<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 26
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. 26 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 July 14, 1997, the Parent and the Purchaser filed an emergency motion
with the Court in the Defensive Tactics Litigation seeking (i) a clarification
of the Court's order stating that the order does not affect any obligation the
Company otherwise has to permit the Parent to make the Dead-Hand Elimination
Proposal or to call it for a vote at the Annual Meeting and have the results of
such vote calculated and reported, or (ii) in the alternative, if the Court's
order was intended to have any such effect, a limited stay of those aspects of
the order pending appeal. The full text of the motion is set forth in Exhibit
11(g)(20).
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(g)(19) Parent's Presentation Materials to Shareholders.
(g)(20) Motion filed by the Parent and the Purchaser on July 14, 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: July 15, 1997
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
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<S> <C> <C>
Exhibit 11(g)(19) Presentation to Shareholders..........................................................
Exhibit 11(g)(20) Motion Filed by the Parent and Purchaser..............................................
</TABLE>
<PAGE>
HEALTHDYNE TECHNOLOGIES, INC.
Presentation to Shareholders
July 14, 1997
Confidential
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Salomon Brothers
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<PAGE>
DON'T BE FOOLED - HEALTHDYNE'S BOARD
STILL REFUSES TO AUCTION THE COMPANY
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Salomon Brothers 1
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<PAGE>
IT'S TIME TO ELECT DIRECTORS TO ACT ON YOUR BEHALF
Invacare's Board Nominees are committed to considering all bona fide
offers for Healthdyne in a prompt auction and sale.
o Over the past six months, Healthdyne has repeatedly asserted that the
Company is not for sale
o Recent comments by Healthdyne have indicated that it hoped to announce a
"value enhancing transaction" - what do they want shareholders to think
they mean by this?
o In any case, these comments still reflect no commitment on the part of the
--
Board to sell the Company
o Since January, Invacare has made every attempt to talk to management and
negotiate a transaction
o Healthdyne refused to talk for six months and then imposed onerous
conditions on Invacare that would force us to drop the tender and the
proxy contest in order to speak to the Company
o As a result, Invacare has been unfairly excluded from whatever "process"
Healthdyne is conducting to "evaluate its options"
o By contrast, Invacare's nominees are committed to promptly auctioning the
Company and achieving the best available price and terms for shareholders
to the best of their ability
o Invacare's auction process would be open to and would solicit all
---
interested parties
o Invacare's Proposals would facilitate the prompt auction and sale of
Healthdyne
o After all, it is Invacare's actions in pursuing Healthdyne that have
propelled the stock; without us, this stock would quickly return to the
sleepy status quo
ELECT INVACARE'S BOARD NOMINEES AND VOTE FOR ITS PROPOSALS TO ASSURE THAT
THE BOARD PURSUES A SALE OF THE COMPANY AND SEEKS THE BEST AVAILABLE PRICE
AND TERMS FOR SHAREHOLDERS.
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Salomon Brothers 2
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<PAGE>
DECIDE FOR YOURSELF IF HEALTHDYNE'S BOARD IS ACTING IN YOUR BEST INTERESTS
o Prior to Invacare showing any interest in Healthdyne, the Company
consistently underperformed its market comparables
o On an operating basis, Healthdyne is smaller, less profitable and slower
growing than its comparables
o For 8 straight quarters, Healthdyne had been unable to meet the market's
expectations
o First and second quarter 1997 results managed to surpass Wall Street
estimates by only $0.02 and $0.03, and then only after ignoring
surprisingly large charges ostensibly related to resisting Invacare's
premium offer
o In a period in which management was attempting to thwart Invacare's
premium offer, there are indications that they used extraordinary efforts
to bolster short term results
o Healthdyne's management and Board have used every method possible -
including appealing to the Georgia legislature and defending the "dead
hand" provision - to try to entrench themselves and take away the
shareholders' right to choose
o Can shareholders afford to trust management's ability to meet future
estimates . .
o . . . Particularly in an industry that is consolidating, and in which
short term product advantages are quickly overtaken by competitors?
o In May 1996, Petit sold 17% of his holdings at prices between $13.00 and
$14.25 per share, prices significantly less than Invacare's $15 per share
offer, which Petit and the rest of the Board termed "grossly inadequate"
o Because of the Healthdyne Board's entrenching actions, Invacare can't give
you the full choice of director Nominees you deserve at the Annual Meeting
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Salomon Brothers 3
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<PAGE>
AN AUCTION WILL ASSURE THE BEST RESULT FOR ALL SHAREHOLDERS
...Your best option is to vote for Invacare's four Nominees to
constitute a majority of the Board and to vote for Invacare's
Proposals.
o As a major shareholder of Healthdyne stock, Invacare is also interested in
achieving the best available price and terms for the Company in excess of
its offer
o Invacare owns 4.7% of Healthdyne
o In the event that a better offer is not obtained, Invacare's current offer
of $15.00 remains an excellent opportunity for shareholders
o Invacare's current offer represents a premium of approximately 70% over
Healthdyne's $8.88 closing price on December 31, 1996, the day before
Invacare made its initial acquisition proposal to Healthdyne
o This offer represents superior value for the Company and is a significant
premium when compared to current comparable public market and private
market multiples
o INVACARE'S OUTSTANDING OFFER IS ALL CASH, FULLY FINANCED AND HAS CLEARED
ANTI-TRUST REVIEW; INVACARE COULD EXECUTE A TRANSACTION EXPEDITIOUSLY
THANKS TO INVACARE'S OFFER, HEALTHDYNE'S SHARE PRICE HAS RESISTED THE
RECENT MARKET COLLAPSE.
HOW LONG WOULD THIS LAST IF INVACARE WENT AWAY?
INVACARE'S GOAL IS TO PRESENT THE SHAREHOLDERS WITH THE BEST AVAILABLE
OPTION FOR THE SALE OF HEALTHDYNE, EVEN IF INVACARE IS NOT THE SUCCESSFUL
BIDDER.
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Salomon Brothers 4
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<PAGE>
HEALTHDYNE'S STOCK PERFORMANCE
Shortly after Petit sold shares last summer, the company's stock price plummeted
to $9 per share on disappointing earnings. It stayed at this range until
Invacare rescued it by launching its premium offer in January.
[Graph of Healthdyne's daily
Stock Price and Trading Volume
from 4/11/96 through 7/10/97]
(a) 05/07/96 - 05/29/96: Petit sells 17% of his holdings at prices between
$13.00 and $14.25 per share.
(b) 06/26/96: Petit disposes of an additional 23% of his holdings for "exchange
fund" interests.
(c) 07/10/97: Stock falls 33% in a week on disappointing earnings expectations.
(d) 10/16/96: Stock rises on speculation of Apria contract. Confirmed next day.
(e) 01/02/97: Invacare makes $12.50 per share acquisition proposal privately to
Healthdyne.
(f) 01/10/97: Invacare publicly announces $12.50 per share offer to Healthdyne.
(g) 01/27/97: Invacare launches $13.00 per share tender offer.
(h) 02/03/97: Healthdyne announces disappointing fourth quarter earnings.
(i) 03/20/97: Amendment proposed to Georgia corporate law intended to thwart the
offer.
(j) 03/25/97: Georgia House of Representatives rejects amendment by 2-1
majority.
(k) 03/31/97: Invacare increases offer to $13.50 per share.
(l) 04/08/97: Healthdyne announces 1st quarter "window dressed" results of $0.16
per share, pro forma for $0.06 per share charge related to costs
associated with the offer.
(m) 06/04/97: Invacare increases offer to $15.00 per share.
(n) 06/23/97: In response to Invacare's pressure, Healthdyne announces it will
"explore alternatives" to offer, but reaffirms that company is not
for sale.
(o) 07/10/97: Healthdyne announces 2nd quarter results of $0.20 per share, pro
forma for $0.04 per share charge relating to costs associated with
the offer.
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Salomon Brothers 5
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<PAGE>
A GLIMPSE OF WHAT WOULD HAPPEN IF INVACARE WENT AWAY
During the management-entrenchment legislative initiative, Healthdyne traded
down to $11 level because the proposed legislation might have been enacted. But
as soon as the legislation was defeated, Healthdyne's stock rebounded to its
prior levels reflecting Invacare's premium bid.
[Graph showing Healthdyne's daily high, low, open and close Stock Prices from
3/10/97 through 4/4/97 with 3/21/97 (the day Healthdyne attempted to change
Georgia Legislation), 3/25/97 (the day the Georgia House voted overwhelmingly
not to accept the proposal) and 3/28/97 (Good Friday and the day the Legislation
died in committee) specially marked]
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Salomon Brothers 6
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<PAGE>
COMPARABLE TRADING OVER THE PAST YEAR
Until Invacare made its offer, Healthdyne's stock had under-performed its
comparables.
[Graph showing weekly data of Price as a Percentage of Base Period for
Healthdyne, the Home Healthcare Index (NELL, RESP, RESM, SMD, VITL) and the
S&P Industrial Average (400 Stocks) from 1/6/95 through 12/27/96]
Summary Statistics:
High Low Average Latest
Healthdyne Tech, Inc. 136% 76% 108% 87%
Home Healthcare Index: (NELL, RESP, RESM, SMD, VTL) 167% 100% 142% 148%
S&P Industrial Average (400 Stocks) 162% 100% 131% 162%
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Salomon Brothers 7
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<PAGE>
HEALTHDYNE TECHNOLOGIES, A LACKLUSTER PERFORMER
Healthdyne is...
smaller, less profitable, and slower growing
LTM REVENUES LTM EBITDA MARGIN 3 YEAR REVENUE GROWTH
NELL $737 NELL 30.6% NELL 57.9%
SMD 660 SMD 22.6 SMD 26.8
RESP 161 RESP 19.9 RESP 19.5
HDTC 136 HDTC 16.8 HDTC 15.3
VITL 92 VITL 13.6 VITL 11.9
RESM 46 RESM 9.5 RESM 3.2
- --------------------------------------------------------------------------------
LTM REVENUES LTM EBITDA MARGIN 3 YEAR REVENUE GROWTH
NELL $60 NELL 20.9% NELL 91.2%
SMD 19 SMD 15.1 SMD 51.6
RESP 19 RESP 11.9 RESP 40.9
HDTC 7 HDTC 8.1 HDTC 25.9
VITL 6 VITL 5.5 VITL 5.7
RESM 2 RESM 0.3 RESM (32.7)
- --------------------------------------------------------------------------------
Note: LTM is as of 3/31/97 for all companies except Healthdyne. For illustrative
purposes, operating statistics for Healthdyne reflect results as of
6/30/97.
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Salomon Brothers 8
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<PAGE>
FLUCTUATING RESULTS
(Dollars in Millions, Except per Share Data)
Healthdyne has failed to achieve steady quarter-to-quarter or year-to-year
growth in revenues and earnings.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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6/30/95 6/30/96 % Change 9/30/95 9/30/96 % Change 12/31/95 12/31/96 % Change 3/31/96 3/31/97 % Change
-------------------------- -------------------------- ---------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 28.2 $ 28.6 1.4% $ 25.7 $ 29.2 13.7% $ 29.0 $ 33.1 14.1% $ 27.5 $ 35.7 29.8%
Gross Profit 10.8 11.4 5.5% 10.4 12.0 15.2% 12.0 12.4 3.3% 11.5 13.8 20.5%
Gross Margins 38.5% 40.0% 40.7% 41.2% 41.5% 37.5% 41.7% 38.7%
Operating Income $ 3.2 $ 2.7 (15.7%) $ 2.6 $ 2.7 4.5% $ 3.5 $ 2.8 (20.2%) $ 3.4 $ 4.0 15.4%
Operating Margins 11.4% 9.5% 10.0% 9.2% 12.0% 8.4% 12.5% 11.1%
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</TABLE>
THREE MONTHS ENDED
- ----------------------------------------------
6/30/96 6/30/97 % Change
---------------------------
Revenues $ 28.6 $ 38.1 38.1%
Gross Profit 11.4 16.0 39.9%
Gross Margins 40.0% 42.1%
Operating Income $ 2.7 $ 5.1 89.6%
Operating Margins 9.5% 13.5%
- ----------------------------------------------
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
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12/31/93 12/31/94 % Change 12/31/94 12/31/95 % Change 12/31/95 12/31/96 % Change
-------------------------------- --------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 68.6 $ 89.0 29.8% $ 89.0 $ 110.5 24.1% $ 110.5 $ 118.3 7.1%
Gross Profit 28.1 33.6 19.5% 33.6 43.8 30.5% 43.8 47.3 8.1%
Gross Margins 41.0% 37.7% 37.7% 39.6% 39.6% 40.0%
Operating Income $ 9.2 $ 8.7 (5.3%) $ 8.7 $ 12.2 40.1% $ 12.2 $ 11.6 (4.9%)
Operating Margin 13.4% 9.8% 9.8% 11.0% 11.0% 9.8%
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</TABLE>
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Salomon Brothers 9
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<PAGE>
HEALTHDYNE'S INABILITY TO MAKE ESTIMATES
For 8 straight quarters, Healthdyne had been unable to meet the market's
expectations. In the first two quarters of 1997, Healthdyne's pro forma
EPS finally met Wall Street's estimates, but only after ignoring
surprisingly large charges ostensibly related to Invacare's premium offer.
[Graph showing quarterly data of Healthdyne's Normalized EPS from December 1993
through June 1997 and First Call Estimates 1- quarter prior from December 1993
through December 1997]
Given management's poor track record, and the fact that the first two
quarters surpassed estimates by only $0.02 and $0.03 in a period in which
management was attempting to thwart Invacare's offer and get re-elected,
can you afford to trust management's ability to meet future estimates?
Note: *Pro Forma for per share charges relating to costs associated with
Invacare's offer [denotes Healthdyne's EPS for first, second and
third quarter of 1997 of $0.16, $0.16 and $0.20, respectively].
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Salomon Brothers 10
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<PAGE>
RELATIVE VALUATION
Invacare's current offer is approximately 70% above Healthdyne's stock
price on December 31, 1996 immediately prior to its initial offer. It also
represents a premium to public trading values in Healthdyne
's sector.
<TABLE>
<CAPTION>
Premium/ Price/Earnings Firm Value/LTM
------------------ Equity Firm LTM LTM -----
- --------- -------
- ---------------
Market 52 Wk. Low Value(a) Value(b) Sales Net Inc. LTM
Sales EBITDA EBIT
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Healthdyne Technologies
Pre-Offer (12/31/96) @ $8.875 0% 16% $113 $142 $114 $6 20.2x 1.4x 10.1x 12.9x
Current Tender Offer @ $15.00 69 97 $202 $231 $136 $7(c) 26.5x(c) 1.7x 12.5x 15.8x
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- -------------------------------
Public Comparables
N
ellcor Puritan Bennett $1,185 $1,156 $737 $60 18.7x 1.6x 9.3x 12.5x
ResMed 174 147 46 7 24.2 3.2 16.2 21.7
Respironics 479 484 161 19 24.8 3.0 13.3 16.3
Sunrise Medical 285 482 660 2 NM 0.7 7.7 17.1
Vital Signs
224 210 92 19 11.6 2.3 7.4 8.4
--------------------------------------------------------------------------------------------------------------------------------
LTM Mean @ 12/16/96 20.9x 2.2x 11.6x
16.0x
LTM Mean @ 07/10/97 19.8x 2.2x 10.8x 15.2x
--------------------------------------------------------------------------------------------------------------------------------
Change: Increase (Decline) (5.2%) (1.9%) (7.1%) (5.1%)
--------------------------------------------------------------------------------------------------------------------------------
Invacare
$24.00 @ 07/10/97 $735 $899 $637 $40 18.2x 1.4x l0.4x 13.3x
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Equity Value is based on the purchase of all fully diluted shares at the
offer price less any option proceeds. Includes 600,000 shares already
purchased.
(b) Firm Value equals Equity Value plus straight debt, minority interest,
straight preferred stock, all out-of-the-money convertibles, less cash.
(c) As of June 30, 1997. Pro Forma for a $0.04 per share charge related to
costs associated with the offer.
Note: 1997 & 1998 estimates are based on First Call estimates. Stock prices as
of 7/10/97.
LTM with respect to the Pre-offer is 9/30/96. LTM with respect to the Current
Offer is 3/31/97.
LTM for comparable companies is as of 3/31/97. LTM for Healthdyne is as of
6/30/97.
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Salomon Brothers 11
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<PAGE>
ACTING IN YOUR BEST INTERESTS
Although Healthdyne's financials do not readily disclose any extraordinary
efforts to boost short term earnings, we note that in the first two
quarters ....
o INVACARE HAS BEEN INFORMED THAT CERTAIN OF HEALTHDYNE'S MAJOR INDEPENDENT
SALES REPS HAD THEIR COMMISSIONS SUMMARILY REDUCED IN EARLY JANUARY AND
THAT, AS SOON AS THE FIRST QUARTER ENDED, HEALTHDYNE'S CHAIRMAN PETIT
PERSONALLY CALLED THE REPS AND REINSTATED THEIR COMMISSIONS - - WILL
HEALTHDYNE RESTATE THE FIRST QUARTER?
o INVENTORY DAYS DROPPED SHARPLY IN THE FIRST QUARTER, POSSIBLY AS A RESULT
OF CHANNEL-LOADING. INVACARE HAS BEEN INFORMED THAT SOME OF HEALTHDYNE'S
MAJOR CUSTOMERS WERE PERSUADED TO PURCHASE NOT ONLY FIRST QUARTER
REQUIREMENTS, BUT ALSO FUTURE REQUIREMENTS, THROUGH AN EXTENDED DATING
PAYMENT PROGRAM, WITH HEALTHDYNE PAYING STORAGE COSTS.
o INVACARE HAS BEEN TOLD THAT HEALTHDYNE HAS OFFERED EXTENDED PAYMENT TERMS
TO SELECT CUSTOMERS. ACCOUNTS RECEIVABLE DAYS HAVE INCREASED AND THE
COMPANY HAS PAID ITS BILLS SLOWER AS WELL. DAYS PAYABLE INCREASED FROM 47
DAYS TO 73 DAYS(A) AS THE COMPANY ATTEMPTED TO MANAGE ITS WORKING CAPITAL.
o SG&A APPEARED TO DECLINE TO 23% FROM 26%(A), BUT WAS ANY SG&A REALLY
ALLOCATED TO "MERGER-RELATED" EXPENSES AND, THEREFORE, DISREGARDED?
(a) 2nd quarter 1997 from 2nd quarter 1996.
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Salomon Brothers 12
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<PAGE>
CONSTANT DISAPPOINTMENTS
Healthdyne consistently disappointed Wall Street for 8 straight quarters
and the analysts have been embarrassed into lowering their estimates again
and again, often more than once in the same period. An instructive example
from Michael J. Weber at Wheat First Butcher Singer:
o NOVEMBER 3, 1995
"Estimates reduced somewhat. Despite some offset from the potential
of higher margins (in part due to beginning sales of the
higher-margin bi-level ventilator), we are reducing our 1996 EPS
projection from $0.79 to $0.74. We are also fine-tuning our 1995
estimate to $0.50 from $0.52."
o FEBRUARY 26, 1996
"EPS estimates somewhat reduced; still looking for notable
growth.... Thus, we are fine-tuning our 1996 estimate downward by
four cents to $0.70. We are introducing a preliminary 1997
projection of $0.85."
o MAY 3, 1996
"With the quarter, we are reducing our estimate for 1996 to $0.68
from $0.70 to reflect continued softness in the concentrator market
and the results from the first quarter In addition, we are
fine-tuning our 1997 estimate downward to $0.84....".
o OCTOBER 30, 1996
"We have further fine-tuned our EPS estimates downward for the next
five quarters.... We are taking our 1997 projection down five cents
to $0.65 (within a range of $0.60 to $0.70)".
o JANUARY 6, 1997
"We are lowering (again) our Q4 and 1997 estimates.... We are
dropping our 1997 projections from $0.65 to $0.60 to (1) build in
even more conservatism; and (2) amid very early indications of
additional pricing pressures in the industry."
CONSTANT DISAPPOINTMENTS LIKE THESE CAN'T BE CURED WITH ONLY A
COUPLE OF ON-TARGET QUARTERS.
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Salomon Brothers 13
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<PAGE>
HEALTHDYNE'S MANAGEMENT DOESN'T SEEM TO TRUST YOU
Management has taken numerous actions meant to prevent you not only from
accepting Invacare's offer, but also from exercising your right to elect
directors at the upcoming 1997 Annual Meeting and other critical
shareholder rights.
AMONG OTHER THINGS, MANAGEMENT HAS:
o IMPLEMENTED AND DEFENDED A DIRECTOR-ENTRENCHING "DEAD-HAND"
PROVISION IN THEIR POISON PILL WHICH PURPORTS TO RESERVE ONLY TO THE
CURRENT DIRECTORS OR THEIR HAND-PICKED SUCCESSORS THE RIGHT TO PULL
THE PILL - RESULTING IN INVACARE ONLY BEING ABLE TO NOMINATE
CANDIDATES FOR A MAJORITY OF THE BOARD WHILE IT PURSUES AN APPEAL
o TRIED TO ENGINEER ANTI-SHAREHOLDER LEGISLATION IN GEORGIA THAT WOULD
HAVE STRIPPED YOUR RIGHTS TO ELECT A FULL BOARD AT THE ANNUAL
MEETING AND TO REMOVE DIRECTORS AT ANY TIME WITH OR WITHOUT CAUSE
o DELAYED THE ANNUAL MEETING AS LONG AS POSSIBLE
o AMENDED THE BY-LAWS TO PERMIT MANAGEMENT TO DELAY A SPECIAL MEETING
OF SHAREHOLDERS FOR MORE THAN FOUR MONTHS AFTER RECEIVING THE
REQUISITE LEVEL OF VALID SHAREHOLDER DEMANDS
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Salomon Brothers 14
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<PAGE>
COERCION OF SHAREHOLDER VOTING FOR DIRECTORS
The Director-Entrenching "Dead Hand" Provision
o The current Board adopted a poison pill which has a "dead hand"
provision - A PROVISION WHICH STRIPS FROM ANY DULY ELECTED
DIRECTORS, OTHER THAN THE INCUMBENTS AND THEIR HAND-PICKED
SUCCESSORS, THE ABILITY TO REDEEM OR AMEND THE RIGHTS
o If the "dead hand" is enforced, shareholders would be reluctant to
elect a completely new Board, even if they wanted an auction of the
company and preferred Invacare's nominees, BECAUSE A NEW BOARD
WITHOUT ANY INCUMBENTS WOULD LACK THE ABILITY TO DISARM THE POISON
PILL AND PERMIT A SALE TO GO FORWARD
o THE CURRENT DIRECTORS ARE BLATANTLY ATTEMPTING TO COERCE
SHAREHOLDERS INTO RE-ELECTING THEM, by trying to strip from
Invacare's nominees the one power they will need as Healthdyne
directors to fulfill their mandate to auction and sell the company
at the best available price and terms
o Although many people, including Invacare, believe "dead hands" to be
illegal and unenforceable, Healthdyne's board has vigorously
defended it and a Georgia federal district court recently ruled that
it would not enjoin it. INVACARE IS APPEALING THAT DECISION AS
EXPEDITIOUSLY AS POSSIBLE.
o Nonetheless, Invacare has been forced to reduce its slate to a
simple majority in order to leave "continuing directors" on the
Board (because until the "dead hand" is overturned, they will be the
only directors empowered to disarm the pill) - thus proving the
director-entrenching nature of the "dead hand."
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Salomon Brothers 15
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<PAGE>
OUTRAGEOUS ENTRENCHMENT ATTEMPT THROUGH LEGISLATION
Just as flagrant and objectionable was management's effort to entrench
itself by attempting to engineer eleventh-hour anti-shareholder
legislation in Georgia at the expense of its own shareholders and the
shareholders of every public Georgia corporation.
o ON MARCH 20, 1997, THE SAME DAY INVACARE ANNOUNCED A SLATE OF
DIRECTOR NOMINEES FOR HEALTHDYNE'S 1997 ANNUAL MEETING, A GEORGIA
STATE SENATOR FROM HEALTHDYNE'S DISTRICT, ON BEHALF OF HEALTHDYNE,
INTRODUCED LEGISLATION DESIGNED TO ENTRENCH THE HEALTHDYNE
DIRECTORS. AMENDMENT WOULD HAVE:
o Imposed staggered board scheme on all publicly-traded Georgia
corporations, permitting only the corporation's board to
opt-out prior to March 31, 1999
o Eliminated right of shareholders to remove directors for poor
performance (other than extreme circumstances such as felony
conviction and gross dereliction of duty)
o Eliminated other crucial shareholder rights, including to
control the size of the board and to restrict the discretion
or power of the board through by-law amendments
o HEALTHDYNE USED EVERY "STEALTH" TACTIC IT COULD TO TRY TO CRAM THE
LEGISLATION THROUGH WITHOUT DUE CONSIDERATION BY THE GEORGIA
LEGISLATURE.
o The legislation was introduced as an amendment to an otherwise
uncontroversial corporate law bill already passed by the House
o The amendment was proposed late in the afternoon, shortly
prior to consideration of the full bill, with no advance
notice or warning and no opportunity for normal hearings and
study. There were only five full workdays remaining in the
legislative session
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<PAGE>
OUTRAGEOUS ENTRENCHMENT ATTEMPT THROUGH LEGISLATION (CONTINUED)
o EVEN AFTER THE GEORGIA HOUSE REJECTED THE LEGISLATION BY MORE THAN A
2-1 MAJORITY AND MAJOR PUBLIC OPPOSITION, including by Institutional
Shareholder Services, the National Association of Corporate
Directors, many major institutional Investors, the Georgia state
auditor (controller of the Georgia state pension fund) and the
Chairman of the Georgia State Bar Corporate Code Revisions
Committee, Healthdyne's management and its legislative cronies
desperately continued to try to push the legislation through.
o The Atlanta Constitution lambasted it as a "stealth amendment"
gathering speed like a "runaway train" without full debate or
consideration.
o The Atlanta Journal decried the "legislative meddling in a
takeover battle" which would "dramatically change the state's
whole investment climate", and opined that "this is the sort
of thing the shareholders of a company ought to decide."
o EVEN THOUGH IT FAILED, THIS EXPENSIVE EFFORT TO STRIP YOU OF
CRITICAL RIGHTS HAS ALREADY COST YOU - IT WAS FUNDED BY HEALTHDYNE
AND CHARGED AGAINST ITS FIRST QUARTER EARNINGS.
This legislation would have been bad policy, bad law and bad process with
only one goal: to entrench Healthdyne's management at the expense of
shareholders of all Georgia corporations, including you.
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<PAGE>
THE OFFER
Invacare has been seeking to negotiate a mutually advantageous merger with
Healthdyne for nearly a year. In January, Invacare took its offer to
Healthdyne's shareholders.
- --------------------------------------------------------------------------------
HISTORY: SINCE SUMMER 1996 - Frequent contact attempts rebuffed
DECEMBER 1996 - Stock price closed at $8.88 on December 31,
1996
JANUARY 1997 - Letter to Board offering $12.50 per share,
subsequently made public Premium tender offer
commenced at $13.00 per share
APRIL 1997 - Offer raised to $13.50 per share
JUNE 1997 - Offer raised to $15.00 per share (expires August
1, 1997 unless extended)
- --------------------------------------------------------------------------------
KEY CONDITIONS: 1. Acquisition of at least 51% of the voting power, on a fully
diluted basis;
2. Healthdyne's "poison-pill" rights being invalidated or
becoming inapplicable; and
3. Inapplicability, invalidation or satisfaction of the
Georgia anti-takeover statutes.
- --------------------------------------------------------------------------------
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<PAGE>
MARKET PERFORMANCE SINCE THE OFFER
Thanks to Invacare's premium offer, Healthdyne's stock has resisted the industry
wide decline in values and multiples since January.
[Graph showing daily data of Price as a Percentage of Base Period for
Healthdyne, the Home Healthcare Index (NELL, RESP, RESM, SMD, VITL) and the S&P
Industrial Average (400 Stocks) from 1/1/97 through 7/10/97]
Price/Earnings Firm Value/LTM
-------------- ------------------------
LTM Sales EBITDA EBIT
================================================================================
Healthdyne Technologies
Pre-Offer (12/31/96) @ $8.875 20.2x 1.4x 10.1x 12.9x
Current Tender Offer @ $15.00 (c) 26.5x (c) 1.7x 12.5x 15.8x
------------------------------------------------------------------------------
Public Comparables
LTM Mean @ 12/16/96 20.9x 2.2x 11.6x 16.0x
LTM Mean @ 07/10/97 19.8x 2.2x 10.8x 15.2x
------------------------------------------------------------------------------
Change:Increase (Decline) (5.2%) (1.9%) (7.1%) (5.1%)
------------------------------------------------------------------------------
(a) 01/02/97: Invacare makes $12.50 per share acquisition proposal privately to
Healthdyne.
(b) 01/10/97: Invacare publicly announces $12.50 per share offer to Healthdyne.
(c) 01/27/97: Invacare launches $13.00 per share tender offer.
(d) 02/03/97: Healthdyne announces disappointing fourth quarter earnings.
(e) 03/20/97: Amendment proposed to Georgia corporate law intended to thwart the
offer.
(f) 03/25/97: Georgia House of Representatives rejects amendment by 2-1
majority.
(g) 03/31/97: Invacare increases offer to $13.50 per share.
(h) 04/08/97: Healthdyne announces 1st quarter "window dressed" results of $0.16
per share, pro forma for $0.06 per share charge related to costs
associated with the offer.
(i) 05/16/97: Invacare files a Motion for a Preliminary Injunction ordering the
elimination of "dead-hand pill" restrictions.
(j) 06/04/97: Invacare increases offer to $15.00 per share.
(k) 06/23/97: Healthdyne announces it will "explore alternatives" to offer, but
reaffirms that that the company is not for sale.
(l) 07/10/97: Healthdyne announces 2nd quarter results of $0.20 per share, pro
forma for a $0.04 per share charge related to costs associated
with the offer.
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<PAGE>
INVACARE'S PROPOSALS
NUMBER OF DIRECTORS PROPOSAL
o Limit the Healthdyne Board to current seven seats
o Prevent current Board from trying to manipulate Board size to their
advantage - they've admitted they may need to increase Board size
for "reasons unrelated to the Invacare offer"
o Ensure that, if elected, Invacare's Nominees will constitute a
majority of the Board
DEAD-HAND ELIMINATION PROPOSAL
o Require Healthdyne board to amend rights agreement to remove the
"dead hand" provisions, thus permitting a newly elected board to
disarm the poison pill to permit a sale transaction to go forward
o District court has ruled that the Proposal will not be binding under
Georgia law; decision is being appealed
o If appeal is successful, adoption of the Proposal will eliminate the
"dead hand"
o In any case, Invacare believes that, if approved, the Proposal
should still be presented at the Annual Meeting and will serve, at
the least, as a shareholder demand that the Board remove the "dead
hand"
o Healthdyne is trying to use court's decision to avoid permitting any
vote on the Proposal, forcing Invacare to go back to court just to
let the shareholders voice their opinion
BY-LAWS REPEAL PROPOSAL
o Repeal all by-laws amendments adopted by current Board after March
20, 1997, the day Invacare delivered its notice to Healthdyne
o Designed to prevent current Board from attempting to manipulate the
corporate landscape to their advantage
o Only direct effect known at this time: repeal amendments they
adopted permitting them to delay calling a special meeting for more
than four months after receiving a valid shareholder demand
SPECIAL MEETING PROPOSAL
o Reduce level of shareholders needed to demand a special meeting from
60% to 10%, require the Board to hold the meeting within 45 days of
receiving valid demands, and otherwise streamline the special
meeting process
o Permit shareholders to demand special meetings promptly, without
need for two separate proxy/consent solicitations
o Give shareholders more effective power of oversight over future
Boards, including Invacare's Nominees
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- ----------------
<PAGE>
SUGGESTED ACTIONS
VOTE FOR INVACARE'S NOMINEES AND PROPOSALS AT THE ANNUAL MEETING
o ELECT A MAJORITY OF DIRECTORS WHO ARE COMMITTED TO PROMPTLY AUCTION
THE COMPANY FOR THE BEST AVAILABLE PRICE AND TERMS TO THE BEST OF
THEIR ABILITY
o APPROVE PROPOSALS WHICH WILL FURTHER FACILITATE THE PROMPT AUCTION
AND SALE OF THE COMPANY AND YOUR ABILITY TO OVERSEE IT
- ----------------
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- ----------------
<PAGE>
APPENDIX
- ----------------
Salomon Brothers 22
- ----------------
<PAGE>
WHO IS INVACARE?
- ----------------
Salomon Brothers 23
- ----------------
<PAGE>
WHO IS INVACARE?
Invacare is the largest and fastest-growing maker of home health care
products, and has quickly reached a leading position in every market that
it has entered. Healthdyne's product lines will complement Invacare's.
Product Lines Invacare Healthdyne
- --------------------------------------------------------------------------------
Respiratory Products
Oxygen Concentrators X X
Nebulizer Compressors X X
Liquid Oxygen Systems X
Sleep Apnea Products X
Wheelchairs X
Scooters X
Ambulatory Aids X
Home Care Beds X
Seating and Positioning Products X
Mattress Overlays X
- --------------------------------------------------------------------------------
LTM Sales $637 million $127 million
- --------------------------------------------------------------------------------
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Salomon Brothers 24
- ----------------
<PAGE>
INVACARE MARKET PERFORMANCE
According to a financial management survey of 10,000 public companies last
January, Invacare is one of the 100 best performing companies in America,
measured by growth and returns.
- --------------------------------------------------------------------------------
Seven Year Performance
- --------------------------------------------------------------------------------
[Graph showing weekly data of Price as a Percentage of Base Period for
Healthdyne and the S&P Industrial Average (400 Stocks) from 7/6/90 through
7/4/97]
Summary Statistics:
High Low Average Latest
Invacare Corporation 892% 85% 447% 670%
S&P Industrial Average (400 Stocks) 249% 83% 138% 247%
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Salomon Brothers 25
- ----------------
<PAGE>
CONSISTENT GROWTH
(Dollars in Millions, Except per Share Data)
Invacare's growth and returns met or exceeded Wall Street's expectations
for 29 consecutive quarters (seven consecutive years).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
- ------------------------------------------------------------------------------------------------------------------------------------
6/30/95 6/30/96 % Change 9/30/95 9/30/96 % Change 12/31/95 12/31/96 % Change 3/31/96 3/31/97 % Change
-------------------------- -------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $122.3 $159.2 30.1% $130.5 $158.1 21.1% $143.5 $167.7 16.9% $134.5 $151.5 12.7%
Gross Profit 40.1 51.4 28.1% 43.9 53.2 21.2% 48.9 55.3 13.0% 41.6 44.2 6.2%
Gross Margins 32.8% 32.3% 33.6% 33.6% 34.1% 33.0% 31.0% 29.2%
Operating Income $13.0 $16.7 28.9% $15.7 $18.0 15.0% $17.3 $20.5 18.4% $10.2 $12.5 22.4%
Operating Margins 10.6% 10.5% 12.0% 11.4% 12.0% 12.2% 7.6% 8.3%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
- ----------------------------------------------------------------------------------------------------------------------------------
12/31/93 12/31/94 % Change 12/31/94 12/31/95 % Change 12/31/95 12/31/96 % Change
------------------------------------ ---------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $365.5 $411.1 12.5% $411.1 $504.0 22.6% $504.0 $619.5 22.9%
Gross Profit 118.5 133.1 12.3% 133.1 166.3 25.0% 166.3 201.5 21.1%
Gross Margins 32.4% 32.4% 32.4% 33.0% 33.0% 32.5%
Operating Income $36.9 $43.7 18.6% $43.7 $54.1 23.8% $54.1 $65.4 20.8%
Operating Margin 10.1% 10.6% 10.6% 10.7% 10.7% 10.6%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
Exhibit 11(g)(20)
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. )
_________________________)
PLAINTIFFS' MEMORANDUM IN SUPPORT OF EMERGENCY
MOTION FOR CLARIFICATION OF JULY 3, 1997 ORDER, OR,
IN THE ALTERNATIVE, FOR A LIMITED STAY PENDING APPEAL
-----------------------------------------------------
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
Attorneys for Plaintiffs
<PAGE>
NOW COME Plaintiffs Invacare Corporation and I.H.H. Corp (collectively,
"Invacare") and file this Memorandum in Support of their Emergency Motion for
Clarification of July 3, 1993 Order, or, in the Alternative, For a Limited Stay
Pending Appeal.
PRELIMINARY STATEMENT
---------------------
On July 3, 1997, this Court issued an Order which in part found that
Invacare's proposed bylaw amendment regarding Healthdyne's Dead Hand Provision
(the "Proposed Bylaw") was invalid under Georgia law. Invacare has appealed
this ruling to the Eleventh Circuit Court of Appeals. Invacare brings this
emergency motion because recent public announcements by Healthdyne indicate that
it will attempt to moot the issue on appeal and destroy Invacare's appellate
rights by refusing to permit a vote at the upcoming July 30, 1997 annual
shareholders' meeting on Invacare's shareholder proposal (the "Bylaw Proposal")
to amend the bylaws by adopting the Proposed Bylaw. Healthdyne's intended
action is not permitted or even contemplated by this Court's July 3 Order.
As disclosed in Invacare's proxy solicitation materials, Invacare's Bylaw
Proposal, if adopted, will have one of two effects. Either the Proposed Bylaw
will be legally binding, or it will be merely advisory. Given the Court's July
3 Order, it is clear that the Proposed Bylaw cannot be legally binding unless
the Eleventh Circuit reverses the July 3 Order. The July 3 Order,
1
<PAGE>
however, does not invalidate the alternative, advisory aspect of the Bylaw
Proposal. Nevertheless, Healthdyne has recently announced that the Bylaw
Proposal IN ITS ENTIRETY "may not be submitted to the shareholders for a vote"
and that votes in favor of the Bylaw Proposal will not be "tabulated or
counted".
If Healthdyne is allowed to block a vote on the Bylaw Proposal and the
Eleventh Circuit later determines that the Proposed Bylaw is valid under Georgia
law, Invacare will have forever lost the unique opportunity to have a
shareholder vote on the Bylaw Proposal at the 1997 annual meeting while
Invacare's tender offer and merger proposal remain open. Even if Invacare
prevails on appeal and could, in theory, bring the Bylaw Proposal before the
shareholders at some future meeting, it still will have been irreparably harmed
by losing forever its right, and the unique opportunity, to have the Bylaw
Proposal voted on by the shareholders at the upcoming July 30 meeting.
Clarification of the Order to permit a shareholder vote on the Bylaw Proposal
(which Invacare acknowledges would not result in a legally binding bylaw even if
approved by the shareholders unless the Eleventh Circuit reverses) or,
alternatively, granting a limited stay to permit a vote, is necessary to
preserve the issue for appeal and to prevent Invacare from suffering irreparable
harm.
2
<PAGE>
STATEMENT OF FACTS
------------------
A. PROCEDURAL BACKGROUND
---------------------
On July 3, 1997, this Court issued its order (the "Order") on Invacare's
motion for preliminary injunction and the parties' cross motions for summary
judgment regarding Invacare's Proposed Bylaw. In granting Healthdyne's motion
for summary judgment and denying Invacare's cross-motion, the Court concluded
that the Proposed Bylaw is invalid under Georgia law because it would infringe
on the discretion of the board. Order, p. 11. The Order says nothing about a
merely advisory proposal which, of course, would have no binding effect on the
board.
Also on July 3, 1997, Invacare filed in this Court a Notice of Appeal of
the rulings in the Court's Order and filed a Motion for Expedited Appeal in the
Eleventh Circuit. Although the Eleventh Circuit denied Invacare's Motion for
Expedited Appeal on July 10, 1997, Invacare's appeal remains pending.
B. HEALTHDYNE'S INTENT TO BLOCK A VOTE ON THE
BYLAW PROPOSAL BASED ON THE ORDER
------------------------------------------
Healthdyne issued a press release on July 7, 1997 stating that, because
this Court found the Proposed Bylaw to be invalid, the Bylaw Proposal "may not
be submitted to the shareholders for a vote at the annual meeting." SEE
Healthdyne's July 7, 1997 Press Release, attached hereto at Tab A. Four days
later, on July 11,
3
<PAGE>
1997, Healthdyne sent a letter to its shareholders stating that "so long as the
Court's Order is in effect, Healthdyne Technologies will not tabulate or count
any votes received on [the Bylaw Proposal]." SEE July 11, 1997 Healthdyne
letter to shareholders, attached hereto at Tab B. By these statements,
Healthdyne announced its intention to go beyond the boundaries of the Court's
Order to block the shareholders from voting on the Bylaw Proposal, even though,
absent reversal by the Eleventh Circuit, such vote would merely be non-binding
and advisory.
ARGUMENT
--------
I. THIS COURT SHOULD CLARIFY THAT ITS JULY 3 ORDER
WAS NOT INTENDED AND SHOULD NOT BE INTERPRETED TO
BLOCK A SHAREHOLDER VOTE ON THE BYLAW PROPOSAL.
-------------------------------------------------
Even after Invacare's appeal of the Court's Order to the Eleventh Circuit,
this Court retains jurisdiction "to act in aid of the appeal, to correct
clerical mistakes, or to aid in the execution of a judgment that has not been
superseded." SHOWTIME V. COVERED BRIDGE COND. ASS'N, 895 F.2d 711, 713 (11th
Cir. 1990). Under this rule, the Court has the well-established authority to
clarify its Order.(1) This Court should exercise its retained
___________________
(1) SEE, E.G., U.S. V. NICHOLS, 56 F.3d 403, 411 (2d Cir. 1995) (approving
district court's clarification of order, where court "simply clarified that
its finding of competency did not depend on the allocation of the burden of
proof, thereby aiding this court in avoiding unnecessary construction of a
statute and possible remand ... the supplemental finding was a permissable
act in aid of this
4
<PAGE>
jurisdiction to clarify that its Order was not intended and should not be
interpreted to authorize Healthdyne to prevent Invacare from making the Bylaw
Proposal or to refuse to call it for a shareholder vote at the annual meeting.
Healthdyne's announced intention to refuse to submit the Bylaw Proposal to
a shareholder vote and to refuse to count votes in favor of the Bylaw Proposal
is an effort to take more relief than the Court granted. Although the Court's
Order concludes that, if adopted, the Proposed Bylaw would be invalid under
Georgia law, nothing in the Order prohibits the shareholders from simply voting
on the Bylaw Proposal.(2)
The Court's Order that the Proposed Bylaw was invalid should not prevent
the shareholders from voting on the Bylaw Proposal at the annual meeting.
Invacare continues to intend to make the Bylaw Proposal at the meeting for two
reasons: (1) in order to give the
___________________
appeal."); N.L.R.B. V. CINCINNATI BRIDGE, INC., 829 F.2d 585, 589 n.3 (6th
Cir. 1987) (district court had jurisdiction to enforce order which "merely
clarified" the order from which appeal was taken).
(2) The Court's Order specifically noted that the only issue raised by the
parties' cross-motions for summary judgment was "the validity of the proposed
bylaw amendment." SEE Order, p. 8. Healthdyne's briefing submitted neither
evidence nor arguments regarding its obligation to call the Bylaw Proposal
for a vote at the annual meeting, whatever the legal effect of its adoption,
and the Court's Order did not address such obligations. SEE Order, p. 11.
5
<PAGE>
shareholders an opportunity to advise Healthdyne's board of directors of the
sentiments regarding the Dead Hand Provision; and (2) in order to preserve its
rights on appeal, which will be effectively destroyed if Healthdyne is able to
block a vote on the proposal at the upcoming meeting.
Despite this Court's ruling that the Proposed Bylaw is invalid, Invacare
has the right to have the shareholders vote on the Bylaw Proposal as a
non-binding, precatory shareholder proposal -- a shareholder resolution that,
while not binding on the board of directors, informs the board of the
shareholders' opinions and desires. Section 6 of Article I of Healthdyne's
bylaws specifically sets forth procedures which a shareholder must follow to
provide proper notice of business to be brought before an annual meeting.(3)
See Tab C. Healthdyne has never contended that Invacare has not properly
provided notice of its intent to bring the Bylaw Proposal before the annual
meeting. If Healthdyne believed that Invacare did not follow the procedures set
out in its bylaws, it
___________________
(3) Generally, these procedures provide that in order to be timely the
shareholder notice must be delivered to the Secretary of the Corporation not
less than 60 days nor more than 90 days prior to the anniversary date of the
immediately proceeding annual meeting of shareholders. To be in proper
written form, the notice must set forth a brief description of the business
to be brought before the annual meeting and the reasons for conducting such
business, the name and record address of such shareholder, and other
information related to the shareholder and the proposal.
6
<PAGE>
would have informed Invacare of that fact and would not have included the Bylaw
Proposal in its proxy cards and solicitation materials. Instead, Healthdyne has
conceded that the procedures were properly followed by including the Bylaw
Proposal in Healthdyne's own preliminary and definitive proxy statements and
proxy cards filed with the Securities and Exchange Commission ("SEC") and
repeatedly mailed to its shareholders. Since Invacare has followed the
demanding procedures set forth in Healthdyne's bylaws, Invacare, as a Healthdyne
shareholder, has the right to make the Bylaw Proposal at the annual meeting,
discuss it, and have the shareholders vote on it.
In its March 24, 1997 Supplemental Notice of Business to Be Brought Before
the 1997 Annual Meeting ("Notice"), Invacare informed Healthdyne that "[a]ll of
the Shareholder Proposals . . . would be intended to be binding on the Board of
Directors to the fullest extent permitted by law", specifically putting
Healthdyne on notice that Invacare's proposals, including the Bylaw Proposal,
should be voted on by the shareholders as advisory or precatory even if
ultimately declared invalid or non-binding. SEE Notice, p. 3, attached hereto
at Tab D. Moreover, Invacare has consistently stated in its communications with
Healthdyne's shareholders that even if the Proposed Bylaw were declared invalid,
the Bylaw Proposal would have an advisory effect. Invacare, therefore,
7
<PAGE>
understands that while this Court's Order declaring the Proposed Bylaw invalid
remains in effect, the Bylaw Proposal, if approved, will compel no action by the
board of directors and will be advisory only. Nonetheless, so long as Invacare
has complied with Healthdyne's bylaw requirements governing shareholder
proposals, Invacare is permitted to submit the Bylaw Proposal to a vote by
Healthdyne's shareholders.(4)
___________________
(4) Although Invacare's Bylaw Proposal is made pursuant to Healthdyne's
bylaws, it should be noted that the federal rules governing proxy
solicitations allow solicitation of proxies for non-binding votes on
precatory shareholder proposals. Specifically, Rules 14a-7 and 14a-8 of the
federal proxy rules, 17 C.F.R. Section 240.14a-7, .14a-8 permit shareholders
to solicit proxies on resolutions that, if approved, are not legally binding.
The main distinctions between Rules 14a-7 and 14a-8 are that a Rule 14a-7
shareholder communication is not subject to a management exclusion on the
basis of content and must be paid for by the shareholder, while a Rule 14a-8
shareholder proposal, though subject to management's exclusion for
content-based reasons, is included in a management solicitation at no charge
to the shareholder. SEE Patrick Ryan, RULE 14a-8, INSTITUTIONAL SHAREHOLDER
PROPOSALS, AND CORPORATE DEMOCRACY, 23 Ga. Law Rev. 97, 101 and 108 (1933)
(noting that the typical shareholder proposal is advisory or precatory in
nature and the non-binding, precatory nature of shareholder proposals "is an
entirely appropriate development given shareholder's limited state law power
to set corporate policy"). Shareholders routinely advance non-binding
precatory proposals under this rule to inform management of the shareholders'
views concerning the adoption of takeover defenses, particularly poison pill
provisions. SEE, E.G., INTERNATIONAL BROTHERHOOD OF TEAMSTERS V. FLEMING
COMPANIES, INC., 1997 U.S. Dist. LEXIS 2980 (W.D. Okla. Jan. 24, 1997); Joann
S. Lublin, 'POISON PILLS' ARE GIVING SHAREHOLDERS A BIG HEADACHE, UNION
PROPOSALS ASSERT, Wall Street Journal, May 23, 1997, at C1 ("[b]etween 1988
and 1996, 52 non-binding measures to curb poison pills won a majority of the
votes cast; half of those businesses later abandoned their pills").
8
<PAGE>
Unless the previously scheduled shareholder vote on the Bylaw Proposal is
allowed to go forward, Invacare will suffer irreparable harm in the form of the
effective loss of its appellate rights on the validity of the Proposed Bylaw.
If Healthdyne prevents the shareholders from considering the Bylaw Proposal and
then the Eleventh Circuit later reverses this Court and declares that the
Proposed Bylaw is valid under Georgia law, Invacare will have lost forever the
unique opportunity to have the shareholders consider the Bylaw Proposal on July
30 at the 1997 annual meeting while Invacare's tender offer and merger proposal
remain open. Healthdyne's statements that it will not submit the Bylaw Proposal
to a shareholder vote nor count votes received in favor of the proposal are
clearly calculated to render meaningless any subsequent decision by the Eleventh
Circuit and frustrate the appellate process itself.
Healthdyne will not be harmed by permitting the shareholders to vote on the
Bylaw Proposal. Invacare's Bylaw Proposal is already on the proxy cards mailed
to the shareholders by both Healthdyne and Invacare. Calling the Bylaw Proposal
for a vote at the shareholders meeting, counting and tabulating the votes, and
announcing the results along with the results of the votes on the directors and
other shareholder proposals already on the ballot will not harm Healthdyne.
Furthermore, the shareholders'
9
<PAGE>
consideration of the Bylaw Proposal interferes neither with Healthdyne's efforts
to solicit shareholder votes nor with the shareholders' opportunity to consider
and vote on directors and the other proposals contained in the proxies. Invacare
understands that unless the Eleventh Circuit reverses the Order, a shareholder
vote will be advisory only, and the shareholders have been fully informed of the
potential consequences of passing the Bylaw Proposal. SEE Supplement Dated July
14, 1997 to Proxy Statement of Invacare Corporation, attached hereto at Tab E
(providing that as a result of the Order, even if the Bylaw Proposal is "validly
adopted by the shareholders at the annual meeting, [it] would not be legally
binding on the Healthdyne Board of Directors", but will "serve as an advisory
statement by the shareholders that they demand the Board remove" the Dead Hand
Provision).
II. IN THE ALTERNATIVE, A LIMITED STAY IS NECESSARY
TO PRESERVE THE STATUS QUO AND INVACARE'S RIGHTS
PENDING APPEAL.
------------------------------------------------
To the extent that the Court did intend and does interpret the Order as
permitting Healthdyne to block a shareholder vote on the Bylaw Proposal,
Invacare seeks a limited stay of that portion of the Order pending appeal. This
Court has the "inherent power to make orders appropriate to preserve the status
quo" until the Court of Appeals renders its decision. MCCLATCHEY NEWSPAPERS V.
CENTRAL VALLEY TYPOGRAPHICAL UNION NO. 46, 686 F.2d 731, 734 (9th Cir.
10
<PAGE>
1982); SEE ALSO CHRISTIAN SCIENCE READING ROOM V. CITY & COUNTY OF SAN
FRANCISCO, 784 F.2d 1010, 1017 (9th Cir. 1986) (recognizing "inherent power of
court to preserve the status quo when, in its sole discretion, the court deems
the circumstances to so justify"); 7 James M. Moore, ET AL. Moore's Federal
Practice & Procedure 62.05, at 62-02 (1992) (describing as wide and flexible
the "inherent power of the court to exercise its discretion to preserve the
status quo" during appeal). In determining whether to exercise this power, the
Court should consider (1) whether the stay applicant will suffer irreparable
injury absent a stay; (2) whether a party will suffer irreparable injury if a
stay is issued; (3) whether the stay applicant has demonstrated a "substantial
possibility" of success on appeal; and (4) where the public interest lies.
UNITED STATES V. UNITED STATES FISHING VESSEL MAYLIN, 130 F.R.D. 684, 686 (S.D.
Fla. 1990).
The possibility of irreparable injury is the "most crucial factor" in a
court's consideration of a motion for stay. UNITED STATES V. LOUISIANA, 815 F.
Supp. 947, 953 (E.D. La. 1993). Accordingly, when a movant demonstrates a
strong threat of irreparable injury, he need only show a "substantial case on
the merits" (I.E., that its argument on appeal does not contravene
well-established law) rather than a "probability of success on the merits."
RUIZ V. ESTELLE, 650 F.2d 555, 565 (5th Cir. 1981); HELMS
11
<PAGE>
V. CODY, 1994 U.S. Dist. Lexis 11222, *5 (E.D. La. 1994) (movant need only show
"substantial case on the merits" rather than "probability of success"); THE
ISALY CO. V. KRAFT, INC., 662 F. Supp. 62, 63 (M.D. Fla. 1985) (movant "need
only present a substantial case on the merits when a serious legal question is
involved and show that the balance of equities weighs heavily in favor of
granting the stay"). The circumstances at issue in this case satisfy these
requirements and support Invacare's motion to stay enforcement of a limited
portion of the Order pending appeal.
1. A Limited Stay Is Necessary to Prevent Invacare From Suffering
Irreparable Injury.
--------------------------------------------------------------
Irreparable harm is "potential harm which cannot be redressed by a legal or
an equitable remedy" at a later time. INSTANT AIR FREIGHT CO. V. C.F. AIR
FREIGHT, INC., 882 F.2d 797, 801 (3d Cir. 1989). Enforcement of a judgment
during appeal in a manner that necessarily renders a party's appeal meaningless
constitutes irreparable injury. SEE PLANNED PARENTHOOD OF SOUTHEASTERN
PENNSYLVANIA V. CASEY, 822 F. Supp. 227, 236 (E.D. Pa. 1993) (staying judgment
to ensure that movant's rights are not rendered moot during appeal). For that
reason, courts routinely grant stays "to preserve the status quo until the court
of appeals can determine the validity of the district court's disposition."
JENKINS V. MISSOURI, 1997 U.S. Dist. Lexis 8661, *4 (W.D. Mo. 1997); SEE ALSO
CASEY, 822 F. Supp. at 236 ("A trial court has
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broad discretion to preserve the status quo and grant interim relief as long as
a balancing of the equities supports it."); THE ISALY CO, 662 F. Supp. at 63
(staying judgment when "denying a stay would moot the appeal" and alter the
status quo).
As discussed in Section I above, unless the previously scheduled
shareholder vote on the Bylaw Proposal is allowed to go forward, Invacare will
suffer irreparable injury in the form of the effective loss of its appellate
rights on the validity of the Proposed Bylaw. Healthdyne's actions are clearly
calculated to render meaningless any subsequent decision by the Eleventh Circuit
and frustrate the appellate process itself. There is no reason to permit
Healthdyne to moot issues now on appeal. SEE SEWANEE LAND, COAL & CATTLE, INC.
V. LAMB, 735 F.2d 1294, 1295 (11th Cir. 1984) (noting that failure to grant stay
may render appeal moot if enforcement of judgment prevents court of appeals from
granting relief sought).
Finally, Invacare will also suffer irreparable injury in the form of the
loss of its right to have the shareholders vote on the Bylaw Proposal as an
advisory statement at the annual meeting. As discussed in Section I above,
Invacare has properly notified Healthdyne of its intent to make the Bylaw
Proposal at the annual meeting, and will be gravely harmed if the shareholders
are
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prevented from voting on it, regardless of whether the consequences of its
approval are ultimately found to be legally binding or not.
2. Preserving the Status Quo by Permitting a Shareholder Vote Will
Not Harm Healthdyne.
---------------------------------------------------------------
In contrast to the injury that Invacare faces, the granting of a stay to
maintain the status quo will not harm Healthdyne. As discussed in Section I
above, the Bylaw Proposal has been included in all proxy materials sent to the
shareholders, Healthdyne will not be affected in any way in calling the Bylaw
Proposal for a vote at the annual meeting, and the Bylaw Proposal will not
interfere with solicitation or voting on directors or the other proposals.
Moreover, Invacare seeks only a limited stay -- an order staying only so much of
the Order as would prevent Healthdyne's board from blocking a shareholder vote
on the Bylaw Proposal and refusing to announce the results of the vote.
Invacare does not seek a stay of that part of the Order declaring the Proposed
Bylaw to be invalid. Invacare understands that unless the Eleventh Circuit
reverses this Court's Order, a shareholder vote will be advisory only. A stay
permitting a shareholder vote on the Bylaw Proposal in no way threatens
Healthdyne's interests and rights during appeal.
3. Invacare's Appeal Presents a Substantial Case on The Merits.
-----------------------------------------------------------
Given the irreparable harm that Invacare will suffer if a stay is not
ordered and the lack of harm that a stay would cause
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Healthdyne, the balance of equities tips decidedly in favor of a stay. It is
well established in this circuit that the stronger the showing of irreparable
injury, the less probability of success the movant is required to show. COLLINS
& CO. V. CLAYTOR, 476 F. Supp. 407, 408 (N.D. Ga. 1979)("a much stronger showing
on one or more of the necessary factors lessens the amount of proof required for
the remaining factors.") In fact, when the balance of equities weighs in favor
of granting a stay, "the movant need only present a substantial case on the
merits." RUIZ, 650 F.2d at 565. A movant satisfies this burden by showing that
the appeal involves "serious legal questions with broad impact" and that "no
definitive ruling guides" disposition of the appeal. UNITED STATES V. BAYLOR
UNIV. MED. CTR., 711 F.2d 38, 40 (5th Cir. 1983). For purposes of this motion,
this Court is not required to assess Invacare's probability of success. Rather,
it is enough that Invacare's appeal involves unsettled questions of law within
the circuit. SEE HELMS, 1994 U.S. Dist. Lexis at *5-6 (finding substantial case
on merits when no precedent controlled outcome of the dispute on appeal).
Invacare's appeal satisfies the "substantial case" requirement for several
reasons. First, this is an issue of first impression under Georgia law. At the
June 17, 1997 hearing on the parties' motions, the Court observed: "These
questions as to both motions are pretty close." Transcript, p. 123. Second,
the validity of
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the Proposed Bylaw impacts the rights of every shareholder in every Georgia
corporation. Third, as Invacare argued in opposition to Healthdyne's motion for
summary judgment, several Georgia statutes support Invacare's claim that Georgia
law explicitly authorizes the Proposed Bylaw. SEE, E.G., O.C.G.A. 14-2-801(b)
(the corporation shall be managed by a board of directors "subject to any
limitations set forth in the articles of incorporation, bylaws approved by the
shareholders, or agreements among the shareholders which are otherwise lawful");
ACCORD O.C.G.A. 14-2-1020(c). There are no Georgia cases supporting the
conclusion that the Proposed Bylaw is invalid under Georgia law. Because
Invacare's appeal presents legal arguments with broad impact and contravenes no
dispositive ruling on Georgia law, Invacare presents a substantial case on
appeal and satisfies the third requirement of a stay.
4. The Public Interest Supports the Grant of a Stay Pending
Appeal.
--------------------------------------------------------
In this case, the public interest clearly favors the granting of a stay.
Invacare contends and has argued that Georgia law provides Healthdyne's
shareholders -- its owners -- the right to determine what powers they grant the
board of directors. Invacare's Proposed Bylaw, by limiting the authority of the
board of directors to implement the Dead Hand Provision, merely supports these
rights. Likewise, the granting of a stay ensures that the
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shareholders may meaningfully consider the Bylaw Proposal and that, if the
shareholders adopt the Bylaw Proposal and the Eleventh Circuit were to reverse
and find the Proposed Bylaw valid, Healthdyne will effectuate the shareholders'
decision concerning their corporation. Finally, as discussed in Section I
above, the shareholders have been and will be fully informed of the non-binding
nature of the vote on the Bylaw Proposal unless the appeal is successful.
CONCLUSION
----------
Healthdyne's attempt to prevent submission of the Bylaw Proposal to a
shareholder vote threatens to injure Invacare irreparably by effectively mooting
issues now on appeal, thereby destroying Invacare's appellate rights, and by
preventing Invacare from submitting what at the least would be a precatory
proposal to the shareholders. In contrast, allowing the shareholders to vote on
the Bylaw Proposal permits the shareholders to express their opinion on the
issue without harming Healthdyne's interests. For all the foregoing reasons,
this Court should enter an order clarifying that its July 3, 1997 Order does not
affect any obligations Healthdyne otherwise has to permit Invacare to make the
Bylaw Proposal, to call it for a shareholder vote at the annual meeting, and to
tabulate and announce the result of the vote. Alternatively, the Court should
enter an order staying enforcement
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of the July 3, 1997 Order to the extent it would have any of the foregoing
effects to preserve Invacare's right to a meaningful appeal in the Eleventh
Circuit.
DATED: July 14, 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
Georgia Bar No. 553826
Of Counsel:
SIMPSON THACHER & BARTLETT Attorneys for Plaintiffs Invacare
425 Lexington Avenue Corporation and I.H.H. Corp.
New York, New York 10017
(212) 455-2000
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