<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 21
TO
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
HEALTHDYNE TECHNOLOGIES, INC.
(Name of Subject Company)
I.H.H. CORP.
INVACARE CORPORATION
(Bidders)
------------------------
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
18139610
(CUSIP Number of Class of Securities)
------------------------
THOMAS R. MIKLICH, ESQ.
CHIEF FINANCIAL OFFICER, GENERAL COUNSEL, TREASURER AND CORPORATE SECRETARY
INVACARE CORPORATION
899 CLEVELAND STREET
ELYRIA, OHIO 44035
TELEPHONE: (216) 329-6000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications on Behalf of Bidders)
------------------------
COPY TO:
ROBERT E. SPATT, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017-3954
TELEPHONE: (212) 455-2000
------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Amendment No. 21 amends and supplements the Tender Offer Statement on
Schedule 14D-1 filed on January 27, 1997 (as amended, the "Schedule 14D-1")
relating to the offer by I.H.H. Corp., a Delaware corporation (the "Purchaser")
and a wholly owned subsidiary of Invacare Corporation, an Ohio corporation (the
"Parent"), to purchase all of the outstanding shares of Common Stock, par value
$0.01 per share (the "Shares"), of Healthdyne Technologies, Inc., a Georgia
corporation (the "Company"), and unless and until the Purchaser declares that
the Rights Condition as defined in the Offer to Purchase referred to below is
satisfied) the associated Preferred Stock Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement, as amended, dated as of May 22, 1995, between
the Company and SunTrust Bank, Atlanta (formerly Trust Company Bank), as Rights
Agent, at a purchase price of $15 per Share (and associated Right), net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated January 27, 1997, as amended
and supplemented by the Supplements thereto dated April 4, 1997 and June 6, 1997
(the "Offer to Purchase"), and in the related Letter of Transmittal. Unless
otherwise indicated, all capitalized terms used but not defined herein shall
have the meanings assigned to them in the Schedule 14D-1.
The Schedule 14D-1 is hereby amended and supplemented as follows:
On June 9, 1997, the Company filed a brief in opposition to the Parent's
Dead-Hand Elimination Proposal Counterclaim.
On June 11, 1997 the Company filed a reply brief in support of the Company's
Dead-Hand Elimination Proposal Counterclaim and in opposition to the Parent's
Dead-Hand Elimination Proposal Counterclaim.
On June 12, 1997, the Parent and the Purchaser filed a Reply Memorandum in
Support of the Parent's Motion for Summary Judgment on the Parent's Dead-Hand
Elimination Proposal Counterclaim. A copy of the memorandum filed by the Parent
and the Purchaser is set forth in Exhibit 11(g)(15).
On June 13, 1997, the Court informed the Parent that the hearing in the
Defensive Tactics Litigaiton would be held on June 17, 1997, rather than on June
16, 1997, as originally scheduled, because of a conflict in the Court's
schedule. A copy of the Parent's press release is set forth in Exhibit (g)(37)
and is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(37) Press Release issued by the Parent on June 13, 1997.
(g)(15) Memorandum filed by the Parent and the Purchaser on June 12, 1997.
2
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Statement is true, complete and correct.
INVACARE CORPORATION
By: /s/ THOMAS R. MIKLICH
-----------------------------------------
Name: Thomas R. Miklich
Title: Chief Financial Officer
I.H.H. CORP.
By: /s/ THOMAS R. MIKLICH
-----------------------------------------
Name: Thomas R. Miklich
Title: President
Date: June 16, 1997
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------------------- -------------------------------------------------------------------------------------- ---------
<S> <C> <C>
Exhibit 11(a)(37) Press Release issued by the Parent on June 13, 1997...................................
Exhibit 11(g)(15) Memorandum filed by the Parent and the Purchaser on June 12, 1997.....................
</TABLE>
<PAGE>
Exhibit 11(a)(37)
NEWS RELEASE [LETTERHEAD OF MACKENZIE PARTNERS, INC]
FOR IMMEDIATE RELEASE
Contact: Mark Harnett
MacKenzie Partners, Inc.
(212) 929-5877
COURT DELAYS HEARING ONE DAY IN
HEALTHDYNE TECHNOLOGIES LITIGATION
Elyria, Ohio -- (June 13, 1997) -- Invacare Corporation (NASDQ/NMS:IVCR)
announced today that it has been informed by the District Court in Atlanta,
Georgia that, in order to avoid a conflict in the court's schedule, the
hearing date in Invacare's litigation against Healthdyne Technologies, Inc.
(NASDQ/NMS:HDTC) has been moved from Monday, June 16, 1997 to Tuesday, June
17, 1997. At the hearing, the court will hear arguments on Invacare's
challenge to the "dead-hand" provisions of Healthdyne's poison pill.
# # #
<PAGE>
Exhibit 11(g)(15)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
- -------------------------
)
INVACARE CORPORATION and )
I.H.H. CORP., )
)
Plaintiffs, )
)
v. ) CIVIL ACTION NO: 97-CV-0205-CC
)
HEALTHDYNE TECHNOLOGIES, )
INC., et al., )
)
)
Defendants. )
)
- -------------------------)
REPLY MEMORANDUM IN SUPPORT OF PLAINTIFFS'
MOTION FOR PRELIMINARY INJUNCTION AGAINST THE USE
OF THE "DEAD HAND" PROVISION OF HEALTHDYNE'S POISON PILL
KING & SPALDING
191 Peachtree Street, N.E.
Suite 4900
Atlanta, Georgia 30303-1763
(404) 572-4600
SIMPSON THACHER & BARTLETT
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
<PAGE>
PRELIMINARY STATEMENT
There are no disputed facts material to this motion. There is no
dispute that Invacare is offering $15 in cash for all Healthdyne shares. There
is no dispute as to the operation of Healthdyne's Dead Hand Provision. The
Georgia statutes say what they say. There are no credibility issues to be
determined. The only issue for this Court is the application of Georgia law to
the relevant undisputed facts. Therefore, Invacare's motion could not be better
positioned for resolution by this Court.
Invacare is not asking this Court to approve its Offer or to require
Healthdyne's shareholders to accept the Offer. Invacare is not asking this Court
to declare that all "continuing director" provisions of any kind are illegal.
Invacare is not asking this Court to void Healthdyne's Poison Pill. Invacare is
simply asking this Court to remove this particular Dead Hand Provision so that
the Healthdyne's shareholders can decide for themselves whether to accept
Invacare's Offer.
Poison pills are legal because, and only because, they do not preclude
proxy contests that allow shareholders to exercise their voting franchise. MORAN
V. HOUSEHOLD INTERNATIONAL, INC., 500 A.2d 1346, 1355 (Del. 1985). Where there
is no shareholder vote "safety valve" around poison pills, they are not valid.
The Dead Hand Provision closes off the safety valve. That is why no court in the
nation has ever approved a dead hand, and why it cannot stand here.
Healthdyne's concession that the Dead Hand Provision "limits"
future boards is dispositive of this motion. Healthdyne argues
- 1 -
<PAGE>
that the limitation on future boards is too insignificant to trouble the Court
because the Dead Hand Provision "merely" limits the authority of a new board "in
one capacity". That one capacity, however, happens to be the capacity to govern
the fate of the company in the face of a potential change of corporate control
- -- the single most important event in the life of any company. The choice left
by the Dead Hand Provision is between the current Healthdyne board and a future
board emasculated by the reach of the Dead Hand. That is not a legal or
meaningful choice.
On the very first page of its brief, Healthdyne takes umbrage at the
term "Dead Hand". This is not just quibbling. Healthdyne must blind the Court to
the distinctions between its Dead Hand Provision and other completely benign
"continuing director" provisions, such as those found in Georgia's statutes, in
order to wrap itself in the cloak of Georgia authority. But Georgia's statutory
continuing director provisions respect shareholder sovereignty and provide vital
safety valves which permit the shareholders, not the board, to have the ultimate
authority over proposed transactions. By contrast, "dead hands" reject
shareholder sovereignty by entirely frustrating the ability of the shareholders
to approve a transaction opposed by the current board. The Georgia legislature
has never "embraced" a dead hand.
Healthdyne claims that the Dead Hand Provision is legal because it
allows the shareholders to elect either four of Invacare's seven nominees
(leaving behind a minority that can veto any transaction), or all seven Invacare
nominees (although all
- 2 -
<PAGE>
seven will be significantly impaired). Either way, the newly elected directors
would be powerless to remove the impediment to the very transaction which they
were elected to facilitate. Shareholders' voting rights would be seriously
impaired, the authority of future boards would be severely limited, and Invacare
will have lost the opportunity to have its Offer fairly considered by the
shareholders. This is irreparable harm.
I. ARGUMENT
A. THIS MOTION CAN AND SHOULD BE GRANTED ON THIS RECORD
Healthdyne's argument that this motion is "procedurally defective" has been
specifically rejected in the context of a contest for corporate control:
[Although] a full record is salutary in most cases, delay pending plenary fact
finding is not a practical response to a takeover situation. Judicial
proceedings involving corporate takeovers aptly illustrate the aphorism that no
decision is a decision. Furthermore, the defendants here have pointed to no
relevant facts which are in dispute.
NEWELL CO. V. CONNOLLY, 624 F. Supp. 126, 129-30 (D. Mass. 1985)
(preliminarily enjoining target company's anti-takeover tactics).
The real goal of parties raising the specter of supposed procedural
defects is delay, "the most potent weapon in a tender-offer fight."
EDGAR V. MITE CORP., 457 U.S. 624, 637 n. 11 (1981); see also Hyde
PARK PARTNERS V. CONNOLLY, 839 F.2d 837, 854 (1st Cir. 1988)
("[T]iming is everything with tender offers, . . . a delay would
effectively kill the takeover bid in its present form."); SEE ALSO
BANK OF NEW YORK CO. V. IRVING BANK CORP., 528 N.Y.S.3d 482, 484-85
- 3 -
<PAGE>
(1988) ("the probability that the election would be unfairly tainted lends
urgency to the issue"). Tellingly, Healthdyne does not cite a single corporate
control case which suggests that this motion is procedurally defective, because
it cannot.
There is no procedural defect here because Healthdyne has "pointed to
no relevant facts which are in dispute." NEWELL, 624 F. Supp. at 129-30. This
motion turns on the operation of the Dead Hand Provision, which Healthdyne
concedes precludes directors who are not hand-picked by the incumbent directors
from redeeming or amending the Poison Pill. See Healthdyne Brief at 35-36. In an
attempt to manufacture a factual dispute, Healthdyne asserts that the Court must
reconcile factual statements in supposedly divergent affidavits. Although both
parties have submitted expert affidavits offering analysis, argument, and
opinion on the legality of the Dead Hand Provision, these affidavits do not
dispute any of the facts necessary to a resolution of this motion.1
- --------
1 The cases cited by Healthdyne are not to the contrary. In
West Point-Pepperell, Inc. v. Farley Inc., 711 F. Supp. 1088, 1096
(N.D. Ga. 1988), the issue was the constitutionality of the Georgia
Business Combination Statute based on whether it permitted an
unsolicited tender offer to have a "meaningful opportunity for
success." The resolution of that factual issue required
reconciliation of affidavits that were in "sharp and critical
conflict." Id. at 1096. Furthermore, the applicability of Georgia
statutes and fiduciary duty obligations to undisputed facts is
plainly not "too complex" for this Court to decide. The case
relied upon by Healthdyne to the contrary, Western Elec. Co. v.
Milgo Elec. Corp., 450 F. Supp. 835 (S.D. Fla. 1978), is
inapposite, because it involved interpretation of the differing
legal protections created by patents issued under U.K. law and U.S.
law and the consent decree entered into by AT&T and the "Baby
Bells" after its break-up (perhaps the most complex and heavily
litigated regulatory construct in U.S. history).
- 4 -
<PAGE>
In short, delay here is denial. Healthdyne wants to suppress
the shareholders' rights without a decision on the merits. That
result is fundamentally wrong.
B. THE DEAD HAND PROVISION IS ILLEGAL UNDER
THE GEORGIA BUSINESS CORPORATION CODE
BECAUSE IT LIMITS FUTURE BOARDS
Healthdyne argues that the "sole discretion" language of O.C.G.A. ss.
14-2-624(c) provides that the only possible limitation on the authority of a
board of directors to adopt a rights plan and establish its terms and conditions
is the board's fiduciary duties. Healthdyne Brief, pp. 20-21. This is wrong.
First, Healthdyne ignores both ss. 624(c)'s specific reference to ss. 601 and
the comment that demonstrates that the purpose of this language in ss. 624(c)
was to reverse the holding in West Point-Pepperell, Inc. v. Farley, Inc., 711 F.
Supp. 1088 (N.D. Ga. 1988) that a discriminatory poison pill is prohibited by
the predecessor to ss. 14-2-601, which provided that all shares of the same
class must be equal and that if there was more than one class of shares, the
articles of incorporation had to identify the various classes and the specific
ways in which their rights differed. Thus, ss. 624(c) authorizes the use of
poison pills by making it clear that the directors' "sole discretion" to adopt
rights plans is not limited by anything in ss. 601 and that the differences
among rights holders need not be set forth in the articles of incorporation.
Significantly, ss. 624(c) makes no reference whatsoever to ss. 801 --
which clearly states that any limitations on the powers of directors must be
"set forth in the articles of incorporation,
- 5 -
<PAGE>
bylaws approved by the shareholders, or agreements among the shareholders which
are otherwise lawful"2 -- or to limitations on the power of newly elected
directors. If Healthdyne's argument about the Legislature's intent were
correct, the statute would refer to ss. 801 and would have to read as follows:
"Nothing contained in Code Sections 14-2-601 or 14-2-801 shall be deemed to
limit the board of directors' authority to determine, in its sole discretion,
the terms and conditions of the rights, options. . . ." That is not what the
statute says. Therefore, because Healthdyne has conceded that the Dead Hand
Provision limits the authority of new directors, and those limits are not in
the articles or shareholder approved bylaws, it violates ss. 801.
Healthdyne has not denied that its sweeping argument that the "sole
discretion" phrase in ss. 624(c) trumps all the other carefully drafted
provisions of the GBCC, if correct, would permit a board of directors to do
unilaterally in a rights plan what it cannot do in any other manner, whether
through amendment of the articles of incorporation or bylaws.3 See Invacare's
First Brief, pp. 22-25; Carney Aff., P. P. 38-42; Carney's Third Aff., P. P.
4-5. Tellingly,
- --------
2 Healthdyne argues in its summary judgment papers that Invacare has "conceded"
that board authority is "subject only to limitations contained in the articles
of incorporation" by not quoting the remainder of ss. 801 referencing
shareholder bylaws and other agreements in its Complaint. Obviously, the full
text of the statute is controlling.
3 If Healthdyne's interpretation of the "sole discretion"
language of ss. 624 were correct, ss. 624 would be unconstitutional as
applied under the seminal case on anti-takeover statutes. Edgar v.
MITE, 457 U.S. at 637-40 (state statute unconstitutional where it
allowed incumbent management to "stymie" a takeover).
- 6 -
<PAGE>
Healthdyne has chosen not to address the extreme and absurd implications of its
argument.
C. THE BANK OF NEW YORK DECISION SHOULD
BE FOLLOWED BY THIS COURT
Defendants also claim that Bank of New York "provides no guidance" for
this Court in deciding the legality of the Dead Hand Provision. Healthdyne
Brief, pp. 24-25. They claim that Georgia law -- unlike New York law --
"expressly endorse[s] discrimination between continuing directors and insurgent
directors" via the Fair Price and Business Combination statutes. Id. However, at
the time Judge Cahn decided Bank of New York in 1988, New York had a business
combination statute which employed the concept of a "continuing director" -- a
director elected prior to a bidder becoming a greater than 10% "interested
shareholder" -- although it did not use the words "continuing director". Section
912(b) of the New York Business Corporation Law provides, inter alia, that
unless a shareholder receives director approval prior to becoming an interested
shareholder, the shareholder cannot effect a business combination for five
years. Thus, not only did New York's corporate code, like Georgia's, provide
that limitations on the powers of directors had to be set forth in the
shareholder controlled documents, it also had an anti-takeover statute which,
like Georgia's, employed the concept of a continuing director. The Court should
clearly look to Bank of New York, the only case in the country ruling on a Dead
Hand.
- 7 -
<PAGE>
D. THE GEORGIA FAIR PRICE AND BUSINESS
COMBINATION STATUTES DO NOT AUTHORIZE
DEAD HAND CONTINUING DIRECTOR PROVISIONS
Healthdyne attempts to justify the Dead Hand Provision by claiming that
Georgia law sanctions the type of "continuing director" provision found in the
Dead Hand Provision. Healthdyne Brief, pp. 25-26. This claim is invalid.
Although the Georgia Fair Price and Business Combination statutes do employ a
"continuing director" concept, the definitions and powers of these continuing
directors (hereafter "Statutory Continuing Directors") have been carefully
circumscribed by the Legislature and are crucially different from the unbridled
powers Healthdyne has given its Dead Hand Continuing Directors.
These statutory "continuing director" provisions recognize shareholder
sovereignty and help protect the free exercise of shareholder voting rights,
whereas the Dead Hand Continuing Director provisions reject shareholder
sovereignty and are expressly designed to limit shareholders' voting rights. The
Georgia Fair Price and Business Combination statutes recognize a principle that
once a shareholder owns 10% or more of the corporation, that shareholder becomes
an "interested shareholder" who may be able unfairly to influence board
decisions and distort shareholder voting choices on mergers and other business
combinations. See O.C.G.A. ss.ss. 14-2-1110, 1131. The statutes thus provide
that to avoid certain restrictions on business combinations, directors elected
by the shareholders before the acquiror becomes an "interested shareholder" by
gaining more than
- 8 -
<PAGE>
10% ownership of the corporation (referred to as "continuing
directors") must approve the transaction. O.C.G.A. ss.ss. 14-2-1111,
1132.
These provisions force a potential bidder to deal with a board elected
by the shareholders at a time when their voting decisions were free from
influence by a dominant shareholder. Under these statutes, as long as
Healthdyne's shareholders elect Invacare's nominees before Invacare becomes an
"interested shareholder" by increasing its ownership of Healthdyne from the
current 4.7% to 10% or more, then the newly elected directors will become
Statutory Continuing Directors fully empowered to approve the tender offer and
merger transactions proposed by Invacare free of the restrictions of those
statutes.4 This is the only fair result, since the shareholders will have
expressed their desire -- free from any possible distorting influence resulting
from Invacare
- --------
4 Healthdyne contends (at 29-30) that Invacare's nominees will not be
"continuing directors" under the Fair Price Statute even if Invacare and its
affiliates hold less than 10% of Healthdyne's stock at the time of their
election, arguing that Invacare will have beneficial ownership of shares
tendered to it in the Offer or for which revocable proxies have been given to it
in respect of the upcoming Annual Meeting, even though such tenders and proxies
may be withdrawn at any time. Healthdyne's unprecedented interpretation of the
Fair Price Statute definition of "beneficial ownership" is simply wrong and is
at odds with both common sense and all relevant authority. Invacare previously
addressed this point in footnote 7 of its initial brief. In addition, the Court
is respectfully referred to copies of correspondence between Invacare's and
Healthdyne's counsel addressing this matter in more detail, attached as Exhibits
1-4 to the June 13, 1997 Smith Aff. See also Carney Aff., P. 35; Third Carney
Aff., P. P. 12-13.
- 9 -
<PAGE>
owning greater than 10% of Healthdyne -- to elect Invacare's
nominees and permit them to approve the transaction. Indeed,
shareholder sovereignty and the protection of the free exercise of
shareholder voting rights uninfluenced by a dominant shareholder
are the principal underpinnings of the Statutory Continuing
Director provisions. Moreover, the ultimate safety valve -- a
proxy contest -- is constitutionally required. See CTS Corp. v.
Dynamics Corp. of America, 481 U.S. 69, 91 (1987).
In stark contrast, the Dead Hand Continuing Director Provision rejects
the well-accepted principle of shareholder sovereignty and replaces it with the
alien notion of the sovereignty of the incumbent board. The Dead Hand Provision
would flatly prohibit new directors elected by the shareholders from ever
qualifying as Dead Hand Continuing Directors capable of removing the poison pill
obstacle to Invacare's proposed transactions, keeping that power instead solely
in the hands of the incumbent board or their handpicked successors.
In addition, Statutory Continuing Director limitations were passed by
the Georgia Legislature and reflect a careful balancing of the provisions of
the GBCC, whereas the one-sided Dead Hand Continuing Director limitations were
adopted by fiat of the incumbent Healthdyne board without approval by the
Healthdyne shareholders. Given the Legislature's care in drafting the statutes
to keep the door open for shareholders to elect new directors constituting
"continuing directors" in a bidder-sponsored proxy contest, Healthdyne's claim
that Georgia law "as a matter of
- 10 -
<PAGE>
policy" embraces the far-reaching, draconian Dead Hand Continuing Director
concept is completely unsupportable. The carefully balanced and narrow drafting
of the Statutory Continuing Director provisions instead shows that the Georgia
Legislature has given approval to the "continuing director" concept only under
circumscribed conditions in which the sovereignty of shareholder voting rights
has been preserved.
E. DEFENDANT'S RELIANCE ON THE DEAD HAND PROVISION
VIOLATES THEIR FIDUCIARY DUTIES AS MATTER OF LAW
Healthdyne half-heartedly asserts that the leading Delaware cases on
directors' fiduciary duties in the context of board interference with
shareholder voting rights -- such as Blasius, Unocal, and Unitrin -- would not
be followed by Georgia courts because Georgia has a statutory "process-oriented"
standard of director care. Healthdyne Brief, pp. 32-33. This argument can be
quickly dismissed because Healthdyne and its Delaware counsel have already
stipulated in this case "that the Court should use Delaware law as guidance in
interpreting Georgia corporate law." See Healthdyne's Response Brief on
Plaintiffs' Motion for a Preliminary Injunction on the Annual Meeting, p. 13
n.3.5
- --------
5 Although Georgia does have a statutory standard of care for directors,
O.C.G.A. ss. 14-2-830, the Comment to that section makes it clear that the
Legislature has left it to the courts to define the parameters of the statutory
standard, specifically its relationship to the business judgment rule. As noted
in Invacare's opening brief (p. 17, n.5), Georgia has given considerable
deference to the decisions of Delaware courts in matters of corporate law. This
deference has not been accorded to the corporate law of Virginia which
Healthdyne urges on the Court.
- 11 -
<PAGE>
Defendants argue that Blasius, which establishes that board
interference with shareholder voting rights is invalid, is distinguishable
because the issue there was whether the board could prevent a new majority from
being elected, not an entirely new board. Healthdyne Brief at 35. However,
Blasius clearly speaks more broadly to any board action infringing on
shareholder voting rights, as illustrated by the manner in which the court
framed the issue for its discussion: "Why the deferential business judgment rule
does not apply to board acts taken for the primary purpose of interfering with a
stockholder's vote, even if taken advisedly and in good faith." Blasius, 564
A.2d at 659.
Defendants also argue that the Dead Hand Provision does not infringe on
the shareholders' voting franchise since shareholders may still elect a new
board, albeit one with limited powers. Healthdyne's acknowledgment of the
impotence of any newly elected board proves Invacare's point: by destroying the
power of new directors to remove the Poison Pill, Healthdyne's board has
rendered futile the shareholders' exercise of their right to vote the
incumbent board out of office. Such action -- even if taken in "good faith"
- -- violates the directors' fiduciary duties as a matter of law. Blasius, 564
A.2d at 663; see also Moran, supra.
F. HEALTHDYNE CONCEDES THAT THE DEAD
HAND PROVISION IS PRECLUSIVE AND COERCIVE.
Under the Unocal and Unitrin cases discussed at pp. 31-33 of Invacare's
opening brief, board-adopted defensive measures which are "preclusive" -- by
depriving stockholders of their rights to
- 12 -
<PAGE>
receive tender offers or by restricting proxy contests -- or "coercive" -- by
forcing shareholders into a management-sponsored alternative -- fail the Unocal
test and are invalid as a matter of law. Healthdyne twice concedes the
preclusive and coercive effects of the Dead Hand Provision in its brief:
[T]he shareholders can replace the entire board if they choose,
although that would limit the new board's ability to approve a sale
of the Company.
* * *
Invacare's nominees can take control of the Healthdyne Board while
still leaving Continuing Directors in place to redeem the Rights
Plan. If and when the Continuing Directors decide to redeem the
Rights Plan, then the barrier to a takeover will be removed.
Healthdyne Brief, pp. 35-36 (emphasis added). Healthdyne thus admits both that
the Dead Hand Provision precludes the shareholders from exercising their rights
in a proxy contest to elect a new board fully empowered to redeem the poison
pill and that it precludes shareholders from accepting Invacare's tender offer
absent approval by Dead Hand Continuing Directors.6
Finally, Unocal and Unitrin establish that board action may not place any
conditions on the shareholders' right to an open and fair proxy contest --
shareholders' free voting rights cannot be conditioned on the shareholders
commencing costly and time
- --------
6 Defendant's expert claims to have identified two
instances in which a transaction was consummated in the face of a
dead hand provision. Margotta Aff., P. 31. Neither is apt because
both ended up as friendly transactions approved by the incumbent
directors. Second Grundfest Aff., P. P. 4, 12.
- 13 -
<PAGE>
consuming litigation to force action by board members bent on a course of
entrenchment. The opportunity to litigate is not a substitute for the right to
vote.
G. Invacare Has Established Irreparable Harm.
Healthdyne admits that Invacare would be harmed by the loss of the
opportunity to acquire Healthdyne (at 37), but asserts that such an injury is
insufficient for an injunction because Healthdyne "does not owe fiduciary duties
to Invacare as a tender offeror" (at 38). This is irrelevant. Courts routinely
recognize that a party barred from a tender offer will suffer irreparable injury
without regard to the presence of any fiduciary relationship with the defendant.
See, e.g., Bank of New York, supra; Newell, supra.
Healthdyne also argues (at 38) that "Healthdyne's shareholders other
than Invacare do not face any risk of injury" if the injunction is denied,
because they can simply sell at the market price or vote defendants out of
office. First, Healthdyne does not rebut the affidavit of proxy solicitor Mark
Harnett, which establishes that the Dead Hand Provision will frustrate the
shareholders' right to elect directors of their choice. Harnett Aff., P. 8. The
affidavits of two institutional shareholders of Healthdyne -- collectively
owning over 6% of Healthdyne -- confirm this fact. See Affidavits of Bonnie L.
Smith and Eric Rosenfeld. Second, selling any significant volume of shares into
the market is not viable since the market price of Healthdyne's shares has been
based on daily volume of less than 2% of Healthdyne's 12
- 14 -
<PAGE>
million outstanding shares. The only way for all shareholders to receive the
benefit of Invacare's premium price is through Invacare's tender offer and
merger proposal. Healthdyne's argument that the aggrieved shareholders can
simply vote defendants out of office is both wrong and ironic: the Dead Hand
Provision itself prevents shareholders who favor a sale of Healthdyne from
voting against the defendants, because only they have the power to redeem the
Poison Pill.
Finally, Healthdyne asserts that the public interest favors denial of
the injunction because the Georgia Legislature "endorses" the continuing
director concept. This is nonsense. The public interest obviously favors open,
fair corporate elections, which the injunction is necessary to permit.
II. CONCLUSION
For the foregoing reasons, the Court should grant Invacare's motion.
DATED: June 12, 1997
KING & SPALDING
/s/ M. Robert Thornton
----------------------------------
191 Peachtree Street, N.E. M. Robert Thornton
Atlanta, Georgia 30303 Georgia Bar No. 710475
Telephone: (404) 572-4600 Michael R. Smith
Facsimile: (404) 572-5100 Georgia Bar No. 661689
David J. Onorato
Of Counsel: Georgia Bar No. 553826
SIMPSON THACHER & BARTLETT Attorneys for Plaintiffs Invacare
425 Lexington Avenue Corporation and I.H.H. Corp.
New York, New York 10017
(212) 455-2000
- 15 -
