INVACARE CORP (Form: 10-K, Received: 02/25/2011 13:28:26)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-15103

INVACARE CORPORATION

(Exact name of Registrant as specified in its charter)

Ohio

95-2680965

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

One Invacare Way, P.O. Box 4028, Elyria, Ohio 44036

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (440) 329-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Exchange on which Registered

Common Shares, without par value

Rights to Purchase Preferred Shares, without par value

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to the filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such short period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section229.405) is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ¨		Accelerated filer x
Non-accelerated filer ¨		Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes ¨ No x

As of June 30, 2010, the aggregate market value of the 28,334,691 Common Shares of the Registrant held by non-affiliates was $587,661,491 and the aggregate market value of the 17,342 Class B Common Shares of the Registrant held by non-affiliates was $359,673. While the Class B Common Shares are not listed for public trading on any exchange or market system, shares of that class are convertible into Common Shares at any time on a share-for-share basis. The market values indicated were calculated based upon the last sale price of the Common Shares as reported by The New York Stock Exchange on June 30, 2010, which was $20.74. For purposes of this information, the 2,954,236 Common Shares and 1,080,174 Class B Common Shares which were held by Executive Officers and Directors of the Registrant were deemed to be the Common Shares and Class B Common Shares held by affiliates.

As of February 23, 2011, 31,316,801 Common Shares and 1,084,947 Class B Common Shares were outstanding.

Documents Incorporated By Reference

Portions of the Registrant’s definitive Proxy Statement to be filed in connection with its 2011 Annual Meeting of Shareholders are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) of this report.

Except as otherwise stated, the information contained in this Annual Report on Form 10-K is as of December 31, 2010.

INVACARE CORPORATION

2010 ANNUAL REPORT ON FORM 10-K CONTENTS


Item		Page
PART I:
1.	Business		I-3
1A.	Risk Factors		I-17
1B.	Unresolved Staff Comments		I-29
2.	Properties		I-29
3.	Legal Proceedings		I-32
	Executive Officers of the Registrant		I-32

PART II:
5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		I-34
6.	Selected Financial Data		I-37
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		I-38
7A.	Quantitative and Qualitative Disclosures About Market Risk		I-52
8.	Financial Statements and Supplementary Data		I-52
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		I-52
9A.	Controls and Procedures		I-52
9B.	Other Information		I-53

PART III:
10.	Directors and Executive Officers of the Registrant		I-54
11.	Executive Compensation		I-54
12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		I-54
13.	Certain Relationships and Related Transactions		I-54
14.	Principal Accounting Fees and Services		I-54

PART IV:
15.	Exhibits and Financial Statement Schedules		I-55
Signatures			I-56

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PART I

Item 1.

Business.

GENERAL

Invacare Corporation is the world’s leading manufacturer and distributor in the estimated $11.0 billion worldwide market for medical equipment and supplies used in the home based upon its distribution channels, breadth of product line and net sales. The company designs, manufactures and distributes an extensive line of health care products for the non-acute care environment, including the home health care and extended care markets. The company continuously revises and expands its product lines to meet changing market demands and currently offers numerous product lines. The company sells its products principally to over 25,000 home health care and medical equipment providers, distributors and government locations in the United States, Australia, Canada, Europe, New Zealand and Asia. Invacare’s products are sold through its worldwide distribution network by its sales force, telesales associates and various organizations of independent manufacturers’ representatives and distributors. The company also distributes medical equipment and disposable medical supplies manufactured by others.

Invacare is committed to design and deliver the best value in medical products, which promote recovery and active lifestyles for people requiring home and other non-acute health care. Invacare pursues this vision by:

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designing and developing innovative and technologically superior products;

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ensuring continued focus on the company’s primary market—the non-acute health care market;

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marketing the company’s broad range of products;

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driving efficiency and innovation through the use of the company’s global resources;

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providing a professional and cost-effective sales, customer service and distribution organization;

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supplying innovative provider support and aggressive product line extensions;

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building a strong referral base among health care professionals;

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continuously advancing and recruiting top management candidates;

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empowering all employees;

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providing a performance-based reward environment; and

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continually striving for total quality throughout the organization.

When the company was acquired in December 1979 by a group of investors, including some of its current officers and Directors, it had $19.5 million in net sales and a limited product line of standard wheelchairs and patient aids. In 2010, Invacare reached approximately $1.7 billion in net sales, representing a 16% compound average sales growth rate since 1979, and, based upon the company’s distribution channels, breadth of product line and net sales, currently is the leading company in each of the following major, non-acute, medical equipment categories: power and manual wheelchairs, home care bed systems and home oxygen systems.

The company’s executive offices are located at One Invacare Way, Elyria, Ohio, 44036 and its telephone number is (440) 329-6000. In this report, “Invacare” and the “company” refer to Invacare Corporation and, unless the context otherwise indicates, its consolidated subsidiaries.

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THE HOME MEDICAL EQUIPMENT INDUSTRY

North America Market

The home medical equipment (HME) market includes home health care products, physical rehabilitation products and other non-disposable products used for the recovery and long-term care of patients. The company believes that patients overwhelmingly prefer care and treatment in their home. There is a growing body of evidence that homecare generally results in faster recovery and better outcomes. Homecare is often more cost-effective and comfortable than institutional care by a considerable factor. A principal reason is that homecare patients are not exposed to today’s increasingly virulent strains of hospital-borne pathogens. Invacare, through its diverse product and service offerings, delivers what the company refers to as a “medical trifecta”: patient satisfaction; better outcomes; and lower costs. The company’s view is an adequately equipped home is a better recovery option for a significant number of patients who face hospitalization. Accordingly, demand for domestic home medical equipment products is expected to grow during the next decade and beyond as a result of the factors mentioned above and more, including:

Growth in Population over Age 65. Globally, overall life expectancy continues to increase. Recent reports from the U.S. Department of Health and Human Services (DHHS) state that the average life expectancy in the United States for men and women who reach the age of 65 is now 82 and 85, respectively. Furthermore, life expectancy in the United States at birth is now an average of 78 for men and women together, a record high. The DHHS also reports that people age 75 or older represent the vast majority of home health care patients and will increase to 12% of the population by the year 2050. The oldest of the “Baby Boomer” generation, which numbers roughly 78 million people, will begin to turn 65 in 2011 and for the next 18 years.

Treatment Trends. The company believes that many medical professionals and patients prefer home health care over institutional care because home health care results in greater patient independence, increased patient responsibility and improved responsiveness to treatment. Further, health care professionals, public payors and private payors appear to favor home care as a cost-effective, clinically appropriate alternative to facility-based care. Recent surveys show that approximately 70% of adults would rather recover from an accident or illness in their home, and approximately 90% of the population aged 65 and over showed a preference for home-based, long-term care. In addition, the number of hospital beds per capita has fallen over the past twenty-five years in the United States, a trend which is expected to continue. This decline has coincided with the reduction in average length of stays in hospitals.

Technological Trends. Technological advances have made medical equipment increasingly adaptable for use in the home. Current hospital procedures often allow for earlier patient discharge, thereby lengthening recuperation periods outside of the traditional institutional setting. In addition, continuing medical advances prolong the lives of adults and children, thus increasing the demand for home medical care equipment.

Health Care Cost Containment Trends. Health care expenditures in the United States for 2009 were estimated to be $2.5 trillion dollars or approximately 17.6% of the Gross Domestic Product (GDP), the highest among industrialized countries. It is now estimated that federal, state and local government spending on health care in the U.S. will soon exceed private health care spending for the first time. By 2019, the nation’s health care spending is projected to increase to $4.5 trillion, growing at an average annual rate of 7.0%. Over this same period, spending on health care is expected to be approximately 19.3% of GDP. The rising cost of health care has caused many payors of health care expenses to look for ways to contain costs. The company believes that home health care and home medical equipment will play a significant role in reducing health care costs. In fact, a recent study conducted by Frank Lichtenberg, the Courtney C. Brown Professor of Business at the Columbia University Graduate School of Business and a Research Associate with the National Bureau of Economic Research, found that a nationwide increase in the use of home health care can save the U.S. billions of dollars in hospital costs. The study estimates the United States may have

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saved as much as $25 billion in total hospital payroll costs in 2008 alone thanks to the growth of the home health care sector during the previous 10 years. The study mentions that “it is a reasonable calculation” that further savings will be realized in the years ahead if the use of home care continues to grow.

Society’s Mainstreaming of People with Disabilities. People with disabilities are increasingly a part of the fabric of society, in part due to the 1991 Americans with Disabilities Act, or the “ADA.” This legislation provides mainstream opportunities to people with disabilities. The ADA imposes requirements on certain components of society to make reasonable accommodations to integrate people with disabilities into the community and the workplace.

Distribution Channels. The changing home health care market continues to provide new ways of reaching the consumer. The distribution network for products has expanded to include not only specialized home health care providers and extended care facilities but also retail drug stores, surgical supply houses, rental, hospital and HMO-based stores, home health agencies, mass merchandisers and the Internet.

Europe/Asia/Pacific Market

The company believes that, while many of the market factors influencing demand in the U.S. are also present in Europe and Asia/Pacific—aging of the population, technological trends and society’s acceptance of people with disabilities—each of the markets of Europe and in Asia/Pacific have distinctive characteristics. The health care industry tends to be more heavily socialized and, therefore, is more influenced by government regulation and fiscal policy. Variations in product specifications, regulatory approval processes, distribution requirements and reimbursement policies require the company to tailor its approach to the local market. Management believes that as the European markets develop more common product requirements and the company continues to refine its distribution channels, the company can more effectively penetrate these markets. Likewise, the company expects to increase its sales in the highly fragmented Australian, New Zealand and Asian markets as these markets, and the company’s distribution within them, develop.

United States/Europe Market

The company is directly affected by government regulation and reimbursement policies in virtually every country in which the company operates. In the United States, the growth of health care costs has increased at rates in excess of the rate of inflation and as a percentage of GDP for several decades. A number of efforts to control the federal deficit have impacted reimbursement levels for government sponsored health care programs, and private insurance companies and state Medicaid programs peg their reimbursement levels to Medicare.

Reimbursement guidelines in the home health care industry have a substantial impact on the nature and type of equipment an end-user can obtain and, thus, affect the product mix, pricing and payment patterns of the company’s customers who are medical equipment providers. The company believes its strong market position and technical expertise will allow it to respond to ongoing regulatory changes. However, the issues described above will likely continue to have significant impacts on the pricing of the company’s products.

GEOGRAPHICAL SEGMENTS AND PRODUCT CATEGORIES

North America

North America includes: North America/Home Medical Equipment (NA/HME), Invacare Supply Group (ISG) and Institutional Products Group (IPG).

NA/HME

This segment includes: Rehab, Standard and Respiratory product lines as discussed below.

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REHAB PRODUCTS

Power Wheelchairs. Invacare manufactures a complete line of power wheelchairs for individuals who require independent powered mobility. The range includes products that can be significantly customized to meet an individual’s specific needs, as well as products that are inherently versatile and meet a broad range of individual requirements. Center-wheel drive power wheelchair lines are marketed under the Invacare ^® TDX ^® brand names and include a full range of powered mobility products. The TDX ^® line of power wheelchairs offer an unprecedented combination of power, stability and maneuverability. The Pronto ^® Series Power Wheelchairs with SureStep ^® Stability feature center-wheel drive performance for exceptional maneuverability and intuitive driving. Power tilt and recline systems are offered as well.

Custom Manual Wheelchairs. Invacare manufactures and markets a range of custom manual wheelchairs for everyday, sports and recreational uses. These lightweight chairs are marketed under the Invacare ^® and Invacare Top End ^® brand names. The chairs provide mobility for people with moderate to severe disabilities in their everyday activities as well as for use in various sports such as basketball, racing and tennis.

Personal Mobility. Invacare manufactures and distributes personal mobility products, including compact scooters available in three-wheel and four-wheel versions.

Seating and Positioning Products. Invacare markets seat cushions, back supports and accessories under three series: the Invacare ^® Absolute ^™ Series provides simple seating solutions for comfort, fit and function; the Invacare InTouch ^™ Series includes versatile modular seating, providing optimal rehab solutions; and the Invacare PinDot ^® Series offers custom seating solutions personalized for the most challenged clients. The company also markets specialty seating products, pediatric seating and wheelchairs as well as various standers that allow people to stand that otherwise would be unable.

STANDARD PRODUCTS

Manual Wheelchairs. Invacare’s manual wheelchairs are sold for use inside and outside the home, institutional settings or public places. Clients include people who are chronically or temporarily disabled and require basic mobility performance with little or no frame modification. Examples of the company’s manual wheelchair lines, which are marketed under the Invacare ^® brand name, include the 9000 and the Tracer ^® product lines. These wheelchairs are designed to accommodate the diverse capabilities and unique needs of the individual, from petite to bariatric sizes.

Personal Care. Invacare is principally a distributor of a full line of personal care products, including ambulatory aids such as crutches, canes, walkers, knee walkers and wheeled walkers. Also available are safety aids such as tub transfer benches, shower chairs and grab bars, and patient care products such as commodes and other toilet assist aids.

Home Care Beds. Invacare manufactures and distributes a wide variety of manual, semi-electric and fully-electric beds for home use under the Invacare ^® brand name. Home care bed accessories include bedside rails, mattresses, overbed tables and trapeze bars. Also available are bariatric beds and accompanying accessories to serve the special needs of bariatric patients.

Low Air Loss Therapy Products. Invacare distributes a complete line of mattress overlays and replacement products, under the Invacare ^® Solace ^® and microAIR ^® brand names. These products, which use either pressure reducing foam or air flotation to redistribute weight and move moisture away from patients, assist in the total care of those who are immobile and spend a great deal of time in bed.

Patient Transport. Invacare manufactures and/or distributes products needed to assist in transferring individuals from surface to surface (bed to chair) or transporting from room to room. Designed for use in the home and institutional settings, these products include patient lifts and slings, and a series of mobile, multi-functional recliners.

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RESPIRATORY PRODUCTS

Non-Delivery Oxygen . Trends in the industry continue to be towards a non-delivery oxygen model. The Invacare ^® HomeFill ^® Oxygen System is the standard in ambulatory oxygen technology. Approaching 200,000 units in the field, it is the basis for a non-delivery model and allows patients to fill their own high-pressure cylinders from a concentrator in their home. With some upfront investment, the long-term benefits are unmatched, allowing providers to virtually eliminate time-consuming and costly service calls associated with cylinder and/or liquid oxygen deliveries.

Rounding out Invacare’s non-delivery oxygen offerings are the Invacare ^® SOLO ₂ ^® Transportable Concentrator and the Invacare ^® XPO ₂ ^™ Portable Concentrator, which are now both approved by the FAA for use in flight. The SOLO ₂ ^® offers continuous flow oxygen up to 3 LPM or pulse dose oxygen in settings 1-5. It is a flexible, reliable and clinically robust system that is easy to operate. Named for its extreme portability, the XPO ₂ ^™ weighs just 6 pounds with pulse dose settings 1-5 to meet the needs of a broad range of patients.

Stationary Oxygen Concentrators. Invacare oxygen concentrators are manufactured under the Perfecto ₂ ^™ name and are available in five and 10 liter models. All Invacare stationary concentrators provide patients with durable equipment and reliable oxygen either at home or in a healthcare setting.

Aerosol Products and Oxygen Accessories. Invacare offers a family of aerosol compressors under the Stratos ^™ name. Invacare also has an expanded line of conservers and regulators to maximize the efficiency of oxygen cylinders.

OTHER PRODUCTS

Other products include various services, including repair services, equipment rentals, accounts receivable collections and external contracting.

Invacare Supply Group (ISG)

Invacare distributes numerous lines of branded medical supplies including ostomy, incontinence, diabetic, interals, wound care and urology products as wells as home medical equipment, including aids for daily living.

Institutional Products Group (IPG)

Invacare, operating as Invacare Continuing Care, Invacare Continuing Care Canada and Champion, is a manufacturer and marketer of healthcare furnishings including beds, case goods and patient handling equipment for the long-term care markets, specialty clinical recliners for dialysis and oncology clinics and certain other home medical equipment and accessory products.

Asia/Pacific

The company’s Asia/Pacific operations consist of Invacare Australia, which distributes the Invacare range of products which includes: manual and power wheelchairs, lifts, ramps, beds, furniture and pressure care products; Dynamic Controls, a manufacturer of electronic operating components used in power wheelchairs, scooters, respiratory and other products; and Invacare New Zealand, a distributor of a wide range of home medical equipment.

Europe

The company’s European operations operate as a “common market” company with sales throughout Europe. The European operations currently sell a line of products providing room for growth as Invacare continues to broaden its product line offerings in line with its globalization strategy.

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Most wheelchair products sold in Europe are designed locally to meet specific market requirements. The company manufactures and/or assembles both manual and power wheelchair products in the following countries: United Kingdom, France and Germany. Manual wheelchair products are also manufactured and/or assembled in Portugal, Switzerland and Sweden. Beds are assembled in Denmark and Portugal. Personal care products are manufactured in Germany; and Dolomite products are manufactured in Sweden. Oxygen products such as concentrators and HomeFill ^® Oxygen Systems are imported from Invacare U.S. or China operations.

For information relating to net sales by product group, see Business Segments in the Notes to the Consolidated Financial Statements included in this report.

WARRANTY

COMPETITION

North America and Asia/Pacific

The home medical equipment market is highly competitive and Invacare products face significant competition from other well-established manufacturers and distributors. The company believes that its success in increasing market share is dependent on providing value to the customer based on the quality, performance and price of the company products, the range of products offered, the technical expertise of the sales force, the effectiveness of the company distribution system, the strength of the dealer and distributor network and the availability of prompt and reliable service for its products. Various competitors, from time to time, have instituted price-cutting programs in an effort to gain market share and may do so again in the future.

Europe

As a result of the differences encountered in the European marketplace, competition generally varies from one country to another. The company typically encounters one or two strong competitors in each country, some of them becoming regional leaders in specific product lines.

MARKETING AND DISTRIBUTION

North America and Asia/Pacific

Invacare products are marketed in the United States and Asia/Pacific primarily to providers who in turn sell or rent these products directly to consumers within the non-acute care setting. Invacare’s primary customer is the home medical equipment (HME) provider. The company also employs a “pull-through” marketing strategy to medical professionals, including physical and occupational therapists, who refer their patients to HME providers to obtain specific types of home medical equipment.

Invacare’s domestic sales and marketing organization consists primarily of a homecare sales force, which markets and sells Invacare ^® branded products to HME providers. Each member of Invacare’s home care sales force functions as a Territory Business Manager (TBM) and handles all product and service needs for an account, thus saving customers’ valuable time. The TBM also provides training and servicing information to providers, as well as product literature, point-of-sale materials and other advertising and merchandising aids. In Canada, products are sold by a sales force and distributed through regional distribution centers to health care providers throughout Canada.

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The Inside Sales Department provides increased sales coverage of smaller accounts and complements the efforts of the field sales force. Inside Sales offers cost-effective sales coverage through a targeted telesales effort, and has delivered solid sales growth since its existence.

Invacare’s Technical Education department offers education programs that continue to place emphasis on improving the productivity of repair technicians. The Service Referral Network includes numerous providers who honor the company’s product warranties regardless of where the product was purchased. This network of servicing providers seeks to ensure that all consumers using Invacare products receive quality service and support that is consistent with the Invacare brand promise.

Additionally, Invacare is the only manufacturer with a breadth of service offerings that includes the ability to assist providers in the collection of outstanding co-pays, rental capabilities, software and technology to streamline efficiencies, repair services and replacement parts. These tools and resources assist home and long-term care providers in maximizing efficiency and furthering their business success.

The company markets products and services to the institutional care market through IPG. IPG products include beds and furnishings, patient handling, bathing, durable medical equipment and clinical therapies, such as therapeutic support surfaces. IPG sales and marketing organizations consist of field sales representatives and independent rep agencies supported by a marketing group that generates awareness and demand at institutions for Invacare products and services. IPG also provides interior design services for nursing homes and assisted living facilities involved with renovation and new construction.

In 2010, Invacare continued to focus on a growing suite of programs and services designed to simplify business for HME providers, reduce their costs, optimize their resources and improve their bottom line. Invacare is working to help HME providers respond to the challenges associated with competitive bidding, escalating operating costs and changes in Medicare reimbursement through products, services and business consulting.

The company sells distributed products, primarily soft goods and disposable medical supplies, through ISG. ISG products include ostomy, incontinence, wound care and diabetic supplies, as well as 40 other categories of other soft goods and disposables. ISG markets its products through field account managers, inside telesales, a customer service department and the Internet. Additionally, ISG entered the long-term care market on a regional basis and markets to those nursing homes utilizing independent manufacturer representatives. ISG also markets a Home Delivery Program to home medical equipment providers through which ISG drop ships supplies in the provider’s name to the customer’s address. Thus, providers have no products to stock, no minimum order requirements and delivery is made within 24 to 48 hours nationwide. ISG also offers many customized marketing programs as well as business to consumer and business to business website development, designed to help its customers create awareness, grow companion and cash sales and assist in patient retention.

Invacare continues to improve performance and usability on www.invacare.com . In 2010, the company implemented a new global website platform with the goal of creating a highly usable web presence and one central destination for all Invacare web users. Invacare also increased participation in online forums and engaged customers by utilizing social media tools, including a corporate blog ( www.invacareconnects.com ), Facebook page and YouTube channel. These moves toward a more customer-centric approach allow the company to provide a user interface that better addresses customer needs.

Also in 2010, the company continued its strategic advertising campaign in key business to business publications that reach Invacare’s respective customers. The company contributed extensively to editorial coverage in trade publications concerning the products the company manufactures; and company representatives attended numerous trade shows and conferences on a national and regional basis in which Invacare products were displayed to providers, health care professionals, managed care professionals and consumers. “Yes, you can ^® ” continues to be Invacare’s global tagline, and it remains steadfast in company ads and on the Invacare global website and is indicative of the company’s “can do” attitude.

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The company continues to generate greater consumer awareness of its products. This was evidenced by the company’s sponsorship of a variety of wheelchair sporting events and support of various philanthropic causes benefiting the consumers of the company’s products. The company continued its sponsorships of individual wheelchair athletes and teams, including several of the top-ranked male and female racers, hand cyclists, and wheelchair tennis players in the world. The company also continued its support of disabled veterans through its sponsorship of the 30th National Veterans Wheelchair Games, the largest annual wheelchair sports event in the world. The games bring a competitive and recreational sports experience to military service veterans who use wheelchairs for their mobility needs due to spinal cord injury, neurological conditions or amputation.

Europe

The company’s European operations consist primarily of manufacturing, marketing and distribution operations in Western Europe and export sales activities through local distributors elsewhere in the world. The company has a sales force and where appropriate, distribution centers, in Austria, Belgium, Denmark, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom, and sells through distributors elsewhere in Europe and in the Middle East. In markets where the company has its own sales force, product sales are typically made through dealers of medical equipment and, in certain markets, directly to government agencies. In 2010, the continued consolidation of big buying groups tending to develop their business on a European scale has continued. As a result, Invacare is generalizing the application of pan-European pricing policies.

In 2010, Invacare was the title sponsor for the fifteenth year in a row of the “Invacare World Team Cup,” a wheelchair tennis tournament, which was in Antalya, Turkey.

PRODUCT LIABILITY COSTS

The company’s captive insurance company, Invatection Insurance Company, currently has a policy year that runs from September 1 to August 31 and insures annual policy losses of $10,000,000 per occurrence and $13,000,000 in the aggregate of the company’s North American product liability exposure. The company also has additional layers of external insurance coverage insuring up to $75,000,000 in annual aggregate losses arising from individual claims anywhere in the world that exceed the captive insurance company policy limits or the limits of the company’s per country foreign liability limits, as applicable. There can be no assurance that Invacare’s current insurance levels will continue to be adequate or available at affordable rates.

Product liability reserves are recorded for individual claims based upon historical experience, industry expertise and indications from the third-party actuary. Additional reserves, in excess of the specific individual case reserves, are provided for incurred but not reported claims based upon actuarial valuations at the time such valuations are conducted. Historical claims experience and other assumptions are taken into consideration to estimate the ultimate reserves. For example, the actuarial analysis assumes that historical loss experience is an indicator of future experience, that the distribution of exposures by geographic area and nature of operations for ongoing operations is expected to be very similar to historical operations with no dramatic changes and that the government indices used to trend losses and exposures are appropriate. Estimates made are adjusted on a regular basis and can be impacted by actual loss awards and settlements on claims. While actuarial analysis is used to help determine adequate reserves, the company is responsible for the determination and recording of adequate reserves in accordance with accepted loss reserving standards and practices.

PRODUCT DEVELOPMENT AND ENGINEERING

Invacare is committed to continuously improving upon and renewing its product offerings. Invacare’s key globalization initiative is moving from a local product development approach to address local markets, to a global product development approach, aimed at developing global product platforms. This strategy is designed to

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enable the company to increase the number of new products it introduces and offer more innovative product solutions, while at the same time reducing complexity within the business. By leveraging its engineering and product development capabilities on a global basis, Invacare expects to further increase its industry leadership in the broadest range of product offerings in both home care and continuing care medical device equipment.

2010’s marquee global product was the Invacare ^® FDX ^® Front-Wheel Drive Power Wheelchair . Launched in May in the United States and July in Europe, this wheelchair completes Invacare’s power wheelchair offerings with a solution for substantially all custom rehab needs. Invacare now offers its customers a full range of power bases and drive wheel configurations, including center-wheel, rear-wheel and now front-wheel drive. The FDX ^® Wheelchair features core technologies such as the Single Stage Drive (SSD) motor-gearbox combination, Invacare ^® MK6i ^™ Electronics and Invacare ^® G-Trac ^™ true-tracking technology.

Also globally, Invacare expanded the presence of its European Jazz Rollator by introducing it as the Invacare ^® FR300 ^™ Rollator into the United States. This rollator combines a high-end, streamlined look with the clinical benefits associated with walking more inside the rollator frame. Other features include a curb climber, or integrated “pedal” that makes it easier to negotiate obstacles and a unique x-brace and folding mechanism which allows the rollator to be folded easily and with one hand for portability.

The following are some of Invacare’s other notable product developments and updates:

Global Products

The new Single Stage Drive (SSD) motor-gearbox combination has several inherent advantages over current drive technology. The new SSD drive system is more efficient than previous designs and consolidates motor-gearbox combinations globally, reducing SKUs. As a two piece unit, the new SSD motor is easier to service because the motor- gearbox modules can be replaced separately. In addition, the SSD drive technology will be completely designed and manufactured by Invacare, further enhancing overall quality.

The Invacare ^® PCS (positioning-comfort-stability) back is designed for optimal comfort and function. Single-point mounting hardware with quick-release latch provides secure mounting, while allowing height, depth and back angle adjustments with easy installation and removal. The spacer fabric cover improves airflow between the user and the back, increasing comfort and preventing heat and moisture build-up. Three inches of contour depth allow for centering and postural stability without interfering with hip placement. For customizable support, the PCS back comes with optional pelvic stabilizers and thoracic lateral supports to provide additional pelvic and trunk control and stability.

The Invacare ^® Leo ^™ Scooter offers a stable four-wheel base that provides a smooth, safe drive and handles varying surfaces with ease. Features include a full lighting package, built-in splash guards to protect the electronics and transaxle, comfortable seating that swivels and slides and flat free tires. There are many add-on accessories available such as a rear basket or oxygen holder.

Made from robust, yet lightweight plastic, the new Invacare ^® Bathboard has been developed to fit most types of baths and provides a stable and ergonomic surface for showering and personal hygiene.

The Invacare ^® Roze ^™ Stand Assist Lift is for clients who require help in standing up or in transfers from one location to another. With the ability to handle up to 200 kg, the Roze lift ^™ perfectly fits the requirements for a lift system for everyday use. In addition to delivering safe client handling, it reduces the burden of lifting for the caregiver. Of particular note is the wide-opening base, which together with a removable footplate and an intelligent control box makes it easy for any caregiver to accomplish transfers, quickly and safely, on a daily basis.

The Invacare ^® Jasmine Mobile Lift is a flexible solution that offers high comfort for all clients. The lift provides safe patient handling with up to 200 kg weight capacity. With its expansive, wide-opening base

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and high lifting mechanism, Jasmine makes life easier for caregivers operating this new Invacare lift system. The control box features an intelligent service monitoring system that enables a safe operating environment for the caregiver, while allowing maximum comfort for the client during each transfer.

The new Invacare ^® Top End ^® Pro chair is designed for aspiring athletes who want durability in a chair, but also need to be able to make quick and easy adjustments. Available in two versions, as suitable for basketball or tennis, the new Top End ^® Pro chair is available in both a short and tall frame to accommodate a range of differing body shapes.

The Invacare ^® Top End ^® Twirl wheelchair allows one to have fun, exercise and compete in wheelchair dancing with its specially developed dancing anti-tip ability and robust center-of-gravity positioning.

Local Products

The Invacare ^® TDX ^® SI-2 power wheelchair in Europe provides excellent TDX power and performance. It has 14” drive wheels to handle aggressive terrain with ease, while its integrated rear suspension offers a smooth ride. Center wheel drive and a narrow footprint provide excellent indoor maneuverability, while its clean lines and brightly painted frame combine for a simple yet elegant design. The end result is an eye-catching power wheelchair with a go-anywhere attitude.

With the new Invacare Storm ^® 4 X-plore power wheelchair in Europe, the demanding user can enjoy all the benefits of Storm ^® 4, combined with a four-wheel-suspension for enhanced outdoor performance, increased shock absorption / comfort and better traction on uneven ground. The G-Trac ^™ option is also available for the ultimate driving performance. The new Storm ^® 4 X-plore offers the same advantages as the Storm ^® 4 in terms of configurability, adaptability and functionality. The stylish look of Storm ^® 4 has been conserved, with its modularity, flexible seat concept and the trouble-free servicing.

In the United States, Invacare introduced the Invacare ^® Insignia ^® Wheelchair . This high-strength lightweight chair offers height adjustable arms that convert from desk to full length, allowing providers to stock one chair instead of two, as well as a robust wheel lock, simple adjustable head tube design, sleek caster fork, adjustable angle back and quick release axles. It is a stylish, lightweight chair that is easy to use and adjusts to a patient’s specific needs.

The European küschall ^® K-Series family has grown with the latest addition: the K-Series Titanium . The newest K-Series features a rigid titanium wheelchair, is available in a 75° or 90° front frame angle. Available with titanium footrest, backrest and hand rims as well as a carbon axle to experience a highly active and dynamic wheelchair which is ideal for the active user.

The Invacare ^® Rea Spirea4NG in Europe is a dynamic and durable lightweight folding wheelchair ideal for everyday use. By incorporating user feedback into the design, the Spirea4NG offers light handling, minimal adjustment requirements, high technical quality and low maintenance, making it a perfect choice for users and care givers.

The European Invacare ^® SoftAIR dynamic mattresses are designed for patients at very high risk of developing pressure ulcers. There are two options available within the SoftAIR range, the SoftAIR Super, and the SoftAIR Excellence.

The newly designed Invacare ^® Knee Walker from the United States is a great alternative for those who are weary of discomfort related to crutches. The new design enhances stability, tracking control and patient comfort and sets a new standard for the market. The Knee Walker comes with a convenient basket and folds easily for transport and storage.

Invacare added a low-cost stationary concentrator to its product portfolio with the Invacare ^® Perfecto ₂ ^™ V Concentrator. This concentrator meets a patient’s oxygen needs easily and effectively and is equipped with an oxygen sensor to ensure oxygen purity levels are monitored and appropriate. An alarm will also alert the patient of low flow or any issues with kinked or loose tubing. It also features easy-to-access and clean filters, which prolong the life of the equipment, as well as easy-to-access circuit breakers which allow the system to be reset easily after power surges or outages.

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MANUFACTURING AND SUPPLIERS

The company’s objective is to continue to reduce costs through cost reductions and possibly facility consolidation while maintaining the highest quality supply chain in the industry. The company seeks to achieve this objective through a strategic combination of Invacare manufacturing facilities, contract manufacturing facilities and key suppliers. The operational strategy further supports the marketing strategy with flexible providers of new and modified products that respond to the demands of the market.

The supply chain is focused on providing custom-configured, made-to-order manufactured products as well as high-quality, cost-effective solutions for standard stock products. As strategic choices are made globally, the company will continue to be focused on providing quick product delivery to the market as a specific competitive advantage to the marketing and sales teams in these regions.

The company continues to emphasize reducing the costs of its global manufacturing and distribution operations. Access to sourcing opportunities has been facilitated by the company’s establishment of a test and design engineering facility in the company’s Suzhou, China location. In Asia, Invacare manufactures products that serve regional market opportunities through the company’s wholly-owned factory in Suzhou, Jiangsu Province, China. The Suzhou facility supplies products to the major geographic regions of the world served by Invacare: North America, Europe and Asia/Pacific.

Best practices in lean manufacturing are used throughout the company’s operations to eliminate waste, shorten lead times, optimize inventory, improve productivity, drive quality and engage supply chain associates in the defining and implementation of needed change.

The company purchases raw materials, components, sub-assemblies and finished goods from a variety of suppliers around the world. The company’s Hong Kong-based Asian sourcing and purchasing office has proven to be a significant asset to the company’s supply chain through the identification, development and management of suppliers across Asia. Where appropriate, Invacare utilizes contracts with suppliers in all regions to increase the guarantees of delivery, cost, quality and responsiveness. In those situations where contracts are not advantageous, Invacare works to manage multiple sources of supply and relationships that provide increased flexibility to the supply chain.

North America

The company has focused its factories in North America on the production of powered mobility and custom manual wheelchairs and seating products, the fully integrated manufacture of homecare and institutional care beds, the final assembly of respiratory products and the integrated component fabrication, painting and final assembly of a variety of standard manual wheelchairs and personal care products. The company operates four major factories located in Elyria, Ohio; Sanford, Florida; London, Ontario and Reynosa, Mexico.

Asia/Pacific

The Asia/Pacific region is focused on improving its customer delivery effectiveness, expanding its reach into all customer channels in all major metropolitan centers and integrating its distribution operations across the region.

Europe

The company has nine manufacturing/assembly facilities spread throughout Europe with the capability to manufacture patient aid, wheelchair, powered mobility, bath safety, beds and patient transport products. The European manufacturing and logistics facilities are focused on accelerating opportunities for streamlining to gain productivity improvements in cost and quality over the next few years.

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GOVERNMENT REGULATION

The company is directly affected by government regulation and reimbursement policies in virtually every country in which it operates. Government regulations and health care policy differ from country to country, and within some countries (most notably the U.S., European Union, Australia and Canada), from state to state or province to province. Changes in regulations and health care policy take place frequently and can impact the size, growth potential and profitability of products sold in each market.

In the U.S., the growth of health care costs has increased at rates in excess of the rate of inflation and as a percentage of GDP for several decades. A number of efforts to control the federal deficit have impacted reimbursement levels for government sponsored health care programs and private insurance companies often imitate changes made in federal programs. Reimbursement guidelines in the home health care industry have a substantial impact on the nature and type of equipment an end user can obtain and thus, affect the product mix, pricing and payment patterns of the company’s customers who are the HME providers.

The company continues its pro-active efforts to shape public policy that impacts home and community-based, non-acute health care. The company is currently very active with federal legislation and regulatory policy makers. Invacare believes that these efforts give the company a competitive advantage in two ways. First, customers frequently express appreciation for the company’s efforts on behalf of the entire industry. Second, sometimes the company has the ability to anticipate and plan for changes in public policy, unlike most other HME manufacturers who must react to change after it occurs.

The United States Food and Drug Administration (the “FDA”) regulates the manufacture and sale of medical devices. Under such regulation, medical devices are classified as Class I, Class II or Class III devices. The company’s principal products are designated as Class I or Class II devices. In general, Class I devices must comply with labeling and record keeping requirements and are subject to other general controls. In addition to general controls, certain Class II devices must comply with product design and manufacturing controls established by the FDA. Domestic and foreign manufacturers of medical devices distributed commercially in the U.S. are subject to periodic inspections by the FDA. Furthermore, state, local and foreign governments have adopted regulations relating to the design, manufacture and marketing of health care products.

The quality management system of all locations required to meet ISO 13485 requirements for the US, Canada, Europe and other foreign markets were inspected by a third party quality system registrar during 2010. All facilities were found to be in compliance and were issued new quality system certificates.

From time to time, the company may undertake voluntary recalls or field corrective actions of the company’s products to maintain ongoing customer relationships and to enhance the company’s reputation for adhering to high standards of quality and safety. None of the company’s actions has been classified by the FDA as high risk. The company continues to strengthen its programs to better ensure compliance with applicable regulations and actively keeps abreast of proposed regulations, particularly those which could have a material adverse effect on the company.

The company occasionally sponsors clinical studies, usually involving its respiratory products. These studies have historically been non-significant risk studies with human subjects. Such studies, their protocols, participant criteria and all results are registered in the Clinical Registry managed by the National Institutes of Health and available to the public via the Internet.

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In regards to reimbursement, the company is mindful of three key issues. In the United States, the Centers for Medicaid and Medicare Services is moving forward with National Competitive Bidding in the first nine metropolitan areas. While the company expects this to be neutral to earnings in 2011, it will remain judicious in its extension of credit to customers and it will monitor whether other payors begin to model their payments on this system. The company also will closely watch State Medicaid budgets and how deficits may impact coverage and payments for home medical equipment and institutional care products. In the European segment, there is discussion by the French government of reduced wheelchair reimbursement in the second half of 2011. This issue was originally anticipated to occur in 2010, but it was delayed.

Last year’s health care reform law in the U.S., the Patient Protection and Accountable Care Act, included a number of provisions affecting the HME industry. First, the health care law expanded Round 2 of the Medicare competitive bid program from 70 to 91 bid areas. Second, the law eliminated the Medicare program’s first month purchase option for standard power wheelchairs effective January 1, 2011. Instead, Medicare now makes rental payments for 13 months before the beneficiary assumes ownership of the standard power wheelchair. Finally, the new health care law imposed a “productivity adjustment” to the annual fee schedules of all Medicare providers, including HME providers, that limits any annual cost of living increases applied to the fee schedules. The 2010 health care reform law also includes a new tax on U.S. sales of medical device manufacturers or importers, such as Invacare. The law will impose a yearly 2.3% sales-based excise tax on medical device manufacturers starting in 2013. The excise tax will be deductible by the manufacturer on its federal tax return. The excise tax will not apply to medical devices that the Secretary of Treasury determines are generally purchased by the general public at retail for individual use. At this point, it is unclear whether any of Invacare products will be determined to be exempt from the tax by the Department of Treasury.

Although these reductions in Medicare payments are not beneficial to the home care industry, the company believes that it can still grow and thrive in this environment. No significant cost-of-living adjustments have been made over the last few years to the reimbursement and payment amounts permitted under Medicare with respect to the company’s products, but the company will continue to try to respond with improved productivity to address the lack of support from Congress. In addition, the company’s respiratory products (for example, the low-cost HomeFill ^® oxygen delivery system) can help offset the Medicare reimbursement cuts to the home care provider. The company will continue to focus on developing products that help the provider improve profitability. Additionally, the company continues to focus on low-cost country sourcing and/or manufacturing to help ensure that the company is one of the lowest cost manufacturers and distributors to the home care provider.

BACKLOG

The company generally manufactures most of its products to meet near-term demands by shipping from stock or by building to order based on the specialty nature of certain products. Therefore, the company does not have substantial backlog of orders of any particular product nor does it believe that backlog is a significant factor for its business.

EMPLOYEES

As of December 31, 2010, the company had approximately 6,300 employees.

FOREIGN OPERATIONS AND EXPORT SALES

The company also markets its products for export to other foreign countries. In 2010, the company had product sales in over 80 countries worldwide. For information relating to net sales, operating income and identifiable assets of the company’s foreign operations, see Business Segments in the Notes to the Consolidated Financial Statements.

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AVAILABLE INFORMATION

The company files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments thereto, as well as proxy statements and other documents with the Securities and Exchange Commission (SEC). The public may read and copy any material that the company files with the SEC at the SEC’s Public Reference Room located at 100 F Street, NE, Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website, www.sec.gov , which contains all reports, proxy statements and other information filed by the company with the SEC.

Additionally, Invacare’s filings with the SEC are available on or through the company’s website, www.invacare.com , as soon as reasonably practicable after they are filed electronically with, or furnished to, the SEC. Copies of the company’s filings also can be requested, free of charge, by writing to: Shareholder Relations Department, Invacare Corporation, One Invacare Way, P.O. Box 4028, Elyria, OH 44036-2125.

FORWARD-LOOKING INFORMATION

This Form 10-K contains forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Terms such as “will,” “should,” “could”, “plan,” “intend,” “expect,” “continue,” “forecast,” “believe,” “anticipate” and “seek,” as well as similar comments, are forward-looking in nature. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results and events may differ significantly from those expressed or anticipated as a result of risks and uncertainties which include, but are not limited to, the following: adverse changes in government and other third-party payor reimbursement levels and practices (such as, for example, the Medicare bidding program covering nine metropolitan areas beginning in 2011 and an additional 91 metropolitan areas beginning in 2013), impacts of the U.S. health care reform legislation that was recently enacted (such as, for example, the excise tax beginning in 2013 on medical devices, together with further regulations to be promulgated by the U.S. Secretary of Treasury, if adopted); the uncertain impact on the Company’s providers, on the Company’s suppliers and on the demand for the Company’s products resulting from the current global economic conditions and general volatility in the credit and stock markets; loss of key health care providers; exchange rate and tax rate fluctuations; inability to design, manufacture, distribute and achieve market acceptance of new products with higher functionality and lower costs; consolidation of health care providers and the Company’s competitors; lower cost imports; uncollectible accounts receivable; difficulties in implementing/upgrading Enterprise Resource Planning systems; risks inherent in managing and operating businesses in many different foreign jurisdictions; ineffective cost reduction and restructuring efforts; potential product recalls; legal actions or regulatory proceedings and governmental investigations (including, for example, compliance costs or other adverse effects arising from FDA or other regulatory enforcement actions); product liability claims; possible adverse effects of being leveraged, which could impact the Company’s ability to raise capital, limit its ability to react to changes in the economy or the health care industry or expose the Company to interest rate or event of default risks; increased freight costs; inadequate patents or other intellectual property protection; extensive government regulation of the Company’s products; failure to comply with regulatory requirements or receive regulatory clearance or approval for the Company’s products or operations in the United States or abroad; incorrect assumptions concerning demographic trends that impact the market for the Company’s products; decreased availability or increased costs of materials which could increase the Company’s costs of producing or acquiring the Company’s products, including possible increases in commodity costs; the loss of the services of the Company’s key management and personnel; inability to acquire strategic acquisition candidates because of limited financing alternatives; increased security concerns and potential business interruption risks associated with political and/or social unrest in foreign countries where the Company’s facilities or assets are located; provisions of Ohio law or in the Company’s debt agreements, shareholder rights plan or charter documents that may prevent or delay a change in control, as well as the risks described from time to time in Invacare’s reports as filed with the Securities and

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Exchange Commission. Except to the extent required by law, we do not undertake and specifically decline any obligation to review or update any forward-looking statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments or otherwise.

Item 1A.

Risk Factors.

The company’s business, operations and financial condition are subject to various risks and uncertainties. One should carefully consider the risks and uncertainties described below, together with all of the other information in this annual report on Form 10-K and in the company’s other filings with the SEC, before making any investment decision with respect to the company’s securities. The risks and uncertainties described below may not be the only ones the company faces. Additional risks and uncertainties not presently known by the company or that the company currently deems immaterial may also affect the company’s business. If any of these known or unknown risks or uncertainties actually occur, develop or worsen, the company’s business, financial condition, results of operations and future growth prospects could change substantially.

The adoption of healthcare reform and other legislative developments in the United States may adversely affect the company’s business, results of operations and/or financial condition.

In March 2010, significant reforms to the healthcare system were adopted as law in the United States. The law includes provisions that, among other things, reduce and/or limit Medicare reimbursement, require all individuals to have health insurance (with limited exceptions) and impose new and/or increased taxes. Specifically, the law imposes a 2.3% excise tax on U.S. sales of most medical devices beginning in 2013. The company is still evaluating the impact of this tax on its overall business. Various healthcare reform proposals have also emerged at the state level. The new law and these proposals could impact the demand for the company’s products or the prices at which the company sells its products. In addition, the excise tax will increase the company’s cost of doing business. The impact of this law and these proposals could have a material adverse effect on the company’s business, results of operations and/or financial condition.

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) institutes a wide range of reforms, some of which may impact the company. Among other things, the Act contains significant corporate governance and executive compensation-related provisions that authorize or require the SEC to adopt additional rules and regulations in these areas, such as shareholder “say on pay” voting and proxy access. The impact of these provisions on the company’s business is uncertain. The Act also provides for new statutory and regulatory requirements for derivative transactions, including foreign exchange and interest rate hedging transactions. Certain transactions will be required to be cleared on exchanges, and cash collateral will be required for those transactions. While the Act provides for a potential exception from these clearing and cash collateral requirements for commercial end-users such as the company, the exception is subject to future rule making and interpretation by regulatory authorities. The company enters into foreign exchange contracts, interest rate swaps and foreign currency forward contracts from time to time to manage its exposure to commodity price risk, foreign currency exchange risk and interest rate risk. If, in the future, the company is required to provide cash collateral for its hedging transactions, it could reduce the company’s ability to execute strategic hedges. In addition, the contractual counterparties in hedging arrangements will be required to comply with the Act’s new requirements, which could ultimately result in increased costs of these arrangements to customers such as the company.

Changes in government and other third-party payor reimbursement levels and practices have negatively impacted and could continue to negatively impact the company’s revenues and profitability.

The company’s products are sold primarily through a network of medical equipment and home health care providers, extended care facilities, hospital and HMO-based stores and other providers. In addition, the company sells directly to various government providers throughout the world. Many of these providers (the company’s customers) are reimbursed for the products and services provided to their customers and patients by third-party

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payors, such as government programs, including Medicare and Medicaid, private insurance plans and managed care programs. Most of these programs set maximum reimbursement levels for some of the products sold by the company in the United States and abroad. If third-party payors deny coverage, make the reimbursement process or documentation requirements more uncertain or further reduce their current levels of reimbursement (i.e., beyond the reductions described below), or if the company’s costs of production increase faster than increases in reimbursement levels, the company may be unable to sell the affected product(s) through its distribution channels on a profitable basis.

Reduced government reimbursement levels and changes in reimbursement policies have in the past added, and could continue to add, significant pressure to the company’s revenues and profitability. For example, CMS also introduced competitive bidding for nine metropolitan areas in the U.S., which went into effect in January 2011. The reimbursement rates for nine product categories were reduced by an average of 32 percent in these nine metropolitan areas. CMS is currently scheduled to expand the NCB program to an additional 91 metropolitan areas in January 2013.

Similar trends and concerns are occurring in state Medicaid programs. These recent changes to reimbursement policies, and any additional unfavorable reimbursement policies or budgetary cuts that may be adopted in the future, could adversely affect the demand for the company’s products by customers who depend on reimbursement from the government-funded programs. The percentage of the company’s overall sales that are dependent on Medicare or other insurance programs may increase as the portion of the U.S. population over age 65 continues to grow, making the company more vulnerable to reimbursement level reductions by these organizations. Reduced government reimbursement levels also could result in reduced private payor reimbursement levels because some third-party payors index their reimbursement schedules to Medicare fee schedules. Reductions in reimbursement levels also may affect the profitability of the company’s customers and ultimately force some customers without strong financial resources to go out of business. The reductions that went into effect recently may prove to be so dramatic that some of the company’s customers may not be able to adapt quickly enough to survive. The company is the industry’s largest creditor and an increase in bankruptcies in the company’s customer base could have an adverse effect on the company’s financial results.

Outside the United States, reimbursement systems vary significantly by country. Many foreign markets have government-managed health care systems that govern reimbursement for new home health care products. The ability of hospitals and other providers supported by such systems to purchase the company’s products is dependent, in part, upon public budgetary constraints. Various countries have tightened reimbursement rates and other countries may follow. If adequate levels of reimbursement from third-party payors outside of the United States are not obtained, international sales of the company’s products may decline, which could adversely affect the company’s net sales and would have a material adverse effect on the company’s business, financial condition and results of operations.

The impact of all the changes discussed above is uncertain and could have a material adverse effect on the company’s business, financial condition and results of operations.

The company is subject to risks arising out of the continuing global economic uncertainty.

As is the case for many companies operating in the current economic environment, the company is exposed to a number of risks. These risks include the possibility that: one or more of the lenders participating in the company’s revolving credit facility may be unable or unwilling to extend credit to the company; the third party company that provides lease financing to the company’s customers may refuse or be unable to fulfill its financing obligations or extend credit to the company’s customers; one or more customers of the company may be unable to pay for purchases of the company’s products on a timely basis; one or more key suppliers may be unable or unwilling to provide critical goods or services to the company; and one or more of the counterparties to the company’s hedging arrangements may be unable to fulfill its obligations to the company. Although the company

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has taken actions in an effort to mitigate these risks, during periods of economic downturn, the company’s exposure to these risks increases. Events of this nature may adversely affect the company’s liquidity or sales and revenues, and therefore have an adverse effect on the company’s business and results of operations.

If the company’s cost reduction efforts are ineffective, the company’s revenues and profitability could be negatively impacted.

In response to reimbursement reductions, including competitive pricing pressures, the company continues to initiate numerous cost reduction and organizational efficiency efforts, including globalization of its product lines. The company may not be successful in achieving the operating efficiencies and operating cost reductions expected from these efforts and the company may experience business disruptions associated with the restructuring and cost reduction activities. These efforts may not produce the full efficiency and cost reduction benefits that the company expects. Further, these benefits may be realized later than expected, and the costs of implementing these measures may be greater than anticipated. If these measures are not successful, the company may undertake additional cost reduction efforts, which could result in future charges. Moreover, the company’s ability to achieve other strategic goals and business plans and the company’s financial performance may be adversely affected and the company could experience business disruptions with customers and elsewhere if the company’s cost reduction and restructuring efforts prove ineffective.

The company’s revenues and profits are subject to exchange rate and interest rate fluctuations that could adversely affect its results of operations or financial position.

Currency exchange rates are subject to fluctuation due to, among other things, changes in local, regional or global economic conditions, the imposition of currency exchange restrictions and unexpected changes in regulatory or taxation environments. The functional currency of the company’s subsidiaries outside the United States is the predominant currency used by the subsidiaries to transact business. Through the company’s international operations, the company is exposed to foreign currency fluctuations, and changes in exchange rates can have a significant impact on net sales and elements of cost. The company conducts a significant number of transactions in currencies other than the U.S. dollar. In addition, because certain of the company’s costs and revenues are denominated in other currencies, the company’s results of operations are exposed to foreign exchange rate fluctuations as the financial results of those operations are translated from local currency into U.S. dollars upon consolidation.

The company uses forward contracts primarily to help reduce its exposure to transactional exchange rate risk. Despite the company’s efforts to mitigate these risks, however, the company’s revenues and profitability may be materially adversely affected by exchange rate fluctuations. The company does not have a meaningful way to hedge translation.

The company also is exposed to market risk through various financial instruments, including fixed rate and floating rate debt instruments. The company does at times use interest swap agreements to mitigate its exposure to interest rate fluctuations, but those efforts may not adequately protect the company from significant interest rate risks. Interest on much of the company’s debt is based on LIBOR, which is currently historically low. Increases in LIBOR could have a significant impact on the company’s reported interest expense.

The industry in which the company operates is highly competitive and some of the company’s competitors may be larger and may have greater financial resources than the company does.

The home medical equipment market is highly competitive and the company’s products face significant competition from other well-established manufacturers. Reduced government reimbursement levels and changes in reimbursement policies, such as the competitive bidding program implemented by CMS, may drive competitors that have greater financial resources than the company to offer drastically reduced pricing terms in an effort to secure government acceptance of their products and pricing. Any increase in competition may cause the company to lose market share or compel the company to reduce prices to remain competitive, which could have a material adverse affect on the company’s results of operations.

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The company’s success depends on the company’s ability to design, manufacture, distribute and achieve market acceptance of new products with higher functionality and lower costs.

The company sells products to customers primarily in markets that are characterized by technological change, product innovation and evolving industry standards, yet in which product price is increasingly a primary consideration in customers’ purchasing decisions. The company is continually engaged in product development and improvement programs. The company must continue to design and improve innovative products, effectively distribute and achieve market acceptance of those products, and reduce the costs of producing the company’s products, in order to compete successfully with the company’s competitors. If competitors’ product development capabilities become more effective than the company’s product development capabilities, if competitors’ new or improved products are accepted by the market before the company’s products or if competitors are able to produce products at a lower cost and thus offer products for sale at a lower price, the company’s business, financial condition and results of operation could be adversely affected.

The consolidation of health care customers and the company’s competitors could result in a loss of customers or in additional competitive pricing pressures.

Numerous initiatives and reforms instituted by legislators, regulators and third-party payors to reduce home medical equipment costs have resulted in a consolidation trend in the home medical equipment industry as well as among the company’s customers, including home health care providers. In the past, some of the company’s competitors have been lowering the purchase prices of their products in an effort to attract customers. This in turn has resulted in greater pricing pressures, including pressure to offer customers more competitive pricing terms, and the exclusion of certain suppliers from important market segments as group purchasing organizations, independent delivery networks and large single accounts continue to consolidate purchasing decisions for some of the company’s customers. Further consolidation could result in a loss of customers, in increased collectability risks, or in increased competitive pricing pressures.

The company may be adversely affected by legal actions or regulatory proceedings.

The company may be subject to claims, litigation or other liabilities as a result of injuries caused by allegedly defective products, acquisitions the company has completed or in the intellectual property area. Any such claims or litigation against the company, regardless of the merits, could result in substantial costs and could harm the company’s business or its reputation. Intellectual property litigation or claims also could require the company to:

•

cease manufacturing and selling any of the company’s products that incorporate the challenged intellectual property;

•

obtain a license from the holder of the infringed intellectual property right alleged to have been infringed, which license may not be available on commercially reasonable terms, if at all; or

•

redesign or rename the company’s products, which may not be possible, and could be costly and time consuming and could result in lost revenues and market share.

The results of legal proceedings are difficult to predict and the company cannot provide any assurance that an action or proceeding will not be commenced against the company, or that the company will prevail in any such action or proceeding. An unfavorable resolution of any legal action or proceeding could materially and adversely affect the company’s business, results of operations, liquidity or financial condition or its reputation.

Product liability claims may harm the company’s business, particularly if the number of claims increases significantly or the company’s product liability insurance proves inadequate.

The manufacture and sale of home health care devices and related products exposes the company to a significant risk of product liability claims. From time to time, the company has been, and is currently, subject to a number of product liability claims alleging that the use of the company’s products has resulted in serious injury or even death.

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Even if the company is successful in defending against any liability claims, these claims could nevertheless distract the company’s management, result in substantial costs, harm the company’s reputation, adversely affect the sales of all the company’s products and otherwise harm the company’s business. If there is a significant increase in the number of product liability claims, the company’s business could be adversely affected.

The company’s captive insurance company, Invatection Insurance Company, currently has a policy year that runs from September 1 to August 31 and insures annual policy losses of $10,000,000 per occurrence and $13,000,000 in the aggregate of the company’s North American product liability exposure. The company also has additional layers of external insurance coverage insuring up to $75,000,000 in annual aggregate losses arising from individual claims anywhere in the world that exceed the captive insurance company policy limits or the limits of the company’s per country foreign liability limits as applicable. There can be no assurance that the company’s current insurance levels will continue to be adequate or available at affordable rates.

In addition, as a result of a product liability claim or if the company’s products are alleged to be defective, the company may have to recall some of its products, may have to incur significant costs or may suffer harm to its business reputation.

The company’s products are subject to recalls, which could harm the company’s reputation and business.

The company is subject to ongoing medical device reporting regulations that require the company to report to the FDA or similar governmental authorities in other countries if the company’s products cause, or contribute to, death or serious injury, or if they malfunction and would be likely to cause, or contribute to, death or serious injury if the malfunction were to recur. The FDA and similar governmental authorities in other countries have the authority to require the company to do a field correction or recall the company’s products in the event of material deficiencies or defects in design or manufacturing. In addition, in light of a deficiency, defect in design or manufacturing or defect in labeling, the company may voluntarily elect to recall or correct the company’s products. A government mandated or voluntary recall/field correction by the company could occur as a result of component failures, manufacturing errors or design defects, including defects in labeling. Any recall/field correction would divert managerial and financial resources and could harm the company’s reputation with its customers, product users and the health care professionals that use, prescribe and recommend the company’s products. The company could have product recalls or field actions that result in significant costs to the company in the future, and these actions could have a material adverse effect on the company’s business.

The company is subject to extensive government regulation, and if the company fails to comply with applicable laws or regulations, the company could suffer severe civil or criminal sanctions or be required to make significant changes to the company’s operations that could have a material adverse effect on the company’s results of operations.

The company sells its products principally to medical equipment and home health care providers who resell or rent those products to consumers. Many of those providers (the company’s customers) are reimbursed for the

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Invacare products sold to their customers and patients by third-party payors, including Medicare and Medicaid. The U.S. federal government and the governments in the states and other countries in which the company operates regulate many aspects of the company’s business. As a medical device manufacturer, the company is subject to extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating reimbursement under various government programs. The marketing, invoicing, documenting and other practices of health care suppliers and manufacturers are all subject to government scrutiny. Government agencies periodically open investigations and obtain information from health care suppliers and manufacturers pursuant to the legal process. Violations of law or regulations can result in severe administrative, civil and criminal penalties and sanctions, including disqualification from Medicare and other reimbursement programs, which could have a material adverse effect on the company’s business. The company has established numerous policies and procedures that the company believes are sufficient to ensure that the company will operate in substantial compliance with these laws and regulations. In addition, the company employs a Director of Compliance and Internal Audit to continue to develop, implement, monitor and manage these policies and procedures, including internal controls, to comply with applicable legal, regulatory and company standards. The company cannot guarantee that its efforts will be effective to prevent a material adverse effect on the company’s business from noncompliance issues.

The company received a subpoena in 2006 from the U.S. Department of Justice seeking documents relating to three long-standing and well-known promotional and rebate programs maintained by the company. The company believes that the programs described in the subpoena are in compliance with all applicable laws and the company has cooperated fully with the government investigation. As of February 2011, the subpoena remains pending.

Health care is an area of rapid regulatory change. Changes in the law and new interpretations of existing laws may affect permissible activities, the costs associated with doing business, and reimbursement amounts paid by federal, state and other third-party payors. The company cannot predict the future of federal, state and local regulation or legislation, including Medicare and Medicaid statutes and regulations, or possible changes in health care policies in any country in which the company conducts business. Future legislation and regulatory changes could have a material adverse effect on the company’s business.

The company’s research and development and manufacturing processes are subject to federal, state, local and foreign environmental requirements.

The company’s research and development and manufacturing processes are subject to federal, state, local and foreign environmental requirements, including requirements governing the discharge of pollutants into the air or water, the use, handling, storage and disposal of hazardous substances and the responsibility to investigate and clean up contaminated sites. Under some of these laws, the company also could be held responsible for costs relating to any contamination at the company’s past or present facilities and at third-party waste disposal sites. These could include costs relating to contamination that did not result from any violation of law and, in some circumstances, contamination that the company did not cause. The company may incur significant expenses relating to the failure to comply with environmental laws. The enactment of stricter laws or regulations, the stricter interpretation of existing laws and regulations or the requirement to undertake the investigation or remediation of currently unknown environmental contamination at the company’s own or third party sites may require the company to make additional expenditures, which could be material.

The company’s failure to comply with regulatory requirements or receive regulatory clearance or approval for the company’s products or operations in the United States or abroad could adversely affect the company’s business.

The company’s medical devices are subject to extensive regulation in the United States by the Food and Drug Administration, or the “FDA,” and by similar governmental authorities in the foreign countries where the company does business. The FDA regulates virtually all aspects of a medical device’s development, testing,

I-22

manufacturing, labeling, promotion, distribution and marketing. In addition, the company is required to file reports with the FDA if the company’s products cause, or contribute to, death or serious injury, or if they malfunction and would be likely to cause, or contribute to, death or serious injury if the malfunction were to recur. In general, unless an exemption applies, the company’s wheelchair and respiratory medical devices must receive a pre-marketing clearance from the FDA before they can be marketed in the United States. The FDA also regulates the export of medical devices to foreign countries. The company cannot be assured that any of the company’s devices, to the extent required, will be cleared by the FDA through the pre-market clearance process or that the FDA will provide export certificates that are necessary to export certain of the company’s products. If FDA issues a warning letter as a result of its findings from their inspections, the FDA could refuse to provide export certificates until the matters covered in the warning letter are resolved.

Additionally, the company may be required to obtain pre-marketing clearances to market modifications to the company’s existing products or market its existing products for new indications. The FDA requires device manufacturers themselves to make and document a determination as to whether or not a modification requires a new clearance; however, the FDA can review and disagree with a manufacturer’s decision. The company has applied for, and received, a number of such clearances in the past. The company may not be successful in receiving clearances in the future or the FDA may not agree with the company’s decisions not to seek clearances for any particular device modification. The FDA may require a clearance for any past or future modification or a new indication for the company’s existing products. Such submissions may require the submission of additional data and may be time consuming and costly, and ultimately may not be cleared by the FDA.

If the FDA requires the company to obtain pre-marketing clearances for any modification to a previously cleared device, the company may be required to cease manufacturing and marketing the modified device or to recall the modified device until the company obtains FDA clearance and the company may be subject to significant regulatory fines or penalties. In addition, the FDA may not clear these submissions in a timely manner, if at all. The FDA also may change its policies, adopt additional regulations or revise existing regulations, each of which could prevent or delay pre-market clearance of the company’s devices, or could impact the company’s ability to market a device that was previously cleared. Any of the foregoing could adversely affect the company’s business.

As part of its regulatory function, the FDA routinely inspects the sites of medical device companies, and in 2010, the FDA inspected certain of the company’s facilities. In December 2010, the company received a warning letter from the FDA related to documentation and procedures at the company’s Sanford, Florida facility. The letter does not call into question the safety or efficacy of Invacare products, and production has not been impacted. The company is taking these issues very seriously and has added resources to ensure it is addressing all of the FDA’s concerns in a timely manner. However, the results of regulatory claims, proceedings, investigations, or litigation are difficult to predict. An unfavorable resolution or outcome of an FDA inspection or investigation could materially and adversely affect the company’s business, financial condition, and results of operations.

The company’s failure to comply with the regulatory requirements of the FDA and other applicable U.S. regulatory requirements may subject the company to administrative or judicially imposed sanctions. These sanctions include warning letters, civil penalties, criminal penalties, injunctions, consent decrees, product seizure or detention, product recalls and total or partial suspension of production.

In many of the foreign countries in which the company markets its products, the company is subject to extensive regulations that are similar to those of the FDA, including those in Europe. The regulation of the company’s products in Europe falls primarily within the European Economic Area, which consists of the 27 member states of the European Union, as well as Iceland, Liechtenstein and Norway. Only medical devices that comply with certain conformity requirements of the Medical Device Directive are allowed to be marketed within the European Economic Area. In addition, the national health or social security organizations of certain foreign countries, including those outside Europe, require the company’s products to be qualified before they can be marketed in those countries. Failure to receive or delays in the receipt of, relevant foreign qualifications in the European Economic Area or other foreign countries could have a material adverse effect on the company’s business.

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Decreased availability or increased costs of raw materials could increase the company’s costs of producing its products.

The company purchases raw materials, fabricated components, some finished goods and services from a variety of suppliers. Raw materials such as plastics, steel, and aluminum are considered key raw materials. Where appropriate, the company employs contracts with its suppliers, both domestic and international. In those situations in which contracts are not advantageous, the company believes that its relationships with its suppliers are satisfactory and that alternative sources of supply are readily available. From time to time, however, the prices and availability of these raw materials fluctuate due to global market demands, which could impair the company’s ability to procure necessary materials, or increase the cost of these materials. Inflationary and other increases in costs of these raw materials have occurred in the past and may recur from time to time. In addition, freight costs associated with shipping and receiving product and sales are impacted by fluctuations in the cost of oil and gas. A reduction in the supply or increase in the cost of those raw materials could impact the company’s ability to manufacture its products and could increase the cost of production. As an example, inflation in China has in the past and will probably in the future increase costs and an appreciation of the Yuan or an increase in labor rates could have an unfavorable impact on the cost of key components and some finished goods. Demand in China and other developing countries for raw materials may result in increases in the cost of key commodities and could have a negative impact on the profits of the company if these increases cannot be passed onto the company’s customers.

Lower cost imports could negatively impact the company’s profitability.

Lower cost imports sourced from Asia may negatively impact the company’s sales volumes. In the past, competition from certain of these products has caused the company to lower its prices, cutting into the company’s profit margins and reducing the company’s overall profitability.

Difficulties in implementing or upgrading the company’s Enterprise Resource Planning systems may disrupt the company’s business.

The company is continuously upgrading its Enterprise Resource Planning (ERP) systems which results in various complexities and business process changes that can negatively affect the company’s ability to handle transactions, such as the processing of orders, and can create customer disruptions and or loss of some business. While the company believes that the difficulties associated with implementing and upgrading the company’s ERP systems are manageable, there can be no assurance that the company will not experience disruptions or inefficiencies in the company’s business operations as a result of new system implementations or upgrades.

The company’s reported results may be adversely affected by increases in reserves for uncollectible accounts receivable.

The company has a large balance of accounts receivable and has established a reserve for the portion of such accounts receivable that the company estimates will not be collected because of the company’s customers’ non-payment. The specific reserve is based on historical trends and current relationships with the company’s customers and providers. Changes in the company’s collection rates can result from a number of factors, including turnover in personnel, changes in the payment policies or practices of payors, changes in industry rates or pace of reimbursement or changes in the financial health of the company’s customers. As a result of past changes in Medicare reimbursement regulations, specifically changes to the qualification processes and reimbursement levels of consumer power wheelchairs and custom power wheelchairs, the business viability of several of the company’s customers had become questionable and several have failed. Further, as national competitive bidding is implemented in additional areas, the number of start-up or new providers who have three-year contracted pricing will increase. The company’s reserve for uncollectible receivables has fluctuated in the past and will continue to fluctuate in the future. Changes in rates of collection, even if they are small in absolute terms, could require the company to increase its reserve for uncollectible receivables beyond its current level. The company has reviewed the accounts receivables, including those receivables financed through DLL,

I-24

associated with many of its customers that are most exposed to these issues. If the business viability of certain of the company’s customers deteriorates or if the company’s credit policies are ineffective in reducing the company’s exposures to credit risk, additional increases in reserves for uncollectible accounts may be necessary, which could adversely affect the company’s financial results.

Failure to properly manage the distribution of the company’s products may result in reduced revenue and profitability.

The company uses a variety of distribution methods to sell its products and services. The company’s distribution network includes various customers such as specialized home health care providers and extended care facilities, hospital and HMO-based stores, home health agencies, mass merchandisers and the Internet. As the company reaches more customers worldwide through an increasing number of new distribution channels, inventory management becomes more challenging. If the company is unable to properly manage and balance inventory levels and potential conflicts among these various distribution methods, its operating results could be harmed.

The company is subject to certain risks inherent in managing and operating businesses in many different foreign jurisdictions.

The company has significant international operations, including operations in Australia, Canada, New Zealand, Mexico, Asia (primarily China) and Europe. There are risks inherent in operating and selling products internationally, including:

•

different regulatory environments and reimbursement systems;

•

difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;

•

foreign customers who may have longer payment cycles than customers in the United States;

•

tax rates in certain foreign countries that may exceed those in the United States and foreign earnings that may be subject to withholding requirements;

•

the imposition of tariffs, exchange controls or other trade restrictions including transfer pricing restrictions when products produced in one country are sold to an affiliated entity in another country;

•

general economic and political conditions in countries where the company operates or where end users of the company’s products reside;

•

security concerns and potential business interruption risks associated with political and/or social unrest in foreign countries where the company’s facilities or assets are located;

•

difficulties associated with managing a large organization spread throughout various countries;

•

difficulties in enforcing intellectual property rights and weaker intellectual property rights protection in some countries;

•

required compliance with a variety of foreign laws and regulations; and

•

differing consumer product preferences.

The factors described above also could disrupt the company’s product manufacturing/assembling and key suppliers located outside of the United States. For example, the company increasingly relies on its manufacturing and sourcing operations in China for the production of its products. Disruptions in the company’s foreign operations, particularly those in China or Mexico, may impact the company’s revenues and profitability.

The company’s debt may limit the company’s flexibility in operating its business.

The company has substantial outstanding indebtedness. This indebtedness requires a significant portion of cash flow from operations to be dedicated to the payment of principal and or interest, thus reducing the

I-25

company’s ability to use its cash flow to fund its operations, capital expenditures and future business opportunities. The company’s indebtedness also may limit the company’s ability to react to changes in the economy or its industry.

The company’s revolving credit facility contains various covenants that limit the company’s ability to engage in specified types of transactions. In addition, under the company’s revolving credit facility, it is required to satisfy and maintain specified financial ratios and other financial condition tests. These covenants could materially and adversely affect the company’s ability to finance its future operations or capital needs. Furthermore, they may restrict the company’s ability to conduct and expand its business and pursue its business strategies. The company’s ability to meet these financial ratios and financial condition tests can be affected by events beyond its control, including changes in general economic and business conditions.

If the company’s patents and other intellectual property rights do not adequately protect the company’s products, the company may lose market share to its competitors and may not be able to operate profitably.

The company relies on a combination of patents, trade secrets and trademarks to establish and protect the company’s intellectual property rights in its products and the processes for the development, manufacture and marketing of the company’s products.

The company uses non-patented proprietary know-how, trade secrets, undisclosed internal processes and other proprietary information and currently employs various methods to protect this proprietary information, including confidentiality agreements, invention assignment agreements and proprietary information agreements with various vendors, employees, independent sales agents, distributors, consultants and others. However, these agreements may be breached. The FDA or another governmental agency may require the disclosure of this information in order for the company to have the right to market a product. Trade secrets, know-how and other unpatented proprietary technology also may otherwise become known to, or independently developed by, the company’s competitors.

In addition, the company holds U.S. and foreign patents relating to a number of its components and products and has patent applications pending with respect to other components and products. The company also applies for additional patents in the ordinary course of its business, as the company deems appropriate. However, these precautions offer only limited protection, and the company’s proprietary information may become known to, or be independently developed by, competitors, or the company’s proprietary rights in intellectual property may be challenged, any of which could have a material adverse effect on the company’s business, financial condition and results of operations. Additionally, the company cannot assure that its existing or future patents, if any, will afford the company adequate protection or any competitive advantage, that any future patent applications will result in issued patents or that the company’s patents will not be circumvented, invalidated or declared unenforceable.

Any proceedings before the U.S. Patent and Trademark Office could result in adverse decisions as to the priority of the company’s inventions and the narrowing or invalidation of claims in issued patents. The company also could incur substantial costs in any proceeding. In addition, the laws of some of the countries in which the company’s products are or may be sold may not protect the company’s products and intellectual property to the same extent as U.S. laws, if at all. The company also may be unable to protect the company’s rights in trade secrets and unpatented proprietary technology in these countries.

In addition, the company holds patent and other intellectual property licenses from third parties for some of its products and on technologies that are necessary in the design and manufacture of some of the company’s products. The loss of these licenses could prevent the company from, or could cause additional disruption or expense in, manufacturing, marketing and selling these products, which could harm the company’s business.

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The company’s operating results and financial condition could be adversely affected if the company becomes involved in litigation regarding its patents or other intellectual property rights.

Litigation involving patents and other intellectual property rights is common in the company’s industry, and other companies within the company’s industry have used intellectual property litigation in an attempt to gain a competitive advantage. The company currently is, and in the future may become, a party to lawsuits involving patents or other intellectual property. If the company loses any of these proceedings, a court or a similar foreign governing body could invalidate or render unenforceable the company’s owned or licensed patents, require the company to pay significant damages, seek licenses and/or pay ongoing royalties to third parties, require the company to redesign its products, or prevent the company from manufacturing, using or selling its products, any of which would have an adverse effect on the company’s results of operations and financial condition. The company has brought, and may in the future also bring, actions against third parties for infringement of the company’s intellectual property rights. The company may not succeed in these actions. The defense and prosecution of intellectual property suits, proceedings before the U.S. Patent and Trademark Office or its foreign equivalents and related legal and administrative proceedings are both costly and time consuming. Protracted litigation to defend or prosecute the company’s intellectual property rights could seriously detract from the time the company’s management would otherwise devote to running its business. Intellectual property litigation relating to the company’s products could cause its customers or potential customers to defer or limit their purchase or use of the affected products until resolution of the litigation.

The company’s business strategy relies on certain assumptions concerning demographic trends that impact the market for its products. If these assumptions prove to be incorrect, demand for the company’s products may be lower than expected.

The company’s ability to achieve its business objectives is subject to a variety of factors, including the relative increase in the aging of the general population. The company believes that these trends will increase the need for its products. The projected demand for the company’s products could materially differ from actual demand if the company’s assumptions regarding these trends and acceptance of its products by health care professionals and patients prove to be incorrect or do not materialize. If the company’s assumptions regarding these factors prove to be incorrect, the company may not be able to successfully implement the company’s business strategy, which could adversely affect the company’s results of operations. In addition, the perceived benefits of these trends may be offset by competitive or business factors, such as the introduction of new products by the company’s competitors or the emergence of other countervailing trends, including lower reimbursement and pricing.

The loss of the services of the company’s key management and personnel could adversely affect its ability to operate the company’s business.

The company’s future success will depend, in part, upon the continued service of key managerial, research and development staff and sales and technical personnel. In addition, the company’s future success will depend on its ability to continue to attract and retain other highly qualified personnel. The company may not be successful in retaining its current personnel or in hiring or retaining qualified personnel in the future. The company’s failure to do so could have a material adverse effect on the company’s business. The company’s executive officers have substantial experience and expertise in the company’s industry. The company’s future success depends, to a significant extent, on the abilities and efforts of its executive officers and other members of its management team. If the company loses the services of any of its management team, the company’s business may be adversely affected.

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The company’s Chairman of the Board of Directors and certain members of management own shares representing a substantial percentage of the company’s voting power and their interests may differ from other shareholders.

The company has two classes of common stock. The Common Shares have one vote per share and the Class B Common Shares have 10 votes per share. As of January 1, 2011, the company’s chairman, Mr. A. Malachi Mixon, III, and certain members of management beneficially own approximately 33% of the combined voting power of the company’s Common Shares and Class B Common Shares and could influence the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of the company’s assets. They also will have the power to influence or make more difficult a change in control. The interests of Mr. Mixon and his relatives may differ from the interests of the other shareholders and they may take actions with which some shareholders may disagree.

Since the company’s ability to obtain further financing may be limited, the company may be unable to acquire strategic acquisition candidates.

The company’s plans typically include identifying, acquiring, and integrating other strategic businesses. There are various reasons for the company to acquire businesses or product lines, including providing new products or new manufacturing and service capabilities, to add new customers, to increase penetration with existing customers, and to expand into new geographic markets. The company’s ability to successfully grow through acquisitions depends upon its ability to identify, negotiate, complete and integrate suitable acquisitions and to obtain any necessary financing. The costs of acquiring other businesses could increase if competition for acquisition candidates increases. Further, the provisions of the company’s existing credit facility impose limitations regarding acquisitions, which could prevent significant acquisitions, without entering into amendments with regard to those provisions. If the company is unable to obtain the necessary financing, it may miss opportunities to grow its business through strategic acquisitions.

Additionally, the success of the company’s acquisition strategy is subject to other risks and costs, including the following:

•

the company’s ability to realize operating efficiencies, synergies, or other benefits expected from an acquisition, and possible delays in realizing the benefits of the acquired company or products;

•

diversion of management’s time and attention from other business concerns;

•

difficulties in retaining key employees of the acquired businesses who are necessary to manage these businesses;

•

difficulties in maintaining uniform standards, controls, procedures and policies throughout acquired companies;

•

adverse effects on existing business relationships with suppliers or customers;

•

the risks associated with the assumption of contingent or undisclosed liabilities of acquisition targets; and

•

ability to generate future cash flows or the availability of financing.

In addition, an acquisition could materially impair the company’s operating results by causing the company to incur debt or requiring the amortization of acquisition expenses and acquired assets.

Armed hostilities, terrorism, natural disasters, political unrest or public health issues could harm the company’s business.

Armed hostilities, terrorism, natural disasters, political unrest or public health issues, whether in the U.S. or abroad, could cause damage or disruption to the company, its suppliers or customers, or could create political or

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economic instability, any of which could harm the company’s business. These events could cause a decrease in demand for the company’s products, could make it difficult or impossible for the company to deliver products or for the company’s suppliers to deliver materials, and could create delays and inefficiencies in the company’s manufacturing operations.

Certain provisions of the company’s debt agreements, its charter documents, its shareholder rights plan and Ohio law could delay or prevent the sale of the company.

Provisions of the company’s debt agreements, its charter documents, its shareholder rights plan and Ohio law may make it more difficult for a third party to acquire, or attempt to acquire, control of the company even if a change in control would result in the purchase of shares of the company at a premium to market price. In addition, these provisions may limit the ability of shareholders of the company to approve transactions that they may deem to be in their best interest.

Item 1B.

Unresolved Staff Comments.

None.

Item 2.

Properties.

The company owns or leases its warehouses, offices and manufacturing facilities and believes that these facilities are well maintained, adequately insured and suitable for their present and intended uses. Information concerning certain leased facilities of the company as of December 31, 2010 is set forth in Leases and Commitments in the Notes to the Consolidated Financial Statements of the company included in this report and in the table below:


North American/HME Operations	Square Feet		Ownership Or Expiration Date of Lease	Renewal Options	Use
Akron, Ohio		17,477	April 2012	One (5 yr.)	Offices
Alexandria, Virginia		230	September 2011	None	Offices
Alpharetta, Georgia		11,665	March 2014	None	Warehouse and Offices
Arlington, Texas		63,626	June 2011	One (3 yr.)	Warehouse
Atlanta, Georgia		91,418	April 2011	None	Warehouse and Offices
Beijing, China		1,399	January 2013	None	Offices
Brookfield, Wisconsin		3,200	January 2013	Two (3 yr.)	Warehouse and Offices
Chicopee, Massachusetts		4,800	November 2015	Two (3 yr.)	Warehouse and Offices
Cranbury, New Jersey		111,987	April 2018	Two (3 yr.)	Warehouse and Offices
Eden Prairie, Minnesota		3,764	September 2013	Two (3 yr.)	Warehouse and Offices
Elyria, Ohio
—1200 Taylor Street		251,656	Own	—	Manufacturing and Offices
—899 Cleveland Street		126,657	November 2013	None	Warehouse
—One Invacare Way		50,000	Own	—	Headquarters
—1320 Taylor Street		30,000	January 2015	One (5 yr.)	Offices
—1160 Taylor Street		4,800	Own	—	Warehouse and Offices
—56 Ternes Avenue		12,001	December 2011	Two (1 yr.)	Warehouse
Hampden, Maine		4,800	September 2011	Three (1 yr.)	Warehouse and Offices
Hong Kong, China		2,236	November 2012	None	Offices
Kansas City, Missouri		2,822	February 2013	One (3 yr.)	Warehouse and Offices
Kirkland, Quebec		26,196	November 2015	None	Manufacturing, Warehouse and Offices
Knoxville, Tennessee		2,400	May 2012	One (1 yr.)	Warehouse and Offices

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North American/HME Operations	Square Feet		Ownership Or Expiration Date of Lease	Renewal Options	Use
Lithia Springs, Georgia		4,000	December 2011	None	Warehouse and Offices
Marlboro, New Jersey		2,800	June 2012	None	Offices
Mississauga, Ontario		61,375	February 2016	None	Warehouse and Offices
Modesto, California		3,675	January 2013	Two (3 yr.)	Warehouse and Offices
Morton, Minnesota		28,400	May 2012	Two (3 yr.)	Manufacturing, Warehouse and Offices
Norristown, Pennsylvania		3,790	January 2013	None	Warehouse and Offices
North Ridgeville, Ohio		152,861	Own	—	Manufacturing, Warehouse and Offices
Norwood, Massachusetts		15,000	February 2014	One (3 yr.)	Warehouse and Offices
Pharr, Texas		4,375	November 2012	None	Warehouse and Offices
Pinellas Park, Florida		11,400	July 2011	None	Manufacturing and Offices
Pinellas Park, Florida		3,200	June 2011	Two (1 yr.)	Manufacturing
Reynosa, Mexico		152,256	Own	—	Manufacturing and Offices
Sacramento, California		26,900	May 2011	None	Manufacturing, Warehouse and Offices
Sanford, Florida		116,272	Own	—	Manufacturing and Offices
Scarborough, Ontario		5,428	February 2014	None	Manufacturing and Offices
Shenzhen, China		4,020	September 2012	None	Offices
Simi Valley, California		38,501	February 2014	One (5 yr.)	Manufacturing, Warehouse and Offices
Spicewood, Texas		6,500	Month to Month	None	Manufacturing and Offices
Suzhou, China		11,841	December 2012	None	Manufacturing and Offices
Suzhou, China		86,863	October 2012	None	Manufacturing and Offices
Tonawanda, New York		7,515	March 2013	None	Warehouse and Offices
Vaughan, Ontario		26,637	December 2015	None	Manufacturing and Offices
Wallingford, Connecticut		4,000	December 2013	One (3 yr.)	Warehouse and Offices
Warwick, Rhode Island		3,100	Month to Month	One (1 yr.)	Warehouse and Offices
Woburn, Massachusetts		5,200	Month to Month	None	Warehouse and Offices

Invacare Supply Group
Grand Prairie, Texas		87,508	August 2015	One (5 yr.)	Warehouse and Offices
Jacksonville, Florida		79,652	September 2014	Two (3 yr.)	Warehouse and Offices
Jamesburg, New Jersey		83,200	Month to Month	None	Warehouse and Offices
Milford, Massachusetts		29,582	December 2015	None	Offices
Rancho Cucamonga, California		55,890	February 2012	None	Warehouse and Offices
South Bend, Indiana		68,121	September 2011	None	Warehouse and Offices

Institutional Products Group
Elkhart, Indiana		44,718	Month to Month	Two (5 yr.)	Manufacturing, Warehouse and Offices
Elkhart, Indiana		12,000	April 2011	One (1 yr.)	Manufacturing
London, Ontario		103,200	Own	—	Manufacturing and Offices
St. Louis, Missouri		8,196	July 2013	Two (3 yr.)	Offices

Asia/Pacific Operations
Auckland, New Zealand		30,518	September 2014	None	Manufacturing, Warehouse and Offices
Banyo, QLD, Australia		26,791	July 2013	One (5 yr.)	Warehouse and Offices
Beverley, SA, Australia		9,601	December 2013	One (3 yr.)	Warehouse and Offices
Broadview, SA, Australia		16,146	October 2011	One (5 yr.)	Warehouse and Offices

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Asia/Pacific Operations	Square Feet		Ownership Or Expiration Date of Lease	Renewal Options	Use
Carrum Downs, VIC, Australia		16,006	December 2012	One (5 yr.)	Warehouse and Offices
Christchurch, New Zealand		13,691	December 2014	Two (6 yr.)	Offices
Christchurch, New Zealand		22,027	December 2014	One (3 yr.)	Manufacturing, Warehouse and Offices
Kidderminster, United Kingdom		6,200	January 2018	None	Warehouse and Offices
Malaga, WA, Australia		8,396	April 2011	None	Warehouse and Offices
North Olmsted, Ohio		2,280	October 2013	One (3 yr.)	Warehouse and Offices
Southport, QLD, Australia		1,119	Month to Month	None	Retail
Suzhou, China		41,290	September 2013	None	Warehouse and Offices
North Rocks, NSW, Australia		45,712	August 2012	Two (3 yr.)	Warehouse and Offices

European Operations
Albstadt, Germany		78,523	February 2018	Two (5 yr.)	Manufacturing, Warehouse and Offices
Anderstorp, Sweden		47,576	Own	—	Manufacturing, Warehouse and Offices
Bergen, Norway		1,076	November 2012	One (5 yr.)	Warehouse and Offices
Brondby, Denmark		17,922	June 2011	One (1 yr.)	Warehouse and Offices
Dio, Sweden		110,524	Own	—	Manufacturing, Warehouse and Offices
Dublin, Ireland		5,000	December 2024	Three (5 yr.)	Warehouse and Offices
Ede, The Netherlands		12,917	November 2011	One (5 yr.)	Warehouse
Ede, The Netherlands		9,257	November 2011	One (5 yr.)	Warehouse and Offices
Fondettes, France		191,856	Own	—	Manufacturing and Warehouse
Girona, Spain		14,639	January 2012	One (1 yr.)	Warehouse and Offices
Gland, Switzerland		5,586	September 2012	One (5 yr.)	Offices
Gland, Switzerland		1,184	September 2012	One (4 yr.)	Offices
Goteborg, Sweden		7,502	September 2012	One (3 yr.)	Warehouse and Offices
Hong, Denmark		155,541	Own	—	Manufacturing, Warehouse and Offices
Isny, Germany		47,232	Own	—	Manufacturing, Warehouse and Offices
Isny, Germany		1,615	Own	—	Warehouse
Loppem, Belgium		4,036	March 2015	One (3 yr.)	Warehouse and Offices
Mondsee, Austria		2,153	March 2011	One (3 yr.)	Warehouse and Offices
Odense, Denmark		1,776	June 2011	One (1 yr.)	Warehouse and Offices
Oporto, Portugal		88,270	December 2015	One (1 yr.)	Manufacturing, Warehouse and Offices
Oskarshamn, Sweden		3,552	April 2011	One (1 yr.)	Warehouse
Oslo, Norway		36,414	August 2011	None	Manufacturing, Warehouse and Offices
Pencoed, United Kingdom		150,000	December 2019	None	Manufacturing and Offices
Porta Westfalica, Germany		134,563	October 2021	Two (5yr.)	Manufacturing, Warehouse and Offices
Spanga, Sweden		3,229	December 2013	One (3 yr.)	Warehouse and Offices
Spanga, Sweden		16,146	Own	—	Warehouse and Offices
Thiene, Italy		21,528	Own	—	Warehouse and Offices
Thiene, Italy		10,764	October 2012	None	Warehouse
Trondheim, Norway		3,229	May 2011	One (3 yr.)	Services and Offices
Witterswil, Switzerland		40,343	March 2015	One (5 yr.)	Manufacturing, Warehouse and Offices
Witterswil, Switzerland		2,319	June 2011	None	Warehouse
Witterswil, Switzerland		4,080	June 2011	None	Warehouse

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Item 3.

Legal Proceedings.

In the ordinary course of its business, Invacare is a defendant in a number of lawsuits, primarily product liability actions in which various plaintiffs seek damages for injuries allegedly caused by defective products. All of the product liability lawsuits have been referred to the company’s captive insurance company and/or excess insurance carriers and generally are contested vigorously. The coverage territory of the company’s insurance is worldwide with the exception of those countries with respect to which, at the time the product is sold for use or at the time a claim is made, the U.S. government has suspended or prohibited diplomatic or trade relations. Management does not believe that the outcome of any of these actions will have a material adverse effect upon the company’s business or financial condition.

As part of its regulatory function, the FDA routinely inspects the sites of medical device companies, and in 2010, the FDA inspected certain of the company’s facilities. In December 2010, the company received a warning letter from the FDA related to documentation and procedures at the company’s Sanford, Florida facility. The letter does not call into question the safety or efficacy of Invacare products, and production has not been impacted. The company is taking these issues very seriously and has added resources to ensure it is addressing all of the FDA’s concerns in a timely manner. The costs associated with making the process improvements indicated in the FDA’s letter are currently not expected to be material; however, at the time of this filing the matter remains pending.

Executive Officers of the Registrant.*

The following table sets forth the names of the executive officers of Invacare, each of whom serves at the pleasure of the Board of Directors, as well as certain other information.


Name	Age	Position
A. Malachi Mixon, III	70	Chairman of the Board of Directors
Gerald B. Blouch	64	President and Chief Executive Officer and Director
Robert K. Gudbranson	47	Senior Vice President, Chief Financial Officer and Treasurer
Anthony C. LaPlaca	52	Senior Vice President—General Counsel and Secretary
Joseph B. Richey, II	74	President—Invacare Technologies, Senior Vice President—Electronics and Design Engineering and Director
Louis F.J. Slangen	63	Senior Vice President—Corporate Marketing and Chief Product Officer
Patricia A. Stumpp	49	Senior Vice President—Human Resources
Carl E. Will	40	Senior Vice President—Global Commercial Operations

*	The description of executive officers is included pursuant to Instruction 3 to Section (b) of Item 401 of Regulation S-K.

A. Malachi Mixon, III has been a director since 1979. Mr. Mixon served as Chief Executive Officer from 1979 through 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 The Sherwin-Williams Company (NYSE), Cleveland, Ohio, a manufacturer and distributor of coatings and related products and Park-Ohio Holdings Corp. (NASDAQ), Cleveland, Ohio, a diversified manufacturing services and products holding company. Mr. Mixon 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. Mr. Mixon previously served on the Board of Directors of Lamson & Sessions from 1990 until it was sold in November 2007.

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Gerald B. Blouch 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 and has served as Chairman—Invacare International since December 1993. Previously, Mr. Blouch was President—Homecare Division from March 1994 to December 1994 and Senior Vice President—Homecare Division from September 1992 to March 1994. Mr. Blouch served as Chief Financial Officer of Invacare from May 1990 to May 1993 and Treasurer of Invacare from March 1991 to May 1993.

Robert K. Gudbranson was appointed Senior Vice President and Chief Financial Officer in April 2008. From October 2005 until his appointment at Invacare, Mr. Gudbranson served as Vice President of Strategic Planning and Acquisitions at Lincoln Electric Holdings, Inc. (NASDAQ: LECO), a $2.0 billion global manufacturer of welding, brazing and soldering products located in Cleveland, Ohio. Prior to joining Lincoln Electric, Mr. Gudbranson served as Director of Business Development and Investor Relations at Invacare from June 2002 to October 2005. Mr. Gudbranson has also served as Invacare’s Assistant Treasurer and as the European Finance Director.

Anthony C. LaPlaca was appointed Senior Vice President, General Counsel and Secretary effective January 2009. Previously, Mr. LaPlaca served as Vice President and General Counsel for six and a half years with Bendix Commercial Vehicle Systems LLC, a member of the Knorr-Bremse group. Prior to that, he served as Vice President and General Counsel to Honeywell Transportation & Power Systems and General Counsel to Honeywell Commercial Vehicle Systems LLC.

Joseph B. Richey, II has been a director since 1980 and in September 1992 was named President—Invacare Technologies Division and Senior Vice President—Electronic and Design Engineering. Previously, Mr. Richey was Senior Vice President of Product Development from July 1984 to September 1992 and Senior Vice President and General Manager of North American Operations from September 1989 to September 1992. Mr. Richey is also a member of the Board of Trustees for Case Western Reserve University and The Cleveland Clinic Foundation. Mr. Richey previously served on the Board of Directors of Steris Corporation from 1987 to July 2009.

Louis F. J. Slangen was named Senior Vice President—Corporate Marketing and Chief Product Officer in September 2010. Previously, Mr. Slangen served as Senior Vice President—Global Market Development from June 2004 to September 2010; Senior Vice President—Sales & Marketing from December 1994 to June 2004 and from September 1989 to December 1994 was Vice President—Sales and Marketing. Mr. Slangen was also President—Rehab Division from March 1994 to December 1994 and Vice President and General Manager—Rehab Division from September 1992 to March 1994.

Patricia A. Stumpp has been the Senior Vice President—Human Resources since September 2009. Mrs. Stumpp joined Invacare in 1991 and was promoted to her current position in 2009. Prior to her promotion, Mrs. Stumpp served as Director of Compensation & Benefits from January 2001 to August 2009 and as Director of Human Resources Group from August 2006 until August 2009. She also has prior experience in healthcare, small business and the services industry. She holds a B.A. in Psychology and M.B.A. from The University of Toledo.

Carl E. Will has been Senior Vice President—Global Commercial Operations since September 2010. Prior to his September 2010 promotion, Mr. Will served as Senior Vice President—North American Homecare from January 2007 through September 2010 having previously serving as Group Vice President of Standard Products and IPG. Mr. Will is responsible for revenue and earnings across all lines of business, channels and geographies, as well as expanding Invacare’s global market share. Prior to joining Invacare, Mr. Will was responsible for commercial operations at General Electric in the Light Emitting Diode (LED) division and served as a strategic consultant at McKinsey and Company. He received a B.S. degree in Accounting from The Ohio State University and an M.B.A. from the Fuqua School of Business at Duke University.

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PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Invacare’s Common Shares, without par value, trade on the New York Stock Exchange (NYSE) under the symbol “IVC.” Ownership of the company’s Class B Common Shares (which are not listed on NYSE) cannot be transferred, except, in general, to family members without first being converted into Common Shares. Class B Common Shares may be converted into Common Shares at any time on a share-for-share basis. The number of record holders of the company Common Shares and Class B Common Shares at February 23, 2011 was 3,087 and 22, respectively. The closing sale price for the Common Shares on February 23, 2011 as reported by NYSE was $29.50. The prices set forth below do not include retail markups, markdowns or commissions.

The range of high and low quarterly prices of the Common Shares and dividends in each of the two most recent fiscal years were as follows:


	2010						2009
	High		Low		Cash Dividends Declared		High		Low		Cash Dividends Declared
Quarter Ended:
December 31	$	30.71	$	26.52	$	0.0125	$	26.19	$	21.22	$	0.0125
September 30		26.51		20.00		0.0125		23.55		17.02		0.0125
June 30		27.50		21.02		0.0125		17.70		15.06		0.0125
March 31		30.16		24.52		0.0125		19.81		14.67		0.0125

During 2010 and 2009, the Board of Directors also declared annualized dividends of $0.045 per Class B Common Share. For information regarding limitations on the payment of dividends in the company loan and note agreements, see Long Term Debt in the Notes to the Consolidated Financial Statements included in this report. The Common Shares are entitled to receive cash dividends at a rate of at least 110% of cash dividends paid on the Class B Common Shares.

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SHAREHOLDER RETURN PERFORMANCE GRAPH

The following graph compares the yearly cumulative total return on Invacare’s common shares against the yearly cumulative total return of the companies listed on the Standard & Poor’s 500 Stock Index, the Russell 2000 Stock Index and the S&P Healthcare Equipment & Supplies Index*.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Invacare Corporation, The S&P 500 Index,

The Russell 2000 Index And S&P Healthcare Equipment & Supplies

LOGO


	12/05		12/06		12/07		12/08		12/09		12/10
Invacare Corporation	$	100.00	$	78.11	$	80.38	$	49.63	$	79.95	$	96.83
S&P 500		100.00		115.80		122.16		76.96		97.33		111.99
Russell 2000		100.00		118.37		116.51		77.15		98.11		124.46
S&P Healthcare Equipment & Supplies		100.00		102.69		112.74		78.33		99.52		102.60

*	The S&P Healthcare Equipment & Supplies Index is a capitalization-weighted average index comprised of health care companies in the S&P 500 Index.

The graph assumes $100 invested on December 31, 2005 in the common shares of Invacare Corporation, S&P 500 Index, Russell 2000 Index and the S&P Healthcare Equipment & Supplies Index, including reinvestment of dividends, through December 31, 2010.

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The following table presents information with respect to repurchases of common shares made by the company during the three months ended December 31, 2010.


Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (2)
10/1/2010-10/31/10		—	$	—		—		1,362,900
11/1/2010-11/30/10		233,990		26.59		185,000		1,177,900
12/1/2010-12/31/10		20,435		29.00		20,000		1,157,900

Total		254,425	$	26.78		205,000		1,157,900

(1)

Includes 48,990 shares repurchased between November 1, 2010 and November 30, 2010 and 435 shares repurchased between December 1, 2010 and December 31, 2010 that were surrendered to the company by employees for tax withholding purposes in conjunction with the vesting of restricted shares held by the employees under the company’s 2003 Performance Plan.

(2)

On August 17, 2001, the Board of Directors authorized the company to purchase up to 2,000,000 Common Shares, excluding any shares acquired from employees or directors as a result of the exercise of options or vesting of restricted shares pursuant to the company’s performance plans. The Board of Directors reaffirmed its authorization of this repurchase program on November 5, 2010. To date, the company has purchased 842,100 shares with authorization remaining to purchase 1,157,900 more shares. The company purchased 205,000 shares pursuant to this Board authorized program during 2010.

During 2010, the company purchased a total of $57,790,000 in principal amount of its outstanding 4.125% Convertible Senior Subordinated Debentures due 2027 in open market transactions for an aggregate of approximately $69,242,000, plus accrued and unpaid interest. During the first nine months of 2010, the company purchased a total of $29,000,000 in principal amount of its outstanding 9 ³ / 4 % Senior Notes due 2015 in open market transactions for an aggregate of approximately $31,213,000. On November 1, 2010, the company purchased an aggregate of $142,945,000 in principal amount of the 9 ³ / 4 % Senior Notes due 2015 in a tender offer conducted by the company. The company paid $1,075.00 for each $1,000 principal amount of the 9 ³ / 4 % Senior Notes due 2015 validly tendered in the tender offer, which included a consent payment of $30.00 per $1,000 principal amount of the 9 ³ / 4 % Senior Notes due 2015. In the tender offer, the company also paid accrued and unpaid interest on the purchased 9 ³ / 4 % Senior Notes due 2015 up to, but not including, November 1, 2010. On December 31, 2010, the company redeemed the remaining $3,055,000 principal amount of 9 ³ / 4 % Senior Notes due 2015 for an aggregate amount of approximately $3,237,000, plus accrued and unpaid interest. The company may continue from time to time seek to retire or purchase the Company’s outstanding 4.125% Convertible Senior Subordinated Debentures due 2027, in open market purchases, privately negotiated transactions or otherwise.

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Item 6.

Selected Financial Data.

The selected consolidated financial data set forth below with respect to the company’s consolidated statements of operations, cash flows and shareholders’ equity for the fiscal years ended December 31, 2010, 2009 and 2008, and the consolidated balance sheets as of December 31, 2010 and 2009 are derived from the Consolidated Financial Statements included elsewhere in this Form 10-K. The consolidated statements of earnings, cash flows and shareholders’ equity data for the fiscal years ended December 31, 2007 and 2006 and consolidated balance sheet data for the fiscal years ended December 31, 2008, 2007 and 2006 are derived from the company’s previously filed Consolidated Financial Statements. The data set forth below should be read in conjunction with Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the company’s Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K.


	2010 *		2009 **		2008 ***		2007 ****			2006 *****
	(In thousands, except per share and ratio data)
Earnings
Net Sales	$	1,722,081	$	1,693,136	$	1,755,694	$	1,602,237		$	1,498,035
Net Earnings (loss)		25,341		41,179		34,857		(1,714	)		(317,774	)
Net Earnings (loss) per Share—Basic		.78		1.29		1.09		(0.05	)		(10.00	)
Net Earnings (loss) per Share—Assuming Dilution		.78		1.29		1.09		(0.05	)		(10.00	)
Dividends per Common Share		0.05		0.05		0.05		0.05			0.05
Dividends per Class B Common Share		0.04545		0.04545		0.04545		0.04545			0.04545

Balance Sheet
Current Assets	$	526,159	$	528,464	$	551,058	$	591,085		$	655,758
Total Assets		1,280,400		1,359,501		1,314,473		1,500,042			1,490,451
Current Liabilities		290,308		290,327		284,998		326,611			447,976
Working Capital		235,851		238,137		266,060		264,474			207,782
Long-Term Debt		238,090		272,234		407,707		457,233			448,883
Other Long-Term Obligations		99,591		95,703		88,826		106,046			107,223
Shareholders’ Equity		652,411		701,237		532,942		610,152			486,369

Other Data
Research and Development Expenditures	$	25,954	$	25,725	$	24,764	$	22,491		$	22,146
Capital Expenditures		17,353		17,999		19,957		20,068			21,789
Depreciation and Amortization		36,804		40,562		43,744		43,717			39,892

Key Ratios
Return on Sales %		1.5		2.4		2.0		(.1	)		(21.2	)
Return on Average Assets %		1.9		3.1		2.5		(.1	)		(20.3	)
Return on Beginning Shareholders’ Equity %		3.6		7.7		5.7		(.4	)		(42.2	)
Current Ratio		1.8:1		1.8:1		1.9:1		1.8:1			1.5:1
Debt-to-Equity Ratio		0.4:1		0.4:1		0.8:1		0.7:1			0.9:1

*	Reflects loss on debt extinguishment including debt finance charges and associated fees of $40,164 ($40,164 after tax or $1.23 per share assuming dilution) as a result of the company’s decision to extinguish higher interest rate debt.

Reflects restructuring charge of $4,804 ($4,124 after tax or $.13 per share assuming dilution); loss on debt extinguishment including debt fees $2,878 ($2,878 after tax or $.09 per share assuming dilution); asset write-downs for intangibles and investments of $8,409 ($7,909 after tax or $.25 per share assuming dilution).

***	Reflects restructuring charge of $4,766 ($4,516 after tax or $.14 per share assuming dilution).

****	Reflects restructuring charge of $11,408 ($10,478 after tax or $.33 per share assuming dilution) and $13,408 expense related to finance charges, interest and fees associated with the company’s previously reported debt covenant violations ($13,408 after tax or $.42 per share assuming dilution).

*****

Reflects restructuring charge of $21,250 ($18,700 after tax or $.59 per share assuming dilution), $3,745 expense related to finance charges, interest and fees associated with the company’s previously reported debt covenant violations ($3,300 after tax or $.10 per share assuming dilution), $26,775 expense related to accounts receivable collectability issues arising primarily from Medicare reimbursement reductions for power wheelchairs announced on November 15, 2006 ($26,775 after tax or $.84 per share assuming dilution), $300,417 expense for an impairment charge related to the write-down of goodwill and other intangible assets ($300,417 after tax or $9.45 per share assuming dilution).

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Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OUTLOOK

Invacare returned to organic net sales growth in 2010 and plans to increase the growth rate in 2011. As the company shifts to a global operating model, it intends to leverage its regional product strengths into its other geographic markets. For example, the company will be introducing a new bath lift in the United States that was developed and has already enjoyed success in Europe. The company also has identified a number of internal opportunities to reduce complexity and drive organic net sales. For instance, the company is integrating its Motion Concepts seating and positioning subsidiary with its existing Invacare ^® branded seating products. The combined efforts of the Invacare and Motion Concepts teams are expected to lead to improved product design through one product development center, an enhanced sales organization that is focused on one united goal and greater ease in sales and technical support for customers. Similarly, the company intends to deploy its research and development efforts more efficiently to accelerate new product introductions that are expected to show benefits during the year. For instance, the new Invacare ^® FDX ^® power wheelchair, launched in Europe and the United States in 2010, is the company’s first global power wheelchair platform and it has already started to gain traction with clinicians and providers.

The company will benefit from interest savings in 2011, as a result of paying down higher interest rate debt, namely the $146 million of 9 ³ / 4 % senior notes retired in the fourth quarter of 2010. However, this benefit will be partially offset by a number of items. First, the new revolving credit facility entered into by the company in October 2010 bears a higher interest rate than the previous revolving credit facility. Second, the company’s indebtedness has increased as a result of the debt finance charges, premium and fees paid during 2010 to extinguish the previous debt structure. In addition, the new credit facility affords Invacare the opportunity to pursue acquisitions or buy back company stock.

The company’s organic net sales growth and interest savings will likely be partially offset by the potential for continued increases in freight and commodity costs, particularly in aluminum and steel, which are already being incurred in 2011. Additionally, as Invacare plans for its business in the United States to continue to improve, the company’s overall effective tax rate on adjusted pre-tax earnings is expected to increase, since the United States tax rate is the highest of the countries in which it does business. The company anticipates continued volatility related to foreign exchange rates which could be a benefit or a detriment. The company may also manage potential increases in LIBOR rates by entering into interest rate swap agreements to fix some of its exposure.

As part of its regulatory function, the FDA routinely inspects the sites of medical device companies, and in 2010, the FDA inspected certain of the company’s facilities. In December 2010, the company received a warning letter from the Food and Drug Administration (FDA) related to documentation and procedures at the company’s Sanford, Florida facility. The letter does not call into question the safety or efficacy of Invacare products, and production has not been impacted. The company is taking these issues very seriously and has added resources to ensure it is addressing all of the FDA’s concerns in a timely manner. The costs related to making the process improvements are not expected to be material and have been included in the company’s 2011 operating plan and guidance.

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Organic sales growth, earnings and cash flow for 2011 are expected to be consistent with the guidance provided in the company’s February 3, 2011 press release. The guidance should be read in conjunction with the information contained herein under “Risk Factors” and “Forward-Looking Information.”

RESULTS OF OPERATIONS

2010 Versus 2009

Net Sales. Consolidated net sales for 2010 increased 1.7% for the year, to $1,722,081,000 from $1,693,136,000 in 2009. Foreign currency translation increased net sales by less 0.3 of a percentage point while acquisitions increased sales by 0.4 of a percentage point. The organic net sales increase was 1.0% which was driven by growth in ISG, Europe and Asia/Pacific segments.

North America/Home Medical Equipment

NA/HME net sales decreased 0.1% in 2010 versus the prior year to $747,599,000 from $748,401,000 with an acquisition increasing net sales by 0.9 of a percentage point while foreign currency translation increased net sales by 0.7 of a percentage point. The organic net sales decline of 1.7% was driven by a decline in the Respiratory product line partially offset by increases in Standard and Rehab product lines. Respiratory product line net sales decreased by 16.9% in 2010, primarily driven by lower sales of both concentrators and HomeFill ^® oxygen delivery systems to national providers. Standard product line net sales improved by 2.6% in 2010, driven by increased volumes in standard wheelchairs, beds and therapeutic support surfaces. Rehab product line net sales increased by 2.0% in 2010 primarily driven by increases in custom power products.

Invacare Supply Group

ISG net sales increased 6.1% in 2010 over the prior year to $297,517,000 from $280,295,000. The net sales increase was primarily in the result of volume increases in diabetic, incontinence, ostomy and urological products.

Institutional Products Group

IPG net sales decreased 1.3% in 2010 over the prior year to $88,261,000 from $89,423,000. Foreign currency translation increased net sales by 0.7 of a percentage point. The organic net sales decrease of 2.0% was largely driven by continued weakness in capital expenditures by nursing home customers, due primarily to budgetary pressures in state Medicaid programs.

Europe

European net sales increased 0.6% in 2010 compared to the prior year to $506,069,000 from $503,084,000 with foreign currency translation decreasing net sales by 1.9 percentage points. Organic net sales increased 2.5% attributable to increases in France, U.K., Germany and Sweden and increases in Standard and Respiratory product lines.

Asia/Pacific

Asia/Pacific net sales increased 14.9% in 2010 from the prior year to $82,635,000 from $71,933,000. Foreign currency translation increased net sales by 12.9 percentage points. The organic net sales growth of 2.0% was driven by the Company’s New Zealand distribution business and increased demand for product from the Company’s subsidiary which produces microprocessor controllers. Changes in exchange rates, particularly with the Euro and U.S. Dollar, have had, and may continue to have, a significant impact on sales in this segment.

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Gross Profit. Consolidated gross profit as a percentage of net sales was 29.6% in 2010 as compared to 29.1% in 2009. The margin improvement was primarily the result of volume increases and cost reduction activities, including warranty costs. Gross profit as a percentage of net sales for NA/HME, IPG and Asia/Pacific segments were favorable as compared to the prior year with ISG and European segments unfavorable to the prior year.

NA/HME gross profit as a percentage of net sales increased by 1.5 percentage points in 2010 versus 2009. The improvement in margins was primarily a result of cost reduction initiatives including freight and warranty expenses.

ISG gross profit as a percentage of net sales decreased 0.6 percentage points in comparison to the prior year. The decrease was primarily as a result of unfavorable product mix to lower margin diabetic and ostomy products partially offset by volume increases and cost reduction programs including freight costs.

IPG gross profit as a percentage of net sales increased 0.8 percentage points in 2010 from the prior year. The increase in margin is primarily attributable to cost reduction activities including freight costs partially offset by reduced volumes.

Gross profit in Europe as a percentage of net sales declined 0.4 percentage points in 2010 from the prior year. The decrease was primarily a result of unfavorable product mix toward lower margin product and unfavorable foreign currency transactions partially offset by cost reduction activities associated with commodity costs.

Gross profit in Asia/Pacific as a percentage of net sales increased by 4.3 percentage points in 2010 from the prior year. The improvement was primarily as a result of increased volumes and favorable foreign currency impact principally due to the strengthening of the U.S. dollar.

Selling, General and Administrative. Consolidated selling, general and administrative expenses as a percentage of net sales were 23.9% in 2010 and 23.5% in 2009. The overall dollar increase was $12,867,000 or 3.2%, with foreign currency translation increasing expenses by $4,869,000 or 1.2 percentage points and an acquisition increasing expenses by approximately $4,455,000 or 1.1 percentage points. Excluding acquisitions and the impact of foreign currency translation, selling, general and administrative (SG&A) expenses increased $3,543,000 or 0.9%. This increase is primarily attributable to increased associate costs and higher legal expenses related to enforcement of intellectual property rights.

SG&A expenses for NA/HME increased 4.8% or $9,950,000 in 2010 compared to 2009. An acquisition increased these expenses by approximately $4,455,000 while foreign currency increased SG&A expense by $1,672,000. Excluding the acquisition and foreign currency translation, SG&A expense increased $3,823,000 or 1.8% primarily due to increased associate costs, and higher legal expenses related to enforcement of intellectual property rights. In addition, the SG&A expenses for 2010 include an impairment charge related to a customer list of $248,000 recorded as a result of the company’s 2010 intangible impairment review.

SG&A expenses for ISG decreased by 4.8% or $1,357,000 in 2010 compared to 2009. The decrease is primarily attributable to a decrease in distribution and marketing costs partially offset by increased bad debt expense.

SG&A expenses for IPG increased by 16.8% or $2,599,000 in 2010 compared to 2009. Foreign currency translation increased SG&A expenses by 1.6 percentage points or $242,000. Excluding the impact of foreign currency translation, SG&A expenses increased by $2,357,000 due to increased associate costs and unfavorable currency transaction effects associated with the Canadian Dollar versus the U.S. Dollar. In addition, the SG&A expenses for 2010 include an impairment charge related to a trademark of $336,000 recorded as a result of the company’s 2010 intangible impairment review.

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European SG&A expenses decreased by 0.5% or $568,000 in 2010 compared to 2009. Foreign currency translation decreased SG&A expenses by approximately $390,000. Excluding the foreign currency translation impact, SG&A expenses decreased by $178,000.

Asia/Pacific SG&A expenses increased 8.8% or $2,243,000 in 2010 compared to 2009. Foreign currency translation increased expenses by $3,345,000. Excluding the foreign currency translation impact, SG&A expenses decreased $1,102,000 or 4.3% primarily due to favorable currency transactions partially offset by increased associate costs.

Debt Finance Charges and Fees Associated with Debt Refinancing. In 2010, as part of the company’s refinancing, proceeds of the refinancing were used by the company to repay amounts outstanding on its $150,000,000 revolving credit facility which was not due to expire until February 2012 and repurchase all of its outstanding 9.75% Senior Notes which were not due until February 2015. During 2010, the company also extinguished $57,799,000 in principal amount of its outstanding 4.125% convertible senior subordinated debentures due in February 2027. This early debt extinguishment resulted in debt fees and premium expenses of $40,164,000 for all of these debt instruments.

Related to the revolving credit facility, the company expensed $1,228,000 of deferred financing fees, which were previously capitalized. Related to the senior notes, the company incurred the following debt fees and premium expenses: debt deferred financing fees of $3,764,000, which were previously capitalized and premiums and fees associated with the early extinguishment of the debt of $14,907,000. Related to the convertible senior subordinated debentures, the company incurred $18,763,000 of premiums paid and losses recorded as a result of early debt extinguishment and expensed deferred financing fees of $1,502,000, which were previously capitalized.

In 2009, the company fully repaid its $250,000,000 term loan facility which was not due to expire until February 2013. As a result, deferred financing fees of $2,878,000, which were previously capitalized, were expensed. All of these charges in 2010 and 2009 are included in the All Other segment.

Asset write-downs to intangibles and investments. The company has made other investments in limited partnerships and non-marketable equity securities, which are accounted for using the cost method, adjusted for any estimated declines in value. These investments were acquired in private placements and there are no quoted market prices or stated rates of return and the company does not have the ability to easily sell these investments. In 2009, the company recognized an impairment charge totaling $6,713,000 on investments along with an impairment charge of $1,696,000 on its intangibles. The company completed an evaluation of the residual value related to its investments in the fourth quarter of 2010 and recognized an immaterial loss. These charges are included in the All Other Segment.

Interest. Interest expense decreased to $20,647,000 in 2010 from $33,150,000 in 2009, representing a 37.7% decrease. This decrease was attributable to debt reduction during the year and, to a lesser extent, decreased borrowing rates in 2010 compared to 2009. Interest income in 2010 was $724,000, which was lower than the prior year amount of $1,674,000, primarily due to decreased volume of financing provided to customers.

Income Taxes. The company had an effective tax rate of 33.4% in 2010 and 12.9% in 2009. The company’s effective tax rate is lower than the expected U.S. federal statutory rate due to earnings abroad being taxed at rates lower than the U.S. statutory rate. In both years, the company’s rate was higher than it otherwise would have been due to losses without benefit, and due to valuation allowances in the United States, Australia and New Zealand. In addition, the 2009 tax rate was lower than the 2010 rate primarily due to a loss carryback, resulting from a tax law change in the United States, which previously was fully offset by a valuation allowance. See “Income Taxes” in the Notes to the Consolidated Financial Statements included elsewhere in this report for more detail.

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Research and Development. The company continues to invest in research and development activities to maintain its competitive advantage. The company dedicates funds to applied research activities to ensure that new and enhanced design concepts are available to its businesses. Research and development expenditures, which are included in costs of products sold, increased to $25,954,000 in 2010 from $25,725,000 in 2009. The expenditures, as a percentage of net sales, were 1.5% and 1.5% in 2010 and 2009, respectively.

2009 Versus 2008

Charge Related to Restructuring Activities. Throughout 2009, the company continued its cost reduction and profit improvement initiatives, which now are substantially complete as related to restructuring activities. The company has achieved tremendous benefits from its cost reduction initiatives, principally related to product sourcing savings, headcount reductions and manufacturing consolidation. However, as was expected, a significant portion of this benefit was offset by continued pricing pressures and product mix shift toward lower margin product, primarily in the U.S. and Europe, as a result of reimbursement changes.

Restructuring charges of $4,804,000 were incurred during 2009 of which $298,000 was recorded in cost of goods sold, since it relates to inventory markdowns, and the remaining charge amount was included in the Charge Related to Restructuring Activities in the Consolidated Statement of Earnings. The costs incurred during 2009 were principally for severance expenses.

Net Sales. Consolidated net sales for 2009 decreased 3.6% for the year, to $1,693,136,000 from $1,755,694,000 in 2008. Foreign currency translation decreased net sales by four percentage points while acquisitions increased sales by less than one percentage point. The remaining increase was driven by performance in NA/HME, ISG and Europe.

North America/Home Medical Equipment

NA/HME net sales increased 0.9% in 2009 versus the prior year to $748,401,000 from $741,502,000 with acquisitions increasing net sales by one percentage point while foreign currency translation decreased net sales by one percentage point. Standard product line net sales improved by 5.5% in 2009, driven by increased volumes in beds, patient transport and therapeutic support surfaces products. Rehab product line net sales decreased by 0.6% in 2009, despite volume increases in custom power products. Respiratory product line net sales decreased by 8.1% in 2009, primarily driven by lower sales of HomeFill ^® oxygen delivery systems to national providers.

Invacare Supply Group

ISG net sales increased 5.4% in 2009 over the prior year to $280,295,000 from $265,818,000. Acquisitions and foreign currency translation had no impact on the sales increase. The net sales increase was primarily in diabetic, incontinence and wound care products.

Institutional Products Group

IPG net sales decreased 10.3% in 2009 over the prior year to $89,423,000 from $99,662,000. Foreign currency translation decreased net sales by approximately one percentage point. The net sales decrease was largely driven by continued weakness in capital expenditures by nursing home customers, due primarily to budgetary pressures in state Medicaid programs.

Europe

European net sales decreased 9.2% in 2009 compared to the prior year to $503,084,000 from $553,845,000 with foreign currency translation decreasing net sales by nine percentage points. The net sales decrease was the result of sales declines primarily in France, where sales of beds and wheelchairs into nursing homes weakened as a result of changes in reimbursement rules. This decline was partially offset by favorable net sales performance in the U.K. region.

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Asia/Pacific

Asia/Pacific net sales decreased 24.2% in 2009 from the prior year to $71,933,000 from $94,867,000. Foreign currency translation decreased net sales by eight percentage points. The sales decline at the company’s subsidiary, which manufactures controllers, was largely due to external customers whose demand for inventory remained weak in the current economic environment. The company’s Australian distribution business had lower sales due in large part to weak demand from long-term care facilities which continue to delay capital purchases. Changes in exchange rates, particularly with the Euro and U.S. Dollar, have had, and may continue to have, a significant impact on sales in this segment.

Gross Profit. Consolidated gross profit as a percentage of net sales was 29.1% in 2009 as compared to 27.8% in 2008. The margin improvement compared to the prior year for all segments except Asia/Pacific and Europe was primarily the result of volume increases and cost reduction activities, including commodity cost and freight reductions.

NA/HME gross profit as a percentage of net sales was 34.1% in 2009 versus 30.5% in 2008. The significant improvement in margins was primarily a result of increased volumes, selective price increases implemented in the second half of 2008 and cost reduction initiatives.

ISG gross profit as a percentage of net sales increased 1.1 percentage points in comparison to the prior year. The improvement was primarily as a result of volume increases, freight reduction programs and reduced discounts associated with lower sales to larger providers.

IPG gross profit as a percentage of net sales increased 5.0 percentage points in 2009 from the prior year. The increase in margin is primarily attributable to selective price increases introduced in the second half of 2008 and cost reduction activities associated with commodity and freight costs.

Gross profit in Europe as a percentage of net sales declined 0.7 percentage points in 2009 from the prior year. The decrease was primarily a result of unfavorable product mix toward lower margin product and unfavorable foreign currency transactions partially offset by cost reduction activities associated with commodity and freight costs.

Gross profit in Asia/Pacific as a percentage of net sales decreased by 7.6 percentage points in 2009 from the prior year. The decrease was primarily as a result of volume declines and unfavorable foreign currency impact principally due to the strengthening of the U.S. dollar.

Selling, General and Administrative. Consolidated selling, general and administrative expenses as a percentage of net sales were 23.5% in 2009 and 22.7% in 2008. The overall dollar increase was $392,000 or 0.1%, with foreign currency translation decreasing expenses by $14,143,000 or four percentage points and acquisitions increasing expenses by approximately $1,804,000 or one percentage point. Excluding acquisitions and foreign currency translation impact, selling, general and administrative (SG&A) expenses increased $12,731,000 or 3.2%. This increase is primarily attributable to higher bad debt expense and unfavorable foreign currency transactions.

SG&A expenses for NA/HME increased 5.4% or $10,604,000 in 2009 compared to 2008. Acquisitions increased these expenses by approximately $1,804,000 while foreign currency decreased SG&A expense by $969,000. Excluding foreign currency translation, SG&A expense increased $9,769,000 or 4.9% primarily due to higher bad debt expense.

SG&A expenses for ISG increased by 6.7% or $1,754,000 in 2009 compared to 2008. The increase is primarily attributable to higher bad debt expense.

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SG&A expenses for IPG increased by 6.3% or $922,000 in 2009 compared to 2008. Foreign currency translation decreased SG&A expenses by approximately one percentage point or $185,000. Excluding the impact of foreign currency translation, SG&A expenses increased by $1,107,000 due to unfavorable currency transaction effects associated with the Canadian Dollar versus the U.S. Dollar.

European SG&A expenses decreased by 8.0% or $10,593,000 in 2009 compared to 2008. Foreign currency translation decreased SG&A expenses by approximately $9,812,000. Excluding the foreign currency translation impact, SG&A expenses decreased by $781,000.

Asia/Pacific SG&A expenses decreased 8.3% or $2,295,000 in 2009 compared to 2008. Foreign currency translation decreased expenses by $3,177,000. Excluding the foreign currency translation impact, SG&A expenses increased $882,000 or 3.2% primarily due to unfavorable currency transaction effects.

Debt Finance Charges and Fees Associated with Debt Refinancing. In 2009, the company fully repaid its $250,000,000 term loan facility which was not due to expire until February 2013. As a result, deferred financing fees of $2,878,000 pre-tax, which were previously capitalized, were expensed in the All Other operating segment.

Asset write-downs to intangibles and investments. The company has made other investments in limited partnerships and non-marketable equity securities, which are accounted for using the cost method, adjusted for any estimated declines in value. These investments were acquired in private placements and there are no quoted market prices or stated rates of return and the company does not have the ability to easily sell these investments. The company completed an evaluation of the residual value related to these investments in the fourth quarter of 2009 which considered the weakening in the commercial real estate market as well as the redemption of one of the investments for a nominal amount and as a result, the company recognized impairment charges totaling $6,713,000 pre-tax which is included in the All Other segment.

In accordance with ASC 350, Intangibles—Goodwill and Other , the company reviews intangibles for impairment. As a result of the company’s 2009 intangible impairment review, impairment charges of $896,000 and $800,000 were recorded related to trademarks for Europe and a customer list for NA/HME, respectively as the actual cash flows associated with these intangibles were less than what was originally used to value the intangibles.

Interest. Interest expense decreased to $33,150,000 in 2009 from $42,927,000 in 2008, representing a 22.8% decrease. This decrease was attributable to debt reduction during the year and, to a lesser extent, decreased borrowing rates in 2009 compared to 2008. Interest income in 2009 was $1,674,000, which was lower than the prior year amount of $3,045,000, primarily due to decreased volume of financing provided to customers. As a result of the company’s adoption, effective January 1, 2009, of FASB Staff Position APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion ( Including Partial Cash Settlement ) (FSP APB 14-1) as codified in Debt with Conversion and Other Options, ASC 470-20, the company’s 2009 financial statements contain restated amounts for 2008 and 2007 that reflect an increase in interest expense of $3,694,000 and $2,904,000 for 2008 and 2007, respectively. See “Accounting Policies” in the Notes to Consolidated Financial Statements included elsewhere in this report.

Income Taxes. The company had an effective tax rate of 12.9% in 2009 and 27.1% in 2008. The company’s effective tax rate is lower than the expected U.S. federal statutory rate due to earnings abroad being taxed at rates lower than the U.S. statutory rate. In both years, the company’s rate was higher than it otherwise would have been due to losses without benefit, and due to valuation allowances in the United States, Australia and New Zealand. In addition, the 2009 tax rate was lower than the 2008 tax rate primarily due to a loss carryback, resulting from a tax law change in the United States, which previously was fully offset by a valuation allowance. See “Income Taxes” in the Notes to the Consolidated Financial Statements included elsewhere in this report for more detail.

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Research and Development. The company continues to invest in research and development activities to maintain its competitive advantage. The company dedicates funds to applied research activities to ensure that new and enhanced design concepts are available to its businesses. Research and development expenditures, which are included in costs of products sold, increased to $25,725,000 in 2009 from $24,764,000 in 2008. The expenditures, as a percentage of net sales, were 1.5% and 1.4% in 2009 and 2008, respectively.

INFLATION

Although the company cannot determine the precise effects of inflation, management believes that inflation does continue to have an influence on the cost of materials, salaries and benefits, utilities and outside services. The company attempts to minimize or offset the effects through increased sales volumes, capital expenditure programs designed to improve productivity, alternative sourcing of material and other cost control measures. In 2010, 2009 and 2008, the company was able to offset the majority of the impact of price increases from suppliers by productivity improvements, increasing prices to customers and other cost reduction activities.

LIQUIDITY AND CAPITAL RESOURCES

The company continues to maintain an adequate liquidity position through its unused bank lines of credit (see Long-Term Debt in the Notes to Consolidated Financial Statements included in this report) and working capital management.

The company’s debt, including the debt discount (related to the recording of convertible debt in accordance with ASC 470-20 which requires the recording of a debt discount, reducing debt and increasing equity) as described below, decreased by $50,396,000 from $321,597,000 at December 31, 2009 to $271,201,000 at December 31, 2010 as a result of improved cash flow generation. The company’s recorded debt discount was $25,137,000 as of December 31, 2010 and $48,272,000 as of December 31, 2009, respectively. The decrease in the recorded discount during 2010 was principally the result of extinguishing $57,799,000 of convertible debt during the year.

On October 28, 2010, the company entered into a new senior secured revolving credit agreement (the “New Credit Agreement”) which provides for a $400 million senior secured revolving credit facility maturing in October 2015. Pursuant to the terms of the New Credit Agreement, the company may from time to time borrow, repay and re-borrow up to an aggregate outstanding amount at any one time of $400 million, subject to customary conditions. The New Credit Agreement also provides for the issuance of swing line loans and letters of credit.

Borrowings under the New Credit Agreement bear interest, at the company’s election, at (i) the London Inter-Bank Offer Rate (“LIBOR”) plus a margin; or (ii) a Base Rate Option plus a margin. The applicable margin is based on the company’s leverage ratio and at the time of entry into the New Credit Agreement, the applicable margin was 2.50% per annum for LIBOR loans and 1.50% for the Base Rate Option loans. In addition to interest, the company is required to pay commitment fees on the unused portion of the New Credit Agreement. The commitment fee rate is initially 0.40% per annum and, like the interest rate spreads, is subject to adjustment thereafter based on the company’s leverage ratio. The obligations of the borrowers under the New Credit Agreement are secured by substantially all of the company’s U.S. assets and are guaranteed by substantially all of the company’s material domestic and foreign subsidiaries.

The company may from time to time seek to retire or purchase its 4.125% Convertible Senior Subordinated Debentures due 2027, in open market purchases, privately negotiated transactions or otherwise. Such purchases or exchanges, if any, will depend on prevailing market conditions, the company’s liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material. During 2010, the company extinguished $57,799,000 in convertible senior subordinated debentures.

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The New Credit Agreement contains certain covenants that are customary for similar credit arrangements, including covenants relating to, among other things, financial reporting and notification, compliance with laws, preservation of existence, maintenance of books and records, use of proceeds, maintenance of properties and insurance, and limitations on liens, dispositions, issuance of debt, investments, payment of dividends, repurchases of capital stock, acquisitions, transactions with affiliates, and capital expenditures. There also are financial covenants that require the company to maintain a maximum leverage ratio (consolidated funded indebtedness to consolidated EBITDA, each as defined in the New Credit Agreement) of no greater than 3.50 to 1, and a minimum interest coverage ratio (consolidated EBITDA to consolidated interest charges, each as defined in the New Credit Agreement) of no less than 3.50 to 1. As of December 31, 2010, the company’s leverage ratio was 1.89 and the company’s interest coverage ratio was 8.40 and the company was in compliance with all covenant requirements. Under the most restrictive covenant of the company’s borrowing arrangements as of December 31, 2010, the company had the capacity to borrow up to an additional $215,068,000.

While there is general concern about the potential for rising interest rates, the company believes that its exposure to interest rate fluctuations is manageable given that portions of the company’s debt are at fixed rates for extended periods of time, the company has the ability to utilize swaps to exchange variable rate debt to fixed rate debt, if needed, and the company’s free cash flow should allow it to absorb any modest rate increases in the months ahead without any material impact on its liquidity or capital resources. As of December 31, 2010, the weighted average floating interest rate on borrowings was 3.29%.

CAPITAL EXPENDITURES

There are no individually material capital expenditure commitments outstanding as of December 31, 2010. The company estimates that capital investments for 2011 could approximate between $25,000,000 and $30,000,000, compared to actual capital expenditures of $17,353,000 in 2010. The company believes that its balances of cash and cash equivalents, together with funds generated from operations and existing borrowing facilities, will be sufficient to meet its operating cash requirements and fund required capital expenditures for the foreseeable future.

CASH FLOWS

Cash flows provided by operating activities were $122,207,000 in 2010, compared to $155,663,000 in the previous year. The decline in operating cash flows in 2010 was primarily attributable to an increase in net working capital assets specifically trade receivables and inventories. Trade receivables increased due to strong fourth quarter 2010 sales.

Cash flows used for investing activities were $30,617,000 in 2010, compared to $16,682,000 in 2009. The increase in cash used was primarily attributable to an acquisition in the amount of $13,725,000 in the NA/HME segment in 2010.

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Cash flows required by financing activities in 2010 were $77,634,000, compared to cash flows required of $153,290,000 in 2009. The decrease in cash used was primarily attributable to the company paying down less debt in 2010 as compared to 2009. This was partially offset by increase in the use of cash for the payment of debt financing costs related to the company’s early extinguishment of debt and refinancing of $30,329,000.

During 2010, the company generated free cash flow of $104,890,000 compared to free cash flow of $141,598,000 in 2009. The decrease is due primarily to an increase in net working capital assets as noted above. Free cash flow is a non-GAAP financial measure that is comprised of net cash provided by operating activities, excluding net cash impact related to restructuring activities, less net purchases of property and equipment, net of proceeds from sales of property and equipment. Management believes that this financial measure provides meaningful information for evaluating the overall financial performance of the company and its ability to repay debt or make future investments (including acquisitions, etc.).

The non-GAAP financial measure is reconciled to the GAAP measure as follows (in thousands):


	Twelve Months Ended December 31,
	2010			2009
Net cash provided by operating activities	$	122,207		$	155,663
Plus: Net cash impact related to restructuring activities		—			2,771
Less: Purchases of property and equipment—net		(17,317	)		(16,836	)

Free Cash Flow	$	104,890		$	141,598

CONTRACTUAL OBLIGATIONS

The company’s contractual obligations as of December 31, 2010 are as follows (in thousands):


	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
4.125% Convertible Senior Subordinated Debentures due 2027	$	128,552	$	3,185	$	6,369	$	6,369	$	112,629
Revolving Credit Agreements due 2015		184,932		6,950		—		177,982		—
Operating lease obligations		57,750		19,374		21,433		9,357		7,586
Capital lease obligations		12,090		1,575		2,850		2,727		4,938
Purchase obligations (primarily computer systems contracts)		9,232		3,676		3,567		1,989		—
Product liability		24,160		4,134		9,414		4,558		6,054
SERP		26,524		391		2,030		2,302		21,801
Other, principally deferred compensation		9,308		66		928		288		8,026

Total	$	452,548	$	39,351	$	46,591	$	205,572	$	161,034

“Other” includes an estimated payment of $700,000 in years 1-3 for liabilities recorded for uncertain tax positions. The table does not include any other payments related to liabilities recorded for uncertain tax positions as the company cannot make a reasonably reliable estimate as to any other payments. See Income Taxes in the Notes to the Consolidated Financial Statements included in this report.

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DIVIDEND POLICY

It is the company’s policy to pay a nominal dividend in order for its stock to be more attractive to a broader range of investors. The current annual dividend rate remains at $0.05 per Common Share and $0.045 per Class B Common Share. It is not anticipated that this will change materially as the company continues to have available significant growth opportunities through internal development and acquisitions. For 2010, annualized dividends of $0.05 per Common Share and $0.045 per Class B Common Share were declared and paid.

CRITICAL ACCOUNTING POLICIES

The Consolidated Financial Statements included in the report include accounts of the company and all majority-owned subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying Consolidated Financial Statements and related footnotes. In preparing the financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

The following critical accounting policies, among others, affect the more significant judgments and estimates used in preparation of the company’s consolidated financial statements.

Revenue Recognition

Invacare’s revenues are recognized when products are shipped to unaffiliated customers. Revenue Recognition , ASC 605, provides guidance on the application of generally accepted accounting principles to selected revenue recognition issues. The company has concluded that its revenue recognition policy is appropriate and in accordance with GAAP and ASC 605. Shipping and handling costs are included in cost of goods sold.

Sales are made only to customers with whom the company believes collection is reasonably assured based upon a credit analysis, which may include obtaining a credit application, a signed security agreement, personal guarantee and/or a cross corporate guarantee depending on the credit history of the customer. Credit lines are established for new customers after an evaluation of their credit report and/or other relevant financial information. Existing credit lines are regularly reviewed and adjusted with consideration given to any outstanding past due amounts.

The company offers discounts and rebates, which are accounted for as reductions to revenue in the period in which the sale is recognized. Discounts offered include: cash discounts for prompt payment, base and trade discounts based on contract level for specific classes of customers. Volume discounts and rebates are given based on large purchases and the achievement of certain sales volumes. Product returns are accounted for as a reduction to reported sales with estimates recorded for anticipated returns at the time of sale. The company does not ship any goods on consignment.

Distributed products sold by the company are accounted for in accordance with the revenue recognition guidance in ASC 605-45-05 . The company records distributed product sales gross as a principal since the company takes title to the products and has the risks of loss for collections, delivery and returns.

Product sales that give rise to installment receivables are recorded at the time of sale when the risks and rewards of ownership are transferred. In December 2000, the company entered into an agreement with De Lage Landen, Inc. (“DLL”), a third party financing company, to provide the majority of future lease financing to

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Invacare customers. As such, interest income is recognized based on the terms of the installment agreements. Installment accounts are monitored and if a customer defaults on payments, interest income is no longer recognized. All installment accounts are accounted for using the same methodology, regardless of duration of the installment agreements.

Allowance for Uncollectible Accounts Receivable

The estimated allowance for uncollectible amounts is based primarily on management’s evaluation of the financial condition of the customer. In addition, as a result of the third party financing arrangement, management monitors the collection status of these contracts in accordance with the company’s limited recourse obligations and provides amounts necessary for estimated losses in the allowance for doubtful accounts and establishing reserves for specific customers as needed.

The company continues to closely monitor the credit-worthiness of its customers and adhere to tight credit policies. During the second quarter of 2010, the Centers for Medicare and Medicaid Services announced the single payment amounts for Round 1 of the Competitive Bidding Program which commenced on January 1, 2011 in nine metropolitan statistical areas (MSAs). The single payment amounts will be used to determine the price that Medicare pays for certain durable medical equipment, prosthetics, orthotics and supplies. The program replaces Medicare’s existing fee schedule amounts with market-based prices. The company believes the changes announced could have a significant impact on the collectability of accounts receivable for those customers which are in the MSA locations impacted and which have a portion of their revenues tied to Medicare reimbursement. As a result, this is an additional risk factor which the company considers when assessing the collectability of accounts receivable.

Invacare has an agreement with DLL, a third party financing company, to provide the majority of future lease financing to Invacare’s North America customers. The DLL agreement provides for direct leasing between DLL and the Invacare customer. The company retains a recourse obligation for events of default under the contracts. The company monitors the collections status of these contracts and has provided amounts for estimated losses in its allowances for doubtful accounts.

Inventories and Related Allowance for Obsolete and Excess Inventory

Inventories are stated at the lower of cost or market with cost determined by the first-in, first-out method. Inventories have been reduced by an allowance for excess and obsolete inventories. The estimated allowance is based on management’s review of inventories on hand compared to estimated future usage and sales. A provision for excess and obsolete inventory is recorded as needed based upon the discontinuation of products, redesigning of existing products, new product introductions, market changes and safety issues. Both raw materials and finished goods are reserved for on the balance sheet.

In general, Invacare reviews inventory turns as an indicator of obsolescence or slow moving product as well as the impact of new product introductions. Depending on the situation, the company may partially or fully reserve for the individual item. The company continues to increase its overseas sourcing efforts, increase its emphasis on the development and introduction of new products, and decrease the cycle time to bring new product offerings to market. These initiatives are sources of inventory obsolescence for both raw material and finished goods.

Goodwill, Intangible and Other Long-Lived Assets

Property, equipment, certain intangibles and certain other long-lived assets are amortized over their useful lives. Useful lives are based on management’s estimates of the period that the assets will generate revenue. Under Intangibles—Goodwill and Other , ASC 350, goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests. Furthermore, goodwill and other long-lived assets are reviewed for

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impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The company completes its annual impairment tests in the fourth quarter of each year. The discount rates used have a significant impact upon the discounted cash flow methodology utilized in the company’s annual impairment testing as higher discount rates decrease the fair value estimates.

The company utilizes a discounted cash flow method model to analyze reporting units for impairment in which the company forecasts income statement and balance sheet amounts based on assumptions regarding future sales growth, profitability, inventory turns, days’ sales outstanding, etc. to forecast future cash flows. The cash flows are discounted using a weighted average cost of capital discount rate where the cost of debt is based on quoted rates for 20-year debt of companies of similar credit risk and the cost of equity is based upon the 20-year treasury rate for the risk free rate, a market risk premium, the industry average beta and a small cap stock adjustment. The assumptions used are based on a market participant’s point of view and yielded a discount rate of 9.59% in 2010 compared to 10.74% in 2009 and 8.90% to 9.90% in 2008.

The company also utilizes an EV (Enterprise Value) to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) Method to compute the fair value of its reporting units which considers potential acquirers and their EV to EBITDA multiples adjusted by an estimated premium. While more weight is given to the discounted cash flow method, the EV to EBITDA Method does provide corroborative evidence of the reasonableness of the discounted cash flow method results.

While there was no indication of impairment in 2010 related to goodwill, a future potential impairment is possible for any of the company’s reporting units should actual results differ materially from forecasted results used in the valuation analysis. Furthermore, the company’s annual valuation of goodwill can differ materially if the market inputs used to determine the discount rate change significantly. For instance, higher interest rates or greater stock price volatility would increase the discount rate and thus increase the chance of impairment. For example, if the discount rate used were 100 basis points higher for the 2010 impairment analysis, there still would not be any indicator of potential impairment for any of the reporting units.

Product Liability

The company’s captive insurance company, Invatection Insurance Co., currently has a policy year that runs from September 1 to August 31 and insures annual policy losses of $10,000,000 per occurrence and $13,000,000 in the aggregate of the company’s North American product liability exposure. The company also has additional layers of external insurance coverage insuring up to $75,000,000 in annual aggregate losses arising from individual claims anywhere in the world that exceed the captive insurance company policy limits or the limits of the company’s per country foreign liability limits, as applicable. There can be no assurance that Invacare’s current insurance levels will continue to be adequate or available at affordable rates.

Product liability reserves are recorded for individual claims based upon historical experience, industry expertise and indications from the third-party actuary. Additional reserves, in excess of the specific individual case reserves, are provided for incurred but not reported claims based upon third-party actuarial valuations at the time such valuations are conducted. Historical claims experience and other assumptions are taken into consideration by the third-party actuary to estimate the ultimate reserves. For example, the actuarial analysis assumes that historical loss experience is an indicator of future experience, that the distribution of exposures by geographic area and nature of operations for ongoing operations is expected to be very similar to historical operations with no dramatic changes and that the government indices used to trend losses and exposures are appropriate.

Estimates made are adjusted on a regular basis and can be impacted by actual loss awards and settlements on claims. While actuarial analysis is used to help determine adequate reserves, the company is responsible for the determination and recording of adequate reserves in accordance with accepted loss reserving standards and practices.

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Warranty

Generally, the company’s products are covered from the date of sale to the customer by warranties against defects in material and workmanship for various periods depending on the product. Certain components carry a lifetime warranty. A provision for estimated warranty cost is recorded at the time of sale based upon actual experience. The company continuously assesses the adequacy of its product warranty accrual and makes adjustments as needed. Historical analysis is primarily used to determine the company’s warranty reserves. Claims history is reviewed and provisions are adjusted as needed. However, the company does consider other events, such as a product recall, which could warrant additional warranty reserve provision. No material adjustments to warranty reserves were necessary in the current year. See Warranty Costs in the Notes to the Condensed Consolidated Financial Statements included in this report for a reconciliation of the changes in the warranty accrual.

Accounting for Stock-Based Compensation

The company accounts for share based compensation under the provisions of Compensation—Stock Compensation , ASC 718 . The company has not made any modifications to the terms of any previously granted options and no changes have been made regarding the valuation methodologies or assumptions used to determine the fair value of options granted since 2005 and the company continues to use a Black-Scholes valuation model. As of December 31, 2010, there was $15,539,000 of total unrecognized compensation cost from stock-based compensation arrangements granted under the 2003 Plan, which is related to non-vested options and shares, and includes $5,190,000 related to restricted stock awards. The company expects the compensation expense to be recognized over a four-year period for a weighted-average period of approximately two years.

The substantial majority of the options awarded have been granted at exercise prices equal to the market value of the underlying stock on the date of grant. Restricted stock awards granted without cost to the recipients are expensed on a straight-line basis over the vesting periods.

Income Taxes

As part of the process of preparing its financial statements, the company is required to estimate income taxes in various jurisdictions. The process requires estimating the company’s current tax exposure, including assessing the risks associated with tax audits, as well as estimating temporary differences due to the different treatment of items for tax and accounting policies. The temporary differences are reported as deferred tax assets and or liabilities. Substantially all of the company’s U.S. deferred tax assets are offset by a valuation allowance. The company also must estimate the likelihood that its deferred tax assets will be recovered from future taxable income and whether or not valuation allowances should be established. In the event that actual results differ from its estimates, the company’s provision for income taxes could be materially impacted. The company does not believe that there is a substantial likelihood that materially different amounts would be reported related to its critical accounting policies.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On January 21, 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06 or the ASU). The ASU amends ASC 820 to require a number of additional disclosures regarding fair value measurements. The amended guidance requires entities to disclose additional information regarding assets and liabilities that are transferred between levels of the fair value hierarchy. Entities are also required to disclose information in the Level 3 roll forward about purchases, sales, issuances and settlements on a gross basis. In addition to these new disclosure requirements, ASU 2010-06 also amends Topic 820 to further clarify existing guidance pertaining to the level of disaggregation at which fair value disclosures should be made and the requirements to disclose

I-51

information about the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. The company adopted ASU 2010-06 effective January 1, 2010 and the standard was utilized in preparing the fair value measurement disclosures.

On July 21, 2010, the FASB issued Accounting Standards Update No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (ASU 2010-20). ASU 2010-20 requires entities to provide additional disclosures regarding credit-risk exposures, including how credit risk is analyzed and assessed, and allowances for credit losses, including reasons for changes each period. The company adopted ASU 2010-20 effective December 31, 2010 and the company’s receivable disclosures in this 2010 Form 10-K reflect the required disclosures. The adoption of ASU 2010-20 did not have any material impact on the company’s financial position, results of operations or cash flows.

Item 7A.

Quantitative and Qualitative Disclosure about Market Risk.

The company is exposed to market risk through various financial instruments, including fixed rate and floating rate debt instruments. The company does at times use interest swap agreements to mitigate its exposure to interest rate fluctuations. Based on December 31, 2010 debt levels, a 1% change in interest rates would impact annual interest expense by approximately $1,849,000. Additionally, the company operates internationally and, as a result, is exposed to foreign currency fluctuations. Specifically, the exposure results from intercompany loans, intercompany sales or payments and third party sales or payments. In an attempt to reduce this exposure, foreign currency forward contracts are utilized to hedge intercompany purchases and sales as well as third party purchases and sales. The company does not believe that any potential loss related to these financial instruments would have a material adverse effect on the company’s financial condition or results of operations.

On October 28, 2010, the company entered into the New Credit Agreement which provides for a $400,000,000 senior secured revolving credit facility maturing in October 2015 at variable rates. As of December 31, 2010, the company had outstanding $77,201,000 in principal amount of 4.125% Convertible Senior Subordinated Debentures due in February 2027, of which $25,137,000 is included in equity. Accordingly, while the company is exposed to increases in interest rates, its exposure to the volatility of the current market environment is limited as the company does not currently need to re-finance any of its debt. However, the company’s New Credit Agreement contains covenants with respect to, among other items, consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) and interest coverage, as defined in the agreement. The company is in compliance with all covenant requirements, but should it fall out of compliance with these requirements, the company would have to attempt to obtain alternative financing and thus likely be required to pay much higher interest rates.

Item 8.

Financial Statements and Supplementary Data.

Reference is made to the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statement of Earnings, Consolidated Statement of Cash Flows, Consolidated Statement of Shareholders’ Equity, Notes to Consolidated Financial Statements and Financial Statement Schedule, which appear on pages FS-1 to FS-50 of this Annual Report on Form 10-K.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.

Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

As of December 31, 2010, an evaluation was performed, under the supervision and with the participation of the company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the company’s disclosure controls and procedures (as defined in

I-52

Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on that evaluation, the company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company’s disclosure controls and procedures were effective as of December 31, 2010, in ensuring that information required to be disclosed by the company in the reports it files and submits under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and (2) accumulated and communicated to the company’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

(b) Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining a system of adequate internal control over financial reporting that provides reasonable assurance that assets are safeguarded and that transactions are authorized, recorded and reported properly. The system includes self-monitoring mechanisms; regular testing by the company’s internal auditors; a Code of Conduct; written policies and procedures; and a careful selection and training of employees. Actions are taken to correct deficiencies as they are identified. An effective internal control system, no matter how well designed, has inherent limitations—including the possibility of the circumvention or overriding of controls—and therefore can provide only reasonable assurance that errors and fraud that can be material to the financial statements are prevented or would be detected on a timely basis. Further, because of changes in conditions, internal control system effectiveness may vary over time.

Management’s assessment of the effectiveness of the company’s internal control over financial reporting is based on the Internal Control—Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission.

In management’s opinion, internal control over financial reporting is effective as of December 31, 2010.

(c) Attestation Report of the Registered Public Accounting Firm

The company’s independent registered public accounting firm, Ernst & Young LLP, audited the company’s internal control over financial reporting and, based on that audit, issued an attestation report regarding the company’s internal control over financial reporting, which is included in this Annual Report on Form 10-K on page FS-2.

(d) Changes in Internal Control Over Financial Reporting

There have been no changes in the company’s internal control over financial reporting that occurred during the company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

Item 9B.

Other Information.

None.

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PART III

Item 10.

Directors and Executive Officers of the Registrant.

Information required by Item 10 as to the executive officers of the company is included in Part I of this Annual Report on Form 10-K. The other information required by Item 10 as to the directors of the company, the Audit Committee, the audit committee financial expert, the procedures for recommending nominees to the Board of Directors, compliance with Section 16(a) of the Exchange Act and corporate governance is incorporated herein by reference to the information set forth under the captions “Election of Directors,” “Corporate Governance,” and “Section 16(a) Beneficial Ownership Compliance” in the company’s definitive Proxy Statement for the 2011 Annual Meeting of Shareholders.

Item 11.

Executive Compensation.

The information required by Item 11 is incorporated by reference to the information set forth under the captions “Executive Compensation” and “Corporate Governance” in the company’s definitive Proxy Statement for the 2011 Annual Meeting of Shareholders.

Item 12.

Security Ownership of Certain Beneficial Owners and Management.

The information required by Item 12 is incorporated by reference to the information set forth under the caption “Share Ownership of Principal Holders and Management” in the company’s definitive Proxy Statement for the 2011 Annual Meeting of Shareholders.

Information regarding the securities authorized for issuance under the company’s equity compensation plans is incorporated by reference to the information set forth under the captions “Compensation of Executive Officers” and “Compensation of Directors” in the company’s definitive Proxy Statement for the 2011 Annual Meeting of Shareholders.

Item 13.

Certain Relationships and Related Transactions.

The information required by Item 13 is incorporated by reference to the information set forth under the caption “Certain Relationships and Related Transactions” in the company’s definitive Proxy Statement for the 2011 Annual Meeting of Shareholders.

Item 14.

Principal Accounting Fees and Services.

The information required by Item 14 is incorporated by reference to the information set forth under the caption “Independent Auditors” and “Pre-Approval Policies and Procedures” in the company’s definitive Proxy Statement for the 2011 Annual Meeting of Shareholders.

I-54

PART IV

Item 15.

Exhibits and Financial Statement Schedules.

(a)(1) Financial Statements.

The following financial statements of the company are included in Part II, Item 8:

Consolidated Statement of Earnings—years ended December 31, 2010, 2009 and 2008

Consolidated Balance Sheet—December 31, 2010 and 2009

Consolidated Statement of Cash Flows—years ended December 31, 2010, 2009 and 2008

Consolidated Statement of Shareholders’ Equity—years ended December 31, 2010, 2009 and 2008

Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules.

The following financial statement schedule of the company is included in Part II, Item 8:

Schedule II—Valuation and Qualifying Accounts

All other schedules have been omitted because they are not applicable or not required, or because the required information is included in the Consolidated Financial Statements or notes thereto.

(a)(3) Exhibits.

See Exhibit Index at page number I-57 of this Report on Form 10-K.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized as of February 25, 2011.


INVACARE CORPORATION

By:		/s/ G ERALD B. B LOUCH
		Gerald B. Blouch
		President and Chief Executive Officer

I-55

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of February 25, 2011.


Signature		Title

/s/ A. M ALACHI M IXON , III A. Malachi Mixon, III		Chairman of the Board of Directors

/s/ G ERALD B. B LOUCH Gerald B. Blouch		President and Chief Executive Officer and Director (Principal Executive Officer)

/s/ R OBERT K. G UDBRANSON Robert K. Gudbranson		Senior Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

/s/ J AMES C. B OLAND James C. Boland		Director

/s/ M ICHAEL F. D ELANEY Michael F. Delaney		Director

/s/ C. M ARTIN H ARRIS , M.D. C. Martin Harris, M.D.		Director

/s/ J AMES L. J ONES James L. Jones		Director

/s/ D ALE C. L A P ORTE Dale C. LaPorte		Director

/s/ D AN T. M OORE , III Dan T. Moore, III		Director

/s/ J OSEPH B. R ICHEY , II Joseph B. Richey, II		President—Invacare Technologies, Senior Vice President—Electronics and Design Engineering and Director

/s/ C HARLES S. R OBB Charles S. Robb		Director

/s/ W ILLIAM M. W EBER William M. Weber		Director

I-56

INVACARE CORPORATION

Report on Form 10-K for the fiscal year ended December 31, 2010.

Exhibit Index


Official Exhibit No.	Description	Sequential Page No.
2.1	Sale and Purchase Agreement Regarding the Sale and Purchase of All Shares in WP Domus GmbH by and among WP Domus LLC, Mr. Peter Schultz and Mr. Wilhelm Kaiser, Invacare GmbH & Co. KG and Invacare Corporation dated as of July 31, 2004		(A	)

2.2	Guarantee Letter Agreement of Warburg, Pincus Ventures, L.P. and Warburg, Pincus International, L.P. dated as of September 9, 2004		(A	)

3(a)	Second Amended and Restated Articles of Incorporation		(L	)

3(b)	Code of Regulations, as amended on May 21, 2009		(N	)

3(c)	Amendment to Code of Regulations, adopted May 20, 2010		(S	)

4(a)	Specimen Share Certificate for Common Shares		(G	)

4(b)	Specimen Share Certificate for Class B Common Shares		(G	)

4(c)	Rights agreement between Invacare Corporation and National City Bank (as predecessor in interest to Wells Fargo Bank, N.A.) dated as of July 8, 2005		(F	)

4(d)	Indenture, dated as of February 12, 2007, by and among Invacare Corporation, the Guarantors named therein and Wells Fargo Bank, N.A., as trustee (including the Form of 4.125% Convertible Senior Subordinated Debenture due 2027 and related Guarantee attached as Exhibit A)		(I	)

4(f)	Amendment No. 1 to Rights agreement between Invacare Corporation and Wells Fargo Bank, N.A. dated as of October 28, 2009		(O	)

10(a)	1992 Non-Employee Directors Stock Option Plan adopted in May 1992		(E	)

10(b)	Deferred Compensation Plan for Non-Employee Directors, adopted in May 1992		(E	)

10(c)	Invacare Corporation 1994 Performance Plan approved January 28, 1994		(E	)*

10(d)	Amendment No. 1 to the Invacare Corporation 1994 Performance Plan approved May 28, 1998		(E	)*

10(e)	Amendment No. 2 to the Invacare Corporation 1994 Performance Plan approved May 24, 2000		(B	)*

10(f)	Amendment No. 3 to the Invacare Corporation 1994 Performance Plan approved March 13, 2003		(C	)*

10(g)	Invacare Retirement Savings Plan, effective January 1, 2001, as amended		(J	)*

10(h)	Agreement entered into by and between the company and its Chief Financial Officer		(D	)*

10(i)	Invacare Corporation 401(K) Plus Benefit Equalization Plan, effective January 1, 2003, as amended and restated		(J	)*

10(j)	Invacare Corporation Amended and Restated 2003 Performance Plan		(M	)*

10(k)**	Form of Change of Control Agreement entered into by and between the company and certain of its executive officers and schedule of all such agreements with current executive officers		*

I-57


Official Exhibit No.	Description	Sequential Page No.
10(l)**	Form of Indemnity Agreement entered into by and between the company and its directors and certain of its executive officers and schedule of all such agreements with directors and executive officers		*

10(m)**	Invacare Corporation Deferred Compensation Plus Plan, effective January 1, 2005, as amended August 19, 2009 and on November 23, 2010		*

10(n)	Invacare Corporation Death Benefit Only Plan, effective January 1, 2005, as amended		(J	)*

10(o)	Supplemental Executive Retirement Plan, as amended and restated effective February 1, 2000		(E	)*

10(p)	Form of Director Stock Option Award under Invacare Corporation 1994 Performance Plan		(E	)*

10(q)	Form of Director Stock Option Award under Invacare Corporation 2003 Performance Plan		(J	)*

10(r)**	Form of Director Deferred Option Award under Invacare Corporation 2003 Performance Plan		*

10(s)	Form of Restricted Stock Option Award under Invacare Corporation 2003 Performance Plan		(J	)*

10(t)	Form of Stock Option Award under Invacare Corporation 2003 Performance Plan		(J	)*

10(u)	Form of Executive Stock Option Award under Invacare Corporation 2003 Performance Plan		(J	)*

10(v)	Form of Switzerland Stock Option Award under Invacare Corporation 2003 Performance Plan		(J	)*

10(w)	Form of Switzerland Executive Stock Option Award under Invacare Corporation 2003 Performance Plan		(J	)*

10(x)**	Director Compensation Schedule

10(y)	Invacare Corporation Executive Incentive Bonus Plan, as amended March 9, 2010		(Q	)*

10(aa)	Purchase Agreement by and among Invacare Corporation, the Subsidiary Guarantors named therein, and the Initial Purchasers named therein dated as of February 5, 2007		(H	)

10(ab)**	Form of Rule 10b5-1 Sales Plan entered into between the company and certain of its executive officers and other employees and a schedule of all such agreements with executive officers and other employees

10(ac)	A. Malachi Mixon, III Retirement Benefit Agreement		(J	)*

10(ad)	Cash Balance Supplemental Executive Retirement Plan, as amended and restated, effective December 31, 2008		(K	)*

10(ae)	Form of Participation Agreement, for current participants in the Cash Balance Supplemental Executive Retirement Plan, as of December 31, 2008, entered into by and between the company and certain participants and a schedule of all such agreements with participants		(K	)*

10(af)	Amended and Restated Severance Protection Agreement, between the company and Gerald B. Blouch, effective December 31, 2008		(K	)*

I-58


Official Exhibit No.	Description	Sequential Page No.
10(ag)	Amendment No. 1 to the Cash Balance Supplemental Executive Retirement Plan, effective August 19, 2009		(P	)*

10(ah)	$400,000,000 Revolving Credit Facility Credit Agreement by and among Invacare Corporation, the other borrowers, guarantors and lenders thereto; PNC Bank, National Association, as Administrative Agent; Keybank National Association and Bank of America, N.A. as Co-Syndication Agents; and RBS Citizens, N.A. as Documentation Agent.		(R	)*

21**	Subsidiaries of the company

23**	Consent of Independent Registered Public Accounting Firm

31.1**	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2**	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	Management contract, compensatory plan or arrangement

**	Filed herewith



(A)		Reference is made to the appropriate Exhibit to the company report on Form 8-K, dated September 9, 2004, which Exhibit is incorporated herein by reference.

(B)		Reference is made to the appropriate Exhibit of the company report on Form S-8, dated March 30, 2001, which Exhibit is incorporated herein by reference.

(C)		Reference is made to the appropriate Exhibit of the company report on Form 10-Q for the quarter ended March 31, 2003, which Exhibit is incorporated herein by reference.

(D)		Reference is made to Exhibit 10.1 of the company report on Form 8-K, dated March 6, 2008.

(E)		Reference is made to the appropriate Exhibit of the company report on Form 10-K for the fiscal year ended December 31, 2004, which Exhibit is incorporated herein by reference.

(F)		Reference is made to the appropriate Exhibit of the company report on Form 8-K, dated July 8, 2005, which is incorporated herein by reference.

(G)		Reference is made to the appropriate Exhibit of the company report on Form 10-K for the fiscal year ended December 31, 2005, which Exhibit is incorporated herein by reference.

(H)		Reference is made to the appropriate Exhibit of the company report on Form 8-K, dated February 5, 2007, which is incorporated herein by reference.

(I)		Reference is made to the appropriate Exhibit of the company report on Form 8-K, dated February 12, 2007, which is incorporated herein by reference.

(J)		Reference is made to the appropriate Exhibit of the company report on Form 10-K for the fiscal year ended December 31, 2007, which Exhibit is incorporated herein by reference.

(K)		Reference is made to the appropriate Exhibit of the company report on Form 8-K, dated December 31, 2008, which is incorporated herein by reference.

I-59


(L)		Reference is made to the appropriate Exhibit of the company report on Form 10-K for the fiscal year ended December 31, 2008, which Exhibit is incorporated herein by reference.

(M)		Reference is made to the appropriate Exhibit of the company report on Form 8-K, dated May 21, 2009, which is incorporated herein by reference.

(N)		Reference is made to the appropriate Exhibit of the company report on Form 10-Q, dated June 30, 2009, which is incorporated herein by reference.

(O)		Reference is made to the appropriate Exhibit of the company report on Form 8-A, dated October 30, 2009, which is incorporated herein by reference.

(P)		Reference is made to the appropriate Exhibit of the company report on Form 10-Q, dated September 30, 2009, which is incorporated herein by reference.

(Q)		Reference is made to the appropriate Exhibit to Appendix A of the company Definitive Proxy Statement on Schedule 14A, dated April 8, 2005, which is incorporated herein by reference.

(R)		Reference is made to the appropriate Exhibit of the company report on Form 8-K, dated October 28, 2010, which is incorporated herein by reference.

(S)		Reference is made to Appendix A to the company’s definitive proxy statement on Schedule 14A dated April 7, 2010, which is incorporated herein by reference.

I-60

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Invacare Corporation

We have audited the accompanying consolidated balance sheets of Invacare Corporation and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of earnings, cash flows and shareholders’ equity for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Invacare Corporation and subsidiaries at December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with U. S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Invacare Corporation’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2011 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Cleveland, Ohio

February 25, 2011

FS-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Invacare Corporation

We have audited Invacare Corporation’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Invacare Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Report on Internal Control over Financial Reporting” which is included in Item 9A. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Invacare Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Invacare Corporation and subsidiaries as of December 31, 2010 and 2009 and the related consolidated statements of earnings, cash flows and shareholders’ equity for each of the three years in the period ended December 31, 2010 of Invacare Corporation, and the financial statement schedule for the three years in the period ended December 31, 2010 and our report dated February 25, 2011 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Cleveland, Ohio

February 25, 2011

FS-2

CONSOLIDATED STATEMENT OF EARNINGS

INVACARE CORPORATION AND SUBSIDIARIES


	Years Ended December 31,
	2010			2009			2008
	(In thousands, except per share data)
Net sales	$	1,722,081		$	1,693,136		$	1,755,694
Cost of products sold		1,212,440			1,199,942			1,266,802

Gross Profit		509,641			493,194			488,892
Selling, general and administrative expenses		411,513			398,646			398,254
Charges related to restructuring activities		—			4,506			2,949
Loss on debt extinguishment including debt finance charges and associated fees		40,164			2,878			—
Asset write-downs to intangibles and investments		—			8,409			—
Interest expense		20,647			33,150			42,927
Interest income		(724	)		(1,674	)		(3,045	)

Earnings before Income Taxes		38,041			47,279			47,807
Income taxes		12,700			6,100			12,950

Net Earnings	$	25,341		$	41,179		$	34,857

Net Earnings per Share—Basic	$	0.78		$	1.29		$	1.09

Weighted Average Shares Outstanding—Basic		32,393			31,969			31,902

Net Earnings per Share—Assuming Dilution	$	0.78		$	1.29		$	1.09

Weighted Average Shares Outstanding—Assuming Dilution		32,694			31,996			31,953

See notes to consolidated financial statements.

FS-3

CONSOLIDATED BALANCE SHEETS

INVACARE CORPORATION AND SUBSIDIARIES


	December 31, 2010			December 31, 2009
	(In thousands)
Assets
Current Assets
Cash and cash equivalents	$	48,462		$	37,501
Trade receivables, net		252,004			263,014
Installment receivables, net		3,959			3,565
Inventories, net		174,375			172,222
Deferred income taxes		5,778			390
Other current assets		41,581			51,772

Total Current Assets		526,159			528,464
Other Assets		45,484			48,006
Other Intangibles		70,911			85,305
Property and Equipment, net		130,763			141,633
Goodwill		507,083			556,093

Total Assets	$	1,280,400		$	1,359,501

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	143,753		$	141,059
Accrued expenses		130,079			142,293
Accrued income taxes		8,502			5,884
Short-term debt and current maturities of long-term obligations		7,974			1,091

Total Current Liabilities		290,308			290,327
Long-Term Debt		238,090			272,234
Other Long-Term Obligations		99,591			95,703
Shareholders’ Equity
Preferred Shares (Authorized 300 shares; none outstanding)		—			—
Common Shares (Authorized 100,000 shares; 33,559 and 33,048 issued in 2010 and 2009, respectively)—no par		8,401			8,273
Class B Common Shares (Authorized 12,000 shares; 1,086 and 1,111, issued and outstanding in 2010 and 2009, respectively)—no par		272			278
Additional paid-in-capital		231,685			229,272
Retained earnings		370,001			346,272
Accumulated other comprehensive earnings		112,631			174,204
Treasury shares (2,319 and 1,834 shares in 2010 and 2009, respectively)		(70,579	)		(57,062	)

Total Shareholders’ Equity		652,411			701,237

Total Liabilities and Shareholders’ Equity	$	1,280,400		$	1,359,501

See notes to consolidated financial statements.

FS-4

CONSOLIDATED STATEMENT OF CASH FLOWS

INVACARE CORPORATION AND SUBSIDIARIES


	Years Ended December 31,
	2010			2009			2008
	(In thousands)
Operating Activities
Net earnings	$	25,341		$	41,179		$	34,857
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		36,804			40,562			43,744
Provision for losses on trade and installment receivables		16,979			19,281			14,284
(Benefit) provision for deferred income taxes		(2,467	)		1,785			1,420
Provision for other deferred liabilities		2,781			2,573			2,930
Provision for stock-based compensation		6,135			4,495			3,299
Loss on disposals of property and equipment		233			1,237			145
Loss on debt extinguishment including debt finance charges and associated fees		40,164			2,878			—
Asset write-downs to intangibles and investments		—			8,409			—
Amortization of convertible debt discount		3,198			4,142			3,694
Changes in operating assets and liabilities:
Trade receivables		(5,839	)		6,452			(15,031	)
Installment sales contracts, net		(2,423	)		(3,356	)		(3,788	)
Inventories		(6,352	)		20,515			(292	)
Other current assets		3,181			11,628			4,754
Accounts payable		5,534			12,532			(20,440	)
Accrued expenses		(6,980	)		(18,012	)		5,479
Other long-term liabilities		5,918			(637	)		1,359

Net Cash Provided by Operating Activities		122,207			155,663			76,414
Investing Activities
Purchases of property and equipment		(17,353	)		(17,999	)		(19,957	)
Proceeds from sale of property and equipment		36			1,163			211
Business acquisitions, net of cash acquired		(13,725	)		—			(8,420	)
Decrease in other long-term assets		801			601			4,882
Other		(376	)		(447	)		799

Net Cash Used for Investing Activities		(30,617	)		(16,682	)		(22,485	)
Financing Activities
Proceeds from revolving lines of credit and long-term borrowings		708,742			400,123			356,261
Payments on revolving lines of credit and long-term borrowings		(751,660	)		(553,436	)		(417,182	)
Proceeds from exercise of stock options		2,912			1,628			834
Payment of financing costs		(30,329	)		—			—
Payment of dividends		(1,612	)		(1,605	)		(1,599	)
Purchase of treasury stock		(5,687	)		—			—

Net Cash Used by Financing Activities		(77,634	)		(153,290	)		(61,686	)
Effect of exchange rate changes on cash		(2,995	)		4,294			(6,927	)

Increase (decrease) in cash and cash equivalents		10,961			(10,015	)		(14,684	)
Cash and cash equivalents at beginning of year		37,501			47,516			62,200

Cash and cash equivalents at end of year	$	48,462		$	37,501		$	47,516

See notes to consolidated financial statements.

FS-5

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

INVACARE CORPORATION AND SUBSIDIARIES


	Common Stock		Class B Stock			Additional Paid-in- Capital			Retained Earnings			Accumulated Other Comprehensive Earnings			Treasury Stock			Total
	(In thousands)
January 1, 2008 Balance	$	8,034	$	278		$	206,307		$	273,440		$	164,969		$	(42,877	)	$	610,151
Exercise of stock options		61					5,697									(5,011	)		747
Non-qualified stock option expense							1,961												1,961
Restricted stock awards		24					1,314									(333	)		1,005
Net earnings										34,857									34,857
Foreign currency translation adjustments													(124,361	)					(124,361	)
Unrealized loss on cash flow hedges													(387	)					(387	)
Defined benefit plans:
Amortization of prior service costs and unrecognized losses and credits													2,513						2,513
Plan amendment giving rise to prior service credit													12,455						12,455
Amounts arising during the year, primarily due to the addition of new participants													(4,287	)					(4,287	)
Marketable securities holding loss													(113	)					(113	)

Total comprehensive loss																			(79,323	)
Dividends										(1,599	)								(1,599	)

December 31, 2008 Balance	$	8,119	$	278		$	215,279		$	306,698		$	50,789		$	(48,221	)	$	532,942

Exercise of stock options		123					9,529									(8,297	)		1,355
Non-qualified stock option expense							2,713												2,713
Restricted stock awards		31					1,751									(544	)		1,238
Net earnings										41,179									41,179
Foreign currency translation adjustments													119,453						119,453
Unrealized gain on cash flow hedges													3,329						3,329
Defined benefit plans:
Amortization of prior service costs and unrecognized losses and credits													537						537
Marketable securities holding gain													96						96

Total comprehensive income																			164,594
Dividends										(1,605	)								(1,605	)

December 31, 2009 Balance	$	8,273	$	278		$	229,272		$	346,272		$	174,204		$	(57,062	)	$	701,237

Exercise of stock options		99					9,108									(6,909	)		2,298
Non-qualified stock option expense							4,113												4,113
Restricted stock awards		23					1,999									(921	)		1,101
Conversion from Class B Stock to Common Stock		6		(6	)														—
Net earnings										25,341									25,341
Foreign currency translation adjustments													(59,823	)					(59,823	)
Unrealized gain on cash flow hedges													245						245
Defined benefit plans:
Amortization of prior service costs and unrecognized losses and credits													549						549
Amounts arising during the year, primarily due to the addition of new participants													(1,860	)					(1,860	)
Marketable securities holding loss													(684	)					(684	)

Total comprehensive loss																			(36,232	)
Extinguishment of Convertible Debt							(12,807	)											(12,807	)
Dividends										(1,612	)								(1,612	)
Purchase of treasury shares																(5,687	)		(5,687	)

December 31, 2010 Balance	$	8,401	$	272		$	231,685		$	370,001		$	112,631		$	(70,579	)	$	652,411

See notes to consolidated financial statements.

FS-6

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting Policies

Nature of Operations: Invacare Corporation is the world’s leading manufacturer and distributor in the estimated $11.0 billion worldwide market for medical equipment and supplies used in the home based upon the company’s distribution channels, breadth of product line and net sales. The company designs, manufactures and distributes an extensive line of health care products for the non-acute care environment, including the home health care, retail and extended care markets.

Principles of Consolidation: The consolidated financial statements include the accounts of the company and its wholly owned subsidiaries. Certain foreign subsidiaries, represented by the European segment, are consolidated using a November 30 fiscal year end in order to meet filing deadlines. No material subsequent events have occurred related to the European segment, which would require disclosure or adjustment to the company’s financial statements. All significant intercompany transactions are eliminated.

Use of Estimates: The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from these estimates.

Inventories: Inventories are stated at the lower of cost or market with cost determined by the first-in, first-out method. Market values are based on the lower of replacement cost or estimated net realizable value. Inventories have been reduced by an allowance for excess and obsolete inventories. The estimated allowance is based on management’s review of inventories on hand compared to estimated future usage and sales.

Property and Equipment: Property and equipment are stated on the basis of cost. The company principally uses the straight-line method of depreciation for financial reporting purposes based on annual rates sufficient to amortize the cost of the assets over their estimated useful lives. Machinery and equipment as well as furniture and fixtures are generally depreciated using lives of 3 to 10 years, while buildings and improvements are depreciated using lives of 5 to 40 years. Accelerated methods of depreciation are used for federal income tax purposes. Expenditures for maintenance and repairs are charged to expense as incurred. Amortization of assets under capital leases is included in depreciation expense.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. The asset would be considered impaired when the future net undiscounted cash flows generated by the asset are less than its carrying value. An impairment loss would be recognized based on the amount by which the carrying value of the asset exceeds its fair value.

Goodwill and Other Intangibles: In accordance with Intangibles—Goodwill and Other , ASC 350, goodwill and indefinite lived intangibles are subject to annual impairment testing. For purposes of the impairment test, the fair value of each reporting unit is estimated by forecasting cash flows and discounting those cash flows using appropriate discount rates. The fair values are then compared to the carrying value of the net assets of each reporting unit. In 2010, the company recorded impairment charges, included in amortization expense, of $336,000 and $248,000 related to intangible assets for the IPG and the NA/HME segments, respectively, as the actual and future projected cash flows associated with these intangibles were less than what was originally used to value the intangibles. In 2009, the company recorded impairment charges related to intangible assets for Europe of $896,000 and NA/HME of $800,000 as the actual and future projected cash flows associated with these intangibles were less than what was originally used to value the intangibles. No impairments were recognized in 2008.

FS-7

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounting Policies—Continued

Accrued Warranty Cost: Generally, the company’s products are covered by warranties against defects in material and workmanship for various periods depending on the product from the date of sale to the customer. Certain components carry a lifetime warranty. A provision for estimated warranty cost is recorded at the time of sale based upon actual experience. The company continuously assesses the adequacy of its product warranty accrual and makes adjustments as needed. Historical analysis is primarily used to determine the company’s warranty reserves. Claims history is reviewed and provisions are adjusted as needed. However, the company does consider other events, such as a product recall, which could warrant additional warranty reserve provision. No material adjustments to warranty reserves were necessary in the current year. See Current Liabilities in the Notes to the Consolidated Financial Statements for a reconciliation of the changes in the warranty accrual.

Product Liability Cost: The company’s captive insurance company, Invatection Insurance Co., currently has a policy year that runs from September 1 to August 31 and insures annual policy losses of $10,000,000 per occurrence and $13,000,000 in the aggregate of the company’s North American product liability exposure. The company also has additional layers of external insurance coverage insuring up to $75,000,000 in annual aggregate losses arising from individual claims anywhere in the world that exceed the captive insurance company policy limits or the limits of the company’s per country foreign liability limits, as applicable. There can be no assurance that Invacare’s current insurance levels will continue to be adequate or available at affordable rates.

Product liability reserves are recorded for individual claims based upon historical experience, industry expertise and other indicators. Additional reserves, in excess of the specific individual case reserves, are provided for incurred but not reported claims based upon actuarial valuations at the time such valuations are conducted. Historical claims experience and other assumptions are taken into consideration by the company in estimating the ultimate reserves. For example, the actuarial analysis assumes that historical loss experience is an indicator of future experience, that the distribution of exposures by geographic area and nature of operations for ongoing operations is expected to be very similar to historical operations with no dramatic changes and that the government indices used to trend losses and exposures are appropriate. Estimates made are adjusted on a regular basis and can be impacted by actual loss awards and settlements on claims. While actuarial analysis is used to help determine adequate reserves, the company is responsible for the determination and recording of adequate reserves in accordance with accepted loss reserving standards and practices.

Revenue Recognition: Invacare’s revenues are recognized when products are shipped to unaffiliated customers, risk of loss is passed and title is transferred. Revenue Recognition , ASC 605, provides guidance on the application of generally accepted accounting principles to selected revenue recognition issues. Shipping and handling costs are included in cost of goods sold.

FS-8

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounting Policies—Continued

Product sales that give rise to installment receivables are recorded at the time of sale when the risks and rewards of ownership are transferred. As such, interest income is recognized based on the terms of the installment agreements. Installment accounts are monitored and if a customer defaults on payments, interest income is no longer recognized. All installment accounts are accounted for using the same methodology, regardless of duration of the installment agreements. The company has entered into an agreement with De Lage Landen, Inc. (“DLL”), a third party financing company, to provide the majority of future lease financing to Invacare customers.

Research and Development: Research and development costs are expensed as incurred and included in cost of products sold. The company’s annual expenditures for product development and engineering were approximately $25,954,000, $25,725,000 and $24,764,000 for 2010, 2009 and 2008, respectively.

Advertising: Advertising costs are expensed as incurred and included in selling, general and administrative expenses. The company has a co-op advertising program in which the company reimburses customers up to 50% of their costs of qualifying advertising expenditures. Invacare product and brand logos must appear in all advertising. Invacare requires customers to submit proof of advertising with their claims for reimbursement. The company’s cost of the program is included in SG&A expense in the consolidated statement of earnings at the time the liability is estimated. Reimbursement is made on an annual basis and within 3 months of submission and approval of the documentation. The company receives monthly reporting from those in the program of their qualified advertising dollars spent and accrues based upon information received. Advertising expenses amounted to $20,119,000, $16,519,000 and $16,224,000 for 2010, 2009 and 2008, respectively, the majority of which is incurred for advertising in the United States.

Stock-Based Compensation Plans: The company accounts for share based compensation under the provisions of the Compensation—Stock Compensation , ASC 718 . The amounts of stock-based compensation expense recognized were as follows (in thousands):


	2010		2009		2008
Stock-based compensation expense recognized as part of selling, general and administrative expense	$	6,135	$	4,495	$	3,299

The amounts above reflect compensation expense related to restricted stock awards and nonqualified stock options awarded under the 2003 Performance Plan. Stock-based compensation is not allocated to the business segments, but is reported as part of All Other as shown in the company’s Business Segment Note to the Consolidated Financial Statements.

Income Taxes: The company uses the liability method in measuring the provision for income taxes and recognizing deferred tax assets and liabilities on the balance sheet. The liability method requires that deferred income taxes reflect the tax consequences of currently enacted rates for differences between the tax and financial reporting bases of assets and liabilities. With the exception of two subsidiaries, undistributed earnings of the company’s foreign subsidiaries are considered to be indefinitely reinvested and, accordingly with the exception of the two subsidiaries, no provision for income taxes has been provided for unremitted earnings of these foreign subsidiaries. The amount of the unrecognized deferred tax liability for temporary differences related to investments in these foreign subsidiaries that are permanently reinvested is not practically determinable. The

FS-9

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounting Policies—Continued

company has established a deferred tax liability of $625,000 for the unremitted earnings of the two subsidiaries for which the company intends to remit earnings when available under local statutory laws.

Derivative Instruments: Derivatives and Hedging, ASC 815, requires companies to recognize all derivative instruments in the consolidated balance sheet as either assets or liabilities at fair value. The accounting for changes in fair value of a derivative is dependent upon whether or not the derivative has been designated and qualifies for hedge accounting treatment and the type of hedging relationship. For derivatives designated and qualifying as hedging instruments, the company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.

The company recognizes its derivative instruments as assets or liabilities in the consolidated balance sheet measured at fair value. A majority of the company’s derivative instruments are designated and qualify as cash flow hedges. Accordingly, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the fair value of the hedged item, if any, is recognized in current earnings during the period of change.

Foreign Currency Translation: The functional currency of the company’s subsidiaries outside the United States is the applicable local currency. The assets and liabilities of the company’s foreign subsidiaries are translated into U.S. dollars at year-end exchange rates. Revenues and expenses are translated at monthly average exchange rates. Gains and losses resulting from translation of balance sheet items are included in accumulated other comprehensive earnings.

Net Earnings Per Share: Basic earnings per share are computed based on the weighted-average number of Common Shares and Class B Common Shares outstanding during the year. Diluted earnings per share are computed based on the weighted-average number of Common Shares and Class B Common Shares outstanding plus the effects of dilutive stock options and awards outstanding during the year. Diluted earnings per share can potentially be impacted by the convertible notes should the conditions be met to make the notes convertible or if average market price of company stock for the period exceeds the conversion price of $24.79.

Defined Benefit Plans: The company’s benefit plans are accounted for in accordance with Compensation-Retirement Benefits , ASC 715 which requires plan sponsors to recognize the funded status of their defined benefit postretirement benefit plans in the consolidated balance sheet, measure the fair value of plan assets and benefit obligations as of the balance sheet date and to recognize changes in that funded status in the year in which the changes occur through comprehensive income.

Recent Accounting Pronouncements: On January 21, 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06 amends ASC 820 to require a number of additional disclosures regarding fair value measurements. The amended guidance requires entities to disclose additional information regarding assets and liabilities that are transferred between levels of the fair value hierarchy. Entities are also required to disclose information in the Level 3 roll forward about purchases, sales, issuances and settlements on a gross basis. In addition to these new disclosure requirements, ASU 2010-06 also amends Topic 820 to further clarify existing guidance pertaining to the level of disaggregation at which fair value disclosures should be made and the requirements to disclose information about the valuation techniques and inputs used in estimating Level II and Level III fair value measurements. The company adopted ASU 2010-06 effective January 1, 2010 and it was utilized in preparing the fair value measurement disclosures.

FS-10

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounting Policies—Continued

On July 21, 2010, the FASB issued Accounting Standards Update No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (ASU 2010-20). ASU 2010-20 requires entities to provide additional disclosures regarding credit-risk exposures, including how credit risk is analyzed and assessed, and allowances for credit losses, including reasons for changes each period. The company adopted ASU 2010-20 effective December 31, 2010 and the company’s receivable disclosures were prepared considering the additional disclosures. The adoption of ASU 2010-20 did not have any material impact on the company’s financial position, results of operations or cash flows.

Receivables

Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. Substantially all of the company’s receivables are due from health care, medical equipment providers and long term care facilities located throughout the United States, Australia, Canada, New Zealand and Europe. A significant portion of products sold to providers, both foreign and domestic, is ultimately funded through government reimbursement programs such as Medicare and Medicaid in the U.S. As a consequence, changes in these programs can have an adverse impact on dealer liquidity and profitability. The estimated allowance for uncollectible amounts ($25,327,000 in 2010 and $21,995,000 in 2009) is based primarily on management’s evaluation of the financial condition of specific customers. In addition, as a result of the third party financing arrangement with DLL, a third party financing company which the company has worked with since 2000, management monitors the collection status of these contracts in accordance with the company’s limited recourse obligations and provides amounts necessary for estimated losses in the allowance for doubtful accounts and establishing reserves for specific customers as needed. The company charges off uncollectible trade accounts receivable after such receivables are moved to collection status and legal remedies are exhausted. See Concentration of Credit Risk in the Notes to the Consolidated Financial Statements for a description of the financing arrangement. Long-term installment receivables are included in “Other Assets” on the consolidated balance sheet.

The company’s U.S. customers electing to finance their purchases can do so using DLL. In addition, Invacare often provides financing directly for its Canadian customers for which DLL is not an option, as DLL typically provides financing to Canadian customers only on a limited basis. The installment receivables recorded on the books of the company represent a single portfolio segment of finance receivables to the independent provider channel. The portfolio segment is comprised of two classes of receivables distinguished by geography and credit quality. The U.S. installment receivables are the first class and represent installment receivables re-purchased from DLL because the customers were in default. Default with DLL is defined as a customer being delinquent by three payments. The Canadian installment receivables represent the second class of installment receivables which were originally financed by Invacare because third party financing was not available to the HME providers. The Canadian installment receivables are typically financed for twelve months and historically have had a very low risk of default.

The estimated allowance for uncollectible amounts and evaluation for impairment for both classes of installment receivables is based on the company’s quarterly review of the financial condition of each individual customer with the allowance for doubtful accounts adjusted accordingly. Installments are individually and not collectively reviewed for impairment. The company assesses the bad debt reserve levels based upon the status of the customer’s adherence to a legally negotiated payment schedule and the company’s ability to enforce judgments, liens, etc.

For purposes of granting or extending credit, the company utilizes a scoring model to generate a composite score that considers each customer’s consumer credit score and or D&B credit rating, payment history, security

FS-11

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Receivables—Continued

collateral and time in business. Additional analysis is performed for customers desiring credit greater than $250,000 which includes a detailed review of the customer’s financials as well as consideration of other factors such as exposure to changing reimbursement laws.

Interest income is recognized on installment receivables based on the terms of the installment agreements. Installment accounts are monitored and if a customer defaults on payments and is moved to collection, interest income is no longer recognized. Subsequent payments received once an account is put on non-accrual status are generally first applied to the principal balance and then to the interest. Accruing of interest on collection accounts does not occur and accruing of interest would only be restarted if the account became current again. All installment accounts are accounted for using the same methodology regardless of the duration of the installment agreements. When an account is placed in collection status, the company goes through a legal process of adjudication which typically approximates 18 months. Any write-offs are made after the legal process has been completed. The company has not made any changes to either its accounting policies or methodology to estimation allowances for doubtful accounts in the last twelve months.

Installment receivables as of December 31, 2010 and 2009 consist of the following (in thousands):


	2010									2009
	Current			Long- Term			Total			Current			Long- Term			Total
Installment receivables	$	5,777		$	4,854		$	10,631		$	5,015		$	8,268		$	13,283
Less:
Unearned interest		(118	)		—			(118	)		(97	)		—			(97	)

		5,659			4,854			10,513			4,918			8,268			13,186
Allowance for doubtful accounts		(1,700	)		(3,141	)		(4,841	)		(1,353	)		(4,727	)		(6,080	)

	$	3,959		$	1,713		$	5,672		$	3,565		$	3,541		$	7,106

Installment receivable purchased from DLL during the twelve months ended December 31, 2010 increased the gross installment receivables balance by $4,799,000 during the year compared to $5,242,000 in 2009. No sales of installment receivables were made by the company during the year.

The movement in the installment receivables allowance for doubtful accounts was as follows (in thousands):


	2010
Balance as of January 1	$	6,080
Current period provision		4,022
Direct write-offs charged against the allowance		(5,261	)

Balance as of December 31	$	4,841

FS-12

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Receivables—Continued

Installment receivables by class as of December 31, 2010 consist of the following (in thousands):


	2010
	Total Installment Receivables		Unpaid Principal Balance		Related Allowance for Doubtful Accounts		Interest Income Recognized
U.S.
Impaired Installment receivables with a related allowance recorded	$	7,153	$	7,153	$	4,822	$	—
Canada
Non-Impaired Installment receivables with no related allowance recorded		3,222		3,104		—		109
Impaired Installment receivables with a related allowance recorded		256		256		19		—

Total Canadian Installment Receivables	$	3,478	$	3,360	$	19	$	109

Total
Non-Impaired Installment receivables with no related allowance recorded		3,222		3,104		—		109
Impaired Installment receivables with a related allowance recorded		7,409		7,409		4,841		—

Total Installment Receivables	$	10,631	$	10,513	$	4,841	$	109

Installment receivables with a related allowance recorded as noted in the table above represent those installment receivables on a non-accrual basis in accordance with ASU 2010-20. As of December 31, 2010, the company had no U.S. installment receivables past due of 90 days or more for which the company is still accruing interest. Individually, all U.S. installment receivables are assigned a specific allowance for doubtful accounts based on management’s review when the company does not expect to receive both the contractual principal and interest payments as specified in the loan agreement. However, while the full balance may be deemed to be impaired, the company does historically collect a large percentage of the principal of its U.S. installment receivables.

The company had Canadian installment receivables which were past due of 90 days or more totaling $7,000 for which the company is still accruing interest.

The aging of the company’s installment receivables was as follows as of December 31, 2010 (in thousands):


	Total		U.S.		Canada
Current	$	3,097	$	—	$	3,097
0-30 Days Past Due		89		—		89
31-60 Days Past Due		31		—		31
61-90 Days Past Due		5		—		5
90+ Days Past Due		7,409		7,153		256

	$	10,631	$	7,153	$	3,478

FS-13

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Inventories

Inventories as of December 31, 2010 and 2009 consist of the following (in thousands):


	2010		2009
Finished goods	$	101,243	$	99,701
Raw materials		59,921		59,451
Work in process		13,211		13,070

	$	174,375	$	172,222

Other Current Assets

Other current assets as of December 31, 2010 and 2009 consist of the following (in thousands):


	2010		2009
Value added tax receivables	$	13,829	$	14,347
Supplier receivables		5,703		5,500
Recoverable income taxes		3,708		13,195
Derivatives (forward exchange contracts)		2,884		1,907
Prepaid insurance		2,222		2,105
Prepaids and other current assets		13,235		14,718

	$	41,581	$	51,772

Property and Equipment

Property and equipment as of December 31, 2010 and 2009 consist of the following (in thousands):


	2010			2009
Machinery and equipment	$	332,687		$	329,181
Land, buildings and improvements		91,956			98,160
Furniture and fixtures		27,775			26,635
Leasehold improvements		15,705			14,744

		468,123			468,720
Less allowance for depreciation		(337,360	)		(327,087	)

	$	130,763		$	141,633

Acquisitions

In June 2010, Invacare Corporation acquired Centralized Medical Equipment LLC and the majority of the assets of Specialty Medical Equipment LLC, both Massachusetts limited liability companies, collectively referred to as Boston Rentals, which rent equipment to skilled nursing and long-term care providers, for $13,725,000, which was paid in cash. The results of the acquisitions are included in the Institutional Products Group segment since the date of acquisition.

In March 2008, Invacare Corporation acquired the assets of Naylor Medical Sales & Rentals, Inc. (Naylor), a Tennessee corporation specializing in renting product, for $2,152,000, which was paid in cash. In October 2008, Invacare Corporation purchased a billing company operating as Homecare Collection Services (HCS) for

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Acquisitions—Continued

$6,268,000. Both of these acquisitions were made to expand the company’s services business. The company’s results of operations include the results of Naylor and HCS since their respective dates of acquisition. Pursuant to the HCS purchase agreement, the company agreed to pay contingent consideration based upon earnings before interest, taxes and depreciation over the three years subsequent to the acquisition up to a maximum of $3,000,000. During 2010, the company settled the contingency for the minimum amount of $500,000.

Goodwill

The carrying amount of goodwill by operating segment is as follows (in thousands):


	North America/ HME		Invacare Supply Group		Institutional Products Group		Europe			Asia/ Pacific		Consolidated
Balance at January 1, 2009	$	9,162	$	23,073	$	17,511	$	396,632		$	28,308	$	474,686
Foreign currency translation adjustments		—		—		2,756		70,753			7,509		81,018
Purchase accounting adjustments		389		—		—		—			—		389

Balance at December 31, 2009	$	9,551	$	23,073	$	20,267	$	467,385		$	35,817	$	556,093
Foreign currency translation adjustments		—		—		1,238		(60,870	)		4,330		(55,302	)
Acquisitions		6,292		—		—		—			—		6,292

Balance at December 31, 2010	$	15,843	$	23,073	$	21,505	$	406,515		$	40,147	$	507,083

As a result of the Boston Rentals acquisition in 2010, additional goodwill of $6,292,000 was recorded, which is deductible for tax purposes. In accordance with Intangibles—Goodwill and Other , ASC 350, goodwill is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The company completes its annual impairment tests in the fourth quarter of each year. The discount rates used have a significant impact upon the discounted cash flow methodology utilized in the company’s annual impairment testing as higher discount rates decrease the fair value estimates used in the company’s testing. For purposes of Step I of the impairment test, the fair value of each reporting unit is estimated by forecasting cash flows and discounting those cash flows using appropriate discount rates. The fair values are then compared to the carrying value of the net assets of each reporting unit. Step II of the impairment test requires a more detailed assessment of the fair values associated with the net assets of a reporting unit that fails the Step I test, including a review for impairment in accordance with Property, Plant and Equipment, ASC 360.

The company also utilizes an EV (Enterprise Value) to EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) Method to compute the fair value of its reporting units which considers potential acquirers and their EV to EBITDA multiples adjusted by an estimated premium. While more weight is given to the discounted cash flow method, the EV to EBITDA Method does provide corroborative evidence of the reasonableness of the discounted cash flow method results.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Goodwill—Continued

Other Intangibles

All of the company’s other intangible assets have been assigned definite lives and continue to be amortized over their useful lives, except for $31,246,000 related to trademarks, which have indefinite lives. The changes in intangible balances reflected on the balance sheet from December 31, 2009 to December 31, 2010 were the result of foreign currency translation and amortization except for intangible write-downs, noted below, which totaled $584,000 and the addition of a customer list intangible of $2,430,000, which was assigned a five-year life, as a result of the Boston Rentals acquisition. The company’s intangibles consist of the following (in thousands):


	December 31, 2010				December 31, 2009
	Historical Cost		Accumulated Amortization		Historical Cost		Accumulated Amortization
Customer Lists	$	72,998	$	40,071	$	78,780	$	36,359
Trademarks		31,246		—		34,953		—
License agreements		3,183		2,958		4,326		4,051
Developed Technology		8,521		3,988		7,409		2,434
Patents		7,518		5,863		7,020		5,246
Other		6,092		5,767		5,905		4,998

	$	129,558	$	58,647	$	138,393	$	53,088

Amortization expense related to other intangibles was $8,451,000, $8,671,000 and $9,634,000 for 2010, 2009 and 2008, respectively. Estimated amortization expense for each of the next five years is expected to be $8,659,000 for 2011, $7,837,000 in 2012, $6,970,000 in 2013, $6,704,000 in 2014 and $5,615,000 in 2015. Amortized intangibles are being amortized on a straight-line basis for periods from 3 to 20 years with the majority of the intangibles being amortized over a life of between 10 and 13 years.

In accordance with ASC 350, Intangibles—Goodwill and Other , the company reviews intangibles for impairment. For purposes of the impairment test, the fair value of each indefinite lived intangible is estimated by forecasting cash flows and discounting those cash flows using appropriate discount rates. The fair values are then compared to the carrying value of the intangible. For amortized intangibles, the forecasted undiscounted cash flows were compared to the carrying value, and if impairment results, the impairment is measured based on the estimated fair value of the intangibles. In 2010, the company recorded impairment charges of $336,000 and $248,000 related to certain intangible assets in the IPG and the NA/HME segments, respectively, as the actual and remaining forecasted cash flows associated with these intangibles were less than what was originally used to value the intangibles. As a result of the company’s 2009 intangible impairment review, impairment charges of $896,000 and $800,000 were recorded related to trademarks for Europe and a customer list for NA/HME, respectively, as the actual and remaining forecasted cash flows associated with these intangibles were less than the cash flows originally used to value the intangibles.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Current Liabilities

Accrued expenses as of December 31, 2010 and 2009 consisted of accruals for the following (in thousands):


	2010		2009
Salaries and wages	$	46,658	$	45,252
Taxes other than income taxes, primarily Value Added Taxes		19,981		19,390
Warranty cost		18,252		21,506
Freight		11,189		13,058
Professional		7,333		5,888
Product liability, current portion		4,134		4,232
Rebates		3,320		3,488
Insurance		2,393		2,270
Interest		2,273		9,822
Derivative liability (foreign forward exchange contracts)		1,929		2,173
Severance		524		1,507
Other items, principally trade accruals		12,093		13,707

	$	130,079	$	142,293

Accrued rebates relate to several volume incentive programs the company offers its customers. The company accounts for these rebates as a reduction of revenue when the products are sold in accordance with the guidance in ASC 605-50, C ustomer Payments and Incentives .

Changes in accrued warranty costs were as follows (in thousands):


	2010			2009
Balance as of January 1	$	21,506		$	16,798
Warranties provided during the period		5,996			12,186
Settlements made during the period		(9,681	)		(9,404	)
Changes in liability for pre-existing warranties during the period, including expirations		431			1,926

Balance as of December 31	$	18,252		$	21,506

Long-Term Debt

Debt as of December 31, 2010 and 2009 consisted of the following (in thousands):


	2010			2009
$400,000,000 senior secured revolving credit facility, due in October 2015	$	184,932		$	—
Revolving credit agreements, due in February 2012		—			1,725
Convertible senior subordinated debentures at 4.125%, due in February 2027		52,064			86,728
Senior notes at 9.75%, due in February 2015		—			173,490
Other notes and lease obligations		9,068			11,382

		246,064			273,325
Less current maturities of long-term debt		(7,974	)		(1,091	)

	$	238,090		$	272,234

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Long-Term Debt—Continued

On October 28, 2010, the company entered into a new credit agreement (the “New Credit Agreement”) which provides for a $400,000,000 senior secured revolving credit facility maturing in October 2015. Pursuant to the terms of the New Credit Agreement, the company may from time to time borrow, repay and re-borrow up to an aggregate outstanding at any one time of $400,000,000 under the new senior secured revolving credit facility, subject to customary conditions. The New Credit Agreement also provides for the issuance of swing line loans and letters of credit.

Borrowings under the new senior secured revolving credit facility bear interest, at the company’s election, at (i) the London Inter-Bank Offer Rate (“LIBOR”) plus a margin; or (ii) a Base Rate Option plus a margin. The applicable margin is based on the company’s leverage ratio and at the time of entry into the New Credit Agreement, the applicable margin was 2.50% per annum for LIBOR loans and 1.50% for the Base Rate Option loans. In addition to interest, the company is required to pay commitment fees on the unused portion of the senior secured revolving credit facility. The commitment fee rate is initially 0.40% per annum and, like the interest rate spreads, is subject to adjustment thereafter based on the company’s leverage ratio. The obligations of the borrowers under the New Credit Agreement are secured by substantially all of the company’s U.S. assets and are guaranteed by substantially all of the company’s material domestic and foreign subsidiaries.

The New Credit Agreement required the company to redeem, purchase or repurchase no less than $100 million in principal amount of the 9.75% Senior Notes due 2015 (the “Senior Notes”) and/or the company’s 4.25% Convertible Senior Subordinated Debentures due 2027 (the “Convertible Notes”) by February 28, 2011. This was completed by December 31, 2010. After February 28, 2011, the company may redeem, purchase or repurchase the Convertible Notes so long as no event of default is then occurring or would be caused thereby and the company’s leverage ratio after such redemption, purchase or repurchase is not more than 3.00 to 1. The New Credit Agreement provides for customary events of default with corresponding grace periods, including, among other things, failure to pay any principal or interest when due, failure to perform or observe covenants, bankruptcy or insolvency events and change of control.

On February 12, 2007, the company entered into a $400,000,000 senior secured credit facility (“revolving credit agreement”) consisting of a $250,000,000 term loan facility and a $150,000,000 revolving credit facility. The company’s obligations under the revolving credit facility were secured by substantially all of the company’s assets and were guaranteed by its material domestic subsidiaries, with certain obligations also guaranteed by its material foreign subsidiaries. Borrowings under the revolving credit facility were at LIBOR plus a margin of 1.25%, including a facility fee of 0.25% per annum on the facility. During 2009, the company fully repaid its $250,000,000 term loan facility which was not due to expire until February 2013. As a result, $2,878,000 of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Long-Term Debt—Continued

deferred financing fees, which were previously capitalized, were expensed in the All Other operating segment in 2009. As part of the refinancing done on October 28, 2010, the outstanding amount owed on the existing revolving credit agreement entered into in 2007 was repaid, and as a result, $1,228,000 of deferred financing fees, which were previously capitalized, were expensed in the All Other segment.

In February 2007, the company issued $175,000,000 principal amount of 9.75% Senior Notes due 2015. The notes were unsecured senior obligations of the company guaranteed by substantially all of the company’s domestic subsidiaries, and paid interest at 9.75% per annum on each February 15 and August 15. During 2010, the company retired all of its outstanding Senior Notes at a premium above par and recognized a loss of $18,671,000, including $3,764,000 of deferred financing fees, which were previously capitalized.

Also, in 2007, the company issued $135,000,000 principal amount of Convertible Senior Subordinated Debentures due 2027. The debentures are unsecured senior subordinated obligations of the company guaranteed by substantially all of the company’s domestic subsidiaries, pay interest at 4.125% per annum on each February 1 and August 1, and are convertible upon satisfaction of certain conditions into cash, common shares of the company, or a combination of cash and common shares of the company, subject to certain conditions, and at the company’s discretion. The debentures allow the company to satisfy the conversion using any combination of cash or stock. The company intends to satisfy the accreted value of the debentures using cash. Assuming adequate cash on hand at the time of conversion, the company also intends to satisfy the conversion spread using cash, as opposed to stock. As of December 31, 2010, the if-converted value of the company’s Convertible Notes exceeded the principal amount of those notes by $16,721,000. During 2010, the company retired $57,799,000 in principal amount of Convertible Notes at a premium above par. In accordance with ASC 470-20, Convertible Debt, the company utilized the inducement method of accounting to calculate the loss associated with the early retirement of the convertible debt. For the year ended December 31, 2010, the company recorded expense of $20,265,000 related to the loss on the debt extinguishment including the write-off of $1,502,000 of deferred financing fees, which were previously capitalized.

The company includes the dilutive effect of shares necessary to settle the conversion spread in the Net Earnings per Share—Assuming Dilution calculation unless such amounts are anti-dilutive. The initial conversion rate is 40.3323 shares per $1,000 principal amount of debentures, which represents an initial conversion price of approximately $24.79 per share. Holders of the debentures can convert the debt to common stock if the company’s common stock price is at a level in excess of $32.23, a 30% premium to the initial conversion price for at least 20 trading days during a period of 30 consecutive trading days preceding the date on which the notice of conversion is given. At a conversion price of $32.23 (30% premium over $24.79), the full conversion of the convertible debt equates to 3,114,000 shares. The debentures are redeemable at the company’s option, subject to specified conditions, on or after February 6, 2012 through and including February 1, 2017. The company may redeem some or all of the debentures for cash on or after February 1, 2017. Holders have the right to require the company to repurchase all or some of their debentures upon the occurrence of certain circumstances on February 1, 2017 and 2022. The company evaluated the terms of the call, redemption and conversion features under the applicable accounting literature, including Derivatives and Hedging, ASC 815, and determined that the features did not require separate accounting as derivatives. The notes, debentures and common shares issuable upon conversion of the debentures have been registered under the Securities Act.

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INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Long-Term Debt—Continued

The components of the company’s convertible debt as of December 31, 2010 and 2009 consist of the following (in thousands):


	2010			2009
Carrying amount of equity component	$	46,205		$	59,012

Principal amount of liability component	$	77,201		$	135,000
Unamortized discount		(25,137	)		(48,272	)

Net carrying amount of liability component	$	52,064		$	86,728

The unamortized discount of $25,137,000 is to be amortized through February 2017. The effective interest rate on the liability component was 11.5% for 2007 through 2010. Non-cash interest expense of $3,198,000, $4,142,000 and $3,694,000 was recognized in 2010, 2009 and 2008, respectively, in comparison to actual interest expense paid of $4,178,000, $5,569,000 and $5,569,000 based on the stated coupon rate of 4.125%, for each of the same periods. The convertible debt was not convertible as of December 31, 2010 nor was the convertible debt conversion price threshold of $32.23, as noted above, met.

Included in the $400,000,000 senior secured revolving credit facility, there was $12,982,000 of borrowings denominated in foreign currencies as of December 31, 2010 while there were none as of December 31, 2009. For 2010 and 2009, the weighted average interest rate on borrowings was 6.06% and 6.67%, respectively.

In July 2009, cash flow hedges entered into in July 2007 that exchanged the LIBOR variable rate on $125,000,000 of term loan debt for a fixed rate of 5.0525% expired. As of December 31, 2010, the company was not a party to any interest rate swap agreements.

The aggregate minimum maturities of long-term debt for each of the next five years are as follows: $7,974,000 in 2011, $947,000 in 2012, $918,000 in 2013, $972,000 in 2014, and $179,025,000 in 2015. Interest paid on borrowings was $28,341,000, $33,188,000 and $40,547,000 in 2010, 2009 and 2008, respectively.

Other Long-Term Obligations

Other long-term obligations as of December 31, 2010 and 2009 consist of the following (in thousands):


	2010		2009
Supplemental Executive Retirement Plan liability	$	26,133	$	25,677
Product liability		20,026		19,757
Deferred income taxes		32,559		30,276
Deferred compensation		8,542		7,253
Other		12,331		12,740

Total long-term obligations	$	99,591	$	95,703

Leases and Commitments

The company leases a portion of its facilities, transportation equipment, data processing equipment and certain other equipment. These leases have terms from 1 to 14 years and provide for renewal options. Generally, the company is required to pay taxes and normal expenses of operating the facilities and equipment. As of

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INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Leases and Commitments—Continued

December 31, 2010, the company is committed under non-cancelable operating leases, which have initial or remaining terms in excess of one year and expire on various dates through 2024. Lease expenses were approximately $23,094,000 in 2010, $23,966,000 in 2009, and $23,363,000 in 2008.

The amount of buildings and equipment capitalized in connection with capital leases was $14,197,000 and $17,637,000 at December 31, 2010 and 2009, respectively. At December 31, 2010 and 2009, accumulated amortization was $5,201,000 and $6,295,000, respectively, which is included in depreciation expense.

Future minimum operating and capital lease commitments, as of December 31, 2010, are as follows (in thousands):


Year	Capital Leases			Operating Leases
2011	$	1,575		$	19,374
2012		1,467			12,695
2013		1,383			8,738
2014		1,363			5,906
2015		1,364			3,451
Thereafter		4,938			7,586

Total future minimum lease payments		12,090		$	57,750

Amounts representing interest		(3,086	)

Present value of minimum lease payments	$	9,004

Retirement and Benefit Plans

Substantially all full-time salaried and hourly domestic employees are included in the Invacare Retirement Savings Plan sponsored by the company. The company makes matching cash contributions up to 66.7% of employees’ contributions up to 3% of compensation, quarterly contributions equal to 4% of qualified wages and may make discretionary contributions to the domestic plans based on an annual resolution of the Board of Directors. Contribution expense for the Invacare Retirement Savings Plan in 2010, 2009 and 2008 was $7,153,000, $6,681,000, and $6,140,000, respectively.

The company sponsors a Deferred Compensation Plus Plan covering certain employees, which provides for elective deferrals and the company retirement deferrals so that the total retirement deferrals equal amounts that would have contributed to the company’s principal retirement plans if it were not for limitations imposed by income tax regulations.

The company also sponsors a non-qualified defined benefit Supplemental Executive Retirement Plan (SERP) for certain key executives. Effective December 31, 2008, the SERP was amended, in part to comply with IRS Section 409A. As a result of the amendment, the plan became a defined benefit cash balance plan for the non-retired participants and thus, future payments by the company will be made based upon a cash balance formula with interest credited at a rate determined annually by the Compensation Committee of the Board of Directors, currently 6%. The plan continues to be unfunded with individual hypothetical accounts maintained for each participant. Future company expense will be equal to the hypothetical contributions made for each participant plus the crediting of interest.

The projected benefit obligation related to this unfunded plan was $26,524,000 and $26,068,000 at December 31, 2010 and 2009, respectively, and the accumulated benefit obligation was $26,524,000 and

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INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Retirement and Benefit Plans—Continued

$25,941,000 at December 31, 2010 and 2009, respectively. The projected benefit obligations were calculated using an assumed future salary increase of 4% at both December 31, 2010 and 2009. The assumed discount rate, relevant for three participants unaffected by plan conversion as explained below, for both 2010 and 2009 was 6% based upon the discount rate on high-quality fixed-income investments without adjustment. The retirement age was 65 for both 2010 and 2009. Expense for the plan in 2010, 2009 and 2008 was $2,176,000, $2,128,000, and $2,391,000, respectively of which $1,535,000, $1,454,000, and $1,294,000 was related to interest cost with the remaining portion related to service costs, prior service costs and other gains/losses. Benefit payments in 2010, 2009 and 2008 were $1,592,000, $517,000 and $424,000, respectively. In 2010, benefit payments included a lump sum distribution to a plan participant.

In 2005, the company began sponsoring a Death Benefit Only Plan for certain key executives that provides a benefit equal to three times the participant’s final target earnings should the participant’s death occur while an employee and a benefit equal to one times the participant’s final earnings upon the participant’s death after normal retirement or post-employment. Expense for the plan in 2010, 2009 and 2008 was $399,000, $190,000, and $121,000, respectively of which $235,000, $131,000, and $72,000 was related to service cost and accrual adjustments with the remaining portion related to interest costs. There were no benefit payments in 2010, 2009 or 2008.

In Switzerland, the company also maintains a statutory pension plan with a private insurance company and, in accordance with Swiss law, the plan functions as a defined contribution plan whereby employee and employer contributions are defined as a percentage of individual salary depending on the age of the employee and a guaranteed interest rate, which is annually defined by the Swiss Pension Fund. Under U.S. GAAP, the plan is treated as a defined benefit plan. Expense for the plan was $23,000 and $498,000 in 2010 and 2009, respectively.

Accumulated other comprehensive income associated with the SERP, Swiss pension plan and Death Benefit Only Plan (Defined Benefit Plans) was $2,332,000 and $1,021,000 as of December 31, 2010 and 2009, respectively for a net change of $1,331,000 with $2,598,000 in net periodic benefit costs recognized during the year.

In conjunction with these non-qualified U.S. defined benefit plans, the company has invested in life insurance policies related to certain employees to help satisfy these future obligations. The current cash surrender value of these policies approximates the current benefit obligations.

Shareholders’ Equity Transactions

The company’s Common Shares have a $.25 stated value. The Common Shares and the Class B Common Shares generally have identical rights, terms and conditions and vote together as a single class on most issues, except that the Class B Common Shares have ten votes per share, carry a 10% lower cash dividend rate and, in general, can only be transferred to family members. Holders of Class B Common Shares are entitled to convert their shares into Common Shares at any time on a share-for-share basis.

The 2003 Performance Plan, as amended (the “2003 Plan”), allows the Compensation and Management Development Committee of the Board of Directors (the “Committee”) to grant up to 6,800,000 Common Shares in connection with incentive stock options, non-qualified stock options, stock appreciation rights and stock awards (including the use of restricted stock), which includes the addition of 3,000,000 Common Shares authorized for issuance under the 2003 Plan, as approved by the company’s shareholders on May 21, 2009. The maximum aggregate number of Common Shares that may be granted during the term of the 2003 Plan pursuant to all awards, other than stock options, is 1,300,000 Common Shares. The Committee has the authority to

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INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Shareholders’ Equity Transactions—Continued

determine which participants will receive awards, the amount of the awards and the other terms and conditions of the awards. During 2010, 2009 and 2008, the Committee granted 646,797, 754,581 and 701,594 non-qualified stock options, respectively, each having a term of ten years and generally granted at the fair market value of the company’s Common Shares on the date of grant under the 2003 Plan. There were no stock appreciation rights outstanding at December 31, 2010, 2009 or 2008.

Restricted stock awards for 92,900, 125,840, and 96,800 shares were granted in years 2010, 2009 and 2008 without cost to the recipients. The 2010 weighted average fair value of the 2010 restricted stock awards was $25.26. The restricted stock awards vest ratably over the four years after the award date. There were 91,491 restricted stock awards with a weighted average fair value of $23.32 that vested in 2010 and 17,325 restricted stock awards with a weighted average fair value of $24.23 that were forfeited in 2010.

At December 31, 2010 and 2009, there were 243,770 and 247,961 shares, respectively, for restricted stock awards that were unvested. Unearned restricted stock compensation of $5,190,000 in 2010, $4,866,000 in 2009 and $4,505,000 in 2008, determined as the market value of the shares at the date of grant, is being amortized on a straight-line basis over the vesting period. Compensation expense of $2,023,000, $1,783,000 and $1,338,000 was recognized in 2010, 2009 and 2008, respectively, related to restricted stock awards granted since 2004.

The 2003 Plan and the 1994 Performance Plan have provisions that allow employees to exchange mature shares to pay the exercise price and surrender shares for the options or restricted awards to cover the minimum tax withholding obligation. Under these provisions, the company acquired approximately 280,000 treasury shares for $7,830,000 in 2010, 410,000 shares for $8,841,000 in 2009 and 224,000 shares for $5,344,000 in 2008.

The following table summarizes information about stock option activity for the three years ended December 31, 2010, 2009 and 2008:


	2010			Weighted Average Exercise Price		2009			Weighted Average Exercise Price		2008			Weighted Average Exercise Price
Options outstanding at January 1		4,619,528		$	29.28		4,910,547		$	29.37		4,732,965		$	30.02
Granted		646,797			25.22		754,581			20.38		701,594			24.82
Exercised		(399,144	)		23.08		(490,325	)		19.68		(243,982	)		23.60
Canceled		(382,986	)		25.07		(555,275	)		26.27		(280,030	)		33.89

Options outstanding at December 31		4,484,195		$	29.60		4,619,528		$	29.28		4,910,547		$	29.37

Options exercise price range at December 31	$	10.70 to				$	10.70 to				$	10.70 to
	$	47.80				$	47.80				$	47.80
Options exercisable at December 31		2,941,772					3,099,092					3,654,689
Options available for grant at December 31*		2,478,905					3,132,623					746,320

*	Options available for grant as of December 31, 2010 reduced by net restricted stock award activity of 487,578.

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INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Shareholders’ Equity Transactions—Continued

The following table summarizes information about stock options outstanding at December 31, 2010:


	Options Outstanding						Options Exercisable
Exercise Prices	Number Outstanding At 12/31/10		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable At 12/31/10		Weighted Average Exercise Price
$ 10.70 – $15.00		20,175		1.8 years	$	10.85		19,425	$	10.70
$ 15.01 – $25.00		1,446,742		7.4	$	21.66		784,436	$	22.30
$ 25.01 – $35.00		1,636,332		6.5	$	27.50		756,965	$	29.88
$ 35.01 – $47.80		1,380,946		3.3	$	40.67		1,380,946	$	40.67

Total		4,484,195		5.8	$	29.60		2,941,772	$	32.80

The plans provide that shares granted come from the company’s authorized but unissued Common Shares or treasury shares. In addition, the company’s stock-based compensation plans allow participants to exchange mature shares for the exercise price and surrender shares for minimum withholding taxes, which results in the company acquiring treasury shares. Pursuant to the plans, the Committee has established that the majority of the 2010 grants may not be exercised within one year from the date granted and options must be exercised within ten years from the date granted. Accordingly, for the stock options issued in 2010, 2009 and 2008, 25% of such options vested in the year following issuance. The stock options awarded during such years provided a four-year vesting period whereby options vest equally in each year. The 2010, 2009 and 2008 expense has been adjusted for estimated forfeitures of awards that will not vest because service or employment requirements have not been met.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:


	2010			2009			2008
Expected dividend yield		.21	%		.21	%		.21	%
Expected stock price volatility		39.6	%		39.9	%		31.5	%
Risk-free interest rate		1.57	%		1.81	%		2.65	%
Expected life in years		3.9			3.7			3.7
Forfeiture percentage		10.5	%		12.7	%		5.7	%

Expected stock price volatility is calculated at each date of grant based on historical stock prices for a period of time commensurate with the expected life of the option. The weighted-average fair value of options granted during 2010, 2009 and 2008 was $7.83, $6.84 and $6.91, respectively. The weighted-average remaining contractual life of options outstanding at December 31, 2010, 2009 and 2008 was 5.8, 5.5 and 5.0 years, respectively. The weighted-average contractual life of options exercisable at December 31, 2010 was 4.3 years. The total intrinsic value of stock awards exercised in 2010, 2009 and 2008 was $1,928,000, $962,000 and $263,000, respectively. As of December 31, 2010, the intrinsic value of all options outstanding and of all options exercisable was $18,136,000 and $7,864,000, respectively.

The exercise of stock awards in 2010, 2009 and 2008 resulted in cash received by the company totaling $2,912,000, $1,628,000 and $834,000 for each period, respectively with no tax benefits for any period. The total fair value of awards vested during 2010, 2009 and 2008 was $5,261,000, $1,716,000 and $1,771,000, respectively.

As of December 31, 2010, there was $15,539,000 of total unrecognized compensation cost from stock-based compensation arrangements granted under the plans, which is related to non-vested options and shares, which

FS-24

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Shareholders’ Equity Transactions—Continued

includes $5,190,000 related to restricted stock awards. The company expects the compensation expense to be recognized over a weighted-average period of approximately two years. Prior to the adoption of ASC 718, Compensation—Stock Compensation , the company presented all tax benefit deductions resulting from the exercise of stock options as a component of operating cash flows in the Consolidated Statement of Cash Flows. In accordance with ASC 718, any tax benefits resulting from tax deductions in excess of the compensation expense recognized for those options is classified as a component of financing cash flows.

Effective July 8, 2005, the company adopted a new Rights Agreement to replace the company’s previous shareholder rights plan, which expired on July 7, 2005. In order to implement the new Rights Agreement, the Board of Directors declared a dividend of one Right for each outstanding share of the company’s Common Shares and Class B Common Shares to shareholders of record at the close of business on July 19, 2005. Each Right entitles the registered holder to purchase from the company one one-thousandth of a Series A Participating Serial Preferred Share, without par value, at a Purchase Price of $180.00 in cash, subject to adjustment. The Rights will not become exercisable until after a person (an “Acquiring Party”) has acquired, or obtained the right to acquire, or commences a tender offer to acquire, shares representing 30% or more of the company’s outstanding voting power, subject to deferral by the Board of Directors. After the Rights become exercisable, under certain circumstances, the Rights may be exercisable to purchase Common Shares of the company, or common shares of an acquiring company, at a price equal to the exercise price of the Right divided by 50% of the then current market price per Common Share or acquiring company common share, as the case may be. The Rights will expire on July 18, 2015 unless previously redeemed or exchanged by the company. The company may redeem and terminate the Rights in whole, but not in part, at a price of $0.001 per Right at any time prior to 10 days following a public announcement that an Acquiring Party has acquired beneficial ownership of shares representing 30% or more of the company’s outstanding voting power, and in certain other circumstances described in the Rights Agreement.

Capital Stock

Capital stock activity for 2010, 2009 and 2008 consisted of the following (in thousands of shares):


	Common Stock Shares		Class B Shares			Treasury Shares
January 1, 2008 Balance		32,126		1,112			(1,200	)
Conversion of Class B to Common		1		(1	)		—
Exercise of stock options		242		—			(204	)
Restricted stock awards		80		—			(20	)

December 31, 2008 Balance		32,449		1,111			(1,424	)
Exercise of stock options		490		—			(386	)
Restricted stock awards		109		—			(24	)

December 31, 2009 Balance		33,048		1,111			(1,834	)
Exercise of stock options		399		—			(247	)
Restricted stock awards		87		—			(33	)
Purchase of shares for treasury		—		—			(205	)
Conversion of Class B to Common		25		(25	)		—

December 31, 2010 Balance		33,559		1,086			(2,319	)

Stock awards for 5,600 and 17,325 shares were cancelled in 2010 and 2009. There were no stock award cancellations in 2008.

FS-25

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other Comprehensive Earnings

The components of accumulated other comprehensive earnings are as follows (in thousands):


	Currency Translation Adjustments			Unrealized Gain (Loss) on Available- for-Sale Securities			Defined Benefit Plans			Unrealized Gain (Loss) on Derivative Financial Instruments			Total
Balance at January 1, 2008	$	179,053		$	701		$	(12,239	)	$	(2,546	)	$	164,969
Foreign currency translation adjustments		(124,361	)											(124,361	)
Unrealized loss on available for sale securities					(113	)								(113	)
Deferred tax asset relating to unrealized gain on available for sale securities					40									40
Valuation reserve reduction relating to unrealized loss on available for sale securities					(40	)								(40	)
Amortization of prior service costs and unrecognized losses								2,513						2,513
Plan amendment giving rise to prior service credit								12,455						12,455
Amounts arising during the year, primarily due to the addition of new participants								(4,287	)					(4,287	)
Deferred tax expense resulting from amortization of prior service costs and unrecognized losses, prior service credit and other amounts arising during the year								(3,738	)					(3,738	)
Valuation reserve reduction resulting from amortization of prior service costs and unrecognized losses, prior service credit and other amounts arising during the year								3,738						3,738
Current period unrealized loss on cash flow hedges, net of reclassifications											(470	)		(470	)
Deferred tax benefits relating to unrealized loss on derivative financial instruments											83			83

Balance at December 31, 2008	$	54,692		$	588		$	(1,558	)	$	(2,933	)	$	50,789
Foreign currency translation adjustments		119,453												119,453
Unrealized gain on available for sale securities					96									96
Deferred tax liability relating to unrealized loss on available for sale securities					(34	)								(34	)
Valuation reserve reduction relating to unrealized loss on available for sale securities					34									34
Defined Benefit Plans:
Amortization of prior service costs and unrecognized losses								537						537
Deferred tax expense resulting from amortization of prior service costs and unrecognized losses, prior service credit and other amounts arising during the year								(188	)					(188	)
Valuation reserve reduction resulting from amortization of prior service costs and unrecognized losses, prior service credit and other amounts arising during the year								188						188
Current period unrealized gain on cash flow hedges, net of reclassifications											3,360			3,360
Deferred tax loss relating to unrealized loss on derivative financial instruments											(31	)		(31	)

Balance at December 31, 2009	$	174,145		$	684		$	(1,021	)	$	396		$	174,204
Foreign currency translation adjustments		(59,823	)											(59,823	)
Unrealized loss on available for sale securities					(684	)								(684	)
Deferred tax liability relating to unrealized gain on available for sale securities					239									239
Valuation reserve reduction relating to unrealized gain on available for sale securities					(239	)								(239	)
Defined Benefit Plans:
Amortization of prior service costs and unrecognized losses								549						549
Amounts arising during the year, primarily due to the addition of new participants								(1,860	)					(1,860	)
Deferred tax adjustment resulting from Defined benefit plan amortization of prior service costs and unrecognized losses								459						459
Valuation reserve increase resulting from amortization of prior service costs, unrecognized losses and other adjustments related to Defined benefit plans								(459	)					(459	)
Current period unrealized gain on cash flow hedges, net of reclassifications											273			273
Deferred tax loss relating to unrealized gain on derivative financial instruments											(28	)		(28	)

Balance at December 31, 2010	$	114,322		$	—		$	(2,332	)	$	641		$	112,631

FS-26

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other Comprehensive Earnings—Continued

A $2,803,000 net gain in 2010 and net losses of $3,158,000 in 2009 and $26,000 in 2008 were reclassified into earnings related to derivative instruments designated and qualifying as cash flow hedges.

Charges Related to Restructuring Activities

On July 28, 2005, the company announced multi-year cost reductions and profit improvement actions, which included: reducing global headcount, outsourcing improvements utilizing the company’s China manufacturing capability and third parties, shifting substantial resources from product development to manufacturing cost reduction activities and product rationalization, reducing freight exposure through freight auctions and changing the freight policy, general expense reductions and exiting four facilities. The restructuring was necessitated by the continued decline in reimbursement by the U.S. government as well as similar reimbursement pressures abroad and continued pricing pressures faced by the company as a result of outsourcing by competitors to lower cost locations.

The company’s previous restructuring activities concluded in the fourth quarter of 2009 thus no additional charges were incurred in 2010. The company did record restructuring charges of $4,804,000, $4,766,000, $11,408,000 and $21,250,000 in 2009, 2008, 2007 and 2006, respectively, of which $298,000, $1,817,000, $1,817,000, and $3,973,000, respectively is recorded in cost of products sold as it relates to inventory markdowns. There have been no material changes in accrued balances related to the charge, either as a result of revisions in the plan or changes in estimates. A progression by reporting segment of the accruals recorded as a result of the restructuring is as follows (in thousands):


	Severance			Product Line Discontinuance			Contract Terminations			Other			Total
December 31, 2009 Balance
NA/HME		46			1			23			—			70
IPG		5			—			—			—			5
Europe		816			—			—			343			1,159
Asia/Pacific		42			—			—			—			42

Total	$	909		$	1		$	23		$	343		$	1,276

Payments
NA/HME		(46	)		(1	)		(23	)		—			(70	)
IPG		(5	)		—			—			—			(5	)
Europe		(816	)		—			—			(343	)		(1,159	)
Asia/Pacific		(42	)		—			—			—			(42	)

Total	$	(909	)	$	(1	)	$	(23	)	$	(343	)	$	(1,276	)

December 31, 2010 Balance
NA/HME		—			—			—			—			—
ISG		—			—			—			—			—
Europe		—			—			—			—			—
Asia/Pacific		—			—			—			—			—

Total	$	—		$	—		$	—		$	—		$	—

FS-27

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Income Taxes

Earnings (loss) before income taxes consist of the following (in thousands):


	2010			2009			2008
Domestic	$	(16,115	)	$	(797	)	$	(10,138	)
Foreign		54,156			48,076			57,945

	$	38,041		$	47,279		$	47,807

The company has provided for income taxes (benefits) as follows (in thousands):


	2010			2009			2008
Current:
Federal	$	4,749		$	(8,310	)	$	560
State		689			1,775			(600	)
Foreign		9,729			10,850			11,570

		15,167			4,315			11,530
Deferred:
Federal		(1,696	)		—			190
Foreign		(771	)		1,785			1,230

		(2,467	)		1,785			1,420

Income Taxes	$	12,700		$	6,100		$	12,950

Included in the 2009 Federal current tax benefit is a benefit of $7,750,000 resulting from the carryback of the 2008 Federal domestic net operating loss as a result of the Worker, Homeownership and Business Assistance Act of 2009, which became effective in November of 2009. The deferred tax asset previously recorded by the company, related to the loss carryforward, was fully offset by a tax valuation allowance.

A reconciliation to the effective income tax rate from the federal statutory rate is as follows:


	2010			2009			2008
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal income tax benefit		1.2			2.4			(0.8	)
Tax credits		(41.1	)		(146.4	)		(3.0	)
Foreign taxes at less than the federal statutory rate excluding valuation allowances		(24.4	)		(12.2	)		(15.9	)
Federal and foreign valuation allowance		4.6			13.3			9.3
Non-deductible extinguishment and debt finance costs		8.5			—			—
Withholding taxes		(0.4	)		2.4			1.6
Compensation		(0.3	)		0.6			0.7
Dividends		54.8			129.3			4.0
Life insurance		(1.1	)		(1.0	)		2.3
Foreign branch activity		(3.4	)		(5.2	)		(7.3	)
Uncertain tax positions		(1.7	)		(2.5	)		(0.4	)
Other, net		1.7			(2.8	)		1.6

		33.4	%		12.9	%		27.1	%

FS-28

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Income Taxes—Continued

At December 31, 2010, total deferred tax assets were $108,850,000, total deferred tax liabilities were $53,650,000 and the tax valuation allowance total was $81,981,000 for a net deferred income tax liability of $26,781,000 compared to total deferred tax assets of $96,495,000, total deferred tax liabilities of $61,331,000 and a tax valuation allowance total of $65,050,000 for a net deferred income tax liability of $29,886,000 at December 31, 2009. Significant components of deferred income tax assets and liabilities at December 31, 2010 and 2009 are as follows (in thousands):


	2010			2009
Current deferred income tax assets (liabilities), net:
Loss carryforwards	$	5,853		$	907
Bad debt		9,398			8,657
Warranty		4,338			5,167
State and local taxes		2,699			2,628
Other accrued expenses and reserves		5,535			1,932
Inventory		2,742			3,984
Compensation and benefits		1,182			2,089
Product liability		292			292
Valuation allowance		(21,657	)		(23,229	)
Other, net		(4,604	)		(2,037	)

	$	5,778		$	390

Long-term deferred income tax assets (liabilities), net:
Goodwill & intangibles		(24,478	)		(27,176	)
Convertible debt		(8,798	)		(16,895	)
Fixed assets		(15,770	)		(15,223	)
Compensation and benefits		13,416			12,300
Loss and credit carryforwards		45,519			44,116
Product liability		4,428			4,203
State and local taxes		9,480			6,559
Valuation allowance		(60,324	)		(41,821	)
Other, net		3,968			3,661

	$	(32,559	)	$	(30,276	)

Net Deferred Income Taxes	$	(26,781	)	$	(29,886	)

The company recorded a valuation allowance for its domestic net deferred tax assets due to a domestic loss recognized in each year from 2006 through 2009 and based upon near term domestic projections. For 2010 the company estimates a domestic current tax return liability of approximately $3,200,000 and has recorded a deferred tax asset equal to this amount. In addition, during 2007 through 2010, the company also recorded valuation allowances for certain foreign country net deferred tax assets where recent performance results in a three year cumulative loss and near term projections do not warrant substantial positive evidence to overcome the past losses. The company made net payments for income taxes of $2,600,000, $12,340,000, and $10,564,000 during the years ended December 31, 2010, 2009 and 2008, respectively.

At December 31, 2010, the company had foreign tax loss carryforwards of approximately $42,385,000 of which $26,770,000 are non-expiring, $5,868,000 expire in 2026, and $9,747,000 expire in 2027, of which $24,796,000 are offset by valuation allowances. At December 31, 2010 the company also had a $12,324,000 domestic capital loss carryforward of which $8,526,000 expires in 2011 and $3,798,000 expires in 2012, and

FS-29

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Income Taxes—Continued

$380,000,000 of domestic state and local tax loss carryforwards, of which $201,000,000 expire between 2011 and 2014, $91,000,000 expire between 2015 and 2024 and $88,000,000 expire after 2024. The company has domestic federal tax credit carryforwards of $35,075,000 of which $12,953,000 expire between 2014 and 2018 and $21,664,000 expire between 2019 and 2029 and $458,000 is indefinite.

As of December 31, 2010 and 2009, the company had a liability for uncertain tax positions, excluding interest and penalties of $3,420,000 and $5,770,000, respectively. The company does not believe there will be a material change in its unrecognized tax positions over the next twelve months.

The total liabilities associated with unrecognized tax benefits that, if recognized, would impact the effective tax rates were $3,420,000 and $5,770,000 at December 31, 2010 and 2009, respectively.

A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands):


	2010			2009
Balance at beginning of year	$	6,710		$	6,400
Additions to:
Positions taken during the current year		1,400			1,130
Positions taken during a prior year		265			2,340
Deductions due to:
Exchange rate impact		(65	)		280
Positions taken during a prior year		(15	)		(95	)
Settlements with taxing authorities		(3,185	)		(2,365	)
Lapse of statute of limitations		(610	)		(980	)

Balance at end of year	$	4,500		$	6,710

The company recognizes interest and penalties associated with uncertain tax positions in income tax expense. During 2010, 2009 and 2008 the benefit for interest and penalties was $1,150,000, $490,000 and $155,000, respectively. The Company had approximately $740,000 and $2,035,000 of accrued interest and penalties as of December 31, 2010 and 2009, respectively.

The company and its subsidiaries file income tax returns in the U.S. and certain foreign jurisdictions. The company is subject to U.S. federal income tax examinations for calendar year 2009 and 2010, and is subject to various U.S. state income tax examinations for 2005 to 2010. With regards to foreign income tax jurisdictions, the company is generally subject to examinations for the periods 2005 to 2010.

FS-30

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Net Earnings Per Common Share

The following table sets forth the computation of basic and diluted net earnings per common share.


	2010		2009		2008
	(In thousands except per share data)
Basic
Average common shares outstanding		32,393		31,969		31,902
Net earnings	$	25,341	$	41,179	$	34,857
Net earnings per common share	$	0.78	$	1.29	$	1.09
Diluted
Average common shares outstanding		32,393		31,969		31,902
Shares related to convertible debt		163		—		—
Stock options and awards		138		27		51

Average common shares assuming dilution		32,694		31,996		31,953
Net earnings	$	25,341	$	41,179	$	34,857
Net earnings per common share	$	0.78	$	1.29	$	1.09

At December 31, 2010, 2009, and 2008, 2,396,061, 4,230,630 and 4,337,838 shares associated with stock options, respectively were excluded from the average common shares assuming dilution, as they were anti-dilutive. At December 31, 2010, the majority of the anti-dilutive shares were granted at an exercise price of $41.87, which was higher than the average fair market value price of $25.82 for 2010. In 2009, the majority of the anti-dilutive shares were granted at an exercise price of $41.87, which was higher than the average fair market value price of $19.42 for 2009. In 2008, the majority of the anti-dilutive shares were granted at an exercise price of $25.79, which was higher than the average fair market value price of $20.99 for 2008. Shares necessary to settle a conversion spread on the convertible notes were included in the common shares assuming dilution as the average market price of the company stock for 2010 did exceed the conversion price, which was not the case in 2009 and 2008.

Concentration of Credit Risk

The company manufactures and distributes durable medical equipment and supplies to the home health care, retail and extended care markets. The company performs credit evaluations of its customers’ financial condition. In December 2000, Invacare entered into an agreement with De Lage Landen, Inc. (“DLL”), a third party financing company, to provide the majority of future lease financing to Invacare’s North America customers. The DLL agreement provides for direct leasing between DLL and the Invacare customer. The company retains a recourse obligation of $25,829,000 at December 31, 2010 to DLL for events of default under the contracts, which total $69,430,000 at December 31, 2010. Guarantees, ASC 460, requires the company to record a guarantee liability as it relates to the limited recourse obligation. As such, the company has recorded a liability of $655,000 for this guarantee obligation within accrued expenses. The company monitors the collections status of these contracts and has provided amounts for estimated losses in its allowances for doubtful accounts in accordance with Receivables, ASC 310-10-05-4 . Credit losses are provided for in the financial statements.

Substantially all of the company’s receivables are due from health care, medical equipment providers and long term care facilities located throughout the United States, Australia, Canada, New Zealand and Europe. A significant portion of products sold to dealers, both foreign and domestic, is ultimately funded through government reimbursement programs such as Medicare and Medicaid. In addition, the company has also seen a significant shift in reimbursement to customers from managed care entities. As a consequence, changes in these programs can have an adverse impact on dealer liquidity and profitability. In addition, reimbursement guidelines

FS-31

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Concentration of Credit Risk—Continued

in the home health care industry have a substantial impact on the nature and type of equipment an end user can obtain as well as the timing of reimbursement and, thus, affect the product mix, pricing and payment patterns of the company’s customers.

The company’s top 10 customers accounted for approximately 12.4% of 2010 net sales. The loss of business of one or more of these customers may have a significant impact on the company, although no single customer accounted for more than 3.3% of the company’s 2010 net sales. Providers who are part of a buying group generally make individual purchasing decisions and are invoiced directly by the company.

Derivatives

ASC 815 requires companies to recognize all derivative instruments in the consolidated balance sheet as either assets or liabilities at fair value. The accounting for changes in fair value of a derivative is dependent upon whether or not the derivative has been designated and qualifies for hedge accounting treatment and the type of hedging relationship. For derivatives designated and qualifying as hedging instruments, the company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.

Cash Flow Hedging Strategy

The company uses derivative instruments in an attempt to manage its exposure to foreign currency exchange risk and interest rate risk. Foreign forward exchange contracts are used to manage the price risk associated with forecasted sales denominated in foreign currencies and the price risk associated with forecasted purchases of inventory over the next twelve months. Interest rate swaps are, at times, utilized to manage interest rate risk associated with the company’s fixed and floating-rate borrowings.

The company was not a party to any interest rate swap agreements during 2010. During 2009, the company was a party to interest rate swap agreements that qualified as cash flow hedges and effectively converted floating-rate debt to fixed-rate debt, so the company could avoid the risk of changes in market interest rates. The gains or losses on interest rate swaps are reflected in interest expense on the consolidated statement of earnings.

To protect against increases/decreases in forecasted foreign currency cash flows resulting from inventory purchases/sales over the next year, the company utilizes foreign currency forward contracts to hedge portions of its forecasted purchases/sales denominated in foreign currencies. The gains and losses are included in cost of products sold and selling, general and administrative expenses on the consolidated statement of earnings. If it is later determined that a hedged forecasted transaction is unlikely to occur, any prospective gains or losses on the forward contracts would be recognized in earnings. The company does not expect any material amount of hedge ineffectiveness related to forward contract cash flow hedges during the next twelve months.

The company has historically not recognized any material amount of ineffectiveness related to forward contract cash flow hedges because the company generally limits it hedges to between 60% and 90% of total

FS-32

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Derivatives—Continued

forecasted transactions for a given entity’s exposure to currency rate changes and the transactions hedged are recurring in nature. Furthermore, the majority of the hedged transactions are related to intercompany sales and purchases for which settlement occurs on a specific day each month. Forward contracts with a total notional amount in USD of $173,337,000 and $180,664,000 matured during the twelve months ended December 31, 2010 and 2009, respectively. Foreign exchange forward contracts qualifying and designated for hedge accounting treatment were as follows (in thousands USD):


	December 31, 2010					December 31, 2009
	Notional Amount		Unrealized Net Gain (Loss)			Notional Amount		Unrealized Net Gain (Loss)
USD / AUD	$	3,072	$	(223	)	$	3,294	$	(41	)
USD / CAD		32,974		(14	)		49,345		202
USD / EUR		32,419		927			22,119		(526	)
USD / GBP		4,212		86			3,640		(72	)
USD / NZD		9,577		202			8,286		130
USD / SEK		10,395		95			8,965		(100	)
USD / MXP		—		—			2,520		217
EUR / CHF		8,768		54			2,755		(9	)
EUR / GBP		18,068		(577	)		22,258		27
EUR / SEK		8,045		92			3,800		15
EUR / NZD		2,630		5			8,029		359
GBP / CHF		770		(3	)		501		14
GBP / SEK		2,014		(43	)		2,169		37
GBP / DKK		1,016		(27	)		765		17
CHF / SEK		6,937		(3	)		—		—
DKK / CHF		514		1			—		—
DKK / SEK		1,465		18			7,439		52
DKK / NOK		—		—			2,236		19
NOK / EUR		—		—			342		6
NOK / CHF		—		—			592		(9	)
NOK / SEK		—		—			1,190		(21	)

	$	142,876	$	590		$	150,245	$	317

Fair Value Hedging Strategy

In 2010 and 2009, the company did not utilize any derivatives designated as fair value hedges. However, the company has in the past utilized fair value hedges in the form of forward contracts to manage the foreign exchange risk associated with certain firm commitments and has entered into interest rate swaps to effectively convert fixed-rate debt to floating-rate debt in an attempt to avoid paying higher than market interest rates. For derivative instruments designated and qualifying as fair value hedges, the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item associated with the hedged risk are recognized in the same line item associated with the hedged item in earnings.

Derivatives Not Qualifying or Designated for Hedge Accounting Treatment

The company utilizes foreign currency forward or option contracts that do not qualify for hedge accounting treatment in an attempt to manage the risk associated with the conversion of earnings in foreign currencies into U.S. Dollars. While these derivative instruments do not qualify for hedge accounting treatment in accordance with ASC 815, these derivatives do provide the company with a means to manage the risk associated with currency translation. These instruments are recorded at fair value in the consolidated balance sheet and any gains

FS-33

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Derivatives—Continued

or losses are recorded as part of earnings in the current period. A gain of $28,000 and a loss of $68,000 were recorded by the company for the year ended December 31, 2010 and 2009, respectively, related to derivatives not qualifying for hedge accounting treatment.

The company also utilizes foreign currency forward contracts that are not designated as hedges in accordance with ASC 815. These contracts are entered into to eliminate the risk associated with the settlement of short-term intercompany trading receivables and payables between Invacare Corporation and its foreign subsidiaries. The currency forward contracts are entered into at the same time as the intercompany receivables or payables are created so that upon settlement, the gain/loss on the settlement is offset by the gain/loss on the foreign currency forward contract. No material net gain or loss was realized by the company in 2010 or 2009 related to these forward contracts and the associated short-term intercompany trading receivables and payables.

Foreign exchange forward contracts not qualifying or designated for hedge accounting treatment entered into in 2010 and 2009, respectively, and outstanding were as follows (in thousands USD):


	December 31, 2010				December 31, 2009
	Notional Amount		Gain (Loss)		Notional Amount		Gain (Loss)
CAD / USD	$	14,636	$	337	$	2,194	$	(3	)
EUR / USD		1,394		28		—		—
CHF / USD		—		—		1,102		(39	)
DKK / USD		—		—		7,580		(77	)
GBP / USD		—		—		3,304		(73	)
NZD / USD		—		—		1,756		59
SEK / USD		—		—		9,899		(126	)
EUR / NZD		—		—		7,457		(324	)

	$	16,030	$	365	$	33,292	$	(583	)

The fair values of the company’s derivative instruments were as follows (in thousands):


	December 31, 2010				December 31, 2009
	Assets		Liabilities		Assets		Liabilities
Derivatives designated as hedging instruments under ASC 815
Foreign currency forward contracts	$	2,518	$	1,928	$	1,815	$	1,498
Derivatives not designated as hedging instruments under ASC 815
Foreign currency forward contracts		366		1		92		675

Total derivatives	$	2,884	$	1,929	$	1,907	$	2,173

The fair values of the company’s foreign currency forward assets and liabilities are included in Other Current Assets and Accrued Expenses, respectively in the Consolidated Balance Sheets.

FS-34

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Derivatives—Continued

The effect of derivative instruments on the Statement of Earnings and Other Comprehensive Income (OCI) was as follows (in thousands):


Derivatives in ASC 815 cash flow hedge relationships	Amount of Gain (Loss) Recognized in OCI on Derivatives (Effective Portion)			Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)			Amount of Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Year ended December 31, 2010
Foreign currency forward contracts	$	(2,530	)	$	2,803		$	(134	)
Interest rate swap contracts		—			—			—

	$	(2,530	)	$	2,803		$	(134	)

Year ended December 31, 2009
Foreign currency forward contracts	$	962		$	(339	)	$	—
Interest rate swap contracts		5,556			(2,819	)		—

	$	6,518		$	(3,158	)	$	—


Derivatives not designated as hedging instruments under ASC 815							Amount of Gain Recognized in Income on Derivatives
Year ended December 31, 2010
Foreign currency forward contracts							$	3,800
Year ended December 31, 2009
Foreign currency forward contracts							$	2,899

The gains or losses recognized as the result of the settlement of cash flow hedge foreign currency forward contracts are recognized in net sales for hedges of inventory sales or cost of product sold for hedges of inventory purchases. In 2010, net sales were increased by $1,605,000 and cost of product sold was decreased by $1,198,000 for a net realized gain of $2,803,000. In 2009, net sales were increased by $3,093,000 and cost of product sold was increased by $3,432,000 for a net realized loss of $339,000 compared to a net loss of $26,000 in 2008.

The company recognized net losses of $2,819,000 and $2,684,000 in 2009 and 2008, respectively related to interest rate swap agreements which are reflected in interest expense on the consolidated statement of earnings. Gains of $3,800,000 and $2,899,000 were recognized in selling, general and administrative (SG&A) expenses in 2010 and 2009, respectively, on foreign currency forward contracts not designated as hedging instruments which were offset by losses of comparable amounts also recorded in SG&A expenses on the intercompany trade payables for which the derivatives were entered into to offset.

Fair Values of Financial Instruments

Pursuant to ASC 820, the inputs used to derive the fair value of assets and liabilities are analyzed and assigned a level I, II or III priority, with level I being the highest and level III being the lowest in the hierarchy. Level I inputs are quoted prices in active markets for identical assets or liabilities. Level II inputs are quoted prices for similar assets or liabilities in active markets: quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. Level III inputs are based on valuations derived from valuation techniques in which one or more significant inputs are unobservable.

FS-35

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Values of Financial Instruments—Continued

The following table provides a summary of the company’s assets and liabilities that are measured on a recurring basis (in thousands).


				Basis for Fair Value Measurements at Reporting Date
				Quoted Prices in Active Markets for Identical Assets / (Liabilities)		Significant Other Observable Inputs			Significant Other Unobservable Inputs
	Total			Level I		Level II			Level III
December 31, 2010 :
Forward Exchange Contracts—net	$	955			—	$	955			—

December 31, 2009 :
Forward Exchange Contracts—net		(266	)		—		(266	)		—

Forward Contracts: The company operates internationally and as a result is exposed to foreign currency fluctuations. Specifically, the exposure includes intercompany loans and third party sales or payments. In an attempt to reduce this exposure, foreign currency forward contracts are utilized and accounted for as hedging instruments. The forward contracts are used to hedge the following currencies: AUD, CAD, CHF, CNY, DKK, EUR, GBP, MXP, NOK, NZD, SEK and USD. The company does not use derivative financial instruments for speculative purposes. Fair values for the company’s foreign exchange forward contracts are based on quoted market prices for contracts with similar maturities.

The gains and losses that result from the majority of the forward contracts are deferred and recognized when the offsetting gains and losses for the identified transactions are recognized. The company recognized a net gain of $2,803,000 in 2010, a net loss of $339,000 in 2009 and a net loss of $26,000 in 2008 on ASC 815 designated derivatives. Gains or losses recognized as the result of the settlement of forward contracts are recognized in cost of products sold for hedges of inventory transactions, sales for hedges of forecasted sales or selling, general and administrative expenses for other hedged transactions. The company’s forward contracts are included in Other Current Assets or Accrued Expenses in the Consolidated Balance Sheets.

The carrying amounts and fair values of the company’s financial instruments at December 31, 2010 and 2009 are as follows (in thousands):


	2010						2009
	Carrying Value			Fair Value			Carrying Value			Fair Value
Cash and cash equivalents	$	48,462		$	48,462		$	37,501		$	37,501
Other investments		1,588			1,588			1,521			1,521
Installment receivables, net of reserves		5,672			5,672			7,106			7,106
Long-term debt (including current maturities of long-term debt)		(246,064	)		(264,382	)		(273,325	)		(293,133	)
Forward contracts in Other Current Assets		2,884			2,884			1,907			1,907
Forward contracts in Accrued Expenses		(1,929	)		(1,929	)		(2,173	)		(2,173	)

The company, in estimating its fair value disclosures for financial instruments, used the following methods and assumptions:

Cash, cash equivalents: The carrying amount reported in the balance sheet for cash, cash equivalents equals its fair value.

FS-36

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Values of Financial Instruments—Continued

Installment receivables: The carrying amount reported in the balance sheet for installment receivables approximates its fair value. The interest rates associated with these receivables have not varied significantly since inception. Management believes that after consideration of the credit risk, the net book value of the installment receivables approximates market value.

Long-term debt: Fair values for the company’s senior notes and convertible debt are based on quoted market prices as of the end of the year, while the revolving credit facility fair values are based upon the company’s estimate of the market for similar borrowing arrangements.

Other investments: The company has made other investments in limited partnerships and non-marketable equity securities, which are accounted for using the cost method, adjusted for any estimated declines in value. These investments were acquired in private placements and there are no quoted market prices or stated rates of return and the company does not have the ability to easily sell these investments. The company completed an evaluation of the residual value related to these investments in the fourth quarter of 2010 and recognized an immaterial loss. In the fourth quarter 2009, the company recognized impairment charges totaling $6,713,000 pre-tax, which is included in the All Other segment, as a result of an evaluation of the residual value related to these investments which considered the weakening in the commercial real estate market as well as the redemption of one of the investments for a nominal amount.

Other Intangibles and Goodwill: Under Intangibles—Goodwill and Other , ASC 350, goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests. Furthermore, goodwill and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The company completes its annual impairment tests in the fourth quarter of each year. The discount rates used have a significant impact upon the discounted cash flow methodology utilized in the company’s annual impairment testing as higher discount rates decrease the fair value estimates.

The company utilizes a discounted cash flow method model to analyze reporting units for impairment in which the company forecasts income statement and balance sheet amounts based on assumptions regarding future sales growth, profitability, inventory turns, days’ sales outstanding, etc. to forecast future cash flows. The cash flows are discounted using a weighted average cost of capital discount rate where the cost of debt is based on quoted rates for 20-year debt of companies of similar credit risk and the cost of equity is based upon the 20-year treasury rate for the risk free rate, a market risk premium, the industry average beta, a small cap stock adjustment and company specific risk premiums. The assumptions used are based on a market participant’s point of view and yielded a discount rate of 9.59% in 2010 compared to 10.74% in 2009 and 8.90% to 9.90% in 2008.

FS-37

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Values of Financial Instruments—Continued

For purposes of testing intangibles for impairment, the fair value of each unamortized intangible is estimated by forecasting cash flows and discounting those cash flows using appropriate discount rates and using market participant assumptions regarding taxes, impact of contributory assets in the valuation models, etc. The fair values are then compared to the carrying value of the intangible. For amortized intangibles, the forecasted undiscounted cash flows were compared to the carrying value, and if impairment results, the impairment is measured based on the estimated fair value of the intangibles.

As a result of the company’s 2010 intangible impairment review, the company calculated the fair value of an IPG segment indefinite-lived trademark and a NA/HME segment customer list with a remaining life of eight years as each had indicators of impairment, principally net sales less than forecasted. The fair value of the trademark was calculated using a relief from royalty payment methodology which requires applying an estimated market royalty rate to forecasted net sales and discounting the resulting cash flows to determine fair value. The calculated fair value was $3,930,000 compared to a carrying value of $4,266,000 for a resulting impairment charge of $336,000. The fair value of the customer list was calculated using an excess earnings method, using a discounted cash flow model. Estimated cash flow returns to the customer relationship were reduced by the cash flows required to satisfy the return requirements of each of the assets employed with the residual cash flow then discounted to value the customer relationship. The calculated fair value was $500,000 compared to a carrying value of $748,000 for a resulting impairment charge of $248,000. Both fair values were calculated using inputs that are not observable in the market and included management’s own estimates regarding the assumptions that market participants would use and thus these inputs are deemed Level III inputs in regards to the fair value hierarchy.

Business Segments

The company operates in five primary business segments: North America/Home Medical Equipment (NA/HME), Invacare Supply Group (ISG), Institutional Products Group (IPG), Europe and Asia/Pacific.

The NA/HME segment sells each of three primary product lines, which includes: standard, rehab and respiratory products. Invacare Supply Group sells distributed product and the Institutional Products Group sells health care furnishings and accessory products. Europe and Asia/Pacific sell the same product lines. Each business segment sells to the home health care, retail and extended care markets.

The company evaluates performance and allocates resources based on profit or loss from operations before income taxes for each reportable segment. The accounting policies of each segment are the same as those described in the summary of significant accounting policies for the company’s consolidated financial statements. Intersegment sales and transfers are based on the costs to manufacture plus a reasonable profit element. Therefore, intercompany profit or loss on intersegment sales and transfers is not considered in evaluating segment performance except for Asia/Pacific due to its significant intercompany sales volume.

In 2010, management changed how it views segment earnings before taxes and accordingly reclassifications have been made to the company’s segment disclosure of earnings (loss) before income tax amounts for 2009 to be consistent with 2010 presentation. As a result, 2009 earnings before taxes increased for NA/HME by $2,878,000 and the loss before income taxes for All Other increased by $2,878,000. For product sales, All Other was revised to exclude parts sales which have been allocated based on major product categories to which the parts sales relate and prior periods were restated accordingly.

FS-38

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Business Segments—Continued

The information by segment is as follows (in thousands):


	2010			2009			2008
Revenues from external customers
North America/HME	$	747,599		$	748,401		$	741,502
Invacare Supply Group		297,517			280,295			265,818
Institutional Products Group		88,261			89,423			99,662
Europe		506,069			503,084			553,845
Asia/Pacific		82,635			71,933			94,867

Consolidated	$	1,722,081		$	1,693,136		$	1,755,694

Intersegment revenues
North America/HME	$	83,316		$	72,273		$	56,826
Invacare Supply Group		75			232			527
Institutional Products Group		5,571			2,639			2,668
Europe		10,165			9,719			12,482
Asia/Pacific		33,616			31,143			31,132

Consolidated	$	132,743		$	116,006		$	103,635

Depreciation and amortization
North America/HME	$	16,514		$	17,905		$	19,478
Invacare Supply Group		383			403			377
Institutional Products Group		1,155			1,306			1,670
Europe		13,620			15,285			17,198
Asia/Pacific		4,941			5,555			4,987
All Other(1)		191			108			34

Consolidated	$	36,804		$	40,562		$	43,744

Net interest expense (income)
North America/HME	$	12,841		$	26,687		$	25,934
Invacare Supply Group		3,058			3,153			3,531
Institutional Products Group		513			2,525			3,865
Europe		721			(1,876	)		6,027
Asia/Pacific		2,790			987			525

Consolidated	$	19,923		$	31,476		$	39,882

Earnings (loss) before income taxes
North America/HME	$	54,586		$	39,115		$	17,655
Invacare Supply Group		7,547			5,374			2,192
Institutional Products Group		9,258			9,213			6,725
Europe		39,344			34,685			44,675
Asia/Pacific		6,754			1,639			8,705
All Other(1)		(79,448	)		(42,747	)		(32,145	)

Consolidated	$	38,041		$	47,279		$	47,807

FS-39

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Business Segments—Continued


	2010		2009		2008
Assets
North America/HME	$	356,678	$	310,404	$	359,364
Invacare Supply Group		88,678		86,469		88,540
Institutional Products Group		45,561		45,518		33,491
Europe		660,620		761,992		683,870
Asia/Pacific		92,322		90,318		90,062
All Other(1)		36,541		64,800		59,146

Consolidated	$	1,280,400	$	1,359,501	$	1,314,473

Long-lived assets
North America/HME	$	98,651	$	72,527	$	99,709
Invacare Supply Group		24,126		24,085		24,312
Institutional Products Group		32,066		31,191		28,103
Europe		510,728		596,142		517,319
Asia/Pacific		52,565		50,323		43,163
All Other(1)		36,105		56,769		50,809

Consolidated	$	754,241	$	831,037	$	763,415

Expenditures for assets
North America/HME	$	9,836	$	8,110	$	6,590
Invacare Supply Group		404		196		506
Institutional Products Group		234		245		962
Europe		4,448		5,268		6,311
Asia/Pacific		2,224		3,433		5,567
All Other(1)		207		747		21

Consolidated	$	17,353	$	17,999	$	19,957

(1)

Consists of un-allocated corporate selling, general and administrative costs and intercompany profits, which do not meet the quantitative criteria for determining reportable segments. In addition, the “All Other” earnings (loss) before income taxes includes loss on debt extinguishment including debt finance charges, interest and fees and impairment charges recognized related to limited partnership investments.

Net sales by product, are as follows (in thousands):


	2010		2009		2008
North America/HME
Standard	$	303,798	$	296,068	$	280,662
Rehab		288,756		283,214		284,793
Respiratory		111,242		133,821		145,627
Other(1)		43,803		35,298		30,420

	$	747,599	$	748,401	$	741,502

Invacare Supply Group
Distributed	$	297,517	$	280,295	$	265,818

Institutional Products Group
Continuing Care	$	88,261	$	89,423	$	99,662

FS-40

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Business Segments—Continued


	2010		2009		2008
Europe
Standard	$	289,577	$	285,253	$	325,218
Rehab		183,271		185,186		196,340
Respiratory		20,493		17,137		16,901
Other(1)		12,728		15,508		15,386

	$	506,069	$	503,084	$	553,845

Asia/Pacific
Rehab	$	38,226	$	31,428	$	39,171
Standard		21,216		28,363		31,695
Respiratory		1,021		626		1,290
Other(1)		22,172		11,516		22,711

	$	82,635	$	71,933	$	94,867

Total Consolidated	$	1,722,081	$	1,693,136	$	1,755,694

(1)	Includes various services, including repair services, equipment rentals and external contracting.

No single customer accounted for more than 3.3% of the company’s sales.

Contingencies

In the ordinary course of its business, the company is a defendant in a number of lawsuits, primarily product liability actions in which various plaintiffs seek damages for injuries allegedly caused by defective products. All of the product liability lawsuits have been referred to the company’s captive insurance company and/or excess insurance carriers and generally are contested vigorously. The coverage territory of the company’s insurance is worldwide with the exception of those countries with respect to which, at the time the product is sold for use or at the time a claim is made, the U.S. government has suspended or prohibited diplomatic or trade relations. The amount recorded for identified contingent liabilities is based on estimates. Amounts recorded are reviewed periodically and adjusted to reflect additional technical and legal information that becomes available. Actual costs to be incurred in future periods may vary from the estimates, given the inherent uncertainties in evaluating certain exposures. Subject to the imprecision in estimating future contingent liability costs, the company does not expect that any sum it may have to pay in connection with these matters in excess of the amounts recorded will have a materially adverse effect on its financial position, results of operations or liquidity.

As a medical device manufacturer, the company is subject to extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating reimbursement under various government programs. The marketing, invoicing, documenting and other practices of health care suppliers and manufacturers are all subject to government scrutiny. Violations of law or regulations can result in administrative, civil and criminal penalties and sanctions, including disqualification from Medicare and other reimbursement programs, which could have a material adverse effect on the company’s business. The company has established numerous policies and procedures that the company believes are sufficient to ensure that the company will operate in substantial compliance with these laws and regulations. Further, the FDA regulates virtually all aspects of a medical device’s development, testing, manufacturing, labeling, promotion, distribution and marketing. The company’s failure to comply with the regulatory requirements of the FDA and other applicable U.S. regulatory requirements may subject the company to administrative or judicially imposed sanctions. These sanctions include warning letters, civil penalties, criminal penalties, injunctions, consent decrees, product seizure or detention, product recalls and total or partial suspension of production.

FS-41

Supplemental Guarantor Information

Effective February 12, 2007, substantially all of the domestic subsidiaries (the “Guarantor Subsidiaries”) of the company became guarantors of the indebtedness of Invacare Corporation under its 4.125% Convertible Senior Subordinated Debentures due 2027 (the “Debentures”) with an original aggregate principal amount of $135,000,000. The majority of the company’s subsidiaries are not guaranteeing the indebtedness of the Debentures (the “Non-Guarantor Subsidiaries”). Each of the Guarantor Subsidiaries has fully and unconditionally guaranteed, on a joint and several basis, to pay principal, premium, and interest related to the Debentures and each of the Guarantor Subsidiaries are directly or indirectly wholly-owned subsidiaries of the company.

Presented below are the consolidating condensed financial statements of Invacare Corporation (Parent), its combined Guarantor Subsidiaries and combined Non-Guarantor Subsidiaries with their investments in subsidiaries accounted for using the equity method. The company does not believe that separate financial statements of the Guarantor Subsidiaries are material to investors and accordingly, separate financial statements and other disclosures related to the Guarantor Subsidiaries are not presented.

FS-42

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Supplemental Guarantor Information—Continued

CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS


	The Company (Parent)			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations			Total
	(in thousands)
Year ended December 31, 2010
Net sales	$	403,227		$	723,402		$	693,463		$	(98,011	)	$	1,722,081
Cost of products sold		283,859			563,837			462,776			(98,032	)		1,212,440

Gross Profit		119,368			159,565			230,687			21			509,641
Selling, general and administrative expenses		132,177			70,902			169,114			39,320			411,513
Loss on debt extinguishment including debt finance charges and associated fees		40,164			—			—			—			40,164
Income (loss) from equity investee		97,602			37,438			(591	)		(134,449	)		—
Interest expense—net		16,208			729			2,986			—			19,923

Earnings (loss) before Income Taxes		28,421			125,372			57,996			(173,748	)		38,041
Income taxes		3,080			—			9,620			—			12,700

Net Earnings (loss)	$	25,341		$	125,372		$	48,376		$	(173,748	)	$	25,341

Year ended December 31, 2009
Net sales	$	388,141		$	707,618		$	681,374		$	(83,997	)	$	1,693,136
Cost of products sold		275,089			555,503			453,464			(84,114	)		1,199,942

Gross Profit		113,052			152,115			227,910			117			493,194
Selling, general and administrative expenses		16,813			118,940			156,791			106,102			398,646
Charges related to restructuring activities		301			60			4,145			—			4,506
Loss on debt extinguishment including debt finance charges and associated fees		2,878			—			—			—			2,878
Asset write-downs to intangibles and investments		8,409			—			—			—			8,409
Income (loss) from equity investee		(22,580	)		25,508			(13,445	)		10,517			—
Interest expense (income)—net		27,021			(2,897	)		7,352			—			31,476

Earnings (loss) before Income Taxes		35,050			61,520			46,177			(95,468	)		47,279
Income taxes (benefit)		(6,129	)		99			12,130			—			6,100

Net Earnings (loss)	$	41,179		$	61,421		$	34,047		$	(95,468	)	$	41,179

Year ended December 31, 2008
Net sales	$	368,574		$	683,773		$	776,405		$	(73,058	)	$	1,755,694
Cost of products sold		274,948			547,193			517,861			(73,200	)		1,266,802

Gross Profit		93,626			136,580			258,544			142			488,892
Selling, general and administrative expenses		112,554			117,195			157,639			10,866			398,254
Charge related to restructuring activities		217			—			2,732			—			2,949
Income (loss) from equity investee		83,013			48,405			5,518			(136,936	)		—
Interest expense (income)—net		31,173			(1,065	)		9,774			—			39,882

Earnings (loss) before Income Taxes		32,695			68,855			93,917			(147,660	)		47,807
Income taxes (benefit)		(2,162	)		194			14,918			—			12,950

Net Earnings (loss)	$	34,857		$	68,661		$	78,999		$	(147,660	)	$	34,857

FS-43

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Supplemental Guarantor Information—Continued

CONSOLIDATING CONDENSED BALANCE SHEETS


	The Company (Parent)		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations			Total
	(in thousands)
December 31, 2010
Assets
Current Assets
Cash and cash equivalents	$	4,036	$	2,476	$	41,950	$	—		$	48,462
Trade receivables, net		95,673		68,504		87,827		—			252,004
Installment receivables, net		—		876		3,083		—			3,959
Inventories, net		72,499		39,299		63,873		(1,296	)		174,375
Deferred income taxes		3,289		—		2,489		—			5,778
Other current assets		12,274		6,895		27,685		(5,273	)		41,581

Total Current Assets		187,771		118,050		226,907		(6,569	)		526,159
Investment in subsidiaries		1,489,732		594,690		—		(2,084,422	)		—
Intercompany advances, net		77,990		745,991		226,421		(1,050,402	)		—
Other Assets		42,782		1,881		821		—			45,484
Other Intangibles		1,241		8,590		61,080		—			70,911
Property and Equipment, net		46,791		12,093		71,879		—			130,763
Goodwill		5,023		34,388		467,672		—			507,083

Total Assets	$	1,851,330	$	1,515,683	$	1,054,780	$	(3,141,393	)	$	1,280,400

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	73,468	$	14,923	$	55,362	$	—		$	143,753
Accrued expenses		39,090		20,690		75,572		(5,273	)		130,079
Accrued income taxes		5,633		—		2,869		—			8,502
Short-term debt and current maturities of long-term obligations		7,149		83		742		—			7,974

Total Current Liabilities		125,340		35,696		134,545		(5,273	)		290,308
Long-Term Debt		217,164		—		20,926		—			238,090
Other Long-Term Obligations		48,645		1,123		49,823		—			99,591
Intercompany advances, net		807,770		180,743		61,889		(1,050,402	)		—
Total Shareholders’ Equity		652,411		1,298,121		787,597		(2,085,718	)		652,411

Total Liabilities and Shareholders’ Equity	$	1,851,330	$	1,515,683	$	1,054,780	$	(3,141,393	)	$	1,280,400

FS-44

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Supplemental Guarantor Information—Continued

CONSOLIDATING CONDENSED BALANCE SHEETS


	The Company (Parent)		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations			Total
	(in thousands)
December 31, 2009
Assets
Current Assets
Cash and cash equivalents	$	6,569	$	2,526	$	28,406	$	—		$	37,501
Trade receivables, net		101,416		64,451		101,312		(4,165	)		263,014
Installment receivables, net		—		954		2,611		—			3,565
Inventories, net		42,512		39,114		91,916		(1,320	)		172,222
Deferred income taxes		—		—		390		—			390
Other current assets		15,608		6,307		31,245		(1,388	)		51,772

Total Current Assets		166,105		113,352		255,880		(6,873	)		528,464
Investment in subsidiaries		1,447,759		594,024		—		(2,041,783	)		—
Intercompany advances, net		115,510		1,057,341		196,323		(1,369,174	)		—
Other Assets		43,246		3,420		1,340		—			48,006
Other Intangibles		1,604		8,023		75,678		—			85,305
Property and Equipment, net		49,608		9,344		82,681		—			141,633
Goodwill		5,023		24,634		526,436		—			556,093

Total Assets	$	1,828,855	$	1,810,138	$	1,138,338	$	(3,417,830	)	$	1,359,501

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	70,867	$	12,986	$	57,206	$	—		$	141,059
Accrued expenses		45,309		24,137		78,400		(5,553	)		142,293
Accrued income taxes		—		—		5,884		—			5,884
Short-term debt and current maturities of long-term obligations		173		—		918		—			1,091

Total Current Liabilities		116,349		37,123		142,408		(5,553	)		290,327
Long-Term Debt		262,188		—		10,046		—			272,234
Other Long-Term Obligations		45,156		2,040		48,507		—			95,703
Intercompany advances, net		703,925		564,582		100,667		(1,369,174	)		—
Total Shareholders’ Equity		701,237		1,206,393		836,710		(2,043,103	)		701,237

Total Liabilities and Shareholders’ Equity	$	1,828,855	$	1,810,138	$	1,138,338	$	(3,417,830	)	$	1,359,501

FS-45

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Supplemental Guarantor Information—Continued

CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS


	The Company (Parent)			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations			Total
	(in thousands)
Year ended December 31, 2010
Net Cash Provided (Used) by Operating Activities	$	101,658		$	15,427		$	44,442		$	(39,320	)	$	122,207
Investing Activities
Purchases of property and equipment		(7,281	)		(1,567	)		(8,505	)		—			(17,353	)
Proceeds from sale of property and equipment		—			—			36			—			36
Business acquisitions, net of cash acquired		—			(13,725	)		—			—			(13,725	)
Decrease (increase) in other long-term assets		291			(11	)		521			—			801
Other		153			(174	)		(355	)		—			(376	)

Net Cash Used for Investing Activities		(6,837	)		(15,477	)		(8,303	)		—			(30,617	)
Financing Activities
Proceeds from revolving lines of credit and long-term borrowings		689,022			—			19,720			—			708,742
Payments on revolving lines of credit and long-term borrowings		(751,660	)		—			—			—			(751,660	)
Proceeds from exercise of stock options		2,912			—			—			—			2,912
Payment of financing costs		(30,329	)		—			—			—			(30,329	)
Payment of dividends		(1,612	)		—			(39,320	)		39,320			(1,612	)
Purchase of treasury stock		(5,687	)		—			—			—			(5,687	)

Net Cash Provided (Used) by Financing Activities		(97,354	)		—			(19,600	)		39,320			(77,634	)
Effect of exchange rate changes on cash		—			—			(2,995	)		—			(2,995	)

Increase (Decrease) in cash and cash equivalents		(2,533	)		(50	)		13,544			—			10,961
Cash and cash equivalents at beginning of year		6,569			2,526			28,406			—			37,501

Cash and cash equivalents at end of year	$	4,036		$	2,476		$	41,950		$	—		$	48,462

FS-46

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Supplemental Guarantor Information—Continued

CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS


	The Company (Parent)			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations			Total
	(in thousands)
Year ended December 31, 2009
Net Cash Provided (Used) by Operating Activities	$	154,367		$	1,823		$	105,575		$	(106,102	)	$	155,663
Investing Activities
Purchases of property and equipment		(6,733	)		(1,875	)		(9,391	)		—			(17,999	)
Proceeds from sale of property and equipment		5			—			1,158			—			1,163
Decrease (increase) in other long-term assets		737			(122	)		(14	)		—			601
Other		(579	)		416			(284	)		—			(447	)

Net Cash Used for Investing Activities		(6,570	)		(1,581	)		(8,531	)		—			(16,682	)
Financing Activities
Proceeds from revolving lines of credit and long-term borrowings		400,123			—			—			—			400,123
Payments on revolving lines of credit and long-term borrowings		(552,294	)		—			(1,142	)		—			(553,436	)
Proceeds from exercise of stock options		1,628			—			—			—			1,628
Payment of dividends		(1,605	)		—			(106,102	)		106,102			(1,605	)

Net Cash Provided (Used) by Financing Activities		(152,148	)		—			(107,244	)		106,102			(153,290	)
Effect of exchange rate changes on cash		—			—			4,294			—			4,294

Increase (Decrease) in cash and cash equivalents		(4,351	)		242			(5,906	)		—			(10,015	)
Cash and cash equivalents at beginning of year		10,920			2,284			34,312			—			47,516

Cash and cash equivalents at end of year	$	6,569		$	2,526		$	28,406		$	—		$	37,501

FS-47

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Supplemental Guarantor Information—Continued

CONSOLIDATING CONDENSED STATEMENTS OF CASH FLOWS


	The Company (Parent)			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations			Total
	(in thousands)
Year ended December 31, 2008
Net Cash Provided (Used) by Operating Activities	$	33,365		$	2,248		$	51,667		$	(10,866	)	$	76,414
Investing Activities
Purchases of property and equipment		(5,377	)		(1,246	)		(13,334	)		—			(19,957	)
Proceeds from sale of property and equipment		—			2			209			—			211
Business acquisitions, net of cash acquired		(6,268	)		(2,152	)		—			—			(8,420	)
Decrease in other long-term assets		4,882			—			—			—			4,882
Other		(620	)		1,666			(247	)		—			799

Net Cash Used for Investing Activities		(7,383	)		(1,730	)		(13,372	)		—			(22,485	)
Financing Activities
Proceeds from revolving lines of credit and long-term borrowings		334,680			—			21,581			—			356,261
Payments on revolving lines of credit and long-term borrowings		(376,110	)		(7	)		(41,065	)		—			(417,182	)
Proceeds from exercise of stock options		834			—			—			—			834
Payment of dividends		(1,599	)		—			(10,866	)		10,866			(1,599	)

Net Cash Provided (Used) by Financing Activities		(42,195	)		(7	)		(30,350	)		10,866			(61,686	)
Effect of exchange rate changes on cash		—			—			(6,927	)		—			(6,927	)

Increase (Decrease) in cash and cash equivalents		(16,213	)		511			1,018			—			(14,684	)
Cash and cash equivalents at beginning of year		27,133			1,773			33,294			—			62,200

Cash and cash equivalents at end of year	$	10,920		$	2,284		$	34,312		$	—		$	47,516

FS-48

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Interim Financial Information (unaudited)


	QUARTER ENDED (In thousands, except per share data)
	March 31,		June 30,			September 30,		December 31,
2010
Net sales	$	402,240	$	430,828		$	437,476	$	451,537
Gross profit		117,713		126,490			131,567		133,871
Earnings before income taxes		5,306		2,414			20,923		9,398
Net earnings (loss)		3,106		(611	)		15,598		7,248
Net earnings (loss) per share—basic		.10		(.02	)		.48		.22
Net earnings (loss) per share—assuming dilution		.09		(.02	)		.48		.22

	March 31,		June 30,			September 30,		December 31,
2009
Net sales	$	397,995	$	412,541		$	434,031	$	448,569
Gross profit		108,468		118,055			131,454		135,217
Earnings before income taxes		4,447		10,561			17,776		14,495
Net earnings		2,397		7,661			13,476		17,645
Net earnings per share—basic		.08		.24			.42		.55
Net earnings per share—assuming dilution		.08		.24			.42		.55

FS-49

INVACARE CORPORATION AND SUBSIDIARIES

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS


	COL A.		COL B.		COL C.			COL D.
	Balance At Beginning of Period		Charged To Cost And Expenses		Additions (Deductions) Describe			Balance At End of Period
			(In thousands)
Year Ended December 31, 2010
Deducted from asset accounts—
Allowance for doubtful accounts	$	28,075	$	16,979	$	(14,886	)(A)	$	30,168
Inventory obsolescence reserve		15,009		5,350		(6,117	)(B)		14,242
Tax valuation allowances		65,050		4,526		12,405	(D)		81,981
Accrued warranty cost		21,506		6,427		(9,681	)(B)		18,252
Accrued product liability		23,989		8,523		(8,352	)(C)		24,160
Year Ended December 31, 2009
Deducted from asset accounts—
Allowance for doubtful accounts	$	23,090	$	19,281	$	(14,296	)(A)	$	28,075
Inventory obsolescence reserve		12,419		6,497		(3,907	)(B)		15,009
Tax valuation allowances		75,507		6,275		(16,732	)(D)		65,050
Accrued warranty cost		16,798		14,112		(9,404	)(B)		21,506
Accrued product liability		23,758		7,880		(7,649	)(C)		23,989
Year Ended December 31, 2008
Deducted from asset accounts—
Allowance for doubtful accounts	$	42,960	$	14,284	$	(34,154	)(A)	$	23,090
Inventory obsolescence reserve		12,501		8,469		(8,551	)(B)		12,419
Tax valuation allowances		70,084		5,721		(298	)(D)		75,507
Accrued warranty cost		16,616		12,546		(12,364	)(B)		16,798
Accrued product liability		21,136		8,083		(5,461	)(C)		23,758

Note (A)—Uncollectible accounts written off, net of recoveries.

Note (B)—Amounts written off or payments incurred.

Note (C)—Loss and loss adjustment.

Note (D)—Other activity not affecting federal or foreign tax expense.

FS-50

Exhibit 10(k)

AGREEMENT

This AGREEMENT (“Agreement”), is made as of the 31st day of December, 2008, between INVACARE CORPORATION, an Ohio corporation (“Invacare”), and (the “Executive”).

Invacare previously has entered into an agreement with Executive that is similar to this Agreement in recognition of the importance of the Executive’s services to the continuity of management of Invacare and based upon its determination that it will be in the best interests of Invacare to encourage the Executive’s continued attention and dedication to the Executive’s duties in the potentially disruptive circumstances of a possible Change of Control of Invacare. (As used in this Agreement, the term “Change of Control” and certain other capitalized terms have the meanings ascribed to them in Section 10 hereof.)

Invacare has determined that it is necessary to amend and restate such previous agreement with Executive based on certain changes to the existing Change of Control Agreements between Invacare and certain of its executive officers, including Executive, that were reviewed and approved by the Compensation, Management Development and Corporate Governance Committee of Invacare including, without limitation, revisions intended to comply with Internal Revenue Code Section 409A.

Invacare and the Executive agree, effective as of the date first set forth above (the “Effective Date”), as follows:

1. Additional Payment if Executive is Employed by Invacare on First Anniversary of the Date of a Change of Control or if Employment is Terminated in Certain Circumstances Within One Year of a Change of Control . If, following the occurrence of a Change of Control, either (i) the Executive continues to be employed by Invacare or one of its Affiliates on the first anniversary of the date of the Change of Control, or (ii) the Executive’s employment with Invacare is terminated by Invacare for any reason other than Cause, Disability, or death, or is terminated by the Executive for Good Reason, within one year after the Change of Control, then Invacare shall pay to the Executive, within ten business days after the earlier of such events, a lump-sum amount equal to the sum of (a) the Executive’s Annual Base Salary plus (b) the Executive’s Target Bonus.

2. Severance Benefits if Employment is Terminated in Certain Circumstances Within Three Years of a Change of Control . If, within three years following the occurrence of a Change of Control, the Executive’s employment with Invacare is terminated by Invacare for any reason other than Cause, Disability, or death, or is terminated by the Executive for Good Reason, then the provisions of this Section 2 shall become applicable in all respects and Invacare shall pay to the Executive, in addition to any amount paid or payable pursuant to Section 1 above, the amounts specified in Sections 2.1, 2.2, 2.3, 2.4, and 2.5 on the dates indicated therein, shall provide to the Executive the benefits specified in Section 2.6 for the periods specified

therein, and shall cause certain rights of the Executive (or his or her Beneficiary (or Beneficiaries), as applicable) to vest as provided in Sections 2.7, 2.8, 2.9, and 2.10:

2.1 Lump Sum Severance Benefit . Invacare shall pay to the Executive, within ten business days after the Termination Date, a lump sum severance benefit equal to two times the sum of (i) the Executive’s Annual Base Salary plus (ii) the Executive’s Target Bonus.

2.2 Invacare Retirement Savings Plan . Invacare shall pay to the Executive, within 60 days after the Termination Date, a lump sum amount equal to three times the highest amount of total contributions (including both matching contributions and other employer contributions) made by Invacare to the Invacare Retirement Savings Plan (or related successor plan or plans) with respect to the Executive for any single plan year ending on or after the date that is three years before the date of the Change of Control. In the event the Executive is not fully vested under the Invacare Retirement Savings Plan as of the Termination Date, the lump sum amount payable under this Section 2.2 shall be increased to include an amount equal to the non-vested portion of the Executive’s account under the Invacare Retirement Savings Plan.

2.3 401(k) Plus Plan . Invacare shall pay to the Executive, within 60 days after the Termination Date, a lump sum amount equal to three times the highest amount of the employer contributions (including both matching contributions and other employer contributions) credited to the Invacare 401(k) Plus Benefit Equalization Plan (or related successor plan or plans) (the “401(k) Plus Plan”) for the benefit of the Executive for any single plan year ending on or after the date that is three years before the date of the Change of Control.

2.4 Deferred Compensation Plus Plan . Invacare shall pay to the Executive, within 60 days after the Termination Date, a lump sum amount equal to three times the highest amount of the employer contributions (including both matching contributions and other employer contributions) credited to the Invacare Deferred Compensation Plus Plan (or related successor plan or plans) for the benefit of the Executive for any single plan year ending on or after the date that is three years before the date of the Change of Control.

2.5 SERP . Invacare shall pay to the Executive, within 60 days after the Termination Date, a lump sum amount equal to the sum of the contributions and credited interest which were scheduled to be added to Executive’s account under the Invacare Cash Balance Supplemental Executive Retirement Plan (or related successor plan or plans), during the three year period immediately following the Termination Date (including prorated amounts, as applicable), if Executive had continued in the employ of Invacare through the third anniversary of the Termination Date, all as reflected on the attachment to the participation agreement executed by the Executive in connection with such plan.

2.6 Insurance Benefits . Invacare shall provide to the Executive, from the Termination Date through the third anniversary of the Termination Date, continuing coverage under health, life, and disability insurance programs at least equal in all respects to the highest level of such coverage provided by Invacare to the Executive at any time during the period beginning one year before the Change of Control and ending on the Termination Date.

2.7 Stock Options and Restricted Stock . In respect of all options to purchase Invacare stock and all shares of restricted stock that have been granted to the Executive pursuant to any stock option or restricted stock agreement, plan or arrangement sponsored by Invacare and which remain outstanding as of the Termination Date, and notwithstanding any other provision to the contrary contained in any stock option or restricted stock agreement, plan or arrangement, Invacare shall:

(a) with respect to all options, cause such options:

(i)

to become exercisable in full as of the Termination Date;

(ii)

to continue to be exercisable until the earlier to occur of the second anniversary of the Termination Date or the expiration date of the option;

(iii)

to be exercisable (and/or to be eligible to satisfy any tax withholding requirements in connection with the exercise of the options) using shares of Invacare common stock previously owned by the Executive and/or shares subject to the options being exercised as consideration in lieu of a cash payment or other arrangement, but only to the extent that any such exercise of the option (and/or withholding tax payments) would not result in Invacare being required to take an additional charge in respect of such exercise in determining and reporting its net income for financial accounting purposes; and

(b) with respect to all restricted stock, cause such restricted stock:

(i)

to become vested in full as of the Termination Date; and

(ii)

to be eligible to satisfy any tax withholding requirements in connection with such vesting of the restricted stock using shares of Invacare common stock previously owned by the Executive and/or shares of restricted stock that become so vested as consideration (in lieu of a cash payment or other

arrangement) for the payment of withholding tax, but only to the extent that any such withholding tax payments would not result in Invacare being required to take an additional charge in respect of such accelerated vesting or withholding tax payment in determining and reporting its net income for financial accounting purposes.

2.8 Vesting of Certain Rights . Invacare shall cause the Executive’s rights under (a) the Invacare 401(k) Plus Plan, (b the Invacare Deferred Compensation Plus Plan and (c) the Invacare Cash Balance Supplemental Executive Retirement Plan, to become, as of the Termination Date, immediately vested in full.

2.9 Death of the Executive . In the event of the Executive’s death at any time after the Termination Date through the third anniversary of the Termination Date, then, assuming the Executive was, as of such time, entitled to receive payments and/or benefits pursuant to Sections 1 and/or 2 of this Agreement:

(a) the amounts described in Sections 1, 2.1, 2.2, 2.3, 2.4, and 2.5, to the extent not paid to the Executive, shall be paid to the Beneficiary as soon as practicable following the Executive’s death;

(b) any person who would have been entitled to coverage as the Executive’s dependent (or otherwise because of the Executive’s coverage) under any health insurance program maintained by Invacare (as described in Section 2.6) shall continue to be provided with such coverage as though the Executive had survived through the third anniversary of the Termination Date;

(c) such persons as may be entitled thereto shall receive such benefits as may be provided under any Employee Benefit Plans in accordance with the terms of such Employee Benefit Plans;

(d) such persons as may be entitled thereto shall receive such benefits as may be provided under any other agreement the Executive may have with Invacare or an Affiliate including, without limitation, any agreement relating to options to purchase Invacare stock.

2.10 Alternate Form of Benefit . Notwithstanding the preceding provisions of this Section 2, to the extent the Executive cannot, as a matter of law, or pursuant to the customs or policies of any insurance underwriter or the terms of any benefit plan, realize any benefit or advantage described above in this Section 2 (and especially Section 2.6), or if Invacare reasonably believes that providing the Executive with any such benefit or advantage would be economically disadvantageous because doing so would cause Invacare to lose tax or other

benefits or would cause Executive to incur additional taxes or lose other benefits, Invacare shall notify the Executive and shall pay to the Executive an additional amount or provide a comparable benefit which shall, taking account of any federal, state and local income taxes incurred by the Executive in respect of such payments or benefits, place the Executive in the same, or substantially the same, position, on an after-tax basis, as though he had realized such benefit or advantage; provided , that the amount of any payment to the Executive pursuant to the preceding clause shall be calculated at Invacare’s cost and expense by the Accounting Firm, and its determination of such amount shall be final and binding upon both the Executive and Invacare, and the Executive and Invacare shall each provide the Accounting Firm with such information as it may reasonably request in order to calculate any such amount; provided further , that in no event shall any such additional amount or comparable benefit be provided to the Executive prior to or materially after the time the original payment or benefit would have been provided.

2.11 Later Time for Payment on Account of Termination . Notwithstanding the preceding provisions of Sections 1 and 2, solely to the extent required to comply with applicable provisions of Internal Revenue Code Section 409A (“Section 409A”) with respect to any amounts or benefits not exempt from 409A, payments made pursuant to Sections 1 (ii), 2.1, 2.2, 2.3, 2.4, 2.5 and 2.6 on account of the Executive’s termination of employment shall: (a) not commence until the date that is six months and a day following the Termination Date; and (b) upon commencement, include along with the initial payment an amount sufficient to reimburse the Executive for reasonable lost interest at a rate of 6% per annum, compounded annually, incurred during the period commencing on the date which is 60 days after the Termination Date through the date of payment by Invacare. In the event that Invacare, in the exercise of its reasonable discretion, determines that a delay in payments under this Section 2.11 is required in order to comply with Code Section 409A, Invacare shall, within two business days after the Termination Date, deposit the entire amount due and to become due under Sections 1(ii) and 2, in the trust established by Invacare with Wachovia Bank of North Carolina, N.A. pursuant to a Benefit Security Trust Agreement dated August 21, 1996, as such agreement may be amended from time to time in accordance with its terms. Payments to the Executive from such trust shall thereafter be made in accordance with this Section 2.11; provided, however, that Invacare shall remain fully obligated to the Executive for the full and complete satisfaction of its liabilities and obligations under this Agreement.

3. Excess Parachute Payment Gross-Up; Section 409A Gross-Up .

3.1 Potential for Excess Parachute Payments and for Section 409A Liability . Invacare and the Executive acknowledge that, upon or following a Change of Control, one or more payments or distributions or acceleration or alteration of rights or benefits to be made by Invacare to or for the benefit of the

Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, under some other plan, agreement, or arrangement, or otherwise) (a “Payment”) may be determined to be an “excess parachute payment” that is not deductible by Invacare for Federal income tax purposes and with respect to which the Executive will be subject to an excise tax, penalties or interest because of Sections 280G and 4999, respectively, of the Internal Revenue Code. Invacare and the Executive also acknowledge that, upon or following a Change of Control, one or more Payments may be determined to give rise to liability on the part of the Executive for accelerated or additional tax (or interest or penalties) under Section 409A of the Internal Revenue Code. If benefits become payable to the Executive under Sections 1 or 2 of this Agreement, the Accounting Firm, which shall make all determinations required to be made under this Section 3, shall determine whether any Payment would be an excess parachute payment and whether any Payment would give rise to Section 409A liability on the part of the Executive. The Accounting Firm shall communicate its determination, together with detailed supporting calculations, to Invacare and to the Executive within 30 days after the Termination Date or such earlier time as is requested by Invacare. Invacare and the Executive shall cooperate with each other and the Accounting Firm and shall provide necessary information so that the Accounting Firm may make all such determinations. Invacare shall pay all of the fees of the Accounting Firm for services performed by the Accounting Firm as contemplated in this Section 3.

3.2 Excess Parachute Payment Gross-Up . If any Payment gives rise, directly or indirectly, to liability on the part of the Executive for excise tax, penalties or interest as a result of Section 4999 of the Internal Revenue Code, Invacare shall make additional cash payments to the Executive, from time to time and at the same time, as any Payment constituting an excess parachute payment is paid or provided to the Executive (or as soon thereafter as is practicable and, in any event, no later than March 15 of the calendar year which follows the calendar year in which the excess parachute payment was made or provided to the Executive), in such amounts as are necessary to put the Executive in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under Section 4999 of the Internal Revenue Code or otherwise, or other taxes) and payment of penalties and interest arising as a result of Section 4999 of the Internal Revenue Code, as the Executive would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to an excise tax, penalties or interest as a result of Section 4999 of the Internal Revenue Code.

3.3 Section 409A Gross-Up . If any Payment gives rise, directly or indirectly, to liability on the part of the Executive for tax, penalties or interest as a result of 409A, Invacare shall make additional cash payments to the Executive, from time to time and at the same time, as any Payment giving rise to such liability is paid or provided to the Executive (or as soon thereafter as is practicable and, in any event, no later than March 15 of the calendar year which follows the calendar year in which the Payment giving rise to Section 409A liability was

made or provided to the Executive), in such amounts as are necessary to put the Executive in the same position, after payment of all federal, state, and local taxes (whether income taxes, excise taxes under 409A or otherwise, or other taxes) and interest and penalties, as the Executive would have been in after payment of all federal, state, and local income taxes if the Payments had not given rise to excise taxes, penalties or interest under 409A; provided , however, that in no event shall Invacare be required to make additional cash payments under this Section 3.3 if the Accounting Firm determines that doing so would result in a windfall to the Executive due to duplicative gross-up provisions in this Agreement or in any other binding arrangement.

4. Other Benefits .

4.1 Reimbursement of Certain Expenses After a Change of Control . Invacare shall pay, as incurred (in no event later than the end of the Executive’s taxable year following the year in which such expenses were incurred), all expenses incurred by the Executive at any time during the longer of 20 years or the Executive’s lifetime, including the reasonable fees of counsel engaged by the Executive, in respect of enforcing the Executive’s rights hereunder and/or defending any action brought to have this Agreement declared invalid or unenforceable.

4.2 Sick Leave Pay for Executive . If, after a Change of Control and prior to the Termination Date, the Executive is unable to perform services for Invacare for any period by reason of accidental bodily injury or sickness, Invacare will pay and provide to the Executive, as sick leave pay, all compensation and benefits to which the Executive would have been entitled had the Executive continued to be actively employed by Invacare through the earliest of the following dates (the “Sick Leave Period”): (a) the first date on which the Executive is again capable of performing services for Invacare consistent with past practice , or (b) the date on which the Executive’s employment is terminated by Invacare by reason of Disability or otherwise, or (c) the date on which Invacare has paid and provided 29 months of compensation and benefits to the Executive during the period of the Executive’s incapacity, or (d) the date of the Executive’s death. Notwithstanding the foregoing, the Sick Leave Period may not be greater than 6 months unless the Executive’s injury or sickness can be expected to result in death or can be expected to last for a continuous period of not less than 6 months, and such injury or sickness renders the Executive unable to perform the duties of his position of employment or any substantially similar position of employment. The foregoing sick leave pay is intended to compensate Executive for compensation and benefits that he otherwise would have earned during the Sick Leave Period, and shall not reduce or otherwise have any effect on Executive’s rights to receive any other compensation, benefits or other Payments hereunder for any other reason, including as may be owed arising out of cessation of Executive’s employment.

5. No Set-Off; No Obligation to Seek Other Employment or to Otherwise Mitigate Damages; No Effect Upon Other Plans . Invacare’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim whatsoever which Invacare may have against the Executive. The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. The amount of any payment provided for under this Agreement shall not be reduced by any compensation or benefits earned by the Executive as the result of employment by another employer or otherwise after the termination of the Executive’s employment.

6. Taxes; Withholding of Taxes . Without limiting the right of Invacare to withhold taxes pursuant to this Section 6, the Executive shall be responsible (after taking into account all payments to be made by Invacare to or on behalf of the Executive under Sections 1 or 2 hereof, and any gross-ups required under Section 3 hereof) for all income, excise, and other taxes (federal, state, city, or other) imposed on or incurred by the Executive as a result of receiving the payments provided in this Agreement, including, without limitation, the payments provided under Sections 1 or 2 of this Agreement. Subject to Section 3.1 hereof, Invacare may withhold from any amounts payable under this Agreement all federal, state, city, or other taxes as Invacare shall determine to be required pursuant to any law or government regulation or ruling. Without limiting the generality of the foregoing, Invacare may withhold from any amount payable under this Agreement amounts sufficient to satisfy any withholding requirements that may arise out of any benefit provided to or in respect of the Executive by Invacare under Section 2 of this Agreement.

7. Term of this Agreement . This Agreement shall be effective as of the date first above written and shall thereafter apply to any Change of Control occurring on or before December 31, 2009 or during any succeeding applicable term, and on December 31, 2009 and on December 31 of each succeeding year thereafter (a “Renewal Date”), the term of this Agreement, if not previously terminated, shall be automatically extended for an additional year unless either party has given notice to the other, at least one year in advance of that Renewal Date, that the Agreement shall not apply to any Change of Control occurring after that Renewal Date.

7.1 Termination of Agreement Upon Termination of Employment Before a Change of Control . This Agreement shall automatically terminate on the first date occurring before a Change of Control on which the Executive is no longer employed by Invacare, except that, for purposes of this Agreement, any involuntary termination of employment of the Executive or any termination by the Executive for Good Reason that is effected within 6 months before a Change in Control and primarily in contemplation of a Change of Control that actually occurs after the date of the termination shall be deemed to be a termination of the Executive’s employment as of the date immediately after that Change of Control, and in such case, the Change in Control shall constitute the date as of which the Executive’s right to payment hereunder shall become vested.

7.2 No Termination of Agreement During Three Year Period Beginning on Date of a Change of Control . After a Change of Control, this Agreement may not be terminated. However, if the Executive’s employment with Invacare continues for more than three years following the occurrence of a Change of Control, then, for all purposes of this Agreement other than Sections 1 and 4.1, that particular Change of Control shall thereafter be treated for purposes of this Agreement as if it never occurred; provided, however, that the foregoing shall not deprive Executive of any rights, benefits or payments (or allow Invacare to avoid any obligations) that were or became vested under this or any other agreement, plan or arrangement.

8. Internal Revenue Code Section 409A . This Agreement is intended to meet the requirements for exemption from (or to the extent not exempt, compliance with) Section 409A (including without limitation, the exemptions for short-term deferrals and separation pay arrangements), and this Agreement shall be so construed and administered. Notwithstanding anything in this Agreement to the contrary, at any time prior to a Change in Control, Invacare may unilaterally amend this Agreement, retroactively or prospectively, while maintaining the spirit of this Agreement and after consultation with Executive, to secure exemption from (or, to the extent not exempt, to ensure compliance with), the requirements of 409A and to avoid adverse tax consequences to Executive thereunder. Furthermore, at any time prior to a Change in Control, the Executive agrees to execute such further instruments and take such further action as may be necessary to comply with 409A or to avoid adverse tax consequences to Executive thereunder.

9. Miscellaneous .

9.1 Successor to Invacare . In the event that

(a)

Invacare transfers all or substantially all of its assets to another corporation or entity; or

(b)

(i) Invacare consolidates with or merges with or into any other corporation or entity and

(ii) either (x) Invacare is not the surviving corporation or entity of such consolidation or merger or (y) Invacare is the surviving corporation or entity of such consolidation or merger but the shareholders of Invacare immediately prior to the consummation of such merger or consolidation do not own securities representing a majority of the outstanding voting power of such surviving corporation or entity or its parent after the consummation of the consolidation or merger,

then, in any of such events, the entity surviving such consolidation or merger and each Affiliate thereof having an individual net worth of $5 million or more shall assume joint and several liability for this Agreement in a signed writing and

deliver a copy thereof to the Executive. Upon such assumption, the successor corporation or entity and each Affiliate thereof having an individual net worth of $5 million or more shall become obligated to perform the obligations of Invacare under this Agreement and the term “Invacare” as used in this Agreement shall be deemed to refer to such successor entity and such Affiliates jointly and severally. Any failure of Invacare to obtain the written agreement of such successor or surviving entity (including a parent successor entity) and the required Affiliates to assume this Agreement before the effectiveness of any such succession shall be deemed to be a material breach of this Agreement.

9.2 Notices . Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered in person or by confirmed facsimile transmission (to the Senior Vice President of Human Resources of Invacare in the case of notices to Invacare and to the Executive in the case of notices to the Executive) or mailed by United States registered mail, return receipt requested, postage prepaid, addressed as follows:

If to Invacare:

Invacare Corporation

One Invacare Way

Elyria, OH 44035

Attention: Senior Vice President of Human Resources

If to the Executive:

or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

9.3 Employment Rights . Nothing expressed or implied in this Agreement shall create any right or duty on the part of Invacare or the Executive to have the Executive continue as an officer of Invacare or an Affiliate of Invacare or to remain in the employment of Invacare or an Affiliate of Invacare.

9.4 Administration . Invacare shall be responsible for the general administration of this Agreement and for making payments under this Agreement. All fees and expenses billed by the Accounting Firm for services contemplated under this Agreement shall be the responsibility of Invacare.

9.5 Source of Payments . Any payment specified in this Agreement to be made by Invacare may be made directly by Invacare solely from its general

assets, and the Executive shall have the rights of an unsecured general creditor of Invacare with respect thereto.

9.6 Validity . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which shall remain in full force and effect.

9.7 Modification; Waiver. No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in a writing signed by the Executive and Invacare. No waiver by either party hereto at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or at any prior or subsequent time.

9.8 Entire Agreement; Supercession. Except as otherwise specifically provided herein, this Agreement, including its attachments, contains the entire agreement between the parties concerning the subject matter hereof and incorporates and supersedes any and all prior discussions or agreements, written or oral, the parties may have had with respect to such subject matter, including without limitation that certain change of control agreement previously entered into by Invacare and the Executive, which is hereby amended and restated in its entirety; provided , however, that except as expressly provided otherwise herein, nothing in this Agreement shall affect any rights the Executive or anyone claiming through the Executive may have in respect of either (a) any Employee Benefit Plan which provides benefits to or in respect of the Executive or (b) any other agreements the Executive may have with Invacare or an Affiliate of Invacare, including without limitation any employment or severance protection agreements the Executive may have with Invacare or an Affiliate of Invacare.

9.9 Post-Mortem Payments; Designation of Beneficiary . As indicated in Section 2.9, in the event that, following the termination of the Executive’s employment with Invacare, the Executive is entitled to receive any payments pursuant to this Agreement and the Executive dies, such payments shall be made to the Executive’s Beneficiary designated hereunder. At any time after the execution of this Agreement, the Executive may prepare, execute, and file with the Secretary of Invacare a copy of the Designation of Beneficiary form attached to this Agreement as Exhibit A. The Executive shall thereafter be free to amend, alter or change such form; provided , however, that any such amendment, alteration or change shall be made by filing a new Designation of Beneficiary form with the Secretary or the Senior Vice President of Human Resources of Invacare. In the event the Executive fails to designate a beneficiary, following the death of the Executive, all payments of the amounts specified by this Agreement which would have been paid to the Executive’s designated beneficiary pursuant to this Agreement shall instead be paid to the Executive’s spouse, if any, if she survives the Executive or, if there is no spouse or she does not survive the Executive, to the Executive’s estate.

9.10 Service with Affiliates . Any services the Executive performs for an Affiliate of Invacare shall be deemed performed for Invacare. Any transfer of the Executive’s employment from Invacare to an Affiliate of Invacare, or from an Affiliate of Invacare to Invacare, or from an Affiliate of Invacare to another Affiliate of Invacare shall be deemed not to constitute a termination of the Executive’s employment with Invacare.

9.11 Time Periods . Any action required to be taken under this Agreement within a certain number of days shall be taken within that number of calendar days; provided , however, that if the last day for taking such action falls on a weekend or a holiday, the period during which such action may be taken shall be automatically extended to the next business day. If the day for taking any action under this Agreement falls on a weekend or a holiday, such action may be taken on the next business day. Notwithstanding the foregoing, no such extension shall permit an action to be taken at a time that would cause an exempt payment to become subject to Section 409A or to cause a payment that would otherwise be compliant with Section 409A to cease to be so compliant.

9.12 Incorporation by Reference . The incorporation herein of any terms by reference to another document shall not be affected by the termination of any agreement set forth in such other document or the invalidity of any provisions thereof.

9.13 Binding Effect; Construction of Agreement . This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal representatives, executors, administrators, successors, heirs, and designees (including, without limitation, the Beneficiary). Upon the Executive’s death, for purposes of this Agreement, the term “Executive” shall be deemed to include, as applicable, any person (including, without limitation, the Beneficiary) who is entitled to benefits under this Agreement following the Executive’s death.

9.14 Governing Law . All questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of Ohio, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Ohio or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Ohio.

9.15 Representations and Warranties of Invacare . Invacare represents and warrants to the Executive that (i) Invacare is a corporation duly organized, validly existing, and in good standing under the laws of the State of Ohio; (ii) Invacare has the power and authority to enter into and carry out this Agreement, and there exists no contractual or other restriction upon its so doing; (iii) Invacare has taken such corporate action as is necessary or appropriate to enable it to enter into and perform its obligations under this Agreement; and (iv) this Agreement constitutes the legal, valid and binding obligation of Invacare, enforceable against Invacare in accordance with its terms.

9.16 Gender . The use of the feminine, masculine or neuter pronoun shall not be restrictive as to gender and shall be interpreted in all cases as the context may require.

10. Definitions .

10.1 Accounting Firm . The term “Accounting Firm” means the independent auditors of Invacare for the fiscal year preceding the year in which the Change of Control occurred and such firm’s successor or successors; provided, however, if such firm is unable or unwilling to serve and perform in the capacity contemplated by this Agreement, Invacare shall select another national accounting firm of recognized standing to serve and perform in that capacity under this Agreement, except that such other accounting firm shall not be the then independent auditors for Invacare or any of its Affiliates.

10.2 Affiliate . The term “Affiliate” shall mean, with respect to any person or entity, any other person or entity which controls, is controlled by, or is under common control with such person or entity within the meaning of Section 414(b) or (c) of the Internal Revenue Code.

10.3 Annual Base Salary . “Annual Base Salary” means the highest annual rate of base salary payable by Invacare to the Executive at any time between the Effective Date and the Termination Date.

10.4 Beneficiary . “Beneficiary” means the person designated by the Executive as his beneficiary pursuant to Section 9.9 or such other person as determined pursuant to Section 9.9 hereof.

10.5 Cause . The employment of the Executive by Invacare shall have been terminated for “Cause” if, after a Change of Control and prior to the termination of employment, any of the following has occurred:

(a) the Executive shall have been convicted of a felony,

(b) the Executive commits an act or series of acts of dishonesty in the course of the Executive’s employment which are materially inimical to the best interests of Invacare and which constitutes the commission of a felony, all as determined by the vote of three-fourths of all of the members of the Board of Directors of Invacare (other than the Executive, if the Executive is a Director of Invacare), which determination is confirmed by a panel of three arbitrators appointed and acting in accordance with the rules of the American Arbitration Association for the purpose of reviewing that determination,

(c) any federal or state regulatory agency with jurisdiction over Invacare has issued a final order, with no further right of appeal, that has the effect of suspending, removing, or barring the Executive from continuing his service as an officer or director of Invacare, or

(d) after being notified in writing by the Board of Directors of Invacare to cease any particular Competitive Activity, the Executive shall intentionally continue to engage in such Competitive Activity more than thirty (30) days after receipt of such notice while the Executive remains in the employ of Invacare.

10.6 Change of Control . A “Change of Control” shall be deemed to have occurred at the first time on which, after the Effective Date:

(a) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or report), each as adopted under the Securities Exchange Act of 1934, as amended, disclosing the acquisition, in a transaction or series of transactions, by any person (as the term “person” is used in Section 13(d) and Section 14(d)(2) of the Securities Exchange Act of 1934, as amended), other than (1) A. Malachi Mixon and/or any Affiliate of A. Malachi Mixon, (2) Invacare or any of its subsidiaries, (3) any employee benefit plan or employee stock ownership plan or related trust of Invacare or any of its subsidiaries, or (4) any person or entity organized, appointed or established by Invacare or any of its subisidiaries for or pursuant to the terms of any such plan or trust, of such number of shares of Invacare as entitles that person to exercise 30% or more of the voting power of Invacare in the election of Directors; or

(b) During any period of 24 consecutive calendar months, individuals who at the beginning of such period constitute the Directors of Invacare cease for any reason to constitute at least a majority of the Directors of Invacare unless the election of each new Director of Invacare (over such period) was approved or recommended by the vote of at least two-thirds of the Directors of Invacare then still in office who were Directors of Invacare at the beginning of the period; or

(c) There is a merger, consolidation, combination (as defined in Section 1701.01(Q), Ohio Revised Code), majority share acquisition (as defined in Section 1701.01(R), Ohio Revised Code), or control share acquisition (as defined in Section 1701.01(Z)(1), Ohio Revised Code, or in Invacare’s Articles of Incorporation) involving Invacare and, as a result of which, the holders of shares of Invacare prior to the transaction become, by reason of the transaction, the holders of such number of shares of the surviving or acquiring corporation or other entity as entitles them to exercise less than fifty percent (50%) of the voting power of the surviving or acquiring corporation or other entity in the election of Directors; or

(d) There is a sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Invacare, but only if the transferee of the assets in such transaction is not a subsidiary of Invacare; or

(e) The shareholders of Invacare approve any plan or proposal for the liquidation or dissolution of Invacare, but only if the transferee of the assets of Invacare in such liquidation or dissolution is not a subsidiary of Invacare.

If an event described in any of Clauses (a), (b), (c), (d), and (e) occurs, a Change of Control shall be deemed to have occurred for all purposes of this Agreement and, except as provided in the last sentence of Section 7.2, that Change of Control shall be irrevocable.

10.7 Competitive Activity . The Executive shall be deemed to have engaged in “Competitive Activity” if the Executive engages in any business or business activity (other than as a director, officer, or employee of Invacare) in which Invacare engages as of the time of the notice provided in Section 10.5(d).

10.8 Demotion or Removal . The Executive shall be deemed to have been subjected to “Demotion or Removal” if, during the three year period commencing on the date of a Change of Control, other than by Voluntary Resignation or with the Executive’s written consent, the Executive ceases to hold the highest position held by him at any time during the one year period ending on the date of the Change of Control with all of the duties, authority, and responsibilities of that office as in effect at any time during the one year period ending on the date of the Change of Control.

10.9 Disability . For purposes of this Agreement, the Executive’s employment will have been terminated by Invacare by reason of “Disability” of the Executive only if (a) as a result of accidental bodily injury or sickness, the Executive has been unable to perform his normal duties for Invacare for a period of 180 consecutive days, and (b) the Executive begins to receive payments under the executive long term disability plan or its successor plan(s) sponsored by Invacare not later than 30 days after the Termination Date.

10.10 Employee Benefit Plan . “Employee Benefit Plan” means any plan or arrangement defined as such in 29 U.S.C. §1002 which provides benefits to the employees of Invacare or its Affiliates.

10.11 Good Reason . The Executive shall have “Good Reason” to terminate his employment under this Agreement if, at any time after a Change of Control has occurred and before the third anniversary of that Change of Control, one or more of the events listed in (a) through (f) of this Section 10.11 occurs and, based on that event, the Executive gives notice of such event (and of his intention to terminate his employment if Invacare does not cure such condition(s)) on a date that is both (i) within 90 days of the occurrence of that event and (ii) not later than the third anniversary of that Change of Control, and Invacare does not cure the condition(s) constituting the event within 30 days after such notice:

(a) The Executive is subjected to a Demotion or Removal involving a material diminution in the Executive’s authority, duties, or responsibilities or in those of the individual to whom the Executive is required to report; or

(b) The Executive’s Annual Base Salary is materially reduced (which for this purposes shall be deemed to occur if the reduction is five percent (5%) or greater); or

(c) The Executive’s opportunity for incentive compensation is materially reduced from the level of his opportunity for incentive compensation as in effect immediately before the date of the Change of Control or from time to time thereafter (which for this purposes shall be deemed to occur if the reduction is equivalent to a five percent (5%) or greater reduction in Executive’s Annual Base Salary); or

(d) The Executive is excluded (other than by his volitional action(s)) from full participation in any benefit plan or arrangement maintained for senior executives of Invacare generally, and such exclusion materially reduces the benefits provided to the Executive; or

(e) The Executive’s principal place of employment for Invacare is relocated a material distance (which for this purpose shall be deemed to be more than 35 miles) from One Invacare Way, Elyria, Ohio; or

(f) Any other action or inaction that constitutes a material breach by Invacare of this Agreement or any other agreement under which the Executive provides his services to Invacare.

10.12 Internal Revenue Code . A reference to any provision of the Internal Revenue Code means that provision of the Internal Revenue Code of 1986, as amended, and any successor provision, and any applicable regulations promulgated thereunder.

10.13 Target Bonus . “Target Bonus” means the Executive’s Annual Base Salary multiplied by the higher of (a) the target bonus percentage in effect for the Executive under Invacare’s bonus plan during the fiscal year immediately preceding the fiscal year in which the Change of Control occurs, or (b) the target bonus percentage in effect for the Executive under Invacare’s bonus plan during the fiscal year in which the Change of Control occurs.

10.14 Termination Date . “Termination Date” means the date on which (and related terms, such as “termination of employment” and “terminate employment” mean a situation in which) the Executive incurs a separation from service with Invacare and all of its Affiliates within the meaning of Section 409A. A separation from service under Section 409A includes a quit, discharge, or retirement, or a leave of absence (including military leave, sick leave, or other

bona fide leave of absence such as temporary employment by the government, at the point that such leave exceeds the greater of six months, the period for which the Participant’s right to reemployment is provided either by statute or by contract, or in the case of sick leave, 29 months, if the Executive’s injury or sickness can be expected to result in death or can be expected to last for a continuous period of not less than 6 months, and such injury or sickness renders the Executive unable to perform the duties of his position of employment or any substantially similar position of employment). A separation from service under Section 409A also occurs upon a permanent decrease in service to a level that is no more than twenty percent (20%) of its prior level. For this purpose, whether a separation from service has occurred is determined based on whether it is reasonably anticipated that no further services will be performed by the Executive after a certain date or that the level of bona fide services the Executive will perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services if the Executive has been providing services less than 36 months).

10.15 Voluntary Resignation . A “Voluntary Resignation” shall have occurred if the Executive terminates his employment with Invacare by voluntarily resigning at his own instance without having been requested to so resign by Invacare, except that any resignation by the Executive will not be deemed to be a Voluntary Resignation if, at the time of that resignation, the Executive had Good Reason to resign.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


INVACARE CORPORATION
(“Invacare”)

By



(the “Executive”)

Exhibit A

DESIGNATION OF BENEFICIARY

To:	Invacare Corporation

Attn: Secretary

I, the undersigned, , am a party to a certain Agreement with Invacare Corporation, an Ohio corporation, dated as of December 31, 2008 (the “Agreement”). Pursuant to the agreement, I have the right to designate a person or persons to receive, in the event of my death, any amounts that might become payable to me under the Agreement. I hereby exercise this right and direct that, upon my death, any amounts payable to me under the Agreement shall be distributed in the proportions set forth below to the following person(s) if he, she or they survive me, namely:

Beneficiary

Relationship

Percent Share

If none of the above-designated person (s) survives me, any amounts payable under the Agreement shall be distributed to .

Any and all previous designations of beneficiary made by me are hereby revoked, and I hereby reserve the right to revoke this designation of beneficiary.


Date:
		(Signature)


		(Print name)

Schedule of Change of Control Agreements with Current Executive Officers


Name	Position	Date of Agreement
A. Malachi Mixon, III	Chairman of the Board of Directors	December 31, 2008

Gerald B. Blouch	President and Chief Executive Officer	December 31, 2008

Robert K. Gudbranson	Senior Vice President — Chief Financial Officer	December 31, 2008

Joseph B. Richey, II	President — Invacare Technologies Division and Senior Vice President - Electronics and Design Engineering	December 31, 2008

Louis F. J. Slangen	Senior Vice President — Corporate Marketing and Chief Product Officer	December 31, 2008

Patricia A. Stumpp	Senior Vice President — Human Resources	September 1, 2009

Anthony C. LaPlaca	Senior Vice President and General Counsel	December 31, 2008

Carl E. Will	Senior Vice President — Global Commercial Operations	November 19, 2010

Exhibit 10(l)

INVACARE CORPORATION

FORM OF INDEMNITY AGREEMENT

THIS AGREEMENT is made as of the day of , 20 , by and between INVACARE CORPORATION, an Ohio corporation (the “Corporation”), and (“Indemnitee”), a Director and an Officer of the Corporation.

WHEREAS, it is essential to the Corporation to retain and attract as Directors and/or Officers the most capable persons available, such as Indemnitee; and

WHEREAS, the prevalence of corporate litigation subjects directors and officers to expensive litigation risks, and it is the policy of the Corporation to indemnify its Directors and/or Officers so as to provide them with the maximum possible protection permitted by law; and

WHEREAS, in addition, because the statutory indemnification provisions of the Ohio Revised Code expressly provide that they are non-exclusive, it is the policy of the Corporation to indemnify Directors and Officers who, on behalf of the Corporation, have entered into settlements of derivative suits or have paid judgments, fines or penalties therefor, provided they have not breached the applicable statutory standard of conduct; and

WHEREAS, Indemnitee does not regard the protection available under the Corporation’s Code of Regulations and insurance, if any, as adequate in the present circumstances, and considers it necessary and desirable to his or her service as a Director and/or Officer to have maximum protection, and the Corporation desires to provide such protection to induce Indemnitee to serve in such capacity; and

WHEREAS, the Ohio Revised Code Section 1701.13(E) and the Corporation’s Code of Regulations Article V(a) provide that indemnification of Directors and Officers of the Corporation may be authorized by agreement, and thereby contemplates that contracts of this nature may be entered into between the Corporation and Indemnitee with respect to indemnification of Indemnitee as a Director or an Officer of the Corporation.

NOW, THEREFORE, for good and valuable consideration, the sufficiency and adequacy of which is hereby acknowledged, the Corporation and Indemnitee do hereby agree as follows:

1. Agreement to Serve. Indemnitee agrees to serve or continue to serve as a Director and/or Officer of the Corporation for so long as he or she is duly elected or appointed or until such time as he or she tenders his or her resignation in writing or is otherwise terminated or removed from office.

The Corporation expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on the Corporation hereby in order to induce Indemnitee to continue to serve as a Director and/or Officer of the Corporation, and acknowledges that Indemnitee is relying upon this Agreement in continuing in such capacity.

2. Definitions. As used in this Agreement:

The term “Proceeding” shall include any threatened, pending, or completed action, suit or proceeding, whether brought by or in the right of the Corporation or otherwise and whether of a civil, criminal, administrative or investigative nature, in which Indemnitee may be or may have been involved as a party or otherwise, by reason of the fact that Indemnitee is or was a Director and/or Officer of the Corporation or any subsidiary of the Corporation, by reason of any action taken by Indemnitee or of any inaction on his or her part while acting as such a Director and/or Officer, or by reason of the fact that he or she is or was serving at the request of the Corporation as a director, officer, member or manager, partner, trustee, employee or agent of another corporation, domestic or foreign, non-profit or for-profit, a limited liability company or a partnership, joint venture, trust or other enterprise; in each case whether or not he or she is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification or reimbursement can be provided under this Agreement.

The term “Expenses” shall include, without limitation, expenses of investigations, judicial or administrative proceedings or appeals, attorneys’ fees and disbursements and any expenses of establishing a right to indemnification under Paragraph 9 of this Agreement, but shall not include the amount of judgments, fines or penalties against or settlements paid by Indemnitee.

References to “other enterprise” shall include, without limitation, employee benefit plans; references to “fines” shall include, without limitation, any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Corporation” shall include, without limitation, any service as a Director or Officer of the Corporation which imposes duties on, or involves services by, such Director or Officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Agreement.

3. Indemnity in Third-Party Proceedings. The Corporation shall indemnify Indemnitee in accordance with the provisions of this Paragraph 3 if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding (other than a Proceeding by or in the right of the Corporation to procure a judgment in its favor) by reason of the fact that Indemnitee is or was a Director and/or Officer of the Corporation or a subsidiary of the Corporation, or is or was serving at the request of the Corporation as a director, officer, member or manager, partner, trustee, employee or agent of another corporation, domestic or foreign, non-profit or for-profit, a limited liability company or a partnership, joint venture, trust or other enterprise, against all Expenses, judgments, settlements, fines and penalties, actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such Proceeding, but only if Indemnitee acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, in the case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful. The termination of any such Proceeding by judgment, order of court, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal proceeding, that such person had reasonable cause to believe that his or her conduct was unlawful.

4. Indemnity for Expenses in Proceedings by or in the Right of the Corporation. The Corporation shall indemnify Indemnitee in accordance with the provisions of this Paragraph 4 if Indemnitee is a party to or threatened to be made a party to any Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was a Director and/or Officer of the Corporation or a subsidiary of the Corporation, or is or was serving at the request of the Corporation as a director, officer, member or manager, partner, trustee, employee or agent of another corporation, domestic or foreign, non-profit or for-profit, a limited liability company or a partnership, joint venture, trust or other enterprise, against all Expenses actually and reasonably incurred by Indemnitee in connection with the defense of such Proceeding, but only if he or she acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification for Expenses shall be made under this Paragraph 4 in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged by a court order or judgment, by a court of competent jurisdiction, to be liable to the Corporation, unless and only to the extent that any court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses as such court shall deem proper.

5. Indemnity for Amounts Paid in Settlement in Proceedings by or in the Right of the Corporation. The Corporation shall indemnify Indemnitee in accordance with the provisions of this Paragraph 5 if Indemnitee is a party to or threatened to be made a party to any Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was a Director and/or Officer of the Corporation or a subsidiary of the Corporation, or is or was serving at the request of the Corporation as a director, officer, member or manager, partner, trustee, officer, employee, or agent of another corporation, domestic or foreign, non-profit or for-profit, a limited liability company or a partnership, joint venture, trust or other enterprise, against all amounts actually and reasonably paid in settlement by Indemnitee in connection with any such Proceeding, but only if he or

she acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation.

6. Indemnity for Amounts Paid for in Judgments in Proceedings by or in the Right of the Corporation. The Corporation shall indemnify Indemnitee in accordance with the provisions of this Paragraph 6 if Indemnitee is a party to or threatened to be made a party to any Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was a Director and/or Officer of the Corporation or a subsidiary of the Corporation, or is or was serving at the request of the Corporation as a director, officer, member or manager, partner, trustee, officer, employee, or agent of another corporation, domestic or foreign, non-profit or for-profit, a limited liability company or a partnership, joint venture, trust or other enterprise, against all judgments, fines and penalties actually and reasonably incurred by Indemnitee in connection with any such Proceeding, but only if he or she acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation.

7. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any Proceeding or in defense of any claim, issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.

8. Advances of Expenses. Any Expenses incurred by or on behalf of Indemnitee pursuant to Paragraphs 3 or 4 in any Proceeding shall be paid by the Corporation in advance upon the written request of Indemnitee if Indemnitee shall undertake to (a) repay such amount to the extent that it is ultimately determined by clear and convincing evidence in a court that Indemnitee is not entitled to indemnification hereunder, and (b) reasonably cooperate with the Corporation concerning the action, suit or proceeding giving rise to the Expenses. Any advances to be made under this Paragraph 8 shall be paid by the Corporation to Indemnitee within twenty (20) days following delivery of a written request therefor by Indemnitee to the Corporation.

9. Procedure. Any indemnification and advances provided for in Paragraph 3, 4, 5, 6, 7 and 8 shall be made no later than twenty (20) days after receipt of the written request of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Corporation’s Code of Regulations or Articles of Incorporation providing for indemnification, is not paid in full by the Corporation within twenty (20) days after a written request for payment thereof has been first received by the Corporation, Indemnitee may, but need not, at any time thereafter bring an action against the Corporation to recover the unpaid amount of the claim and, subject to the other provisions of this Agreement, Indemnitee also shall be entitled to be paid for the Expenses of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for Expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Corporation to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Corporation and Indemnitee shall be entitled to receive advance payments of expenses pursuant to Paragraph 8 hereof unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties’ intention that if the Corporation contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide. There shall exist in such action a rebuttable presumption that Indemnitee has met the applicable standard(s) of conduct and is therefore entitled to indemnification pursuant to this Agreement. Neither the failure of the Corporation (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel or its shareholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct as may be required by applicable law, nor any actual determination by the Corporation (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its shareholders) that Indemnitee has not met such applicable standard of conduct, shall (a) constitute a defense to such action, (b) create a presumption that Indemnitee has or has not met the applicable standard of conduct, or (c) otherwise alter the presumption in favor of Indemnitee referred to in the preceding sentence.

10. Allowance for Compliance with SEC Requirements. Indemnitee acknowledges that the Securities and Exchange Commission (“SEC”) has expressed the opinion that indemnification of directors and officers from liabilities under the Securities Act of 1933, as amended (the “Act”), is against public policy as expressed in the Act

and is, therefore, unenforceable. Indemnitee hereby acknowledges and agrees that it will not be a breach of this Agreement for the Corporation to undertake with the SEC in connection with the registration for sale of any capital stock or other securities of the Corporation from time to time that, in the event a claim for indemnification against such liabilities (other than the payment by the Corporation of expenses incurred or paid by a director or officer of the Corporation in the successful defense of any action, suit or proceeding) is asserted in connection with such capital stock or other securities being registered, the Corporation will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of competent jurisdiction on the question of whether or not such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Indemnitee further agrees that such submission to a court of competent jurisdiction shall not be a breach of this Agreement.

11. Indemnification Hereunder Not Exclusive. The indemnification provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under the Articles of Incorporation or the Code of Regulations of the Corporation, any agreement, any vote of shareholders or disinterested directors, the Ohio General Corporation Laws, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office.

The indemnification under this Agreement for any action taken or not taken while serving in an indemnified capacity shall continue as to Indemnitee even though he or she may have ceased to be a Director and/or Officer and shall inure to the benefit of the heirs, executors and personal representatives of Indemnitee.

12. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Corporation for some claims, issues or matters, but not as to other claims, issues or matters, or for some or a portion of the Expenses, judgments, fines or penalties actually and reasonably incurred by Indemnitee or amounts actually and reasonably paid in settlement by Indemnitee in the investigation, defense, appeal or settlement of any Proceeding, but not for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such claims, issues or matters or Expenses, judgments, fines, penalties or amounts paid in settlement to which Indemnitee is entitled.

13. No Rights of Continued Employment. Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment with the Corporation.

14. Reimbursement to Corporation by Indemnitee; Limitation on Amounts Paid by Corporation. To the extent Indemnitee has been indemnified by the Corporation hereunder and later receives payments from any insurance carrier covering the same Expenses, judgments, fines, penalties or amounts paid in settlement so indemnified by the Corporation hereunder, Indemnitee shall immediately reimburse the Corporation hereunder for all such amounts received from the insurer.

Notwithstanding anything contained herein to the contrary, Indemnitee shall not be entitled to recover amounts under this Agreement which, when added to the amount of indemnification payments made to, or on behalf of, Indemnitee, under the Articles of Incorporation or Code of Regulations of the Corporation, in the aggregate exceed the Expenses, judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Indemnitee (“Excess Amounts”). To the extent the Corporation has paid Excess Amounts to Indemnitee, Indemnitee shall be obligated to immediately reimburse the Corporation for such Excess Amounts.

Notwithstanding anything contained herein to the contrary, the Corporation shall not be obligated under the terms of this Agreement to indemnify Indemnitee:

(a) or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise, but such indemnification or advancement of expenses may be provided by the Corporation in specific cases if the Board of Directors finds it appropriate;

(b) if it is proved by final judgment in a court of law or other final adjudication to have been based upon or attributable to the Indemnitee’s in fact having gained any personal profit or advantage to which he or she was not legally entitled;

(c) for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous;

(d) for a disgorgement of profits made from the purchase and sale by Indemnitee of securities pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any state statutory law or common law; or

(e) for any Expenses, judgment, fine or penalty which the Corporation is prohibited by applicable law from paying as indemnity or for any other reason.

15. Scope. Notwithstanding any other provision of this Agreement, except Paragraph 14 hereof, the Corporation hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Corporation’s Code of Regulations or Articles of Incorporation, or by statute. In the event of any change, after the date of this Agreement, in any applicable law, statute or rule which expands the right of an Ohio corporation to indemnify a member of its board of directors or an officer, such change shall be deemed to be within the purview of the Indemnitee’s rights and the Corporation’s obligations under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of an Ohio corporation to indemnify a member of its board of directors or an officer, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

16. Notice to Insurers. If, at the time of the receipt of a written request of Indemnitee pursuant to Paragraph 9 hereof, the Corporation has director and officer liability insurance in effect, the Corporation shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Corporation shall thereafter take all necessary or desirable action, using commercially reasonable efforts, to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

17. Continuation of Rights and Obligations. All rights and obligations of the Corporation and Indemnitee hereunder shall continue in full force and effect despite the subsequent amendment or modification of the Corporation’s Articles of Incorporation or Code of Regulations, as such are in effect on the date hereof, and such rights and obligations shall not be affected by any such amendment or modification, any resolution of directors or shareholders of the Corporation, or by any other corporate action which conflicts with or purports to amend, modify, limit or eliminate any of the rights or obligations of the Corporation and/or Indemnitee hereunder.

18. Amendment and Modification. This Agreement may only be amended, modified or supplemented by the written agreement of the Corporation and Indemnitee.

19. Assignment. This Agreement shall not be assigned by the Corporation or Indemnitee without the prior written consent of the other party thereto, except that the Corporation may freely assign its rights and obligations under this Agreement to any subsidiary for whom Indemnitee is serving as a director and/or officer thereof; provided, however, that no permitted assignment shall release the assignor from its obligations hereunder. Subject to the foregoing, this Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, including, without limitation, any successor to the Corporation by way of merger, consolidation and/or sale or disposition of all or substantially all of the capital stock of the Corporation.

20. Saving Clause. If this Agreement or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, the Corporation shall nevertheless indemnify Indemnitee as to Expenses, judgments, fines, penalties and amounts paid in settlement with respect to any Proceeding to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated or by any other applicable law.

21. Counterparts. This Agreement may be executed in two or more fully or partially executed counterparts each of which shall be deemed an original binding the signer thereof against the other signing parties, but all counterparts together shall constitute one and the same instrument. Executed signature pages may be removed from counterpart agreements and attached to one or more fully executed copies of this Agreement. The parties may execute and deliver this Agreement by facsimile signature, which shall have the same binding effect as an original ink signature.

22. Notice. Indemnitee shall, as a condition precedent to his or her right to be indemnified under this Agreement, give to the Corporation notice in writing as soon as practicable of any claim made against him or her for which indemnity will or could be sought under this Agreement. Notice to the Corporation shall be directed to the Corporation at its headquarters located at One Invacare Way, Elyria, Ohio 44035, Attention: Chairman (or such other address as the Corporation shall designate in writing to Indemnitee). Notice shall be deemed received three days after the date postmarked if sent by prepaid mail, properly addressed. In addition, Indemnitee shall give the Corporation such information and cooperation as it may reasonably require within Indemnitee’s power.

23. Applicable Law. All matters with respect to this Agreement, including, without limitation, matters of validity, construction, effect and performance, shall be governed by and construed in accordance with the laws of the State of Ohio applicable to contracts made and to be performed therein between the residents thereof (regardless of the laws that might otherwise be applicable under principles of conflict of law).

IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be duly executed and signed as of the day and year first above written.


INVACARE CORPORATION
THE “CORPORATION”

By
Its:

“INDEMNITEE”

Schedule of Indemnity Agreements with Current Directors and Executive Officers


Person	Position	Date of Agreement
A. Malachi Mixon, III	Chairman of the Board and Director	May 24, 2001

Gerald B. Blouch	President & Chief Executive Officer and Director	May 24, 2001

Joseph B. Richey, II	President - Invacare Technologies, Senior Vice President - Electronics and Design Engineering and Director	May 24, 2001

Louis F.J. Slangen	Senior Vice President - Corporate Marketing and Chief Product Officer	May 24, 2001

Robert K. Gudbranson	Senior Vice President and Chief Financial Officer	April 1, 2008

Anthony C. LaPlaca	Senior Vice President and General Counsel	December 29, 2008

Patricia A. Stumpp	Senior Vice President - Human Resources	September 1, 2009

Carl E. Will	Senior Vice President - Global Commercial Operations	November 19, 2010

James C. Boland	Director	May 24, 2001

Michael F. Delaney	Director	May 24, 2001

Dan T. Moore, III	Director	May 24, 2001

William M. Weber	Director	May 24, 2001

Dr. C. Martin Harris	Director	January 24, 2003



Dale C. LaPorte	Director	February 12, 2009

Charles S. Robb	Director	March 1, 2010

James L. Jones	Director	December 1, 2010

Exhibit 10(m)

INVACARE CORPORATION

DEFERRED COMPENSATION PLUS PLAN

INVACARE CORPORATION

DEFERRED COMPENSATION PLUS PLAN

(Effective January 1, 2005)

Table of Contents


		Page
ARTICLE I INTRODUCTION			4
1.1	Name of Plan		4
1.2	Purposes of Plan		4
1.3	“Top Hat” Pension Benefit Plan		4
1.4	Plan Unfunded		4
1.5	Effective Date		4
1.6	Administration		5

ARTICLE II DEFINITIONS AND CONSTRUCTION			6
2.1	Definitions		6
2.2	Number and Gender		12
2.3	Headings		12

ARTICLE III PARTICIPATION AND ELIGIBILITY			13
3.1	Participation		13
3.2	Commencement of Participation		13
3.3	Cessation of Active Participation		13
3.4	Protective Measures		13

ARTICLE IV CONTRIBUTIONS AND VESTING			14
4.1	Deferrals by Participants		14
4.2	Effective Date of Participation and Deferral Election Form		15
4.3	Modification or Revocation of Election by Participant		15
4.4	Matching Contributions		15
4.5	Make Whole IQC Contributions		15
4.6	Discretionary Contributions		15
4.7	Suspension of Contributions		16
4.8	Vesting		16
4.9	Suspension and Forfeiture Following Accelerated Distribution of Grandfathered Deferrals		16

ARTICLE V ACCOUNTS			17
5.1	Establishment of Bookkeeping Accounts		17
5.2	Subaccounts		17
5.3	Earnings Elections		17
5.4	Hypothetical Accounts and Creditor Status of Participants		18
5.5	Investments		18

ARTICLE VI PAYMENT OF ACCOUNT			19
6.1	Timing of Distribution of Accounts		19


6.2	Adjustment for Investment Gains and Losses Upon a Distribution	19
6.3	Form of Payment	19
6.4	Change in Date or Form of Distribution	20
6.5	Transition Elections	21
6.6	Designation of Beneficiaries	21
6.7	Change of Beneficiary Designation	21
6.8	No Beneficiary Designation	21
6.9	Withdrawals for Unforeseeable Emergency	22
6.10	Withholding	22

ARTICLE VII ADMINISTRATION		23
7.1	Committee	23
7.2	General Powers of Administration	23
7.3	Indemnification of Committee	24

ARTICLE VIII DETERMINATION OF BENEFITS, CLAIMS PROCEDURE AND ADMINISTRATION		25
8.1	Claims	25
8.2	Claim Decision	25
8.3	Request for Review of a Denied Claim	26
8.4	Review of Decision	26
8.5	Discretionary Authority	27

ARTICLE IX AMENDMENT AND TERMINATION		28
9.1	Power to Amend or Terminate	28
9.2	Distribution Upon Plan Termination	28

ARTICLE X MISCELLANEOUS		30
10.1	Plan Not a Contract of Employment	30
10.2	Non-Assignability of Benefits	30
10.3	Severability	30
10.4	Governing Laws	30
10.5	Binding Effect	30
10.6	Entire Agreement	30
10.7	No Guaranty of Tax Consequences	31

INVACARE CORPORATION

DEFERRED COMPENSATION PLUS PLAN

(Effective January 1, 2005)

ARTICLE I

INTRODUCTION

1.1

Name of Plan.

Invacare Corporation (the “Company”) hereby adopts the Invacare Corporation Deferred Compensation Plus Plan (the “Plan”).

1.2

Purposes of Plan.

The purposes of the Plan are to provide deferred compensation for a select group of management or highly compensated Employees and to provide eligible Employees the opportunity to defer receipt of a portion of Base Salary, Bonus Compensation and/or other compensation.

1.3

“Top Hat” Pension Benefit Plan.

The Plan is an “employee pension benefit plan” within the meaning of ERISA Section 3(2). The Plan is maintained, however, for a select group of management or highly compensated employees and, therefore, is exempt from Parts 2, 3 and 4 of Title 1 of ERISA. The Plan is not intended to qualify under Code Section 401(a).

1.4

Plan Unfunded.

The Plan is unfunded. All benefits will be paid from the general assets of the Company, which will continue to be subject to the claims of the Company’s creditors. No amounts will be set aside for the benefit of Plan Participants or their Beneficiaries.

1.5

Effective Date.

The Company maintains the Invacare Corporation 401(k) Plus Benefit Equalization Plan (“Prior Plan”) which relates to certain deferred compensation amounts which were deferred, earned and vested on or prior to December 31, 2004, plus earnings and losses attributable thereto. Such amounts remain subject to all terms and provisions of the Prior Plan which are not intended to be modified by the terms hereof, or otherwise materially modified, so as to allow such amounts to be exempt from Code Section 409A.

The Company now establishes the Invacare Corporation Deferred Compensation Plus Plan, effective January 1, 2005, which relates to (i) amounts deferred after December 31, 2004, and (ii) any amounts previously deferred under the Prior Plan but which were not vested prior to January 1, 2005 (all liabilities with respect to such amounts being hereby transferred to this Plan), plus earnings and losses attributable thereto. The Plan is effective as of the Effective Date; provided, however, that in general this document reflects the provisions of the Plan in effect for periods on and after January 1, 2009. For the period between the Effective Date and

January 1, 2009, the Plan was operated in good faith compliance with Code Section 409A and applicable transition guidance and relief thereunder (including but not limited to Notice 2007-86), but this document is not intended to fully reflect the operation of the Plan during such period.

1.6

Administration.

The Plan shall be administered by the Committee or its delegates, as set forth in Section 7.1.

ARTICLE II

DEFINITIONS AND CONSTRUCTION

2.1

Definitions.

For purposes of the Plan, the following words and phrases shall have the respective meanings set forth below, unless their context clearly requires a different meaning:

(a)

“Account” means the bookkeeping account or accounts maintained by the Company to reflect the Participant’s Base Salary Deferrals, Bonus Deferrals, Matching Contributions, IQC Contributions, Discretionary Contributions and Prior Plan Unvested Amounts, together with all earnings, gains and losses thereon. Accounts shall be further denominated as Retirement Accounts or In-Service Distribution Accounts.

(b)

“Affiliate” means any corporation or business organization during any period during which it would be treated, together with the Company, as a single employer for purposes of Code Sections 414(b) or (c).

(c)

“Base Salary” means the base rate of cash compensation, including commissions, paid by the Company to or for the benefit of a Participant for services rendered or labor performed while a Participant, including base pay a Participant could have received in cash in lieu of (i) deferrals pursuant to Section 4.1 and (ii) contributions made on his behalf to any qualified plan maintained by the Company or to any cafeteria plan under Code Section 125 maintained by the Company.

(d)

“Base Salary Deferral” means the amount of a Participant’s Base Salary which the Participant elects to have withheld hereunder and credited to his Account pursuant to Section 4.1.

(e)

“Beneficiary” means the person or persons designated by the Participant in accordance with Section 6.6 or, in the absence of an effective designation, the person or entity described in Section 6.8.

(f)

“Board” means the Board of Directors of the Company.

(g)

“Bonus Compensation” means the amount that is awarded to a Participant for a Plan Year under any bonus arrangement maintained by the Company and is “performance-based compensation” under Code Section 409A.

(h)

“Bonus Deferral” means the amount of a Participant’s Bonus Compensation which the Participant elects to have withheld hereunder and credited to his Account pursuant to Section 4.1.

(i)

“Change of Control” means the first time on which, after the Effective Date:

(i)

There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or report), each as adopted under the Securities Exchange Act of 1934, as amended, disclosing the acquisition, in a transaction or series of transactions, by any person (as the term “person” is used in Section 13(d) and Section 14(d)(2) of the Securities Exchange Act of 1934, as amended), other than (1) A. Malachi Mixon and/or any Affiliate of A. Malachi Mixon, (2) Invacare or any of its subsidiaries, (3) any employee benefit plan or employee stock ownership plan or related trust of Invacare or any of its subsidiaries, or (4) any person or entity organized, appointed or established by Invacare or any of its subsidiaries for or pursuant to the terms of any such plan or trust, of such number of shares of Invacare as entitles that person to exercise 30% or more of the voting power of Invacare in the election of Directors; or

(ii)

During any period of 24 consecutive calendar months, individuals who at the beginning of such period constitute the Directors of Invacare cease for any reason to constitute at least a majority of the Directors of Invacare unless the election of each new Director of Invacare (over such period) was approved or recommended by the vote of at least two-thirds of the Directors of Invacare then still in office who were Directors of Invacare at the beginning of the period; or

(iii)

There is a merger, consolidation, combination (as defined in Section 1701.01(Q), Ohio Revised Code), majority share acquisition (as defined in Section 1701.01(R), Ohio Revised Code), or control share acquisition (as defined in Section 1701.01(Z)(1), Ohio Revised Code, or in Invacare’s Articles of Incorporation) involving Invacare and, as a result of which, the holders of shares of Invacare prior to the transaction become, by reason of the transaction, the holders of such number of shares of the surviving or acquiring corporation or other entity as entitles them to exercise less than fifty percent (50%) of the voting power of the surviving or acquiring corporation or other entity in the election of Directors; or

(iv)

There is a sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Invacare, but only if the

transferee of the assets in such transaction is not a subsidiary of Invacare; or

(v)

The shareholders of Invacare approve any plan or proposal for the liquidation or dissolution of Invacare, but only if the transferee of the assets of Invacare in such liquidation or dissolution is not a subsidiary of Invacare.

If an event described in any of Clauses (a), (b), (c), (d), and (e) occurs, a Change of Control shall be deemed to have occurred for all purposes of this Agreement and that Change of Control shall be irrevocable.

(j)

“Code” means the Internal Revenue Code of 1986, as amended. In general, a reference to the Code will include all lawful regulations and pronouncements promulgated thereunder, including without limitation, all applicable transition relief with respect to Code Section 409A.

(k)

“Committee” means the administrative committee named to administer the Plan pursuant to Section 7.1.

(l)

“Company” means Invacare Corporation and any successor thereto.

(m)

“Deferral Period” means the period of time for which a Participant elects to defer receipt of the Base Salary Deferrals and Bonus Deferrals credited to such Participant’s In-Service Account(s).

(n)

“Directors” means the Board of Directors of the Company.

(o)

“Disability” means, with respect to any Participant, that such Participant is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, either (i) unable to engage in any substantial gainful activity, or (ii) receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company. Without limitation, for purpose of this Plan, a Participant will be deemed to have a Disability if the Participant is determined to be totally disabled by the Social Security Administration, or is determined to be disabled in accordance with a disability insurance program of the Company or any Affiliate (provided that the definition of disability applied under such disability insurance program complies with the requirements of Section 409A).

(p)

“Discretionary Contribution” means the Company’s contribution, if any, made pursuant to Section 4.6.

(q)

“Effective Date” means January 1, 2005, except where a different date is specifically set forth.

(r)

“Employee” means any common-law employee of the Company or any Affiliate.

(s)

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended. In general, a reference to ERISA will include all lawful regulations and pronouncements promulgated thereunder.

(t)

“401(k) Plan” means the Invacare Retirement Savings Plan, as in effect on January 1, 2005, and as amended from time to time thereafter.

(u)

“In-Service Distribution Accounts” means an Account(s) to which a Participant’s Base Salary Deferrals and Bonus Deferrals are credited pursuant to the terms of the Plan and the election of a Participant. Each of a Participant’s In-Service Distribution Accounts is distributable in a future calendar year which is not less than two (2) years following the end of the Plan Year in which the deferral of compensation was made and which is selected by the Participant pursuant to Section 4.1 hereof. A Participant may have up to two (2) In-Service Distribution Accounts under the Plan at any one time.

(v)

“IQC Contributions” means the amount, if any, of Invacare Quarterly Contributions made by the Company under the 401(k) Plan for a Plan Year.

(w)

“Key Employee” means a “specified employee” within the meaning of Code Section 409A(a)(2)(B)(i). For purposes of this Plan, “Key Employees” will be identified on the basis of the 12 month period ending each December 31 and each such identification will apply during the 12 month period commencing on the succeeding April 1.

(x)

“Make Whole IQC Contribution” means a contribution equal to the Invacare Quarterly Contribution that would have been made to the 401(k) Plan for a Participant but for the limitation on compensation contained in Code Section 401(a)(17).

(y)

“Matching Contribution” means the matching amount, as determined by the Company each year, that would be credited to the Participant’s Account based on Base Salary Deferrals and

Bonus Deferrals under the 401(k) Plan if such deferrals had been deferred by the Participant into the 401(k) Plan (but without regard to the limitations of Code Section s 401(a)(17), 415 or other relevant limitations under the Code), reduced by the actual matching contributions made on deferrals under the 401(k) Plan. Any Matching Contribution shall be credited by the Company to the Retirement Account of each Participant at such time or times as the Company determines.

(z)

“Participant” means each Employee who has been selected for participation in the Plan, who has become a Participant pursuant to Article III and who retains an Account under this Plan.

(aa)

“Participation and Deferral Election Form” means the written agreement pursuant to which the Participant elects the amount of his Base Salary and/or his Bonus Compensation to be deferred pursuant to the Plan, the Account to which such deferrals are to be credited, the Deferral Period, if applicable, the deemed investment of amounts deferred and the time and form of payment of such amounts and such other matters as the Committee shall determine from time to time.

(bb)

“Plan” means the Invacare Corporation Deferred Compensation Plus Plan, as in effect on the Effective Date, and as amended from time to time hereafter.

(cc)

“Plan Year” means the 12-consecutive month period commencing January 1 of each year ending on the following December 31.

(dd)

“Prior Plan Unvested Amounts” means any unvested amount credited to a Participant’s Account under the Invacare Corporation 401(k) Benefit Equalization Plus Plan as of December 31, 2004 which is transferred to the Participant’s Retirement Account under this Plan on or after the Effective Date.

(ee)

“Retirement” means a Participant’s Termination of Employment after the attainment of age fifty-five (55) and completion of ten (10) Years of Service or more.

(ff)

“Retirement Account” means an Account to which Base Salary Deferrals and Bonus Deferrals are credited pursuant to the terms of the Plan and the election of a Participant. A Participant’s Retirement Account shall also be credited with any Matching Contributions, Make Whole IQC Contributions, Profit Sharing Contributions and Discretionary Contributions creditable to a Participant under the terms of the Plan. A Participant’s Retirement Account is generally payable upon his Retirement.

(gg)

“Termination of Employment” means the separation from service of a Participant from the Company and all Affiliates for any reason, which includes:

(i)

a voluntary resignation;

(ii)

involuntary discharge for any reason, with or without cause;

(iii)

Retirement;

(iv)

death;

(v)

a leave of absence (including military leave, sick leave, or other bona fide leave of absence) but only at the point that such leave exceeds the greatest of (i) six months, (ii) the period for which the Participant’s right to reemployment is guaranteed either by statute or by contract, or (iii) 12 months if such leave constitutes sick leave arising by reason of an injury to, or sickness of, the Participant, which, in either case, involves a medically determinable physical or mental impairment that (y) is expected to result in death or to last for a continuous period of not less than 6 months, and (z) renders the Participant unable to perform the duties of his position of employment or any substantially similar position of employment; or

(vi)

a permanent decrease in the Participant’s service to a level that is no more than twenty percent (20%) of its prior level.

In determining whether a Termination of Employment has occurred, this definition shall be interpreted in accordance with regulations under Code Section 409A, with respect to separation from service, including, without limitation, whether it is reasonably anticipated that no further services will be performed by the Participant after a certain date or that the level of bona fide services the Participant will perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services if the Participant has been providing services less than 36 months).

The transfer of a Participant from the Company to an Affiliate or from an Affiliate to the Company or another Affiliate shall not constitute a Termination of Employment for purposes of this Plan. In addition, without limiting the generality of the foregoing, in

determining Affiliates for purposes of applying this definition of Termination of Employment, the usual “at least 80%” standard in Code Section 1563(a)(1), (2) and (3) shall read “at least 50%” (or, where the Compensation Committee has determined that there is a good business reason for such lower limit, “at least 20%”) for purposes of construing Code Sections 414(b) and 414(c).

(hh)

“Unforeseeable Emergency” means a severe financial hardship to a Participant within the meaning of Code Section 409A resulting from: (i) an illness or accident of the Member or the Member’s spouse or dependent (as defined in Code Section 152 without regard to Code Sections 152(b)(1), (b)(2) and (d)(1)(B)); (ii) loss of the Participant’s property due to casualty; or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

(ii)

“Valuation Date” means each business day.

(jj)

“Years of Service” shall have the same meaning as in the 401(k) Plan.

2.2

Number and Gender.

Wherever appropriate herein, words used in the singular shall be considered to include the plural and words used in the plural shall be considered to include the singular. The masculine gender, where appearing in the Plan, shall be deemed to include the feminine gender.

2.3

Headings.

The headings of Articles and Sections herein are included solely for convenience, and if there is any conflict between such headings and the rest of the Plan, the text shall control.

ARTICLE III

PARTICIPATION AND ELIGIBILITY

3.1

Participation.

Participants in the Plan are those Employees who are (a) subject to the income tax laws of the United States, (b) members of a select group of highly compensated or management Employees, and (c) selected by the Committee or its delegates, in its sole discretion, as Participants. The Committee shall notify each Participant of his selection as a Participant. An Employee who satisfies the eligibility requirements set forth in subsections (a) and (b) shall remain eligible to continue participation in the Plan for each Plan Year following his selection by the Committee as a Participant unless the Committee shall determine otherwise.

3.2

Commencement of Participation.

Except as provided in the following sentence, an Employee shall become a Participant effective as of the first day of the Plan Year following the date on which his Participation and Deferral Election Form becomes effective.

3.3

Cessation of Active Participation.

Notwithstanding any provision herein to the contrary, an individual who has become a Participant in the Plan shall cease to be a Participant hereunder, effective as of such date as may be designated by the Committee, provided that for purposes of ceasing Base Salary Deferrals and Bonus Deferrals, such date may only occur as of the end of a Plan Year, except to the extent otherwise permitted under Code Section 409A. Any such Committee action shall be communicated to such Participant prior to the effective date of such action.

3.4

Protective Measures.

If the Administrator determines, in its sole discretion, that a Participant is not, or may not be, a member of a “select group of management or highly compensated employees” within the meaning of Section 201(2), 301(a)(3), 401(a)(1) or 4021(b)(6) of ERISA, then the Administrator may, in its sole discretion, terminate the Participant’s participation in the Plan as of the last day of the then current Plan Year. Such Participant’s deferral election(s) shall also be cancelled as of the last day of such Plan Year. Such termination of participation shall not impact the time and form of payment of the amounts credited to such Participant’s Accounts, which will be distributed by the Company in accordance with the other provisions hereof.

ARTICLE IV

CONTRIBUTIONS AND VESTING

4.1

Deferrals by Participants.

No later than the last day of the Plan Year immediately preceding the Plan Year to which the Participation and Deferral Election Form relates, a Participant who elects to make Base Salary Deferrals must file with the Committee a Participation and Deferral Election Form pursuant to which such Participant elects to make Base Salary Deferrals.

A Participant must file a Participation and Deferral Election Form to make Bonus Deferrals at a time prescribed by the Committee which time shall be not later than six (6) months before the end of the 12 month period over which the services upon which the Bonus Compensation is based are performed, provided that in no event may an election to defer be made after such Bonus Compensation to which the Bonus Deferral relates has become readily ascertainable.

A deferral election will be irrevocable as of the last permissible date for making such election, as described in this Section 4.1.

A Participant shall be entitled to defer a whole percent of his Base Salary or Bonus Compensation, subject to a maximum deferral of fifty percent (50%) of Base Salary and one hundred percent (100%) of Bonus Compensation.

At the time a Participant completes a Participation and Deferral Election Form, he shall elect to have his Base Salary Deferrals and Bonus Deferrals credited to a Retirement Account or an In-Service Distribution Account.

An election to have amounts credited to an In-Service Distribution Account shall specify the Deferral Period applicable to such amounts by specifying the calendar year in which payment of amounts in such In-Service Distribution Account shall be made or shall commence to be made in accordance with Section 6.1, which shall be no sooner than two full years following the Plan Year to which such deferrals relate and whether the distribution is to be paid in a lump sum or in annual installments amortized over a specified period of years not to exceed five (5) years in accordance with Section 6.3(b). A Participant shall be permitted a maximum of two In-Service Distribution Accounts in existence at any time. Once a Participant has two In-Service Distribution Accounts established, he may make further In-Service Distribution elections only if the amount subject to such further elections can be properly allocated to an existing In-Service Distribution Account. In the event an election to have amounts credited to an In-Service Distribution Account fails to specify a valid Deferral Period, then any amounts subject to such election shall be credited to an In-Service Distribution Account with a Deferral Period of two full years following the Plan Year to which the deferrals relate. If the Participant already has two existing In-Service Distribution Accounts, the amounts subject to the election shall be credited to the Account that has a remaining Deferral Period that is closest to but not less than two years.

Base Salary Deferrals will be credited to the Account of each Participant as soon as practicable following each pay date, if and to the extent that the Participant earned such Base Salary as an Employee for such pay date. Bonus Deferrals will be credited to the Account of each Participant not later than the last day of the month in which such Bonus Compensation otherwise would have been paid to the Participant in cash, provided that if the Participant has incurred a Termination of Employment at the time the Bonus Compensation would otherwise have been paid, the Bonus Deferral shall be immediately distributed from the Plan if the Participant has received full distribution of his Account; otherwise, it shall be credited to the Plan and paid in accordance with the timing and form of payment otherwise applicable to such Participant’s Retirement Account.

4.2

Effective Date of Participation and Deferral Election Form.

Except as provided below with respect to a new Participant, a Participant’s Participation and Deferral Election Form shall become effective on the first day of the Plan Year to which it relates. If an Employee fails to timely complete a Participation and Deferral Election Form in accordance with Section 4.1, the Employee shall be deemed to have elected not to make Base Salary Deferrals and/or Bonus Deferrals for such Plan Year.

4.3

Modification or Revocation of Election by Participant.

Subject to Section 6.10, a Participant may not prospectively change the amount of his Base Salary Deferrals or Bonus Deferrals during a Plan Year. Unless required or permitted by law, under no circumstances may a Participant’s Participation and Deferral Election Form be made, modified or revoked retroactively.

4.4

Matching Contributions.

Each Participant who elects to make Base Salary Deferrals and/or Bonus Deferrals to the Plan and who has completed at least six (6) months of service with the Company or any Affiliate will receive Matching Contributions in accordance with the applicable matching contribution percentage formula provided under the 401(k) Plan. Matching Contributions will be credited to the Participant’s Retirement Account at such time or times as the Company shall determine.

4.5

Make Whole IQC Contributions.

Each year, the Retirement Account of each eligible Participant shall be credited with the Make Whole IQC Contribution, if any, to which he is entitled under Section 2.1(x).

4.6

Discretionary Contributions.

For each Plan Year, the Retirement Account of each eligible Participant shall be credited with such Discretionary Contribution, if any, as is determined by the Company for such Plan Year at such time or times as the Company shall determine.

4.7

Suspension of Contributions.

Anything contained herein to the contrary notwithstanding, if a Participant receives a distribution from the Plan due to an Unforeseeable Emergency, any existing deferral election(s) made under Section 4.1 shall be cancelled. Any future deferral election made under Section 4.1 shall apply only to Base Salary or Bonus Compensation that would otherwise be payable at least six (6) months after receipt of such distribution. If required by the terms of the 401(k) Plan, if a Participant receives a hardship distribution under the 401(k) Plan, he shall have any existing deferral election(s) made under Section 4.1 cancelled. Any future deferral election made under Section 4.1 shall apply only to Base Salary or Bonus Compensation that would otherwise be payable at least six (6) months after receipt of such distribution.

4.8

Vesting.

A Participant shall be 100% vested at all times in that portion of his Account which is attributable to Base Salary Deferrals and Bonus Deferrals. Matching Contributions, Make Whole IQC Contributions, Discretionary Contributions and Prior Plan Unvested Amounts shall vest in accordance with the vesting schedule contained in the 401(k) Plan. Notwithstanding the foregoing, all Matching Contributions, Make Whole IQC Contributions, Profit Sharing Contributions and Discretionary Contributions shall be 100% vested immediately upon a Change in Control or a Participant’s Disability. Any provisions of the Plan relating to the distribution of a Participant’s Account shall mean only the vested portion of such Account. Since the Plan is unfunded, the portion of a Participant’s Account which is not vested and therefore not distributed with the vested portion of his Account shall remain property of the Company and shall not be allocated to the Accounts of other Participants or otherwise inure to their benefit.

4.9

Suspension and Forfeiture Following Accelerated Distribution of Grandfathered Deferrals.

If a Participant elects to receive an accelerated distribution from the Participant’s account under the Invacare Corporation 401(k) Plus Benefit Equalization Plan, he shall forfeit the unvested portion of his Account under the Plan and shall be suspended from making future deferral elections under Section 4.1 for the two (2) consecutive Plan Years which begin on or after the date of such distribution, although any existing deferral election(s) under Section 4.1 for the Plan Year in which such accelerated distribution is taken shall remain in force.

ARTICLE V

ACCOUNTS

5.1

Establishment of Bookkeeping Accounts.

A separate bookkeeping Account or Accounts shall be maintained for each Participant. Such Account(s) shall be credited with the Base Salary Deferrals and Bonus Deferrals made by the Participant pursuant to Section 4.1, Matching Contributions made by the Company pursuant to Section 4.4, Make Whole IQC Contributions made pursuant to Section 4.5, Discretionary Contributions made pursuant to Section 4.6 and any Prior Plan Unvested Amount credited (or charged, as the case may be) with the hypothetical investment results determined pursuant to Section 5.3, and charged with distributions made to or with respect to a Participant.

5.2

Subaccounts.

Within each Participant’s bookkeeping Account, separate subaccounts shall be maintained to the extent necessary or desirable for the administration of the Plan. At a minimum, a Retirement Account shall be maintained for distributions to be made upon a Participant’s Retirement or other Termination of Employment and an In-Service Distribution Account shall be maintained for distributions to be made upon expiration of each Deferral Period selected by the Participant under Section 4.1.

5.3

Earnings Elections.

Amounts credited to a Participant’s Account shall be credited or charged with earnings and losses based on hypothetical investments elected by the Participant. A Participant may elect different investment allocations for new contributions and existing Account balances. Only whole percentages may be elected, the minimum percentage for any allocation is 1%, and the total elections must allocate 100% of all new contributions and 100% of all existing Account balances. Investment elections may be changed daily, in accordance with procedures established by the Committee. The hypothetical investment alternatives and the procedures relating to the election of such investments, other than those set forth in this Section 5.3, shall be determined by the Committee from time to time. A Participant’s Account shall be adjusted as of each Valuation Date to reflect investment gains and losses.

Notwithstanding the foregoing provisions of this Section 5.3, if investment in Invacare stock is permitted hereunder, the Company in its sole discretion, shall have the authority to place such restrictions upon the investment directions of any person who is subject to Section 16(b) of the Securities Exchange Act of 1934 as amended (“Insider”) as shall be appropriate to comply with such section. Such restrictions shall include, but shall not be limited to the following: Insiders shall be permitted to submit investment directions relating to Invacare stock only on a “semi-annual date” which is no less than six (6) months after the date of the most recent investment direction received from such Insider relating to Invacare Stock. For purposes of this Section 5.3, the term “semi-annual date” shall mean a date which is within the period that begins the third business day following the date on which the Company’s first fiscal quarter and

third fiscal quarter summary statements of sales and earnings shall be released and which ends on the twelfth business day following such release date.

5.4

Hypothetical Accounts and Creditor Status of Participants.

The Accounts established under this Article V shall be hypothetical in nature and shall be maintained for bookkeeping purposes only. Neither the Plan nor any of the Accounts (or subaccounts) shall hold any actual funds or assets. The payments to a Participant, his Beneficiary or any other distributee hereunder shall be made from assets of the Company which shall continue, at all times, to be a part of the general unrestricted assets of the Company. The right of any person to receive one or more payments under the Plan shall be an unsecured claim against the general assets of the Company. Any liability of the Company to any Participant, former Participant, or Beneficiary with respect to a right to payment shall be based solely upon contractual obligations created by the Plan. Neither the Company, the Board, nor any other person shall be deemed to be a trustee of any amounts to be paid under the Plan. Except as provided in Section 5.5, nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and a Participant, former Participant, Beneficiary, or any other person.

5.5

Investments.

The Company may, in its sole discretion, acquire insurance policies, annuities or other financial vehicles for the purpose of providing future assets to the Company to meet its anticipated liabilities under the Plan. Such policies, annuities, or other acquired assets, shall at all times be and remain unrestricted general property and assets of the Company or property of a trust established pursuant to this Plan. Participants and Beneficiaries shall have no rights, other than as general creditors, with respect to any such policies, annuities or other acquired assets. Furthermore, the Company may establish a trust to hold such policies, annuities or other acquired assets, to be used to make, or reimburse the Company for, payments to the Participants or Beneficiaries of all or part of the benefits under this Plan, provided, however, that the trust assets shall at all times remain subject to the claims of general creditors of the Company in the event of its insolvency. In the event that a trust is established under this section, the Company shall remain liable for paying the benefits under this Plan. However, any payment of benefits to a Participant or Beneficiary made by the trust shall satisfy the Company’s obligation to make such payment to such person.

ARTICLE VI

PAYMENT OF ACCOUNT

6.1

Timing of Distribution of Accounts.

Distribution of a Participant’s entire Account (including any undistributed In-Service Distribution Accounts) shall be made or shall commence to be made as soon as practicable, but no later than 90 days, following the Participant’s Retirement or other Termination of Employment or death. Prior to a Participant’s Termination of Employment, distribution of a Participant’s In-Service Distribution Account(s) shall be made or shall commence to be made as soon as practicable after, but no later than 90 days following the expiration of the Deferral Period selected by the Participant for such Account(s). Notwithstanding the foregoing, if a Participant is a Key Employee, in the event of distribution upon Termination of Employment (for reasons other than death), actual payment of the Participant’s Accounts shall not occur prior to the first day of the seventh month following the Termination of Employment.

6.2

Adjustment for Investment Gains and Losses Upon a Distribution.

For purposes of any distributions hereunder, the value of a Participant’s Account shall be determined as of the Valuation Date immediately preceding the time such distribution is to be made.

6.3

Form of Payment.

(a)

In general, all distributions hereunder shall be made in the form of a single lump sum payment. Notwithstanding the foregoing, at the time a Participant makes his first deferral election hereunder, a Participant may elect that if his Account is payable by reason of Retirement, payment shall be made in a lump sum or in annual installments amortized over a period of years not to exceed fifteen (15) years. Gains and losses on the unpaid balance shall continue to be credited or charged to the Account in accordance with the provisions of Section 5.3. Each annual installment shall be equal to the value of the Account as of the Valuation Date immediately preceding the date of payment divided by the number of installments remaining.

(b)

Except as provided below, a Participant’s In-Service Distribution Account(s) shall be paid in one of the following forms as elected by the Participant:

(i)

A lump sum amount which is equal to the applicable Account balance; or

(ii)

A nnual installments amortized over a period of years not to exceed five (5) years. Gains and losses on the unpaid balance shall continue to be credited or charged to the Account in accordance with the provisions of Section 5.3. Each annual installment shall be equal to the value of the Account as of the Valuation Date immediately preceding the date of payment divided by the number of installments remaining.

Notwithstanding the form elected, if at the time of distribution by reason of Termination of Employment, a Participant’s total Account value under the Plan and all similar arrangements that would constitute a single nonqualified deferred compensation plan as defined under Treasury Regulation 1.409A-1(c)(2) is not more than the amount specified in Code Section 402(g)(1)(B), as adjusted from time to time, then the benefit shall be paid in a single lump sum as soon as practicable but no later than 90 days following the distribution event; provided, however, that if a Participant is a Key Employee, payment of the Participant’s Accounts for reasons other than death shall not occur prior to the first day of the seventh month following the Termination of Employment.

6.4

Change in Date or Form of Distribution.

In general, the form of payment elected by a Participant with respect to his Retirement Account shall be determined by the Participant’s election made at the time he makes his initial deferral election hereunder. Furthermore, the time and form of payment of any In-Service Distribution Account shall be determined by the Participant’s election made at the time he first elects such In-Service Distribution Account. Notwithstanding the foregoing, a Participant may elect one time to change the form of payment of his Retirement Account or the time and form of payment of his In-Service Distribution Account. Any such revised election shall be made by submitting such election in the form determined by the Committee and shall be subject to the following rules:

(a)

the election may not take effect until at least 12 months after the date on which such election is made;

(b)

the payment with respect to which such election is made must be deferred (other than a distribution upon death or Unforeseeable Emergency) for a period of not less than five (5) years from the date such payment would otherwise have been paid; and

(c)

any subsequent election affecting a distribution at a specified time (or pursuant to a fixed schedule) may not be made less than 12 months before the date the payment is scheduled to be paid.

Any such revised election will become irrevocable as of the earlier of the last permissible date for making such election under (a) or (c) above.

6.5

Transition Elections.

Notwithstanding Sections 4.3, 6.3 and 6.4 above, the distributions and distribution elections (and subsequent changes thereto) permitted by the Company prior to 2009 pursuant to the transition relief under Code Section 409A, shall be given full force and effect. In addition, Participants shall be permitted to make such further elections to change the time and form of payment as are permitted by the Company under Section 6.4 above.

6.6

Designation of Beneficiaries.

Each Participant shall have the right, at any time, to designate one (1) or more persons or an entity as Beneficiary (both primary as well as secondary) to whom benefits under this Plan shall be paid in the event of a Participant’s death prior to complete distribution of the Participant’s Account. Each Beneficiary designation shall be in such form as prescribed by the Committee and will be effective only when filed with the Committee during the Participant’s lifetime. Designation by a married Participant of a Beneficiary other than the Participant’s spouse shall not be effective unless the spouse executes a written consent that acknowledges the effect of the designation and is witnessed by a notary public, or the consent cannot be obtained because the spouse cannot be located.

6.7

Change of Beneficiary Designation.

Except as provided below, any nonspousal designation of Beneficiary may be changed by a Participant without the consent of such Beneficiary by the filing of a new designation with the Committee. The filing of a new designation shall cancel all designations previously filed.

6.8

No Beneficiary Designation.

If any Participant fails to designate a Beneficiary in the manner provided above, or if the Beneficiary designated by a deceased Participant dies before the Participant or before complete distribution of the Participant’s benefits, the Participant’s Beneficiary shall be the person in the first of the following classes in which there is a survivor:

(a)

The Participant’s surviving spouse;

(b)

The Participant’s children in equal shares, except that if any of the children predeceases the Participant but leaves issue surviving, then such issue shall take by right of representation the share the parent would have taken if living;

(c)

The Participant’s parents;

(d)

The Participant’s estate.

6.9

Withdrawals for Unforeseeable Emergency.

A Participant may apply in writing to the Committee for, and the Committee may permit, a withdrawal of all or any part of a Participant’s Account, together with all earnings, gains and losses thereon, if the Committee, in its sole discretion, determines that the Participant has incurred an Unforeseeable Emergency. The amount that may be withdrawn shall be limited to the amount reasonably necessary to relieve the Unforeseeable Emergency upon which the request is based, plus the federal and state taxes due on the withdrawal, as determined by the Committee. The Committee may require a Participant who requests a withdrawal on account of an Unforeseeable Emergency to submit such evidence as the Committee, in its sole discretion, deems necessary or appropriate to substantiate the circumstances upon which the request is based and the unavailability of other resources with which the Participant may relieve the Unforeseeable Emergency.

6.10

Withholding.

All distributions shall be subject to legally required income and employment tax withholding. All deferrals shall be determined net of any required tax or other withholdings (including, without limitation, withholdings for FICA tax).

ARTICLE VII

ADMINISTRATION

7.1

Committee.

The Plan shall be administered by a Committee, which shall include the Senior Vice President of Human Resources, the Chief Financial Officer and the Senior Vice President and General Counsel, or the respective successors to those positions. The Committee shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof. The Committee may delegate to others certain aspects of the management and operational responsibilities of the Plan including the employment of advisors and the delegation of ministerial duties to qualified individuals, provided that such delegation is in writing. No member of the Committee who is a Participant shall participate in any matter relating to his status as a Participant or his rights or entitlement to benefits as a Participant.

7.2

General Powers of Administration.

The Committee shall be the Plan Administrator under ERISA (the “Administrator”). The Administrator will be responsible for the general administration of the Plan and will have all powers as may be necessary to carry out the provisions of the Plan and may, from time to time, establish rules for the administration of the Plan and the transaction of the Plan’s business. In addition to any powers, rights and duties set forth elsewhere in this Plan, it will have the following powers and duties:

(a)

To enact rules, regulations, and procedures and to prescribe the use of such forms as it deems advisable;

(b)

To appoint or employ agents, attorneys, actuaries, accountants, assistants or other persons (who may also be Participants in this Plan or be employed by or represent the Company) at the expense of the Company, as it deems necessary to keep its records or to assist it in taking any other action authorized or required under the Plan;

(c)

To interpret the Plan, and to resolve ambiguities, inconsistencies and omissions, to determine any question of fact, to determine the right to benefits of, and the amount of benefits, if any, payable to, any person in accordance with the provisions of the Plan and resolve all questions arising under the Plan;

(d)

To administer the Plan in accordance with its terms and any rules and regulations it establishes; and

(e)

To maintain records concerning the Plan as it deems sufficient to prepare reports, returns and other information required by the Plan or by law; and

(f)

To direct the Company to pay benefits under the Plan, and to give other directions and instructions as may be necessary for the proper administration of the Plan.

Any decision, interpretation or other action made or taken by the Administrator arising out of or in connection with the Plan, will be within the absolute discretion of the Administrator, and will be final, binding and conclusive on the Company, and all Participants and Beneficiaries and their respective heirs, executors, administrators, successors and assigns. The Administrator’s determinations under the Plan need not be uniform, and may be made selectively among Participants, whether or not they are similarly situated.

7.3

Indemnification of Committee.

The Company shall indemnify the members of the Committee against any and all claims, losses, damages, expenses, including attorney’s fees, incurred by them, and any liability, including any amounts paid in settlement with their approval, arising from their action or failure to act, except when the same is judicially determined to be attributable to their gross negligence or willful misconduct.

ARTICLE VIII

DETERMINATION OF BENEFITS, CLAIMS PROCEDURE AND ADMINISTRATION

8.1

Claims.

A Participant, Beneficiary or other person who believes that he or she is being denied a benefit to which he or she is entitled (hereinafter referred to as “Claimant”), or his or her duly authorized representative, may file a written request for such benefit with the Committee setting forth his or her claim. The request must be addressed to the Committee at the Company at its then principal place of business.

8.2

Claim Decision.

Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within a reasonable period of time, but ordinarily not later than ninety days, and shall, in fact, deliver such reply within such period. However, the Committee may extend the reply period for an additional ninety days for reasonable cause. If the reply period will be extended, the Committee shall advise the Claimant in writing during the initial 90-day period indicating the special circumstances requiring an extension and the date by which the Committee expects to render the benefit determination.

If the claim is denied in whole or in part, the Committee will render a written opinion, using language calculated to be understood by the Claimant, setting forth:

(a)

the specific reason or reasons for the denial;

(b)

the specific references to pertinent Plan provisions on which the denial is based;

(c)

a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation as to why such material or such information is necessary;

(d)

appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review, including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review; and

(e)

the time limits for requesting a review of the denial under Section 8.3 and for the actual review of the denial under Section 8.4.

If no notice is provided, the claim will be deemed denied. The interpretations, determinations and decisions of the Administrator will be final and binding upon all persons with respect to any right, benefit and privilege hereunder, subject to the review procedures set forth in this Article.

8.3

Request for Review of a Denied Claim.

Within sixty days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Senior Vice President of Human Resources of the Company (“Executive Officer”) review the Committee’s prior determination. Such request must be addressed to the Executive Officer at the Company at its then principal place of business. The Claimant or his or her duly authorized representative may submit written comments, documents, records or other information relating to the denied claim, which information shall be considered in the review under this Section without regard to whether such information was submitted or considered in the initial benefit determination.

The Claimant or his or her duly authorized representative shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information which (a) was relied upon by the Committee in making its initial claims decision, (b) was submitted, considered or generated in the course of the Committee making its initial claims decision, without regard to whether such instrument was actually relied upon by the Committee in making its decision or (c) demonstrates compliance by the Committee with its administrative processes and safeguards designed to ensure and to verify that benefit claims determinations are made in accordance with governing Plan documents and that, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants. If the Claimant does not request a review of the Committee’s determination within such 60-day period, he or she shall be barred and estopped from challenging such determination.

8.4

Review of Decision.

Within a reasonable period of time, ordinarily not later than sixty days, after the Executive Officer’s receipt of a request for review, it will review the Committee’s prior determination. If special circumstances require that the sixty-day time period be extended, the Executive Officer will so notify the Claimant within the initial 60-day period indicating the special circumstances requiring an extension and the date by which the Executive Officer expects to render its decision on review, which shall be as soon as possible but not later than 120 days after receipt of the request for review. In the event that the Executive Officer extends the determination period on review due to a Claimant’s failure to submit information necessary to decide a claim, the period for making the benefit determination on review shall not take into account the period beginning on the date on which notification of extension is sent to the Claimant and ending on the date on which the Claimant responds to the request for additional information.

Benefits under the Plan will be paid only if the Executive Officer decides in its discretion that the Claimant is entitled to such benefits. The decision of the Executive Officer shall be final and non-reviewable, unless found to be arbitrary and capricious by a court of competent review. Such decision will be binding upon the Company and the Claimant. Without limiting the foregoing, if the law provides that the Claimant may bring a legal action alleging a claim for benefits under this Plan, then, no Claimant may file any lawsuit in any court of law with respect to a claim for benefits hereunder unless such Claimant has timely and properly taken all steps to submit his claim to the Committee and to appeal any benefit denial to the

Executive Officer, and has otherwise followed the application and review procedures of this Plan.

If the Executive Officer makes an adverse benefit determination on review, the Executive Officer will render a written opinion, using language calculated to be understood by the Claimant, setting forth:

(a)

the specific reason or reasons for the denial;

(b)

the specific references to pertinent Plan provisions on which the denial is based;

(c)

a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information which (i) was relied upon by the Executive Officer in making its decision, (ii) was submitted, considered or generated in the course of the Executive Officer making its decision, without regard to whether such instrument was actually relied upon by the Executive Officer in making its decision or (iii) demonstrates compliance by the Executive Officer with its administrative processes and safeguards designed to ensure and to verify that benefit claims determinations are made in accordance with governing Plan documents, and that, where appropriate, the Plan provisions have been applied consistently with respect to similarly situated claimants; and

(d)

a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following the adverse benefit determination on such review.

8.5

Discretionary Authority.

The Committee and Executive Officer shall both have discretionary authority to determine a Claimant’s entitlement to benefits upon his claim or his request for review of a denied claim, respectively.

ARTICLE IX

AMENDMENT AND TERMINATION

9.1

Power to Amend or Terminate.

The Company reserves the right, by action of its Board in its sole discretion, to retroactively or prospectively amend, modify or terminate this Plan at any time.

9.2

Distribution Upon Plan Termination.

In the event the Company terminates the Plan in the manner permitted under Section 9.1, no liquidation and payment of benefits shall occur as a result of the termination; provided, however, that subject to the provisions of Section 9.1, the Company may, in its discretion, provide by amendment to the Plan for the liquidation and termination of the Plan where:

(a)

the termination and liquidation does not occur proximate to a downturn in the financial health of the Company and Affiliates;

(b)

the Plan and all arrangements required to be aggregated with the Plan under Code Section 409A are terminated and liquidated;

(c)

no payments, other than those that would be payable under the terms of the Plan and the aggregated arrangements if the termination and liquidation had not occurred, are made within twelve (12) months of the date the Company takes all necessary action to irrevocably terminate and liquidate the Plan;

(d)

all payments are made within twenty-four (24) months of the date the Company takes all necessary action to irrevocably terminate and liquidate the Plan; and

(e)

the Company and its Affiliates do not adopt a new arrangement that would be aggregated with any terminated arrangement under Code Section 409A, at any time within three (3) years following the date of the date the Company takes all necessary action to irrevocably terminate and liquidate the Plan.

Notwithstanding the above, the Company may, in its discretion, provide by amendment to liquidate and terminate the Plan where the termination and liquidation occurs within 12 months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 United States Code Section 503(b)(1)(A), provided that all amounts deferred under the Plan are included in the Participants’ gross incomes in the latest of the following years (or, if earlier, the taxable year in which the amount is actually or constructively received):

(a)

the calendar year in which the termination and liquidation occurs;

(b)

the first calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or

(c)

the first calendar year in which the payment is administratively practicable.

Notwithstanding the above, the Company may, in its discretion and pursuant to irrevocable action, provide by amendment to liquidate and terminate the Plan where the termination and liquidation occurs within the 30 days preceding or the 12 months following a “change in control event” (as defined under Code Section 409A), provided that the Plan and all arrangements required to be aggregated with the Plan under Code Section 409A are terminated and liquidated with respect to each Participant who experiences the “change in control event,” and provided that under the terms of the termination and liquidation all such Participants are required to receive all amounts of compensation deferred under the Plan and all aggregated arrangements within 12 months of the irrevocable amendment.

ARTICLE X

MISCELLANEOUS

10.1

Plan Not a Contract of Employment.

The adoption and maintenance of the Plan shall not be or be deemed to be a contract of employment between the Company and any person or to be consideration for the employment of any person. Nothing herein contained shall give or be deemed to give any person the right to be retained in the employ of the Company or to restrict the right of the Company to discharge any person at any time; nor shall the Plan give or be deemed to give the Company the right to require any person to remain in the employ of the Company or to restrict any person’s right to terminate his employment at any time.

10.2

Non-Assignability of Benefits.

No Participant, Beneficiary or distributee of benefits under the Plan shall have any power or right to transfer, assign, anticipate, hypothecate or otherwise encumber any part or all of the amounts payable hereunder, which are expressly declared to be unassignable and non-transferable. Any such attempted assignment or transfer shall be void. No amount payable hereunder shall, prior to actual payment thereof, be subject to seizure by any creditor of any such Participant, Beneficiary or other distributee for the payment of any debt, judgment, or other obligation, by a proceeding at law or in equity, nor transferable by operation of law in the event of the bankruptcy, insolvency or death of such Participant, Beneficiary or other distributee hereunder.

10.3

Severability.

If any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions hereof; instead, each provision shall be fully severable and the Plan shall be construed and enforced as if said illegal or invalid provision had never been included herein.

10.4

Governing Laws.

All provisions of the Plan shall be construed in accordance with the internal laws (but not the choice of laws) of Ohio, except to the extent preempted by federal law.

10.5

Binding Effect.

This Plan shall be binding on each Participant and his heirs and legal representatives and on the Company and its successors and assigns.

10.6

Entire Agreement.

This document and any amendments contain all the terms and provisions of the Plan and shall constitute the entire Plan, any other alleged terms or provisions being of no effect. The Plan, together with any Participation and Deferral Election Forms, constitute the entire agreement between the parties with respect to the subject matter hereof.

10.7

No Guaranty of Tax Consequences.

While the Company has established, and will maintain, the Plan, the Company makes no representation, warranty, commitment, or guaranty concerning the income, employment, or other tax consequences of participation in the Plan under federal, state, or local law.

It is the intention and purpose of the Company that this Plan shall be, at all relevant times, in compliance with (or exempt from) Code Section 409A and all other applicable laws, and this Plan shall be so interpreted and administered. In addition to the general amendment rights of the Company with respect to the Plan, the Company specifically retains the unilateral right (but not the obligation) to make, prospectively or retroactively, any amendment to this Plan or any related document as it deems necessary or desirable to more fully address issues in connection with compliance with (or exemption from) Code Section 409A and such other laws. In no event, however, shall this section or any other provisions of this Plan be construed to require the Company to provide any gross-up for the tax consequences of any provisions of, or payments under, this Plan and the Company shall have no responsibility for tax or legal consequences to any Participant (or Beneficiary) resulting from the terms or operation of this Plan.

IN WITNESS WHEREOF, the Company has caused this Plan to be signed as of the 31st day of December, 2008.


INVACARE CORPORATION

By		/s/ Joseph S. Usaj
Its		Senior Vice President – Human Resources

AMENDMENT NO. 1

INVACARE CORPORATION DEFERRED COMPENSATION PLUS PLAN

(Effective January 1, 2005)

This Amendment No. 1 is executed as of this 19th day of August 19, 2009, by Invacare Corporation, an Ohio corporation (hereinafter referred to as the “Company”).

WITNESSETH:

WHEREAS, effective January 1, 2005, the Company adopted the Invacare Corporation Deferred Compensation Plus Plan (the “Plan), which permits certain management and highly compensated employees to make certain nonqualified deferrals of compensation; and

WHEREAS, the Company now desires further to amend the Plan to further address administrative procedures relating to tax withholding; and

WHEREAS, the Company reserved the right, pursuant to Section 9.1 of the Plan, to make certain amendments thereto;

NOW, THEREFORE, effective as of January 1, 2009, the Company hereby amends the Plan as follows (all capitalized terms not otherwise defined in this Amendment have the meanings ascribed to them in the Plan):

Section 6.10 is hereby amended to read as follows:

“6.10 Withholding.

In addition, to the extent permitted under Code Section 409A, the Company may elect to accelerate payment of a Participant’s benefit hereunder:

(a)

to pay any Federal Insurance Contributions Act (“FICA”) tax imposed under Code Sections 3101, 3121(a), and Section 3121(v)(2) on compensation deferred under the Plan (the “FICA Amount”), as well as to pay the income tax at source on wages imposed under Code Section 3401

or the corresponding withholding provisions of applicable state, local, or foreign tax laws as a result of the payment of the FICA Amount, and to pay the additional income tax at source on wages attributable to the pyramiding Code Section 3401 wages and taxes. However, the total payment accelerated under this Section 5.7(a) shall not exceed the aggregate of the FICA Amount and the income tax withholding related to such FICA Amount; and

(b)

to pay any state, local, or foreign tax obligations arising from participation in the Plan that apply to an amount deferred hereunder before the amount is paid or made available to the Participant (the “State, Local, or Foreign Tax Amount”). Such payment may not exceed the amount of such taxes due as a result of participation in the Plan. Such payment may be made by distributions to the Participant in the form of withholding pursuant to provisions of applicable state, local, or foreign law or by distribution directly to the Participant. The Participant’s benefit hereunder also may be accelerated to pay the income tax at source on wages imposed under Code Section 3401 as a result of such payment and to pay the additional income tax at source on wages imposed under Code Section 3401 attributable to such additional Code Section 3401 wages and taxes. However, the total payment accelerated under this Section 5.7(b) must not exceed the aggregate of the State, Local, or Foreign Tax Amount and the income tax withholding related to such State, Local, or Foreign Tax Amount.

IN WITNESS WHEREOF, Invacare Corporation, by its duly authorized officers, has caused this Amendment to be executed as of the day and year first above written.


INVACARE CORPORATION

(“Company”)

By:		Robert K. Gudbranson
Its:		Senior Vice President and CFO

AMENDMENT NO. 2

INVACARE CORPORATION DEFERRED COMPENSATION PLUS PLAN

(Effective January 1, 2005)

This Amendment No. 2 is executed as of this 23rd day of November, 2010, by Invacare Corporation, an Ohio corporation (hereinafter referred to as the “Company”).

WITNESSETH:

WHEREAS, the Company now desires further to amend the Plan to provide for special discretionary contributions with respect to individual executives; and

WHEREAS, the Company reserved the right, pursuant to Section 9.1 of the Plan, to make certain amendments thereto;

NOW, THEREFORE, effective as of January 1, 2011, the Company hereby amends the Plan as follows (all capitalized terms not otherwise defined in this Amendment have the meanings ascribed to them in the Plan):

There is added to the Plan a new Section 2.1(la) to read as follows:

“(la)

“Compensation” shall have the same meaning as in the 401(k) Plan, except that Compensation shall not be subject to the limitations of Code Section 401(a)(17).”

Section 2.1(p) is hereby amended by the addition of the following sentence:

“The term Special Discretionary Contribution shall mean, with respect to any Participant, any Discretionary Contribution made pursuant to Section 4.6(b) with respect to such Participant.

Section 2.1(x) is hereby amended to read as follows:

“(x) “Make Whole IQC Contribution” means a contribution equal to the Invacare Quarterly Contribution that would have been made to the 401(k) Plan for a Participant but for the limitation on compensation contained in Code Section 401(a)(17) and any Base Salary Deferrals and Bonus Deferrals under this Plan.

Section 2.1(aa) is hereby amended by the addition of the following sentence:

“The term Special Participation Agreement shall mean any agreement providing for Special Discretionary Contributions pursuant to Section 4.6(b) entered into between the Company and the Participant, which may be either in a separate document from the Participation Agreement or part of the Participation Agreement.”

Section 3.2 is hereby amended to read as follows:

3.2

Commencement of Participation.

Except as provided in the following Section, an Employee shall become a Participant effective as of the first day of the Plan Year following the date on which the earliest of his Participation and Deferral Election Form or Separate Participation Agreement becomes effective.

Section 4.6 is hereby amended to read as follows:

4.6

Discretionary Contributions.

For each Plan Year, the Company may credit such Discretionary Contributions under the Plan to the Retirement Accounts of such eligible Participants, and at such times, if any, as is determined by the Company in its discretion, which discretionary Contributions may include, without limitation, either of the following:

(a)

For each Plan Year, the Company may credit to the Retirement Account of each Participant an amount equal to the percentage of such Participant’s

Compensation for the Plan Year that is specified for such Participant as a profit sharing contribution under the Savings Plan, but only with respect to Compensation that is in excess of the compensation limit under Section 401(a)(17) of the Code for such Plan Year before taking into account any Base Salary Deferrals and Bonus Deferrals under this Plan.

(b)

For each Plan Year, the Company may credit the Retirement Account of a Participant with such percentage (if any) of such Participant’s Compensation for the Plan Year as may be provided in a Special Participation Agreement entered into between the Company and the Participant or as may be otherwise determined by the Company.

Section 4.8 is hereby amended to read as follows:

4 . 8

Vesting.

A Participant’s Accounts hereunder shall be subject to vesting in accordance with the following:

(a)

A Participant shall be 100% vested at all times in that portion of his Account which is attributable to Base Salary Deferrals and Bonus Deferrals.

(b)

Matching Contributions, Make Whole IQC Contributions, Discretionary Contributions (other than Special Discretionary Contributions) and Prior Plan Unvested Amounts shall vest in accordance with the vesting schedule contained in the 401(k) Plan.

(c)

Special Discretionary Contributions shall be vested in accordance with such vesting schedule as is set forth in the Special Participation Agreement entered into between the Company and the Participant, or in the absence of such a vesting schedule, in accordance with 4.8(b).

(d)

Notwithstanding the foregoing, all Matching Contributions, Make Whole IQC Contributions, Profit Sharing Contributions and Discretionary Contributions (including any Special Discretionary Contributions) shall be 100% vested immediately upon a Change in Control or a Participant’s Disability.

Any provisions of the Plan relating to the distribution of a Participant’s Account shall mean only the vested portion of such Account. Since the Plan is unfunded, the portion of a Participant’s Account which is not vested and therefore not distributed with the vested portion of his Account shall remain property of the Company and shall not be allocated to the Accounts of other Participants or otherwise inure to their benefit.

Section 5.3 is hereby amended to read as follows:

5.3

Earnings on Accounts.

A Participant’s Accounts shall be credited with earnings and losses in accordance with the following:

(a)

Except as described in subsection (b), amounts credited to a Participant’s Account shall be credited or charged with earnings and losses based on hypothetical investments elected by the Participant. A Participant may elect different investment allocations for new contributions and existing Account balances. Only whole percentages may be elected, the minimum percentage for any allocation is 1%, and the total elections must allocate 100% of all new contributions and 100% of all existing Account balances. Investment elections may be changed daily, in accordance with procedures established by the Committee. The hypothetical investment alternatives and the procedures relating to the election of such investments, other than those set forth in this Section 5.3, shall be determined by the Committee from time to time. A Participant’s Account shall be adjusted as of each Valuation Date to reflect investment gains and losses.

Notwithstanding the foregoing provisions of this subsection (a), if investment in Invacare stock is permitted hereunder, the Company in its sole discretion, shall have the authority to place such restrictions upon the investment directions of any person who is subject to Section 16(b) of the Securities Exchange Act of 1934 as amended (“Insider”) as shall be appropriate to comply with such section. Such restrictions shall include, but shall not be limited to the following: Insiders shall be permitted to submit investment directions relating to Invacare stock only on a “semi-annual date” which is no less than six (6) months after the date of the most recent investment direction received from such Insider relating to Invacare Stock. For purposes of this subsection (a), the term “semi-annual date” shall mean a date which is within the period that begins the third business day following the date on which the Company’s first fiscal quarter and third fiscal quarter summary statements of sales and earnings shall be released and which ends on the twelfth business day following such release date.

(b)

Notwithstanding subsection (a) above, Special Discretionary Contributions shall be credited with earnings, gains and losses in such manner as may be determined under the Special Participation Agreement entered into between the Company and the Participant; provided that if there is no Special Participation Agreement, earnings on the Special Discretionary Contributions shall be determined pursuant to subsection (a) above.

The first sentence of Section 6.9 is hereby amended to read as follows:

“A Participant may apply in writing to the Committee for, and the Committee may permit, a withdrawal of all or any part of a Participant’s Account other than amounts attributable to Discretionary Contributions made pursuant to Section 4.6(b), together with all earnings, gains and losses on the amounts withdrawn, if the Committee in its sole discretion, determines that the Participant has incurred an Unforeseeable Emergency.”

10.

Section 9.1 is amended by the addition of a new second sentence, to read as follows:

“The Company also reserves the right, by action of its Board in its sole discretion, to retroactively or prospectively amend, modify or terminate any Special Participation Agreement at any time, provided that no such action shall reduce the amount credited to the Participant’s Retirement Account under any Special Participation Agreement as of immediately prior to such amendment without the consent of such Participant.”

11.

The second sentence of Section 10.6 is hereby amended to read as follows:

“The Plan, together with any Participation and Deferral Election Forms or Separate Participation Agreements, constitute the entire agreement between the parties with respect to the subject matter hereof.”

IN WITNESS WHEREOF, Invacare Corporation, by its duly authorized officers, has caused this Amendment to be executed as of the day and year first above written.


INVACARE CORPORATION

(“Company”)

By:		Patricia Stumpp
Its:		Senior Vice President, Human Resources

Exhibit 10(r)

AWARD AGREEMENT

(Directors’ Discounted Stock Options)


To:		Grant Number:

(Name of Optionee)		Date of Grant:

There hereby is granted to you, as a Director of Invacare Corporation ( “Invacare” ) or of a subsidiary, an option to purchase Invacare Common Shares, no par value, at an option price of $ per Share in lieu of some or all of the fees you would otherwise earn for services to be performed in calendar year 2011. This option is granted to you pursuant to the Invacare Corporation 2003 Performance Plan (the “Plan”) and is subject to the terms and conditions set forth below. This option is not an incentive stock option as defined in Section 422 of the Internal Revenue Code (the “Code”). Please acknowledge your acceptance of the terms of this option by signing on the reverse side.

A. Malachi Mixon, III

Chairman of the Board

I. GRANT OF OPTION AND VESTING DATE

Since this option represents compensation for services to be provided by you as a Director during 2011, in order to have any rights with respect to this option, you must be a Director during 2011. If you are not a Director on January 1, 2011, this grant shall be null and void. If you are a Director continuously from January 1, 2011 through December 31, 2011, you will have fully satisfied the service requirements for vesting with respect to this option. To the extent this option is vested (a “vested option”), you will be entitled to exercise it in whole or in part, during the year(s) of exercise and in the number or percentage of shares exercisable in such year(s), as is set forth on the separate election made by you prior to the date of grant hereof, which is incorporated into this Agreement, or at such earlier date(s) as may be provided herein.

II. TERM OF OPTION

(a) The term of the option shall be for a period of no more than ten (10) years commencing on the Date of Grant as set forth above. The option shall expire at the close of

regular business hours at Invacare’s principal office at the time it is fully exercised, or if not so exercised, as of the last applicable date for exercise as set forth in the remainder of this Section II or, if earlier, the applicable date set forth in Section III or V.

(b) If on or after January 1, 2011, you have a Separation from Service prior to Retirement for reasons other than death or Disability, your outstanding vested options will be exercisable within the 90-day period following the date of your Separation from Service. Notwithstanding the foregoing, if your Separation from Service occurs on or after October 3 of a calendar year but not later than November 15 of such year, your outstanding vested options must be exercised no later than December 31 of such year, and if your Separation from Service occurs after November 15, your outstanding vested options must be exercised between January 1 of the year following your Separation from Service and the ninetieth (90th) day following the date of your Separation from Service; provided, however, that if your elected year of exercise for any portion of the option is earlier than the dates specified in this paragraph, then such portion of the option must be exercised, if at all, in such earlier elected year.

(c) If on or after January 1, 2011, you become Disabled on or before June 30 of a calendar year, your outstanding vested options will be exercisable at any time up to December 31 of such year. If you become Disabled after June 30 of a calendar year, your outstanding vested options will be exercisable at any time between January 1 of the year following the year in which you became Disabled and the first anniversary of the date you became Disabled ; provided, however, that if your elected year for exercise for any portion of the option is earlier than the dates specified in this paragraph, then such portion of the option must be exercised, if at all, in such earlier elected year.

(d) If on or after January 1, 2011, you die on or before June 30 of a calendar year while you are a Director or Retired Director your personal representative may exercise your outstanding vested options at any time up to December 31 of such calendar year. If your death occurs after June 30 of a calendar year, your personal representative may exercise your outstanding vested options between January 1 of the calendar year following the year in which you died and the first anniversary of the date of your death; provided, however, that if your elected year for exercise for any portion of the option is earlier than the dates specified in this paragraph, then such portion of the option must be exercised, if at all, in such earlier elected year.

(e) Except as provided in subsection (d) above or Section V below, if you become a Retired Director, your outstanding vested option shall be exercisable during the year(s) elected as of the date of this grant.

(f) Notwithstanding anything else herein, other than the right to designate one or more years for exercise made prior to the date of grant hereunder, no Director, Retired Director or beneficiary or representative of a Director or Retired Director may choose the taxable year of the Director in which an option shall be exercised.

(g) In the event that on or after January 1, 2011, you incur a Separation from Service during the one-year vesting period, your option will be pro-rated for the percent of time served.

(h) For purposes of this option agreement, the following meanings shall apply:

(i)

“Change in Control” means the happening of any of the following events:

(1)

Any one person, or more than one person acting as a group (other than (x) the Company or any of its subsidiaries, or (y) any employee benefit plan or employee stock ownership plan or related trust of the Company or any of its subsidiaries, or (z) any person or entity organized, appointed, or established by the Company or any of its subsidiaries, for or pursuant to the terms of any such plan or trust), acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company (as determined by reference to voting power in the election of directors). However, if any one person, or more than one person acting as a group, is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a Change in Control. An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for cash or other property will be treated as an acquisition of stock for purposes of this subparagraph (i). This subparagraph (i) applies only when there is a transfer of stock of the Company (or issuance of stock of the Company) and stock in the Company remains outstanding after the transaction.

(2)

(3)

A majority of members of the Board of Directors is replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors prior to the date of the appointment or election.

(4)

Any one person, or more than one person acting as a group (other than (x) the Company or any of its subsidiaries, or (y) any

employee benefit plan or employee stock ownership plan or related trust of the Company or any of its subsidiaries, or (z) any person or entity organized, appointed, or established by the Company or any of its subsidiaries, for or pursuant to the terms of any such plan), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons), whether by operation of law or otherwise, assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions.

In determining whether a Change in Control has occurred, this definition shall be interpreted in accordance with regulations under Code Section 409A.

(ii)

The term “Disabled” or Disability” shall mean that the Director is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, unable to engage in any substantial gainful activity. Without limitation, for purpose of this option agreement, a Director will be deemed to have a Disability if the Director is determined to be totally disabled by the Social Security Administration.

(iii)

The term “Retirement” shall mean a Separation from Service that occurs at or after the Director has attained age 55 with 5 years of service with the Company, including service as a Director or as an employee . A Director who incurs a Separation from Service at or after Retirement shall be a Retired Director.

(iv)

The term “Separation from Service” shall mean the good faith and complete termination of the contractual relationship between the Director and the Company and all affiliates, which includes:

(1)

a voluntary resignation;

(2)

involuntary discharge for any reason, with or without cause, including a failure to be re-elected after standing for election as a Director;

(3)

Retirement; or

(4)

death.

In determining whether a Separation from Service has occurred, this definition shall be interpreted in accordance with regulations under Code Section 409A with respect to Separation from Service, including, without limitation, whether it is reasonably anticipated that no further services will be performed by the Director after a certain date.

III. TERMINATION OF OPTION UNDER CERTAIN CIRCUMSTANCES

If permitted by law, the Compensation and Management Development Committee of the Company (the “Committee”) may cancel your option at any time if you are not in compliance with all applicable provisions of this Agreement or the Plan or if you, without the prior written consent of the Committee, engage in any of the following activities: (i) you render services for an organization, or engage in a business, that is, in the judgment of the Committee, in competition with Invacare; (ii) you disclose to anyone outside of Invacare, or use for any purpose other than Invacare’s business, any confidential information or material relating to Invacare, whether acquired by you during or after your service with Invacare, in a fashion or with a result that is or may be injurious to the best interests of Invacare, as determined by the Committee; or (iii) you otherwise intentionally commit an act materially inimical to the interests of Invacare or a subsidiary.

The Committee may, in its discretion and as a condition to the exercise of your option, require you to represent in writing that you are in compliance with all applicable provisions of this Agreement and the Plan and have not engaged in any activities referred to in the preceding paragraph.

IV. EXERCISE OF OPTION

The option may be exercised by delivering to the Invacare Finance Department, at Invacare’s principal office, a completed Notice of Exercise of Option (obtainable from the Finance Department) setting forth the number of shares with respect to which your option is being exercised. Such Notice shall be accompanied by either payment in full for the shares, or the execution of a cashless exercise in accordance with the procedures established by the Committee.

V. CHANGE IN CONTROL

Upon a Change in Control on or after January 1, 2011, your outstanding options will immediately vest and be exercisable with respect to all shares covered therein within the 90-day period following such Change in Control. Notwithstanding the foregoing, if the Change in Control occurs on or after October 3 of a calendar year but not later than November 15 of such year, your outstanding options must be exercised no later than December 31 of such year, and if the Change in Control occurs after November 15 of a calendar year, your outstanding options must be exercised between January 1 of the year following the year in which the Change in Control occurred and the ninetieth (90th) day following the date of the Change in Control; provided, however, that in no event may exercise occur after the exercise date(s) you have elected as of the date of this grant.

VI. TRANSFERABILITY

This Agreement shall be binding upon and inure to the benefit of any successor of Invacare and your heirs, estate and personal representative. Your option shall not be transferable other than by Will or the laws of descent and distribution, and your option may be exercised during your lifetime only by you provided that a guardian or other legal representative, who has been duly

appointed may, except as otherwise provided in the Plan, exercise the option on your behalf. Your personal representative shall act in your place with respect to exercising the option or taking any other action pursuant to the Agreement.

VII. ADJUSTMENTS OR AMENDMENTS

In the event that, subsequent to the date of this Agreement, the outstanding common shares of Invacare are, as a result of a stock split, stock dividend, combination or exchange of shares, exchange of other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization, liquidation, dissolution, sale of assets or other such change, including, without limitation, any transaction described in Code Section 424(a), increased, decreased, changed into or exchanged for a different number or kind of shares of stock or other securities of Invacare or another entity or converted into cash, then, except as otherwise provided below, (i) there shall automatically be substituted for each Invacare common share subject to an unexercised option, the amount of cash or other securities into which each outstanding Invacare common share shall be converted or exchanged and (ii) the option price per common share or unit of securities shall be increased or decreased proportionally so that the aggregate purchase price for any securities subject to the option shall remain the same as immediately prior to such event. Notwithstanding the preceding provisions of this Article VII, the Committee may, in its sole discretion, make other adjustments or amendments to the securities subject to options and/or amend the provisions of the Plan and/or this option agreement (including, without limitation, accelerating the date on which unexercised options shall expire or terminate), to the extent appropriate, equitable and in compliance with the provisions of Code Section 424(a) to the extent applicable and any such adjustment or amendment shall be final, binding and conclusive. Any such adjustment or amendment shall provide for the elimination of fractional shares.

VIII. CONTROLLING PROVISIONS OF PLAN

This Agreement is subject to all of the terms, conditions and provisions of the Plan (all of which are incorporated herein by reference to the extent not inconsistent with the specific terms of this option agreement) and to such rules, regulations, and interpretations related to the Plan as may be adopted by the Committee and as may be in effect from time to time. Without limiting the generality of the foregoing, the Committee shall have the same authority to amend or terminate this Agreement and the options granted hereunder as it has to amend the Plan and any awards thereunder. Moreover, the Committee has authority to interpret and construe any provision of this Agreement and its interpretation and construction shall be binding and conclusive.

IX. LIABILITY

The liability of Invacare under this Agreement and any distribution of shares made hereunder is limited to the obligations set forth herein with respect to such distribution and no term or provision of this Agreement shall be construed to impose any liability on Invacare, its officers, employees or any subsidiary with respect to any loss, cost or expense which you may incur in connection with or arising out of any transaction in connection with this Agreement.

X. WITHHOLDING

You agree that, as a condition to your exercise of this Option, Invacare may, if so required by tax regulations, make appropriate provision for tax withholding with respect to the transactions contemplated by this Agreement.

XI. SECTION 409A; NO GUARANTY OF TAX CONSEQUENCES

While the Company has established, and will maintain, the Plan, the Company makes no representation, warranty, commitment, or guaranty concerning the income, employment, or other tax consequences of accepting this option award under federal, state, or local law.

It is the intention and purpose of the Company that this option shall be, at all relevant times, in compliance with Code Section 409A and all other applicable laws, and this option shall be so interpreted and administered. In addition to the general amendment rights of the Company with respect to the Plan, the Company specifically retains the unilateral right (but not the obligation) to make, prospectively or retroactively, any amendment to this option or any related document as it deems necessary or desirable to more fully address issues in connection with compliance with Code Section 409A and such other laws. In no event, however, shall this section or any other provisions of this option be construed to require the Company to provide any gross-up for the tax consequences of any provisions of, or payments under, this Agreement and the option granted hereunder and the Company shall have no responsibility for tax or legal consequences to any Director (or beneficiary) resulting from the terms or operation of this Agreement or such option.

ACCEPTANCE

The undersigned hereby accepts the terms of the stock option granted herein and acknowledges receipt of a copy of the Invacare Corporation 2003 Performance Plan.




(Signature of Optionee)				(Date)

Exhibit 10(x)

INVACARE CORPORATION

BOARD OF DIRECTORS COMPENSATION


Retainer Fee	$	60,000
Additional Retainer Fees
Lead Director:	$	15,000
Audit Chair:	$	15,000
Compensation Chair:	$	15,000
Other Committee Chairs:	$	10,000
Fees for Meetings in excess of 24 in a year	$	1,500

Equity Components		Restricted stock award grant value of $90,000

		For new directors - non-qualified stock option grant equal to $150,000 divided by the market price on date elected

Non-Employee Director Elective Stock Option Program		Non-employee directors may elect to defer all or a portion of their following year director fees into discounted stock options

Exhibit 10(ab)

Rule 10b5-1 Sales Plan

I, , have, as of the date set forth below, established this Sales Plan (the “Plan”) in order to sell to Invacare Corporation (the “Issuer”) common shares, no par value per share, of the Issuer (the “Stock”), pursuant to the requirements of Rule 10b5-1(c)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

1. I elect to surrender shares of Stock to the Issuer in order to satisfy the minimum tax withholding obligation required by federal, state and local governmental authorities (including such amount, if any, as may be required under the American Jobs Creation Act of 2004) with respect to the shares of Stock I will receive on the respective maturity dates of the restricted stock grants currently outstanding and issued to me, and any restricted stock grants that are issued to me in the future by the Issuer, as indicated on Attachment A to the Plan.

2. On each respective maturity date set forth or described on Attachment A hereto, the Issuer agrees to withhold such portion of the restricted stock maturing on such date as is necessary to satisfy such minimum tax withholding obligation required by federal, state and local governmental authorities based on the rates in effect on the applicable maturity date at a price per share equal to the closing price of the Stock on the New York Stock Exchange on the applicable maturity date.

3. The Plan will terminate on the earliest of:

a. the completion of the maturity or the termination of the restricted stock grants currently outstanding and issued to me and any restricted stock grants that are issued to me in the future by the Issuer, as referenced in Section 1 of the Plan;

b. the Issuer’s receipt of notice of my death or mental incapacity;

c. the Issuer’s reasonable determination that: (i) the Plan does not comply with Rule 10b5-1 or other applicable securities laws; or (ii) I have not complied with the Plan, Rule 10b5-1 or other applicable securities laws;

d. the Issuer’s receipt of written notice of termination from me by overnight service and facsimile certifying that I desire to terminate the Plan and have consulted with my legal advisors about the termination of the Plan;

e. the Issuer’s receipt of notice from me by telephone or facsimile specifying that a legal, contractual or regulatory restriction applicable to me or my affiliates would prohibit any sale pursuant to the Plan or result in material adverse consequences to me as a result of any such sale, or

f. the public announcement of a public offering or other distribution of securities by the Issuer or of a merger, acquisition, tender or exchange offer, or other business combination resulting in the exchange or conversion of the Stock of the Issuer into shares of a company other than the Issuer.

4. In the event of a stock split, reverse stock split or stock dividend relating to the Stock, the dollar amount at which shares of Stock are to be surrendered to the Issuer and the number of shares to be surrendered will be automatically adjusted proportionately.

5. In the event of a reincorporation or other corporate reorganization resulting in an automatic share-for-share exchange of new shares for the type of shares of Stock subject to the Plan, then the new shares will automatically replace the type of shares of Stock originally specified in the Plan.

6. The Plan may be modified or amended only upon the written agreement of myself and the Issuer.

7. The Plan may be signed in counterparts, each of which will be an original. I will not assign my rights or obligations under the Plan without the Issuer’s consent.

8. The Plan, and the attached Representation Letter, dated the date hereof, constitutes the entire agreement and Plan between me and the Issuer and supersedes any prior agreements or understandings regarding the Plan. The invalidity or unenforceability of any provision of the Plan will not affect the validity or enforceablity of any other provision.

9. All notices given by the parties under this Plan will be made in the manner specified in this Plan by telephone, facsimile or recognized overnight service as follows:

If to the Issuer:

Invacare Corporation

Attn: Robert K. Gudbranson

One Invacare Way

Elyria, OH 44036

Tel: 440-329-6111

Fax: 440-366-9008

If to me:

____________

Tel:

Fax: .

10. This Plan will be governed by and construed in accordance with the laws of the State of Ohio, without giving effect to the conflict of law principles of that State.

The undersigned have signed this Sales Plan as of .


						Invacare Corporation (the Issuer)
Name:						By:
						Name:
						Title:

Rule 10b5-1 Representation Letter

Invacare Corporation

Attn: Robert K. Gudbranson

One Invacare Way

Elyria, OH 44036

Ladies and Gentlemen:

In consideration of Invacare Corporation (“Invacare”) agreeing to accept the surrender of Invacare common shares from the restricted stock maturing in order to satisfy my minimum tax withholding obligation for federal, state and local taxes under a written plan (the “Plan”) that I, , have established to meet the requirements of Rule 10b5-1(c)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other good and valuable consideration I make the following representations, warranties and covenants:

1. A true and accurate copy of the Plan is attached.

2. I am entering into the Plan in good faith, in compliance with the requirements of Rule 10b5-1, and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1 or other federal securities laws. As of the date hereof, I am not aware of any material nonpublic information about Invacare or its securities.

3. I have consulted with my own advisors as to the legal, tax, business, and financial aspects of, and have not relied on Invacare in connection with, my adoption and implementation of the Plan and I have confirmed that the Plan meets the criteria set forth in Rule 10b5-1. I acknowledge that Invacare is not acting as a fiduciary or an advisor for me.

4. I have been or will be granted all restricted shares that are subject to the Plan free and clear of liens, encumbrances, options or other limitations on disposition of any kind.

5. While the Plan is in effect, I agree that:

a. I will not enter into or alter any corresponding or hedging transaction or position with respect to the securities covered by the Plan (including, without limitation, with respect to any securities convertible or exchangeable into those securities) and I will not alter or deviate from the terms of the Plan; and

b. I will notify Invacare in advance of any sales or purchases of, or derivative transactions on, any of the Invacare securities that I propose to make.

6. Except as provided under the terms of the Plan, I further agree that I will not exercise any subsequent influence over how, when or whether transactions are effected under the plan.

7. I agree to make or cause to be made in a timely manner all necessary filings applicable to me, including Rule 144 filings, filings pursuant to Sections 13 and 16 of the Exchange Act, and any other filings necessary pursuant to the Securities Act of 1933, as amended (the “Securities Act”) and the Exchange Act.

8. The execution and delivery of the Plan by me and the transactions contemplated by the Plan will not contravene any provision of applicable law or any agreement or other instrument binding on me or any of my affiliates or any judgment, order or decree of any governmental body having jurisdiction over me or my affiliates.

9. I agree to give Invacare notice as soon as possible of (a) any subsequent legal, contractual or regulatory restrictions imposed on me due to changes in the securities (or other) laws, contractual restrictions, or anticipated or changed events, that would prevent Invacare or me from complying with the Plan and (b) the occurrence of any event that could cause the Plan to terminate or be suspended under Section 2 or Section 3 of the Plan.


Very truly yours,

Name:
Date:

Schedule of Agreements with Current Officers


Name	Position	Date of Agreement
A. Malachi Mixon, III	Chairman of the Board	August 7, 2007
Gerald B. Blouch	President and Chief Executive Officer	August 6, 2007
Robert K. Gudbranson	Senior Vice President and Chief Financial Officer	February 2, 2009
Brian Ellacott	Vice President & General Manager – Commercial Operations, Americas	August 7, 2007
Doug Harper	Vice President & General Manager - Invacare Supply Group	August 8, 2007
Joseph B. Richey, II	President - Invacare Technologies, Senior Vice President - Electronics and Design Engineering	August 13, 2007
Louis F. J. Slangen	Senior Vice President – Corporate Marketing and Chief Product Officer	August 6, 2007
Carl E. Will	Senior Vice President – Commercial Operations	August 7, 2007
Anthony C. LaPlaca	Senior Vice President - General Counsel and Secretary	November 30, 2009
Patricia Stumpp	Senior Vice President – Human Resources	February 8, 2011
John Remmers	Senior Vice President – Global Supply Chain and Operations	February 8, 2011

Exhibit 21

Invacare Corporation Subsidiaries

1.	6123449 Canada, Inc., a Canadian corporation and wholly owned subsidiary.

2.	Adaptive Switch Laboratories, Inc., a Texas corporation and wholly owned subsidiary.

3.	Alber GmbH Wurenlos, a Swiss corporation and wholly owned subsidiary.

4.	Altimate Medical, Inc., a Minnesota corporation and wholly owned subsidiary.

5.	Aquatec Operations GmbH, a German limited liability company.

6.	Carroll Healthcare General Partner Inc., an Ontario, Canada corporation and wholly owned subsidiary.

7.	Carroll Healthcare, Inc. and Ontario corporation and wholly owned subsidiary.

8.	Carroll Healthcare, LP, an Ontario limited partnership and wholly owned subsidiary.

9.	Champion Manufacturing Inc., a Delaware corporation and wholly owned subsidiary.

10.	Dolomite AB, a Swedish corporation and wholly owned subsidiary.

11.	Dolomite Holding AB, a Swedish corporation and wholly owned subsidiary.

12.	Dynamic Connect (Suzhou) Hi-Tech Electronics Co., Ltd., a Chinese company and wholly owned subsidiary.

13.	Dynamic Controls, a New Zealand corporation and wholly owned subsidiary.

14.	Dynamic Europe Ltd., a UK corporation and wholly owned subsidiary.

15.	Dynamic Suzhou Holdings New Zealand, a New Zealand corporation and wholly owned subsidiary.

16.	Family Medical Supply LLC, a Delaware corporation and wholly owned subsidiary.

17.	Freedom Designs, Inc., a California corporation and wholly owned subsidiary.

18.	Garden City Medical Inc., a Delaware corporation and wholly owned subsidiary.

19.	Home Health Equipment Pty Ltd, an Australian corporation and wholly owned subsidiary.

20.	Invacare AB, a Swedish corporation and wholly owned subsidiary.

21.	Invacare A/S, a Danish corporation and wholly owned subsidiary.

22.	Invacare AS, a Norwegian corporation and wholly owned subsidiary.

23.	Invacare Aquatec GmbH, a German corporation and wholly owned subsidiary.

24.	Invacare Asia Ltd., a Hong Kong company and wholly owned subsidiary.

25.	Invacare Australia Pty Limited, an Australian corporation and wholly owned subsidiary.

26.	Invacare Austria GmbH, an Austrian corporation and wholly owned subsidiary.

27.	Invacare B.V., a Netherlands corporation and wholly owned subsidiary.

28.	Invacare Canada General Partners Inc., a Canadian corporation and wholly owned subsidiary.

29.	Invacare Canada LP, an Ontario, Canada partnership and wholly owned subsidiary.

30.	Invacare Canadian Holdings, Inc., a Delaware corporation and wholly owned subsidiary.

31.	Invacare Canadian Holdings, LLC, a Delaware corporation and wholly owned subsidiary.

32.	Invacare Continuing Care, Inc., a Missouri corporation and wholly owned subsidiary.

33.	Invacare Credit Corporation, an Ohio corporation and wholly owned subsidiary.

34.	Invacare Dolomite AB, a Swedish corporation and wholly owned subsidiary.

35.	Invacare (Deutschland) GmbH, a German corporation and wholly owned subsidiary.

36.	Invacare EC-Hong A/S, a Danish corporation and wholly owned subsidiary.

37.	Invacare Florida Corporation, a Delaware corporation and wholly owned subsidiary.

38.	Invacare Florida Holdings, LLC, a Florida limited liability company and wholly owned subsidiary.

39.	Invacare France Operations SAS, A French corporation and wholly owned subsidiary.

40.	Invacare Germany Holding GmbH, a German corporation and wholly owned subsidiary.

41.	Invacare GmbH and Co. KG, a German corporation and wholly owned subsidiary.

42.	Invacare HCS, LLC, an Ohio limited liability company and wholly owned subsidiary.

43.	Invacare Holding AB, a Swedish corporation and wholly owned subsidiary.

44.	Invacare Holdings AS, a Norwegian corporation and wholly owned subsidiary.

45.	Invacare Holdings C.V., a Netherlands wholly owned partnership subsidiary.

46.	Invacare Holdings LLC, an Ohio limited liability corporation and wholly owned subsidiary.

47.	Invacare Holdings New Zealand, a New Zealand corporation and wholly owned subsidiary.

48.	Invacare Holdings Two AB, a Swedish corporation and wholly owned subsidiary.

49.	Invacare Holdings Two B.V., a Netherlands corporation and wholly owned subsidiary.

50.	Invacare Ireland Ltd., an Ireland corporation and wholly owned subsidiary.

51.	Invacare International Corporation, an Ohio corporation and wholly owned subsidiary.

52.	Invacare International SARL, a Swiss corporation and wholly owned subsidiary.

53.	Invacare Limited, a UK corporation and wholly owned subsidiary.

54.	Invacare Mauritius Holdings, a Republic of Mauritius company and wholly owned subsidiary.

55.	Invacare MeccSan Srl, an Italian corporation and wholly owned subsidiary.

56.	Invacare Medical Equipment (Suzhou) Company, Ltd., a Chinese company and wholly owned subsidiary.

57.	Invacare New Zealand, a New Zealand corporation and wholly owned subsidiary.

58.	Invacare NV, a Belgium corporation and wholly owned subsidiary.

59.	Invacare Rehabilitation Equipment (Suzhou) Company, Ltd., a Chinese company and wholly owned subsidiary.

60.	Invacare Poirier SAS, a French corporation and wholly owned subsidiary.

61.	Invacare Portugal Lda., a Portugal company and wholly owned subsidiary.

62.	Invacare (Portugal) II—Material Ortopudico, Lda., a Portugal company and wholly owned subsidiary.

63.	Invacare Rea AB, a Swedish corporation and wholly owned subsidiary.

64.	Invacare, S.A., a Spanish corporation and wholly owned subsidiary.

65.	Invacare Supply Group, Inc., a Massachusetts corporation and wholly owned subsidiary.

66.	Invacare Trading Company, Inc., a United States Territory of the Virgin Islands corporation and wholly owned subsidiary.

67.	Invacare UK Operations Ltd., a UK corporation and wholly owned subsidiary.

68.	Invacare Verwaltungs GmbH, a German corporation and wholly owned subsidiary.

69.	Invamex S.A. de R.L. de C.V., a Mexican corporation and wholly owned subsidiary.

70.	Invatection Insurance Company, a Vermont corporation and wholly owned subsidiary.

71.	Kuschall AG, a Switzerland corporation and wholly owned subsidiary.

72.	Medbloc, Inc., a Delaware corporation and wholly owned subsidiary.

73.	Motion Concepts, L.P., an Ontario wholly owned limited partnership.

74.	Perpetual Motion Enterprises Limited, an Ontario corporation and wholly owned subsidiary.

75.	RoadRunner Mobility, Inc., a Texas corporation and wholly owned subsidiary.

76.	Scandinavian Mobility International ApS, a Danish corporation and wholly owned subsidiary.

77.	SCI Des Hautes Roches, a French partnership and wholly owned subsidiary.

78.	Specialty Medical Equipment LLC, a Massachusetts limited liability company and wholly owned subsidiary.

79.	The Aftermarket Group, Inc., a Delaware corporation and wholly owned subsidiary.

80.	The Helixx, Inc., an Ohio corporation and wholly owned subsidiary.

81.	Ulrich Alber GmbH, Albstadt, a German limited liability company and wholly owned subsidiary.

Note, “Wholly owned subsidiary” refers to indirect, as well as direct, wholly owned subsidiaries.

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

(1)

Registration Statement (Form S-8, No. 33-87052) dated December 5, 1994 pertaining to the Invacare Corporation stock option plans,

(2)

Registration Statement (Form S-8, No. 333-57978) dated March 30, 2001 pertaining to the Invacare Corporation stock option plans,

(3)

Registration Statement (Form S-8, No. 333-109794) dated October 17, 2003 pertaining to the Invacare Corporation stock option plans,

(4)

Registration Statement (Form S-8, No. 333-136391) dated August 8, 2006 pertaining to the Invacare Corporation stock option plans,

(5)

Registration Statement (Form S-3/A, No. 333-142311) of Invacare Corporation dated May 24, 2007, and

(6)

Registration Statement (Form S-8, No. 333-161109) dated August 6, 2009 pertaining to the Invacare Corporation stock option plans;

of our reports dated February 25, 2011, with respect to the consolidated financial statements and schedule of Invacare Corporation and subsidiaries and the effectiveness of internal control over financial reporting of Invacare Corporation, included in this Annual Report (Form 10-K) of Invacare Corporation for the year ended December 31, 2010.

/s/ ERNST & YOUNG LLP

Cleveland, Ohio

February 25, 2011

Exhibit 31.1

CERTIFICATIONS

I, Gerald B. Blouch, certify that:

1.	I have reviewed this annual report on Form 10-K of Invacare Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

INVACARE CORPORATION

/s/ G ERALD B. B LOUCH

Gerald B. Blouch

Chief Executive Officer

(Principal Executive Officer)

Date: February 25, 2011

Exhibit 31.2

CERTIFICATIONS

I, Robert K. Gudbranson, certify that:

1.	I have reviewed this annual report on Form 10-K of Invacare Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

INVACARE CORPORATION

/s/ R OBERT K. G UDBRANSON

Robert K. Gudbranson

Chief Financial Officer
(Principal Financial Officer)

Date: February 25, 2011

Exhibit 32.1

Certification

Pursuant to Section 18 U.S.C. Section 1350,

as adopted pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Invacare Corporation (the “company”) on Form 10-K for the period ending December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gerald B. Blouch, Chief Executive Officer of the company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.

/s/ G ERALD B. B LOUCH

Gerald B. Blouch

Chief Executive Officer

Date: February 25, 2011

A signed original of this written statement required by Section 906 has been provided to Invacare Corporation and will be retained by Invacare Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

Certification

Pursuant to Section 18 U.S.C. Section 1350,

as adopted pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Invacare Corporation (the “company”) on Form 10-K for the period ending December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert K. Gudbranson, Chief Financial Officer of the company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.

/s/ R OBERT K. G UDBRANSON

Robert K. Gudbranson

Chief Financial Officer

Date: February 25, 2011