<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 10
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
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<PAGE>
This Amendment No. 10 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, dated as of May 22, 1995, as amended, between
the Company and SunTrust Bank, Atlanta (formerly Trust Company Bank), as Rights
Agent, at a purchase price of $13.50 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 (the "Offer
to Purchase"), as amended and supplemented by the Supplement thereto dated April
4, 1997 (the "Supplement") and in the revised Letter of Transmittal (which,
together with any other amendments or supplements thereto, constitute the
"Offer").
The Schedule 14D-1 is hereby amended and supplemented as follows:
On April 7, 1997, the Parent and the Purchaser filed a Motion for
Preliminary Injunction in the Defensive Tactics Litigation (the "Preliminary
Injunction Motion") claiming, among other things, that (i) as part of a scheme
of extreme defensive and director-entrenching measures, the defendants are
delaying the Company's 1997 Annual Meeting of Shareholders in violation of their
fiduciary duties and the Company's By-Laws and (ii) the Georgia Business
Corporation Code requires the defendants to hold the Annual Meeting by no later
than June 30, 1997. The Preliminary Injunction Motion seeks an order requiring
the defendants to take all steps necessary to cause the Company to hold the
Annual Meeting promptly and in any event by no later than June 30, 1997. A copy
of the memorandum of law filed in support of the Preliminary Injunction Motion
is set forth in Exhibit 11(g)(5) and is incorporated herein by reference.
On April 8, 1997, the Parent issued a press release announcing that it had
filed the Preliminary Injunction Motion. The full text of the press release is
set forth in Exhibit 11(a)(24) and is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(g)(5) Memorandum of Law in support of Motion for Preliminary Injunction filed
by the Parent and the Purchaser on April 7, 1997.
(a)(24) Press Release issued by the Parent on April 8, 1997.
</TABLE>
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: April 8, 1997
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
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<S> <C> <C>
11(g)(5) Memorandum of Law in support of Motion for Preliminary Injunction filed by the Parent and the
Purchaser on April 7, 1997.
11(a)(24) Press Release issued by the Parent on April 8, 1997.
</TABLE>
<PAGE>
Exhibit 11(g)(5)
EXHIBIT A
FILED UNDER SEAL*
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
_________________________
)
INVACARE CORPORATION and )
I.H.H. CORP., )
)
Plaintiffs, )
)
v. )
)
HEALTHDYNE TECHNOLOGIES, )
INC., et al. ) CIVIL ACTION NO: 97-CV-0205
)
)
Defendants. )
_________________________)
* CERTAIN PORTIONS OF THIS DOCUMENT (INDICATED BY "* * *")
HAVE BEEN REDACTED FROM THE VERSION FILED WITH THE COURT IN
ACCORDANCE WITH A STIPULATION AND PROTECTIVE ORDER UNDER WHICH
THE DEFENDANTS HAVE DESIGNATED AS CONFIDENTIAL CERTAIN MATERIALS
PRODUCED BY THEM IN DISCOVERY. THE PARENT AND THE PURCHASER DO
NOT BELIEVE THAT THESE DESIGNATIONS ARE JUSTIFIED AND INTEND TO
CONTEST THEM BEFORE THE COURT.
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS'
MOTION FOR PRELIMINARY INJUNCTION REQUIRING
HEALTHDYNE TO HOLD ITS ANNUAL SHAREHOLDERS' MEETING
Plaintiffs Invacare Corp. and I.H.H. Corp. (collectively "Invacare") file
this Memorandum Of Law In Support Of Plaintiffs' Motion for Preliminary
Injunction Requiring Healthdyne to Hold its Annual Shareholders' Meeting.
PRELIMINARY STATEMENT
Plaintiffs have an offer pending to shareholders of defendant Healthdyne
Technologies, Inc. ("Healthdyne") to purchase all outstanding Healthdyne shares
(the "Offer"). Those shareholders, however, are being blocked from even
considering that Offer by numerous director-entrenching defensive measures (such
as a "poison pill") that Healthdyne has in place.
<PAGE>
Defendant Healthdyne and the individual defendants (the "Director Defendants")
not only have these numerous structural obstacles in place, but they have also
steadfastly refused -- for well over three months now -- even to TALK to
Plaintiffs about their Offer. Thus, the only way to allow Healthdyne's
shareholders to consider Plaintiffs' Offer is for Invacare to conduct a proxy
contest to replace Healthdyne's directors with directors who will allow the
shareholders to decide their economic futures FOR THEMSELVES.
In order to allow the shareholders to do this, Healthdyne must hold its
annual shareholders meeting. For the past two years, Healthdyne has held its
annual meeting by the end of May. * * * However, since Plaintiffs made their
Offer, the Director Defendants have made it clear that they intend to delay the
meeting for as long as they possibly can -- realizing that they are faced with
the prospect of being voted out of office by shareholders who disagree with this
decision to reject Plaintiffs' premium Offer. This is not a lawful
justification for failing to hold the annual meeting on a timely basis.
Plaintiffs request that this Court require Healthdyne to hold its annual
meeting. If the Director Defendants believe that the shareholders would be best
served by their remaining in office, then they can make their case to the
shareholders. The decision as to who should guide Healthdyne in the coming
year, however, is for the shareholders to make, not the Director Defendants.
STATEMENT OF FACTS
Healthdyne is a Georgia corporation. Answer of Individual Defendants filed
March 7, 1997 ("Answer"), PARA 13. Georgia law requires that a domestic
corporation such as Healthdyne hold its annual meeting no later than six months
after the close of its previous fiscal year. SEE O.C.G.A. Section 14-2-703.
Healthdyne's fiscal year closed on December 31, 1996. Accordingly, it must hold
its annual meeting absolutely no later than June 30, 1996.
* * * However, Healthdyne * * *; nor has it formally called, or taken the
necessary steps to hold, the meeting for * * * any * * * date. On the contrary,
the defendants, confronted with Invacare's premium Offer, have attempted to
postpone the meeting indefinitely.
-2-
<PAGE>
A. INVACARE'S JANUARY 1997 PROPOSAL TO ACQUIRE HEALTHDYNE.
Defendants' delay tactics began soon after January 2, 1997, when Invacare
wrote to Healthdyne proposing that Invacare acquire Healthdyne in a negotiated
transaction in which Healthdyne shareholders would receive $12.50 per share in
cash, a 40% premium over Healthdyne's 1996 year-end stock price of $8.88 per
share. Answer, PARAPARA 21, 29. That letter stated that Invacare was willing
"to discuss all aspects of" its offer "[i]n the context of a negotiated,
friendly transaction." ID; Smith Aff., Ex. 3 at pp. 24-25.
Shortly after receiving Invacare's proposal, the defendants began adding to
the extreme defensive measures they already had in place to thwart the offer and
entrench incumbent management. Even before January 2, Healthdyne had in place a
"poison pill". This poison pill (described in greater detail in Invacare's
Complaint on file with the Court) was adopted WITHOUT A VOTE OF HEALTHDYNE'S
OWNERS -- THE SHAREHOLDERS -- and is designed to inflict massive economic
penalties on a potential acquiror and to prevent the shareholders from accepting
any offer for their shares without the prior approval of the incumbent Board.
Answer, PARA 37-43; Smith Aff., Ex. 5 at Exhibit C, pp. 1-2. Thus, in adopting
the poison pill, the Director Defendants gave themselves veto power over any
offer to Healthdyne's shareholders, including premium, all-cash offers such as
Invacare's.
-3-
<PAGE>
Healthdyne's poison pill contains a rare and deadly form of poison, namely,
a set of redemption and amendment restrictions referred to as a "dead-hand"
provision (the "Dead-Hand Provision"). The Dead-Hand Provision says that only
the current directors or their personally approved successors can redeem or
eliminate the poison pill. Answer, PARA 37-43; Smith Aff., Ex. 5 at Exhibit C,
pp. 3-4. This provision serves no purpose other than to make it futile for
anyone even to try to replace the incumbent directors. Even after a proxy
contest in which the shareholders vote out the incumbent directors, the newly
elected directors would not be able to remove the obstacle of Healthdyne's
poison pill; only the incumbents could redeem it.
B. HEALTHDYNE'S FURTHER DIRECTOR ENTRENCHMENT MANEUVERS
AND REJECTION OF THE OFFER.
As if their other defenses were not enough,(1) on January 23, Healthdyne's
Board amended Healthdyne's by-laws to repeal a provision specifying the date of
the annual meeting. Answer, PARAPARA 3, 33. The repealed by-law had specified
that if the directors did not set a different date, the annual meeting would
take place on the fourth Tuesday in April. Smith Aff., Ex. 6 at H01543. This
was a clear indication that, faced with Invacare's offer, the Director defendant
intended to postpone calling a shareholders meeting as long as they possibly
could.
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(1)Healthdyne has also opted into the Georgia Fair Price Statute, O.C.G.A.
Section 1110-1113, and the Georgia Business Combination Statute, O.C.G.A.
Section 14-2-1132, providing additional devices which defendants can attempt to
use to impede consideration of Invacare's offer. Answer, PARA 60.
-4-
<PAGE>
Braced by the extreme defensive and entrenchment devices it had started
putting in place, Healthdyne summarily rejected Invacare's offer on January 24,
the very next day. It did so without negotiating or even discussing the offer
with Invacare. Answer, PARA 33; SEE Smith Aff., Ex. 4, at Exhibit 19. In light
of this rejection by Healthdyne's management, Invacare determined to take its
proposal directly to Healthdyne's shareholders by commencing an all-cash
all-shares tender offer on January 27 for all outstanding Healthdyne shares for
$13 in cash for each share (the "Offer"). Answer, PARA 15; Smith Aff., Ex. 3
at p.2. Any shares not tendered in the Offer would receive the same $13 per
share in a subsequent merger. Smith Aff., Ex. 3 at Exhibit 11(a)(1), p.1. Also
on January 27, Invacare announced that, if necessary, it would initiate a proxy
contest with a slate of new directors nominated by Invacare, who would be
committed to removing the obstacles that had been erected to Invacare's Offer.
Smith Aff., Ex. 3 at Exhibit 11(a)(1), pp. 1-2.
On January 31, Healthdyne urged its shareholders to reject the Offer
because of its alleged "inadequacy", Smith Aff., Ex. 4, at Exhibits 22 and 23,
despite the fact that the Offer represented a premium of more than 45 percent
over the market price for Healthdyne shares as of December 31, 1996, just before
Invacare made its initial proposal. Answer, PARAPARA 2, 21. This charge that
the Offer was inadequate was especially brazen when contrasted with the fact
that Healthdyne's 1996 fourth-quarter earnings were off 22% from the previous
year and that Healthdyne had for eight consecutive quarters failed to meet
analysts' quarterly earnings estimates. Smith Aff., Ex. 7; Affidavit of Mark
H. Harnett, dated April 7, 1997 ("Harnett Aff."), at PARA 10.
-5-
<PAGE>
With Healthdyne's failure to announce when it would hold its annual meeting
and with its continuing refusal to discuss the Offer with Invacare, Invacare
gave notice on March 20 of its intent to propose a slate of new directors at the
next annual meeting. Smith Aff., Ex. 8 at p. 2, Item 3.
C. THE DIRECTOR DEFENDANTS' ATTEMPTS TO ENTRENCH
THEMSELVES BY LEGISLATIVE FIAT.
On the same day that Invacare announced its slate of directors, the
defendants put into action yet another -- albeit ultimately unsuccessful --
attempt to entrench themselves and to thwart shareholder consideration of
Invacare's Offer. In what THE ATLANTA CONSTITUTION decried as a "stealth"
maneuver, Smith Aff. Ex. 9, the defendants prevailed upon a sympathetic Cobb
County legislator to propose amending the Georgia Business Corporation Code to
eliminate the rights of ALL shareholders of ALL publicly held Georgia
corporations to elect a full Board at each annual meeting and to remove
directors at any time. Smith Aff. Exs. 10-12.(2)
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(2)Healthdyne's proposed amendment provided, among other things, that unless the
company's board opts out of the statute: (1) its directors would automatically
have "staggered" terms, such that no more than one-third of the Board would have
to stand for election in any given year; and (2) shareholders would be deprived
of their current right to remove directors for any reason. (Smith Aff., Ex. 11).
-6-
<PAGE>
This amendment was clearly designed for one purpose only -- to prevent all
of Healthdyne's directors from having to face re-election against Invacare's
slate of nominees. THE ATLANTA CONSTITUTION described Healthdyne's efforts to
pass the amendment, reporting that Healthdyne "submit[ted] the proposal to
legislators . . . [at] the last minute because executives realized they were
vulnerable to a maneuver to replace the Board." Smith Aff., Ex. 13.(3)
Not content with merely changing their own by-laws, the defendants
attempted to change the law governing EVERY Georgia corporation. The proposed
bill would have dramatically altered existing Georgia corporate law, which
prohibits staggered terms for directors unless approved by the shareholders, not
only for Healthdyne's shareholders BUT FOR EVERY SHAREHOLDER OF EVERY GEORGIA
CORPORATION. Because the bill would have blocked Invacare from replacing more
than a third of the Board this year, it would have blocked prompt consideration
of the Offer.
- --------------------------
(3)The amendment was specifically intended to block the Offer from being
considered by Healthdyne's shareholders. This purpose was acknowledged by its
co-sponsor, Senator Steve Thompson, whom THE ATLANTA CONSTITUTION quoted as
stating: "An Ohio company is trying to take over a Georgia company. We are
trying to offer the Georgia company some protection." Smith Aff., Ex. 14.
-7-
<PAGE>
Unfortunately for the defendants, however, after narrowly passing in the
Senate, the House of Representatives resoundingly defeated the bill by a more
than 2 to 1 margin. SEE Smith Aff., Ex. 15. Although an utter failure, this
legislative foray captures the extreme lengths to which Healthdyne and the
Director Defendants were and are willing to go -- including changing the legal
arrangements for ALL publicly held Georgia corporations, not just Healthdyne --
in order to thwart the Offer and entrench themselves.
The Director Defendants' attempts to entrench themselves by legislative
fiat did not prevent them from simultaneously pursuing still other extreme
entrenchment devices. On March 20, the same day they commenced their ill-fated
legislative foray, the Director Defendants also adopted by-law amendments
allowing Healthdyne's Board to challenge the validity of shareholder demands for
special meetings and to delay such special meetings more than FOUR MONTHS after
a valid shareholder demand is received Smith Aff., Ex. 16, at Exhibit 31. This
was yet another manifestation of defendants' intent to delay ANY shareholder
meeting or vote.
In addition, the Director Defendants gave themselves and Healthdyne's
officers extremely broad indemnification agreements. These agreements purport
to insulate the Director Defendants from liability for any actions taken or
failed to be taken by them -- such as actions to delay the annual meeting,
pursue director-entrenching legislation, or adopt director-entrenching by-laws.
Smith Aff., Ex. 16, at Exhibits 29-30. The Director Defendants thus have
virtually announced that they are on a take-no-prisoners program in their
campaign to block their shareholders from considering whether to remove them
from office.
-8-
<PAGE>
In an attempt to facilitate consideration of the transaction despite
continued Healthdyne stonewalling and intransigence, Invacare announced on March
31 that it had raised the tender offer price to $13.50 in cash per share. Smith
Aff., Ex. 17; Smith Aff., Ex. 18. That day, Invacare's Chairman wrote to his
Healthdyne counterpart, pointing out that Healthdyne had failed to meet
analysts' earning estimates for the past eight quarters and suggesting a meeting
to discuss the Offer rather than engaging in an expensive proxy fight and legal
maneuvering. ID.
On April 3, 1997, Healthdyne once again summarily refused even to sit down
and talk about the Offer. In its press release, Healthdyne continued its
stone-cold silence as to when the annual meeting would be held. Smith Aff., Ex.
18.
D. HEALTHDYNE'S UNEXPLAINED DEPARTURE FROM ITS
PRIOR PRACTICE CONCERNING THE ANNUAL MEETING.
Healthdyne held its 1996 annual meeting on May 23, 1996 and its 1995 annual
meeting on April 20, 1995. Smith Aff., Exs. 20 and 21. * * * Soon after
Invacare's January 2 proposal, however, defendants began implementing a scheme
to delay the annual meeting. It is now clear that defendants do not intend to
hold an annual meeting * * *, because Healthdyne has not even begun to take the
steps dictated by past practice and required by law to have a meeting * * *.
-9-
<PAGE>
In 1995 and 1996, the Healthdyne Board gave shareholders notice of the
annual meeting 30 days in advance of the annual meeting date (the "Notice
Date"), which is standard industry practice. Harnett Aff., PARA 4. Before an
annual meeting, Healthdyne must send out "proxy materials" setting forth its
slate of directors and proposals to be voted upon by the shareholders. * * *
Prior to sending out the proxy materials, Healthdyne must also set a
"Record Date" to determine the appropriate recipients. Harnett Aff., PARA 5. In
1995 and 1996, Healthdyne's Record Date was an average of nine days prior to the
Notice Date, which is consistent with the industry practice. SEE Smith Aff.,
Exs. 20 and 21; Harnett Aff., PARA 5. * * *
Healthdyne must also mail out inquiries, called "broker search cards", to
brokers requesting a preliminary count on how many copies of the proxy materials
they will require. Harnett Aff., PARA 6. Under S.E.C. Rule 14a-13, Healthdyne
would have had to send out broker search cards 20 business days prior to the
Record Date. * * * In summary, in order to have a * * * meeting, Healthdyne
would have had to begin taking steps * * *:
-10-
<PAGE>
* * * * * * * * * * * *
BROKER RECORD DATE NOTICE DATE ANNUAL
SEARCH (9 days before (distribute proxy MEETING
CARDS Notice Date) materials to * * *
(20 business Shareholders 30
days prior to days before
Record Date) Annual Meeting)
However, several major brokerage houses, as well as ADP Proxy Services, which
acts as the proxy department for more than 400 brokerage firms and banks, have
indicated that no broker search cards from Healthdyne have yet been received.
Harnett Aff., PARA 6. In light of the foregoing, the conclusion is inescapable
that Healthdyne has every intention of delaying the 1997 annual meeting for as
long as it possibly can in a desperate attempt to entrench the Director
Defendants and to thwart Invacare's premium Offer. SEE Harnett Aff., PARA 7.
Accordingly, Plaintiffs need the intervention of this Court in order to
have Healthdyne obey the law and call and hold the annual meeting not later than
June 30, 1997.
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<PAGE>
ARGUMENT
I. INVACARE IS ENTITLED TO A PRELIMINARY INJUNCTION
REQUIRING HEALTHDYNE TO HOLD ITS ANNUAL MEETING
NO LATER THAN JUNE 30, 1997.
A. APPLICABLE STANDARD FOR A PRELIMINARY INJUNCTION.
The standards for entry of a preliminary injunction are well-settled in
this Circuit:
To be entitled to injunctive relief, the moving party
must establish that (1) there is a substantial likelihood
that he ultimately will prevail on the merits of the claim;
(2) he will suffer irreparable injury unless the injunction
issues; (3) the threatened injury to the movant outweighs
whatever damage the proposed injunction may cause the
opposing party; and (4) the public interest will not be
harmed if the injunction should issue.
CATE V. OLDHAM, 707 F.2d 1176, 1185 (11th Cir. 1983). To determine the proof
required to establish these elements, "a sliding scale is utilized, which takes
into account the intensity of each in a given calculus." STATE OF TEXAS V.
SEATRAIN INT'L, S.A., 518 F.2d 175, 180 (5th Cir. 1975). Thus, "a much stronger
showing on one or more of the necessary factors lessens the amount of proof
required for the remaining factors." COLLINS & CO. V. CLAYTOR, 476 F. Supp.
407, 408 (N.D. Ga. 1979).
As shown below, Invacare is likely to succeed on the merits of its claims
that delaying the annual meeting beyond June 30, 1997 violates (1) the
defendants' fiduciary duties, (2) O.C.G.A. Section 14-2-703, and (3)
Healthdyne's by-laws. Invacare also shows that it will suffer irreparable injury
to its shareholder voting rights and its opportunity to acquire Healthdyne if
the meeting is delayed, while the defendants will suffer no harm if the Court
orders the meeting to occur by June 30, 1997. Finally, the public interest will
be served by ordering a prompt meeting.
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<PAGE>
B. THE COURT SHOULD ORDER HEALTHDYNE TO CONVENE ITS
1997 ANNUAL MEETING.
1. THE DIRECTOR DEFENDANTS' DELAY OF THE ANNUAL
MEETING IS A BREACH OF THEIR FIDUCIARY DUTIES.
Delaware courts have long recognized that "the shareholder franchise is the
ideological underpinning upon which the legitimacy of directorial power rests."
BLASIUS INDUSTRIES, INC. V. ATLAS CORP., 564 A.2d 651, 659 (Del. Ch. 1988).(4)
The corporate election process provides one of the few, IF NOT THE ONLY,
protections which shareholders have against "perceived inadequate business
performance." ID. Thus, shareholders must have an unfettered right to vote
against management if they so choose. ID.
Accordingly, Delaware courts insure that corporate elections are run with
"scrupulous fairness and without any advantage being conferred to or denied to
any candidate or slate of candidates." APRAHAMIAN V. HBO & CO., 531 A.2d 1204,
1206 (Del. Ch. 1987). Thus, Delaware courts do not apply the traditional
business judgment rule to board actions if such actions are intended to
interfere with or frustrate shareholder voting rights. BLASIUS, 564 A.2d at
659; APRAHAMIAN, 531 A.2d at 1206. Instead, Delaware courts invalidate such
actions "unless the directors are able to . . . [show] a compelling
justification for their actions." HUBBARD V. HOLLYWOOD PARK REALTY ENTERPRISES,
INC., Case No. 11779, 1991 WL 3151 at *8 (Del. Ch. Jan. 14, 1991), citing
BLASIUS.
- --------------------------
(4)Both federal and state courts in Georgia, as well as the Georgia Legislature,
rely heavily on Delaware authority for guidance in corporate jurisprudence.
PELLER V. SOUTHERN CO., 911 F.2d 1532, 1536 (11th Cir. 1990); INT'L. INS. CO. V.
JOHNS, 874 F.2d 1447, 1459 n. 22 (11th Cir. 1989); GRACE BROS. V. FARLEY INDUS.,
450 S.E.2d 814, 816 (Ga. 1994). SEE ALSO, Official Comment, O.C.G.A. Sections
14-2-163; 624; 702; 806; 901; 1006; 1103; 1109; and 1132 (statutes follow
Delaware law).
-13-
<PAGE>
When incumbent management manipulates the date of the annual shareholders
meeting in response to a pending tender offer and proxy battle, several courts
have concluded that such action impermissibly interferes with shareholder voting
rights. SHOEN V. AMERCO, 885 F. Supp. 1332, 1352 (D. Nev. 1994), MODIFIED, No.
94-0475, 1994 WL 904199 (D. Nev. Oct. 24, 1994) and VACATED AFTER SETTLEMENT
(Feb. 9, 1995); INT'L. BANKNOTE CO. V. MULLER, 713 F. Supp. 612, 623 (S.D.N.Y.
1989); SCHNELL V. CHRIS-CRAFT INDUSTRIES, INC., 285 A.2d 437 (Del. 1971);
APRAHAMIAN, 531 A.2d 1204; LERMAN V. DIAGNOSTIC DATA, INC., 421 A.2d 906 (Del.
Ch. Ct. 1980). These courts have not hesitated to enjoin such action when
incumbent management cannot provide a "compelling justification" for
manipulating the annual meeting date. SEE BLASIUS, 564 A.2d at 659 n.2 (the
concern "for credible corporate democra[cy] underlies those cases that strike
down board action that sets or moves an annual meeting date upon a finding that
such action was intended to thwart a shareholder group from effectively mounting
an election campaign."); HUBBARD, 1991 WL 3151 at *7 (courts "invalidate board
action constituting an inequitable manipulation of the corporate machinery that
affected adversely the shareholders' right to conduct a contested election of
directors.").
-14-
<PAGE>
The decision in SCHNELL, 285 A.2d 437, provides the leading authority on
this subject. In SCHNELL, a dissident stockholders group announced its
intention in September 1971 to wage a proxy contest to oust incumbent
management. On October 18, 1971, the company's board responded by amending the
by-laws which set the company's annual shareholder meeting. The new by-law
accelerated the annual meeting from January 11, 1972 to December 8, 1971. The
shareholders group filed suit, seeking to enjoin enforcement of the amended
by-law. The shareholders group argued that, by advancing the date of the annual
meeting, "[the] board . . . deliberately sought to handicap the efforts of
plaintiffs . . . to place their case before their fellow stockholders for a
decision because of the exigencies of time." SCHNELL V. CHRIS-CRAFT INDUSTRIES,
INC., 285 A.2d 430, 431 (Del. Ch. Ct. 1971), REV'D, 285 A.2d 437 (Del. 1971).
The Chancery Court denied plaintiff's request for preliminary injunction.
On appeal, however, the Delaware Supreme Court reversed and instructed the lower
court "to nullify the December 8th date as a meeting date for the
stockholders." SCHNELL, 285 A.2d at 440. The court reasoned that management
cannot
utilize the corporate machinery and Delaware law for the
purpose of perpetuating itself in office; and, to that end,
for the purpose of obstructing the legitimate efforts of
dissident stockholders in the exercise of their rights to
undertake a proxy contest against management.
ID. at 438. Because the board advanced the regular meeting date to "obtain an
inequitable advantage in the [proxy] contest," the court invalidated the
advanced meeting date. ID. at 439.
-15-
<PAGE>
Relying on SCHNELL, several courts have held that incumbent management
improperly manipulated the corporate machinery when they unreasonably delayed
the annual shareholders' meeting. HOLLY SUGAR CORP. V. BUCHSBAUM, [1981-82
Transfer Binder] Fed. Sec. L. Rep. PARA 98,366 at 92,238 (D. Colo. 1981) ("[T]he
obvious and intended effect of [the board's refusal to convene an annual
meeting] has been to deprive shareholders of their valid right to vote in an
election of directors . . . . Such behavior by fiduciaries is per se
wrongful."); DANAHER CORP. V. CHICAGO PNEUMATIC TOOL CO., Nos. 88 C.V. 3499,
3638, 1986 WL 7001 at *13 (S.D.N.Y. June 19, 1986) ("The law is clear that when
a board of directors has improperly postponed or manipulated the timing of the
shareholders annual meeting, courts have the authority to compel the board to
promptly hold such a meeting.").
The evidence clearly demonstrates that the Director Defendants are
improperly delaying Healthdyne's annual meeting as a tactic to impede the Offer
and entrench themselves in office. Since Invacare first made its proposal in
January 1997, the Director Defendants have
1. Deleted the by-law provision setting a default annual meeting date of
the fourth Tuesday in April if the Board did not set an alternate
date;
2. Failed to mail broker search cards in time to convene the
shareholders' meeting in May 1997, * * *;
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3. Failed to make any announcement about their plans to hold a 1997
annual meeting;
4. Proposed legislation to destroy Healthdyne's shareholders' right to
vote out the entire Healthdyne Board at the next annual meeting; and
5. Added a new by-law purporting to allow the incumbent Board to delay
for months any special meeting called by Healthdyne's shareholders.
Defendants' actions show a flagrant disrespect for the rights of Healthdyne
shareholders to vote on new directors supportive of Invacare's Offer. The
recent attempt to cram through a bill stripping the rights of shareholders of
every Georgia corporation -- not just shareholders of Healthdyne -- to elect a
full Board at each annual meeting and to remove directors at any time stands as
a powerful testament to defendants' willingness to stop at nothing to prevent a
shareholder vote on Invacare's proposals. Viewed in the context of these
actions, defendants' purposeful delay of the * * * annual meeting is
unquestionably a manipulation of the voting process designed to help barricade
the Director Defendants in office in clear breach of the Director Defendants'
fiduciary duties under SCHNELL, HOLLY SUGAR CORP., and DANAHER CORP., SUPRA.
Absent an injunction requiring that the annual meeting be held, defendants will
continue their pattern of delay and disenfranchisement of Healthdyne's
shareholders, in further violation of the Director Defendants' fiduciary duties.
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<PAGE>
2. O.C.G.A. Section 14-2-703 REQUIRES THE DIRECTOR DEFENDANTS
TO CONVENE THE ANNUAL MEETING NO LATER THAN JUNE 30, 1997.
The GBCC sets an absolute deadline for the timely holding of the annual
meeting:
(a) The superior court of the county where a corporation's
registered agent is located may summarily order a meeting to
be held:
(1) On application of any shareholder of the
corporation if an annual meeting was not held within the
earlier of six months after the end of a fiscal year of the
corporation or 15 months after its last annual meeting ....
O.C.G.A. Section 14-2-703.(5)
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(5)O.C.G.A. Section 703 in no way limits Invacare's rights to enforce the
Director Defendants' fiduciary or contractual obligations under Healthdyne's
by-laws. Several courts have found that statutes resembling O.C.G.A. Section
703 do not provide the exclusive remedy when directors fail to convene timely
the annual meeting. OCILLA INDUS., INC. V. KATZ, 677 F. Supp. 1291, 1301
(E.D.N.Y. 1987) ("Although section 603 provides a remedy for shareholders when
directors fail to call annual or special meetings within the contemplated time,
this is not exclusive."); DANAHER CORP., 1986 WL 7001 at *7 (statutory remedy is
not exclusive); SILVER V. FARRELL, 450 N.Y.S. 2d 938, 940-41 (N.Y. Sup. Ct.
1982) (statutory provision entitling 10% of shareholders to call special meeting
is not exclusive remedy where directors fail to call annual meeting as required
by the by-laws).
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Section 703 embodies Georgia law regarding how the timing of a
corporation's annual meeting is integral to the process of holding directors
accountable to the shareholders. This section reflects a policy that
shareholders of Georgia corporations should be afforded a TIMELY opportunity to
meet and discuss the previous year's results of operations and to determine
whether to re-elect the incumbent directors with current, not stale, information
about the preceding year's performance. Section 703 also reflects the policy
determination that, at the very latest, this opportunity to discuss the prior
year's results and evaluate whether to continue with existing management should
occur within six months after the preceding fiscal year end. If this six-month
deadline is missed, Section 703 gives shareholders the unqualified right
immediately to compel the holding of the meeting. SEE Official Comment,
O.C.G.A. Section 14-2-701 ("[E]very shareholder entitled to participate in the
meeting has the UNQUALIFIED RIGHT[] . . . to compel the holding of the meeting
under section 703 if the corporation does not PROMPTLY hold the meeting.")
(emphasis added).(6)
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(6)SEE ALSO TWEEDY, BROWNE & KNAPP V. CAMBRIDGE FUND, INC., 318 A2d. 635, 637
(Del. Ch. 1974) (if a shareholder demonstrates that the company failed to
convene the annual meeting within the statutory deadline, "the court has a duty
to make sure that such a meeting and election take place as promptly as
possible.").
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To comply with Section 703, Healthdyne must hold its meeting by June 30,
1997, six months after its previous fiscal year ended on December 31, 1996. As
discussed above, to have its meeting by June 30, 1997, Healthdyne would have to
begin the process by sending out the broker search cards required under the
federal proxy solicitation rules by April 24, 1997 -- 67 days before the June 30
deadline -- to comply with federal law and to maintain Healthdyne's practices of
giving its shareholders 30 days advance notice of the annual meeting and of
setting a record date nine days before the notice. Given the actions of the
Defendant Directors detailed above, Invacare and Healthdyne's other shareholders
require assurance from the Court that Healthdyne will put the annual meeting
process in motion by no later than April 24, 1997.
In an attempt to prevent the Court from interfering with their scheme of
delay and entrenchment, the defendants might claim that this motion is
"premature" arguing that Invacare must wait until June 30 comes and goes without
a meeting before it can seek relief. If Invacare were required to wait until
July to seek relief, the earliest Healthdyne could convene an annual meeting in
compliance with the proxy rules and its prior notice and record date practices
would be some time in September 1997 (or even October if the Court were not able
to rule promptly on such a motion in July).
This argument ignores the fact that with a public company such as
Healthdyne, it will be clear very soon whether there will be a meeting by June
30 because of the advance steps required by the federal proxy solicitation
rules. Invacare submits that the only way to vindicate the clear policy behind
Section 703 that a corporation must hold its annual meeting by no later than six
months after the end of its preceding fiscal year is for the Court to order now
that (1) the meeting must occur not later than June 30, 1997, and (2) Healthdyne
must take the advance steps necessary to hold the meeting by June 30. It would
make a mockery of Section 703 and its strong policy in favor of holding annual
meetings no later than six months after the previous year end to require
Invacare to wait until July to seek relief under the statute -- even though it
will have been obvious long before that no meeting could occur -- particularly
since waiting until July will mean that the meeting cannot be held until
September or October, some nine or ten months after the end of Healthdyne's
preceding fiscal year. The more practical and equitable reading of Section 703
is that it allows the Court to order the prompt scheduling of the meeting once
it is apparent that such a meeting will not be held within the time period
provided in the statute.
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<PAGE>
3. DELAYING THE ANNUAL MEETING BEYOND MAY 1997
VIOLATES HEALTHDYNE'S BY-LAWS.
In addition to breaching their fiduciary duties and Section 703, the delay
of the 1997 annual meeting violates the Director Defendants' contractual
obligations under Healthdyne's by-laws. By-laws are contracts between the
corporation and its shareholders and, therefore, shareholders can sue to enforce
their contractual rights under the by-laws. ER HOLDINGS, INC. V. NORTON CO.,
735 F. Supp. 1094, 1097 (D. Mass. 1990) ("The corporate by-laws constitute a
contract between the corporation's owners -- the shareholders -- and its
managers, the Board."); ACCORD CENTAUR PARTNERS, IV V. NATIONAL INTERGROUP,
INC., 582 A.2d 923, 928 (Del. 1990). Relying on this principle, courts have
ordered directors to comply with by-laws requiring the corporation to hold an
annual meeting for the election of directors. ER HOLDINGS, 735 F. Supp. at
1103; FARRELL, 450 N.Y.S. 2d at 942; SILVERMAN V. GIBERT, 185 So. 2d 373, 376
(La. Ct. App. 1966); PENN-TEXAS CORPORATION V. NILES-BEMENT-POND CO., 112 A. 2d
302, 307 (N.J. Super. Ct. Ch. Div. 1955).
Article I, Section 1 of Healthdyne's by-laws provides that "[t]he ANNUAL
meeting of the shareholders for the election of Directors . . . SHALL be held at
such place . . . on such date and at such time as the Board of Directors may by
resolution provide." (Emphasis added). In addition, Article II, Section 2
provides: "At each ANNUAL meeting of the shareholders, the shareholders shall
elect Directors who shall serve until their successors are elected and qualified
. . . ." (Emphasis added). Under Georgia law, words in a contract are given
their plain and ordinary meaning. STATE FARM MUTUAL AUTO INS. CO. V. BREWER,
472 S.E.2d 529, 530 (Ga. App. 1996); SEE WILLIAMS V. FALLAIZE INS. AGENCY, INC.,
469 S.E.2d 752, 755 (Ga. App. 1996) ("Because the words in this contract are
plain and obvious, they must be given their literal meaning."). Thus,
Healthdyne's by-laws clearly require the Director Defendants to convene the
shareholders' meeting "annually" -- or once a year.
- --------------------------
(7)Article I, Section 6 of Healthdyne's by-laws provides that a shareholder's
notice of business for an annual meeting must be delivered between 60 and 90
days "prior to the anniversary date of the immediately preceding annual meeting
of shareholders." Tying the notice date to the ANNIVERSARY date of the last
annual meeting further supports the interpretation of the by-laws that the
annual meeting be held by late May 1997.
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<PAGE>
SEE, E.G., NILES-BEMENT-POND CO., 112 A.2d at 306, where the Court opined:
That provision of the charter which declares that annual
meetings of the stockholders shall be held for the election
of directors, grants to stockholders a highly important and
valuable right, which the directors can neither defeat nor
impair. IT GIVES THE STOCKHOLDERS THE RIGHT TO SAY, ONCE IN
EACH YEAR, NOT ONCE IN EIGHTEEN MONTHS, OR TWO YEARS . . .
WHO SHALL BE ELECTED DIRECTORS . . . .(emphasis added)
Because last year's annual meeting was in May 1996, Healthdyne is obligated
under its by-laws to hold the 1997 annual meeting in or before May 1997. * * *
The failure to mail broker search cards on or before March 23, 1997 (i.e., in
time to have the meeting in May) shows that the Director Defendants are in
breach of their contractual obligations by failing to convene the annual meeting
in a timely manner.
Moreover, discretion to determine the time and place of the annual meeting
under Article I, Section 1 of Healthdyne's by-laws does not empower them to
materially extend their term in office by delaying the annual meeting. OCILLA
INDUS., 677 F. Supp. at 1301 (ordering meeting to go forward even though by-laws
did not prescribe a particular date); GIBERT, 185 So.2d at 375-76 ("The power to
fix the time and place of the annual stockholders' meeting cannot be construed
as a power of the incumbents to extend their term of office indefinitely.");
ACCORD, 5 Fletcher, CYCLOPEDIA ON THE LAW OF PRIVATE CORPORATIONS Section 2001
at 356 (1990).
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<PAGE>
Accordingly, because the by-laws require ANNUAL elections for all directors
and the last meeting was in May 1996, the Director Defendants must convene the
1997 annual meeting in May 1997.
C. ANY DELAY IN THE ANNUAL MEETING INFLICTS IRREPARABLE HARM ON BOTH
PLAINTIFFS AND HEALTHDYNE SHAREHOLDERS.
Invacare will suffer two forms of irreparable harm without the requested
injunction. First, a delay of the annual meeting will deprive all Healthdyne
shareholders, including Invacare, of their fundamental right to vote for a new
slate of directors. Courts have consistently found that "the denial or
frustration of the right of shareholders to vote their shares or obtain
representation on the board of directors amounts to an irreparable injury."
SHOEN, 885 F. Supp. at 1352. SEE ALSO MULLER, 713 F. Supp. at 623; OCILLA
INDUS., 677 F. Supp. at 1301 ("The disenfranchisement of shareholders poses
serious risk of irreparable harm that cannot be measured in monetary damages.");
MINSTAR ACQUIRING CORP. V. AMF, INC., 621 F. Supp. 1252 (S.D.N.Y. 1985)
(plaintiff will suffer irreparable harm if its tender offer is defeated due to
illegal defensive tactics); TRECO, INC. V. LAND OF LINCOLN SAVINGS AND LOAN, 572
F. Supp. 1447, 1450 (N.D. Ill. 1983) (same).
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<PAGE>
The potential for irreparable harm applies with particular force in the
context of delaying a shareholder vote while a tender offer is pending. Such a
delay may cause the offer to "evaporate" before the shareholders have any
opportunity to vote on the issue. Harnett Aff. PARA 9; SEE ALSO ER HOLDINGS,
735 F. Supp. at 1101 (delay in holding annual meeting would irreparably harm
shareholders as the offer could "evaporate"). 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."); NEWELL CO. V. CONNOLLY, 624 F. Supp. 126, 128 (D. Mass. 1985) (taking
judicial notice that delays frequently cause the bidding company to withdraw its
offer).
Second, a delay will irreparably harm Invacare's opportunity to acquire
Healthdyne. Numerous courts recognize that delay is "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, 839 F.2d at 853 ("[T]iming is everything in tender
offers."); GREAT WESTERN UNITED CORP. V. KIDWELL, 577 F.2d 1256, 1277-78 (5th
Cir. 1978) ("[D]elay can seriously impede a tender offer."), REV'D. ON OTHER
GROUNDS, 443 U.S. 173 (1979) (citation and quotation omitted). Because any
further delay in the annual meeting will likely deprive Invacare of its
opportunity to acquire Healthdyne, Invacare will suffer irreparable harm absent
the requested injunction. SEE NEWELL CO., 624 F. Supp. at 128 (The opportunity
to acquire a company "is a valuable right, the loss of which constitutes
irreparable harm.").
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<PAGE>
D. THE BALANCE OF THE HARDSHIPS AND THE PUBLIC
INTEREST FAVORS AN INJUNCTION.
The balance of hardships tips decidedly in Invacare's favor -- the Director
Defendants cannot claim any legitimate hardship resulting from an injunction
requiring them to hold the annual meeting before June 30. Because Healthdyne
has convened its annual meeting in April and May in the last two years, the
requested injunction simply would require defendants to convene the 1997 annual
meeting in a time period consistent with prior practice. * * *
Finally, the public interest clearly favors an injunction. Georgia law
embodies a public interest in having management of Georgia corporations stand
accountable to the owners of the corporations -- the shareholders -- on a yearly
basis, and within six months of the end of the corporation's preceding fiscal
year. SEE O.C.G.A. Sections 14-2-701, 703. Shareholders need to have certainty
that timely, regular annual meetings will occur so they can take actions to
protect and maximize their investment. The investing public has a clear
interest in seeing that this yearly accountability be maintained. SEE Harnett
Aff. PARAPARA 8-12.
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<PAGE>
CONCLUSION
For the reasons stated herein, the Court should order the Director
Defendants to begin taking steps immediately to convene Healthdyne's annual
meeting and to hold that meeting no later than June 30, 1997.
Dated: April 7, 1997.
KING & SPALDING
/s/ Michael R. Smith
__________________________
M. Robert Thornton
Georgia Bar No. 710475
Michael R. Smith
Georgia Bar No. 661689
David J. Onorato
Georgia Bar No. 553826
191 Peachtree Street, N.E. Attorneys for Plaintiffs Invacare
Atlanta, Georgia 30303 Corporation and I.H.H. Corp.
Telephone: (404) 572-4600
Facsimile: (404) 572-5100
Of Counsel:
SIMPSON THACHER & BARTLETT
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
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<PAGE>
NEWS RELEASE
[MACKENZIE PARTNERS, INC. LETTERHEAD]
Contact: Mark H. Harnett
MacKenzie Partners, Inc.
(212) 929-5877
INVACARE SEEKING COURT ORDER COMPELLING
HEALTHDYNE TECHNOLOGIES TO HOLD SHAREHOLDERS MEETING
ELYRIA, OHIO--(April 8, 1997)--Invacare Corporation (NASDAQ/NMS:IVCR) announced
that it is seeking a court order to compel Healthdyne Technologies, Inc.
(NASDAQ/NMS:HDTC) to hold its 1997 Annual Meeting of Shareholders as promptly
as possible and in any event by June 30, 1997.
A. Malachi Mixon, III, Chairman and Chief Executive Officer of Invacare, said
"Healthdyne's failure to schedule its annual meeting is yet another attempt to
prevent its shareholders from exercising their rights to elect directors of
their own choosing. Healthdyne's last two annual meetings were in May and
April. Yet they have not taken any of the public actions, such as announcing
meeting and record dates, sending out broker search cards and filing
preliminary proxy materials, necessary to hold the 1997 meeting consistent with
that timetable, and have refused to publicly disclose when they intend to hold
the annual meeting. Indeed, the only actions the Healthdyne directors have
taken so far with respect to the 1997 annual meeting have been attempts to
end-run their own shareholders by a failed legislative effort to abolish
shareholders' rights to elect a full board and by deletion of a by-law
provision requiring annual meetings to be held on the fourth Tuesday in April
unless otherwise scheduled."
"We are perplexed that Parker H. Petit, Healthdyne's Chairman, thinks that our
demands that Healthdyne hold its meeting in accordance with Georgia law and
past practices will deny Healthdyne's shareholders an oppotunity to make an
informed decision with respect to our premium tender offer. There is no
question that Healthdyne's first-quarter earnings, about which we have already
expressed concern, will be available prior to the annual meeting, and Mr. Petit
is free to make any other disclosures he thinks will support his rejection of
our premium offer consistent, of course, with his fiduciary duties."
"Unless Mr. Petit believes that he is entitled to delay a shareholders meeting
until some unspecified time more than six months after Healthdyne's year-end
when he decides the company has finally demonstrated 'progress', we cannot
understand his objection to scheduling and holding the annual meeting promptly.
Perhaps he is concerned that shareholders at the annual meeting will ask why
Healthdyne missed Wall Street estimates for eight consecutive quarters, why
Healthdyne's 1996 earnings dropped from 1995 levels, and why Mr. Petit
disposed of approximately one-third of his Healthdyne stock in May and June
while the stock was trading near its 1996 highs and shortly before its
precipitous decline.
"In any case, we believe that Healthdyne and its Board of Directors are
required by Georgia law, their fiduciary duties and their own by-laws to hold
the annual meeting promptly and not later than June 30, 1997, and intend to
take all actions necessary to cause them to do so."
<PAGE>
As previously announced, Invacare is proposing a slate of seven director
nominees and a set of corporate governance by-law amendments for consideration
by shareholders at the annual meeting. Invacare's $13.50 per share tender
offer for all outstanding shares of common stock of Healthdyne is currently
scheduled to expire at 6:00 p.m. on Monday, April 28, 1997, unless extended in
the manner described in the Offer to Purchase dated January 27, 1997, as
amended and supplemented by the Supplement thereto dated April 4, 1997.
# # #
PARTICIPANT INFORMATION
Invacare may solicit proxies for Healthdyne's 1997 annual meeting with respect
to the above-described nominees and proposals. Besides Invacare and the
nominees, other participants in this solicitation may include the following
directors and/or executive officers of Invacare: A. Malachi Mixon, III
(Chairman, Chief Executive Officer and Director), Gerald B. Blouch (President,
Chief Operation Officer and Director), Thomas R. Miklich (Chief Financial
Officer, Secretary, General Counsel and Treasurer), Joseph B. Richey, II
(Senior Vice President--Total Quality Management and Director), Donald P.
Andersen (Group Vice President--Respiratory Products) and Louis F.J. Glangen
(Senior Vice President--Sales & Marketing). Although Salomon Brothers Inc.
("Salomon Brothers"), which is acting as dealer manager in connection with the
tender offer and serving as financial advisor to Inveacare in connection with
the proposed acquisition of Healthdyne, does not admit that it or any of its
directors, officers, employees or affiliates is a "participant", as defined in
Schedule 14A promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, or that such Scheudle 14A requires
the disclosure of certain information concerning them, the following employees
of Salomon Brothers may assist Invacare in such a solicitation: Scott Wilson
(Managing Director), Wilder Fulford (Managing Director), John Fowler (Managing
Director), John Chambers (Director) and Sarah Barnes (Vice President).
Invacare beneficially owns an aggregate of 600,000 shares of Healthdyne's
common stock. Salomon Brothers will receive customary financial advisor and
dealer manager fees, reimbursement and indemnification from Invacare in
connection with the tender offer and any acquisition by Invacare of Healthdyne.
Salomon Brothers will not receive any additional fee for or in connection with
assisting in any solicitation of proxies. Salomon Brothers engages in a full
range of investment banking, securities trading, market-making and brokerage
services for institutional and individual clients. In the ordinary course of
its business, Salomon Brothers maintains customary arrangements and effects
transactions in the securities of Healthdyne for the accounts of its
customers. As a result of its engagement by Invacare, Salomon Brothers has
restricted its proprietary trading in the securities of Healthdyne (although it
may still execute trades for customers on an unsolicited agency basis).
