for the scope of the position within Invacare as compared to the
equivalent responsibilities of the survey data.
The Committee also utilizes recommendations from the consulting firm on
various facets of the Company's executive compensation program. In general, base
salaries are established at market median levels for comparable positions but an
opportunity for significantly higher compensation is provided through annual
cash bonuses. These opportunities are dependent upon material year-to-year
improvement in earnings per share. In addition, long-term compensation is
awarded in the form of stock options 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. Because the Company has determined to link overall
compensation with financial performance, the base salary ranges for its
executives are targeted on an annual basis at approximately the 50th percentile
of ranges established by Comparable Employers for executives having similar
responsibilities. The Committee receives annual survey information from the
independent consultant and also reviews annual recommendations from the Chief
Executive Officer in order to establish appropriate salary levels for each of
the executive officers (other than the CEO). The Committee takes into account
whether each executive met key objectives in both financial and operating
categories, as well as potential future contributions. A determination is also
made as to whether the base salary provides an appropriate reward and incentive
for the executive to sustain and enhance the Company's long-term superior
performance. Important financial performance objectives (some of which may not
be applicable to all executives) include net sales, income from operations, cost
controls, earnings before income tax, earnings per share and return on assets.
Operating objectives vary for each executive and may change from year-to-year.
Financial and operating objectives are considered subjectively in the aggregate
and are not specifically weighted in assessing performance. Increases in 2001
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
2000 operating and financial objectives and the targeted salary ranges as
determined by the market study received from the independent consultant.
Resulting base salaries for the Company's executives, including the CEO, were at
or near the targeted range.
In determining the CEO's base salary for 2001, the Committee took into
account the survey results regarding a 50th percentile salary range of chief
executive officers at Comparable Employers and larger employers who may be
competing for executive talent, as well as the financial performance objectives
described above. The Committee noted that key acquisition activity and
manufacturing consolidation occurred in the United States, Europe, and
Australia, from 1996 through 2000 under the CEO's leadership. These activities
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. The Committee also noted that the
CEO was instrumental in reorganizing the Company in late 2000 to meet the
challenges and opportunities of the current market. 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 change in policy. The Committee noted the initiatives
currently being considered in Washington D.C., due to his efforts. Progress was
also made in meeting the Company's long-term strategic objectives that are set
by management and reviewed by the Board each year. It is the Committee's opinion
that these objectives are a key to the ongoing success of the Company. They also
reflect the CEO's strong understanding of the industry and what is required to
continue to sustain superior financial and operating performance. The Committee
also believes that the CEO has instituted actions that keep the Company's
strategic direction in line with the ever-changing marketplace in which the
Company operates. 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.
8
Specifically, the strong commitment to reenergize the Company's research and
development activities were noted.
Annual Cash Bonus. Consistent with its philosophy that executive
compensation should be linked with the Company's financial performance, the
Committee has determined that annual total cash compensation (salary plus bonus)
should be targeted at the 75th market percentile of Comparable Employers when
the Company meets commensurately challenging financial goals, as previously
outlined, in addition to subjective factors as the Committee deems appropriate.
With the assistance of the independent consultant, the Committee has
determined (and annually reviews) the appropriate bonus targets for each
executive officer (as a percentage of his or her salary) so that annual total
cash compensation for such executive officer will reach the 75th market
percentile if targeted earnings per share objectives are achieved, but with
unlimited potential. During this process, the Committee may also determine that
an executive's performance (taking into account the same factors discussed above
with respect to base salary) and level of responsibilities warrant a change in
the bonus target percentage from the market norm.
Each year, the Committee considers the recommendation from the CEO
regarding the appropriate target for that year's earnings 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.
The CEO's annual cash bonus was targeted to approximate the 75th percentile
of total cash compensation paid to chief executive officers by Comparable
Employers if the 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 2001, the Committee took into account the same factors and events
described above under "Annual Base Salary." Actual earnings per share did not
improve over 2000 and internal targets established for the year were not met.
The total cash compensation paid for 2001, including bonus, were below the
targeted 75th market percentile as determined by the Committee. Since earnings
per share did not increase, no bonuses were paid to the key executives for 2001.
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 as well as other forms deemed
appropriate by the Committee. Total long-term compensation is targeted at
approximately the 75th percentile for long-term compensation by Comparable
Employers but with unlimited potential. Stock options generally are issued as
non-qualified options under the Invacare Corporation 1994 Performance Plan, are
granted at market price, vest in accordance with a schedule established by the
Committee and expire after ten (10) years.
Each year, the Committee determines the appropriate percentage of each
executive's salary which should be targeted as long-term compensation. The
targeted percentage of salary and the stock compensation proposed for each
executive officer may also 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 2001 was based on the subjective
judgment of the Committee, taking into account the CEO's comments regarding the
executive's achievement of the applicable 2000 operating and financial
objectives (as described above under "Annual Base Salary") and the targeted
range for long-term compensation. No particular weight was assigned to any one
operating or financial objective. Outstanding stock compensation held by an
executive officer is generally not considered when the Committee determines the
9
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 2001 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 in March and October of 2001
with respect to long-term compensation payable with respect to 2002.
In March 2000, the Company also made a special stock option grant to the
CEO, COO and CFO. The grants to the COO and CFO vest 100% in 2005 and were made
by the Committee as a retention tool for these executives. The grant to the CEO
vests over four years depending upon the completion of specific goals related to
succession planning. The committee determined that the established goals had
been met to allow the first years vesting.
Other Matters. The Committee believes that all long-term compensation
awarded to key executives in 2001 is "performance-based" and, therefore, will be
deductible notwithstanding Section 162(m) of the Internal Revenue Code of 1986.
However, the Committee has not adopted a policy with respect to whether all
future long-term or other compensation will satisfy the requirements of Section
162(m). The Committee intends to make a determination with respect to this issue
on an annual basis.
The Compensation Committee of the
Board of Directors of Invacare Corporation
James C. Boland, Chairman
Whitney Evans
Dr. Bernadine P. Healy
William M. Weber
10
SHAREHOLDER RETURN PERFORMANCE GRAPHS
The following graph compares the yearly cumulative total return on the
Company's Common Shares against the yearly cumulative total return of the
companies listed on the Standard & Poor's 500 Stock Index, the Russell 2000
Stock Index and the Standard & Poor's Midcap Health Services Index.
[GRAPHIC OMITTED]
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Invacare 100 79 88 73 126 124
S&P 500 100 131 166 198 178 157
Ruessell 2000 100 121 116 139 133 136
MDCARE* 100 91 86 56 96 91
* The Standard & Poor's Midcap Health Services Index is a
capitalization-weighted index that measures the performance of the medical
services sector of the Standard & Poor's Midcap Index. This index contains
companies that are affected by many of the same health care trends as Invacare.
The above graph assumes $100 invested on December 31, 1996 in the Common
Shares of Invacare Corporation, S&P 500 Index, Russell 2000 Index and the S&P
Midcap Health Services Index, including reinvestment of dividends, through
December 31, 2001.
11
COMPENSATION OF EXECUTIVE OFFICERS
The table below shows information for the three years ended December 31,
2001 concerning the annual and long-term compensation for services in all
capacities to the Company of the Chief Executive Officer and the four other most
highly compensated executive officers of the Company (the "Named Executive
Officers") for the year ended December 31, 2001.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
---------------------------------------- -------------------------
Other Restricted All Other
Annual Securities Stock Compen-
Name and Salary Bonus Compen- Underlying Awards ($) sation ($)
Principal Position Year ($) ($) sation ($) Options (#) (2) (1)
-------------------------------- ---- ---------- ------- --------- ------------ ----------- -----------
A. Malachi Mixon, III 2001 860,000 0 - 112,800 461,198 379,913
Chairman and Chief 2000 770,000 760,958 - 391,300 91,532
Executive Officer 1999 700,000 525,000 - 326,100 82,969
Gerald B. Blouch 2001 532,000 0 - 50,600 284,544 141,168
President and 2000 475,000 451,250 - 163,300 156,679
Chief Operating Officer 1999 430,000 306,590 - 139,000 152,481
Thomas R. Miklich, 2001 381,000 0 - 36,300 203,528 85,772
Chief Financial Officer, 2000 340,000 308,898 - 143,300 84,680
General Counsel and 1999 310,000 221,030 - 100,100 76,302
Corporate Secretary
Joseph B. Richey, II 2001 341,000 0 - 15,800 60,043
President-Invacare 2000 325,000 243,750 - 21,000 74,477
Technologies and Senior 1999 310,000 174,530 - 47,100 77,752
Vice President-Electronic
& Design Engineering
Louis F.J. Slangen 2001 300,000 0 - 20,000 69,921
Senior Vice President - 2000 265,000 165,625 - 21,000 83,220
Sales and Marketing 1999 250,000 117,250 - 45,800 70,412
--------------------------------
(1) As described under "Compensation Committee Report on Executive
Compensation," the Company granted 24,020 restricted stock awards on April 1,
2001 that related to special long-term compensation. The awards vest 25%
annually, beginning March 31, 2002, 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. The number of restricted stock awards held by Messrs. Mixon, Blouch
and Miklich at the end of last year is 11,670, 7,200 and 5,150 respectively.
(2) The amounts disclosed in this column include: (a) Company contributions in
the amount of $3,400 for each of Messrs. Mixon, Blouch, Richey, Miklich and
Slangen under the Company's 401(k) plan, a defined contribution plan; (b)
Company contributions in the amounts of $29,019, $16,265, $8,295, $14,733 and
$2,435 for Messrs. Mixon, Blouch, Richey, Miklich and Slangen, respectively,
under the Company's 401(k) Plus Benefit Equalization Plan, a defined
contribution plan; (c) Company contributions in the amounts of $6,800 for each
of Messrs. Mixon, Blouch, Richey, Miklich and Slangen, under the Company's
Profit Sharing Plan, a defined contribution plan; (d) Company contributions in
the amounts of $45,000, $24,464, $13,181, $15,641 and $8,490 for Messrs. Mixon,
Blouch, Richey, Miklich and Slangen, respectively, under the Company's Profit
Sharing Benefit Equalization Plan, a defined contribution plan; (e) the payment
of premiums on group term life insurance policies of $3,564, $3,451, $2,677,
$2,299 and $1,466 for Messrs. Mixon, Blouch, Richey, Miklich and Slangen,
respectively; (f) the dollar value of compensatory split-dollar life insurance
benefits, under the Company's Executive Life Insurance Plan, in the amounts of
$78,341, $23,662, $38,471 and $44,093 for Messrs. Blouch, Richey, Miklich and
12
Slangen, respectively (Mr. Mixon is not covered by a split-dollar life insurance
benefit); (g) payments by the Company, related to premiums under the Company's
Executive Disability Income Plan, in the amounts of $8,447, $2,028, $4,428 and
$3,237 for Messrs. Blouch, Richey, Miklich and Slangen, respectively (Mr. Mixon
does not participate in the Company's Executive Disability Income Plan); (h)
payment by the Company for the premium of a disability insurance policy for Mr.
Mixon amounting to $7,730 and (i) 20% vested portion of the Company's one-time
contribution on behalf of Mr. Mixon for his non-participation in the Executive
Life Insurance Plan since its inception equal to $284,400.
COMPENSATION OF DIRECTORS
The Company paid all Directors who were not employees ("Non-employee
Directors") a $26,000 annual retainer, $2,000 per Board meeting attended and
$1,000 per committee meeting attended, or $1,500 per committee meeting if
committee chairman. Further, Non-employee Directors are eligible to defer
compensation payable by the Company for their services as a Director pursuant to
the Invacare Corporation 1994 Performance Plan. Messrs. Boland, Delaney, Evans,
Healy and Moore elected to defer $29,500, $3,050, $14,750, $30,500 and $31,500
respectively of their 2001 compensation and were issued stock options at a 25%
discount in accordance with the Plan. In addition, the Non-employee Directors
were eligible for a bonus of $4,000 based on profit objectives for 2001.
However, based on 2001 operating results, no bonuses were paid.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows, for the Named Executive Officers, the stock
options granted in 2001 under the Invacare Corporation 1994 Performance Plan.
Individual Grants
-----------------------------------------------------
Number % of Total Potential Realizable Value
of Options Exercise at Assumed Annual Rates
Securities Granted to Price of Share Price Appreciation
Underlying Employees (3) for Option Term (1)
Options in Fiscal ($ per Expiration ------------------------------------
Name Granted (2)(#) Year Share) Date 5% ($) 10%($)
-------------------------- --------------- ------------- ----------- ------------- ------------------------------------
A. Malachi Mixon, III 112,800 22.1% 33.50 10/31/11 2,376,000 6,022,000
Gerald B. Blouch 50,600 10.3% 33.50 10/31/11 1,066,000 3,736,000
Thomas R. Miklich 36,300 7.4% 33.50 10/31/11 765,000 1,938,000
Louis F.J. Slangen 20,000 3.6% 33.50 10/31/11 421,000 1,068,000
Joseph B. Richey, II 15,800 2.8% 33.50 10/31/11 333,000 844,000
All Shareholders (4) N/A N/A N/A N/A 660,200,000 1,642,700,000
-----------
(1) Potential Realizable Value is based on assumed annual growth rates for the
term of the option. The assumed rates of 5% and 10% are set by the Commission
and are not intended to be a forecast of the Company's Common Share price. There
is no assurance that the value realized will be at or near the value estimated
in the Potential Realizable Value applied to value the stock options. Actual
gains, if any, on stock options exercised are dependent on the actual
performance of the stock.
(2) Options become 100% exercisable on September 30, 2005 and vest over four
years at a rate of 25% per year, commencing in 2002.
(3) The exercise price is equal to the fair market value of the Company's Common
Shares on the date of grant.
(4) The potential gain realizable by all shareholders (based on 29,592,839
Common Shares and 1,112,187 Class B Common Shares outstanding at the exercise
price of $33.50 per share as of the grant date of October 31, 2001) at 5% and
10% assumed annual rates over a term of 10 years is provided as a comparison to
the potential gain realizable by the Named Executive Officers at the same
13
assumed annual rates of appreciation in share value over the same 10-year term.
The value of a Common Share would appreciate to approximately $55.00 and $87.00
per share at the assumed 5% and 10% annual growth rates, respectively.
Each of the options issued under the Stock Option Plans includes a
provision which provides that the option shall become immediately exercisable
(notwithstanding any vesting schedule otherwise contained in the option) upon
the commencement of a tender offer for the Company's Common Shares or at any
time within 90 days prior to a dissolution, liquidation or certain mergers or
consolidations of the Company. Upon the occurrence of such a merger or
consolidation, the option shall be subject to such adjustment or amendment as
the Compensation Committee of the Board of Directors deems appropriate and
equitable. Under the terms of the Stock Option Plans, the Committee may also
grant reload options under such circumstances as it deems appropriate.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The table below shows information with respect to options exercised by, and
the value of unexercised options under the Stock Option Plans for, the Named
Executive Officers.
Aggregated Option Exercises in 2001 and
Option Value at Year-End 2001
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options at
Number of Value Options at 12/31/01 (#) 12/31/01 (2)($)
Shares Realized ----------- ------------- ----------- --------------
Name Acquired on (1)($) Exercisable Unexercisable Exercisable Unexercisable
--------------------- ----------- ---------- ----------- ------------- ----------- -------------
Thomas R. Miklich 152,875 2,526,422 24,875 230,650 300,608 2,066,211
Louis F.J. Slangen 58,600 1,400,636 75,300 63,300 764,537 475,384
Gerald B. Blouch 52,040 1,401,889 327,925 281,975 4,161,130 2,473,541
A. Malachi Mixon, III 44,120 1,023,584 749,838 599,512 9,406,683 5,235,545
Joseph B. Richey, II 20,800 603,200 225,665 59,575 3,563,621 483,031
--------------
(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 12/31/01" is equal to the
difference between the option exercise price and the closing price of $33.70
of a Common Share on the NYSE on December 31, 2001.
PENSION PLANS
The Company has established a Supplemental Executive Retirement Plan for
certain executive officers to supplement other savings plans offered by the
Company to provide a specific level of replacement compensation for retirement.
The annual benefit is a single-life annuity in an amount equal to a portion of
final earnings (maximum is 50% at 15 years of service). This annual benefit is
reduced by the annual value of the Company contributions to the qualified Profit
Sharing Plan, Company contributions to the nonqualified 401(k) Plus and Profit
Sharing Equalization Plans, and one-half of the annual Social Security benefit
plus other offsets. The plan is a nonqualified plan and therefore the benefits
accrued under this plan are subject to the claims of the Company's general
creditors in the event of bankruptcy. The benefits will be paid (i) from an
14
irrevocable grantor trust funded from the Company's general funds or (ii)
directly by the Company from general funds.
The following table reflects the estimated annual single-life annuity
payment, without reductions for applicable offsets, payable to a participant
retiring in 2001 at age 65.
Pension Table
Years of Service (2)
------------ ------------- ------------
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) The pension benefits represent annual single-life annuity values subject to
reduction by applicable offsets (as described above). For purposes of estimating
a pension benefit as of December 31, 2001, the current years of service credited
for the Named Executive Officers are 21, 15, 18, 15 and 15 years for Messrs.
Mixon, Blouch, Richey, Miklich and Slangen, respectively.
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
Severance Pay Agreements. To ensure continuity and the continued dedication
of key executives during any period of uncertainty caused by the possible threat
of a takeover, the Company has entered into severance pay agreements with
certain key executives, including each of the Named Executive Officers. In the
event there is a Change of Control (as that term is defined in the agreements)
of the Company and the employment of the contracting executive terminates under
certain conditions described in the agreements at any time during the three year
period following a Change of Control of the Company, the executive will receive
an agreed upon amount of severance pay.
For all of the Named Executive Officers, the severance pay agreements
provide that upon termination for any reason other than death, Disability, by
the Company for Cause or by the executive for other than Good Reason (as such
terms are defined in the agreements), the executive will receive, in addition to
accrued salary, bonus and vacation pay: (a) a lump sum cash amount equal to
three times annual base salary plus the executive's target bonus; (b) continued
participation in the Company's employee welfare benefit plans and other benefit
arrangements for a period of three years following termination; (c) 401(k),
401(k) Plus, profit sharing and retirement benefits so that the total retirement
benefits received will be equal to the retirement benefits which would have been
received had such executive's employment with the Company continued during the
three year period following termination; 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 Code relating to his receipt of "excess
parachute payments."
The salary and other benefits provided by the severance pay agreements will
be payable from the Company's general funds. The Company has agreed to indemnify
such executives for any legal expense incurred in the enforcement of their
rights under the severance pay agreements.
15
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors during
2001 were James C. Boland, Whitney Evans, Dr. Bernadine P. Healy and William M.
Weber.
During 1996, the Company became an investor in Unique Mobility, Inc., a
world leader in the development of high performance DC Motors. Mr. Richey serves
on the Unique Mobility board of directors. During 2001, the Company purchased
Gearless/Brushless motors from Unique Mobility for approximately $3,800,000.
During 2001, the Company purchased travel services from a third party
private aircraft charter company. One of the aircrafts available to be used by
the charter company is owned by Messrs. Mixon and Richey. The Company paid
approximately $473,000 to the charter company for use of the aircraft owned by
Messrs. Mixon and Richey. Invacare believes that the prices and terms charged
are no less favorable than those which could be obtained from unrelated parties.
During 2001, Mr. Miklich was indebted to the Company based on a loan
approved by the Compensation Committee pursuant to its executive compensation
philosophy and the Company's overall compensation program. Mr. Miklich was
loaned approximately $1.3 million. The loan was interest bearing and payable
upon demand of the Company. The loan was repaid in full by April 5, 2002. Also
during 2001, Dan T. Moore was loaned $650,000 and William M. Weber was loaned
$150,000, both loans were interest bearing and were payable upon demand of the
Company. Both loans were repaid in full by April 5, 2002.
AUDIT COMMITTEE AND RELATED MATTERS
Report of the Audit Committee
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. The Audit Committee's activities are governed
by a written charter adopted by the Board of Directors.
Management has the primary responsibility for the Company's financial
statements and the reporting process, including the system of internal controls.
The independent auditors audit the annual financial statements prepared by
management and express an opinion on the conformity of those financial
statements with accounting principles generally accepted in the United States.
The Audit Committee monitors these processes.
In this context, the Audit Committee met and held discussions with
management and the independent auditors. 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 the independent auditors, 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 the independent auditors such other
matters as are required to be discussed with the Audit Committee under generally
accepted auditing standards.
In addition, the independent auditors 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 the independent auditors the
auditors' independence from the Company and its management and considered the
compatibility of non-audit services with the auditors' independence.
The Audit Committee discussed with the Company's financial management and
independent auditors the overall scope and plans for the audit. The Audit
Committee also met with the independent auditors, with and without management
present, to discuss the results of the examinations, their evaluation of the
16
Company's internal controls and the overall quality of the Company's financial
reporting. In addition, the Audit Committee considered other areas of its
oversight relating to the financial reporting process that it determined
appropriate.
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, 2001 for filing with the Securities
and Exchange Commission.
AUDIT COMMITTEE
Frank B. Carr
Dan T. Moore, III
William M. Weber
INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
re-appointed Ernst & Young L.L.P. as independent auditors to audit the financial
statements of the Company for the fiscal year ending December 31, 2002. Fees for
services rendered by Ernst & Young L.L.P. for the last fiscal year were:
Financial Information Systems Design and
Audit Fees Implementation Fees All Other Fees
---------- ---------------------------------------- --------------
$641,000 $0 $1,672,000
Fees for all other services included audit related services of $267,000,
primarily for statutory audits and business acquisitions, and nonaudit services
of $1,405,000, primarily for tax compliance and tax consulting services.
Representatives of Ernst & Young L.L.P. are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they so
desire and are expected to be available to respond to appropriate questions.
17
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those stated in the Notice of Annual Meeting of
Shareholders. However, if other matters properly come before the Annual Meeting,
it is the intention of the persons named in the accompanying Proxy to vote in
accordance with their best judgment on such matters in the absence of
instructions to the contrary. Any shareholder who wishes to submit a proposal
for inclusion in the proxy material to be distributed by the Company in
connection with its Annual Meeting of Shareholders to be held in 2003 must do so
no later than December 16, 2002. To be eligible for inclusion in the 2003 Proxy
material of the Company, proposals must conform to the requirements set forth in
Regulation 14A under the Exchange Act.
The Company may use its discretion in voting Proxies with respect to
Shareholder proposals not included in the Proxy Statement for the Annual Meeting
of Shareholders to be held in 2003, unless the Company receives notice of such
proposals prior to March 1, 2003.
Upon the receipt of a written request from any shareholder, the Company
will mail, at no charge to the shareholder, a copy of the Company's 2001
Annual Report on Form 10-K, including the financial statements and
schedules required to be filed with the Securities and Exchange Commission
pursuant to Rule 13a-1 under the Exchange Act, for the Company's most
recent fiscal year. Written requests for such Report should be directed to:
Shareholder Relations Department
Invacare Corporation
One Invacare Way, P.O. Box 4028
Elyria, Ohio 44036-2125
You are urged to sign and return your Proxy promptly in the enclosed return
envelope to make certain your shares will be voted at the Annual Meeting.
By order of the Board of Directors
/S/ Thomas R. Miklich
---------------------
Thomas R. Miklich,
Secretary
18
________________________________________________________________________________
INVACARE CORPORATION
PROXY FOR COMMON SHARES AND CLASS B COMMON SHARES
Annual Meeting of Shareholders --- May 22, 2002
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby (i) appoints A. MALACHI MIXON, III, WHITNEY EVANS
and JOSEPH B. RICHEY, II, and each of them, as Proxy holders and attorneys, with
full power of substitution, to appear and vote all the Common Shares and Class B
Common Shares of INVACARE CORPORATION, which the undersigned shall be entitled
to vote at the Annual Meeting of Shareholders of the Company, to be held at the
Lorain County Community College, Spitzer Conference Center, 1005 North Abbe
Road, Elyria, Ohio on Wednesday, May 22, 2002 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 three Directors nominated by the Board of
Directors.
(1) ELECTION OF DIRECTORS.
( ) FOR all nominees listed (except as ( ) WITHHOLD AUTHORITY to vote for
marked to the contrary below) all nominees listed
A. Malachi Mixon, III, Michael F. Delaney, and Dr. Bernadine P. Healy
(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)
(2) In their discretion to act on any other matters which may properly come
before the Annual Meeting.
Dated ____________________________ , 2002
____________________________
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.