Proxy2013


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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Invacare Corporation
 
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Invacare Corporation
One Invacare Way
Elyria, Ohio 44035
April 3, 2013
To the Shareholders of
INVACARE CORPORATION:
This year's Annual Meeting of Shareholders will be held at 10:00 A.M. (EDT), on Thursday, May 16, 2013, at the Lorain County Community College, Spitzer Conference Center, Grand Room, 1005 North Abbe Road, Elyria, Ohio. We will be reporting on Invacare's activities and you will have an opportunity to ask questions about its operations.
We hope that you are planning to attend the annual meeting personally and we look forward to seeing you. Whether or not you expect to attend in person, the return of the enclosed proxy as soon as possible would be greatly appreciated and will ensure that your shares will be represented at the annual meeting. If you do attend the annual meeting, you may, of course, withdraw your proxy should you wish to vote in person.
On behalf of the Board of Directors and management of Invacare Corporation, I would like to thank you for your continued support and confidence.
Sincerely yours,  
                        
A. MALACHI MIXON, III
Chairman of the Board of Directors







Invacare Corporation
Notice of Annual Meeting of Shareholders
To Be Held On May 16, 2013
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 Thursday, May 16, 2013, at 10:00 A.M. (EDT), for the following purposes:
1.
To elect eleven directors for a one-year term expiring in 2014;
2.
To approve and adopt the Invacare Corporation 2013 Equity Compensation Plan;
3.
To ratify the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for its 2013 fiscal year;
4.
To hold an advisory vote to approve the compensation of the Company's named executive officers; and
5.
To transact any other business as may properly come before the annual meeting.
Holders of common shares and Class B common shares of record as of the close of business on Friday, March 22, 2013 are entitled to vote at the annual meeting. It is important that your shares be represented at the annual meeting. For that reason, we ask that you promptly sign, date and mail the enclosed proxy card in the return envelope provided. Shareholders who attend the annual meeting may revoke their proxy and vote in person.
By Order of the Board of Directors,
Anthony C. LaPlaca
Secretary
April 3, 2013
Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to Be Held on May 16, 2013:
The Proxy Statement and the 2012 Annual Report are also available
at www.invacare.com/annualreport.












Invacare Corporation

Proxy Statement
For the Annual Meeting of Shareholders
May 16, 2013

 
Why am I receiving these materials?
This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of Invacare for use at the Annual Meeting of Shareholders to be held on May 16, 2013 and any adjournments or postponements that may occur. The time, place and purposes of the annual meeting are set forth in the Notice of Annual Meeting of Shareholders, which accompanies this proxy statement. This proxy statement is being mailed to shareholders on or about April 3, 2013.
Who is paying for this proxy solicitation?
The Company will pay the expense of soliciting proxies, including the cost of preparing, assembling and mailing the notice, proxy statement and proxy. In addition to the solicitation of proxies by mail, Invacare's directors, officers or employees, without additional compensation, may make solicitations personally and by telephone. The Company may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
Who is entitled to vote?
Only shareholders of record at the close of business on March 22, 2013, the record date for the meeting, are entitled to receive notice of and to vote at the annual meeting. On this record date, there were 30,808,348 common shares and 1,084,747 Class B common shares outstanding and entitled to vote.
How many votes do I have?
On each matter to be voted on, you have one vote for each outstanding common share you own as of March 22, 2013 and ten votes for each outstanding Class B common share you own as of March 22, 2013.
How do I vote?
If you are a shareholder of record, you can vote in person at the annual meeting or you can vote by signing and mailing in your proxy card in the enclosed envelope. If you are a shareholder of record, the proxy holders will vote your shares based on your directions.
If you sign and return your proxy card, but do not properly direct how your shares should be voted on a proposal, the proxy holders will vote “FOR” each of the director nominees named in proposal 1, “FOR” proposals 2, 3 and 4, and will use their discretion on any other proposals and other matters that may be brought before the annual meeting.  

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If you hold common shares through a broker or nominee, you may vote in person at the annual meeting only if you have obtained a signed proxy from your broker or nominee giving you the right to vote your shares.
How do I vote my common shares held in the Invacare Retirement Savings Plan?
If you are a participant in the Invacare Retirement Savings Plan, the voting instruction card should be used to instruct the trustee for the Invacare Retirement Savings Plan as to how to vote the number of common shares that you are entitled to vote under the plan. If you do not timely instruct the trustee for the Invacare Retirement Savings Plan as to how to vote the shares credited to your account under the plan, your shares, together with all other uninstructed shares, will be voted in the same proportions that shares for which instructions were received will be voted.
What are the voting recommendations of the Board of Directors?
The Board of Directors recommends that you vote:
For” the election of the eleven nominated directors for a one-year term expiring in 2014;
For” the approval of the Invacare Corporation 2013 Equity Compensation Plan;
For” the ratification of the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for its 2013 fiscal year; and
For” the approval of the compensation of the named executive officers.
What vote is required to approve each proposal?
Except as otherwise provided by Invacare's amended and restated Articles of Incorporation or Code of Regulations, or required by law, holders of common shares and Class B common shares will at all times vote on all matters, including the election of directors, together as one class. The holders of common shares and Class B common shares will vote together as one class on all four proposals described in this proxy statement. No holder of shares of any class has cumulative voting rights in the election of directors.
Election of Directors (Proposal No. 1). The nominees receiving the greatest number of votes will be elected. A proxy card marked “Withhold Authority” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated. Abstentions and broker non-votes will not be voted for or against or withheld from the election of directors and will not be counted for purposes of determining the number of votes cast in the election of directors. However, please note that our majority voting director resignation procedures under our Code of Regulations require any director nominee who receives a greater number of votes marked “Withhold Authority” than marked “For” his or her election in an uncontested election of directors to promptly tender his or her resignation to the Board following certification of the shareholder vote. Under our procedures, the Governance Committee, or another committee comprised entirely of independent directors or the Board of Directors, will, within 90 days following the certification of the shareholder vote, consider, and the Board will determine, whether to accept the resignation. The Board's determination and explanation of its decision will be promptly disclosed in a press release or Form 8-K submitted to the SEC.
Approval and Adoption of the Invacare Corporation 2013 Equity Compensation Plan (Proposal 2). The approval and adoption of the Invacare Corporation 2013 Equity Compensation Plan requires the affirmative vote of the holders of a majority of the votes cast on the proposal. In addition, rules of the New York Stock Exchange require that the total vote cast on the proposal represents over 50% of the total outstanding voting power of the Company on the record date. Abstentions and broker non-votes will not be voted for or against the proposal and will not be counted in the number of votes cast on the proposal. Accordingly, abstentions and broker non-votes also will have the same effect as a vote “Against” this proposal, unless total votes that are cast for and against the proposal represent more than 50% of the outstanding voting power of the Company on the record date, in which case abstentions and broker non-votes will have no effect on the outcome of the vote.

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Ratification of Independent Registered Public Accounting Firm (Proposal No. 3). Ratification of the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm requires the affirmative vote of the holders of a majority of the votes cast on the proposal. Abstentions will not be voted for or against the ratification of the appointment of Ernst & Young LLP and will not be counted in the number of votes cast on the proposal. 
Advisory Vote to Approve Executive Compensation (Proposal No. 4). Advisory approval of the compensation of our named executive officers requires the affirmative vote of the holders of a majority of the votes cast on the proposal. Abstentions and broker non-votes will not be voted for or against approval of our executive compensation and will not be counted in the number of votes cast on the proposal.
What constitutes a quorum?
A quorum of shareholders will be present at the annual meeting if at least a majority of the aggregate voting power of common shares and Class B common shares outstanding on the record date are represented, in person or by proxy, at the annual meeting. On the record date, 41,655,818 votes were represented by outstanding shares; therefore, shareholders representing at least 20,827,910 votes will be required to establish a quorum. Abstentions and broker non-votes will be counted for the purpose of determining the presence of a quorum.
Can I revoke or change my vote after I submit a proxy?
Yes. You can revoke your proxy or change your vote at any time before the proxy is exercised at the annual meeting. This can be done by either submitting another properly completed proxy card with a later date, sending a written notice to our Secretary, or by attending the annual meeting and voting in person. You should be aware that simply attending the annual meeting will not automatically revoke your previously submitted proxy; rather you must notify an Invacare representative at the annual meeting of your desire to revoke your proxy and vote in person.
Can I access the Notice of Annual Meeting, Proxy Statement and the 2012 Annual Report on the Internet?
The Notice of Annual Meeting, Proxy Statement and 2012 Annual Report are available on the Internet at www.invacare.com/annualreport. We also will provide a copy of any of these documents to any shareholder free of charge, upon request by writing to: Shareholder Relations Department, Invacare Corporation, One Invacare Way, P.O. Box 4028, Elyria, Ohio 44036-2125.
If you hold your shares in a bank or brokerage account, your bank or broker may also provide you copies of these documents electronically. Please check the information provided in the proxy materials mailed to you by your bank or broker regarding the availability of this service. Brokerage firms have the authority under the New York Stock Exchange rules to vote shares on certain “routine” matters when their customers do not provide voting instructions. However, on other matters, when the brokerage firm has not received voting instructions from its customers, the brokerage firm cannot vote the shares on that matter and a “broker non-vote” occurs. Proposal 3 is a routine matter, but the other proposals in this proxy statement are non-routine matters. Please be sure to give specific voting instructions to your broker so that your vote can be counted.  

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ELECTION OF DIRECTORS
(Proposal No. 1)
At the 2010 Annual Meeting, Invacare's shareholders approved an amendment to the Code of Regulations to declassify the Board of Directors in stages beginning in 2011, as the directors' terms expire. The declassification of the Board of Directors will be completed this year at the 2013 Annual Meeting, and all directors will be elected to serve a one-year term until the annual meeting in 2014 or until their successors have been duly elected. Each of the nominees is presently a director of Invacare and has indicated his willingness to serve another term as a director if elected.
In accordance with the director age limitations in the Company's Corporate Governance Guidelines, Joseph B. Richey, II will not stand for reelection and will retire from the Board upon the expiration of his current term at the 2013 Annual Meeting. Effective upon Mr. Richey's retirement, the Board of Directors has fixed the number of directors constituting the Board at eleven.

At next year's annual meeting, one other director will reach the director age limit of 75 provided in the Corporate Governance Guidelines, and another two directors will reach the age limit at the 2015 annual meeting. In anticipation of these developments, the Company's Nominating Committee, with input from the Chairman and the Lead Director, has initiated the process of identifying a range of potential director candidates and evaluating their credentials and qualifications, so that the Nominating Committee will be prepared to recommend suitable candidates for election as directors when the Company's current directors retire from the Board, if the Board determines to nominate a candidate to replace any retiring director and maintain the then-current size of the Board of Directors.
Below is certain biographical information regarding our director nominees, as well as a discussion of the qualifications that led the Board of Directors to conclude that each director nominee should serve as a director of the Company. Each of the individuals listed below has a wealth of knowledge, experience and expertise developed over a lifetime of achievement. In the discussion below, we have not detailed all of the numerous factors considered by the Board, but rather have highlighted the primary qualifications that led the Board to conclude that each of the following individuals should serve as a director. The Board of Directors believes that the current Board composition reflects an appropriately diverse group of individuals with relevant knowledge and experience that greatly benefits the Company.
Michael F. Delaney, 64, has been a director since 1986. From 1983 to October 2003, Mr. Delaney served as the Associate Director of Development of the Paralyzed Veterans of America, a national veterans' service organization in Washington, D.C. Since October 2003, Mr. Delaney served as Associate Director of Corporate Marketing of the Paralyzed Veterans of America until his retirement on July 31, 2009. From November 2009 to February 2010, Mr. Delaney provided consulting services to the Department of Defense in connection with its Congressionally Directed Medical Research Program.
The Board concluded that Mr. Delaney should serve as a director of the Company primarily due to his unique background and experience. Mr. Delaney utilizes a wheelchair and has worked tirelessly for decades on behalf of people with disabilities, provides invaluable insight and perspective to the Board with respect to the Company's products, their use, and possible attributes. He uses his background and training in development and marketing to assist the Company with effective approaches to marketing its products to consumers.
C. Martin Harris, M.D., 56, has been a director since 2003 and was appointed Invacare's lead director effective May 17, 2012. Since 1996, Dr. Harris has been the Chief Information Officer and Chairman of the Information Technology Division of The Cleveland Clinic Foundation in Cleveland, Ohio and a Staff Physician for The Cleveland Clinic Hospital and The Cleveland Clinic Foundation Department of General Internal Medicine. Additionally, since 2000, he has been Executive Director of e-Cleveland Clinic, a series of e-health clinical programs offered over the internet. Dr. Harris serves on the board of HealthStream Inc. (NASDAQ), Nashville, Tennessee, which provides internet-based learning and research solutions for the training, information, and education needs of the healthcare industry in the United States and on the board of Thermo

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Fisher Scientific Inc. (NYSE), Waltham, Massachusetts, which provides analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. Dr. Harris was on the Board of Directors of Sewtillion Corporation, an Andover, Massachusetts healthcare software technology company which was sold to Microsoft Corporation in early 2010.  
The Board concluded that Dr. Harris should serve as a director of the Company primarily due to his experience in the healthcare industry as a physician and leader of healthcare organizations and also his expertise in the use of information technology in the healthcare industry. Dr. Harris is nationally recognized for his leadership in developing and organizing electronic management of medical information, including electronic medical records. Through his work with organizations such as e-Cleveland Clinic and the National Health Information Infrastructure Task Force, Dr. Harris has gained experience which enables him to provide valuable input to the Board, and ultimately the Company, as to the latest developments and trends involving the use of information to enhance healthcare diagnoses, patient outcomes and cost efficiencies. In particular, he is able to assist the Board in staying abreast of developments in technological advances in the home medical equipment industry. Dr. Harris' understanding of information technology developments in the healthcare industry has proven to be instrumental to the Board's management of the Company's own strategy and information technology resources, particularly in connecting the Company's widespread international operations.
A. Malachi Mixon, III, 72, has been a director since 1979. Mr. Mixon served as Chief Executive Officer from 1979 through April 2010 and as President until 1996. He has served as Chairman of the Board since 1983. Mr. Mixon serves on the Board of Directors of Park-Ohio Holdings Corp (NASDAQ), Cleveland, Ohio, a provider of supply chain logistics services and a manufacturer of highly engineered products, and The Sherwin-Williams Company (NYSE), Cleveland, Ohio, a manufacturer and distributor of coatings and related products, which service will conclude upon his retirement from the Board of Sherwin-Williams at its 2013 Annual Meeting. Mr. Mixon also serves as Chairman Emeritus of the Board of Trustees of The Cleveland Clinic Foundation, Cleveland, Ohio, one of the world's leading academic medical centers.
The Board concluded that Mr. Mixon, a founder of Invacare, should serve as a director of the Company primarily due to his role as the leader of the Company since its inception and as a nationally recognized and influential medical equipment industry executive. The Board believes that having Mr. Mixon, who is intimately familiar with the Company's capabilities, customers, strategy, position in the industry and with developments within the industry, serving as a director provides the Board with invaluable Company and industry insight. Mr. Mixon has become a leading national spokesman for home medical equipment manufacturers and distributors and one of the visionary forces driving strategy and change across the industry. Mr. Mixon's experience, influence in the industry and in government affairs, and deep knowledge of the Company and its industry provides the Board with the management perspective necessary to successfully oversee the Company and its strategy and business operations.
Gerald B. Blouch, 66, has been President and a director of Invacare since November 1996. Effective January 1, 2011, Mr. Blouch became Chief Executive Officer of Invacare, after serving as interim Chief Executive Officer from April 2010 through December 2010. Mr Blouch served as Chief Operating Officer from December 1994 through December 2010. Previously, Mr. Blouch was President - Homecare Division from March 1994 to December 1994 and Senior Vice President - Homecare Division from September 1992 to March 1994. Mr. Blouch served as Chief Financial Officer of Invacare from May 1990 to May 1993 and Treasurer of Invacare from March 1991 to May 1993.
The Board concluded that Mr. Blouch should serve as a director of the Company primarily due to his role as Chief Executive Officer, and his more than twenty years of experience with the Company, which has given Mr. Blouch a deep knowledge and understanding of the Company and the financial and operational aspects of its business, as well as the competitive environment in which it operates. Mr. Blouch has demonstrated his leadership abilities and his commitment to the Company since he was appointed an executive of Invacare in 1990, and his intimate knowledge of all of the major functional areas of the Company is invaluable to the Board.  

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William M. Weber, 73, has been a director since 1988. Since August 2005, Mr. Weber has served as CEO of Air Enterprises L.L.C., which designs and manufactures custom high end air handling equipment for critical areas in the hospital, drug and educational markets. Mr. Weber also served as a director and Chairman of the Board of Air Enterprises L.L.C. until 2009. Mr. Weber is also Chairman and CEO of Thermotech Enterprises Inc., which designs and manufactures energy recovery wheels for custom air handling manufacturers. From 1994 to 2005, Mr. Weber was President of Roundcap L.L.C. and a principal of Roundwood Capital L.P., a partnership that invested 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.
The Board concluded that Mr. Weber should serve as a director of the Company primarily due to his lengthy experience in managing diverse private businesses, and his financial expertise, particularly in analyzing financial information across a wide variety of investment profiles. As a long time investor in the Company, Mr. Weber also has great knowledge of and familiarity with Invacare's business and operations. Mr. Weber's financial expertise is of particular value to the Board in evaluating and managing the Company's financial risks and internal controls through his role as Chair of the Audit Committee.
Charles S. Robb, 73, has been a director since 2010. Senator Robb served as Lt. Governor of Virginia from 1978 to 1982, as Virginia's 64th governor from 1982 to 1986, and as a United States Senator from 1989 to 2001. Since leaving the Senate, Senator Robb has been a Distinguished Professor of Law and Public Policy at George Mason University and has served as Chairman of the Board of Visitors at the United States Naval Academy and Co-Chairman of the President's Commission on Intelligence Capabilities of the United States Regarding Weapons of Mass Destruction. He has also been a member of the President's Intelligence Advisory Board, the Secretary of State's International Security Advisory Board and the FBI Director's Advisory Board, as well as the Iraq Study Group and several other national security advisory boards and commissions. He is currently Vice Chairman of the Board of Trustees of the MITRE Corporation, a not-for-profit organization that conducts federally funded research and development.
The Board concluded that Senator Robb should serve as a director of the Company primarily due to his extensive experience in both state and federal government and in international affairs. This experience is particularly important today with the current administration's reform of the healthcare system. As the former U.S. Senator from, and former governor of, Virginia and the chairman and/or member of the various organizations listed above, Senator Robb brings a unique perspective to the Board in its evaluation of the Company's management and organization, and in its role and success during the ongoing evolution of the healthcare industry. Additionally, Senator Robb's international experience will be beneficial to the Board as it oversees the Company's global operations and entry into new markets.
Baiju R. Shah, 41, has been a director since 2011. Mr. Shah has been the CEO of BioMotiv since August 2012. BioMotiv is a company focused on advancing a portfolio of discoveries from research institutions to new medicines. Prior to that, Mr. Shah was President and CEO of BioEnterprise Cleveland from 2004 to August 2012, Senior Vice President from 2003 to 2004 and a Vice President from 2002 to 2003. BioEnterprise is a Cleveland-based business formation, recruitment and acceleration initiative designed to grow health care companies and commercialize biomedical technologies. Prior to BioEnterprise, Mr. Shah worked for McKinsey & Company, where he was a leader in its Growth and Business Building practice. In addition, Mr. Shah participates on several civic, nonprofit and advisory boards including RBS Citizens/Charter One.
The Board concluded that Mr. Shah should serve as a director of the Company primarily due to his experience in the healthcare and biomedical industry gained through his leadership of BioMotiv and BioEnterprise. The business insight gained through his work at BioMotiv, BioEnterprise and McKinsey & Company, in particular his demonstrated abilities in advancing initiatives to help companies grow and expand, provides Mr. Shah with a perspective on healthcare business and growth initiatives that is invaluable to the Board.  
James L. Jones, 69, has been a director since 2010. General Jones is currently President of Jones Group International, a global consultancy. General Jones served as National Security Advisor to United States President Barack Obama from January 2009 to November 2010. Prior to joining President Obama's

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administration as National Security Advisory, General Jones was a member of the Company's Board of Directors from March 2007 to January 2009. General Jones served as Supreme Allied Commander of NATO (North Atlantic Treaty Organization) and Commander of the United States European Command from January 2003 until December 2006. From July 1999 to January 2003, General Jones was the 32nd Commandant of the United States Marine Corps.
The Board concluded that General Jones should serve as a director of the Company primarily due to his extensive leadership experience, particularly in international and governmental affairs, developed through his long and distinguished career in the U.S. military and government service. General Jones' capabilities and insights into government and international affairs, as well as organizational leadership and personnel management, make him a uniquely valuable resource to the Board of Directors in overseeing and evaluating the Company's strategic direction and management succession planning.
Dan T. Moore, III, 73, has been a director since 1980. Mr. Moore has been President of Dan T. Moore Co. since 1970 and is Chairman of seven advanced materials manufacturing companies: Soundwich, Inc., Team Wendy LLC, NatGasCar LLC, Delaware Dynamics LLC, Polyfill LLC and Tennessee Iron Products. He is a director of Park-Ohio Holdings Corp (NASDAQ), Cleveland, Ohio, a provider of supply chain logistics services and a manufacturer of engineered products. Mr. Moore is also a Trustee of The Cleveland Clinic Foundation, vice chairman of Cleveland State University and serves as a vice president on the Cleveland Metroparks Board of Park Commissioners. Mr. Moore served as a director of Hawk Corporation, Cleveland, Ohio, a supplier of friction products for brakes, clutches, and transmissions used in aerospace, industrial and specialty applications from 1989 until its sale in December 2010.
The Board concluded that Mr. Moore should serve as a director of the Company primarily due to the leadership capabilities, business acumen and operations experience he has demonstrated over years of managing and serving as a director of numerous manufacturing companies. Mr. Moore is a recognized and successful entrepreneur and a founding investor of Invacare. His skills and experience, coupled with his familiarity with the Company and its operations through his long tenure as a director of the Company, is of particular value to the Board in setting corporate strategy and goals and in evaluating the Company's product and operational challenges and opportunities.
Dale C. LaPorte, 71, has been a director since 2009. Mr. LaPorte served as Senior Vice President - Business Development and General Counsel of the Company from December 2005 to December 2008. Prior to joining the Company, Mr. LaPorte was a partner at Calfee, Halter & Griswold LLP, an Ohio-based law firm, from 1974 to 2005 and served as chairman of that firm from 2000 to 2004. Mr. LaPorte serves as a member of the Board of Trustees of PNC Mutual Funds and the board of directors of Morrison Products, Inc., a manufacturer of air moving equipment for original equipment manufacturers in the heating, ventilation, air conditioning and refrigeration industry.
The Board concluded that Mr. LaPorte should serve as a director of the Company primarily due to his lengthy experience as counsel to the Company, skills in project management, expertise in corporate governance and business development matters, as well as his business acumen and judgment. Mr. LaPorte's skills are a vital asset to the Board, particularly at a time when sound risk management and exemplary governance practices are essential.
Ellen O. Tauscher, 61, was elected as a director on February 9, 2012. Ms. Tauscher currently provides expert advice to the State Department on arms control, missile defense and civil nuclear cooperation. Previously, in March 2009, Ms. Tauscher was nominated by President Obama to serve as Under Secretary of State for Arms Control and International Security and served from her Senate confirmation in June 2009 to February 6, 2012. Prior to joining the State Department, Ms. Tauscher served from January 1997 to June 2009 as a member of the U.S. House of Representatives from California's 10th Congressional District. While a member of Congress, Ms. Tauscher served on the House Armed Services Committee, the House Transportation and Infrastructure Committee and most recently as Chairman of the House Armed Services Subcommittee on Strategic Forces. Prior to serving in Congress, Ms. Tauscher worked in investment banking and the financial industry in various roles for Bache Halsey Stuart Shields, Bear Stearns & Co., Drexel

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Burnham Lambert and as an officer of the American Stock Exchange. From 1977 to 1980, Ms. Tauscher was a member of the New York Stock Exchange representing Bache, Halsey Stuart Shields.
The Board concluded that Ms. Tauscher should serve as a director of the Company primarily due to her extensive experience in international and governmental affairs and her business and financial acumen, developed through her outstanding career in the service of the U.S. State Department and as a member of Congress and her work in investment banking and the financial industry. Ms. Tauscher's government service, coupled with her business experience, makes her a valuable resource to the Board in overseeing the Company's global strategy, strategic direction and operating performance.
Invacare's Board of Directors recommends that shareholders vote “FOR” the election
of all eleven directors for a term expiring in 2014.
APPROVAL AND ADOPTION OF THE
INVACARE CORPORATION 2013 EQUITY COMPENSATION PLAN
(Proposal No. 2)
The second proposal to be acted upon at the Annual Meeting is the approval of the Invacare Corporation 2013 Equity Compensation Plan (the “2013 Plan”), adopted on March 18, 2013 by the Company's Board of Directors (the “Board”). The Board's adoption of the 2013 Plan is subject to approval by the shareholders at the Annual Meeting. If the 2013 Plan is approved by shareholders, it will become effective on the day following the Annual Meeting.
The Board believes that equity-based compensation payable under the 2013 Plan will enable the Company to continue to attract and retain talented directors and employees and provide an incentive for those directors and employees to increase the Company's value. In addition, the Board believes stock ownership is important because it aligns the interests of the Company's key employees with the interests of its shareholders.
The Board adopted the 2013 Plan because the ten-year term of the Company's prior equity plan, the Invacare Corporation Amended and Restated 2003 Performance Plan (the “2003 Plan”), will expire in April 2013. Upon its expiration, no new awards will be granted under the 2003 Plan, but awards granted prior to its expiration will remain in effect under their original terms.
Shareholder approval of the 2013 Plan is intended to constitute approval for purposes of the approval requirements of Section 162(m) of the Internal Revenue Code (the “Code”), so that awards based on the attainment of performance goals using the performance measures set forth in the 2013 Plan are eligible to qualify as “performance-based compensation” under Code Section 162(m). If awards so qualify, the Company may avoid the loss of tax deductions for compensation paid to certain officers of the Company.
Summary of the 2013 Plan
The following summary of the material features of the 2013 Plan is qualified in its entirety by reference to the full text of the 2013 Plan, which is set forth in Appendix A to this proxy statement.
Eligibility and Types of Awards
The Compensation and Management Development Committee of the Board (the “Compensation Committee”), in its discretion, may grant an award under the 2013 Plan to any director or employee of the Company or an affiliate. There are 11 directors and approximately 230 employees who are eligible to participate in the 2013 Plan.
The 2013 Plan provides for the following types of awards with respect to shares of the Company's common shares: incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, unrestricted stock, and performance shares. The Compensation Committee also may grant performance units that are payable in cash.

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Common Shares Subject to the 2013 Plan
Available Shares
The maximum number of the Company common shares, without par value, available for issuance under the 2013 Plan will not exceed the sum of the following:
3,800,000 shares; plus
any shares covered by an award under the 2013 Plan or the 2003 Plan that are forfeited or remain unpurchased or undistributed upon termination or expiration of the award.
The maximum number of shares available for awards of incentive stock options is 3,800,000 shares.
Fungible Share-Counting Method
The 2013 Plan uses a fungible share-counting method, under which:
each common share underlying an award of stock options or SARs will count against the number of total shares available under the 2013 Plan as one share; and
each common share underlying any award other than a stock option or a SAR will count against the number of total shares available under the 2013 Plan as two shares.
Any common shares that are added back to the 2013 Plan as the result of the cancellation or forfeiture of an award granted under the 2013 Plan will be added back in the same manner such shares were originally counted against the total number of shares available under the 2013 Plan. Each common share that is added back to the 2013 Plan due to a cancellation or forfeiture of an award granted under the 2003 Plan will be added back as one common share.
Individual Limits for “Performance-Based Compensation” under Code Section 162(m)
The 2013 Plan sets annual limits with respect to awards that are intended to qualify as “performance-based compensation” under Code Section 162(m). Under the 2013 Plan,
no participant will be granted stock options or SARs for more than 400,000 common shares, in the aggregate, during any calendar year;
no participant will be granted awards of restricted stock, restricted stock units, performance shares or performance units that are intended to qualify as “performance-based compensation” under Code Section 162(m) for more than 50,000 common shares, in the aggregate, during any calendar year; and
no participant will receive any awards payable in cash that are intended to qualify as “performance-based compensation” under Code Section 162(m) and have an aggregate maximum value as of their respective grant dates in excess of $5,000,000 during any calendar year.
Under the 2013 Plan, awards to non-employee directors are subject to annual limits that are similar to those described above.
Outstanding Common Shares and Awards
As of March 18, 2013, there were:
30,808,348 of the Company's common shares outstanding;
5,170,492 stock options granted under the 2003 Plan (and no SARs) outstanding, with an average exercise price of $24.38 and average remaining term of 6.4 years; and
a total of 366,598 full-value awards granted under the 2003 Plan outstanding, all of which are restricted stock awards that are included in the number of the Company's common shares outstanding.

9



After March 18, 2013 and prior to the expiration of the 2003 Plan, the Company may grant awards to newly hired employees under the 2003 Plan, but the total number of common shares underlying any new awards will not exceed 20,000 shares.
Adjustments
In the event of any stock dividend, stock split, consolidation, reorganization, merger, spinoff, or similar transaction affecting the Company's common shares, the Compensation Committee will adjust the number of shares available for grants, the number of shares subject to the full-value award limits and individual limits, and the number of shares and price under outstanding grants made before the event, as provided in the 2013 Plan.
 
No Liberal Share Counting/Recycling Provisions
The 2013 Plan prohibits liberal share counting by requiring that no shares tendered in payment of a stock option's exercise price may be added back into the aggregate share limit. The 2013 Plan also provides that no shares withheld in satisfaction of tax withholding obligations may be added back into the aggregate share limit. The number of common shares covered by a SAR, to the extent that it is exercised and settled in common shares, and whether or not shares are actually issued to a participant upon exercise of the SAR, will be considered issued or transferred. Lastly, in the event that the Company repurchases common shares with stock option exercise proceeds, those shares will not be added to the aggregate plan limit.

Administration
The 2013 Plan will be administered by the Compensation Committee, which has broad discretionary authority under the 2013 Plan. The Compensation Committee may delegate all or any part of its authority and powers under the 2013 Plan to one or more directors or officers of the Company. The Compensation Committee may not, however, delegate its authority and powers:

with respect to awards to persons covered by Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”);
in a way that would jeopardize the 2013 Plan's satisfaction of Rule 16b-3 of the Exchange Act; or
respect to awards intended to qualify as “performance-based compensation” under Code Section 162(m).
 
Performance Targets and Performance Measures
So that certain awards under the 2013 Plan may be eligible to qualify as “performance-based compensation” for purposes of Internal Revenue Code Section 162(m), the Compensation Committee may condition awards on the achievement of certain objective performance targets (“Performance Targets”) established by the Compensation Committee during the first 90 days of the award's performance period. The performance measures used to establish the Performance Targets will be based on any of the factors listed below, alone or in combination, as determined by the Compensation Committee. Such factors may be applied on a corporate-wide or business-unit basis, include or exclude one or more of the Company's subsidiaries, may be in comparison with plan, budget, or prior performance, and/or may be on an absolute basis or in comparison with peer-group performance. Performance measures may differ from participant to participant and from award to award. The factors that may be used as performance measures will be one or more of the following: return on equity; earnings per share; net income; pre-tax income; operating income; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; cash flow; economic profit; total earnings; earnings growth; return on capital; operating measures (including, but not limited to, operating margin and/or operating costs); return on assets; return on net assets; return on capital; return on invested capital; increase in the fair market value of the Company's common shares; or total shareholder return.

10



The Compensation Committee may grant awards that are subject to the achievement of Performance Targets that are either intended to or not intended to qualify as “performance-based compensation” for purposes of Code Section 162(m).
In setting performance measures, the Compensation Committee may provide that any financial factor will be determined in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) or will be adjusted to exclude any or all GAAP or non-GAAP items.
If the Compensation Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the Performance Targets unsuitable, the Compensation Committee may modify such performance measures or the related minimum acceptable level of achievement, except with respect to awards that the Compensation Committee intends to qualify as “performance-based compensation,” to the extent such modification is not allowed under Code Section 162(m).
Minimum Vesting Periods
The 2013 Plan provides for a one-year minimum vesting period for performance-based full-value awards and a three-year minimum vesting period for time-based full value awards (which can vest in ratable tranches over the three-year period). Full-value awards include grants of restricted stock, restricted stock units, performance shares, performance units and unrestricted stock grants. However, a “basket” of shares is reserved in the 2013 Plan, out of which 10% of the shares available under the 2013 Plan can be used for awards that are not subject to the minimum vesting restrictions.
No Repricing
Repricing or replacement of underwater options and SARs is prohibited without shareholder approval under the 2013 Plan, except with respect to adjustments made in connection with certain corporate events or transactions described above in "Common Shares Subject to the 2013 Plan - Adjustments."
Description of Award Types
Subject to the limits imposed by the 2013 Plan, which are generally described in this proposal, the Compensation Committee, in its discretion, may award any of the following types of awards to a participant: incentive stock options; nonqualified stock options; stock appreciation rights; restricted stock; restricted stock units; performance shares; performance units; and unrestricted stock.
Stock Options
The Compensation Committee may grant nonqualified stock options and/or incentive stock options. The Compensation Committee establishes the exercise price, which may not be less than 100% of the fair market value of the common shares on the grant date. Stock options may not be re-priced without shareholder approval unless in connection with certain corporate events or transactions described above in "Common Shares Subject to the 2013 Plan - Adjustments." The Compensation Committee establishes the vesting date and the term of the option, subject to a maximum term of 10 years. A participant may pay the exercise price in cash, or if permitted by the Compensation Committee, by cashless exercise through a broker, by a net exercise, by delivering previously-owned Company common shares having a fair market value equal to the exercise price, any other manner permitted by the Compensation Committee and applicable law, or a combination of the foregoing. An award agreement for a stock option may provide that such option becomes exercisable in the event of the participant's death, disability or retirement.
Additional limits and rules apply to incentive stock options. For example, the Compensation Committee may not grant an employee incentive stock options to the extent that it would result in the employee first being able to exercise incentive stock options to purchase shares with an aggregate fair market value (determined as of the grant date) of more than $100,000 in any year.

11



As of March 18, 2013, the closing price for one common share quoted on the New York Stock Exchange was $14.49.
Stock Appreciation Rights (SARs)
The Compensation Committee may grant stock appreciation rights (“SARs”). The value of SARs is based on the increase in the value of the Company's common shares from the grant date to the date on which the employee exercises the SAR. The Compensation Committee determines the vesting and exercise periods for each SAR. A SAR must expire not later than 10 years after the grant date. SARs may be granted in connection with or separate from stock option grants. An award agreement for a SAR may provide that such SAR becomes exercisable in the event of the participant's death, disability or retirement or in connection with a change in control.

Restricted Stock
The Compensation Committee may grant restricted Company common shares or “restricted stock.” At the time of grant, the Compensation Committee will specify the period of restriction, the number of shares granted, and the conditions of the award. At the time of the award, the Compensation Committee will establish the period that must lapse and/or the performance targets that must be satisfied for the restrictions to lapse. In the case of restricted stock intended to qualify as “performance-based” compensation under Code Section 162(m), the Compensation Committee will base Performance Targets on one or more of the performance measures listed under “Performance Targets and Performance Measures” above. An award agreement for restricted stock may provide for the earlier termination of restrictions on such restricted stock in the event of the participant's death, disability or retirement or in connection with a change in control.
Restricted Stock Units
The Compensation Committee may grant restricted stock units. Restricted stock units will be evidenced by an award agreement containing such terms and provisions, consistent with the 2013 Plan, as the Compensation Committee may approve. A grant of restricted stock units constitutes an agreement by the Company to deliver common shares or cash to the participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions during the restriction period as the Compensation Committee may specify. In the case of a restricted stock unit intended to qualify as “performance-based” compensation under Code Section 162(m), the Compensation Committee will base Performance Targets on one or more of the performance measures listed under “Performance Targets and Performance Measures” above. During the applicable restriction period, the participant will have no right to transfer any rights under his or her award, will have no rights of ownership in the common shares deliverable upon payment of the restricted stock units, and will have no right to vote the common shares. An award agreement for restricted stock units may provide for the earlier termination of restrictions on such restricted stock units in the event of the participant's death, disability or retirement.
Performance Shares/Units
The Compensation Committee may grant performance units and/or performance shares. In the case of performance shares or units intended to qualify as “performance-based compensation” under Code Section 162(m), the Compensation Committee will base Performance Targets on one or more of the performance measures listed under “Performance Targets and Performance Measures” above. Performance units and/or performance shares may be paid in the form of cash, shares, or a combination of cash and shares. An award agreement for performance shares or performance units may provide for the earlier lapse of restrictions or other modifications in the event of the participant's death, disability or retirement.
Unrestricted Share Grants
The Compensation Committee may grant common shares, without restrictions on the shares granted.

12



Dividends and Dividend Equivalents
The 2013 Plan specifies that dividends or dividend equivalents issued with respect to common shares subject to performance-based awards will be deferred until and paid contingent upon the achievement of the applicable Performance Target.
 
Change in Control

The treatment of outstanding awards upon a change in control would depend on whether or not the awards are assumed by the entity effecting the change in control. In general, a change in control will be deemed to have occurred under the 2013 Plan if: (i) a person or group acquires 30% or more of the voting power of the Company in the election of directors (excluding certain purchases by A. Malachi Mixon III or his affiliates or by the Company or its benefit plans); (ii) the Company experiences a turn-over (not approved by at least two-thirds of the Company's directors) of a majority of its directors during a two-year period; (iii) the Company consummates a reorganization, merger or consolidation resulting in a substantial change in ownership of 50% or more of the voting power of the Company; (iv) the Company consummates a sale of all or substantially all of its assets; or (v) the Company's shareholders approve a liquidation or dissolution of the Company.
Upon the occurrence of a change in control, any awards made to a participant under the 2013 Plan that are assumed by the surviving entity will continue to vest and become exercisable in accordance with the terms of the original grant unless, during the two-year period commencing on the date of the change in control, the participant's employment is involuntarily terminated by the Company for reasons other than for “cause” (as defined in the 2013 Plan) or the participant terminates his or her employment for “good reason” (as defined in the 2013 Plan) (a so-called "double trigger"). If a participant's employment is terminated under such circumstances, any outstanding stock options and SARs will become fully vested and exercisable, any restrictions that apply to awards made pursuant to the 2013 Plan will lapse, and any awards that are subject to Performance Targets will immediately be earned or vested and will become immediately payable (unless prohibited by Code Section 409A) in accordance with their terms as if all of the Performance Targets have been achieved at their target levels as of the date of termination.
 Upon the occurrence of a change in control, any awards made under the 2013 Plan that are not assumed by the entity effecting the change in control will become fully vested and exercisable on the date of the change in control or will immediately vest and become immediately payable (unless prohibited by Code Section 409A) in accordance with their terms as if all of the applicable Performance Targets have been achieved at their target levels, and any restrictions that apply to such awards will lapse.
For each stock option and SAR that is not assumed in connection with a change in control, the holder will receive a payment equal to the difference between the consideration received by holders of common shares in the change in control transaction and the exercise price of the applicable stock option or SAR, if such difference is positive. Any stock options or SARs with an exercise price that is higher than the per share consideration received by holders of common shares in connection with the change in control transaction will be canceled for no additional consideration.
For any awards of restricted stock, restricted stock units, performance shares or performance units that are not assumed in connection with the change in control, the holder of those awards will receive the consideration that he or she would have received in the change in control transaction had he or she been a holder of the number of common shares equal to the number of restricted stock units and/or shares of restricted stock covered by the award and the number of common shares payable for awards subject to Performance Targets (as if achieved at target levels).
If the payment or benefit underlying an award constitutes a deferral of compensation under Code Section 409A, then the payment or delivery will be made on the date of payment or delivery originally provided for such payment or benefit in the applicable award agreement.

13



Amendment and Termination
The Board of Directors may amend, suspend, or terminate the 2013 Plan at any time. Shareholder approval of an amendment will be required only to the extent necessary to satisfy applicable legal, regulatory agency and stock exchange rules.
Recoupment
Any awards or payments made under the 2013 Plan are subject to the Company's Executive Compensation Adjustment and Recapture Policy.
Compliance with Section 409A of the Internal Revenue Code
To the extent applicable, it is intended that the 2013 Plan and any grants made thereunder comply with or be exempt from the provisions of Code Section 409A so that the income inclusion provisions of Code Section 409A (a)(1) do not apply to the participants. The 2013 Plan and any grants made under the 2013 Plan will be administered in a manner consistent with this intent.
Federal Income Tax Consequences
Tax Consequences for the Participants
The federal income tax consequences to a participant vary depending upon the type of award granted under the 2013 Plan. Generally, there are no federal income tax consequences to an employee upon the grant or exercise of an incentive stock option. If the employee holds the shares purchased through the exercise of an incentive stock option for more than two years after the grant day and one year after the exercise date (“required holding period”), the employee will be eligible for capital gains treatment on any excess of the sales price over the option price upon selling the shares. However, if the employee sells the shares during the required holding period, he must recognize ordinary income on the date of sale equal to the difference between the option price and the fair market value of the shares on the exercise date. The balance of the employee's gain, if any, on the sale of the shares is subject to capital gains treatment.
The recipient of a non-qualified stock option realizes ordinary income upon exercising the option equal to the difference between the option price and the fair market value on the exercise date of the shares purchased. Upon the subsequent sale of any such shares by the recipient, any appreciation or depreciation in the value of the shares after the exercise date will be treated as a capital gain or loss for the recipient.
A participant generally does not recognize income from the grant of restricted stock until the restrictions on the shares lapse. Pursuant to Code Section 83(b), a participant may elect to recognize income at the time of the grant, based on the value of the shares at that time. Any dividends on restricted stock paid to a participant before the lapse of restrictions are taxable to the participant.
A participant generally does not recognize income from the grant of restricted stock units until the restrictions on the restricted stock units lapse. At that time, the participant must recognize as ordinary income an amount equal to the fair market value of the shares underlying the restricted stock units. Any dividend equivalents paid to a participant with respect to restricted stock units before the lapse of restrictions are taxable to the participant.
No income generally will be recognized upon the grant of performance shares or performance units. Upon payment in respect of the earn-out of performance shares or performance units, the recipient generally will be required to include as taxable ordinary income in the year of receipt an amount equal to the amount of cash received and the fair market value of any unrestricted common shares received.
In general, awards of unrestricted stock are taxable to the participants and deductible by the Company at the time paid.

14



Tax Consequences to the Company or Subsidiary
To the extent that a participant recognizes ordinary income in the circumstances described above, the Company or the subsidiary for which the participant performs services will be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Code Section 280G and is not disallowed by the $1 million limitation on certain executive compensation under Code Section 162(m). In the case of grants of incentive stock options, the Company does not receive an income tax deduction, provided that the employee disposes of the shares after the required holding period.
Registration with the SEC
The Company intends to file a Registration Statement on Form S-8 relating to the issuance of common shares under the 2013 Plan with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, as soon as practicable after approval of the 2013 Plan by the Company's shareholders.
New Plan Benefits
It is not possible to determine specific amounts and types of awards that may be awarded in the future under the 2013 Plan because the grant and actual pay-out of awards under such plans are discretionary.
The Company's Board of Directors unanimously recommends a vote “FOR” the approval and adoption of the Invacare Corporation 2013 Equity Compensation Plan.
Equity Compensation Plan Information
The following table provides information as of December 31, 2012 about our common shares that may be issued upon the exercise of options, warrants and rights granted under all of our existing equity compensation plans, including the Invacare Corporation 2003 Performance Plan and the Invacare Corporation 1994 Performance Plan.
Plan Category 
 
Number of  securities
to be issued  upon exercise
of outstanding options,
warrants and  rights (a) 
 
 
Weighted-average
exercise  price of
outstanding  options,
warrants and  rights (b)  
 
Number of securities
remaining available  for future issuance under equity  compensation plans
(excluding securities reflected in column (a)) (c)  
 
Equity compensation plans approved by security holders
 
4,664,634

 
 
$26.21
 
1,248,033

(1)
Equity compensation plans not approved by security holders
 
3,267

(2)
 

 

 
Total
 
4,667,901

 
 
$26.21
 
1,248,033

 

(1)
Represents shares available under the Invacare Corporation 2003 Performance Plan. The Invacare Corporation 2003 Performance Plan allows for the granting of no more than 200,000 shares at an exercise price of not less than 75% of the market value on the date the option is granted. All other option grants must be made at not less than the market value on the date the option is granted. On March 18, 2013, the Company granted awards of an aggregate of 114,700 shares of restricted stock and stock options to purchase an aggregate of 747,450 common shares with an exercise price of $14.49 per share pursuant to the 2003 Plan. As of March 18, 2013 there were 5,170,492 stock options granted under the 2003 Plan (and no SARs) outstanding and a total of 366,598 full-value awards granted under the 2003 Plan outstanding. After March 18, 2013 and prior to the expiration of the 2003 Plan, the Company may grant awards to newly hired employees under the 2003 Plan, but the total number of common shares underlying any new awards will not exceed 20,000 shares.
(2)
Represents phantom share units in the 401(k) Plus Plan and the DC Plus Plan, which are allocated to participants' accounts at their discretion as their investment choice.

15



RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal No. 3)
The Audit Committee has appointed Ernst & Young LLP to continue as the Company's independent registered public accounting firm and to audit its financial statements for the year ended December 31, 2013. The Audit Committee and the Board of Directors are asking you to ratify this appointment. During the year ended December 31, 2012, Ernst & Young LLP served as the Company's principal auditors and provided tax and other services. See “Independent Registered Public Accounting Firm.” Representatives of Ernst & Young LLP are expected to be present at the annual meeting and will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.  
Invacare's Board of Directors unanimously recommends that shareholders vote “FOR
the ratification of the appointment of Ernst & Young LLP as the Company's independent
registered public accounting firm.
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
(Proposal No. 4)
Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended, the Company is providing its shareholders with the opportunity to cast an advisory vote at the Annual Meeting to approve the compensation of the named executive officers, as disclosed in this proxy statement pursuant to the Securities and Exchange Commission's compensation disclosure rules. The shareholder vote on executive compensation is an advisory vote only, and it is not binding on the Company or the Board of Directors.
At its 2012 Annual Meeting of Shareholders, the Company provided its shareholders with the opportunity to cast an advisory vote to approve the compensation of its named executive officers as disclosed in the proxy statement for the 2012 Annual Meeting, and the Company's shareholders approved the proposal. As the Board of Directors views it as a good corporate governance practice, and because the Company's shareholders previously indicated they were in favor of an annual advisory vote, the Company is again asking its shareholders to approve the compensation of its named executive officers as disclosed in this proxy statement in accordance with the SEC's rules.
This proposal, commonly known as a “say-on-pay” proposal, gives the shareholders the opportunity to express their views on the Company's named executive officers' compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the Company's named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, the Company will ask its shareholders to vote “FOR” the following resolution at the annual meeting:
“RESOLVED, that the Company's shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company's Proxy Statement for the 2013 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the compensation tables and any related material disclosed in this proxy statement.”
The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation and Management Development Committee or the Board of Directors. The Compensation and Management Development Committee values the opinions of the shareholders, and to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, the Company will consider its shareholders' concerns, and the Compensation and Management Development Committee will evaluate whether any actions are necessary to address those concerns. The next say-on-pay vote will occur at the Company's 2014 Annual Meeting.
Invacare's Board of Directors unanimously recommends that shareholders vote “FOR
the approval of the compensation of the named executive officers, as disclosed in this proxy statement.

16



SHARE OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
Who are the largest holders of Invacare's outstanding common shares and what is their total voting power?
The following table shows, as of February 22, 2013, the beneficial share ownership of each person or group known by Invacare to beneficially own more than 5% of either class of common shares of Invacare:
Name and business address of
beneficial owner
 
Common Shares
Beneficially Owned  
 
Class B
Common Shares
Beneficially Owned * 
 
Percentage of Total
Voting  Power
Beneficially  Owned 
 
Number of
Shares 
 
Percentage
of Outstanding
Shares 
 
Number
of Shares  
 
Percentage
of  Outstanding
Shares  
 
A. Malachi Mixon, III
 
1,431,758

 
4.1%
 
703,912

 
64.9%
 
18.6%
One Invacare Way
 
 

 
 
 
 

 
 
 
 
Elyria, Ohio 44035(1)(2)
 
 

 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Joseph B. Richey, II
 
792,687

 
2.3%
 
376,262

 
34.7%
 
10.1%
One Invacare Way
 
 

 
 
 
 

 
 
 
 
Elyria, Ohio 44035(3)
 
 

 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Heartland Advisors, Inc
 
4,223,328

 
12.4%
 

 
 
9.4%
789 North Water Street
 
 

 
 
 
 

 
 
 
 
Milwaukee, WI 53202(4)(5)
 
 

 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BlackRock, Inc.
 
3,680,866

 
10.8%
 

 
 
8.2%
40 E. 52nd Street
 
 

 
 
 
 

 
 
 
 
New York, NY 10022(4)(6)
 
 

 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dimensional Fund Advisors LP
 
2,197,062

 
6.5%
 

 
 
4.9%
Palisades West, Building One
 
 

 
 
 
 

 
 
 
 
6300 Bee Cave Road
 
 

 
 
 
 

 
 
 
 
Austin, TX 78746(4)(7)
 
 

 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Vanguard Group, Inc.
 
1,695,712

 
5.0%
 

 
 
3.8%
100 Vanguard Blvd.
 
 

 
 
 
 

 
 
 
 
Malvern, PA 19355(4)(8)
 
 

 
 
 
 

 
 
 
 
____________________  
*
All holders of Class B common shares are entitled to convert any or all of their Class B common shares to common shares at any time, on a share-for-share basis. In addition, Invacare may not issue any additional Class B common shares unless the issuance is in connection with share dividends on, or share splits of, Class B common shares.
  (1)
The number of common shares beneficially owned by Mr. Mixon includes 860,100 common shares that may be acquired upon the exercise of stock options during the 60 days following February 22, 2013. For the purpose of calculating the percentage of outstanding common shares and voting power beneficially owned by Mr. Mixon, the common shares which he had the right to acquire during that period upon the exercise of stock options are considered to be outstanding. The number of common shares shown as beneficially owned by Mr. Mixon also includes (i) 18,901 common shares owned by the trustee for the Invacare Retirement Savings Plan, (ii) 13,669 common shares owned of record by Mr. Mixon's spouse, (iii) 12,288 common shares owned by the trustee for a 1997 grantor retained annuity trust created by Mr. Mixon, (iv) 12,289 common shares owned by the trustee for a 1997 grantor retained annuity trust created by Mr. Mixon's spouse, (v) 95,247 common shares owned by

17



the trustee for a 2009 grantor retained annuity trust created by Mr. Mixon, (vi) 95,247 common shares owned by the trustee for a 2009 grantor retained annuity trust created by Mr. Mixon's spouse, and (vii) 69,446 common shares owned by the trustee for the 2012 grantor retained annuity trust created by Mr. Mixon's spouse. Mr. Mixon disclaims beneficial ownership of the shares held by his spouse and the grantor retained annuity trusts created by his spouse.
  (2)
The number of Class B common shares shown as beneficially owned by Mr. Mixon includes (i) 26,536 Class B common shares owned by the trustee for a 2011 grantor retained annuity trust created by Mr. Mixon, (ii) 83,005 Class B common shares owned by the trustee for a 2011 grantor retained annuity trust created by Mr. Mixon's spouse, (iii) 330,907 Class B common shares owned by the trustee for the 2012 grantor retained annuity trust created by Mr. Mixon, and (iv) 261,461 Class B common shares owned by the trustee for the 2012 grantor retained annuity trust created by Mr. Mixon's spouse. Mr. Mixon disclaims beneficial ownership of the shares held by the grantor retained annuity trusts created by Mr. Mixon's spouse.
  (3)
Includes 114,975 common shares, which may be acquired upon the exercise of stock options during the 60 days following February 22, 2013. For the purpose of calculating the percentage of outstanding common shares and voting power beneficially owned by Mr. Richey, the common shares which he had the right to acquire during that period upon the exercise of stock options are considered to be outstanding.
  (4)
The number of common shares beneficially owned is based upon a Schedule 13G or 13G/A filed by the holder with the SEC to reflect share ownership as of December 31, 2012, provided that the ownership percentages have been calculated by the Company based on the Company's issued and outstanding shares as of February 22, 2013.
  (5)
Based on a Schedule 13G/A filed on February 7, 2013 by Heartland Advisors, Inc., which does not have sole voting power over 4,173,903 shares and has shared dispositive power over 4,223,328 shares.
  (6)
Based on a Schedule 13G/A filed on January 11, 2013, by BlackRock, Inc., which has sole voting and dispositive power over 3,680,866 of the shares.
  (7)
Based on a Schedule 13G/A filed February 11, 2013, which reports that Dimensional Fund Advisors LP (“DFA”) may be deemed to be the beneficial owner of 2,197,062 common shares as a result of acting as investment advisor to or manager of various companies, trusts and accounts (the “DFA Funds”). In its role as investment advisor or manager, DFA possesses sole voting power for 2,158,205 shares and sole dispositive power for 2,197,062 shares that are owned by the DFA Funds. DFA disclaims beneficial ownership of those common shares because they are owned by the DFA Funds.
  (8)
Based on a Schedule 13G/A filed on February 11, 2013 by The Vanguard Group, Inc., which has sole voting power over 49,975 of the shares, sole dispositive power over 1,646,737 of the shares and shared dispositive power over 48,975 of the shares.

18



How many common shares do each of Invacare's directors and executive officers hold and what is their level of total voting power?
The following table sets forth, as of February 22, 2013, the beneficial share ownership of all directors, our five highest paid executive officers, and all directors and executive officers as a group:
Name of beneficial owner 
 
Common Shares
Beneficially Owned  
 
Class B
Common Shares
Beneficially Owned**  
 
Percentage  of
Total Voting Power
Beneficially  Owned 
 
Number
of
Shares  
 
Percentage
of Outstanding
Shares 
 
Number
of
Shares  
 
Percentage
of Outstanding
Shares  
 
Gerald B. Blouch(3)
 
600,700

 
1.8%
 
 
 
1.3%
Michael F. Delaney(3)
 
48,313

 
*
 
 
 
*
Robert K. Gudbranson(3)
 
121,455

 
*
 
 
 
*
C. Martin Harris, M.D.(3)
 
39,446

 
*
 
 
 
*
James L. Jones (3)
 
14,548

 
*
 
 
 
*
Dale C. LaPorte(3)
 
43,984

 
*
 
 
 
*
A. Malachi Mixon, III(1)
 
1,431,758

 
4.1%
 
703,912

 
64.9%
 
18.6%
Dan T. Moore, III(3)
 
134,230

 
*
 
 
 
*
Joseph B. Richey, II(2)
 
792,687

 
2.3%
 
376,262

 
34.7%
 
10.1%
Charles S. Robb(3)
 
23,334

 
*
 
 
 
*
Baiju R. Shah(3)
 
10,929

 
*
 
 
 
*
Louis F.J. Slangen(3)
 
164,507

 
*
 
 
 
*
Ellen O. Tauscher(3)
 
7,135

 
*
 
 
 
*
William M. Weber(3)(4)
 
106,109

 
*
 
 
 
*
All executive officers and Directors as a group (16 persons)(3)
 
3,634,845

 
10.2%
 
1,080,174

 
99.6%
 
31.0%
____________________

*
Less than 1%.
**
All holders of Class B common shares are entitled to convert any or all of their Class B common shares to common shares at any time, on a share-for-share basis. In addition, Invacare may not issue any additional Class B common shares unless the issuance is in connection with share dividends on, or share splits of, Class B common shares.
(1)
See Footnote 1 and Footnote 2 to the preceding table.
(2)
See Footnote 3 to the preceding table.
(3)
The common shares beneficially owned by Invacare's executive officers and directors as a group include an aggregate of 1,762,333 common shares which may be acquired upon the exercise of stock options during the 60 days following February 22, 2013. For the purpose of calculating the percentage of outstanding common shares and voting power beneficially owned by each of Invacare's executive officers and directors, and all of them as a group, common shares which they had the right to acquire upon the exercise of stock options within 60 days of February 22, 2013 are considered to be outstanding. The number of common shares that may be acquired upon the exercise of such stock options for the noted individuals is as follows: Mr. Blouch, 360,950 shares; Mr. Delaney, 24,691 shares; Mr. Gudbranson, 89,175 shares; Dr. Harris, 25,865 shares; General Jones, 5,867 shares; Mr. LaPorte, 7,858 shares; Mr. Mixon, 860,100 shares; Mr. Moore, 27,142 shares; Mr. Richey, 114,975 shares; Senator Robb, 11,853 shares; Mr. Shah, 2,248 shares; Mr. Slangen, 121,075 shares; Ms. Tauscher, 2,135 shares; and Mr. Weber, 27,524 shares.
(4)
All shares are pledged in a margin account.  

19



Section 16(a) Beneficial Ownership Reporting Compliance
The rules of the SEC require us to disclose late filings of reports of stock ownership, and changes in stock ownership, by our directors and executive officers. The Company believes that all of its officers and Directors complied with all filing requirements applicable to them with respect to transactions during the fiscal year ended December 31, 2012, except for the sale of four common shares by Mr. LaPlaca on March 19, 2012, which was reported on a Form 4 filed November 19, 2012.
CORPORATE GOVERNANCE
How many times did the Board meet in 2012?
During the fiscal year ended December 31, 2012, the Board of Directors held four regular meetings, including an annual two-day strategic planning meeting. Each director attended at least 75% of the aggregate of (1) the total number of meetings of the Board of Directors held during the period he or she served as a director and (2) the total number of meetings held by committees of the Board on which he or she served. Board members are expected to attend Invacare's annual meeting of shareholders. Each director then serving on the Board attended last year's annual shareholders meeting.
The non-management directors meet in executive sessions after the end of each of the regularly scheduled Board meetings. Independent directors meet in executive sessions at least once per year. The Company's Lead Director, who is currently C. Martin Harris, M.D., presides over executive sessions.
What codes of ethics apply to directors, officers and employees?
We have adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees. We also have adopted a separate Financial Code of Ethics that applies to our Chief Executive Officer (our principal executive officer), our Chief Financial Officer (our principal financial officer and principal accounting officer) and our controller or persons performing similar functions. You can find both codes on our website at www.invacare.com by clicking on the Investor Relations tab and then the Corporate Governance link. We will post any amendments to the codes, as well as any waivers that are required to be disclosed pursuant to the rules of the Securities and Exchange Commission and the New York Stock Exchange, within four business days, on our website.
Has the Board adopted corporate governance guidelines?
The Board has adopted Corporate Governance Guidelines. The Corporate Governance Guidelines contain principles that, along with the charters of the standing committees of the Board of Directors, provide the framework for Invacare's corporate governance. Among other things, the Corporate Governance Guidelines establish principles relating to:
the composition of the Board of Directors, including independence and other qualification requirements;
responsibilities and functions of the Board of Directors, such as meeting, orientation and continuing education guidelines;
responsibilities of the executive Chairman of the Board, the Chief Executive Officer and the Lead Director;
the establishment and functioning of Board committees;
executive sessions of non-management directors;
succession planning; 
Board access to management, and evaluation of the Board and the Chief Executive Officer;
communication and interaction by the Board with shareholders and other interested parties;

20



share ownership guidelines for directors and executive officers;
engagement by an independent committee of the Board with shareholder proponents following a majority vote on a shareholder proposal; and
periodic self-assessment by the Board and each Board committee.
A copy of the Corporate Governance Guidelines can be found on Invacare's website at www.invacare.com by clicking on the link for Investor Relations.
Who are the current members of the different Board committees?
Director
 
Audit
Committee
 
Nominating
Committee
 
Compensation  and
Management
Development
Committee
 
Investment
Committee
 
Governance
Committee
Gerald B. Blouch
 
 
 
 
 
 
 
 
 
 
Michael F. Delaney
 
 
 
*
 
 
 
*
 
 
C. Martin Harris, M.D.+
 
 
 

 
 
 
 
 
**
Dale C. LaPorte
 
 
 
 
 
 
 
**
 
 
James L. Jones
 
 
 
 
 
*
 
 
 
*
A. Malachi Mixon, III
 
 
 
 
 
 
 
 
 
 
Dan T. Moore, III
 
*
 
*
 
**
 
 
 
 
Joseph B. Richey, II
 
 
 
 
 
 
 
 
 
 
Charles S. Robb
 
 
 
**
 
 
 
*
 
 
William M. Weber
 
**
 
 
 
 
 
 
 
*
Baiju R. Shah
 
 
 
 
 
 
 
*
 
 
Ellen O. Tauscher
 
*
 
 
 
*
 
 
 
 
 
*
Member
**
Chairperson
+
Lead Director
What are the principal functions of the Board committees?
The Board has an Audit Committee; a Nominating Committee; a Compensation and Management Development Committee; an Investment Committee; and a Governance Committee.
Audit Committee.    The Audit Committee assists the Board in monitoring (i) the integrity of Invacare's financial statements, (ii) the independence, performance and qualifications of Invacare's internal and independent auditors, and (iii) Invacare's compliance with legal and regulatory requirements, including medical device regulatory compliance. The specific functions and responsibilities of the Audit Committee are set forth in the Audit Committee Charter adopted by the Board of Directors, a copy of which is available at www.invacare.com by clicking on the Investor Relations tab and then the Corporate Governance link. The Audit Committee met nine times during 2012.  
The Board has determined that each member of the Audit Committee satisfies the current independence standards of the New York Stock Exchange listing standards and Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended. The Board also has determined that each of Dan T. Moore, III and William M. Weber qualifies as an “audit committee financial expert” as that term is defined in Item 407(d)(5) of Regulation S-K, and each of Messrs. Moore and Weber and Ms. Tauscher satisfies the New York Stock Exchange accounting and financial management expertise requirements. James C. Boland served on the Audit Committee during 2012 until his retirement from the Board of Directors on May 17, 2012.

21



Nominating Committee.    The Nominating Committee assists the Board in identifying and recommending individuals qualified to become directors and will consider all qualified nominees recommended by shareholders. Each of the current members of the Nominating Committee is independent within the meaning of the New York Stock Exchange listing standards and Invacare's Corporate Governance Guidelines. The Board of Directors has adopted a charter for the Nominating Committee, which is available at www.invacare.com by clicking on the Investor Relations tab and then the Corporate Governance link. C. Martin Harris, M.D. served on the Nominating Committee during 2012 until May 17, 2012, when committee assignments were realigned by the Board of Directors. The Nominating Committee met one time during 2012.
Compensation and Management Development Committee.    The Compensation and Management Development Committee assists the Board in developing and implementing (i) executive compensation programs that are fair and equitable and that are effective in the recruitment, retention and motivation of executive talent required to successfully meet Invacare's strategic objectives and (ii) a management succession plan that meets Invacare's present and future needs. See “Compensation Discussion and Analysis” below for additional information on the committee and its activities. Each of the current members of the Compensation and Management Development Committee is independent within the meaning of the New York Stock Exchange listing standards and Invacare's Corporate Governance Guidelines. The Board of Directors has adopted a charter for the Compensation and Management Development Committee, which is available at www.invacare.com by clicking on the Investor Relations tab and then the Corporate Governance link. James C. Boland served on the Compensation and Management Development Committee during 2012 until his retirement from the Board of Directors on May 17, 2012. The Compensation and Management Development Committee met five times during 2012.
Investment Committee.    The Investment Committee assists the Board in monitoring the performance and attributes of investment funds chosen for the Invacare Retirement Savings Plan and other plans designated by the Board or the Investment Committee. The Board of Directors has adopted a charter for the Investment Committee, which is available at www.invacare.com by clicking on the Investor Relations tab and then the Corporate Governance link. The Investment Committee met two times during 2012.
Governance Committee.    The Governance Committee assists the Board on all matters relating to corporate governance of the Company, including, but not limited to, the development and implementation of the Company's corporate governance policies and guidelines. Each of the current members of the Governance Committee is independent within the meaning of the New York Stock Exchange listing standards and Invacare's Corporate Governance Guidelines. The Board of Directors has adopted a charter for the Governance Committee, which is available at www.invacare.com by clicking on the Investor Relations tab and then the Corporate Governance link. James C. Boland served on the Governance Committee during 2012 until his retirement from the Board of Directors on May 17, 2012. The Governance Committee met two times during 2012. 
How does the Board manage potential risks?
Risk is inherent in any business and our management is responsible for the day-to-day management of risks that we face. The Board, on the other hand, has responsibility for the oversight of risk management. In its risk oversight role, the Board has the responsibility to evaluate the risk management process to ensure its adequacy and to seek assurances that it is implemented properly by management.
The Board believes that full and open communication between management and the Board of Directors is essential for effective risk management and oversight. At each meeting, the Board of Directors receives presentations from senior management on business operations, financial results and strategic matters, including a quarterly assessment of the sensitivity of the various business, financial, operational, information technology, compliance and human capital risks faced by the Company, and discusses our strategies, key challenges, and risks and opportunities. Relevant members of senior management attend significant portions of the Board's quarterly meetings, as well as many of the Board committee meetings, in order to address any questions or concerns raised by the Board on risk management-related and other matters.

22



The Board's committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements. Enterprise risk assessment reports are regularly provided by management and our internal auditors to the Audit Committee. The Compensation and Management Development Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs and succession planning for executive officers. The Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization and structure, code of conduct, insider trading, conflict of interest policies and corporate governance. The Nominating Committee assists the Board in overseeing the membership and independence of the Board of Directors. While these committees are responsible for evaluating certain risks and overseeing the management of those risks, the entire Board is regularly informed about those risks and committee activities through committee reports.
Does the Board have a Lead Director?
The Company has an independent Lead Director who is responsible for coordinating the activities of the independent directors, including the following specific responsibilities:
(i) advising the Chairman of the Board as to an appropriate schedule of Board meetings, seeking to ensure that the independent directors can perform their duties responsibly while not interfering with the flow of Company operations;
(ii) providing the Chairman of the Board with input as to the preparation for the agendas for the Board and Committee meetings;
(iii) advising the Chief Executive Officer (with input from the Chairman of the Board) as to the quality, quantity and timeliness of the flow of information from Company management that is necessary for the independent directors to effectively and responsibly perform their duties; although Company management is responsible for the preparation of materials for the Board, the Lead Director may specifically request the inclusion of certain material;
(iv) interviewing, along with the Chairman of the Board and the chair of the Nominating Committee, all Board candidates, and making recommendations to the Nominating Committee and the Board;  
(v) assisting the Board and Company officers in assuring compliance with and implementation of the Company's Corporate Governance Guidelines;
(vi) recommending revisions to the Corporate Governance Guidelines as appropriate;
(vii) coordinating and developing the agenda for and moderating executive sessions of the Board's independent directors; acting as principal liaison between the independent directors, the Chairman of the Board and/or the Chief Executive Officer on sensitive issues;
(viii) evaluating, along with the members of the Compensation and Management Development Committee, the performance of both the Chairman of the Board and the Chief Executive Officer; meeting with the Chairman of the Board and the Chief Executive Officer to discuss the Committee's evaluation of performance;
(ix) discussing with the Chairman of the Board, the Chief Executive Officer and the Governance Committee the membership of the various Board Committees, as well as selection of the Committee chairs;
(x) responding to the concerns of any directors, whether or not these concerns are discussed with the full Board;
(xi) with input from the Chairman of the Board, assisting the Governance Committee in its role in connection with the annual self-evaluation process of the Board and its committees;
(xii) acting as a resource for, and counsel to, the Chairman of the Board; and

23



(xiii) performing other responsibilities as delegated by the Board.
A description of the responsibilities of the Lead Director also is included as Exhibit C to Invacare's Corporate Governance Guidelines, which is available at www.invacare.com by clicking on the link for Investor Relations. C. Martin Harris, M.D. serves as the Lead Director of the Board of Directors.
Why are the positions of Chairman of the Board and Chief Executive Officer split?
Gerald B. Blouch was named Invacare's President and Chief Executive Officer effective January 1, 2011. Mr. Blouch succeeded A. Malachi Mixon, III as Chief Executive Officer, allowing Mr. Mixon to focus his efforts on overseeing the activities of the Board of Directors and the Company's government relations and research and product innovation as the Company's executive Chairman of the Board. The Board believes this structure is optimal for the Company because it allows Mr. Blouch, who previously served as President and Chief Operating Officer for many years, to focus on the Company's strategic issues and the day-to-day operation of the business, while enabling Mr. Mixon to focus on leadership of the Board of Directors while still leading the Company in areas where he is uniquely qualified to contribute. The Board believes that the separate roles of Chief Executive Officer and executive Chairman of the Board provide an effective leadership model that capitalizes on the skills, expertise and experience of both Mr. Mixon and Mr. Blouch. The Board's independent directors bring experience, oversight, and expertise from outside the Company and industry, while the executive Chairman of the Board and the Chief Executive Officer bring company and industry specific experience and expertise. One of the key responsibilities of the Board is to oversee and guide management's strategic direction and hold management accountable for the execution of strategy once it is developed. The Board believes the separate roles of Chief Executive Officer and executive Chairman of the Board, together with an independent Lead Director having the duties described above, is in the best interests of the shareholders because it strikes an appropriate balance for the Company; with the CEO and executive Chairman of the Board, there is effective leadership and a focus on strategic development and execution, while the Lead Director helps assure independent oversight and management.  
How does the Board determine whether non-employee directors are independent?
To be considered independent under the New York Stock Exchange independence criteria under Section 303A (the “NYSE Standards”), the Board of Directors must determine that a director does not have a direct or indirect material relationship with Invacare. The Board of Directors has adopted the following guidelines (set forth in the Corporate Governance Guidelines) to assist it in making such determinations:
A director will be considered independent if he or she, at any time that is considered relevant under the NYSE Standards (subject to any applicable transition rules of the NYSE Standards):
(i) has not been employed by Invacare or its affiliates;
(ii) has not had an immediate family member who has been employed by Invacare or its affiliates as an executive officer;
(iii) has not received, and has not had an immediate family member who has received, more than such annual amount of direct compensation from Invacare as may be considered relevant from time to time under the NYSE Standards, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such deferred compensation is not in any way contingent on continued service);
(iv) has not been a partner of Invacare's present internal or external auditor;
(v) has not had an immediate family member who has been a partner of Invacare's present internal or external auditor;
(vi) has not had an immediate family member who has been a partner or employee of a present or former internal or external auditor of Invacare who worked on Invacare's audit;
(vii) has not been a partner or employee of a present or former internal or external auditor of Invacare who worked on Invacare's audit;

24



(viii) has not been employed, and has not had an immediate family member who has been employed, as an executive officer of another company where any of Invacare's present executives serve on that company's compensation committee; and
(ix) has not been an executive officer or an employee of another company, and has not had an immediate family member who has been an executive officer of another company, that does business with Invacare and makes payments to, or receives payments from, Invacare for property or services in an amount that, in the most recent fiscal year, exceeds the greater of $1 million or 2% of such other company's consolidated gross revenues.
Additionally, the following commercial and charitable relationships will be considered immaterial relationships and a director will be considered independent if he or she does not have any of the relationships described in clauses (i) - (ix) above, and:
(i) is not an executive officer of another company, and does not have an immediate family member who is an executive officer of another company, that is indebted to the Company, or to which Invacare is indebted, where the total amount of either company's indebtedness to the other is more than 5% of the total consolidated assets of the other company and exceeds $100,000 in the aggregate; and
(ii) does not serve, and does not have an immediate family member who serves, as an officer, director or trustee of a foundation (other than Invacare's foundation), university, charitable or other not for profit organization, and Invacare's, or Invacare foundation's, annual discretionary charitable contributions (any matching of employee charitable contributions will not be included in the amount of contributions for this purpose) to the organization, in the aggregate, are more than 5% percent of that organization's total annual revenues (or charitable receipts in the event such organization does not generate revenues).  
In the event that a director has a relationship of the type described in clauses (i) or (ii) in the immediately preceding paragraph that falls outside of the “safe harbor” thresholds set forth in such clauses (i) and (ii), or if the director had any such relationship during the prior three years that fell outside of such “safe harbor” thresholds, then in any such case, the Board of Directors annually shall determine whether the relationship is material or not, and therefore, whether the director would be independent or not. If any relationship does not meet the categorical standards of immateriality set forth in clauses (i) and (ii) in the immediately preceding paragraph, Invacare will explain in its next proxy statement the basis for any Board of Directors determination that such relationship is immaterial.
In addition, any director serving on the Audit Committee of Invacare may not be considered independent if he or she directly or indirectly receives any compensation from Invacare other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not in any way contingent on continued service).
The Board examined the transactions and relationships between Invacare and its affiliates and each of the directors, any of their immediate family members and their applicable affiliates. Based on this review, the Board affirmatively determined that each of Messrs. Delaney, Jones, Moore, Robb, LaPorte and Weber, Dr. Harris and Ms. Tauscher is independent and does not have any direct or indirect material relationship with Invacare pursuant to the categorical standards set forth in Invacare's Corporate Governance Guidelines and the NYSE Standards.
The Board determined that Mr. Shah is not independent due to a prior relationship that terminated more than two years ago. From 2003 to August 2012, Mr. Shah was the Chairman and CEO of BioEnterprise Cleveland, a non-profit entity designed to grow health care companies and commercialize biomedical technologies. Mr. Mixon, an executive officer of the Company, previously served on the Board of Trustees of BioEnterprise Cleveland until November 2010. During his tenure on the Board of Trustees, Mr. Mixon rotated on to BioEnterprise's Compensation Committee. Accordingly, pursuant to the categorical standards in the Company's Corporate Governance Guidelines and the NYSE Standards, which require the Board to consider this prior relationship to be relevant if it occurred within the last three years, the Board determined that Mr. Shah is not currently independent. The Board expects that Mr. Shah will be considered independent

25



under the categorical standards in the Corporate Governance Guidelines and the NYSE Standards after November 2013, at which time the prior relationship will have been terminated for more than three years.
How are proposed director nominees identified, evaluated and recommended for nomination?
The Nominating Committee will seek candidates for an open director position by soliciting suggestions from Committee members, the executive Chairman of the Board, incumbent directors, senior management or others. The Committee also may retain a third-party executive search firm to identify candidates from time to time. Additionally, the Committee will consider any unsolicited recommendation for a potential candidate to the Board from Committee members, the Chairman of the Board, other Board members, management and shareholders. The Committee will accept shareholder recommendations regarding potential candidates for the Board, provided that shareholders send their recommendations to the Chairperson of the Nominating Committee, c/o Executive Offices, Invacare Corporation, One Invacare Way, Elyria, Ohio 44036, with the following information:
The name and contact information for the candidate;
A brief biographical description of the candidate, including his or her employment for at least the last five years, educational history, and a statement that describes the candidate's qualifications to serve as a director;
A statement describing any relationship between the candidate and the nominating shareholder, and between the candidate and any employee, director, customer, supplier, vendor or competitor of Invacare; and
The candidate's signed consent to be a candidate and to serve as a director if nominated and elected, including being named in Invacare's proxy statement.
Once the Nominating Committee has identified a prospective candidate, the Committee makes a determination whether to conduct a full evaluation of the candidate. This initial determination is based primarily on the Board's need to fill a vacancy or desire to expand the size of the Board, the likelihood that the candidate can meet the Nominating Committee's evaluation criteria set forth below, as well as compliance with all other legal and regulatory requirements. The Nominating Committee will rely on public information about a candidate, personal knowledge of any committee or Board member or member of management regarding the candidate, as well as any information submitted to the Committee by the person recommending a candidate for consideration. The Nominating Committee, after consultation with the Chairman of the Board, will decide whether additional consideration of the candidate is warranted. 
If additional consideration is warranted, the Nominating Committee may request the candidate to complete a questionnaire that seeks additional information about the candidate's independence, qualifications, experience and other information that may assist the Committee in evaluating the candidate. The Committee may interview the candidate in person or by telephone and also may ask the candidate to meet with senior management. The Committee then evaluates the candidate against the standards and qualifications set out in the Nominating Committee's charter. While the Board does not maintain a policy regarding the diversity of its members, the Nominating Committee charter specifies that a director should have a range of experience and knowledge relevant to the Company, and that such relevant experience and knowledge may be gained through diverse or unique life experiences. The Nominating Committee and the Board believe that the current Board composition reflects a diverse group of individuals with relevant knowledge and experience that greatly benefits the Company. Additionally, the Nominating Committee shall consider other relevant factors as it deems appropriate (including independence issues and familial or related party relationships).
Before nominating an existing director for re-election at an annual meeting, the Committee will consider:
The director's value to the Board; and
Whether the director's re-election would be consistent with Invacare's governance guidelines.

26



After completing the Nominating Committee's evaluation of new candidates or existing directors whose terms are expiring, if the Committee believes the candidate would be a valuable addition to the Board or the existing director is a valued member of the Board, then the Nominating Committee will make a recommendation to the full Board that such candidate or existing director should be nominated by the Board. The Board will be responsible for making the final determination regarding prospective nominees after considering the recommendation of the Committee. These procedures were adhered to with respect to nominees for election at this meeting, who were unanimously recommended by the Nominating Committee and the entire Board of Directors.
How can shareholders and other interested parties communicate with the Board?
Shareholders and other interested parties may communicate their concerns directly to the entire Board or specifically to non-management directors of the Board. Such communications may be confidential or anonymous, if so designated, and may be submitted in writing to the following address: Shareholder Communication, c/o Executive Offices, Invacare Corporation, One Invacare Way, Elyria, Ohio 44036. The status of all outstanding concerns addressed to the entire Board or only to non-management directors will be reported to the Chairman of the Board or to the chair of the Governance Committee, respectively, on a quarterly basis.
Certain Relationships and Related Transactions
The Company has adopted a written policy for the review of transactions with related persons. The policy generally requires review, approval or ratification of transactions involving amounts exceeding $120,000 in which the Company is a participant and in which a director, director-nominee, executive officer, or a significant shareholder of the Company, or an immediate family member of any of the foregoing persons, has a direct or indirect material interest. These transactions must be reported for review by the Governance Committee. Following review, the Governance Committee determines whether to approve or ratify these transactions, taking into account, among other factors it deems appropriate, whether they are on terms no less favorable to the Company than those available with other unaffiliated parties and the extent of the related person's interest in the transaction. The Chairman of the Governance Committee has the authority to approve or ratify any related party transaction in which the aggregate amount involved is expected to be less than $1,000,000. The policy provides for standing pre-approval of certain related party transactions, even if the amounts involved exceed $120,000, including certain transactions involving: compensation paid to executive officers and directors of the Company; other companies or charitable organizations where the amounts involved do not exceed $1,000,000 or 2% of the organization's total annual revenues or receipts; proportional benefits to all shareholders; rates or charges determined by competitive bids; services as a common or contract carrier or public utility; and banking-related services.
During 2012, Invacare purchased travel services from a third party private aircraft charter company. One of the aircraft available for use by the charter company is owned by an entity owned by Mr. Mixon. Invacare paid approximately $718,000 to the charter company in 2012 for use of the aircraft owned by Mr. Mixon. Invacare has confirmed that the transactions were on terms no less favorable to Invacare than those Invacare would expect to obtain from unrelated parties.
The relationship described above has been reviewed and ratified in accordance with the Company's policy for review of transactions with related persons.

27




AUDIT COMMITTEE AND RELATED MATTERS
The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the Company specifically incorporates this Report by reference therein.
Report of the Audit Committee
The Audit Committee assists the Board of Directors in its oversight and monitoring of:
the integrity of the Company's financial statements;
the independence, performance and qualifications of the Company's internal auditors and independent registered public accounting firm; and
the Company's compliance with legal and regulatory requirements.
The Audit Committee's activities are governed by a written charter adopted by the Board of Directors which is available on the Company's website (www.invacare.com) by clicking on the Investor Relations tab and then the Corporate Governance link.
Each member of the Audit Committee satisfies the independence requirements set forth in the New York Stock Exchange listing standards and Rule 10A-3 of the Securities Exchange Act of 1934, as amended.
Management has the primary responsibility for the Company's financial statements and the reporting process, including the system of internal and disclosure controls. Ernst & Young LLP, the Company's independent registered public accounting firm for 2012, audited the annual financial statements prepared by management and expressed an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States. Ernst & Young LLP also audited the Company's internal control over financial reporting as of 2012, and issued an opinion with respect to the Company's internal control over financial reporting as of 2012.  
The Company's Vice President of Internal Audit, together with a nationally-recognized third party firm, conducts the Company's internal audit processes. During 2012, the Audit Committee met with the third party firm, the Vice President of Internal Audit and Ernst & Young LLP, with and without management present, to discuss their examinations, their continuing evaluation of the Company's internal and disclosure controls and the overall quality of the Company's internal procedures and controls over financial reporting.
As part of its oversight responsibilities described above, the Audit Committee met and held discussions with management, with Ernst & Young LLP and with its internal auditors relative to the Company's financial reporting. Management represented to the Audit Committee that the Company's financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the Audit Committee reviewed and discussed the audited financial statements with management and Ernst & Young LLP, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of specific judgments and the clarity of disclosures in the financial statements. The Audit Committee also discussed with Ernst & Young LLP such other matters as are required to be discussed with the Audit Committee by Statement on Auditing Standards No. 61, as amended by Statement on Auditing Standards No. 90, (Communication with Audit Committees).
In addition, Ernst & Young LLP provided to the Audit Committee the written disclosures and letter required by PCAOB Ethics and Independence Rule 3526 (Communications With Audit Committees Concerning Independence), and by all relevant professional and regulatory standards, related to the auditors' independence. The Audit Committee discussed with Ernst & Young LLP its independence from the Company and its management and considered the compatibility of non-audit services with the independence of Ernst & Young LLP.

28



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 2012 for filing with the Securities and Exchange Commission.
The Audit Committee has appointed Ernst & Young LLP as the Company's independent registered public accounting firm for its 2013 fiscal year, and the Company is seeking ratification of such appointment at the 2013 Annual Meeting of Shareholders.
AUDIT COMMITTEE
William M. Weber, Chairman
Dan T. Moore, III
Ellen O. Tauscher

Independent Registered Public Accounting Firm
The Audit Committee and the Board of Directors have selected Ernst & Young LLP to continue as the Company's independent registered public accounting firm and to audit the financial statements of Invacare for the fiscal year ending December 31, 2013. The Audit Committee is asking shareholders to ratify this appointment.  Fees for services rendered by Ernst & Young LLP were:
 
2012
 
2011
Audit Fees
$
3,371,400

 
$
3,409,100

Audit-Related Fees
3,000

 
2,800

Tax Fees
 

 
 

Tax Compliance Services
955,400

 
1,029,900

Tax Advisory Services
875,400

 
559,000

 
1,830,800

 
1,588,900

All Other Fees

 

Total
$
5,205,200

 
$
5,000,800

Audit Fees.    Fees for audit services include fees associated with the audit of the Company's annual financial statements and review of the Company's quarterly financial statements, including fees for statutory audits that are required domestically and internationally and fees related to the completion and delivery of the auditors' attestation report on internal control over financial reporting required under Section 404 of the Sarbanes-Oxley Act. Audit fees also include fees associated with providing consents and review of documents filed with the SEC, other services in connection with statutory and regulatory filings or engagements, as well as accounting consultations billed as audit consultations and other accounting and financial reporting consultation and research work necessary to comply with generally accepted auditing standards.
Audit-Related Fees.    Fees for audit-related services principally include fees associated with accounting consultations, audits in connection with proposed or completed acquisitions and other accounting advisory assistance.
Tax Fees.    Fees for tax services include fees associated with tax compliance, advice and planning services.
Pre-Approval Policies and Procedures
The Audit Committee has adopted a policy that requires advance approval for all audit, audit-related, tax services, and other services performed by our independent registered public accounting firm. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the Audit Committee must

29



approve the permitted service before the independent registered public accounting firm is engaged to perform it. The Audit Committee has delegated to the Chairperson of the Audit Committee authority to approve certain permitted services, provided that the Chairperson reports any such decisions to the Audit Committee at its next scheduled meeting. During 2012, no services were provided to the Company by Ernst & Young LLP other than in accordance with the pre-approval policies and procedures described above.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis

Executive Summary
This Compensation Discussion and Analysis describes our compensation programs and how they apply to our executives, including:
A. Malachi Mixon, III, executive Chairman of the Board;
Gerald B. Blouch, President and Chief Executive Officer;
Robert K. Gudbranson, Senior Vice President and Chief Financial Officer;
Joseph B. Richey, II, President, Invacare Technologies Division and Senior Vice President, Electronics and Design Engineering; and
Louis F.J. Slangen, Executive Vice President, Marketing and Chief Product Officer.
These five executives are referred to in this proxy statement as the “Named Executive Officers” and they are included in the Summary Compensation Table.
In 2012, Invacare persevered through one of the most challenging years in the Company's history. The year was dominated by the Company's consent decree negotiations with the United States Food and Drug Administration (“FDA”), which were completed when the consent decree became effective in December 2012, and by the Company's concerted effort over the year to update and implement a comprehensive portfolio of processes to achieve consistent compliance with the FDA's Quality System Regulation. This effort extensively engaged the entire management team and involved the redeployment of the majority of the Company's design engineering team to focus on quality systems remediation. As a result, the Company suspended most new product development over the past year and delayed its execution of certain other key business initiatives.
Recent uncertainty in the healthcare industry, as well as regulatory compliance matters, have posed challenges to the Company's business over the last few years, particularly in 2012. However, the overall design of the compensation program has remained fairly constant over that time. The compensation program is designed to further the Company's business goals, core values and shareholder interests by enabling the Company to attract and retain the talented executive leadership necessary for the growth and success of the Company's business and motivating its executives to exert the maximum possible effort to further the interests of shareholders, even through challenging times.
The major components of the Company's executive compensation program are base salary, annual cash bonuses, long-term equity compensation through stock options and restricted stock, and other employee and executive benefits. The Compensation Committee uses market compensation information and an independent compensation consultant to ensure that the executive compensation program is competitive relative to companies with which Invacare competes for executive talent.
Several significant developments are reflected in the compensation reported for 2012 for the Named Executive Officers, including the following:
In light of the uncertainty surrounding how the then-proposed FDA consent decree and other external factors might impact the Company's operating performance in 2012, the Company modified its annual cash bonus program to provide for a bonus pool for Named Executive Officers

30



to be funded based on the achievement of an adjusted operating income performance goal that, if met, would represent a 4% increase over 2011 adjusted operating income;
The Company's 2012 adjusted operating income was below the target performance goal established by the Compensation Committee under the annual cash bonus plan for 2012, and as a result, no bonuses were paid on the basis of the Company's consolidated financial performance. Messrs. Gudbranson and Slangen earned annual cash bonuses based only on the achievement of certain individual objectives, which bonuses were substantially below their overall target amounts;
Four of the five Named Executive Officers received merit salary-related awards in 2012 in recognition of their individual performance over the year. Messrs. Blouch and Gudbranson each received a merit salary increase of 3%. Messrs. Slangen and Richey were provided lump sum merit awards equal to 3% and 2%, respectively, of their salaries, in order to recognize their performance without increasing their respective annual base salary levels;
Mr. Mixon's base salary was reduced by 12%, in continuation of the Compensation Committee's plan to, over a multi-year period, further modify Mr. Mixon's compensation in connection with the role and responsibilities that he assumed in 2011;
The Company granted the Named Executive Officers long-term equity compensation awards in 2012 with an overall value below the market median value, in light of the Company's stock price performance and operating results during 2012 and the limited pool of shares remaining under the 2003 Performance Plan;
In granting long-term equity compensation awards, the Compensation Committee continued its practice of awarding a mix of stock options and restricted stock, weighted even more heavily in 2012 toward stock options, which the Compensation Committee views as performance-based. These awards reinforce executives' focus on increasing shareholder value, while still addressing retention and dilution considerations;
The Company modified its stock ownership guidelines to require Named Executive Officers to observe a minimum one (1) year holding period for their net shares from vested restricted stock awards and shares acquired upon the exercise of stock options;
In order to bring the Company's executive benefits more in line with market practices, the Compensation Committee determined in 2012 to discontinue the Executive Disability Income Plan, which had provided coverage for enhanced disability benefits to the Named Executive Officers; and
The Company maintained the reduced Company discretionary quarterly contributions into the Invacare Retirement Savings Plan and DC Plus Plan and the suspension of Company contributions and interest accruals under the SERP, which were initially implemented in 2011.
Impact of Last Year's Say on Pay Vote.   At the 2012 Annual Meeting, the Company's shareholders approved the compensation of the Company's Named Executive Officers, with holders of more than 80% of the votes cast voting in favor of the proposal commonly known as “say on pay.” The Board of Directors has determined that say on pay votes will be held annually until the next shareholder vote on the frequency of say on pay votes.
The Compensation Committee considered the results of the 2012 say on pay vote and believes that the approval of the proposal indicated that shareholders are supportive of the Company's executive compensation program and its philosophy and objectives. The Compensation Committee has sought to make executive compensation decisions that are consistent with the philosophy and objectives that the Company's shareholders approved in 2012.
Developments in 2013. In March 2013, the Compensation Committee determined to transition to implementing a long-term equity compensation program in 2014 and future years that will include awards with performance-based vesting. The program is intended to make long-term performance-based compensation a more significant component of the Named Executive Officers' total compensation, and thus further enhance the alignment of executive compensation with the interests of shareholders. The

31



Compensation Committee expects that future awards under the program will be made early in the fiscal year, in a combination of restricted stock and performance units that would vest after a three-year period based on the achievement of performance goals established by the Compensation Committee. These performance-based awards would be granted under the 2013 Equity Compensation Plan, which the Compensation Committee and Board of Directors have approved, subject to shareholder approval. Accordingly, the implementation of the new long-term equity compensation program and the grant of performance-based awards in the future are contingent upon the approval of the 2013 Equity Compensation Plan by the shareholders of the Company at the Annual Meeting. See “Proposal No. 2 - Approval and Adoption of the Invacare Corporation 2013 Equity Compensation Plan.”
Objectives of the Compensation Program
Invacare's compensation of key management is designed to further the Company's business goals, core values and shareholder interests by attracting and retaining the talented executive leadership necessary for the growth and success of the Company's business and motivating its executives to exert the maximum possible effort to further the interests of shareholders. To this end, the Company's executive compensation is intended to:
reward its executives for sustained financial and operating performance and leadership excellence;
align their interests with those of the Company's shareholders; and
encourage them to remain with the Company for long and productive careers.
Design of the Compensation Program
The major components of the Company's executive compensation program, the primary purpose of each component and the form of compensation of each component are described in the following table.
 
Component
 
Primary Purpose 
 
Form of Compensation 
Base Salary
 
Provides base compensation for day-to-day performance of job responsibilities; recognizes individual skills, competencies, experience and tenure with the Company.
 
Fixed, short-term cash compensation.
 
 
 
 
 
Annual Bonus
 
Incentivizes and rewards performance over the year based on achieving aggressive annual performance goals.
 
Variable or performance-based, short-term cash compensation.
 
 
 
 
 
Stock Options
 
Encourages improvement in the long-term performance of the Company, particularly share price appreciation, thereby aligning interests of executives with the interests of shareholders.
 
Variable or performance-based, long-term equity compensation.
 
 
 
 
 
Restricted Stock
 
Attracts and retains executives and further aligns interests of executives with the interests of shareholders.
 
Fixed, long-term equity compensation.
 
 
 
 
 
Other Employee and Executive Benefits
 
Provides a broad-based executive compensation program for employee retention, retirement and health; provides executive management continuity in the event of an actual or threatened change in control.
 
Employee benefit plans, programs and arrangements generally available to all employees; executive retirement and savings programs; limited perquisites and executive life insurance program; severance and change in control benefits.


32



The executives are compensated principally by using a combination of fixed and performance-based compensation and annual and long-term compensation, which are delivered in cash and equity-based awards. The Compensation Committee does not have a specific policy on the desired mix between fixed and variable, short and long-term, and cash and equity compensation.
The Compensation Committee uses compensation data from pay surveys and from its comparative group, which is referred to as “market compensation” in this section, as well as input from the Compensation Committee's independent compensation consultant and from each of the Chairman, the CEO and the Senior Vice President of Human Resources, to assist it in determining whether the Company's compensation is competitive and reasonable. While the Compensation Committee considers market compensation practices, it strives to incorporate flexibility in the Company's compensation programs and in the assessment process in order to respond to and adjust for, if appropriate, the evolving business environment, including market conditions which may be beyond management's control.  
Compensation Decisions in 2012
The Compensation Committee's decisions are based on its assessment of each executive's performance during the year against a variety of factors which may include corporate and personal goals, leadership qualities, operational performance, business responsibilities, career with the Company, current compensation arrangements and long-term potential to enhance shareholder value. Among the factors which may be considered are key financial measurements, strategic objectives, product improvement and innovation, individual achievements, organizational leadership and high integrity. In annually setting an executive's target compensation, the Company does not necessarily adhere to rigid formulas or react immediately to short-term changes in business performance.
For each of the major components of the Company's executive compensation program, the following table summarizes the Company's target level of compensation relative to market compensation and the Company's actual level of compensation relative to market compensation for 2012.

Component
 
Target Level
 
Actual Level for 2011
Base Salary
 
50th percentile of market compensation, with more experienced executives between the 50th and 75th percentiles of market compensation.
 
CEO and CFO at 50th percentile; other Named Executive Officers at 75th percentile.
 
 
 
 
 
Annual Bonus
 
75th percentile of market compensation, based on aggressive annual performance goals.
 
Three Named Executive Officers received no bonus and two Named Executive Officers were below 75th percentile.
 
 
 
 
 
Total Cash Compensation (Base Salary + Annual Bonus)
 
75th percentile of market compensation.
 
CEO and CFO below 50th percentile; other Named Executive Officers below 75th percentile.
 
 
 
 
 
Equity Compensation Awards (Stock Options + Restricted Stock)
 
Below 50th percentile of market compensation, with executive Chair at 50th percentile.
 
All Named Executive Officers below 50th percentile, except executive Chair at 50th percentile.
Base Salary.    Base salary provides executives with a base level of income. The Company establishes salary levels reflective of the executive's skills, competencies, experience and individual performance. As a result, changes in salary focus primarily on an assessment of the executive's performance in relation to the executive's responsibilities. In addition, the Compensation Committee reviews market compensation data, which provides a comparison of the executive's salary level relative to the salary levels of the executive's peers.

33



In establishing 2012 salary levels for the Named Executive Officers, the Compensation Committee reviewed market compensation data, as well as recommendations from Messrs. Mixon and Blouch regarding Messrs. Richey, Gudbranson and Slangen. The Compensation Committee also considered:
how each executive performed in relation to the executive's responsibilities during the previous year;
each executive's potential future contributions to the Company; and
each executive's particular talents, unique skills, experience, length of service to the Company and depth of industry knowledge.
For 2012, the Compensation Committee reduced Mr. Mixon's base salary by 12%. This change was a continuation of the Compensation Committee's plan to, over a multi-year period, further modify Mr. Mixon's compensation in order to achieve a base salary level at or near the 50th percentile of market compensation, in connection with the role and responsibilities that he assumed in 2011 as executive Chairman of the Board. The Compensation Committee determined that Messrs. Blouch, Gudbranson, Richey and Slangen should receive merit salary-related awards in recognition of their individual performance over the prior year. Accordingly, the Compensation Committee approved a salary merit increase of 3% for Messrs. Blouch and Gudbranson. In addition, the Compensation Committee's review of market compensation data indicated that the salary levels of Messrs. Richey and Slangen were above the market median, in large part due to their long tenure with the Company. After considering, in particular, their length of service, their salary levels relative to market compensation and the recommendation of the independent compensation consultant, the Compensation Committee approved lump sum cash merit awards in lieu of salary increases to Messrs. Slangen and Richey equal to 3% and 2%, respectively, of salary, in order maintain their respective total cash compensation levels relative to their peers in the market compensation data without increasing their salaries. The lump sum amounts are reported in the Bonus column of the Summary Compensation Table.
Annual Cash Bonus.    The Company provides each executive with an opportunity to earn an annual cash bonus under the Company's shareholder-approved Executive Incentive Bonus Plan. All of the Company's executives participate in the bonus plan. The annual bonus plan is intended to provide an opportunity and incentive to compensate the executives for achieving challenging annual performance goals that are indicative of overall Company performance.  
Each year, the Compensation Committee reviews and approves annual bonus plan performance goals. In light of the uncertainty surrounding the FDA consent decree that had been proposed in late 2011 and its potential effects on the Company's operating results in 2012, the Compensation Committee determined to modify its historical performance goal setting practice for 2012, and establish a potential bonus pool for the Named Executive Officers of 4% of the Company's adjusted operating income for 2012, the funding of which was conditioned upon the Company's achievement of an adjusted operating income target for 2012. Under the plan, neither the aggregate target bonus opportunities for, nor the aggregate bonus payouts to, the Named Executive Officers could exceed the established bonus pool, and the maximum payout per individual could not exceed $5,000,000. The Compensation Committee retained discretion to allocate the bonus pool among the Named Executive Officers and decrease any individual's payout, provided that the decrease could not result in an increase to any other individual's payout.
The Compensation Committee and senior management believe that adjusted operating income represents an important measurement of the Company's core operating results that is particularly useful in evaluating the Company's performance in times of economic uncertainty or when the effects of external factors on operating performance is uncertain. In light of these factors, the Compensation Committee determined that, of the various financial measurements that could be used, adjusted operating income was the most appropriate metric for measuring the Company's operating performance for 2012 for purposes of the Executive Incentive Bonus Plan, and that significant improvement in that metric should result in the executive receiving commensurate bonus rewards.


34



Under the bonus plan:
The bonus pool for Named Executive Officers would be funded based upon the Company's achievement of adjusted operating income of at least $100,500,000 for 2012, which would represent a 4% increase over 2011 adjusted operating income;
For Messrs. Blouch, Mixon and Richey, 100% of the potential payout amount was based on achievement of the adjusted operating income target; and
For Messrs. Gudbranson and Slangen, 50% of the potential payout amount was based on achievement of the adjusted operating income target and 50% was based on individual objectives.
In determining the appropriate target for 2012 adjusted operating income, the Compensation Committee reviewed and discussed several items, including previous years' results, the Company's forecasted annual operating plan, the potential effects of the then-proposed FDA consent decree, and the recommendations of senior management. The Compensation Committee sought to establish a performance goal which would:
reflect a meaningful improvement in overall business performance over the previous year;
be challenging, but achievable; and
if achieved, support paying executives total cash compensation targeted at the 75th percentile of market compensation.
Adjusted operating income is the Company's adjusted earnings before income taxes excluding interest and the incremental costs of quality systems remediation and improvements, both one time and permanent. Adjusted earnings is the Company's net earnings from continuing and/or discontinued operations before income taxes and excluding the impact of restructuring charges, amortization of the convertible debt discount (recorded in interest expense), asset write-downs related to goodwill and intangible assets, loss on debt extinguishment including debt finance charges and fees, a discrete tax expense in 2012 related to prior years for a foreign tax matter under audit, a one-time tax benefit as a result of a tax settlement in Germany in 2011 and changes in tax valuation allowances, all divided by adjusted weighted average shares outstanding - assuming dilution, which excludes the dilutive impact of the convertible debt. The Compensation Committee retained the discretion to further adjust the determination of adjusted operating income for the impact of the FDA consent decree, provided that such an adjustment would not apply to any Named Executive Officer to the extent his bonus was based on adjusted operating income.
The Compensation Committee determines target and maximum bonus levels for each executive when the executive first becomes eligible to participate in the Executive Incentive Bonus Plan. The Compensation Committee then annually reviews target and maximum annual bonus levels for each executive as a percentage of the executive's salary. Total annual cash compensation for Messrs. Blouch and Gudbranson is targeted at or near the market median. The other Named Executive Officers have been in their respective roles for relatively long periods of time and, in recognition of the experience and deep industry knowledge that each of those executives brings to their respective roles, the Compensation Committee targets total annual cash compensation opportunity for each of them at or near the 75th percentile of market compensation. Taking into account the same factors discussed above with respect to base salary, the Compensation Committee also considers whether the executive's individual performance and level of responsibilities warrant a change in the bonus target percentage from the previous level. The Compensation Committee does not take into account awards earned under other reward programs in determining annual bonus opportunities.
In establishing the 2012 target bonuses for each of the Named Executive Officers, the Compensation Committee reviewed the target amounts as a percentage of salary that had been established for each of the Named Executive Officers in prior years and determined to make no change, other than to Mr. Mixon's target, which was reduced by 15%, as part of the Compensation Committee's modification of Mr. Mixon's compensation over a multi-year period to achieve a total compensation level at or around the 50th percentile of market compensation for an executive Chairman of the Board of a similar size company. The following table shows the 2012 target and actual cash bonus levels, as a percentage of salary, for each Named

35



Executive Officer based upon the Company's 2012 adjusted operating income goal, and upon the actual results achieved by the Company for 2012.
 
Incentive Amount as a Percentage of Salary  
Named Executive
Target
 
Actual
Mr. Blouch
100%
 
Mr. Mixon
85%
 
Mr. Gudbranson
75%
 
34%
Mr. Richey
75%
 
Mr. Slangen
75%
 
9%
The Company reported 2012 adjusted operating income below the established performance goal, and as a result, no bonuses were paid on the basis of this performance goal. Messrs. Gudbranson and Slangen earned annual cash bonuses based only on the achievement of certain individual objectives, which bonuses were substantially below their overall target amounts.
Mr. Slangen achieved his individual goal of developing and implementing a strategic complexity reduction process, that included a plan and marketing strategy, with respect to the Company's primary global product platforms, to be implemented over the next three years as an important step in achieving the Company's globalization plans. Mr. Gudbranson was responsible for leading the successful re-engineering of the Company's global business analytics modeling system, a further critical step in the Company's globalization plans, and was instrumental in the Company's sale of its subsidiary, Invacare Supply Group.
Long-Term Equity Compensation Awards.    The Company's long-term equity compensation program in 2012 provided grants of stock options and restricted stock under the Company's 2003 Performance Plan. The Compensation Committee approved a long-term equity compensation program for 2012 with values weighted 66% in stock options, which the Compensation Committee views as performance-based compensation, and 34% in restricted stock. The mix of equity awards is intended to provide an appropriate balance of incentives to increase shareholder value, while addressing executive retention and managing shareholder dilution and compensation expense. The mix was weighted more heavily toward stock options in 2012 compared to 2011, and target grants were set below the market median in 2012, primarily in order to enhance the performance-based element of the awards, in light of the Company's stock price performance and operating results during 2012 and the limited pool of shares remaining under the 2003 Performance Plan.
In making equity awards in 2012, the Compensation Committee reviewed information provided by its independent compensation consultant regarding the median market value of long-term compensation awards. Minimum and maximum grant guidelines for each Named Executive Officer other than Mr. Mixon were developed around target grants within 30% below the market median according to each executive's salary and target cash compensation level, organizational level, reporting relationships and job responsibilities to maintain internal equity in the grants among all equity award recipients and to provide the Compensation Committee with some latitude to recognize individual performance and the recipient's role in contributing to the creation of long-term shareholder value. Mr. Mixon's grant guidelines were developed around target grants equal to the market median, as his salary and target cash compensation level had already been reduced by 25% as compared to 2011. The assumed values for stock option grants are based on the Company's stock price at the time of grant and are determined using the Black-Scholes option valuation model, the same model used by the Company to determine its accounting cost with respect to the options.
The Compensation Committee then considered each Named Executive Officer's performance utilizing the same factors considered in setting the executive's base salary levels, the capacity remaining available for grants under the 2003 Performance Plan, the Company's stock price performance in 2012, and the relevant market overhang and the tax deductibility of the awards. The Compensation Committee also considered the recommendations of the Chairman and of the CEO with respect to awards to other Named Executive Officers, and the recommendations of the Chairman regarding awards to the CEO. No particular

36



weight was assigned to any one of these areas. Outstanding long-term equity awards granted in prior years and held by an executive generally are not considered when the Compensation Committee makes its determinations regarding new grants of long-term equity compensation.
The long-term equity compensation granted in 2012 to the Named Executive Officers resulted in annual grants of stock options and restricted stock at combined values within the targeted range for each of these individuals. Awards granted in 2012 to each of the Named Executive Officers are set forth in the Grants of Plan-Based Awards for Fiscal Year 2012 Table.
Stock Options.    The stock options granted in 2012 were issued under the 2003 Performance Plan as non-qualified options with an exercise price equal to the Company's closing price on the New York Stock Exchange on the date of grant. The stock options become exercisable ratably over a four-year period to support retention, and they expire after ten years to reward long-term stock price appreciation. The Compensation Committee views the stock options as being performance-based compensation, as the recipient recognizes value in the stock option only to the extent that the Company's stock price appreciates over the price of the Company's stock on the date of grant.
Restricted Stock.    The restricted stock granted in 2012 was issued at no cost to the recipient and vests ratably over four years to strengthen the retention value of the award. In order to enhance their retention value, the terms of the restricted stock allow the holder, subject to certain restrictions, to surrender a portion of the vested shares to the Company to cover any minimum tax withholding obligation. The grants of restricted stock provide that the holders of that restricted stock will be entitled to receive cash dividends declared and paid by the Company on the Company's outstanding common shares only to the extent that the restricted stock is vested at the time of the dividend.
The Summary Compensation Table shows the aggregate grant date fair value of the stock options and restricted stock awarded to each of the Named Executive Officers over the past three years. In accordance with SEC rules, the grant date fair value of those awards is included in the total compensation reported in the Summary Compensation Table for the Named Executive Officers. However, those amounts are not necessarily indicative of the actual value of the awards to the recipients. The following table shows, for each Named Executive Officer, the equity awards received by the executive during the past three years, the combined grant date fair value of those awards, the estimated value to the executive of those awards as of a recent date and a comparison of the two values expressed as a percentage of the grant date fair value. In each case, the estimated current value to the executive is significantly lower than the grant date fair value, which, with respect to grants made in 2011 and 2010, is a result of the relative decline in the Company's stock price over the same period.

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Number of Shares
Underlying Awards 
 
Combined
Fair Value on
Date of  Grant ($)(2)  
 
Estimated
Current  Value ($)(3) 
 
Estimated
Current Value
% of Fair Value on Date  of Grant  
Named Executive
Officer 
 
Year 
 
Share Price on
Date of  Grant ($)(1)  
 
Stock
Options  
 
Restricted
Stock  
 
Mr. Mixon
 
2012
 
13.37

 
50,000

 
16,200

 
490,946

 
309,274

 
63%
 
 
2011
 
24.45

 
61,300

 
16,200

 
991,926

 
239,274

 
24
 
 
2010
 
25.24

 
99,000

 
27,200

 
1,467,638

 
401,744

 
27
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mr. Blouch
 
2012
 
13.37

 
125,000

 
26,400

 
1,038,847

 
564,928

 
54
 
 
2011
 
24.45

 
99,700

 
26,400

 
1,614,564

 
389,928

 
24
 
 
2010
 
25.24

 
50,000

 
11,600

 
687,284

 
171,332

 
25
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mr. Gudbranson
 
2012
 
13.37

 
30,000

 
5,800

 
242,157

 
127,666

 
53
 
 
2011
 
24.45

 
22,000

 
5,800

 
355,650

 
85,666

 
24
 
 
2010
 
25.24

 
22,000

 
6,100

 
327,544

 
90,097

 
28
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mr. Richey
 
2012
 
13.37

 
13,500

 
3,000

 
114,189

 
63,210

 
55
 
 
2011
 
24.45

 
11,200

 
3,000

 
182,214

 
44,310

 
24
 
 
2010
 
25.24

 
12,000

 
3,300

 
177,972

 
48,741

 
27
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mr. Slangen
 
2012
 
13.37

 
18,600

 
3,000

 
142,169

 
70,350

 
49
 
 
2011
 
24.45

 
11,200

 
3,000

 
182,214

 
44,310

 
24
 
 
2010
 
25.24

 
12,000

 
3,300

 
177,972

 
48,741

 
27
 ___________________ 
 (1)
Closing price per share of the Company's common shares on the New York Stock Exchange on the date of grant.
  (2)
Aggregate grant date fair value of the stock options and restricted stock, calculated in accordance with ASC 718, Compensation - Stock Compensation.
  (3)
Estimated value of stock options and restricted stock to the executive as of February 22, 2013, calculated based on the closing price per share of $14.77 of the Company's common shares on the New York Stock Exchange on February 22, 2013. All stock options referenced in this table that have an exercise price per share in excess of $14.77 are assumed to have a value of zero for purposes of this comparison. All stock options referenced in this table that were granted in 2012 are assumed to have a value of $1.40 per share.
Other Arrangements
The Compensation Committee believes that the benefits summarized below are vital to the attraction and retention of talented executives and, thus, to the long-term success of the Company.
Deferred Compensation and Savings Plans.    The Company maintains the plans described below to provide executives with the opportunity to address long-term financial and retirement planning with a degree of certainty and provide financial stability in the event the executives are impacted by unforeseeable factors that are beyond their control.
The Company maintains the Invacare Retirement Savings Plan, a qualified 401(k) defined contribution plan, for its employees, to which the Company has the discretion to make matching and quarterly contributions on behalf of the employees, including each of the Named Executive Officers. The amounts of the contributions made by the Company on behalf of each Named Executive Officer to the Invacare Retirement Savings Plan are set forth in a footnote to the Summary Compensation Table, and are consistent with the benefits provided to all other participants in the plan up to the regulatory limits imposed on the plan for highly compensated employees.

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The Company provides its highly compensated employees, including the Named Executive Officers, with the opportunity to participate in the Deferred Compensation Plus Plan (“DC Plus Plan”), a non-qualified contributory savings plan, which allows the executives to defer compensation above the amount permitted to be contributed to the Invacare Retirement Savings Plan. Thus, the DC Plus Plan provides the executives with the opportunity to save additional pre-tax funds for retirement up to the amount that the executive otherwise would have been able to save under the Invacare Retirement Savings Plan but for the regulatory limits imposed on that plan for highly compensated employees. In addition to individual deferrals, the Company has the discretion to provide matching contributions and additional quarterly contributions for participating executives which are similar in percentage to the Company contributions made to employees who participate in the Invacare Retirement Savings Plan. The amounts of the contributions made by the Company on behalf of each Named Executive Officer to the DC Plus Plan are set forth in the Non-Qualified Deferred Compensation Table and a footnote to the Summary Compensation Table. The terms of the DC Plus Plan are further described following the Non-Qualified Deferred Compensation for Fiscal Year 2012 Table.
The Company also provides a Supplemental Executive Retirement Plan, or “SERP,” in which the Named Executive Officers participate, to supplement other savings plans offered by the Company and to provide replacement compensation for the executive in retirement. The purpose of this plan is to provide for basic life and income security needs and recognize career contributions. The change in the present value of the accumulated benefit obligation to each Named Executive Officer is set forth in the Summary Compensation Table. The present value of the aggregate accumulated benefit obligation to each Named Executive Officer under the SERP is included in the Pension Benefits for Fiscal Year 2012 Table, and the terms of the SERP are further described following that table.
Effective July 1, 2011, the Compensation Committee, based on the recommendation of management, (1) reduced the discretionary quarterly contributions by the Company for all participants in the Invacare Retirement Savings Plan and DC Plus Plan from 4% to 1% of total cash compensation and (2) suspended the contributions by the Company for all participants in the SERP and reduced the interest accrual rate under the SERP from 6% to zero. The reductions will remain in effect indefinitely, until such time as the Company or, in the case of the SERP, the Compensation Committee determines to restore them.
Perquisites.     Consistent with prior years, the Company provided its Named Executive Officers certain limited perquisites in 2012, which the Compensation Committee believes are reasonable, commensurate with the types of benefits and perquisites provided to similarly situated executives within other companies of comparable size and useful in attracting and retaining executives. They are not tied to individual or Company performance. These perquisites include the payment of premiums on specified excess liability insurance, an annual physical exam and health screening, and the availability of the Company's sporting event tickets for personal use, but do not include any gross-ups by the Company for associated tax liability. Perquisites are reported in the Summary Compensation Table.
Other Benefits.    The Company offers certain other benefits to its executives in order to remain competitive with market benefit plan compensation, as described below.
The Company maintains a death benefit only life insurance plan in which Messrs. Blouch, Gudbranson, Richey and Slangen participate, as well as a separate life insurance benefit for Mr. Mixon, each of which is described in Other Potential Post-Employment Compensation. In addition, the Company also provides other benefits such as medical, dental, life and disability insurance to each Named Executive Officer in a flexible benefits plan, which also is provided to all other eligible U.S. based employees of the Company. The Company previously maintained an Executive Disability Income Plan which provided enhanced disability benefits to the Named Executive Officers, however, in order to bring the Company's executive benefits more in line with market practices, the Company determined in 2012 to discontinue the plan.
In March 2000, in recognition of his long service and contributions to the success of the Company, the Compensation Committee established a Chairman and CEO Retirement Program for Mr. Mixon, which is described in Other Potential Post-Employment Compensation. In addition, Mr. Mixon has been granted a right of first refusal to assume the Company's rights and obligations with respect to the corporate suites and

39



tickets it leases or has rights to at Cleveland-area professional sports arenas in the event that the Company determines not to renew one or more of the leases or the seat rights.
Severance Benefits.    The Company has entered into agreements with Messrs. Blouch, Gudbranson, Richey and Slangen that provide for the payment of certain severance benefits upon terminations of employment other than terminations following a change of control of the Company. These agreements provide some level of income continuity should an executive's employment be terminated without cause by the Company or by the executive for good reason. These agreements are further described under Other Potential Post-Employment Compensation.
Change in Control Benefits.    Each Named Executive Officer also has entered into an agreement with the Company that provides for certain benefits generally payable in the event of a termination following a change in control of the Company. The Company believes that these agreements help retain executives and provide for management continuity in the event of an actual or threatened change in control. They also help to ensure that the interests of executives remain aligned with shareholders' interests during a time when their continued employment may be in jeopardy. Finally, they provide some level of income continuity should an executive's employment be terminated without cause. The agreements provide for the payment and provision of certain benefits to the executives if there is a change in control of the Company and for additional benefits if there is a termination of the executive's employment with the surviving entity within three years after the change in control. These agreements are further described under Other Potential Post-Employment Compensation.
Policies, Guidelines and Practices Related to Compensation
Role of the Compensation Committee.    The Compensation Committee is comprised of independent directors and is responsible for the approval and administration of the Company's existing and proposed executive compensation plans. You may learn more about the responsibilities of the Compensation Committee by reading the Compensation Committee's charter, which is available on the Company's website at www.invacare.com by clicking on the “Investor Relations” tab and then the “Corporate Governance” link. Additional information about the Compensation Committee is also included in this proxy statement under the caption “Corporate Governance - What are the principal functions of the Board committees?”
Role of the Compensation Committee's Independent Compensation Consultant.    During 2012, the Compensation Committee retained and was advised by Pay Governance LLC, as an outside independent compensation consultant with respect to executive compensation matters. This engagement was a continuation of the Compensation Committee's work with Pay Governance LLC in prior years.
The independent compensation consultant's primary role is to analyze the competitiveness of, and provide recommendations to the Compensation Committee and management on, the structure and amounts of each major element of compensation to be paid to the Company's executives. During 2012, the independent compensation consultant participated in three of the Compensation Committee's meetings. The independent compensation consultant's services included ongoing review, comment, consulting support, advice and/or recommendations related to:
selected draft and final materials provided to the members of the Compensation Committee in connection with Compensation Committee meetings during 2012;
compensation for the Chairman, the CEO and the other Named Executive Officers, including comparative and peer group information;
annual and long-term incentive opportunities;
policies and data related to governance and disclosure of executive compensation;
risk assessments of the Company's compensation policies and practices for its employees; and
emerging trends in executive compensation.

40



In addition, during 2012, the independent compensation consultant completed a comprehensive review of the Company's executive compensation program for the purpose of providing the Compensation Committee with an overview of the Company's compensation practices as compared to market practices and with suggestions as to potential alternatives and enhancements to the Company's practices that could be considered by the Compensation Committee for implementation in future years.
Pay Governance LLC does not provide the Company with any other consulting or other services outside of those associated with advising the Compensation Committee on the Company's executive compensation programs. In making its decision to retain the independent compensation consultant for 2012, the Compensation Committee considered the level of the consultant's fees, the expertise and quality of services it has provided to the Company in the past and the anticipated ability of the consultant to provide objective and independent assistance and advice to the Compensation Committee and to Company management.
The Compensation Committee has considered the independence of Pay Governance LLC in light of new SEC rules and proposed New York Stock Exchange listing standards. The Compensation Committee requested and received a letter from Pay Governance LLC addressing the independence of Pay Governance LLC and the partner of Pay Governance LLC involved in the engagement, including the following factors: (1) other services provided to the Company by Pay Governance LLC; (2) fees paid by the Company as a percentage of Pay Governance LLC's total revenue; (3) policies or procedures maintained by Pay Governance LLC that are designed to prevent a conflict of interest; (4) any business or personal relationships between the partner and a member of the Compensation Committee; (5) any stock of the Company owned by the partner; and (6) any business or personal relationships between the Company's executive officers and the partner. The Compensation Committee discussed these considerations and concluded that the work performed by Pay Governance LLC and the partner involved in the engagement did not raise any conflict of interest.
Role of Executive Officers.    The Chairman of the Board, the President and CEO and the Senior Vice President of Human Resources participate in meetings of the Compensation Committee to provide insight into the performance of individual executives and the impact of their respective contributions to the Company's overall performance and to make recommendations as to the structure and implementation of elements of executive compensation. The Chairman of the Board and the CEO assess the performance of each of the Company's other Named Executive Officers, and each of them provides recommendations to the Compensation Committee as to a proposed structure and targeted amounts of salary, cash bonus awards and equity incentive awards for such executive officers. The Chairman of the Board assesses the performance of the CEO. In preparing these recommendations, the Chairman of the Board and the CEO review market compensation data provided by the independent compensation consultant and recommendations of the Senior Vice President of Human Resources. Prior to Compensation Committee meetings, these officers meet with the Chairman of the Compensation Committee to preview and discuss their recommendations and respond to questions. The Chairman of the Board and the CEO do not submit recommendations with respect to their own compensation. The Compensation Committee meets with the Chairman of the Board, without the CEO present, in order to review and discuss the performance and compensation of the CEO, and meets without either of the Chairman of the Board or the CEO present in order to review and discuss the performance and compensation of the Chairman of the Board.
The Chairman of the Board and the CEO also provide the Compensation Committee with recommendations, and participate in discussions with the Compensation Committee regarding suggested performance targets associated with the Company's annual cash bonus program. After the end of the year, the Chairman of the Board and the CEO meet with the Compensation Committee to review overall company performance relative to performance targets.
Market Compensation - Survey Data and Comparative Information.    In order to gauge the competitiveness of the Company's executive compensation levels and help ensure that the Company is positioned to attract and retain qualified executives in the face of competitive pressures, the Compensation Committee retains the independent compensation consultant to identify annually the compensation paid to executives who are comparable to the Company's executives. This information is referred to in this section

41



as “market compensation.” The market compensation is derived from a combination of survey data and comparative information from a group of health care equipment and supply companies, as described below.
Survey Data.    The independent compensation consultant annually reviews survey data from nationally recognized compensation and human resources consulting firms and identifies the compensation levels with respect to annual base salaries, cash bonus awards and long-term incentive awards for each executive position paid by multi-national, diversified manufacturing companies with annual revenues approximating $1.8 billion and $3 billion. The Compensation Committee bases its compensation decisions, in part, on survey data relating to compensation levels at companies with revenues similar to the Company's revenue for the most recently completed year. Survey data relating to compensation levels at companies with higher revenues than the Company are used to provide the Compensation Committee with perspective on how the compensation program could change as the Company grows. The independent compensation consultant uses regression analysis to adjust for differences in company size in determining competitive compensation levels for a company with revenue similar to the Company's. This analysis assists the independent compensation consultant in translating data from companies within the surveys into information that can be more directly compared to the compensation levels for a company more comparable in size to the Company. The companies represented in the survey data include more companies than those represented in the peer group in the stock performance graph included in the Company's 2012 annual report, which reflects the Company's view that a broad range of companies of comparable size compete with Invacare for senior executive talent.
Comparative Information.    In addition to survey data, the independent compensation consultant also annually prepares comparative information regarding annual base salaries, cash bonus awards and long-term incentive awards for the named executive officers of a peer group of 21 companies. All of the peer group companies are in the health care equipment and supply industry, which the Compensation Committee considers to be its primary market for executive talent, particularly for executives in key operations positions. In addition, peers are selected based on revenue, market capitalization and number of employees, and generally have revenue and market capitalization ranging from $1 billion to $4 billion and a number of employees ranging from 3,000 to 12,000. While the Company's annual revenue and number of employees approximated the medians of the companies in the group, its market capitalization was below the median due to the relative decline in the Company's stock price.
Beckman Coulter, Inc.
Bio-Rad Laboratories, Inc.
C.R. Bard, Inc.
CONMED Corporation
The Cooper Companies, Inc.
DENTSPLY International Inc.
Edwards Lifesciences Corp.
Hill-Rom Holdings, Inc.
Hologic, Inc.
Idexx Laboratories, Inc.
Kinetic Concepts, Inc.
Lincare Holdings Inc.
Patterson Companies, Inc.
PSS World Medical, Inc.
ResMed Inc.
St. Jude Medical, Inc.
STERIS Corporation
Teleflex Incorporated
Varian Medical Systems, Inc.
West Pharmaceutical Services, Inc.
Zimmer Holdings, Inc.
The companies in this group are regularly reviewed and changed from time to time to account for acquisitions, mergers and other business-related changes. The group of companies used in 2012 is unchanged from the group used in 2011.
The independent compensation consultant also prepares comparative information regarding annual base salaries, cash bonus awards and long-term incentive awards for executive Chairs at 30 companies which have a separate executive Chairman and CEO that are comparable in size to the Company, which group is different than the comparative group used annually by the Compensation Committee in its review of Named Executive Officer compensation.
Executive Compensation Adjustment and Recapture Policy.    If the Board of Directors or any appropriate Board committee has determined that any fraud or intentional misconduct by a participant in the Executive Incentive Bonus Plan was a significant contributing factor to the Company having to restate all or a portion of its financial statement(s), the Board or committee may take such actions as it deems necessary, in its discretion, to remedy the misconduct and prevent its recurrence. In determining what remedies to pursue, the Board or committee will take into account all relevant factors, including whether the restatement

42



was the result of fraud or intentional misconduct. Under the Executive Incentive Bonus Plan, the Board may, to the extent permitted by applicable law, in appropriate cases, require reimbursement of any bonus or incentive compensation paid to the participant for any fiscal period commencing on or after January 1, 2008 if and to the extent that (a) the amount of incentive compensation was calculated based upon the achievement of certain financial results that were subsequently reduced due to a restatement, (b) the participant engaged in any fraud or intentional misconduct that significantly contributed to the need for the restatement, and (c) the amount of the bonus or incentive compensation that would have been awarded to the participant had the financial results been properly reported would have been lower than the amount actually awarded. In addition, the Board may dismiss the participant, authorize legal action, or take such other action to enforce the participant's obligations to the Company as it may deem appropriate in view of all the facts surrounding the particular case.
The Board of Directors, at the recommendation of the Compensation Committee, adopted a policy providing the Board of Directors with the discretion to recover any equity compensation awarded to a participant on or after January 1, 2008 if the Board of Directors or any appropriate committee has determined that any fraud or intentional misconduct by the participant was a significant contributing factor to the Company having to restate all or a portion of its financial statement(s).
Equity Grant Practices.    The Compensation Committee's historical practice has been to make annual grant determinations in August or September of each year. As part of the Company's anticipated transition to implementing a long-term equity compensation program in 2014 and future years that will include awards with performance-based vesting, the Compensation Committee expects to modify its practices to provide for annual grant determinations in March of each year, following the expected release of earnings for the prior fiscal year in late January or early February, without regard to whether the Company otherwise is in possession of material non-public information. As an initial step in this transition, the Company recently made its annual grant determinations for the current fiscal year in March 2013.
Equity-based grants also are made occasionally during the course of the year to new hires or to current employees in connection with a promotion. The terms of outstanding stock options or restricted stock also may be amended by the Compensation Committee as part of a termination or retirement package offered to a departing employee. Any two of the President and CEO, the Chief Financial Officer and the Senior Vice President of Human Resources may, subject to the approval and ratification of the Compensation Committee, grant stock options or restricted stock to an employee, other than an executive officer, in connection with an offer of employment or promotion, and they may amend any outstanding stock option or restricted stock grant made to an employee, other than an executive officer, in connection with a termination or retirement package, which amendments may include acceleration of vesting or extension of the employee's exercise rights up to the final termination date of the stock option or final vesting date of the restricted stock.
Equity Run Rate.    In determining the total number of stock options and shares of restricted stock to be awarded each year, the Compensation Committee attempts to strike a reasonable balance between the benefits achieved by providing incentives to a wide range of key employees of the Company and the shareholder dilution that results from an equity incentive plan. While the Compensation Committee has not set a formal limit on the number of awards which may be granted in any year, over the past five years, the average annual “run rate” of equity awards granted by the Company was 2.5%. For these purposes, “run rate” is defined as the number of equity awards granted in a particular year compared to the total number of outstanding shares. As of December 31, 2012, the Company's outstanding equity awards were 14.6% of total shares outstanding while shares available for future awards under the 2003 Performance Plan amounted to another 3.9% of total shares outstanding. The Compensation Committee believes that the percentage of equity awards outstanding is higher than desired but is principally attributable to the length of the vesting period for equity awards (four years) and the exercise prices of a substantial portion of the outstanding stock options being above the Company's stock price over the last few years, which has generally resulted in fewer stock options being exercised. As of December 31, 2012, there were 4,664,634 stock options outstanding under the 2003 Performance Plan and its predecessor plans of which 762,044 or 16.3% were exercisable at prices less than the market price of the Company's common shares on that date. In order to reduce the amount of shareholder dilution attributable to grants of equity-based incentives, since 2005, the

43



Compensation Committee has granted top level executives a significant component of restricted stock in lieu of a potentially greater number of stock options that might otherwise have been granted to this same group. The Compensation Committee expects that its anticipated transition to implementing a long-term equity compensation program with performance-based awards in 2014 will result in a lesser number of shares being granted in the form of equity-based incentives on an annual basis relative to prior years and, thus, further reduce the amount of shareholder dilution attributable to such grants.
Tax Matters.    Section 162(m) of the Internal Revenue Code generally provides that certain compensation in excess of $1 million per year paid to a public company's chief executive officer and any of its four other highest paid executive officers is not deductible to the company unless the compensation qualifies for an exception. Section 162(m) provides an exception to the deductibility limit for “performance-based compensation” if certain procedural requirements, including shareholder approval of the material terms of the performance goal, are satisfied.
To the extent practicable in view of its compensation philosophy, the Company seeks to structure its executive compensation to satisfy the requirements for the performance-based compensation exception under Section 162(m). Nevertheless, based upon the Company's current compensation structure, the Compensation Committee believes that it is in the best interests of the Company and its shareholders for the Compensation Committee to retain flexibility in awarding discretionary incentive compensation that may not qualify for the exception for performance-based compensation. The Compensation Committee will continue to review and evaluate, as necessary, the impact of Section 162(m) on the Company and intends to make a determination with respect to this issue on an annual basis.
 The Compensation Committee also considers the impact of Section 409A of the Internal Revenue Code, and the Company generally seeks to structure its compensation arrangements with its employees to comply with or qualify for an exemption from Section 409A to avoid possible adverse tax consequences that may result from noncompliance.
Stock Ownership Guidelines.    The Company maintains stock ownership guidelines for its directors, Named Executive Officers and other executives for the purpose of aligning the interests of directors and key executives with those of the shareholders of the Company. The guidelines also reinforce the primary reason for offering long-term compensation awards. Moreover, it holds those executives most responsible for creating shareholder value more accountable than other employees.
Under the current guidelines of the stock ownership program, executives are expected to own shares equal in value to the following levels:
Chairman of the Board - five times base salary
President and CEO - five times base salary
CFO - two times base salary
Senior Vice Presidents - two times base salary
The number of shares required to be held by each executive is established by multiplying the applicable executive's salary by the applicable multiple and dividing by the Company's average daily stock price for the previous year. The number of shares required to be held by each non-employee director is 7,500 shares. “Stock ownership” is defined to include shares held directly or indirectly by the director or executive, all unvested restricted stock held by the director or executive and 30% of the shares underlying unexercised stock options held by the director or executive that are “in the money” by at least 20%. Directors who have deferred director compensation that they otherwise would have received in cash in a year into the grant of discounted stock options shall be considered, for purpose of the guidelines, to own that number of shares as is determined by dividing 50% of that year's deferred compensation by the closing sale price of the Company's common shares at the end of the prior fiscal year. For purposes of this policy, ownership of the Company's Class B common shares is treated as ownership of common shares.

44



Directors and executive officers are expected to reach their respective ownership levels under the stock ownership guidelines over five (5) years from their date of hire or promotion, and maintain that level of stock ownership afterward. All of the directors and Named Executive Officers have either met the guidelines or are pursuing plans to meet the guidelines.
In 2012, the Company modified the share ownership guidelines to provide that directors and executive officers subject to the guidelines are required to hold their “net shares” until they reach their applicable minimum ownership level, and once they reach the minimum level, they must hold their net shares from equity awards for at least one (1) year after such shares have vested, in the case of restricted stock awards, or have been acquired upon the exercise of stock options. “Net shares” means the difference between the actual shares awarded and any shares sold, surrendered or withheld to pay for taxes or to finance the cost of exercising a stock option.
Derivatives Trading.    As part of its policy relating to the trading of Invacare securities by Company insiders, the Company prohibits an insider from trading in any interest or position relating to the future price of the Company securities, such as a put, call or short sale.
Risk Assessment
The Compensation Committee, with the assistance of the independent compensation consultant, previously conducted a risk assessment of the Company's compensation policies and practices for its employees, including those related to the executive compensation programs discussed above. The Compensation Committee, in conducting the assessment, analyzed associated risks and considered mitigating factors. Based upon its review of the assessment and of the material developments in the Company's compensation policies and practices since the assessment, the Compensation Committee believes that the Company's compensation policies and practices do not encourage excessive or unnecessary risk-taking and are not reasonably likely to have a material adverse effect on the Company.
Report of the Compensation and Management Development
Committee on Executive Compensation
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with the Company's management. Based on that review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's Annual Report on Form 10-K and in the Company's definitive proxy statement prepared in connection with its 2013 Annual Meeting of Shareholders.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
Dan T. Moore, III, Chairperson
James L. Jones
Ellen O. Tauscher

The above Report of the Compensation and Management Development Committee does not constitute soliciting material and should not be deemed filed with the Commission or subject to Regulation 14A or 14C (other than as provided in Item 407 of Regulation S-K) or to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically requests that the information in this Report be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act. If this Report is incorporated by reference into the Company's Annual Report on Form 10-K, such disclosure will be furnished in such Annual Report on Form 10-K and will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act as a result of furnishing the disclosure in this manner.

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Compensation Committee Interlocks and Insider Participation
No member of the Compensation and Management Development Committee was at any time during 2012 or at any other time an officer or employee of the Company or any of its subsidiaries. James C. Boland, Dan T. Moore, III, James L. Jones and Ellen O. Tauscher were the non-employee directors who served on the Compensation Committee during 2012. Ms. Tauscher was appointed to the Compensation and Management Development Committee effective upon her appointment to the Board of Directors on February 9, 2012.
Summary Compensation Table
The following table presents the total compensation to the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer and the two other most highly compensated executive officers of the Company in 2012, 2011 and 2010 (the “Named Executive Officers”).
Name and Principal
Position 
 
Year 
 
Salary
($)(1)  
 
Bonus
($)(2)  
 
Stock
Awards
($)(3)  
 
Option
Awards
($)(4)  
 
Non-
Equity
Incentive
Plan
Compen-
sation
($)(5)  
 
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(6) 
 
All Other
Compen-sation
($)(7)  
 
Total
($)  
A. Malachi Mixon, III
 
2012
 
766,667

 

 
216,594

 
274,352

 

 
84,745

 
88,238

(8)
1,430,596

Chairman of the Board and Former Chief Executive Officer
 
2011
 
850,000

 

 
396,090

 
595,876

 
776,730

 
315,854

 
161,175

(8)
3,095,725

 
2010
 
1,106,000

 
33,200

 
686,528

 
781,110

 
1,437,800

 
664,413

 
174,329

(8)
4,883,380

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gerald B. Blouch
 
2012
 
871,250

 

 
352,968

 
685,879

 

 
155,619

 
76,631

(9)
2,142,347

President and Chief Excecutive Officer
 
2011
 
850,000

 

 
645,480

 
969,149

 
776,730

 
301,289

 
110,992

(9)
3,653,640

 
2010
 
694,000

 
287,800

 
292,784

 
394,500

 
857,090

 
575,221

 
103,572

(9)
3,204,967

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Robert K. Gudbranson
 
2012
 
412,000

 

 
77,546

 
164,611

 
140,000

 
20

 
29,051

(10)
823,228

Chief Financial Officer
 
2011
 
400,000

 

 
141,810

 
213,854

 
274,160

 
68,196

 
52,146

(10)
1,150,166

 
2010
 
364,300

 

 
153,964

 
173,580

 
355,193

 
129,502

 
51,942

(10)
1,228,481

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Joseph B. Richey, II
 
2012
 
435,000

 
8,700

 
40,110

 
74,075

 

 
17,589

 
20,546

(11)
596,020

President - Invacare Technologies and Senior Vice President - Electronics and Design Engineering
 
2011
 
435,000

 
8,700

 
73,350

 
108,871

 
298,149

 
45,579

 
38,721

(11)
1,008,370

 
2010
 
435,000

 
8,700

 
83,292

 
94,680

 
424,125

 
104,316

 
41,146

(11)
1,191,259

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Louis F.J. Slangen
 
2012
 
398,000

 
11,900

 
40,110

 
102,059

 
37,313

 
207,440

 
33,945

(12)
830,767

Senior Vice President - Corporate Marketing and Chief Product Officer
 
2011
 
398,000

 
12,000

 
73,350

 
108,871

 
272,789

 
103,510

 
64,001

(12)
1,032,521

 
2010
 
398,000

 
11,900

 
83,292

 
94,680

 
388,050

 
361,643

 
58,146

(12)
1,395,711

 
____________________ 
  (1)
Of the amounts disclosed in this column, the following Named Executive Officers deferred the following portions of such amounts into the DC Plus Plan during 2012: (i) Mr. Mixon: $23,000; (ii) Mr. Blouch: $26,265; (iii) Mr. Gudbranson: $0; (iv) Mr. Richey: $0; and (v) Mr. Slangen: $12,297; during 2011: (i) Mr. Mixon: $25,500; (ii) Mr. Blouch: $25,500; (iii) Mr. Gudbranson: $0; (iv) Mr. Richey: $0; and (v) Mr. Slangen: $12,300; and during 2010: (i) Mr. Mixon: $113,920 (ii) Mr. Blouch: $27,654; (iii) Mr. Gudbranson: $0; (iv) Mr. Richey: $0; and (v) Mr. Slangen: $12,297.
  (2)
The amounts disclosed in this column for Messrs. Richey and Slangen represent merit cash awards for 2012, 2011 and 2010 paid in lieu of merit salary increases.
  (3)
The values reported in this column represent the aggregate grant date fair value, calculated in accordance with ASC 718, Compensation - Stock Compensation, of all restricted stock awarded to each officer during the fiscal year. For a summary of the terms of these awards, see the Grants of Plan-Based Awards Table that follows. For a description of the assumptions made in computing the values reported in this column, see Shareholders' Equity Transactions in the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

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  (4)
The values reported in this column represent the aggregate grant date fair value, calculated in accordance with ASC 718, Compensation - Stock Compensation, of all stock options awarded to each officer during the fiscal year. For a summary of the terms of these awards, see the Grants of Plan-Based Awards Table that follows. For a description of the assumptions made in computing the values reported in this column, see Shareholders' Equity Transactions in the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012.  
  (5)
The amounts for 2012 in this column represent compensation payable under the Executive Incentive Bonus Plan. Of the amounts disclosed in this column, the following Named Executive Officers deferred the following portions of such amounts into the DC Plus Plan during 2012: (i) Mr. Mixon: $23,302; (ii) Mr. Blouch: $23,302; (iii) Mr. Gudbranson: $0; (iv) Mr. Richey: $0; and (v) Mr. Slangen: $8,184; and during 2011(i) Mr. Mixon: $143,780; (ii) Mr. Blouch: $27,513; (iii) Mr. Gudbranson: $0; (iv) Mr. Richey: $0; and (v) Mr. Slangen: $11,642; and during 2010: (i) Mr. Mixon: $66,360; (ii) Mr. Blouch: $0; (iii) Mr. Gudbranson: $0; (iv) Mr. Richey: $0; and (v) Mr. Slangen: $10,746. For a description of the 2012 bonus opportunities established by the Compensation Committee under the Executive Incentive Bonus Plan, see footnote (3) to the Grants of Plan-Based Awards For Fiscal Year 2012 Table that follows.
  (6)
The amounts reported in this column represent the amounts accrued as expense by the Company in 2012, 2011 and 2010 in accordance with the requirements of ASC 715, Compensation - Retirement Benefits, as they relate to the change in present value of the accumulated benefit obligation to the named executives under the SERP. No above market or preferential earnings on nonqualified deferred compensation were earned by any officer in 2012, 2011 or 2010. The amounts in this column represent the amounts contributed to the SERP by the Company on behalf of the Named Executive Officer during each such fiscal year. For a further description of the terms of the SERP, see Supplemental Executive Retirement Plan following the Pension Benefits for Fiscal Year 2012 Table. For a description of the changes made relating to the Company's contributions to the SERP during 2012, see Compensation Discussion and Analysis.
  (7)
Compensation reported in this column includes (i) the value of dividends earned on outstanding restricted stock awards; (ii) the value of Company contributions made in each fiscal year on behalf of the officer to the Invacare Retirement Savings Plan and the DC Plus Plan; (iii) the value of premiums paid by the Company under the Company's Executive Disability Income Plan before the plan was discontinued in August 2012 (or, in the case of Mr. Mixon, the value of the self-insured coverage provided by the Company to Mr. Mixon under the plan); and (iv) the incremental cost to the Company of perquisites provided by the Company, which include: the payment of premiums on excess liability insurance, the payment of premiums on a whole life insurance policy for the benefit of Mr. Mixon, an annual physical exam and health screening, and the availability of corporate sporting event tickets for personal use. Perquisites are valued on the basis of the aggregate incremental cost to the Company of providing the perquisite to the applicable officer. The value of personal use of corporate suites or tickets is the price shown on the ticket for the event and does not include annual fees or charges attributable to suite rental or ticket availability.
  (8)
Other compensation for Mr. Mixon includes (i) in 2012, $7,500 contributed by the Company to the Invacare Retirement Savings Plan and $51,110 contributed by the Company to the DC Plus Plan; (ii) in 2011, $14,700 contributed by the Company to the Invacare Retirement Savings Plan and $114,767 contributed by the Company to the DC Plus Plan; and (iii) in 2010, $14,700 contributed by the Company to the Invacare Retirement Savings Plan and $101,187 contributed by the Company to the DC Plus Plan.
  (9)
Other compensation for Mr. Blouch includes (i) in 2012, $7,500 contributed by the Company to the Invacare Retirement Savings Plan and $43,837 contributed by the Company to the DC Plus Plan; (ii) in 2011, $14,700 contributed by the Company to the Invacare Retirement Savings Plan and $73,007 contributed by the Company to the DC Plus Plan; and (iii) in 2009, $14,700 contributed by the Company to the Invacare Retirement Savings Plan and $60,253 contributed by the Company to the DC Plus Plan.  

47



(10)
Other compensation for Mr. Gudbranson includes (i) in 2012, $7,500 contributed by the Company to the Invacare Retirement Savings Plan and $4,332 contributed by the Company to the DC Plus Plan; (ii) in 2011, $14,700 contributed by the Company to the Invacare Retirement Savings Plan and $117,472 contributed by the Company to the DC Plus Plan; and (iii) in 2010, $14,700 contributed by the Company to the Invacare Retirement Savings Plan and $16,958 contributed by the Company to the DC Plus Plan.
(11)
Other compensation for Mr. Richey includes (i) in 2012, $7,500 contributed by the Company to the Invacare Retirement Savings Plan and $4,918 contributed by the Company to the DC Plus Plan; (ii) in 2011, $9,800 contributed by the Company to the Invacare Retirement Savings Plan and $21,651 contributed by the Company to the DC Plus Plan; and (iii) in 2010, $9,800 contributed by the Company to the Invacare Retirement Savings Plan and $23,608 contributed by the Company to the DC Plus Plan.
(12)
Other compensation for Mr. Slangen includes (i) in 2012, $2,500 contributed by the Company to the Invacare Retirement Savings Plan and $15,114 contributed by the Company to the DC Plus Plan; (ii) in 2011, $14,700 contributed by the Company to the Invacare Retirement Savings Plan and $28,759 contributed by the Company to the DC Plus Plan; and (iii) in 2010, $14,700 contributed by the Company to the Invacare Retirement Savings Plan and $23,284 contributed by the Company to the DC Plus Plan.
Grants of Plan-Based Awards For Fiscal Year 2012
The following table shows, for the Named Executive Officers, plan-based awards to those officers during 2012, including restricted stock awards and stock option grants, as well as other incentive plan awards.
Name 
 
Grant
Date 
 
Estimated Future Payouts Under Non-Equity Incentive Plan Awards 
 
All Other
Stock 
Awards:
Number of
Shares of
Stock or
Units
(#)
 
All Other
Option 
Awards:
Number of
Securities
Underlying
Options
(#)
 
Exercise
or Base
Price of
Option
Awards
($/Sh) 
 
Grant
Date Fair
Value of
Stock
and
Option
Awards
($/Sh) 
 
  Threshold  
($)  
 
Target
($)  
 
Maximum
($)  
 
A. Malachi Mixon, III
 
8/14/2012
 
 
 
 
 
 
 
16,200

(1)
 
 
 
 
13.37

 
 
8/14/2012
 

 
 
 
 
 
 

 
50,000
(2)
13.37
 
5.49

 
 
3/6/2012
(3)
 
651,667
 
 
 

 
 
 
 
 
 

Gerald B. Blouch
 
8/14/2012
 
 
 
 
 
 
 
26,400

(1)
 
 
 
 
13.37

 
 
8/14/2012
 
 
 
 
 
 
 
 

 
125,000
(2)
13.37
 
5.49

 
 
3/6/2012
(3)
 
871,250
 
 
 

 
 
 
 
 
 

Robert K. Gudbranson
 
8/14/2012
 
 
 
 
 
 
 
5,800

(1)
 
 
 
 
13.37

 
 
8/14/2012
 
 
 
 
 
 
 
 

 
30,000
(2)
13.37
 
5.49

 
 
3/6/2012
(3)
 
309,000
 
 
 

 
 
 
 
 
 

Joseph B. Richey, II
 
8/14/2012
 
 
 
 
 
 
 
3,000

(1)
 
 
 
 
13.37

 
 
8/14/2012
 
 
 
 
 
 
 
 

 
13,500
(2)
13.37
 
5.49

 
 
3/6/2012
(3)
 
326,250
 
 
 

 
 
 
 
 
 

Louis F.J. Slangen
 
8/14/2012
 
 
 
 
 
 
 
3,000

(1)
 
 
 
 
13.37

 
 
8/14/2012
 
 
 
 
 
 
 
 

 
18,600
(2)
13.37
 
5.49

 
 
3/6/2012
(3)
 
298,500
 
 
 


 
 
 
 
 

 
____________________
(1)
Restricted shares granted pursuant to the Invacare Corporation 2003 Performance Plan (the “2003 Plan”). These shares vest in 25% increments over four years, commencing November 15, 2013.  
(2)
Stock options to purchase common shares of the Company granted under the 2003 Plan. These options become exercisable in 25% increments over four years, commencing September 30, 2013 and expire on August 14, 2022.
(3)
On March 6, 2012, the Compensation Committee established performance goals under the Executive Incentive Bonus Plan for the purpose of providing financial incentives for 2012 to certain key employees,

48



including all of the officers included in the above table. See the Annual Cash Bonus discussion in Compensation Discussion and Analysis above for a description of the terms of these awards.
Restricted Stock and Stock Options
Each of the stock option grants and restricted stock awards set forth in the above table was awarded under the 2003 Plan. Under the 2003 Plan, the stock option and restricted stock award agreements entered into in connection with the awards, the Compensation Committee may make certain adjustments to the awards and the awards may be terminated or amended, as further described below.
Adjustments.    In the event of a recapitalization, stock dividend, stock split, reverse stock split, distribution to shareholders (other than cash dividends), or similar transaction, the Compensation Committee can adjust, in any manner that it deems equitable, the number and class of shares that may be issued under the 2003 Plan and the number and class of shares, and the exercise price, applicable to outstanding awards.
Termination of Awards.    The Compensation Committee may cancel any awards if, without the Company's prior written consent, the participant (1) within 18 months after the date such participant terminates employment with the Company, renders services for an organization, or engages in a business, that is (in the judgment of the Compensation Committee) in competition with the Company, or (2) discloses to anyone outside of Invacare, or uses for any purpose other than Invacare's business, any confidential information relating to the Company. In addition, the Compensation Committee may, subject to certain conditions in the 2003 Plan and in its discretion, require the participant to return the economic value of any award that the participant realized or obtained prior to and after such participant engaged in any of the above activities.
Amendment of Awards.    The Compensation Committee may, in its discretion, amend the terms of any award under the 2003 Plan, including to waive, in whole or in part, any restrictions or conditions applicable to, or to accelerate the vesting of, any award. This authority is subject to certain restrictions. In particular, the Compensation Committee may not amend an award in a manner that impairs the rights of any participant without his or her consent, or to reprice any stock options or stock appreciation rights at a lower exercise price, unless in accordance with an adjustment in the context of certain transactions described above.
In addition, in the event of a change in control of the Company, as defined in the 2003 Plan, unless the Board of Directors determines otherwise, (1) all outstanding stock options and any outstanding stock appreciation rights will become fully exercisable, and (2) all restrictions and conditions applicable to restricted stock and other awards exercisable for common shares of the Company will be deemed to have been satisfied. Any other determination by the Board of Directors that is made after the occurrence of the change in control will not be effective unless a majority of the Directors then in office are “continuing directors” and the determination is approved by a majority of the “continuing directors” for this purpose (or is approved by a committee comprised solely of such “continuing directors”). “Continuing directors” are Directors who were in office prior to the change in control or were recommended or elected to succeed “continuing directors” by a majority of the “continuing directors” then in office (or by a committee comprised solely of such “continuing directors” then in office).  
If the Board of Directors or any appropriate committee has determined that any fraud or intentional misconduct by a participant in the 2003 Plan was a significant contributing factor to the Company having to restate all or a portion of its financial statement(s), the Board or committee may take, in its discretion, such actions as it deems necessary to remedy the misconduct and prevent its recurrence. In determining what remedies to pursue, the Board or committee will take into account all relevant factors, including whether the restatement was the result of fraud or intentional misconduct. The Board may, to the extent permitted by applicable law, in all appropriate cases, require forfeiture of any equity compensation awarded to the participant for any fiscal period commencing on or after January 1, 2008 if and to the extent that (1) the amount awarded was calculated, or the vesting of the award was, based upon the achievement of certain financial results that were subsequently reduced due to a restatement, (2) the participant engaged in any fraud or intentional misconduct that significantly contributed to the need for the restatement, and (3) the amount or vesting of the equity compensation award that would have been awarded to the participant had

49



the financial results been properly reported would have been lower than the amount actually awarded. In addition, the Board may terminate the participant's employment, authorize legal action, or take such other action to enforce the participant's obligations to the Company as the Board may deem appropriate in view of all the facts surrounding the particular case.
Executive Incentive Bonus Plan
The Executive Incentive Bonus Plan was unanimously approved and adopted by the Compensation Committee as of March 2, 2005, was approved and adopted by the shareholders of the Company on May 25, 2005, and was reapproved by the shareholders of the Company on May 20, 2010 at the 2010 Annual Meeting. See the Compensation Discussion and Analysis for a discussion of awards under the Executive Incentive Bonus Plan during 2012.
Purpose.    The Executive Incentive Bonus Plan is intended to provide an incentive to the Company's executive officers to improve the Company's operating results and to enable the Company to recruit and retain key officers by making the Company's overall compensation program competitive with compensation programs of other companies with which the Company competes for executive talent.
Administration.    The plan is administered by the Compensation Committee, which generally has the authority to determine the manner in which the Executive Incentive Bonus Plan will operate, to interpret the provisions of the plan and to make all determinations under the plan.
Eligibility and Participation.    All officers of the Company are eligible to be selected to participate in the Executive Incentive Bonus Plan. The Compensation Committee has the discretion to select those officers who will participate in the plan in any given year. A participant must be employed by the Company on the payment date in order to receive an award under the Executive Incentive Bonus Plan, unless the officer's employment terminated prior to the payment date as a result of death, disability, or retirement, or unless the Compensation Committee determines otherwise. For 2012, the Compensation Committee determined that the eligible participants under the plan included Messrs. Mixon, Blouch, Gudbranson, Richey and Slangen, as well as the Company's Senior Vice President, General Counsel and Secretary and the Senior Vice President of Human Resources.
Awards under the Executive Incentive Bonus Plan.    Awards under the plan are designed to ensure that the compensation of the Company's officers is commensurate with their responsibilities and contribution to the success of the Company based on market levels indicated by compensation data obtained from time to time by the Company or the independent compensation consultant engaged by the Compensation Committee. For each calendar year or other predetermined performance period, the Compensation Committee will establish a target bonus for each eligible officer, payable if specified performance goals are satisfied for such performance period.  
Performance Goals.    The performance goal for each performance period will provide for a targeted level or levels of performance using one or more of the following predetermined measurements: stock price, net sales, income from operations, earnings before income tax, earnings per share, cost controls, return on assets, and return on net assets employed. For 2012, the bonus award was based primarily upon satisfaction of an adjusted operating income target, with the award for certain executives being based also upon the achievement of certain individual goals, as further described in the footnotes to the Grants of Plan-Based Awards For Fiscal Year 2012 Table and in Compensation Discussion and Analysis.
The performance goal for a performance period is established in writing by the Compensation Committee on or before the latest date permissible to enable the bonus award to qualify as “performance based compensation” under Section 162(m) of the Internal Revenue Code. During this same time period, the Compensation Committee may adjust or modify the calculation of a performance goal for the performance period in order to prevent the dilution or enlargement of the rights of participants (1) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (2) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of, changes in applicable laws,

50



regulations, accounting principles or business conditions; and (3) in view of the Compensation Committee's assessment of the Company's business strategy, performance of comparable organizations, economic and business conditions, and any other circumstances deemed relevant by the Compensation Committee. The Compensation Committee may establish various levels of bonus depending upon relative performance toward a performance goal.
The target bonus payable to any officer for a performance period is a specified percentage of the officer's base salary for the performance period, but in no event will the bonus payable to any officer for a performance period exceed $5,000,000. This maximum bonus amount was set in part to permit the Executive Incentive Bonus Plan to accommodate continued growth of the Company and also to comply with the requirements of Section 162(m) of the Internal Revenue Code. The Board of Directors believes that this limit will provide the Compensation Committee with sufficient flexibility to reward exceptional contributions toward the Company's success.
In the event of a change in control of the Company, the amount payable to each eligible participant in the plan at the time of such change in control would be equal to the greater of (1) the target bonus that would have been paid if the performance goal for the calendar year in which the change in control occurs had been achieved, or (2) the bonus that would have been paid to the participant if the performance goal that was actually achieved during the portion of the calendar year which occurs prior to the change in control is annualized for the entire calendar year.
If the Board of Directors or any appropriate committee has determined that any fraud or intentional misconduct by a participant in the Executive Incentive Bonus Plan was a significant contributing factor to the Company having to restate all or a portion of its financial statement(s), the Board or committee may take, in its discretion, such actions as it deems necessary to remedy the misconduct and prevent its recurrence. In determining what remedies to pursue, the Board or committee will take into account all relevant factors, including whether the restatement was the result of fraud or intentional misconduct. The Board may, to the extent permitted by applicable law, in all appropriate cases, require reimbursement of any bonus or incentive compensation paid to the participant for any fiscal period commencing on or after January 1, 2008 if and to the extent that (1) the amount of incentive compensation was calculated based upon the achievement of certain financial results that were subsequently reduced due to a restatement, (2) the participant engaged in any fraud or intentional misconduct that significantly contributed to the need for the restatement, and (3) the amount of the bonus or incentive compensation that would have been awarded to the participant had the financial results been properly reported would have been lower than the amount actually awarded. In addition, the Board may terminate the participant's employment, authorize legal action, or take such other action to enforce the participant's obligations to the Company as the Board may deem appropriate in view of all the facts surrounding the particular case.
Amendment and Termination.    The Company reserves the right, exercisable by the Compensation Committee, to amend the Executive Incentive Bonus Plan at any time and in any respect, or to terminate the plan in whole or in part at any time and for any reason. Amendments will be subject to the approval of the Company's shareholders in such manner and with such frequency as is required under Section 162(m) of the Internal Revenue Code.

51




Outstanding Equity Awards at December 31, 2012
The following table shows, for the Named Executive Officers, outstanding equity awards held by such officers at December 31, 2012.
 
Option Awards 
 
 
Stock Awards 
 
Name 
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable  
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexer- cisable 
 
Equity
Incentive
Plan 
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) 
Option
Exercise
Price
($)  
Option
Expiration
Date  
 
Number  of
Shares or
Units of
Stock  That
Have Not
Vested
(#)  
 
Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($)  
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)  
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)  
A. Malachi Mixon, III
137,900

 

 
 
37.70
8/20/2013
 
 

 
 

 
 
142,000

 

 
 
44.30
8/24/2014
 
 

 
 

 
 
 
120,800

 

 
 
41.87
9/8/2015
 
 

 
 

 
 
 
88,100

 

 
 
22.66
8/23/2016
 
 

 
 

 
 
 
88,100

 

 
 
23.71
8/22/2017
 
 

 
 

 
 
 
108,500

 
 
 
25.79
8/20/2018
 
 

 
 

 
 
 
 

 

 
 
 
 
 
11,135

(1)
181,501

 
 
 
109,875

36,625

(2)
 
20.48
8/19/2019
 
 

 
 

 
 
 
 

 

 
 
 
 
 
13,600

(3)
221,680

 
 
 
49,500

49,500

(4)
 
25.24
8/18/2020
 
 

 
 

 
 
 
 

 

 
 
 
 
 
12,150

(5)
198,045

 
 
 
15,325

45,975

(6)
 
24.45
9/2/2021
 
 

 
 

 
 
 
 
 
 
 
 
 
 
16,200

(7)
264,060

 
 
 
 
50,000

(8)
 
13.37
8/14/2022
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gerald B. Blouch
58,700

 

 
 
37.70
8/20/2013
 
 

 
 

 
 
56,300

 

 
 
44.30
8/24/2014
 
 

 
 

 
 
 
45,400

 

 
 
41.87
9/8/2015
 
 

 
 

 
 
 
35,500

 

 
 
22.66
8/23/2016
 
 

 
 

 
 
 
35,500

 

 
 
23.71
8/22/2017
 
 

 
 

 
 
 
38,000

 
 
 
25.79
8/20/2018
 
 

 
 

 
 
 
 

 

 
 
 
 
 
4,360

(1)
71,068

 
 
 
41,625

13,875

(2)
 
20.48
8/19/2019
 
 

 
 

 
 
 
 

 

 
 
 
 
 
5,800

(3)
94,540

 
 
 
25,000

25,000

(4)
 
25.24
8/18/2020
 
 

 
 

 
 
 
 

 

 
 
 
 
 
19,800

(5)
322,740

 
 
 
24,925

74,775

(6)
 
24.45
9/2/2021
 
 

 
 

 
 
 
 
 
 
 
 
 
 
26,400

(7)
430,320

 
 
 
 
125,000

(8)
 
13.37
8/14/2022
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Robert K. Gudbranson
27,500

 
 
 
22.38
4/1/2018
 
 

 
 

 
 
22,300

 
 
 
25.79
8/20/2018
 
 

 
 

 
 
 
22,875

7,625

(2)
 
20.48
8/19/2019
 
 

 
 

 
 
 
 

 

 
 
 
 
 
2,225

(1)
36,268

 
 
 
11,000

11,000

(4)
 
25.24
8/18/2020
 
 

 
 

 
 
 
 

 

 
 
 
 
 
3,050

(3)
49,715

 
 
 
5,500

16,500

(6)
 
24.45
9/2/2021
 
 

 
 

 
 
 
 
 
 
 
 
 
 
4,350

(5)
70,905

 
 
 
 
30,000

(8)
 
13.37
8/14/2022
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,800

(7)
94,540

 
 

52



 
Option Awards  
 
Stock Awards  
Name 
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable  

Number of
Securities
Underlying
Unexercised
Options
(#)
Unexer- cisable 

 
Equity
Incentive
Plan 
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) 
Option
Exercise
Price
($)