Invacare 2006 Annual Report Download - page 82

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Shareholders’ Equity Transactions
The company’s Common Shares have a $.25 stated value. The Common Shares and the Class B Common
Shares generally have identical rights, terms and conditions and vote together as a single class on most issues,
except that the Class B Common Shares have ten votes per share, carry a 10% lower cash dividend rate and, in
general, can only be transferred to family members. Holders of Class B Common Shares are entitled to convert their
shares into Common Shares at any time on a share-for-share basis.
The 2003 Performance Plan (the “2003 Plan”) allows the Compensation Committee of the Board of Directors
(the “Committee”) to grant up to 3,800,000 Common Shares in connection with incentive stock options, non-
qualified stock options, stock appreciation rights and stock awards (including the use of restricted stock). The 1994
Performance Plan (the “1994 Plan”), as amended, expired in 2004 and allowed the Compensation Committee of the
Board of Directors (the “Committee”) to grant up to 5,500,000 Common Shares. The Committee has the authority
to determine which employees and directors will receive awards, the amount of the awards and the other terms and
conditions of the awards. During 2006 and 2005, the Committee granted 522,152 and 614,962, respectively, in non-
qualified stock options for a term of ten years at the fair market value of the company’s Common Shares on the date
of grant under the 2003 Plan. There were no stock appreciation rights outstanding at December 31, 2006, 2005 or
2004.
Restricted stock awards for 115,932, 21,304 and 20,510 shares were granted in years 2006, 2005 and 2004
without cost to the recipients. Under the terms of the restricted stock awards, which were initially granted in 2001,
239,449 of the shares granted vest ratably over the four years after the award date and 6,500 of the shares granted
vest ratably over the 2 years after the award date. At December 31, 2006 and 2005, there were 147,085 and 58,828
shares, respectively for restricted stock awards that were unvested. Unearned restricted stock compensation of
$3,512,000 in 2006, $1,016,000 in 2005 and $911,000 in 2004, determined as the market value of the shares at the
date of grant, is being amortized on a straight-line basis over the vesting period. Compensation expense of
$1,075,000, $881,000 and $812,000 was recognized in 2006, 2005 and 2004, respectively, related to restricted stock
awards granted since 2001.
The 2003 Plan has provisions that allow employees to exchange mature shares to pay the exercise price and
surrender shares for the options to cover the minimum tax withholding obligation. Under these provisions, the
company acquired treasury shares of approximately 128,000 for $4,314,000 in 2006, 124,000 for $6,004,000 in
2005 and 53,000 for $2,444,000 in 2004.
On December 21, 2005, the Board of Directors of Invacare Corporation based on the recommendation of the
Compensation, Management Development and Corporate Governance Committee (the “Committee”), approved
the acceleration of the vesting for substantially all of the company’s unvested stock options which were granted
under the 1994 Plan, as amended, and the 2003 Plan, which were then underwater. The Board of Directors decided
to approve the acceleration of the vesting of the company’s stock options primarily to partially offset the recent
reductions in other benefits made by the company and to provide additional incentive to those critical to the
company’s current cost reduction efforts.
The decision, which was effective as of December 21, 2005, accelerated the vesting for a total of 1,368,307 of
the company’s common shares; including 646,100 shares underlying options held by the company’s named
executive officers. The stock options accelerated equate to 29% of the company’s total outstanding stock options.
Vesting was not accelerated for the restricted awards granted under the Plans and no other modifications were made
to the awards that were accelerated. The exercise prices of the accelerated options, all of which were underwater,
were unchanged by the acceleration of the vesting schedules.
All of the company’s outstanding unvested options under the Plans, which were accelerated, had exercise
prices ranging from $30.91 to $47.80 which were greater than the company’s stock market price of $30.75 as of the
FS-23
INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)