<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
HEALTHDYNE TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PRELIMINARY PROXY MATERIALS DATED MAY , 1997
1997 ANNUAL MEETING OF SHAREHOLDERS
--------------------
(Healthdyne Logo)
Healthdyne Technologies, Inc.
1255 Kennestone Circle
Marietta, Georgia 30066
Dear Fellow Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders of Healthdyne Technologies, Inc. (the "Company"). The Annual
Meeting will be held on July 30, 1997, at ____________________.
Your vote at this year's Annual Meeting is particularly important. As you
undoubtedly are aware, earlier this year Invacare Corporation commenced an
unsolicited tender offer for the Company's shares at $13.50 per share. Your
Board of Directors has determined that Invacare's tender offer is not in the
best interests of the Company's shareholders and should be rejected. In
arriving at this decision, your Board carefully considered numerous factors,
including, among other things, the opinion of the Company's financial advisor,
Cowen & Company, that Invacare's offer is grossly inadequate, from a financial
point of view, to the Company's shareholders (other than Invacare).
To ensure that the best interests of the Company's shareholders are
served, your Board of Directors is actively pursuing its strategic plan in an
effort to maximize shareholder value. We have been extremely pleased with the
results of our strategic plan to date: our first quarter of 1997 yielded a 30%
revenue increase to a record $35.7 million from $27.5 million in the first
quarter of 1996; our new products have continued to perform especially well,
with the Quantum(TM) non-invasive ventilator, introduced in late 1995, selling
at an annualized rate of $25 million based on first quarter results; and we
have made a number of additional new product introductions this year and are on
schedule to introduce several more new products throughout 1997 and into 1998.
As a result, we remain committed to actively pursuing our strategic plan as an
alternative to Invacare's $13.50 offer.
Your Board of Directors recognizes that it is bound by its fiduciary
obligations to act in the best interests of all of the Company's shareholders,
not just Invacare. However, the Board of Directors believes that Invacare's
nominees, if elected, will act in a manner consistent only with the interests
of Invacare. See "Information Concerning the Invacare Offer and Related
Matters -- The Position of the Board of Directors." The Board believes that
the Company should continue to be managed by its present directors and
officers, who will continue to execute its strategic plan, and not by
Invacare's nominees, none of whom, to the best of the Company's knowledge, has
any experience in managing a technology-oriented healthcare company such as
Healthdyne Technologies.
At the Annual Meeting, Invacare is seeking to elect its own nominees to
fill all seven of the seats on your Company's Board and has submitted several
proposals to be considered by the Company's shareholders. Invacare says that
its nominees, if elected, will take action to allow Invacare to purchase
your Healthdyne Technologies shares at $13.50 per share in its tender offer.
Invacare's other proposals also are intended to facilitate its takeover of the
Company at this price.
<PAGE> 3
Your Board believes there are two compelling reasons why you should vote
for your Board's nominees and against Invacare's nominees and proposals.
First, your Board believes that the $13.50 per share Invacare is offering
does not reflect the true value of your Company. Indeed, Invacare's tender
offer price is substantially below the current market price of your shares.
Second, for reasons set forth in the enclosed Proxy Statement, even if
Invacare's nominees are elected and its proposals are adopted, there can be no
assurance that Invacare will purchase any Healthdyne Technologies shares in its
tender offer. In other words, Invacare, through its nominees, could acquire
control over your Company without purchasing and paying for any of your shares.
ACCORDINGLY, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE:
- FOR YOUR BOARD'S SEVEN NOMINEES FOR ELECTION AS DIRECTORS (PROPOSAL
ONE),
- AGAINST INVACARE'S PROPOSAL TO FIX THE SIZE OF THE BOARD AT SEVEN
(PROPOSAL TWO),
- AGAINST INVACARE'S PROPOSAL CONCERNING THE COMPANY'S SHAREHOLDER
RIGHTS PLAN (PROPOSAL THREE),
- AGAINST INVACARE'S PROPOSAL TO REPEAL CERTAIN OF THE COMPANY'S
BY-LAWS (PROPOSAL FOUR) AND
- AGAINST INVACARE'S PROPOSAL TO AMEND THE COMPANY'S SPECIAL MEETING
REQUIREMENTS (PROPOSAL FIVE).
Enclosed you will find a Notice of Annual Meeting, Proxy Statement and
BLUE proxy card. The Proxy Statement sets forth your Board of Directors'
position with respect to Invacare, its nominees, its four proposals and its
unsolicited tender offer. Please review these materials carefully.
Your vote is most important regardless of the number of shares you own.
Whether or not you plan to attend the Annual Meeting, please sign, date and
return the enclosed BLUE proxy card as soon as possible in the postage-paid
envelope provided. This will not prevent you from voting in person at the
Annual Meeting or at any adjournment or postponement thereof, but will assure
that your vote is counted if you are unable to attend. The BLUE proxy card
furnished by the Board of Directors, if properly executed and delivered, will
revoke all prior proxies, including any prior proxy furnished to Invacare.
If you have any questions, please call M. Wayne Boylston, Chief Financial
Officer of the Company, at (800) 421-8754, extension 2336, or our proxy
solicitor, Morrow & Co., Inc. at (212) 754-8000. I look forward to seeing you
on July 30, 1997.
WE URGE YOU TO PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED BLUE
PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. WE URGE YOU NOT
TO SIGN INVACARE'S GOLD PROXY CARD.
Sincerely,
Parker H. Petit
Chairman of the Board
<PAGE> 4
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 30, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders (the
"Annual Meeting") of Healthdyne Technologies, Inc. (the "Company") will be held
on July 30, 1997 at _____________________, located at _______________________,
for the following purposes:
1. To elect seven directors to hold office until the 1998 annual
meeting and until their successors have been duly elected and qualified;
2. To consider and vote upon a proposal made by Invacare
Corporation to amend the Company's By-Laws to fix the size of the Board of
Directors at seven members;
3. To consider and vote upon a proposal made by Invacare
Corporation concerning the Company's Shareholder Rights Plan;
4. To consider and vote upon a proposal made by Invacare
Corporation concerning certain of the Company's By-Laws;
5. To consider and vote upon a proposal made by Invacare
Corporation to amend the Company's Special Meeting requirements; and
6. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
Pursuant to the By-Laws of the Company, the Board of Directors has fixed
June 23, 1997 as the record date for the determination of shareholders entitled
to notice of and to vote at the Annual Meeting and at any adjournment or
postponement thereof. Only holders of common stock of record at the close of
business on that date are entitled to notice of and to vote at the Annual
Meeting and at any adjournment or postponement thereof.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. EACH
SHAREHOLDER, EVEN THOUGH HE OR SHE NOW PLANS TO ATTEND THE ANNUAL MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED BLUE PROXY CARD WITHOUT DELAY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME
PRIOR TO ITS EXERCISE. ANY SHAREHOLDER PRESENT AT THE ANNUAL MEETING OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF MAY REVOKE HIS OR HER PROXY AND VOTE
PERSONALLY ON EACH MATTER BROUGHT BEFORE THE MEETING.
I look forward to welcoming you at the meeting.
Sincerely,
Leslie R. Jones
Secretary
Marietta, Georgia
____________, 1997
<PAGE> 5
PRELIMINARY PROXY MATERIALS DATED MAY__ , 1997
1997 ANNUAL MEETING OF SHAREHOLDERS
-------------------------------
HEALTHDYNE TECHNOLOGIES, INC.
1255 KENNESTONE CIRCLE
MARIETTA, GEORGIA 30066
-------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
July 30, 1997
GENERAL INFORMATION
This Proxy Statement and the accompanying BLUE proxy card are being
furnished to shareholders of Healthdyne Technologies, Inc. (the "Company" or
"Healthdyne Technologies") in connection with the solicitation of proxies by
the Company's Board of Directors for use at the 1997 Annual Meeting of
Shareholders (the "Annual Meeting") to be held on July 30, 1997 at
_________________________, located at _________________________, and at any
adjournment or postponement thereof. The purpose of the Annual Meeting is as
stated in the accompanying Notice of the Annual Meeting of Shareholders (the
"Notice of Meeting"). This Proxy Statement and the accompanying BLUE proxy
card are first being sent or given to shareholders on or about June ____, 1997.
At the Annual Meeting, shareholders will consider and vote upon the
proposals made by Invacare Corporation ("Invacare") and opposed by the Board
(collectively, the "Invacare Proposals") to replace all of the current members
of the Board with Invacare's own nominees (the "Invacare Nominees"), to amend
the Company's By-Laws to fix the size of the Board at seven members, to amend
the Company's shareholder rights plan (the "Shareholder Rights Plan") to remove
certain continuing director provisions (the "Continuing Director Provisions"),
to repeal certain of the Company's By-Laws designed to protect shareholders and
to amend the Company's Special Meeting requirements. The Invacare Proposals
were made by Invacare in furtherance of its attempt to take over the Company by
means of an unsolicited tender offer by I.H.H. Corporation ("I.H.H."), a wholly
owned subsidiary of Invacare, for all outstanding shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), at a net cash
price of $13.50 per share. THE BOARD UNANIMOUSLY URGES SHAREHOLDERS TO VOTE
FOR THE BOARD'S NOMINEES AND AGAINST INVACARE'S PROPOSALS. For information
concerning the tender offer commenced by Invacare on January 27, 1997, see
"INFORMATION CONCERNING THE INVACARE OFFER AND RELATED MATTERS."
VOTING AND REVOCATION OF PROXIES
The Board of Directors has fixed the close of business on June 23, 1997 as
the record date (the "Record Date") for the determination of the holders of the
Company's Common Stock entitled to receive notice of and to vote at the Annual
Meeting and at any adjournment or postponement thereof. Only holders of record
of Common Stock at the close of business on the Record Date will be entitled to
vote at
<PAGE> 6
the Annual Meeting and at any adjournment or postponement thereof. At the close
of business on the Record Date, there were __________ shares of Common Stock
issued and outstanding.
The holders of shares of Common Stock outstanding on the Record Date will
be entitled to one vote for each share held of record upon each matter properly
submitted at the Annual Meeting and at any adjournment or postponement thereof.
The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares of Common Stock is necessary to constitute a
quorum at the Annual Meeting and at any adjournment or postponement thereof.
Shares which are present in person or by proxy but abstain from voting with
respect to one or more proposals voted upon at the meeting will be included for
purposes of determining a quorum at the Annual Meeting and at any adjournment
or postponement thereof.
A BLUE proxy card is enclosed for shareholder use. If the proxy card is
properly executed and returned to the Company in time to be voted, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. EXECUTED PROXIES WITH NO INSTRUCTIONS INDICATED THEREON WILL BE VOTED
(I) FOR THE BOARD'S SEVEN NOMINEES TO FILL THE SEVEN DIRECTORSHIPS WITH TERMS
EXPIRING AT THE ANNUAL MEETING, (II) AGAINST INVACARE'S PROPOSAL TO AMEND THE
COMPANY'S BY-LAWS TO FIX THE SIZE OF THE BOARD AT SEVEN DIRECTORS (THE "BOARD
RESTRICTION PROPOSAL"), (III) AGAINST INVACARE'S PROPOSAL CONCERNING THE
COMPANY'S SHAREHOLDER RIGHTS PLAN (THE "RIGHTS PLAN PROPOSAL"), (IV) AGAINST
INVACARE'S PROPOSAL TO REPEAL CERTAIN OF THE COMPANY'S BY-LAWS (THE "BY-LAW
RESCISSION PROPOSAL"), AND (V) AGAINST INVACARE'S PROPOSAL TO AMEND THE
COMPANY'S SPECIAL MEETING REQUIREMENTS (THE "SPECIAL MEETING PROPOSAL"). It is
not anticipated that any matters other than those set forth in the Notice of
Meeting will be brought before the Annual Meeting or at any adjournment or
postponement thereof. If any other matters properly come before the Annual
Meeting or at any adjournment or postponement thereof, the persons named in the
accompanying proxy will vote the shares represented by all properly executed
proxies on such matters in accordance with their best judgment.
The presence of a shareholder at the Annual Meeting or any adjournment or
postponement thereof will not automatically revoke such shareholder's proxy.
However, a shareholder may revoke a proxy at any time prior to its exercise by
(1) delivering a written notice of revocation to the Secretary of the Company,
(2) submitting a duly executed proxy bearing a later date, or (3) attending the
Annual Meeting or any adjournment or postponement thereof and voting in person.
The BLUE proxy card furnished by the Board of Directors, if properly executed
and delivered, will revoke all prior proxies, including any prior proxy
furnished to Invacare.
Regardless of the number of shares of Common Stock owned, it is important
that shareholders be represented by proxy or in person at the Annual Meeting
and at any adjournment or postponement thereof. Shareholders are requested to
vote by completing the enclosed BLUE proxy card and returning it in the
enclosed postage-paid envelope.
2
<PAGE> 7
VOTE REQUIRED
Directors shall be elected by a plurality of votes cast. The holders of
Common Stock may not vote their shares cumulatively for the election of
directors. Approval of each of Invacare's Board Restriction Proposal,
Invacare's Rights Plan Proposal, Invacare's By-Law Rescission Proposal and
Invacare's Special Meeting Proposal requires that the number of votes cast in
favor of such proposal exceeds the number of votes cast against such proposal,
assuming a quorum is present or otherwise represented. Shares which abstain
from voting with respect to a particular proposal will be counted as shares
represented. Shares considered present at the Annual Meeting that are not
voted for a particular proposal (including broker non-votes and abstentions)
will not be counted either for or against the approval of such proposal.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following tables set forth certain information as to the beneficial
ownership of shares of the Company's Common Stock. Under the rules of the
Securities and Exchange Commission (the "Commission"), a person is deemed to be
a beneficial owner of a security if he or she has or shares the power to vote
or to direct the voting of such security, or the power to dispose or to direct
the disposition of such security. A person is also deemed to be a beneficial
owner of any securities which that person has the right to acquire within sixty
(60) days, as well as any securities owned by such person's spouse, children or
relatives living in the same house. Accordingly, more than one person may be
deemed to be a beneficial owner of the same securities.
Security Ownership of Management. The following table sets forth certain
information as to the Common Stock beneficially owned as of March 31, 1997 by
each of the Company's directors and nominees for director, each executive
officer named in the Summary Compensation Table set forth under the caption
"Executive Compensation" and all directors and executive officers as a group.
Unless otherwise indicated in a footnote each person listed below possesses
sole voting and investment power with respect to the shares indicated as
beneficially owned by him or her.
<TABLE>
<CAPTION>
Amount and Nature Percent
Name of Beneficial Owner of Beneficial Ownership (1) of Class
- ------------------------ --------------------------- --------
<S> <C> <C>
Parker H. Petit (2)......................................... 866,859(3) 6.8%
Craig B. Reynolds........................................... 165,507 1.3%
J. Terry Dewberry........................................... 125,979 *
Alexander H. Lorch.......................................... 13,824 *
J. Leland Strange........................................... 6,667 *
James J. Wellman, M.D....................................... 4,445 *
J. Paul Yokubinas........................................... 105,560 *
Robert M. Johnson........................................... 25,986 *
Leslie R. Jones............................................. 41,860 *
John L. Miclot.............................................. 19,848 *
Vincent J. Persano.......................................... 14,352 *
Robert E. Tucker............................................ 115,411 *
All directors and executive officers as a
group (13 persons)......................................... 1,593,092 12.50%
</TABLE>
- ------------------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended. Includes
shares that may be acquired through the exercise of stock options
exercisable within sixty (60) days for the following individuals: Mr.
Petit - 258,814 shares; Mr. Reynolds - 162,834 shares; Mr. Dewberry -
106,333 shares; Mr. Lorch - 6,667 shares; Mr. Strange - 6,667 shares; Dr.
Wellman - 4,445 shares; Mr. Yokubinas -
3
<PAGE> 8
70,922 shares; Mr. Johnson - 25,986 shares; Ms. Jones - 41,475 shares; Mr.
Miclot - 19,667 shares; Mr. Persano - 12,275 shares; Mr. Tucker - 112,406
shares; all directors and executive officers as a group - 909,720 shares.
(2) Mr. Petit's address is c/o Matria Healthcare, Inc., 1850 Parkway Place,
12th Floor, Marietta, Georgia 30067.
(3) Includes 575,510 shares owned by Mr. Petit, 32,535 shares held by Petit
Investments Limited Partnership and 258,814 shares that may be acquired
through the exercise of stock options exercisable within sixty (60) days.
4
<PAGE> 9
Security Ownership of Certain Beneficial Owners. The following table sets
forth certain information with respect to all shareholders other than Mr.
Petit, whose beneficial interest is set forth under the caption "Security
Ownership of Management," known to the Company to beneficially own as of
December 31, 1996 more than five percent (5%) of the outstanding shares of the
Common Stock. Except as otherwise indicated, the shareholders listed in the
table have sole voting and investment powers with respect to the Common Stock
beneficially owned by them.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of Common
of Beneficial Owner of Beneficial Ownership Stock Outstanding*
- ------------------- ----------------------- ------------------
<S> <C> <C>
Wellington Management Company (1) ........... 1,325,587 10.5%
75 State Street
Boston, Massachusetts 02109
Cowen & Company (2).......................... 647,493 5.1%
Financial Square
New York, New York 10005
</TABLE>
- -----------------------
*Percentages are calculated based on the number of shares outstanding as of
March 31, 1997.
(1) Based on information set forth in a Schedule 13G dated January 24, 1997
providing information as of December 31, 1996. Wellington Management
Company ("Wellington") may be deemed to be the beneficial owner of
1,325,587 shares owned by numerous investment counseling clients.
Wellington has shared voting power as to 254,349 of such shares and shared
dispositive power as to all of such shares.
(2) Based on information set forth in a Schedule 13G dated February 12, 1997,
and filed jointly on behalf of Cowen & Company, Cowen Incorporated and
Joseph M. Cohen, providing information as of December 31, 1996. Cowen &
Company ("Cowen") in its capacity as a broker-dealer and investment
advisor, has shared voting power as to 638,660 of such shares and shared
dispositive power as to all of such shares. On April 2, 1997, Cowen
reported that it and its affiliates own 447,900 shares.
INFORMATION CONCERNING THE INVACARE OFFER AND RELATED MATTERS
THE INVACARE OFFER
Over the past three years, Invacare has approached the Company on several
occasions to discuss possible business combination transactions, and on each
occasion after due consideration of the Invacare overture, the Company
determined not to pursue a transaction with Invacare.
In February 1996, following receipt by the Company from certain companies,
including Invacare, of indications of interest in pursuing a business
combination, the Board of Directors reviewed with management the Company's
strategic business plan and consulted with legal counsel concerning the Board
of Directors' fiduciary duties. The Board of Directors concluded that it was
not in the best interest of the Company or its shareholders to pursue a sale of
the Company at that time. Management was directed to respond to further
exploratory written requests by Invacare or other companies by communicating
that the Board of Directors had concluded that it was not in the Company's best
interest to pursue a sale of the Company and management was further instructed
to keep the Board of Directors informed of any such requests. Management was
also directed that any specific proposal for the acquisition of the Company
should be brought to the Board of Directors' attention immediately.
5
<PAGE> 10
On January 2, 1997, A. Malachi Mixon, III, Chairman and Chief Executive
Officer of Invacare, sent a letter to Craig B. Reynolds, President and Chief
Executive Officer of the Company, indicating Invacare's persistent interest in
a combination with the Company and proposing to acquire the Company in a
negotiated merger transaction in which shareholders of the Company would
receive $12.50 in cash for each share of the Company's Common Stock (the
"Invacare Preliminary Proposal"). Mr. Reynolds sent a copy of the letter to
each member of the Board of Directors and, after consultation with certain
directors, on January 8, 1997, Mr. Reynolds sent a letter to Mr. Mixon, stating
that the Board of Directors of the Company planned to consider the Invacare
Preliminary Proposal at its next regularly scheduled Board of Directors
meeting. Two days later, on January 10, 1997, Invacare issued a press release
disclosing the unsolicited Invacare Preliminary Proposal to acquire all of the
Company's shares.
On January 15, 1997, the Company's Board of Directors met to discuss the
Invacare Preliminary Proposal and appointed Cowen & Company ("Cowen"), as
financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP as legal advisor
to the Board of Directors.
On January 23, 1997, the Board of Directors of the Company met again to
review the Company's financial performance and the Invacare Preliminary
Proposal. The Board of Directors was advised by management and by Cowen as to
the Company's strategic plans for new products, business expansion and
potential earnings growth. Cowen reviewed the current strategic and financial
environment in which the Company operates and summarized enterprise values and
valuation trends related to comparable companies in the respiratory products
industry. Cowen reviewed analyst estimates regarding the Company's potential
earnings per share and future prospects. Cowen reviewed the Company's
financial projections, including the Company's 1997 and 1998 business plans, as
well as the potential financial impact of management's estimates regarding the
Company's market penetration, product mix and the profitability of its various
business lines. Cowen reviewed the potential valuation implications of various
earnings per share projections relative to a range of industry price/earnings
multiples. Cowen also compared the multiples implied by the Invacare
Preliminary Proposal relative to other transactions in the respiratory products
industry. In addition, Cowen reviewed a discounted cash flow analysis of the
Company based on management's projections of future financial performance. In
summary, Cowen concluded that the Invacare Preliminary Proposal was grossly
inadequate from a financial point of view. The Board of Directors was also
advised by its legal counsel as to its fiduciary duties and, among other
things, the merits of electing to be governed by Georgia's Fair Price Statute.
Based on this discussion and advice, the Board of Directors determined that the
sale of the Company was not in the best interests of its shareholders at such
time and issued a press release on January 24, 1997, rejecting the Invacare
Preliminary Proposal. Later that day, the Company filed with the Commission a
Current Report on Form 8-K which stated that on January 23, 1997, the Company's
Board of Directors had amended the Company's By-Laws to (i) elect that the
Company be governed by the Georgia Fair Price Statute and (ii) remove from the
By-Laws a provision requiring the annual meeting of shareholders to be held on
the fourth Tuesday in April unless a different date was set by the Board of
Directors.
On January 27, 1997, Invacare commenced an unsolicited tender offer to
purchase any and all of the outstanding shares of Common Stock, including the
associated Preferred Stock Purchase Rights (the "Rights") (unless the Rights
are redeemed or Invacare is satisfied, in its sole discretion, that the Rights
are invalid) issued pursuant to the Shareholder Rights Plan, at $13.00 per share
of Common Stock and associated Right, net to the seller in cash (the "Invacare
Initial Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase dated January 27, 1997 (the "Initial Invacare Offer to
Purchase") and the related Letter of Transmittal (which together constitute the
"Invacare Initial Offer"). The Invacare Initial Offer proposed that the tender
offer would be followed by a second-step merger in which holders of shares not
validly tendered would receive $13.00 per share. The Invacare Initial Offer also
disclosed that Invacare owned 600,000 shares (approximately 4.9%) of the
Company's Common Stock.
6
<PAGE> 11
The Invacare Initial Offer was conditioned upon, among other things, (1)
the tender of a number of shares of Company Common Stock which, when added to
Invacare's 600,000 shares, would constitute at least 51% of the voting power of
all securities of the Company entitled to vote generally in the election of
directors and in a merger; (2) the Company's Rights having been redeemed by the
Company's Board or Invacare being satisfied, in its sole discretion, that the
Rights have been invalidated or are otherwise inapplicable to, or that certain
provisions thereof would not be triggered by, Invacare's tender offer or the
proposed merger of Invacare and the Company (the "Rights Plan Condition"); (3)
Invacare being satisfied, in its sole discretion, that the restrictions on
business combinations contained in Sections 14-2-1131 through 14-2-1133 (the
"Georgia Business Combination Statute") of the Georgia Business Corporation
Code (the "GBCC") would not apply to Invacare in connection with its tender
offer or proposed merger; and (4) Invacare being satisfied, in its sole
discretion, that the restrictions on business combinations contained in
Sections 14-2-1110 through 14-2-1113 of the GBCC (the "Georgia Fair Price
Statute") would not apply to Invacare in connection with its tender offer or
proposed merger or are invalid or that the proposed merger may be consummated
without any approval required under the Georgia Fair Price Statute at a price
per share not in excess of the price per share to be paid in the offer (the
"Georgia Fair Price Statute Condition"). The Invacare Initial Offer was not
conditioned on the receipt of financing.
The Invacare Initial Offer also stated that if the Company's Board opposed
its tender offer and proposed merger, Invacare intended to nominate individuals
for election as directors of the Company, would consider making other proposals
at the Company's upcoming annual meeting and planned to solicit proxies from
shareholders for the purpose of electing Invacare's director candidates and
approving any of Invacare's proposals.
On January 30, 1997, the Company's Board of Directors convened a meeting
at which the Board of Directors, assisted by its financial and legal advisors,
reviewed the Invacare Initial Offer and its terms and conditions. The Board of
Directors reviewed again the Company's business strategy and strategic plan,
and considered the potential for benefits both with and without a merger with
Invacare. On January 30, 1997, Cowen updated its analysis to reflect the
Invacare Initial Offer and, using an analytical framework similar to that
presented to the Board of Directors on January 23, 1997, Cowen reviewed the
Invacare Initial Offer. In addition, Cowen reviewed the reaction of the
financial markets to the Invacare Initial Offer and potential implications for
the Company and its shareholders. In summary, Cowen concluded that the
Invacare Initial Offer was grossly inadequate from a financial point of view.
After lengthy discussions and presentations from the Company's legal and
financial advisors, the Board of Directors determined that the best means for
providing value to its shareholders was for the Company to continue to pursue
its strategic plan and not to be put up for sale at this time. The Board of
Directors unanimously concluded that, given projected earnings and the new
products planned for introduction in the near future, the Invacare Initial
Offer was grossly inadequate and not in the best interests of the Company and
its shareholders. In particular, the Board of Directors determined that the
Company's current strategic plan offered the potential for greater benefits for
the Company's shareholders than the Invacare Initial Offer, based on, among
other things, greater opportunities for business expansion, revenue and
earnings growth, and the introduction of new products and product lines into
the health care market.
In reaching these conclusions, the Board of Directors took into account a
variety of factors, including but not limited to:
(1) The Board of Directors' familiarity with the financial condition,
business opportunities and current strategies of the Company, the nature of the
markets in which the Company competes and the Board of Directors' confidence in
management and firm belief that the Invacare Initial Offer did not reflect the
fair value of the Company. Specifically, the Board of Directors determined
that the Invacare
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Initial Offer failed to reflect: (a) the Company's leading and innovative
position in the respiratory products industry; (b) the number of significant new
products planned for introduction by the Company into the medical device market;
(c) the expected revenue and earnings growth based on such new products and the
Company's competitive position in such markets, and (d) the Company's prospects
for future growth and expansion, based on its strategic plans, the strategic
alliances and other initiatives which had been recently implemented, the
investments that had been made in an effort to expand the Company's product
lines and devices offered to the market, and the development of new products as
well as enhancements to existing products currently offered by the Company.
(2) The opinion of Cowen to the effect that the price offered pursuant to
the Invacare Initial Offer is grossly inadequate from a financial point of view
to the shareholders of the Company (other than Invacare).
(3) The disruptive effect of the Invacare Initial Offer on the Company's
employees, suppliers and customers.
(4) The fact that the Company's Common Stock traded as high as $14.75 per
share as of June 1996 and closed at $14.25 per share on January 30, 1997.
(5) The fact that, in the event that the Company decides to pursue a sale
at some future date, the opportunity to enter into a "pooling" transaction
would become available only after May 1997.
(6) The Board of Directors' commitment to protecting the best interests of
the Company's shareholders.
On February 13, 1997, the Company issued a shareholder update (the
"Shareholder Update") regarding the strategic plans developed by the Company
and its Board of Directors. The Shareholder Update addressed, among other
things, the Company's plans for new product introductions in the coming year,
the historical performance of the Company's products and the Company's
expectations for the future performance of its existing product lines. The
Shareholder Update also disclosed the Company's strategic plans for positioning
its product lines and increasing its market share in the medical device market.
On February 25, 1997, Invacare issued a press release announcing the
extension of the Invacare Initial Offer, which had been scheduled to expire at
midnight eastern standard time on February 24, 1997, until 6:00 p.m. eastern
standard time on March 24, 1997. At that time, only 2 million shares
(approximately 16%) had been tendered to Invacare.
On March 20, 1997, the Company amended its By-Laws to provide for certain
procedures to govern the calling of special shareholder meetings and entered
into indemnification agreements with its executive officers and directors. See
"Employment Contracts, Termination of Employment, and Change in Control
Agreements with Executive Officers and Directors." Subsequently on March 20,
1997, the Company received Invacare's notice to the Company announcing its
intention to nominate the Invacare Nominees and to make the Invacare Proposals
at the Annual Meeting.
On March 24, 1997, Invacare issued a press release announcing another
extension of the Invacare Initial Offer, this time until 6:00 p.m. eastern
standard time on April 7, 1997. At that time, only 2.3 million shares
(approximately 18%) had been tendered to Invacare.
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On March 31, 1997, Invacare revised the Invacare Initial Offer by
announcing that it would increase the price in its tender offer for all
outstanding shares of the Common Stock of the Company from $13.00 per share to
$13.50 per share (together, with the Invacare Initial Offer, the "Invacare
Offer"). On such date, Invacare also announced another extension of the
Invacare Initial Offer, this time until 6:00 p.m. eastern standard time on
April 28, 1997. At that time, only 2.1 million shares (approximately 17%) were
reported as tendered to Invacare.
On April 2, 1997, the Company issued a press release announcing that the
Board of Directors voted unanimously to reject the Invacare Offer and to
recommend that shareholders of the Company not tender any of their shares
pursuant to the Invacare Offer. The Board of Directors once again considered
the opinion of Cowen that the Invacare Offer was still grossly inadequate from
a financial point of view, the nature of the markets in which the Company
competes, the Company's future business and financial prospects, and the Board
of Directors' familiarity with the financial condition, business opportunities
and current strategies of the Company. A copy of the opinion of Cowen is
attached hereto as Appendix A.
On April 17, 1997, the Company issued a press release announcing that its
Board of Directors had designated July 30, 1997 as the date of the Annual
Meeting and June 23, 1997 as the record date for determining shareholders
entitled to vote at the Annual Meeting. The Company also noted in its press
release that, in setting the date for the Annual Meeting, the Board of
Directors had considered it important that the shareholders of the Company have
the benefit of the Company's second quarter financial results before deciding
how to vote their shares in the upcoming proxy contest.
On April 29, 1997, Invacare issued a press release announcing another
extension of the Invacare Offer, this time until 6:00 p.m. eastern standard
time on May 27, 1997. At that time, only 2.58 million shares (approximately
20%) were reported as tendered to Invacare.
On May 28, 1997, Invacare issued a press release announcing another
extension of the Invacare Offer, this time until 12:00 midnight eastern
standard time on June 20, 1997. At that time, only 1.61 million shares
(aproximately 13%) were reported as tendered to Invacare.
THE COMPANY'S FIRST QUARTER RESULTS
On April 8, 1997, the Company announced in a press release its financial
results for the first quarter ended March 31, 1997. The Company noted that
revenues increased 30%, from $27.5 million in the first quarter of 1996 to a
record $35.7 million for the first quarter of 1997. The Company also reported
net earnings for the first quarter of 1997 of $2.1 million (excluding an after
tax charge of $780,000 for expenses associated with Invacare's unsolicited
tender offer), up from $1.8 million for the first quarter of 1996, and
operating earnings of $4.0 million in the first quarter of 1997 as compared to
$2.8 million for the first quarter of 1996. Revenues from the Company's
non-invasive ventilator, the Quantum, were $6.2 million for the first quarter
of 1997 (compared to $12 million of Quantum revenues during all of 1996), and
revenue from the Company's asthma management product line grew 54% over
comparable revenues for the first quarter of 1996. Selling and administrative
expenses as a percentage of revenues decreased from 24% in the first quarter of
1996 to 22% in the first quarter of 1997.
LITIGATION WITH INVACARE
On January 27, 1997, Invacare and I.H.H. (collectively, the "Plaintiffs")
filed a complaint (the "Complaint") in the United States District Court for the
Northern District of Georgia, Atlanta Division (the "Court"). Named as
defendants in the Complaint are the Company and Craig B. Reynolds, J. Terry
Dewberry, Alexander H. Lorch, J. Leland Strange, James J. Wellman and J. Paul
Yokubinas, each of whom serves on the Company's Board of Directors
(collectively, the "Individual Defendants"). In the Complaint, Plaintiffs
allege that: (i) the Continuing Director Provision of the Company's
Shareholder Rights Plan violates the GBCC and the Supremacy and Commerce
Clauses of the United States Constitution; (ii) that the Company's Board of
Directors and the Individual Defendants breached their fiduciary duties in
refusing to redeem or amend the Company's Shareholder Rights Plan and in using
the
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<PAGE> 14
Shareholder Rights Plan, the Georgia Fair Price Statute, and the Georgia
Business Combination Statute to impede the Invacare Offer; (iii) that the
Georgia Fair Price Statute violates the Supremacy, Due Process and Commerce
Clauses of the United States Constitution and the Due Process Clause of the
Georgia Constitution; (iv) that the aggregate effect of the Georgia Fair Price
Statute, the Georgia Business Combination Statute and Section 14-2-624 of the
GBCC ("Section 624") violates the Supremacy and Commerce Clauses of the United
States Constitution; and (v) that the Company's Board of Directors breached its
fiduciary duties in attempting to impede the Invacare Offer.
On February 27, 1997 and March 7, 1997, the Company and the Individual
Defendants filed their respective answers (the "Answers") to the Complaint. In
the Answers, the Company and the Individual Defendants denied the material
allegations of the Complaint and made a number of averments including: (i) the
Board of Directors fully considered I.H.H.'s proposed acquisition before
rejecting it; (ii) the purchase price proposed pursuant to the Invacare Offer
is grossly inadequate; and (iii) the Board of Directors may in the future adopt
other defensive measures. By way of defenses, the Company and the Individual
Defendants alleged that Invacare and I.H.H. lacked standing to assert a claim
of breach of fiduciary duty and that the Complaint fails to state a claim for
which relief can be granted and, among other things, that the Court should
dismiss the Complaint with prejudice and enter judgment for the Company on all
issues.
On April 7, 1997, the Plaintiffs served the Company with a motion for
preliminary injunction, which sought court intervention to set the date for the
Annual Meeting on June 30, 1997 or earlier. On April 21, 1997, the Company
filed a brief in opposition to the Plaintiffs' motion for preliminary
injunction, contending, in part, that Georgia law and the By-Laws of the
Company do not require the Company to hold the Annual Meeting by June 30, 1997
and that the Plaintiffs cannot prove they will be irreparably injured if the
Annual Meeting is held on July 30, 1997.
On April 14, 1997, the Company filed its Motion to Amend to Add
Counterclaim (the "Motion to Amend"). With its Motion to Amend, the Company
sought leave to amend its Answer with a counterclaim (the "Counterclaim") that
would challenge the Rights Plan Proposal made by Invacare as violative of
Georgia law. The Company is thereby seeking a determination by the Court that
the Rights Plan Proposal is not a proper matter for consideration at the Annual
Meeting.
On April 28, 1997, the Court entered a consent order on Plaintiffs' motion
for preliminary injunction regarding the scheduling of the Company's Annual
Meeting (the "Consent Order"). Pursuant to the Consent Order, Invacare agreed
to withdraw its motion for preliminary injunction and Invacare and the Company
agreed that the Annual Meeting would be held as previously scheduled by the
Company's Board of Directors on July 30, 1997. The Consent Order provides
that, if Invacare changes the offer price or the form of consideration of the
Invacare Offer within fifteen calendar days of the date of the Annual Meeting,
the Company may postpone the Annual Meeting to a date not later than fifteen
days from the date of such change. The Consent Order further provides that, in
the event that such a postponement requires the setting of a new record date
for the Annual Meeting under applicable Georgia law, the Company may not
postpone the meeting but may instead adjourn the meeting to a date not later
than fifteen days from the date of the change in the Invacare Offer.
On May 1, 1997, the Court granted the Company's Motion to Amend its Answer
to add the Counterclaim and file its related motion for summary judgment with
respect to the invalidity of the Rights Plan Proposal (the "Motion for Summary
Judgment on the Rights Plan Proposal").
On May 16, 1997, Invacare filed a motion for preliminary injunction
seeking an order from the Court declaring the Continuing Director Provision
invalid and requiring the Individual Defendants to amend the Shareholder Rights
Plan to remove the Continuing Director Provision ("Invacare's Preliminary
Injunction Motion"). The Court has scheduled a hearing for June 16, 1997 with
respect to Invacare's Preliminary Injunction Motion and the Company's Motion
for Summary Judgment on the Rights Plan Proposal.
On May 18, 1997, Invacare filed a reply to the Company's Counterclaim and
filed its own counterclaim seeking declaratory and injunctive relief in
connection with the Rights Plan Proposal ("Invacare's Rights Plan
Counterclaim"). Invacare's Rights Plan Counterclaim asks the Court to declare
that the Rights Plan Proposal (i) is valid under Georgia law, (ii) proposes an
amendment to the By-Laws that, if approved by the Company's shareholders, is
valid, binding and enforceable under Georgia law in accordance with its terms,
(iii) shall be submitted to the Company's shareholders for a vote at the Annual
Meeting at a time and in a manner such that, if adopted by the shareholders,
will result in the elimination of the Continuing Director Provision and (iv),
if adopted, requires the Board of Directors to eliminate immediately the
Continuing Director Provision. Invacare's Rights Plan Counterclaim also seeks
to enjoin the Company from interfering with consideration of the Rights Plan
Proposal at the Annual Meeting.
THE GEORGIA LEGISLATIVE EFFORT
On March 20, 1997, after consultation with the Company, Georgia state
Senator Steve Thompson introduced legislation as an amendment to an existing
bill (the "GBCC Bill") in the Georgia Senate which would afford protection to
publicly-held companies incorporated in Georgia and would prevent hostile
bidders from circumventing specific requirements of the GBCC designed to
prevent abusive takeover tactics (the "Georgia Corporation Protection
Legislation"). The Company, whose
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headquarters are located in Senator Thompson's district, supported the Georgia
Corporation Protection Legislation and Senator Thompson's efforts to pass the
amended bill.
Specifically, the Georgia Corporation Protection Legislation would have
amended the GBCC to provide, among other things, that: (i) every publicly-held
corporation incorporated in the State of Georgia, including the Company, would
automatically have a "staggered" board of directors in which approximately
one-third of the directors would stand for election each year and serve for a
three-year term; (ii) certain standards for the removal of directors would be
established; (iii) the board of directors would be responsible for fixing the
number of directors; and (iv) the authority of the shareholders of a Georgia
corporation to amend such corporation's by-laws would be clarified. The
Georgia Corporation Protection Legislation would have permitted the board of
directors of a publicly-held Georgia corporation to opt out of its provisions
by resolution of the board of directors at any time. After March 1, 1999,
shareholders of publicly-held Georgia corporations would have been able to opt
out of the Georgia Corporation Protection Legislation provisions upon a
two-thirds vote.
The Georgia State Senate adopted the Georgia Corporation Protection
Legislation amendment to the GBCC Bill on March 20, but on March 25, the House
of Representatives voted against the GBCC Bill. After a joint conference
committee was unable to resolve differences between the House and Senate
versions of the GBCC Bill, the joint conference committee removed the Georgia
Corporation Protection Legislation amendment from the GBCC Bill. The Georgia
General Assembly then passed the GBCC Bill without the Georgia Corporation
Protection Legislation provisions and authorized the appointment of a
legislative committee to study the issues raised by the Georgia Corporation
Protection Legislation.
The Company supported the legislative effort in the Georgia General
Assembly in order to fulfill its fiduciary duties to oppose Invacare's grossly
inadequate offer. Under current Georgia law, it is possible that the holders
of a minority of the outstanding shares of the Company could elect directors in
a proxy contest who would thereafter cause the Company to accept an acquisition
proposal deemed grossly inadequate by the Company's current Board of Directors,
a majority of whom are independent directors. The Company believed this was a
flaw in the Georgia corporation law and was not in the best interest of the
Company or any other Georgia corporation. While the Board of Directors remains
hopeful that the Georgia General Assembly will decide in its next session to
pass the Georgia Corporation Protection Legislation, the Board of Directors
notes that such passage will be too late to assist it in its current efforts to
protect the Company's shareholders against Invacare's grossly inadequate offer
and hostile tactics, and therefore urges the Company's shareholders not to
tender their shares to Invacare.
STOCKHOLDER LITIGATION
On February 12, 1997, three suits (the "Stockholder Actions") were filed
in the United States District Court for the Northern District of Georgia,
Atlanta Division by three individuals (the "Stockholders") who allegedly are
stockholders of the Company and seek to act on behalf of the stockholders of
the Company as a class. Named as defendants in the Stockholder Actions are the
Company and the following directors of Healthdyne Technologies: Craig B.
Reynolds, Parker H. Petit, J. Terry Dewberry, Alexander H. Lorch, J. Leland
Strange, James J. Wellman, and J. Paul Yokubinas (collectively, the "Director
Defendants"). In the Stockholder Actions, the Stockholders allege that: (i)
the Director Defendants have wrongfully refused to take the steps necessary to
maximize stockholder value, including consideration of the Invacare Offer; (ii)
the Director Defendants are wrongfully using their fiduciary positions of
control over the Company and certain allegedly unreasonable defensive tactics to
thwart others in their attempts to acquire the Company; (iii) the Director
Defendants have wrongfully relied upon various anti-takeover devices, including
a Shareholder Rights Plan and the Georgia Business Combination Statute in an
attempt to block the Invacare Offer; (iv) the Company and the
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Director Defendants have taken defensive actions in response to the Invacare
Offer that are unreasonable in light of any perceived threat posed by the
Invacare Offer; and (v) the Director Defendants are in violation of their
fiduciary duties to the stockholders of the Company.
The Stockholder Actions seek injunctive and/or declaratory relief: (i) to
force the Company and the Director Defendants to take steps to maximize
stockholder value, consistent with their fiduciary duties to shareholders; (ii)
to prevent the existing anti-takeover devices and other defensive measures of
the Company from impeding or delaying shareholder consideration of the Invacare
Offer and other offers in violation of Georgia law and the Director Defendants'
fiduciary duties; (iii) to prevent the application of certain Georgia statutes -
such as the Georgia Fair Price Statute and the Georgia Business Combination
Statute - to the Invacare Offer and other offers; and (iv) to prevent the
Director Defendants from otherwise taking further actions to impede or delay
shareholder consideration of the Invacare Offer or other offers. The
Stockholders state that they may assert damages claims at a later date.
The plaintiffs in the Stockholder Actions have also filed a motion for
preliminary injunction substantially similar to Invacare's Preliminary
Injunction Motion and have requested that such motion also be heard by the
Court on June 16, 1997.
The Company and the Director Defendants have not yet filed an answer to
the Stockholder Actions, but they intend to deny all material allegations made
by the Stockholders and to vigorously defend against any and all claims
asserted in the Stockholder Actions.
THE POSITION OF THE BOARD OF DIRECTORS
The Board of Directors has determined unanimously that the Invacare Offer
is not in the best interests of shareholders and is opposing Invacare's
takeover effort, including its proxy solicitation with respect to the Invacare
Nominees and the Invacare Proposals. The Board has determined that, from a
financial point of view, the consideration to be paid to shareholders pursuant
to the Invacare Offer is grossly inadequate and unfair. The Board's
determination is based upon, among other things, the opinion of Cowen that the
$13.50 cash consideration to be paid pursuant to the Invacare Offer is grossly
inadequate, from a financial point of view. The Board of Directors believes
that, in light of the Company's excellent first quarter results and future
prospects, the Company's remaining independent would be a superior alternative
to the Invacare Offer.
The Board of Directors opposes Invacare's tender offer and proxy
solicitation for another important reason - even if the Invacare Nominees are
elected and the Invacare Proposals are adopted, there can be no assurance that
Invacare will purchase any shares in the Invacare Offer. In other words,
Invacare, through its hand-picked nominees, could acquire control over the
Company without having purchased and paid for any Healthdyne Technologies
shares in the Invacare Offer. The Board believes that the Company, if it is
not purchased by Invacare, should continue to be managed by its present
directors and officers, who will continue to execute its strategic plan, and
not by Invacare's Nominees, none of whom, to the best of the Company's
knowledge, has any experience in managing a technology-oriented healthcare
company such as Healthdyne Technologies. In this regard, the Board of Directors
believes that the interests of the Company and all of its shareholders, not
just Invacare, will be best served by retaining the Company's current
directors, who will act on behalf of the Company and its shareholders
independently of the interests of Invacare. If all of the current directors of
the Company are removed, the Board of Directors believes that the Invacare
Nominees will act in a manner consistent only with the interests of Invacare.
The Board believes that Invacare's interests are to acquire the Company at the
lowest possible cost to Invacare by paying the lowest possible price to the
Company's shareholders.
To understand how Invacare could acquire control of the Company without
buying and paying for shares in the Invacare Offer, shareholders need to
remember that the Invacare Offer is subject to the Rights Plan Condition and
the Georgia Fair Price Statute Condition. If these conditions are not
satisfied, Invacare has reserved the right not to buy any shares in the
Invacare Offer. The Rights Plan and the Georgia statute provide that only
"continuing directors" can eliminate the Rights and render the statute
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inapplicable. If the Invacare Nominees are elected, the Board of Directors
believes there will no longer be any "continuing directors" serving on the
Company's Board of Directors. The Company believes that the "continuing
directors" provisions of the Rights Plan and the Georgia statute are valid and
cannot be eliminated by the shareholder proposals or other actions proposed by
Invacare, although Invacare takes a contrary position in its litigation with
the Company. Invacare also argues that its nominees would be "continuing
directors" under the Georgia Fair Price Statute because they would be elected
before Invacare becomes an "interested shareholder" under that statute. An
"interested shareholder" is defined for this purpose as the beneficial owner of
10% of the oustanding Common Stock. The Company disagrees with Invacare's
interpretation of the definition of "beneficial ownership" set forth in the
Georgia Fair Price Statute. As the Company interprets the statute's definition
of "beneficial ownership," shares tendered to Invacare, or shares as to which
Invacare has been granted proxies to vote at the Annual Meeting, would be
deemed to be "beneficially owned" by Invacare prior to the election of
directors at the Annual Meeting. Accordingly, Invacare would be an "interested
shareholder" prior to the Annual Meeting for purposes of the Georgia Statute.
The definition of "beneficial ownership" under the Georgia Fair Price Statute
is subject to differing interpretations, and the Company is not aware of any
case in which a court has construed these provisions. The dispute concerning
the interpretation of these provisions ultimately may have to be resolved by a
court. If the Company's position is correct, the Rights Plan Condition and the
Georgia Fair Price Statute Condition to the Invacare Offer cannot be satisfied
by Invacare's proposed actions. See "INFORMATION CONCERNING THE INVACARE OFFER
AND RELATED MATTERS - Litigation With Invacare" above.
The Board of Directors recognizes its fiduciary obligations with respect
to any potential sale of the Company. In the event that the Board determines
that its strategic plan for the Company is unable to produce greater
shareholder value than that available through a sale of the Company, then the
Board will consider alternatives to the Invacare Offer intended to maximize
shareholder value.
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PROPOSAL ONE
ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The By-Laws of the Company provide that the number of directors shall be
fixed from time to time by the Board of Directors and may concurrently be fixed
by the shareholders. Currently, the number of directors is set at seven and
the Board of Directors has nominated seven candidates for election at the
Annual Meeting to serve as directors until the next annual meeting and until
their successors are duly elected and qualified (the "Board Nominees"). Each
Board Nominee has consented to being named in this Proxy Statement and to serve
if elected. However, if any Board Nominee should become unable to stand for
election, the proxies received in response to this solicitation that were voted
in favor of such Board Nominee will be voted for the election of such other
person as shall be designated by the Board of Directors.
There are no arrangements or understandings between the Company and any
person pursuant to which such person has been elected or nominated as a
director. There are no family relationships between any directors or nominees
of the Company or executive officers of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE BOARD NOMINEES
FOR ELECTION AS DIRECTORS.
NOMINEES AS DIRECTORS
The following is a brief description of each nominee's principal
occupation and business experience during the last five years, directorships of
publicly-held companies presently held by each nominee and certain other
information.
CRAIG B. REYNOLDS, age 48, has served as President of the Company since
January 1987 and became Chief Executive Officer and a director of the Company
in March 1993. Previously, he served as President of the Healthdyne
Cardiovascular Division of Healthdyne, Inc. ("Healthdyne"), the former parent
of the Company, from January 1985 to December 1986 and as Vice President of
Business and Technology Development of the Technologies Division of Healthdyne
from January 1981 to December 1984. He joined Healthdyne in 1981.
PARKER H. PETIT, age 57, has served as a director of the Company since
January 1993. Mr. Petit was the founder of Healthdyne, and acted as its
Chairman of the Board and Chief Executive Officer from 1970 until March 1996.
During 1994 and 1995, Healthdyne sold Home Nutritional Services, Inc., its home
infusion business, to W.R. Grace & Co. and spun off to its shareholders its
interests in the Company and Healthdyne Information Enterprises, Inc., a
healthcare information services company. Mr. Petit ceased acting as Chief
Executive Officer of Healthdyne in March, 1996, when Healthdyne merged its sole
remaining business unit, Healthdyne Maternity Management, with Tokos Medical
Corporation (Delaware) and Matria Healthcare, Inc. ("Matria Healthcare"), with
Matria Healthcare as the surviving corporation (the "Merger"). He is now the
Chairman of the Board of Matria Healthcare. Mr. Petit is also the Chairman of
the Board of Healthdyne Information Enterprises, Inc., a director of Atlantic
Southeast Airlines, Inc., and a director of Intelligent Systems Corporation. He
is also a director of the Georgia
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Research Alliance, a coalition of government and industry leaders formed to
encourage development of high technology business in Georgia, and has been
elected to the Georgia Technology Hall of Fame. In 1996, Mr. Petit endowed the
Institute for BioEngineering and BioScience at the Georgia Institute of
Technology.
J. TERRY DEWBERRY, age 53, has served as a director of the Company since
January 1996. Mr. Dewberry was Vice Chairman of Healthdyne from March 1992
until March 1996, when the Merger was completed. From September 1987 to March
1992, Mr. Dewberry served as President and Chief Operating Officer of
Healthdyne. Mr. Dewberry served as Executive Vice President of Healthdyne from
August 1984 until September 1987. Mr. Dewberry is also a director of
Healthdyne Information Enterprises, Inc.
ALEXANDER H. LORCH, age 73, has been a director of the Company since March
1993. Mr. Lorch is retired as Executive Vice President of Lockheed-Georgia
Co., a division of Lockheed Corporation, and Vice President of Lockheed
Corporation, an aerospace manufacturer, which positions he held from 1975 to
February 1985. He also was President of Lockheed-Georgia International
Service, a subsidiary of Lockheed Corporation, from 1980 to 1985, and Chairman
of the Board of Murdock Engineering Co., a subsidiary of Lockheed Corporation,
from 1981 to February 1985. Mr. Lorch was also a member of the Board of
Directors of Healthdyne until March 1996 when the Merger was completed.
J. LELAND STRANGE, age 55, has served as a director of the Company since
March 1993. Mr. Strange is, and has been since December 1983, Chairman of the
Board, President and Chief Executive Officer of Intelligent Systems
Corporation, a diversified company with operations and investments in
technology and health care related products and services. Mr. Strange also is
a director of IQ Software Corporation and PaySys International, Incorporated.
JAMES J. WELLMAN, M.D., age 53, has served as a director of the Company
since July 1994. Dr. Wellman has been a physician since 1970 specializing in
sleep disorders. He founded Sleep Disorders Center of Georgia, the first sleep
disorders center in Georgia, in 1978, and continues as its Medical Director.
Dr. Wellman is Clinical Assistant Professor of Medicine (Pulmonary Diseases) at
Emory University, a position which he has held since 1976, and was previously
an Instructor of Medicine at Harvard Medical School from 1975 to 1976.
J. PAUL YOKUBINAS, age 59, has served as a director of the Company since
January 1993. Mr. Yokubinas served as President and Chief Operating Officer of
Healthdyne from March 1992 until March 1996, when the Merger was completed.
From May 1991 until March 1992, he served as Vice President of Business
Development of Healthdyne. Mr. Yokubinas was President and principal investor
of C.Q.I. International, Inc., a privately held holding company, from February
1987 to January 1991 and was Executive Vice President of that company from July
1985 to January 1987. Prior to that time, he served as Executive Vice
President of Healthdyne and was a director of Healthdyne from 1971 until March
1996 when the Merger was completed.
BOARD OF DIRECTORS MEETINGS
During the year ended December 31, 1996, the Board of Directors held seven
meetings and took action by unanimous written consent on one occasion. Each of
the directors standing for re-election attended 100% of the total number of
board meetings and meetings of committees of which the director was a member
during 1996.
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COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has established a Compensation
Committee, an Audit Committee, a Nominating Committee and a Stock Option
Committee, each as described below.
The Compensation Committee, consisting of Messrs. Petit, Strange and
Yokubinas, is responsible for the recommendation and approval of salaries of
executive officers. The Compensation Committee, in conjunction with the Board
of Directors, held one meeting during the year ended December 31, 1996.
The Audit Committee is composed of Messrs. Lorch, Strange and Wellman.
The Audit Committee has the authority to perform the following functions:
review and make recommendations annually to the Board of Directors with respect
to the retention or termination of the Company's independent auditors; review
audit fees and the scope and timing of audits; review with the independent
auditors their report or opinion on the Company's financial statements and
related notes, any changes in accounting principles and practices, any
significant proposed adjustments and any unresolved disagreements with
management concerning accounting or disclosure matters; review and report on
the Company's internal accounting and financial controls and the extent to
which recommendations to management of a material nature made by the
independent auditors have been adequately considered and properly implemented;
perform such additional functions as are necessary or prudent to fulfill the
Committee's duties and responsibilities; and report its recommendations and
findings to the full Board of Directors. The Audit Committee met one time
during the year ended December 31, 1996.
The Nominating Committee, which is composed of Messrs. Petit, Lorch and
Reynolds, is responsible for nominating individuals to stand for election to
the Board at the annual meetings of the Company's shareholders, and to fill any
vacancies on the Board that may occur from time to time. The Nominating
Committee held no meetings during the year ended December 31, 1996.
The Stock Option Committee is composed of Messrs. Lorch, Strange and
Wellman. The Stock Option Committee is responsible for approving grants of
stock options under the Company's stock option plans. The Stock Option
Committee met two times during the year ended December 31, 1996 and took action
by unanimous consent three times.
EXECUTIVE COMPENSATION
The following table sets forth compensation paid to the Company's chief
executive officer, each of the four most highly compensated executive officers
of the Company serving as of December 31, 1996, and one individual who no
longer served as an executive officer as of December 31, 1996 (collectively,
the "named executive officers") for their services in all capacities to the
Company during the past three years:
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<PAGE> 21
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- -------------
SECURITIES
UNDERLYING
NAME AND OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#)(1)(2)(3) COMPENSATION ($)(4)
------------------ ---- --------- --------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Craig B. Reynolds................. 1996 234,081 -- 40,000 2,425
President and 1995 195,147 -- 104,733 2,033
Chief Executive Officer 1994 170,853 -- 81,667 1,767
John L. Miclot.................... 1996 181,492 20,000(6) 24,000 63,127(7)
Senior Vice President 1995 25,557(5) 20,000(6) -- 9,293(7)
Sales and Marketing
Robert E. Tucker.................. 1996 183,127 -- 24,000 3,750
Senior Vice President - 1995 139,133 -- 63,691 3,283
Operations 1994 122,435 -- 61,333 2,055
Leslie R. Jones................... 1996 148,115 -- 24,000 3,750
Vice President, General 1995 95,089(8) -- 37,833 3,483
Counsel and Secretary
Robert M. Johnson................. 1996 144,869 -- 10,000 12,663(9)
Senior Vice President - 1995 137,288 25,000(10) 14,944 11,628(9)
Business Development 1994 102,885 -- 23,333 --
Vincent J. Persano................ 1996 125,423 26,000(11) 5,000 3,750
Vice President - Sales 1995 107,250 41,399(11) 26,724 2,766
(former executive officer) 1994 100,000 20,942(11) 9,333 2,014
</TABLE>
- --------------------
(1) Includes options to purchase common stock of Healthdyne as follows: Mr.
Reynolds - 15,000 shares in 1994; Mr. Tucker - 12,000 shares in 1994; Mr.
Johnson - 10,000 shares in 1994; Ms. Jones - 15,000 shares in 1995.
(2) Includes an adjustment to options to purchase the Company's Common Stock
to reflect the Company's Common Stock distribution resulting from a 4 for
3 stock split to shareholders of record on September 6, 1994.
(3) Includes options ("Adjustment Options") to purchase the Company's Common
Stock issued under the Company's Stock Option Plan II in connection with
the Spin-Off (as hereinafter defined) of the Company by Healthdyne in May
1995.
(4) All named executive officers except Mr. Miclot participated in
Healthdyne's or the Company's 401(K) plan. The amounts shown in this
column represent matching contributions made by the Company to the 401(K)
plan on behalf of these individuals.
(5) Mr. Miclot's 1995 compensation represents amounts earned since he
commenced employment with the Company in November of 1995.
(6) As an incentive for Mr. Miclot to enter into employment with the Company,
the Company agreed to pay Mr. Miclot a bonus in the amount of $40,000,
$20,000 of which was paid 30 days following commencement of employment,
with the remaining $20,000 paid upon completion of Mr. Miclot's relocation
to the Marietta, Georgia area.
(7) As an incentive for Mr. Miclot to enter into employment with the Company,
the Company agreed to reimburse Mr. Miclot for certain moving expenses.
(8) Ms. Jones became a full-time employee of the Company on May 22, 1995.
Ms. Jones' 1995 compensation includes compensation for services rendered
to the Company while she was an employee of Healthdyne.
(9) Includes forgiveness of a bridge loan made by the Company in connection
with Mr. Johnson's relocation to the Marietta, Georgia area in the amount
of $8,913 for both 1995 and 1996. See "Employment Contracts, Termination
of Employment, and Change in Control Agreements with Executive Officers
and Directors."
(10) Represents a bonus paid to Mr. Johnson at the time of his acceptance of
employment with the Company.
(11) Represents sales commissions paid to Mr. Persano and payable quarterly
pursuant to a sales incentive plan based upon the achievement by the
Company of certain sales goals established by the President and Chief
Executive Officer.
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<PAGE> 22
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1993 Stock Option Plan and 1996 Stock Option Plan
to the named executive officers of the Company during the last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
% OF TOTAL ANNUAL RATES
NUMBER OF OPTIONS EXERCISE OF STOCK PRICE
SECURITIES GRANTED TO OR APPRECIATION FOR
UNDERLYING EMPLOYEES BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION -----------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ---- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Craig B. Reynolds............ 40,000 14.19% 10.06 4/17/06 253,068 641,320
John L. Miclot............... 24,000 8.51% 10.06 4/17/06 151,841 384,792
Robert E. Tucker............. 24,000 8.51% 10.06 4/17/06 151,841 384,792
Leslie R. Jones.............. 24,000 8.51% 10.06 4/17/06 151,841 384,792
Robert M. Johnson............ 10,000 3.55% 10.06 4/17/06 63,267 160,330
Vincent J. Persano........... 5,000 1.77% 10.06 4/17/06 31,633 80,165
</TABLE>
The options referred to above become exercisable in three annual
installments commencing on the first anniversary date of the option grant. The
options are not transferable, otherwise than by will or the laws of descent and
distribution. Except as provided in each of the option agreements, the options
may not be exercisable unless employment with the Company or an affiliate or
subsidiary of the Company continues. Prior to their scheduled expiration,
options granted under the plans will expire (i) immediately upon the employee's
termination for good cause; (ii) three months after the date of termination for
reason other than good cause; (iii) three months after the employee's voluntary
termination; and (iv) one year after the employee's death or disability. The
optionees are obligated to reimburse the Company at the time of any exercise of
the options for any taxes required to be withheld by the Company under federal,
state or local law as the result of the exercise of the options. See
"Employment Contracts, Termination of Employment, and Change in Control
Agreements with Executive Officers and Directors."
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<PAGE> 23
STOCK OPTION EXERCISES
The following table sets forth information with respect to the named
executive officers concerning the exercise of options for both the Company's
Common Stock and Healthdyne's common stock during the last fiscal year and the
value of unexercised options for the Company's Common Stock held as of the end
of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY - END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Acquired Value Realized Options at In-the-Money Options
Name on Exercise (#) ($)(1) Fiscal Year End(#) at Fiscal Year End($)
- ---- --------------- ------ ------------------ ---------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Craig B. Reynolds (2)............... -- -- 140,611 96,474 112,228 2,081
(3)............... 23,334 168,321 -- -- -- --
John L. Miclot (2)............... -- -- 11,666 47,334 -- --
(3)............... -- -- -- -- -- --
Robert E. Tucker (2)............... -- -- 97,739 56,301 78,399 1,526
(3)............... 18,000 131,434 -- -- -- --
Leslie R. Jones (2)............... -- -- 33,474 32,556 19,523 --
(3)............... 27,002 185,015 -- -- -- --
Robert M. Johnson (2)............... -- -- 22,652 15,625 10,392 --
(3)............... 6,667 50,105 -- -- -- --
Vincent J. Persano (2)............... 19,232 78,243 7,497 14,215 7,779 --
(3)............... 10,000 66,387 -- -- -- --
</TABLE>
(1) Represents the excess of the fair market value of the stock at the time of
exercise above the exercise price of the options.
(2) Represents options to purchase the Company's Common Stock only. The
value of unexercised in-the-money options is based on $8.88, the last sale
price of the Company's Common Stock on December 31, 1996.
(3) Represents options to purchase Healthdyne's common stock only.
PENSION PLAN
The following table shows the estimated pension benefits payable to a
covered participant at normal retirement age under the Company's nonqualified
pension plan, which provides benefits based on remuneration that is covered
under the plan and years of service with the Company and its affiliates.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------
Remuneration 10 15 20 25 30 35
- ------------
<S> <C> <C> <C> <C> <C> <C>
$ 75,000 $15,300 $22,950 $ 30,600 $ 30,600 $ 30,600 $ 30,600
100,000 22,800 34,200 45,600 45,600 45,600 45,600
125,000 30,300 45,450 60,600 60,600 60,600 60,600
150,000 37,800 56,700 75,600 75,600 75,600 75,600
175,000 45,300 67,950 90,600 90,600 90,600 90,600
200,000 52,800 79,200 105,600 105,600 105,600 105,600
</TABLE>
Remuneration covered by the plan is based on the average base salary of
the executive for the three years in which his or her base salary is the
highest. This amount for each of the named executive officers participating in
the plan as of the end of the last fiscal year was $200,027, $178,246, $148,232,
$137,614, $128,347 and $110,891, respectively, for Mr. Reynolds, Mr. Miclot, Mr.
Tucker, Ms. Jones, Mr. Johnson and Mr. Persano. The estimated years of service
for each named executive officer as of the
19
<PAGE> 24
end of the last fiscal year was 16 years for Mr. Reynolds, one year for Mr.
Miclot, 15 years for Mr. Tucker, 12 years for Ms. Jones, three years for Mr.
Johnson and 11 years for Mr. Persano. Years during which the named executive
officers were employed by Healthdyne are included in the years of service for
such named executive officers under the plan. Benefits shown are computed as
a diminishing single life annuity beginning at age 65 with annual reductions
equal to the annual increases in primary social security benefits. The base
salary used to calculate covered compensation is the same figure reported in
the "Salary" column of the Summary Compensation Table, except with respect to
Ms. Jones, whose base salary for these purposes includes compensation for
services rendered to Healthdyne.
COMPENSATION OF DIRECTORS
Directors who are officers of the Company receive no additional
compensation for serving on the Board of Directors. Directors who are not
officers receive a fee of $12,000 per annum, plus $1,000 for each Board meeting
attended and $750 for each committee meeting attended, and are reimbursed for
any travel expenses incurred. As set forth below, in lieu of the $12,000
directors fee, Mr. Petit receives certain other compensation for his services
as Chairman of the Board of Directors.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
AGREEMENTS WITH EXECUTIVE OFFICERS AND DIRECTORS
The Company has entered into separate Noncompetition Agreements with
certain executive officers, including Mr. Reynolds, Mr. Miclot, Mr. Tucker and
Ms. Jones. The terms and conditions of these Noncompetition Agreements are
identical for each of these individuals and provide that in the event the
individual's employment is terminated or the individual terminates employment
for good reason (e.g., loss or reduction of title, responsibility, pay or
benefits) within three years following a change in control as defined in the
Noncompetition Agreement, the individual agrees not to compete for a period of
12 months, as an owner, employee, consultant or agent of any entity which
competes in any material respect with the Company ("Competitor"). The
noncompetition provisions do not apply in the event (i) less than thirty
percent (30%) of the Competitor's revenue in the last fiscal year was related
to Competitor's product lines which compete with the Company ("Competing
Products"), or (ii) the individual provides services to a Competitor which are
unrelated to the Competitor's Competing Products. Pursuant to the
Noncompetition Agreements, these individuals will receive certain benefits in
the event their respective employment with the Company is terminated or the
individual terminates his or her employment for good cause (as defined in the
Noncompetition Agreements) within three years following a change in control of
the Company. In such event, the individual will receive three times his or her
average annual compensation (as reported on the applicable Forms W-2 from the
Company) for the five years ending prior to termination, a continuation of
health, life and disability benefits for three years, and use of a
Company-provided vehicle for three years (including the cost of repair,
maintenance and insurance).
On March 1, 1994, Robert M. Johnson became Senior Vice President --
Business Development of the Company. Mr. Johnson and the Company entered into
a Letter of Agreement, dated January 27, 1994 and amended January 28, 1994,
reflecting the terms of his employment with the Company. In an effort to
expedite Mr. Johnson's relocation to Marietta, Georgia, the Company advanced a
non-interest bearing bridge loan to Mr. Johnson in the amount of $50,800 on
April 25, 1994. Of that amount, $15,150 was repaid on June 26, 1994 and the
balance was converted into a non-interest bearing promissory note, payable in
four equal annual installments on March 1 of each year commencing in 1995 and
continuing through 1998. To the extent that Mr. Johnson is an active full-time
employee of
20
<PAGE> 25
the Company in good standing on such dates, the payments due thereunder will be
forgiven by the Company and reflected as compensation to Mr. Johnson. Mr.
Johnson and the Company entered into a Noncompetition Agreement in April 1996
with substantially the same terms and conditions as the Noncompetition
Agreements described above, except that the period covered by the no-compete
clause is eight rather than 12 months, and the severance payment is two times
his average annual compensation for the five years ending prior to termination.
On November 1, 1995, Mr. Miclot became Senior Vice President-Sales and
Marketing of the Company. Mr. Miclot and the Company entered into a Letter of
Agreement dated October 12, 1995 and executed by Mr. Miclot on October 17,
1995, reflecting the terms of his employment with the Company. The Letter of
Agreement provides, among other things, for a bonus in the amount of $40,000,
$20,000 of which was payable 30 days following commencement of employment and
$20,000 of which was payable following completion of Mr. Miclot's relocation to
the Marietta, Georgia area. The Company also agreed to reimburse Mr. Miclot
for certain relocation expenses. In addition, the Company agreed to reimburse
Mr. Miclot up to $25,000 in the event the confirmed sales price for his
residence in Powell, Ohio was less than Mr. Miclot's purchase price for such
residence. Mr. Miclot was required to repay certain relocation expenses in the
event he voluntarily elected to leave the employ of the Company within the 24
months following commencement of his employment. The Letter of Agreement also
provided for 12 months severance in the event the Company terminated Mr.
Miclot's employment through no fault of Mr. Miclot. This special severance is
not payable in the event Mr. Miclot's termination is due to specific events,
including but not limited to, a change in control of the Company.
In January 1996, the Board of Directors authorized the Company to enter
into an Agreement to Purchase Promissory Note (the "Put") with Bank of America
Illinois (the "Bank") with respect to a $100,000 bridge loan from the Bank to
Mr. Miclot to assist in purchasing a residence in the Marietta, Georgia area.
Pursuant to the Put, the Bank has an option to sell the promissory note to the
Company upon the occurrence of an event of default.
On December 11, 1996, the Board of Directors of the Company agreed to
pay Mr. Petit $50,000 per year for his services as a director and as Chairman
of the Board of Directors. Mr. Petit ceased drawing a salary from the
Company's former parent and its former subsidiaries at the end of 1996, and
each of the three companies for which he serves as Chairman of the Board agreed
to increase his director's fees to reflect the duties and responsibilities he
performs as Chairman of the respective Boards. See "Compensation of
Directors." In addition, the Company agreed to reimburse Matria Healthcare 45%
of the expenses associated with Mr. Petit's office space and associated
overhead, the cost and use of the Matria Board Room for meetings and the cost
of Mr. Petit's assistant and related expenses. The Company's portion of these
expenses is estimated to be approximately $45,000 per year.
On March 20, 1997, the Board of Directors authorized the Company to enter
into indemnification agreements (the "Indemnity Agreements") with its directors
and executive officers. The Indemnity Agreements are consistent with and are
intended to implement the existing provisions of the Company's By-Laws. The
Indemnity Agreements provide for indemnification of directors and executive
officers to the full extent authorized or permitted by law for all expenses,
judgments, fines, penalties and settlement payments incurred by the indemnitee
in connection with any act taken in the indemnitee's capacity as a director or
executive officer of the Company. The Indemnity Agreements also provide for
(i) advancement by the Company of expenses incurred by the director or
executive officer in defending certain litigation, (ii) the appointment of
independent legal counsel to determine whether the director or officer is
entitled to indemnity after a change in control, and (iii) the continued
maintenance by the Company of the directors' and officers' liability insurance
currently in effect for so long as the indemnitee may be subject to any
possible, threatened or pending action, unless the cost of such insurance is
more than 150% of the annualized rate of premiums paid by the Company in fiscal
year 1996. Additionally, pursuant to the Indemnity Agreements, the Company
retains subrogation rights to recover any payments made to the indemnitee by a
third party. The Indemnity Agreements are binding
21
<PAGE> 26
on the Company and any successors thereto and shall continue in effect
regardless of whether an indemnitee continues to serve as a director or
executive officer of the Company.
Employees of the Company hold options to purchase shares of the Company's
Common Stock pursuant to the Stock Option Plan (the "Option Plan"), the 1996
Stock Option Plan (the "1996 Plan") and the Stock Option Plan II (the "Option
Plan II") (collectively the "Plans"). In May 1995, the Company notified the
holders of outstanding options granted under the Option Plan of acceleration of
the exercise date of such options conditioned upon a "Change of Control Event"
defined as (i) any "person" (as such term is used in Sections 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), becoming
a "beneficial owner" (as defined in Rule 13d-3 promulgated pursuant to the
Exchange Act), directly or indirectly, of securities representing 50% or more
of the combined voting power of the Company's then outstanding securities, or
(ii) as a result of, or in combination with, any cash tender offer or exchange
offer, merger or other business combination, sale of assets or contested
election, or any combination of the foregoing transactions (a "Transaction"),
the persons who are directors of the Company before the Transaction ceasing to
constitute a majority of the Board of Directors of the Company or any successor
to the Company. On January 30, 1997, the Board of Directors of the Company
amended the Option Plan to provide that the Stock Option Committee give at
least ten days notice of the potential Change of Control Event and the option
will become fully vested on the date of such notice.
The 1996 Plan also provides for the acceleration of the exercise date of
outstanding options granted under the 1996 Plan. In addition to the definition
set forth above, a Change of Control Event is also defined in the 1996 Plan as
approval by the Company's shareholders of the sale, transfer or other
disposition of all or substantially all of the assets of the Company.
Additionally, the option agreement provides that the Stock Option Committee
give at least ten days notice of the potential Change in Control Event and the
options will become fully vested upon the date of such notice. All options
granted under the Option Plan II are fully vested and therefore will not be
accelerated upon a Change of Control Event.
As of January 1, 1997, employees (or former employees), including
executive officers, held options under the Plans to purchase an aggregate of
1,244,282 shares of the Company's Common Stock at a weighted average exercise
price of $9.19 per share (based on exercise prices ranging from $6.04 to $11.88
per share). Not included in the foregoing are options granted under the Option
Plan II to purchase 683,263 shares of the Company's Common Stock which are held
by officers, directors and employees (or former employees) of Healthdyne or its
successor Matria Healthcare.
The non-employee directors of the Company hold options to purchase the
Company's Common Stock pursuant to the Company's Non-Employee Director Stock
Option Plan (the "Director Plan"). Pursuant to the Director Plan, if an
optionee's service as a member of the Board of Directors is terminated or
discontinued as a result of any extraordinary proceeding which results in a
change in control of the Company, his option will become immediately
exercisable in full for 30 days prior to such proceeding. As of January 1,
1997, non-employee directors held options under the Director Plan to purchase
an aggregate of 39,842 shares of the Company's Common Stock at a weighted
average exercise price of $8.05 per share (based on exercise prices ranging
from $7.13 to $11.88 per share).
The Company's executive officers and certain other employees participate
in a Retirement Benefit Award Program. In the event of a "Change in Control"
of the Company, all benefits accrued to date under these Retirement Benefit
Awards immediately vest and each participant may require the Company to place
in trust for the participant's benefit an amount of money equal to the present
value of the vested benefits under the retirement program. Benefits upon a
Change in Control are calculated to include three additional years of service
for executive officers who are also parties to Noncompetition Agreements with
the Company.
22
<PAGE> 27
The Company has entered into Split-Dollar Life Insurance Agreements
("Insurance Agreements") with the executive officers and certain other
employees. If an employee dies prior to termination of employment with the
Company and prior to his or her Security Release Date (as defined in the
Insurance Agreements), the employee's designated beneficiary will be entitled
to receive as a death benefit an amount equal to two and one-half times the
employee's annual base salary at the time of death. To the extent that the
death benefit under the Policy exceeds such amount, the balance of the death
benefit shall be payable to the Company. The Company retains a security
interest in the Policy until the employee's Security Release Date or until the
employee terminates his or her employment on account of a "Qualifying
Termination." A Qualifying Termination occurs if (i) an employee's employment
with the employer is terminated without cause or (ii) an employee terminates
his or her employment with the employer for "good reason" within one year of a
"Change of Control." After the employee is terminated as a result of a
Qualifying Termination, however, the employee is entitled to exercise all of
his or her ownership in the Policy without any limitation. Pursuant to the
Retirement Benefit Awards, as amended, the value of the Policy is then offset
against the Company's obligations under the Retirement Benefit Award under
certain circumstances.
The definition of Change of Control under the Insurance Agreements is
substantially the same as is set forth under the Plans discussed above except
that Change of Control under the Insurance Agreements also includes changes in
the effective control of the Company which occur on the date that either (i)
any one person, or more than one person acting as a group, acquires ownership
of stock of the Company possessing 20% or more of the total voting power of the
stock of the Company or (ii) a majority of members of the Company's Board of
Directors is replaced during any 12-month period by directors whose appointment
or election is not endorsed by a majority of the members of the Company's Board
of Directors who were directors prior to the date of the appointment or
election of the first of such new directors.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following report and the Stock Performance Graph shall
not be incorporated by reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Overall Objectives and Approach. In making its compensation
determinations, the Company's Compensation Committee evaluates, on both an
absolute and relative basis, a variety of factors, including the Company's
financial results (including sales, earnings, return on equity, return on
assets and balance sheet strength), market share and competitive position, the
potential for future growth, the overall importance of the individual to the
organization, the individual and group performance of senior management, and
compensation levels at comparable companies, especially within the health care
industry. In formulating its determinations, the Compensation Committee
recognizes and rewards achievements on an annual basis, while emphasizing the
value and importance of sustained long-term performance and recognition of
developing trends within the health care industry. The Compensation Committee
reviews information prepared or compiled by the Company and relies on the
business experience of the individual members of the Compensation Committee.
Cash Compensation. Officers and other employees are compensated within
salary ranges that are generally based on similar positions in companies of
comparable size and complexity to the Company. The actual base pay level for
each officer is based on a combination of experience, employment agreement
provisions, performance and the particular needs of the Company for the
services provided by the individual, and is reviewed annually in the first six
months of each year, with the amount
23
<PAGE> 28
of any increases based on factors such as Company performance, general economic
conditions, marketplace compensation trends and individual performance.
Bonuses for executive officers are determined in accordance with, and paid
under, the Company's Incentive Plan. Under this Plan, which is established
annually, an incentive pool established for the benefit of management,
including executive officers, is based upon a percentage of operating profit in
a given year in excess of the Company's Annual Business Performance Plan. Base
bonuses are then paid upon a percentage of the individual's base salary (for
1996, 35% in the case of Mr. Reynolds, 25% in the cases of Mr. Tucker, Mr.
Johnson, Mr. Miclot, Ms. Jones and Mr. Persano). Excess bonuses are paid to
the extent that funds remain in the incentive pool. Under this Incentive Plan,
bonuses are earned only to the extent that the Company's earnings performance
exceeds the Annual Business Performance Plan for the year in question.
Stock Options. The Company grants stock options to a number of its
employees, a policy followed since the Company first became a public company in
1993. Prior to that time, employees of the Company were eligible to and did
receive options from Healthdyne. The grants generally have been based on
guidelines that take salary level, tenure, individual performance rating, the
number of options previously granted to the individual and the individual's
importance to the Company into account. All stock options have been granted at
exercise prices equal to the market price on the date of grant, become
exercisable in three annual installments commencing on the first anniversary of
the grant, and expire on the tenth anniversary. The Company believes that
employee ownership of its Common Stock is an important element to its success.
CEO Compensation. The compensation of Mr. Reynolds, including stock
options, is based upon the performance of the Company and the important role
Mr. Reynolds plays within the Company as its spokesman and chief executive
officer. Mr. Reynolds' long and successful tenure with the Company and his
success in developing the current management team were taken into account, as
well as the fact that the Company achieved solid levels of performance in
recent years.
COMPENSATION COMMITTEE
Parker H. Petit
J. Leland Strange
J. Paul Yokubinas
24
<PAGE> 29
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For purposes of this section, references to Healthdyne shall include,
where appropriate, Healthdyne's successor, Matria Healthcare.
Mr. Petit, the Chairman of the Compensation Committee of the Board of
Directors, was the founder, Chairman of the Board and Chief Executive Officer
of Healthdyne, and Mr. Yokubinas, a member of the Compensation Committee,
served as President and Chief Operating Officer of Healthdyne. Healthdyne
operated the Company as a division of Healthdyne until the Company's June 1993
public offering, after which Healthdyne owned an 81% interest in the Company
until Healthdyne distributed its shares of common stock of the Company to
Healthdyne shareholders as a dividend (the "Spin-Off"). Healthdyne provided
the Company with certain administrative and related services such as
accounting, legal, tax, data processing, human resources and certain other
services, pursuant to an Administrative Services Agreement dated March 31,
1993, as amended (the "Services Agreement"). The Services Agreement was
amended on April 21, 1995, in anticipation of Healthdyne's Spin-Off of its
interest in the Company, to reduce the nature and amount of services to be
provided by Healthdyne to the Company. As a result of the Merger, Matria
Healthcare is now the party to the Services Agreement with the Company. The
Services Agreement was extended on a month-to-month basis effective January 1,
1997 and may be terminated upon 30 days prior written notice. Charges for
services are made on a monthly basis in an amount which is estimated to equal
Matria Healthcare's cost, including overhead, of providing the services. For
the years ended December 31, 1994, 1995 and 1996, the Company reimbursed
Healthdyne for the cost of the administrative and personnel services provided
by employees of Healthdyne in the amounts of $854,000, $918,000 and $235,000,
respectively. In addition, the Company paid $693,000, $637,000 and $289,000 to
reimburse Healthdyne for the cost of various insurance premiums paid by
Healthdyne on behalf of the Company for the years ended December 31, 1994, 1995
and 1996, respectively. The Company is under no obligation to purchase
services pursuant to the Services Agreement. In any event, the amounts paid by
the Company to Healthdyne for services in the past may not be representative of
the amount of services required by the Company in the future.
The Company has an arrangement (originally with Healthdyne Maternity
Management and now with Matria Healthcare), under which the Company supplies
the System 37 Uterine Activity Monitor and certain other products and supplies
to Matria Healthcare at a price which is approximately 33% over the Company's
manufacturing cost. As a result of this arrangement, without the consent of
Matria Healthcare, the Company is prohibited from selling the System 37 monitor
and other competing obstetrical care products to other parties. The aggregate
amount paid by Matria Healthcare to the Company for equipment purchased by
Matria Healthcare from the Company in 1996 was approximately $500,000. In
1996, the Company also provided certain research and development services
related to the System 37 and certain other products for which Healthdyne paid
the Company $228,000.
It is the intention of the Company and Matria Healthcare that all
transactions between them, or between the Company and any affiliated party,
will be on an arm's length basis on terms no less favorable to the Company than
could be obtained from unaffiliated third parties. In addition, the Company
intends that any transactions between the Company and any other affiliated
party, including Matria Healthcare or its affiliates, that are material to the
Company must be approved by the vote of a majority of the independent and
disinterested members of the Board of Directors of the Company. As previously
indicated, Mr. Petit currently serves as Chairman of the Board of Matria
Healthcare.
25
<PAGE> 30
PERFORMANCE GRAPH.
The following performance graph shows a comparison of cumulative total
returns for the Company, the S&P 500 Index and the S&P Healthcare Composite
Index for the period beginning on June 22, 1993 (the date on which shares of
the Common Stock began trading publicly) through March 31, 1997, including
December 31, 1996. The graph assumes that the value of the investment in the
Company's Common Stock and each index was $100 at June 22, 1993, and that all
dividends were reinvested.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
June December December December December March
1993 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Healthdyne Technologies, Inc........ 100 100 142 161 124 197
S&P 500 Index....................... 100 105 107 146 180 185
S&P Healthcare Composite Index...... 100 105 115 181 219 229
</TABLE>
26
<PAGE> 31
PROPOSAL TWO
INVACARE'S BOARD RESTRICTION PROPOSAL
Invacare has stated that it will introduce the following By-Law amendment
for consideration by the shareholders at the Annual Meeting:
To adopt, prior to the election of directors at the Annual
Meeting, a proposal to amend the By-Laws to fix the maximum number
of directors of Healthdyne [Technologies] at seven (7) and provide
that, without the approval of the shareholders, the Board of
Directors may not thereafter amend or repeal the section of the
By-Laws governing the number of directors or adopt any new By-Law
provision which is inconsistent in any manner with such section.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST INVACARE'S BOARD RESTRICTION
PROPOSAL FOR THE REASONS SET FORTH BELOW AND UNDER "THE POSITION OF THE BOARD
OF DIRECTORS" ABOVE.
The Board of Directors believes that the Board Restriction Proposal will
only hamper the efforts of the Board of Directors to manage the Company
effectively and in the best interests of the shareholders. The Board of
Directors has never considered "packing" the Board of Directors of the Company
or increasing the number of directors on the Board as a defensive measure to
the Invacare Offer. In fact, the Board of Directors may need to increase the
size of the Board for reasons unrelated to the Invacare Offer. As a result,
the Board of Directors believes that the Board Restriction Proposal needlessly
limits the flexibility of the Board of Directors by restricting its ability to
change the size of the Board for any reason.
The Board of Directors is already bound by its fiduciary duties to act in
the best interests of the Company and all of its shareholders, not just
Invacare. These fiduciary duties are broad enough to embrace any and all
actions taken by the Board of Directors in response to the grossly inadequate
Invacare Offer, including any defensive measures aimed at increasing the
current size of the Board of Directors, without further restrictions. As a
result, the Board of Directors believes the Board Restriction Proposal is an
unnecessary measure and is not in the best interests of the shareholders of the
Company.
PROPOSAL THREE
INVACARE'S RIGHTS PLAN PROPOSAL
Invacare has stated that it will introduce the following Rights Plan
amendment for consideration by the shareholders at the Annual Meeting:
To adopt, prior to the election of directors at the Annual
Meeting, a proposal to amend the By-Laws to provide that the Board
of Directors shall have no authority to take any action, or omit
to take any action, the effect of which action or omission would
be to impose, or permit to continue or be imposed, any limitation
(directly or indirectly, and including any such limitation imposed by
means of a requirement for concurrence or other action by any particular
director or particular type of director), resulting from or becoming
operative in light of, in whole or in part, a change in the composition of
the Board of Directors (whether or not under specified circumstances), on
the exercise by
27
<PAGE> 32
any future Board of Directors of any power or authority that it would
otherwise have, including any such limitation on the ability of a Board of
Directors to redeem or amend any shareholder rights plan of Healthdyne
[Technologies] which limitation results from or becomes operative in light
of, in whole or in part, a change in the composition of the Board of
Directors (whether or not under specified circumstances). In particular,
but not in limitation, such amendment will also specifically provide that
the incumbent Board of Directors will be in violation of the By-Laws if
such Board, including any requisite group of "continuing directors," fails
to immediately take all necessary action (prior to the consideration of
the election of directors at the Annual Meeting) to amend any shareholder
rights plan of Healthdyne [Technologies] to remove all such limitations.
Such amendment will further provide that such By-Law may not be amended
nor may any new By-Law provision which is in any manner inconsistent there
with be adopted, without the approval of the shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE RIGHTS PLAN PROPOSAL FOR
THE REASONS SET FORTH BELOW AND UNDER "THE POSITION OF THE BOARD OF DIRECTORS"
ABOVE.
The Board of Directors believes the Rights Plan Proposal is simply an
attempt by Invacare to dismantle the defensive measures established by the
Board of Directors to protect the Company's shareholders and to ensure fair
negotiations and a level playing field when the Company is confronted by
hostile bidders like Invacare. The Board of Directors believes the Continuing
Director Provision is a necessary measure designed to protect the Company and
its shareholders from certain non-negotiated takeover attempts which present a
risk of change of control on terms which may be less favorable to the Company's
shareholders than those which could be obtained in a transaction negotiated
with and approved by the Board of Directors. The Continuing Director Provision
is designed to: (i) reduce the risk of inadequate offers or coercive
two-tiered offers which may not offer fair value to shareholders; (ii) mitigate
against market accumulators who, through open market or private purchases, may
achieve a position of substantial influence or control without paying to
selling or remaining shareholders a fair control premium; (iii) deter market
accumulators who are simply interested in putting the Company "in play"; and
(iv) ensure continuity and fairness to the shareholders in the Board
decision-making process in an acquisition or takeover context.
Specifically, the Continuing Director Provision was adopted by the Board
of Directors to prevent a hostile acquirer, like Invacare, from being able to
replace the Company's Board of Directors with sympathetic nominees ready and
willing to accept its own grossly inadequate proposal. In light of Invacare's
repeated statements in its proxy materials that the Invacare Nominees are
already committed to taking all necessary steps to approving and effectuating
the Invacare Offer, the Board of Directors believes the Continuing Director
Provision is especially necessary to ensure that shareholders are not left
vulnerable to the coercive tactics of hostile bidders such as Invacare.
The Continuing Director Provision does not prevent a proxy contest or a
tender or exchange offer for all of the shares of the Company's Common Stock at
a price that is determined by a majority of the Continuing Directors to be fair
and otherwise in the best interests of the shareholders, nor will it deter a
serious bidder who wants to acquire the Company in a manner in which all
shareholders receive what the Continuing Directors believe to be full and fair
value for their shares. Furthermore, the continuation of the Continuing
Director Provision does not excuse or diminish the Continuing Directors'
obligations to discharge their fiduciary duties to act in the best interests of
the shareholders of the Company in any consideration of the Invacare Offer.
28
<PAGE> 33
The Board of Directors believes that the Continuing Director Provision in
the Company's By-Laws is not a rare or unusual exercise of corporate power.
Instead, it is a relatively common component of the shareholder rights plans of
many publicly-held corporations, including one corporation of which an Invacare
Nominee serves as Chairman, President and Chief Executive Officer. The GBCC
(in both the Georgia Fair Price Statute and the Georgia Business Combination
Statute) and a host of other state codes specifically sanction the use of
provisions like the Continuing Director Provision by a board of directors to
ensure continuity and fairness to shareholders in the event that an outside
party attempts a hostile takeover of the corporation. In fact, the Board of
Directors notes that a survey by Associate Professor Donald G. Margotta of
Northeastern University found that, of the 1,371 corporations reviewed
which had shareholder rights plans, 253 companies, including six Georgia
companies, have provisions similar to the Continuing Director Provision. Dr.
Margotta is acting as an expert witness for Healthdyne in its litigation with
Invacare and has consented to the reference to him in this Proxy Statement.
The Board of Directors also believes that the Rights Plan Proposal usurps
the Board of Directors' authority over the management of the Shareholder Rights
Plan and prevents the Board of Directors from effectively exercising their
fiduciary duties to you, the shareholders, by defending shareholder interests
from abusive takeover practices and grossly inadequate offers. Under GBCC
Section 624, the Board of Directors is clearly vested with the right, in its
sole discretion, to set and determine the terms and conditions of any
shareholder rights plan, subject to the fiduciary duties it owes to the
shareholders. This fundamental authority vested in the Board of Directors is
especially critical in the context of a hostile takeover because the Company's
Shareholder Rights Plan empowers the Board of Directors to negotiate on even
terms with hostile bidders for the Company's capital stock. The Rights Plan
Proposal proposes to usurp this authority granted by the GBCC to the Board of
Directors by requiring direct shareholder supervision of the management of the
Company's Shareholder Rights Plan and by handcuffing the Board of Directors in
its efforts to ward off coercive and unfair takeover tactics. In short, the
Board of Directors believes the Rights Plan Proposal, while purporting to
champion shareholder rights, in reality strips the Board of Directors of an
essential defensive measure necessary to protect shareholder interests from the
inadequacy of the Invacare Offer. Because the Board of Directors so strongly
believes that the Rights Plan Proposal is an outright infringement on the
authority of the Board of Directors and its ability to effectively perform its
fiduciary obligations to the shareholders of the Company, the Board of
Directors and the Company have challenged the legality of the Rights Plan
Proposal in the United States District Court for the Northern District of
Georgia, Atlanta Division. See "Litigation with Invacare."
PROPOSAL FOUR
INVACARE'S BY-LAW RESCISSION PROPOSAL
Invacare has stated that it will introduce the following proposal to
rescind certain of the Company's By-Laws for consideration by the shareholders
at the Annual Meeting:
To adopt a proposal to repeal each and every provision of the
By-Laws of Healthdyne [Technologies] or amendments thereto which
was adopted on or after June 30, 1996 and prior to the date of adoption of
such proposal, other than those provisions which were fully disclosed and
properly reflected in the public filings made by Healthdyne [Technologies]
with the Commission prior to March 20, 1997 and those provisions which
were duly approved by the shareholders, and to propose that, without the
approval of the shareholders, the Board of Directors may not thereafter
amend any section of the By-Laws affected by such repeal or adopt any new
by-law provision in a manner which serves to reinstate any repealed
provision or any similar provision.
29
<PAGE> 34
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE BYLAW RESCISSION PROPOSAL
FOR THE REASONS SET FORTH BELOW AND UNDER "THE POSITION OF THE BOARD OF
DIRECTORS" ABOVE.
The Board of Directors believes the By-Law Rescission Proposal represents
a maneuver by Invacare to remove the provisions your Board of Directors has
properly put in place to ensure efficient management of the Company and to
prevent hostile bidders from taking advantage of the Company's shareholders.
Since the Company received the Invacare Preliminary Proposal and determined it
(as well as the Invacare Initial Offer and the Invacare Offer) to be grossly
inadequate after careful review of their respective terms and consultation with
Cowen and the Company's legal advisors, the Board of Directors has taken steps
to meet its fiduciary obligations and protect its shareholders from Invacare's
coercive tactics aimed at acquiring the Company at an unfair price. These
steps have included a properly adopted By-Law amendment to provide specific
procedural and notice requirements for the calling of special shareholder
meetings. See "INFORMATION CONCERNING THE INVACARE OFFER AND RELATED MATTERS."
This By-Law amendment was aimed at conforming the Company's By-Laws to
applicable provisions of the GBCC. Furthermore, the Board of Directors
believes that this By-Law amendment is essential to maintaining a level playing
field in the proxy contest initiated by Invacare and is consistent with
shareholder rights and the continued efficient operation of the Company.
PROPOSAL FIVE
INVACARE'S SPECIAL MEETING PROPOSAL
Invacare has stated that it will introduce the following By-Law amendment
for consideration by the shareholders at the Annual Meeting:
To adopt a proposal to amend the By-Laws to (i) give the
beneficial owners and/or record holders of 10% or more of the
outstanding shares the right to demand a special meeting, (ii)
require that any such meeting be held on the date specified in the
demand notice, so long as such date is not less than forty-five
(45) days after the calendar date such demand notice is delivered
to Healthdyne [Technologies], (iii) set the record date for
purposes of making such demand to the date the first such holder
executes the demand and the record date for the meeting to be the
record date specified in the demand notice, so long as such date
is not less than 10 days after the date such demand notice is
delivered to Healthdyne [Technologies] and so long as such record
date is otherwise in compliance with Georgia law (without
reference to other provisions of Healthdyne [Technologies']
By-Laws), (iv) require the Board of Directors to give notice of
such meeting to the shareholders at the earliest possible time
following the record date for such meeting consistent with the
requirements of Georgia law, (v) provide that the only business to
be conducted at such meeting be the business set forth in the
demand notice delivered to Healthdyne [Technologies], (vi) provide
that any such demands which on their face appear to have been validly made
by record holders, or by beneficial owners providing documentation which
on its face establishes their beneficial ownership (including a
certificate of their record holder nominee), shall be accepted and not
challenged by Healthdyne [Technologies] unless there is an affirmative
reasonable basis on which such validity should be questioned, (vii)
require Healthdyne [Technologies] to use its best efforts to resolve any
disputes regarding special meetings as expeditiously as possible, and
(viii) provide that, without the approval of the shareholders, the Board
of Directors may not further amend or repeal the section of the By-Laws
governing special
30
<PAGE> 35
meetings or adopt any new by-law provision which is inconsistent in any
manner with such section.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE SPECIAL MEETING PROPOSAL
FOR THE REASONS SET FORTH BELOW AND UNDER "THE POSITION OF THE BOARD OF
DIRECTORS" ABOVE.
The Board of Directors believes that the Special Meeting Proposal poses
the risk of significant expense and disruption to the Company and its
shareholders. The By-Laws' current requirement that special shareholder
meetings be called only upon the demand of 60% of the shareholders of the
Company is not a recently adopted response to the Invacare Offer, but rather is
a standing provision of the original By-Laws of the Company designed to ensure
the efficient operation of the Company at minimal cost to the shareholders.
The Board of Directors believes that allowing special shareholder meetings to
be called upon the demand of only 10% of the shareholders of the Company
creates the likelihood of multiple proxy mailings, additional expenditures and
increased disturbance of the affairs of the shareholders and the Company. In
short, the Board of Directors believes that the Special Meeting Proposal is an
inefficient and costly way to manage the business of the Company.
Moreover, the Board of Directors amended the Company's By-Laws relating to
special shareholder meetings to ensure that acquisition proposals and tender
offers for the Company's stock, such as the Invacare Offer, proceed apace and
on an orderly and thoughtful basis. By amending the special shareholder
meeting provisions of the By-Laws to set up a specific timetable for
consideration of shareholder proposals, the Board of Directors sought to
minimize the risk that the shareholders would be forced to make hasty decisions
on matters of critical importance to the Company and its shareholders.
The Board of Directors believes that the Special Meeting Proposal is
designed to provide Invacare with the opportunity to call a hurried special
shareholder meeting in the event it fails to succeed in gaining control of the
Company's Board of Directors at the Annual Shareholders' Meeting. The Board of
Directors believes that the Special Meeting Proposal---which allows only 45
days to prepare proxy materials for a special meeting, file the proxy materials
with the Commission, respond to the comments of the Commission with respect to
the proxy materials, and mail the proxy materials to the shareholders in a
manner providing timely notice of the special meeting---simply provides
inadequate time for shareholders to study the proxy materials and respond. The
Board of Directors further notes that approval of the Special Meeting Proposal
would constitute a departure from the Company's past practice of providing at
least 30 days notice of shareholder meetings. Consequently, the Board of
Directors believes that approval of the Special Meeting Proposal is simply not
in the best interests of the Company's shareholders.
OTHER MATTERS
SOLICITATION OF PROXIES
The cost of solicitation of proxies for the Annual Meeting in the form
enclosed herewith will be borne by the Company. In light of the pending proxy
contest and although no precise estimate can be made at the present time, it is
currently estimated that the aggregate amount to be spent by the Company in
connection with the solicitation of proxies and related matters (excluding (i)
the salaries and fees of directors, officers and employees, (ii) the normal
expenses of an uncontested election and (iii) the expenses incurred in
connection with the Company's response to the Invacare Offer (as defined
below)) will be approximately $__________, of which approximately $_________
has been spent to date. The
31
<PAGE> 36
Company has retained Morrow & Co., Inc. ("Morrow"), a proxy soliciting firm, to
perform various proxy advisory and solicitation services for the Company for a
fee of $_________ plus reimbursement of certain expenses. It is anticipated
that approximately ____ employees of Morrow and directors, officers and other
regular employees of the Company may solicit proxies by letter, telephone,
telecopy, telegraph or in person without additional compensation therefor. The
Company will also provide certain persons, firms, banks and corporations holding
shares in their names or in the names of nominees, which in either case are
beneficially owned by others, proxy materials for transmittal to such beneficial
owners and will reimburse such record owners for their expenses in doing so.
The Company has retained Cowen to act as financial advisor and to assist
in its review of the Invacare Offer. As compensation for its services, Cowen
is entitled to compensation as follows: a retainer fee aggregating $350,000
(payable $50,000 upon the date of Cowen's engagement, $50,000 on April 1, 1997
and $250,000 on December 31, 1997); and a fee of one percent of the
consideration paid or payable in connection with certain transactions involving
a change of control of the Company. The retainer fee will be credited against
any transaction fee. The Company has also agreed to reimburse Cowen, from time
to time upon request, for its reasonable out-of-pocket expenses incurred in
connection with its activities as the Company's financial advisor. Cowen will
not receive any additional fee for or in connection with assisting in any
solicitation of proxies.
INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP to audit the
accounts of the Company and its subsidiaries for the fiscal year ending
December 31, 1997. A representative of KPMG Peat Marwick LLP will be present
at the Annual Meeting and will have the opportunity to make a statement if he
or she so desires and will be available to respond to appropriate shareholder
questions.
SHAREHOLDER PROPOSALS
Shareholders of the Company who intend to submit proposals at the
Company's 1998 Annual Meeting of Shareholders must submit such proposals to the
Company no later than ____________________, 1998, in order to be considered
for inclusion in the proxy statement and form of proxy to be distributed by the
Board in connection with that meeting. Shareholder proposals should be
submitted to Healthdyne Technologies, Inc., 1255 Kennestone Circle, Marietta,
Georgia 30066, Attention: Secretary.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT; OTHER MATTERS
Section 16(a) of the Exchange Act requires the Company's directors and
officers and persons who own more than ten percent of a registered class of the
Company's equity securities to file reports with the Commission regarding
beneficial ownership of Common Stock and other equity securities of the
Company. To the Company's knowledge, based solely on a review of copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1996, all
officers, directors and greater than ten percent beneficial owners complied
with the Section 16(a) filing requirements of the Exchange Act.
As of the date of this Proxy Statement, management does not know of any
other matters to be brought before the shareholders at the Annual Meeting. If,
however, any other matters not now known are properly brought before the
meeting, the persons named in the accompanying proxy will vote the shares
represented by all properly executed proxies on such matters in accordance with
their best judgment.
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<PAGE> 37
CERTAIN INFORMATION CONCERNING PARTICIPANTS
The directors of the Company and the Company's nominees for director, and
certain officers and employees of the Company and its subsidiaries are
participants in the solicitation of proxies on behalf of the Company's Board of
Directors. Certain information with respect to such participants is set forth
in Appendix B hereto.
ANNUAL AND QUARTERLY REPORT
A copy of the Company's Annual Report containing audited financial
statements for the year ended December 31, 1996 prepared in conformity with
generally accepted accounting principles is being delivered to shareholders
concurrently with this Proxy Statement. A copy of Part I of the Company's
Quarterly Report on Form 10-Q containing unaudited financial statements for the
quarter ended March 31, 1997 is attached as Appendix C hereto.
The Company is also required to file with the Commission an Annual Report
on Form 10-K for its fiscal year ended December 31, 1996. Shareholders may
obtain, free of charge, a copy of the Annual Report to Shareholders or the
Annual Report on Form 10-K (excluding exhibits) by writing to:
Leslie R. Jones, Secretary
Healthdyne Technologies, Inc.
1255 Kennestone Circle
Marietta, Georgia 30066
By Order of the Board of Directors
Leslie R. Jones
Secretary
Marietta, Georgia
____________ , 1997
33
<PAGE> 38
APPENDIX A
OPINION OF COWEN & COMPANY
April 2, 1997
Board of Directors
Healthdyne Technologies, Inc.
1255 Kennestone Circle
Marietta, GA 30066
Ladies and Gentlemen:
You have requested our opinion as investment bankers as to the adequacy, from a
financial point of view, to the holders of the outstanding shares of Common
Stock, par value $0.01 per share of Healthdyne Technologies, Inc. (the
"Company") other than Invacare Corporation, of the terms of the Offer to
Purchase (as hereinafter defined). For purposes of this opinion, the "Offer to
Purchase" means the offer described below pursuant to that certain Offer to
Purchase included in the amendment to Schedule 14D-1 filed with the Securities
and Exchange Commission on April 1, 1997 by I.H.H. Corp. (the "Bidder"), a
wholly-owned subsidiary of Invacare Corporation (the "Schedule 14D-1").
As more specifically set forth in the Schedule 14D-1, the Bidder has offered,
subject to certain conditions set forth in the Offer to Purchase, to purchase
all of the outstanding shares of Common Stock of the Company, and the
associated Preferred Stock Purchase Rights issued pursuant to the Rights
Agreement, dated as of May 22, 1995 between the Company and Trust Company Bank,
as Rights Agent (the "Rights Agreement"), at a purchase price of $13.50 per
share (and associated Right) net to the seller in cash.
In the ordinary course of its services, Cowen & Company ("Cowen") is regularly
engaged in the valuation and pricing of businesses and their securities and in
advising corporate securities issuers on related matters.
In arriving at our opinion, Cowen has, among other things:
(1) reviewed the Company's financial statements for the fiscal years ended
December 31, 1994, 1995 and 1996, certain publicly available filings
with the Securities and Exchange Commission and certain other relevant
financial and operating data of the Company;
(2) reviewed the Schedule 14D-1;
(3) held meetings and discussions with management and senior personnel of
the Company to discuss the business, operations, historical financial
results and future prospects of the Company;
(4) reviewed financial projections furnished to us by management of the
Company relating to, among other things, the capital structure, sales,
net income, cash flow, capital requirements and other data of the
Company we deemed relevant;
34
<PAGE> 39
Healthdyne Technologies, Inc.
April 2, 1997
Page 2
(5) reviewed the valuation of the Company in comparison to other similar
publicly traded companies;
(6) reviewed the historical prices and trading activity of the Common
Stock of the Company from March 29, 1996 through March 31, 1997 and
compared those trading histories with those of other companies which
we deemed relevant;
(7) compared the transaction contemplated by the Offer to Purchase with
other similar transactions, including the acquisition of control;
(8) compared the discount rate implied by the Offer to Purchase as applied
to the cash flows assumed by projections of the Company's management,
to the weighted average cost of capital of other similar publicly
traded companies; and
(9) conducted such other studies, analysis, inquiries and investigations
as we deemed appropriate.
Cowen was not requested to, and did not, solicit third party indications of
interest in acquiring the Company.
On April 1, 1997, the closing price of the Common Stock of the Company in the
last transaction reported by Nasdaq National Market was $14 3/8 per share.
In rendering this opinion, we relied upon the Company's management with respect
to the accuracy and completeness of the financial and other information
furnished to us as described above. We have not assumed any responsibility for
independent verification of such information, including financial information,
nor have we made an independent evaluation or appraisal of any of the
properties or assets of the Company.
We have acted as financial advisor to the Board of Directors of the Company in
connection with the Offer to Purchase and will receive a fee for our services.
We will also receive a fee for rendering this opinion. In the past, Cowen and
its affiliates have provided financial advisory and financing services for the
Company and have received fees for the rendering of these services. Cowen served
as the lead manager in the Company's June 1993 initial public offering, advised
the Company in its May 1995 spin-off from Healthdyne, Inc. and advised the
Company with respect to the May 1995 implementation of the Rights Agreement. In
addition, in the ordinary course of its business, Cowen trades the equity
securities of the Company for its own account and for the accounts of its
customers, and, accordingly, it may at any time hold a long or short position in
such securities. Moreover, Cowen and its affiliates own 447,900 shares of Common
Stock of the Company.
On the basis of our review and analysis, as described above, it is our opinion
as investment bankers that, as of the date hereof, the financial terms of the
Offer to Purchase are grossly inadequate, from a financial point of view, to
the stockholders of the Company other than Invacare Corporation.
Very truly yours,
/s/ Cowen & Company
Cowen & Company
<PAGE> 40
APPENDIX B
ADDITIONAL INFORMATION REGARDING PARTICIPANTS
ADDITIONAL INFORMATION
Because of the nature of the proposals which are to be brought before
the Annual Meeting, the rules of the Securities and Exchange Commission (the
"SEC") require the Company to make available to the shareholders certain
additional information with respect to "participants" (as such term is defined
in Rule 14a-11(b) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) in the Board of Directors' solicitation. Pursuant
to the rules of the SEC, the persons named below may be deemed to be
participants (each, a "Participant" and collectively, the "Participants") in
the solicitation by the Board of Directors in opposition to the proposals by
Invacare to be made at the Annual Meeting and in opposition to the nominees
proposed by Invacare at the Annual Meeting. As such, set forth below is certain
information required pursuant to the rules of the SEC with respect to
Participants in such solicitation.
The following information is with respect to Healthdyne Technologies
executive officers and directors who are deemed to be Participants in the
Board's solicitation.
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS POSITION NUMBER OF SHARES
OWNED (1)
<S> <C> <C>
Parker H. Petit Chairman of the Board 866,859(2)
Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, GA 30067
Craig B. Reynolds (3) President, Chief Executive 165,507
Officer and Director
J. Terry Dewberry Director 125,979
1960 Allgood Road
Marietta, GA 30062
Alexander H. Lorch Director 13,824
4802 Lake Fjord Pass
Marietta, GA 30067
J. Leland Strange Director 6,667
Intelligent Systems, Inc.
4355 Shackleford Road
Norcross, GA 30093
James J. Wellman, M.D. Director 4,445
5505 Peachtree Dunwoody
Suite 370
Atlanta, GA 30342
</TABLE>
35
<PAGE> 41
<TABLE>
<S> <C> <C>
J. Paul Yokubinas Director 105,560
111 North Lakeside Drive
Kennesaw, GA 30144
John L. Miclot (3) Senior Vice President - Sales and 19,848
Marketing
Robert M. Johnson (3) Senior Vice President - Business 25,986
Development
Robert E. Tucker (3) Senior Vice President-Operations 115,411
Leslie R. Jones (3) Vice President, General Counsel 41,860
and Secretary
M. Wayne Boylston (3) Vice President - Finance, Chief 39,348
Financial Officer and Treasurer
Jeffrey A. North (3) Corporate Controller 47,448
</TABLE>
(1) Beneficial ownership is determined in accordance with Rule 13d-3
promulgated under the Exchange Act. Includes shares that may be
acquired through the exercise of stock options exercisable within sixty
(60) days for the following individuals: Mr. Petit - 258,814 shares;
Mr. Reynolds - 162,834 shares; Mr. Dewberry - 106,333 shares; Mr. Lorch
- 6,667 shares; Mr. Strange - 6,667 shares; Dr. Wellman - 4,445 shares;
Mr. Yokubinas - 70,922 shares; Mr. Tucker - 112,406 shares, Mr. Johnson
- 25,986 shares; Mr. Miclot - 19,667 shares; Ms. Jones - 41,475 shares;
Mr. Boylston - 36,420 shares; Mr. North - 44,811 shares.
(2) Includes 575,510 shares owned by Mr. Petit, 32,535 shares held by Petit
Investments Limited Partnership and 258,814 shares that may be acquired
through the exercise of stock options exercisable within sixty (60)
days.
(3) Business address is the Company's address.
Set forth below is a summary of the securities of the Company purchased
or sold or otherwise acquired within the past two years by each of the
Participants.
INDIVIDUAL SHARE ACTIVITY
J. Terry Dewberry None
Alexander H. Lorch None
Parker H. Petit Transferred 185,000 shares common stock on 6/26/96 to
an exchange fund limited partnership
Sold 159,926 shares in market transactions 5/7/96 -
5/31/96
<PAGE> 42
J. Leland Strange None
James J. Wellman, M.D. None
J. Paul Yokubinas None
M. Wayne Boylston None
Robert M. Johnson None
Leslie R. Jones Purchased 223 shares common stock through Employee
Stock Purchase Plan 3/31/97
Purchased 162 shares common stock through Employee
Stock Purchase Plan 2/13/97
John L. Miclot Purchased 181 shares common stock through Employee
Stock Purchase Plan 3/31/97
Jeffrey North Purchased 438 shares common stock through Employee
Stock Purchase Plan 2/13/97
Purchased 403 shares common stock through Employee
Stock Purchase Plan 11/8/96
Purchased 281 shares common stock through Employee
Stock Purchase Plan 8/8/96
Purchased 214 shares common stock through Employee
Stock Purchase Plan 5/15/96
Craig B. Reynolds Purchased 274 shares common stock through Employee
Stock Purchase Plan 3/31/97
Purchased 341 shares common stock through Employee
Stock Purchase Plan 2/13/97
Purchased 370 shares common stock through Employee
Stock Purchase Plan 11/8/96
Purchased 220 shares common stock through Employee
Stock Purchase Plan 8/8/95
Purchased 167 shares common stock through Employee
Stock Purchase Plan 5/15/96
Robert E. Tucker None
Healthdyne Technologies has retained Morrow & Co., Inc. to act as
information agent and proxy solicitor in connection with the Invacare offer for
customary fees. Although Cowen & Company ("Cowen"), which is acting as
financial advisor to Healthdyne Technologies in connection with the Invacare
offer, 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
SEC under the Exchange Act, or that such Schedule 14A requires the disclosure
of certain information concerning them, the following employees of Cowen may
assist Healthdyne Technologies in such a solicitation: Robert D. Valdez
(Managing Director) and Edward M. Brown (Director). Cowen will receive
customary financial advisor fees, reimbursement and indemnification from
Healthdyne Technologies in connection with the Invacare offer. Cowen will not
receive any additional fee for or in connection with assisting in any
solicitation of proxies. Cowen engages in a full range of investment banking,
research, sales, trading, market-making, brokerage, asset management and
correspondent clearing services for institutional and individual clients. In
the ordinary course of its business, Cowen maintains customary arrangements and
effects transactions in the securities of Healthdyne Technologies for the
accounts of its customers. As a result of its engagement by Healthdyne
Technologies,
<PAGE> 43
Cowen has restricted its proprietary trading in the securities of Healthdyne
Technologies (although it may still execute trades for customers on an
unsolicited agency basis). As of _______, 1997, Cowen beneficially owned ______
shares of the common stock of the Company. The following summary provides
information with respect to the securities of the Company purchased or sold or
otherwise acquired by Cowen and its affiliates for their own accounts within
the past two years: ____________.
None of the foregoing persons owns of record any securities of the
Company which are not also beneficially owned by them nor do they beneficially
own, directly or indirectly, any securities of any parent or subsidiary of the
Company. Except for the information disclosed herein and in the Proxy
Statement, none of the foregoing persons nor any associate of such person is or
has been, since May 31, 1995, a party to any contract, arrangement or
understanding with any person with respect to securities of the Company,
including, but not limited to, joint ventures, loan or option arrangements,
puts or calls, guarantees against loss or guarantees of profit, division of
losses or profits, or the giving or withholding of proxies. Except for
information disclosed herein and in the Proxy Statement, none of the foregoing
persons nor any associate of such persons has any arrangement or understanding
with any person with respect to any future employment by the Company or its
affiliates or any future transactions to which the Company or any of its
affiliates will or may be a party, nor any material interest, direct or
indirect, in any transaction which has occurred since January 1, 1996, or any
currently proposed transaction, or series of similar transactions, to which the
Company or any of its affiliates was or is to be a party and in which the
amount involves exceeds $60,000.
<PAGE> 44
APPENDIX C
PART I OF THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q
37
<PAGE> 45
APPENDIX D
HEALTHDYNE TECHNOLOGIES, INC.
1255 KENNESTONE CIRCLE
MARIETTA, GEORGIA 30066
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS, JULY 30, 1997
The undersigned hereby appoints M. WAYNE BOYLSTON and JEFFREY A. NORTH,
and each of them, proxies with full power of substitution, to represent and to
vote as set forth herein all the shares of Common Stock of Healthdyne
Technologies, Inc. held of record by the undersigned on June 23, 1997, at the
Annual Meeting of Shareholders of Healthdyne Technologies, Inc. to be held at
_______________________________________________________________________________,
at ____ a.m. local time, on Wednesday, July 30, 1997, and any adjournment or
postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1 AND "AGAINST"
PROPOSALS 2, 3, 4 AND 5.
1. ELECTION OF DIRECTORS
Election of Craig B. Reynolds, Parker H. Petit, J. Terry Dewberry,
Alexander H. Lorch, J. Leland Strange, James J. Wellman, M.D. and
J. Paul Yokubinas as Directors:
[ ] FOR all nominees, except as marked below.
[ ] WITHHOLD vote from all nominees.
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark FOR above and print the name(s) of the persons as to whom you are
withholding authority to vote in the space provided below.)
___________________________________________
Management recommends a vote FOR all the nominees listed above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSALS 2, 3, 4 AND 5.
2. Invacare's Proposal to Amend the Company's By-Laws to Fix the Size
of the Board at Seven Directors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Invacare's Proposal Concerning the Company's Shareholder Rights Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 46
4. Invacare's Proposal to Repeal Certain of the Company's By-Laws
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Invacare's Proposal to Amend the Company's Special Meeting
Requirements.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE AS DESCRIBED
IN THE PROXY STATEMENT AND UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.
This Proxy when properly executed will be voted in the manner
directed by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" PROPOSAL 1 AND "AGAINST" PROPOSALS 2, 3, 4 AND 5.
Dated: ___________________, 1997 ________________________________________
Signature
________________________________________
Signature if Held Jointly
________________________________________
Title
TO VOTE IN ACCORDANCE WITH Please sign exactly as name appears on
THE BOARD OF DIRECTORS' Stock Certificate. If stock is held in
RECOMMENDATION, JUST SIGN the name of two or more persons, all
AND DATE THIS PROXY. NO should sign. When signing as attorney,
BOXES NEED TO BE CHECKED. executor, administrator, trustee, or
guardian, please give full title as
such. If a corporation, please sign in
full corporate name by President or
other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE OR FAX BOTH SIDES OF THIS PROXY CARD TO MORROW & CO, INC. AT
(___)_________.
IF YOU NEED ASSISTANCE WITH THIS PROXY CARD, PLEASE CALL MORROW & CO.,
INC. TOLL-FREE (800) 662-5200 OR COLLECT AT (212) 754-8000.
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