The company’s Common Shares have a $0.25 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 or for estate planning purposes. Holders of Class B Common Shares are entitled to convert their shares into Common Shares at any time on a share-for-share basis. When Class B Common Shares are transferred out of a familial relationship, they automatically convert to Common Shares. The Board of Directors suspended further dividends on the Common Shares and the Class B Common Shares.

As of September 30, 2020, 6,357 Class B Common Shares remained outstanding. Prior conversions of Class B Common Shares have substantially diminished the significance of the company’s dual class voting structure. As of September 30, 2020, the holders of the Common Shares represented approximately 99.9% of the company’s total outstanding voting power.

Equity Compensation Plan

On May 17, 2018, the shareholders of the company approved the Invacare Corporation 2018 Equity Compensation Plan (the “2018 Plan”), which was adopted on March 27, 2018 by the company's Board of Directors (the “Board”). The company’s Board adopted the 2018 Plan in order to authorize additional Common Shares for grant as equity compensation, and to reflect changes to Section 162(m) of the Internal Revenue Code (the “Code”) resulting from the U.S. Tax Cuts and Jobs Act of 2017.

Following shareholder approval of the 2018 Plan, all of the Common Shares then-remaining available for issuance under the Invacare Corporation 2013 Equity Compensation Plan (the “2013 Plan”) and all of the Common Shares that were forfeited or remained unpurchased or undistributed upon termination or expiration of awards under the 2013 Plan and under the Invacare Corporation 2003 Performance Plan (the “2003 Plan”), become available for issuance under the 2018 Plan. Awards granted previously under the 2013 Plan and 2003 Plan will remain in effect under their original terms.

The 2018 Plan uses a fungible share-counting method, under which each Common Share underlying an award of share options or share appreciation rights ("SAR") will count against the number of total shares available under the 2018 Plan as one share; and each Common Share underlying any award other than a share option or a SAR will count against

the number of total shares available under the 2018 Plan as two shares. Shares underlying awards made under the 2003 Plan or 2013 Plan that are forfeited or remain unpurchased or undistributed upon termination or expiration of the awards will become available under the 2018 Plan for use in future awards. Any Common Shares that are added back to the 2018 Plan as the result of forfeiture, termination or expiration of an award granted under the 2018 Plan or the 2013 Plan will be added back in the same manner such shares were originally counted against the total number of shares available under the 2018 Plan or 2013 Plan, as applicable. Each Common Share that is added back to the 2018 Plan due to a forfeiture, termination or expiration of an award granted under the 2003 Plan will be added back as one Common Share.

The Compensation and Management Development Committee of the Board (the “Compensation Committee”), in its discretion, may grant an award under the 2018 Plan to any director or employee of the company or an affiliate. As of September 30, 2020, 3,513,468 Common Shares were available for future issuance under the 2018 Plan in connection with the following types of awards with respect to the company's Common Shares: incentive share options, nonqualified share options, SARs, restricted shares, restricted share units, unrestricted shares and performance shares. The Compensation Committee also may grant performance units that are payable in cash. The Compensation Committee has the authority to determine which participants will receive awards, the amount of the awards and the other terms and conditions of the awards. The Common Shares authorized for issuance under the 2018 Plan includes an additional 1,400,000 Common Shares that were approved by shareholders at the company’s 2020 annual meeting on May 21, 2020.

In the second quarter of 2020 the company transferred a total of 1,004,079 shares into the 2018 Plan from the 2003 and 2013 Plans. At September 30, 2020, an aggregate of 328,274 Common Shares underlie awards which were forfeited or expired unexercised under the 2003 and 2013 Plans and thus are available to be transferred into the 2018 Plan.

The 2018 Plan provides that shares granted come from the company's authorized but unissued Common Shares or treasury shares. In addition, the company's equity compensation plans allow employee participants to exchange shares for minimum withholding taxes, which results in the company acquiring treasury shares.

The amounts of equity-based compensation expense recognized as part of SG&A expenses in All Other in business segments were as follows (in thousands):


	For the Nine Months Ended September 30,
	2020		2019
Restricted share / units	$	4,471	$	3,891
Performance shares / units	2,494		1,648
Non-qualified and performance share options	—		334
Total share-based compensation expense	$	6,965	$	5,873

As of September 30, 2020, unrecognized compensation expense related to equity-based compensation arrangements granted under the company's 2018 Plan and previous plans, which is related to non-vested shares, was as follows (in thousands):


	September 30, 2020
Restricted share and restricted share units	$	8,443
Performance shares and performance share units	11,144

Total unrecognized share-based compensation expense	$	19,587

Total unrecognized compensation cost will be adjusted for future changes in actual and estimated forfeitures and for updated vesting assumptions for the performance share awards (see "Share Options" and "Performance Shares and Performance Share Units" below). No tax benefits for share-based compensation were realized during the three and nine months ended September 30, 2020 and 2019, respectively, due to a valuation allowance against deferred tax assets. In accordance with ASC 718, any tax benefits resulting from tax deductions in excess of the compensation expense recognized is classified as a component of financing cash flows.

Share Options

Generally, non-qualified share option awards have a term of ten years and were granted with an exercise price per share equal to the fair market value of one of the company’s Common Shares on the date of grant. Share option awards granted in 2017 were performance-based awards and became exercisable based upon achievement of performance goals established by the Compensation Committee and achieved over the three-year period ended in 2019 and were subject to the Compensation Committee's exercise of negative discretion to reduce the number of options vested based on the progress towards the company's transformation. The company recognized the compensation expense over a weighted-average period of approximately two years.

The following table summarizes information about share option activity for the nine months ended September 30, 2020:


				Weighted Average Exercise Price
Options outstanding at January 1, 2020	1,441,202			$	18.26


Canceled	(354,006)			24.88
Options outstanding at September 30, 2020	1,087,196			$	16.12
Options exercise price range at September 30, 2020	$	12.15	to	$	33.36
Options exercisable at September 30, 2020	1,087,196
Shares available for grant at September 30, 2020*	3,513,468

________

* Shares available for grant under the 2018 Plan as of September 30, 2020 reduced by net restricted share and restricted share unit award activity of 696,058 shares and performance share and performance share unit award activity of 1,859,054 shares.

The following table summarizes information about stock options outstanding at September 30, 2020:


	Options Outstanding				Options Exercisable
Exercise Prices	Number Outstanding at September 30, 2020	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number Exercisable at September 30, 2020	Weighted Average Exercise Price
$12.15 – $20.00	777,159	5.1	$	12.74	777,159	$	12.73
$20.01 – $25.00	300,149	0.9	24.45		300,149	24.45
$25.01 – $30.00	5,392	0.2	27.82		5,392	27.82
$30.01 – $33.36	4,496	0.6	33.36		4,496	33.36
Total	1,087,196	3.9	$	16.12	1,087,196	$	16.12

The 2018 Plan provides for a one-year minimum vesting period for share options and, generally, options must be exercised within ten years from the date granted. No share options were issued in 2020 or 2019. The performance-based options issued in 2017 vested after the conclusion of the three-year performance period ending December 31, 2019.

Restricted Share and Restricted Share Units

The following table summarizes information about restricted shares and restricted share units (primarily for non-U.S. recipients):


		Weighted Average Fair Value
Shares / Units unvested at January 1, 2020	965,085	$	11.32
Granted	764,012	7.11
Vested	(452,922)	11.47
Canceled	(94,993)	10.19
Shares / Units unvested at September 30, 2020	1,181,182	$	8.63

The 2018 Plan provides for a one-year minimum vesting period for restricted share awards, the outstanding restricted share awards generally vest ratably over the three years after the award date. Unearned restricted share compensation, 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.

Performance Shares and Performance Share Units

The following table summarizes information about performance shares and performance share units (for non-U.S. recipients):


		Weighted Average Fair Value
Shares / Units unvested at January 1, 2020	753,272	$	11.82
Granted	523,329	7.08

Canceled	(65,976)	9.48
Shares / Units unvested at September 30, 2020	1,210,625	$	9.90

During the nine months ended September 30, 2020, performance shares and performance share units (for non-U.S. recipients) were granted as performance awards with a three-year performance period with payouts based on achievement of certain performance goals. The awards are classified as equity awards as they will be settled in Common Shares upon vesting. The number of shares earned will be determined at the end of the three-year performance period based on achievement of performance criteria for January 1, 2020 through December 31, 2022 established by the Compensation Committee at the time of grant. Recipients will be entitled to receive a number of Common Shares equal to the number of performance shares that vest based upon the levels of achievement which may range between 0% and 150% of the target number of shares with the target being 100% of the initial grant.

The fair value of the performance awards is based on the share price on the date of grant discounted for the estimated value of dividends foregone as the awards are not eligible for dividends except to the extent vested. The company assesses the probability that the performance targets will be met with expense recognized whenever it is probable that at least the minimum performance criteria will be achieved. Depending upon the company's assessment of the probability of achievement of the goals, the company may not recognize any expense associated with performance awards in a given

period, may reverse prior expense recorded or record additional expense to make up for expense not recorded in a prior period. Performance award compensation expense is generally expected to be recognized over three years. Expense is being recognized for the 2018, 2019 and 2020 awards as it is considered probable that the performance goals for those awards will be met.