SEVERANCE PROTECTION
AGREEMENT
THIS AMENDED AND
RESTATED SEVERANCE PROTECTION AGREEMENT is made and effective as of
December 31 , 2008, by and between Invacare Corporation, an
Ohio corporation with its principal place of business at One
Invacare Way, Elyria, Ohio 44036 (“Invacare” or the
“Company”), and Gerald B. Blouch (the
“Executive”).
WHEREAS, Executive
is considered a key employee of the Company; and
WHEREAS, the
Company desires to retain and motivate Executive consistent with
the terms of this Agreement; and
WHEREAS, the
Company and Executive, in order to insure Executive’s
continued attention and dedication to his duties, previously
entered into a certain severance protection agreement, effective as
of October 1, 2002; and
WHEREAS, the
Company and Executive desire to amend and restate such previous
agreement because of recent legislation and other economic factors
and in order to further address Internal Revenue Code
Section 409A;
NOW, THEREFORE, in
consideration of the mutual promises and covenants contained
herein, the Company and Executive agree as follows:
1.
Acknowledgement of Position . The Company currently employs
Executive as President and Chief Operating Officer of the Company,
having those duties and responsibilities, and the authority,
customarily possessed by the President and Chief Operating Officer
of a major corporation and such additional duties as have been and
may be assigned to him from time to time by the Chief Executive
Officer and/or the Board of Directors of the Company (the
“Board”) which are consistent with the positions of
President and Chief Operating Officer of a major corporation.
Service by Executive on the boards of other companies shall not be
deemed to be a violation of this Agreement, provided such service
does not significantly interfere with the confidentiality
provisions or performance of his duties hereunder.
2.
Termination of Employment .
A.
Termination Due to Death or Disability . In the event that
Executive’s employment with the Company is terminated due to
his death or disability as defined in Section 3 hereof,
respectively, his estate or his beneficiaries, as the case may be,
shall be entitled to any
payments or
benefits (including salary, etc.) accrued but unpaid at the time of
Executive’s termination due to his death or disability, all
as payable under Company plans in effect at the time of
termination. If Executive dies or becomes disabled during the term
of this Agreement, the duties of the Company and Executive, one to
the other, under this Agreement shall terminate as of the date of
Executive’s death, except as provided above.
B.
Termination by the Company for Cause or Resignation by Executive
other than for Good Reason . Upon Executive’s resignation
other than for “Good Reason” as defined in
Section 3, or upon the termination of Executive’s
employment by the Company for “Cause” as defined in
Section 3, Executive shall be entitled to any payments or
benefits accrued but unpaid at the time of Executive’s
termination by the Company for Cause or resignation by Executive
other than for Good Reason, all as payable under Company plans in
effect at the time of termination.
C.
Termination by the Company other than for Cause or Resignation
of Executive for Good Reason . Upon Executive’s
termination by the Company other than for “Cause” as
defined in Section 3 of this Agreement, or by Executive for
“Good Reason” as described in Section 3 of this
Agreement, Executive shall be entitled to the following amounts and
benefits:
|
|
(i)
|
|
Compensation payable to the extent
of three times the amount of Executive’s then applicable
annual base salary to be paid in a single sum no later than the
earlier of six months and a day after the termination of employment
or the 15th day of the 3rd month of the calendar year following the
calendar year in which such termination of employment occurs (such
earlier date being referred to herein as the “Short-term
Date”);
|
|
|
|
|
|
|
|
(ii)
|
|
75%
of Executive’s target bonus for the year in which employment
terminates to be paid no later than the Short-term Date;
|
|
|
|
|
|
|
|
(iii)
|
|
Any
then-outstanding stock option grant or award shall immediately vest
in full as of the date of termination of employment
(notwithstanding any provision therein contained); and
|
2
|
|
(iv)
|
|
The
exercise period of any unexercised stock option shall be extended
until the earlier of two (2) years after the date of
termination of employment or expiration of the option
(notwithstanding any provision therein contained). In addition,
Executive shall be permitted to exercise any such option by means
of a cashless exercise program, so long as (a) such program is
allowed under all applicable laws and regulations, and (b) the
Company is not required to recognize additional compensation
expense as a result thereof.
|
In the event
Executive violates any of the Restrictive Covenants, as defined in
Section 11 of this Agreement, Executive shall no longer be
entitled to receive any further cash severance amounts pursuant to
subclauses (i) and (ii) above (and shall be obligated to
promptly repay to the Company any such amounts previously paid to
him, with interest at a rate of 6% compounded annually for any
period from the initial violation of the Restrictive Covenants
until the date of repayment), and thereafter subclauses
(iii) and (iv) shall terminate and instead, the treatment
of Executive’s options will be governed by the terms of the
option plans and agreements thereunder.
The
term “disability” as used in this Agreement shall mean
Executive’s inability, due to a mental or physical condition,
to continue to provide services to the Company substantially
consistent with past practice for a period of at least ninety
(90) consecutive days, as evidenced by a written certification
as to such condition from a physician designated by Executive and
reasonably acceptable to the Board.
Executive
shall have “Good Reason” to terminate his employment
under this Agreement if one or more of the events listed in
(a) through (f) of this Section occurs and, based upon
that event, Executive gives notice of his intention to terminate
his employment effective on a date that is within 90 days of
the initial occurrence of that event and Invacare does not cure the
condition(s) constituting the event within 30 days after such
notice:
3
|
|
(i)
|
|
Executive is subjected to a material
Demotion or Removal involving the Executive’s authority,
duties, or responsibilities or in those of the individual to whom
the Executive is required to report;
|
|
|
|
|
|
|
|
(ii)
|
|
Executive’s Annual Base
Salary, which shall mean his salary for the most recent fiscal year
of the Company, is materially reduced (which for this purpose shall
be deemed to occur if the reduction is equivalent to a five percent
(5%) or greater reduction in the Executive’s Annual Base
Salary);
|
|
|
|
|
|
|
|
(iii)
|
|
Executive’s opportunity for
incentive compensation as an officer or employee of the Company is
materially reduced from the level of his opportunity for such
incentive compensation for the prior year, without his prior
written consent (which for this purposes shall be deemed to occur
if the reduction is equivalent to a five percent (5%) or greater
reduction in Executive’s Annual Base Salary);
|
|
|
|
|
|
|
|
(iv)
|
|
Executive is excluded from full
participation in any benefit plan or arrangement maintained for
senior executives of the Company generally, and such exclusion
materially reduces the benefits provided to the
Executive;
|
|
|
|
|
|
|
|
(v)
|
|
Executive’s responsibilities,
duties, or authority as an officer or employee of the Company are
at any time materially reduced from those then currently held by
him; or
|
|
|
|
|
|
|
|
(vi)
|
|
Executive’s principal place of
employment is relocated more than 35 miles from One Invacare Way,
Elyria, Ohio without his prior written consent.
|
The
employment of Executive by the Company shall have been terminated
for “Cause” if any of the following has
occurred:
|
|
(i)
|
|
Executive shall have been convicted
of a felony;
|
|
|
|
|
|
|
|
(ii)
|
|
Executive commits an act or series
of acts of dishonesty in the course of Executive’s employment
which are materially inimical to
|
4
|
|
|
|
the
best interests of the Company and which constitutes the commission
of a felony, all as determined by the vote of three-fourths of all
of the members of the Board (exclusive of the Executive, if the
Executive is a Director of the Company), which determination is
confirmed by a panel of three arbitrators appointed and acting in
accordance with the rules of the American Arbitration Association
for the purpose of reviewing that determination;
|
|
|
|
|
|
|
|
(iii)
|
|
any
federal or state regulatory agency with jurisdiction over the
Company has issued a final order, with no further right of appeal,
that has the effect of suspending, removing, or barring Executive
from continuing his service as an officer or Director of the
Company;
|
|
|
|
|
|
|
|
(iv)
|
|
after being notified in writing by
the Board to cease any particular Competitive Activity, Executive
shall intentionally continue to engage in such Competitive Activity
while Executive remains in the employ of the Company; or
|
|
|
|
|
|
|
|
(v)
|
|
Executive shall fail to devote his
full business time to the business of the Company (excluding for
these purposes any services performed for any charitable
organizations, or organizations where he is participating as the
Company’s representative), which failure continues after
30 days following the Company’s notice to Executive
specifying such failure, during which time he will have the right
to cure.
|
Executive
shall be deemed to have been subjected to “Demotion or
Removal” if (other than by voluntary resignation or with
Executive’s written consent) Executive ceases to hold the
highest position as an employee/officer of Invacare held by him at
any time during the effectiveness of this Agreement with all of the
duties, authority, and responsibilities of that office as in effect
at any time during the effectiveness of this Agreement.
5
E.
Competitive Activity .
Executive
shall be deemed to have engaged in “Competitive
Activity” if Executive engages in any business or business
activity (other than as a Director, officer, or employee of the
Company) that violates Section 7 hereof.
Termination
(and related terms, such as “termination of employment”
and “terminate employment” mean a situation in which)
the Executive incurs a “separation from service” with
Invacare and all of its Affiliates within the meaning of Code
Section 409A, which includes:
|
|
(a)
|
|
a
voluntary resignation or a resignation by Executive for Good
Cause,
|
|
|
|
|
|
|
|
(b)
|
|
involuntary discharge by Invacare
for any reason;
|
|
|
|
|
|
|
|
(c)
|
|
retirement;
|
|
|
|
|
|
|
|
(d)
|
|
a
leave of absence (including military leave, sick leave, or other
bona fide leave of absence) but only at the point that such leave
exceeds the greatest of (i) six months, (ii) the period
for which the Executive’s right to reemployment is guaranteed
either by statute or by contract, or (iii) 12 months if
such leave constitutes sick leave arising by reason of an injury
to, or sickness of, Executive, which, in either case, (A) is
expected to result in death or to last for a continuous period of
not less than 6 months, and (B) renders the Executive unable
to perform the duties of his position of employment or any
substantially similar position of employment; or
|
|
|
|
|
|
|
|
(e)
|
|
a
permanent decrease in Executive’s service to a level that is
no more than twenty percent (20%) of its prior level.
|
For purposes of
this subsection G, whether a separation from service has occurred
is determined based on whether it is reasonably anticipated that no
further services will be performed by the Executive after a certain
date or that the level of bona fide services the Executive will
perform after such date (whether as an employee or as an
independent contractor) would permanently decrease to no more than
twenty percent (20%) of the average level of bona fide services
performed (whether as an employee or an independent
6
contractor)
over the immediately preceding 36-month period (or the full period
of services if the Executive has been providing services less than
36 months).
4. Notice
of Termination .
Any
termination of Executive’s employment by the Company or by
Executive shall be communicated by written Notice of Termination to
the other party hereto, which shall set forth the effective date of
such termination (not earlier than the date of mailing, or delivery
by other means, of the notice).
In
the event either party to this Agreement shall be forced to enforce
the terms of this Agreement, the party successfully enforcing such
terms shall be entitled to reimbursement of its reasonable legal
and accounting fees from the other party hereto.
6. Term;
Change of Control .
This
Agreement’s term shall begin on the effective date written
above and shall terminate three (3) years thereafter or upon a
Change of Control of the Company as defined in the Change of
Control Agreement between Executive and the Company dated as of
April 1, 2000, and as most recently amended and restated as of
December 31, 2008, as the same may be further amended (the
“Change of Control Agreement”); provided, however, that
if such Change of Control does not occur, then the term of this
Agreement automat
|
