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| IVC > SEC Filings for IVC > Form 8-K on 7-Jan-2009 | All Recent SEC Filings |
7-Jan-2009
Change in Directors or Principal Officers, Financial Statements and Exhibits
Invacare Corporation ("Invacare" or the "Company") has approved amendments
and taken other actions with respect to a number of the Company's compensation
and benefit plans and to certain of its agreements with its executive officers
and employees, primarily to reflect changes as necessary to comply with
Section 409A of the Internal Revenue Code ("Section 409A"). Section 409A is the
tax law enacted in 2004 governing "non-qualified" deferred compensation
arrangements that imposes additional tax and penalties on service providers
(including employees and directors) if a covered arrangement does not comply
with Section 409A. Final IRS regulations require documentary compliance with
Section 409A by December 31, 2008. The following is a summary of the most
significant terms of these amendments and revisions.
DC Plus Plan
The DC Plus Plan is a non-qualified contributory savings plan for highly
compensated employees, which allows participants to defer compensation above the
amount allowed in the Invacare Retirement Savings Plan (the Company's qualified
retirement plan) and to provide participants with additional pre-tax savings
opportunities. In 2004, the Company froze what was originally established as the
401(k) Benefit Equalization Plus Plan (the "401(k) Plus Plan") and prohibited
further deferrals and contributions to that plan for compensation earned after
December 31, 2004. It then adopted the DC Plus Plan, effective January 1, 2005,
in order to address the requirements of Section 409A. All benefits of the
participants earned and vested in the 401(k) Plus Plan as of December 31, 2004
remain preserved under the pre-existing plan provisions.
As has been described in the Company's proxy statements, the DC Plus Plan
allows participants from and after January 1, 2005 to defer all or any portion
of their annual cash bonus compensation and up to 50% of their salary to the
plan. The Company provides a matching contribution on amounts deferred of up to
an annual maximum of 2% of salary, as well as a quarterly contribution of up to
4% of salary for the benefit of eligible participants (both reduced by the
actual matching and quarterly contributions under the qualified plan).
Previously, the DC Plus Plan was designed as a "pour-over" plan that transferred
to the qualified plan deferrals up to certain IRS limits on an annual basis, but
that feature was removed effective January 1, 2009. Participants may allocate
contributions among an array of funds representing a full range of risk/return
profiles, including Company common shares reflected in phantom share units.
Employee deferrals and contributions by the Company for the benefit of each
employee are credited with earnings, gains or losses based on the performances
of investment funds selected by the employee. These funds previously were the
same as those offered for investment under the qualified plan, but as of
January 1, 2009, a new series of investment choices is being offered under the
DC Plus Plan. Participants do not have any direct interest in or ownership of
the funds. Participant's contributions are always 100% vested and Company
contributions vest according to a five year graduated scale. All distributions
from the plan are in the form of cash and are paid in a single lump sum upon
termination of employment or death, unless the participant terminates employment
after reaching retirement age, the account is over the required threshold amount
(i.e., over $20,000 in the 401(k) Plus Plan portion and $16,500, as adjusted
from time to time, in the DC Plus Plan portion), and the participant has elected
to receive payment in annual installments instead of a lump sum. The installment
period cannot exceed 15 years. Distributions under the DC Plus Plan may be made
only upon termination of employment,
death, disability or hardship, or at a time certain specified by the employee at
the time of deferral in accordance with the terms of the plan.
Supplemental Executive Retirement Plan
For many years, the Company has provided a Supplemental Executive Retirement
Plan for certain of its executive officers (the "Pre-existing SERP"), which has
been described in the Company's proxy statements. In order to comply with
Section 409A, to simplify the design and accounting for future benefits and to
avoid an unintended diminution of benefits under the Pre-existing SERP for
executives who worked past normal retirement age, the Company has amended and
restated this plan to alter the benefits provided to current and future SERP
participants.
The currently-employed SERP participants are Messrs. Mixon (Chairman and
Chief Executive Officer), Blouch (President and Chief Operating Officer),
Gudbranson (Senior Vice President and Chief Financial Officer), Richey
(President - Invacare Technologies and Senior Vice President - Product
Development), Slangen (Senior Vice President Sales and Marketing), Usaj (Senior
Vice President Human Resources) and LaPlaca (Senior Vice President and General
Counsel) (the "Active Participants"). As of December 31, 2008, Invacare has an
aggregate, accumulated benefit obligation to those participants of approximately
$19,348,000. There is an additional benefit owed to previously-employed
participants, but those individuals are not affected by Section 409A and they
will remain entitled to benefits under the Pre-existing SERP. The Company has
purchased life insurance policies as a way to assist in the ultimate funding of
its SERP obligations.
Except for changes mandated by Section 409A (which generally are adverse to
the participating executive), the most significant difference between the
Pre-existing SERP and the amended SERP is the way that benefits are earned. The
Pre-existing SERP is intended to provide a benefit equal to 50% of final
compensation (subject to certain offsets) at normal retirement. Under the
amended plan, the benefit is stated as a hypothetical account balance. Active
Participants will receive an initial credit to their account balance
approximately equal to their accumulated benefit obligation from the
Pre-existing SERP as of December 31, 2008. Thereafter, so long as the Company
continues the plan in the amended form, Active Participants will receive
specified annual company credits, plus annual interest credits, to their
hypothetical accounts designed to result in a benefit after a "full career" at
Invacare that approximates the projected benefit provided under the Pre-existing
SERP after a "full career." Each of the Active Participants has signed a
participation agreement confirming his or her consent to the amended Plan
design. Future participants who are selected by the Compensation Committee of
the Board (the "Committee") will be entitled to receive annual contributions,
plus interest credits, to their hypothetical account balances equal to a
specified percentage of their ongoing targeted compensation. The particular
percentage for each future participant will be based upon his or her age at the
time of initial participation, as specified in the amended plan. Once a
participant reaches his or her full career normal retirement benefit
(approximately 3.65 times his or her then targeted compensation), the only
additional annual credits under the current design would be those for interest
(initially 6% of the account balance, subject to adjustment by the Committee).
In designing the SERP amendment, the Company attempted to avoid any change which
would materially increase Invacare's future earnings charges attributable to the
SERP.
The Pre-existing SERP also provided for enhanced benefits where a
participant's career at Invacare is interrupted in certain circumstances, such
as certain terminations of employment within the two years following a change in
control, or if someone should become disabled. Since the new design builds a
participant's benefit with annual credits over a period of years, benefits
payable to a participant who terminates at the early end of a "full career" due
to disability or within the two years following a change in control could be
adversely affected. As a result, the amended Plan provides additional credits in
the event of termination following disability or in some cases within two years
of a change in control. These additional credits are designed to bring the
affected participant's account to an amount that approximates the benefit that
would have been provided under the Pre-existing SERP.
Change of Control Agreements
For many years, Invacare has had agreements with each of its named executive
officers that protect them against certain circumstances, including certain
terminations of their employment, within the three-year period following a
change of control as defined in the agreements. Largely in response to
Section 409A, these so-called "double-trigger" change of control agreements have
been amended and restated effective as of December 31, 2008. These agreements
are referred to as "double-trigger" agreements because payment of substantially
all of the benefits under an agreement (with the exception of a retention bonus
equal to one year's salary payable if the executive remains employed on the date
that is one year following a change of control) are not payable until both a
change of control has occurred, and the covered executive has suffered a
qualifying termination of employment or resignation for good reason. The
payments and benefits provided under the amended and restated change of control
agreements remain substantially unchanged from the original version except that
the new agreement references provision of additional benefits under several
newly adopted plans, including the amended SERP and the DC Plus Plan (described
above) and eliminates payments under the original agreements that were
equivalent to three years of automobile subsidy and club dues.
Other Plans and Agreements
Invacare also amended several other employee benefit plans and agreements
that cover benefits or compensation payable to its directors and/or executive
officers, including amendments or actions taken to achieve compliance with
Section 409A with respect to the Company's 2003 Performance Plan, as amended,
and the Company's Severance Protection Agreement with Gerald B. Blouch.
The foregoing descriptions of the Amended and Restated Supplemental Executive
Retirement Plan, the related participation agreement, the Amended and Restated
Change of Control Agreements and the DC Plus Plan do not purport to be complete
and are qualified in their entirety by reference to the full text of those
documents, copies of which are attached hereto as Exhibit 10.1, 10.2, 10.3 and
10.4, respectively, and are incorporated herein by reference.
Item 7.01. Regulation FD Disclosure.
On December 31, 2008, the Company issued a press release, which is furnished
herewith as
Exhibit 99.1.
(d) Exhibits.
Exhibit Number Description
10.1 Cash Balance Supplemental Executive Retirement Plan, as amended and
restated, effective December 31, 2008.
10.2 Form of Participation Agreement, for current participants in the
Cash Balance Supplemental Executive Retirement Plan, as of
December 31, 2008, with schedule of participants.
10.3 Form of Change of Control Agreement, as amended, as of December 31,
2008, with schedule of participants.
10.4 Deferred Compensation Plus Plan, as amended, effective December 31,
2008.
10.5 Amended and Restated Severance Protection Agreement, between the
Company and Gerald B. Blouch, effective December 31, 2008.
99.1 Press Release, dated December 31, 2008.
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