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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 30, 1996.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MATRIA HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-2205984
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1850 PARKWAY PLACE, SUITE 1200
MARIETTA, GEORGIA 30067
(770) 423-4500
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
J. BRENT BURKEY, ESQ.
SENIOR VICE PRESIDENT
AND GENERAL COUNSEL
MATRIA HEALTHCARE, INC.
1850 PARKWAY PLACE, SUITE 1200
MARIETTA, GEORGIA 30067
(770) 423-4500
(Name, address, including zip code,
and telephone number, including
area code, of agent for service)
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WITH A COPY TO:
---------------
ROBERT F. BYRNES PATRICIA A. WILSON, ESQ.
PRESIDENT TROUTMAN SANDERS LLP
MATRIA HEALTHCARE, INC. 600 PEACHTREE STREET, N.E.
1850 PARKWAY PLACE, SUITE 1200 SUITE 5200, NATIONSBANK PLAZA
MARIETTA, GEORGIA 30067 ATLANTA, GEORGIA 30308-2216
(770) 423-4500 (404) 885-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT AS
DETERMINED BY MARKET CONDITIONS.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH AMOUNT OFFERING AGGREGATE AMOUNT OF
CLASS OF SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT* PRICE* FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 772,032 shares $7.4375 $5,741,988 $1,980
per share (together with
associated common stock
purchase rights)
========================================================================================================================
</TABLE>
*Based upon the average of the high and low prices on August 27, 1996,
as reported by the Nasdaq National Market and estimated solely for
the purpose of calculating the registration fee pursuant to Rule
457(c) of the Securities Act of 1933, as amended.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, Dated August 30, 1996
PROSPECTUS
772,032 SHARES
MATRIA HEALTHCARE, INC.
COMMON STOCK
($.01 PAR VALUE)
The 772,032 shares (the "Shares") of Common Stock, $.01 par value
(together with associated common stock purchase rights, the "Common Stock"),
of Matria Healthcare, Inc. ("Matria" or the "Company") offered hereby are being
offered for the account of the selling stockholders of the Company identified
herein (the "Selling Stockholders"). The Shares offered hereby were issued by
the Company in connection with the Company's acquisition of the remaining
outstanding equity interest in National Reproductive Medical Centers, Inc. not
already owned by the Company. The Company will not receive any proceeds from
the sale of the Shares. See "The Selling Stockholders."
The Selling Stockholders, directly, or through agents, broker-dealers or
underwriters designated from time to time, may sell the Shares from time to time
on terms to be determined at the time of sale. To the extent required, the
number of Shares to be sold, the names of any agent or broker-dealer or
underwriter and any applicable commission or discount with respect to any
particular offer will be set forth in an accompanying Prospectus Supplement. The
Selling Stockholders reserve the sole right to accept or reject, in whole or in
part, any proposed purchase of the Shares to be made directly or through agents.
The Company has agreed to bear all of the expenses (other than commissions,
underwriting discounts and fees of any counsel of the Selling Stockholders) in
connection with the registration and sale of the Shares being offered by the
Selling Stockholders. See "Plan of Distribution."
The Common Stock of the Company is quoted on the Nasdaq National Market
under the symbol "MATR." On August 23, 1996, the last sale price of the Common
Stock as reported on the Nasdaq National Market was $7 3/8 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREIN FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
SHARES.
The Selling Stockholders and any agents or broker-dealers that
participate with the Selling Stockholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), and any commissions received by them
and any profit on their resale of the Shares may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
herein for indemnification arrangements among the Company and the Selling
Stockholders.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is , 1996.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can
be inspected and copied at the offices of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at its regional offices located
at 7 World Trade Center, 13th Floor, New York, New York 10048, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can be obtained at prescribed rates from the Public Reference Section of the
Commission, at 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports,
proxy statements and other information can also be obtained from the Web site
that the Commission maintains at www.sec.gov.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act. This Prospectus omits certain of the information
contained in the Registration Statement as permitted by the rules and
regulations of the Commission, and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Company and the securities offered hereby. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and in
each instance reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been previously filed by the Company with
the Commission and are hereby incorporated by reference in this Prospectus as
of their respective dates:
<TABLE>
<S> <C>
(a) Annual Report on Form 10-K for the year ended December 31, 1995;
(b) Current Report on Form 8-K dated March 8, 1996, as amended by Form 8-K/A dated March 29, 1996;
(c) Quarterly Report on Form 10-Q for the three months ended March 31, 1996;
(d) Quarterly Report on Form 10-Q for the three months ended June 30, 1996;
(e) Current Report on Form 8-K dated July 10, 1996, as amended by Form 8-K/A dated August 28, 1996;
</TABLE>
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<TABLE>
<S> <C>
(f) The description of the Common Stock in the Company's Registration Statement on Form 8-A dated February
7, 1996, and any amendments or reports filed for the purpose of amending such description; and
(g) The description of the Common Stock Purchase Rights in the Company's Registration Statement on Form 8-A
dated February 7, 1996, and any amendments or reports filed for the purpose of amending such
description.
</TABLE>
Additionally, all documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the offering of the
securities made hereby shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statements contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide, upon request, without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, on the
written or oral request of such person, a copy of any or all of the documents
incorporated herein by reference (other than certain exhibits to such documents
which are not specifically incorporated by reference in such documents).
Requests for such copies should be directed to: Matria Healthcare, Inc., 1850
Parkway Place, Suite 1200, Marietta, Georgia 30067, Attention: J. Brent Burkey,
Senior Vice President, General Counsel and Secretary (770) 423-4500.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR A SUPPLEMENT TO THIS PROSPECTUS
IN CONNECTION WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY STATE OR OTHER JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS
AT ANY TIME DOES NOT IMPLY THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
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THE COMPANY
The Company is a Delaware corporation which was incorporated on
October 4, 1995 for the purpose of the merger (the "Merger") of Tokos Medical
Corporation (Delaware), a Delaware corporation ("Tokos"), and Healthdyne, Inc.,
a Georgia corporation ("Healthdyne"), with and into Matria. The effective date
of the Merger was March 8, 1996. Prior to the Merger, Matria had no material
assets or liabilities and its then outstanding shares of Common Stock were held
exclusively by Tokos and Healthdyne. As a result of the Merger, the operations
and assets of Tokos and Healthdyne were consolidated into Matria, and each
share of common stock of Tokos and Healthdyne outstanding on the effective date
of the Merger was exchanged for one share of Matria Common Stock.
Matria is a leading provider of specialized obstetrical home
healthcare services which assist physicians in the management of high-risk
pregnancies. In addition, Matria provides home healthcare services for the
management of other complicated obstetrical and gynecological conditions, such
as pregnancy induced hypertension. Matria's services are designed to achieve
improved medical outcomes at significant cost savings through the reduction of
patient hospitalization. Services offered by Matria include screening to
assist in the identification of women who may be at risk of complications
during pregnancy; maternal risk assessment and prenatal education for
asymptomatic patients; daily management and education of high risk patients;
administration and supervision of a range of home infusion therapies for
obstetrical and gynecological conditions; and specialty obstetrical and
gynecological nursing.
As the successor to Tokos, Matria has the exclusive marketing rights
in the United States and Canada to a proprietary immunoassay for fetal
fibronectin developed and patented by Adeza Biomedical Corporation, a
California corporation ("Adeza"), and approved by the United States Food and
Drug Administration ("FDA") as a reliable marker for preterm delivery in
symptomatic patients.
The principal executive offices of the Company are located at 1850
Parkway Place, Suite 1200, Marietta, Georgia 30067, and its telephone number is
(770) 423-4500.
RECENT DEVELOPMENTS
In March 1995, Healthdyne acquired a 15% ownership interest in National
Reproductive Medical Centers, Inc., a Delaware corporation and multi-site
provider of infertility treatment services ("NRMC"), which interest was
transferred to the Company in the Merger. Effective as of June 1, 1996, the
Company acquired the remaining 85% ownership interest in NRMC through exercise
of an option under the terms of a Shareholders Agreement dated February 28, 1995
among Healthdyne and the shareholders of NRMC. The acquisition was effected by
merging NRMC with a wholly-owned subsidiary of Matria on July 10, 1996. Results
of operations of NRMC have been included in the consolidated results of
operations of the Company since June 1, 1996.
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Acquisition costs incurred in the two-step acquisition of NRMC totalled
$14.207 million, consisting of the issuance of 779,679 shares of the Company's
Common Stock valued at $8.50 per share ($6.627 million), the assumption of NRMC
common stock options and the substitution of options to purchase 60,604 shares
of the Company's Common Stock valued at $8.50 per share ($515,134), a $6.74
million payment in cash to former NRMC stockholders (including a $1.25 million
payment for the initial 15% investment) and $325,000 of transaction costs.
As part of the transaction, the Company agreed to provide stock price
protection for the shares of Common Stock issued to the NRMC stockholders. If
the average closing price of the Company's Common Stock for the five trading
days prior to the effective date of the Registration Statement falls below $8.50
per share, the Company must, at its sole discretion, either issue additional
shares of its Common Stock (valued at such average price) or pay cash to former
NRMC stockholders in an amount equal to such shortfall. The issuance of such
additional shares or payment of cash will not affect the recorded purchase
price.
The NRMC acquisition has been accounted for using the purchase method
of accounting. The purchase price was allocated based on estimated fair values
at acquisition. The excess of purchase price over the fair value of the net
assets acquired was $14.034 million and is being amortized on a straight-line
basis over five years.
RISK FACTORS
Prospective purchasers of Shares should consider carefully the factors
set forth below, as well as the other information contained in this Prospectus,
in evaluating an investment in the Shares.
In addition to the historical information contained or incorporated by
reference herein, the discussion in this Prospectus contains forward-looking
statements with respect to the Company that involve risks and uncertainties.
The actual performance and results of the Company could differ materially from
those discussed in this Prospectus. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed in this "Risk
Factors" section, as well as those discussed elsewhere in this Prospectus or in
the documents incorporated by reference herein.
UNCERTAINTIES ASSOCIATED WITH INTEGRATION OF BUSINESSES
The Merger in March 1996 involved the integration of Healthdyne and
Tokos, two companies that had previously operated independently. Since the
Merger, Matria has begun to consolidate the service centers and other
facilities of Healthdyne and Tokos, based on a case-by-case review of the
existing operations. Matria may incur significant costs and expenses in
consolidating the operations and facilities of Healthdyne and Tokos, which
costs and expenses could have a material adverse effect on the results of
operations or financial condition of Matria and could exceed estimates already
charged as restructuring costs. While savings in operating
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costs are expected to be achieved as a result of the Merger, no assurance can
be given that difficulties will not be encountered in integrating the
operations of Tokos and Healthdyne or that the full benefits and attendant cost
savings expected from such integration will be realized or achieved in the
expected time frame. Any delays or unexpected costs incurred in connection
with such integration could have a material adverse effect on the results of
operations or financial condition of Matria.
LARGE PERCENTAGE OF ASSETS COMPRISED OF GOODWILL
Although Matria has substantial assets reflected on its balance sheet,
a large percentage of those assets are intangible assets or goodwill (as
opposed to tangible assets, such as cash, accounts receivable, inventory and
equipment). At June 30, 1996, Matria's total assets were approximately $253.14
million, of which approximately $164.1 million, or 64.8% of total assets, were
goodwill and intangibles, most of which are being amortized on a straight-line
basis over five years. This large percentage of intangible assets may have a
tendency to depress the price of Matria Common Stock. In addition, any future
write down of such goodwill by Matria could have a material adverse effect on
the results of operations of Matria.
RECENT AND CONTINGENT CASH OUTLAYS
Matria has, directly or through its predecessors, incurred various
obligations requiring significant cash outlays. In July 1996, Matria made a $5
million cash payment, together with accrued interest of $344,623, as final
payment of a $10 million settlement of a class action securities lawsuit
against Tokos which had been settled in 1995. Also in July 1996, Matria paid
$5.5 million in cash to certain stockholders of NRMC in connection with its
acquisition of the remaining outstanding equity interest in NRMC. See "The
Company - Recent Developments." Matria has incurred substantial costs in
connection with the Merger, and, as of June 30, 1996, its remaining liability
for such estimated costs was approximately $11.575 million. Additionally,
Maria may be required to make additional severance payments of approximately
$7.9 million pursuant to employment agreements with certain former officers of
Tokos and Healthdyne, and may be required to place in trust approximately $3.2
million under a retirement benefit awards program for such officers. While
Matria believes that its current cash balances and expected cash flows from
operations and investing activities will be sufficient to fund its current
operations and cash obligations as well as any expansion of NRMC's business in
the foreseeable future, there can be no assurance that lower than expected cash
flows would not have a material adverse effect on the operating results or
financial condition of Matria.
HEALTHCARE REFORM AND FEDERAL BUDGET LEGISLATION
Healthcare is an area of extensive and dynamic change. In recent
years, an increasing number of legislative proposals have been introduced or
proposed in Congress and in some state legislatures that would effect major
changes in the healthcare system, either nationally or at the state level.
Among the proposals under consideration are cost controls on healthcare
providers, insurance market reforms to increase the availability of group
health insurance to small
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businesses and requirements that all businesses offer health insurance coverage
to their employees. The costs of certain proposals would be funded in part by
reductions in payments by governmental programs, including Medicare and
Medicaid, to healthcare providers. In addition, both public and private payors
are increasing pressures to limit increases in healthcare costs. These changes
could have a material adverse effect on the results of operations or financial
condition of Matria.
In November 1995, the United States Senate and House of Representatives
passed a budget reconciliation bill which would establish a framework for
balancing the federal budget in seven years. While the President has vetoed the
bill, the Administration has agreed to negotiations to achieve a balanced budget
in this timeframe. Therefore, many of the budget reduction proposals in the
reconciliation bill may become part of any final legislation.
The bill passed by the Senate and House would result in a major
restructuring of the current Medicaid program. Rather than operating as an
entitlement program, the new "MediGrant" program would provide federal block
grants to the states for medical assistance provided to low income individuals
and families. While the states would be subject to certain federal
requirements, states would also have broad flexibility to establish their
coverage, eligibility and payment standards. Given the fixed federal funds that
would be available to support state MediGrant programs, there would be no
assurance that, if enacted, these provisions would not have a material adverse
effect on the results of operations of companies, like Matria, which provide
services to participants in these programs.
POSSIBLE LIMITATIONS ON REIMBURSEMENTS BY THIRD PARTY PAYORS
Most of Matria's revenues are attributable to payments received from
third party payors such as private insurance companies, health maintenance
organizations and government payors. Any significant reduction in third party
reimbursement for the services offered by Matria could have a material adverse
effect on the results of operations or financial condition of Matria. In
addition, managed care providers, which are a growing segment of private payors,
are placing downward pressure on the prices that companies can obtain for their
services. The interrelated lowering of reimbursement rates, increasing medical
review of bills for services and negotiating for reduced contract rates could
have a material adverse effect on the results of operations or financial
condition of Matria.
EXTENSIVE REGULATION
Participants in the healthcare industry, including providers of
services such as those offered by Matria, are subject to extensive federal,
state and local regulation relating to, among other things, licensure, conduct
of operations and the addition of facilities and services, and there can be no
assurance that future regulatory changes will not have a material adverse
effect on the results of operations or financial condition of Matria. As a
provider of services to patients under various government programs, including
certain state Medicaid programs, Matria is subject to the federal fraud and
abuse laws. These laws prohibit any bribe, kickback, rebate
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or payment of other remuneration of any sort in return for the referral of
Medicare or Medicaid patients, and the submission of false claims. Violations
of these provisions may result in civil and criminal penalties and exclusion
from participation in the Medicare and Medicaid programs.
The broad language of the anti-kickback provisions of the fraud and
abuse laws has been interpreted by the courts and governmental enforcement
agencies in a manner which could impose liability on healthcare providers for
engaging in a wide variety of business transactions. Limited "safe harbor"
regulations exempt certain practices from enforcement action under the
prohibitions. However, these safe harbors are only available to transactions
which fall entirely within the narrowly defined guidelines.
Recently, the federal government made a policy decision to increase
significantly the resources allocated to enforcing the fraud and abuse laws.
The Office of the Inspector General, in cooperation with other federal
agencies, has announced its intention to scrutinize the activities of home
health agencies, durable medical equipment suppliers and skilled nursing
facilities in California, Florida, Illinois, New York and Texas, states in
which Matria has significant operations. Private insurers and various state
enforcement agencies also have increased their scrutiny of healthcare claims in
an effort to identify and prosecute fraudulent and abusive practices. Matria
maintains an internal regulatory compliance review program and from time to
time may retain special counsel to provide advice on compliance with such laws
and regulations. However, no assurance can be given that the practices of
Matria, if reviewed, would be found to be in compliance with such laws, as such
laws ultimately may be interpreted.
In 1993, Congress enacted the so-called "Stark Law," which imposes
civil penalties and exclusions for referrals by physicians to certain entities
with which they have a financial relationship (subject to specified exceptions).
In addition, several states in which Matria operates have laws that prohibit
certain direct or indirect payments or fee-splitting arrangements between
healthcare providers, if such arrangements are designed to induce or encourage
the referral of patients to a particular provider. Other states have enacted or
are considering legislation that either prohibits "physician self-referral"
arrangements or requires physicians to disclose any financial interests they may
have with a healthcare provider that such physicians recommend to their
patients. Possible sanctions for a violation of these restrictions include loss
of licensure and civil and criminal penalties. Such statutes and proposed
legislation vary from state to state and seldom have been interpreted by the
courts or regulatory agencies. Strict enforcement of these regulations is
likely. Matria has certain financial relationships with physicians who may
refer, or be in a position to refer, patients to Matria for services. Although
Matria believes that these financial relationships meet applicable exceptions
permitting referrals by such physicians, if the laws are subsequently
interpreted to prohibit these relationships, Matria may be required to further
modify these arrangements or to discontinue accepting referrals from such
physicians.
The federal budget reconciliation legislation, which was vetoed by the
President, would have established new fraud and abuse sanctions and penalties
and would have made the Stark prohibitions on physician self-referrals less
restrictive in certain respects. It is not clear whether
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similar legislation will become law or, if enacted, what impact such
legislation would have on the services offered by Matria, but the elimination
of certain self-referral restrictions could create additional competitive
pressures on the operations of Matria.
Matria's obstetrical management services, which utilize home uterine
activity monitors, account for a substantial portion of its revenues. These
monitors are classified as medical devices under the Federal Food, Drug and
Cosmetic Act of 1976 (the "FDC Act") and are subject to regulation by the FDA.
While the devices are labeled only for certain indications, as part of the
practice of medicine, physicians may and do prescribe the devices for
indications for which the devices are not labeled, such as for use in detecting
preterm labor in general. Management cannot quantify the portion of Matria's
business resulting from such "off-label use". Matria does not anticipate any
change in the FDA's policies permitting physicians to prescribe the use of these
devices for indications for which the devices are not labeled, but if the FDA
did change its policies to limit the use of such devices or otherwise require
Matria to change the business practices currently carried on regarding the use
of such devices, such actions could have a material adverse effect on the
results of operations or financial condition of Matria.
In addition, some of the services that Matria offers involve the
provision of drugs that are regulated by the FDA under the FDC Act. While
these drugs are labeled for specific indications and cannot be promoted for any
other indications, physicians may and do prescribe the drugs for indications
that have not been approved by the FDA. For example, terbutaline is labeled
for the treatment of asthma but is frequently prescribed by obstetricians as a
tocolytic for the treatment of preterm labor. Although Matria does not promote
the drug for this purpose, it regularly fills physician orders to dispense and
provide nursing services in connection with the medication for preterm labor
patients. In May 1993, the FDA Fertility and Maternal Health Drugs Advisory
Committee met to discuss the safety and efficacy of terbutaline for tocolysis.
The Committee recommended that the manufacturers of terbutaline apply for
approval of the drug in the treatment of preterm labor. In August 1996, the
National Women's Health Network in Washington, D.C. petitioned the FDA to stop
Matria from marketing a terbutaline pump as a treatment for preterm labor. The
FDA is currently considering the petition. Any action by the FDA that limits
the ability of Matria to offer a high risk pregnancy management service
involving the administration of drugs for indications for which the drugs have
not been labeled could have a material adverse effect on the results of
operations or financial condition of Matria.
Failure of Matria to comply with these regulations or laws could
adversely affect Matria's ability to provide, or to receive reimbursement for,
its products and services and could also subject Matria and its officers to
penalties. Changes in these laws or interpretations of existing regulations or
laws could have a material adverse effect on permissible activities of Matria,
the relative costs of doing business and the amount of reimbursement by
government and other third party payors. In addition, laws and regulations
often are adopted to regulate new products, services and industries. There can
be no assurance that either the states or the federal government will not
impose additional regulations upon Matria's activities which might adversely
affect its results of operations or financial condition.
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RECENT MEDICAL CONTROVERSIES
In May 1996, an eight-member committee of the American College of
Obstetricians and Gynecologists ("ACOG") published an opinion stating, among
other things, that the use of home uterine activity monitoring devices has not
been shown to prevent prematurity. While the committee opinion represented a
more recent review of existing literature, there was essentially no change from
its 1989 and 1992 opinions regarding the independent benefit of home uterine
activity monitoring in reducing prematurity. The 1996 opinion, however, did
acknowledge the benefit of home uterine activity monitoring in early detection
of preterm labor, prolongation of pregnancy and improved pregnancy outcomes as
measured by gestational age at delivery, birthweight, NICU admission and NICU
lengths of stay. The ACOG committee opinions from time to time have received
substantial business and medical press coverage. While Matria does not believe
that either home uterine activity monitoring or any other diagnostic devices
can in and of itself improve therapeutic outcomes (e.g., a mammogram cannot
prevent breast cancer), it does believe that monitoring can assist the
physician in the early detection of preterm labor which, based on physician
interventions, may improve pregnancy outcomes. There have been a number of
studies regarding the use of home uterine activity monitoring devices. Matria
believes that the results of these studies have been, and will continue to be,
reviewed by practicing physicians in determining whether to prescribe home
uterine activity monitoring for their patients. However, no assurance can be
given that physicians will continue to prescribe home uterine activity
monitoring services.
COMPETITION
The home healthcare services industry is highly competitive. While
Matria is aware of only a few national companies that currently offer a broad
line of home healthcare services specifically designed for the treatment and
management of high risk obstetrical patients, there are a number of local and
national companies that provide one or more of the services provided by Matria.
In addition, no assurance can be given that other companies, particularly those
in other segments of the home healthcare industry, will not enter Matria's
market. Certain of Matria's competitors and potential competitors have
significantly greater financial, marketing and technical resources than those
of Matria. There can be no assurance that Matria will not encounter increased
competition in the future that could limit its ability to maintain or increase
its market share. Such increased competition could have a material adverse
effect on Matria's business, results of operations or financial condition of
Matria.
DEPENDENCE ON RELATIONSHIPS WITH THIRD PARTIES
The profitability and growth of Matria's business depends on its
ability to establish and maintain close working relationships with managed care
organizations, private and governmental third-party payors, hospitals,
physicians, physician groups, home health agencies and other institutional
health providers, and large self-insured employers. Managed care plans have
continued to consolidate to enhance their ability to influence the delivery of
healthcare services and are increasingly contracting with providers of home
care services which can offer "one stop
10
<PAGE> 13
shopping" for home care services. There can be no assurance that relationships
developed by Healthdyne or Tokos will be successfully maintained by Matria or
that additional relationships will be successfully developed and maintained in
existing or future markets. The loss of such existing relationships or the
failure to continue to develop such relationships could have a material adverse
effect on Matria's business, results of operations or financial condition.
Managed care organizations and third-party payor entities are increasingly
exercising greater control over the utilization of healthcare services and
other clinical decisions that have traditionally been made exclusively by
physicians. Both Tokos and Healthdyne entered into a number of contractual
agreements with managed care organizations and third-party payor entities under
which they agreed to perform services pursuant to specified conditions at
negotiated rates. To a more limited extent, Tokos and Healthdyne also entered
into risk sharing arrangements for the provision of their services including
capitation. There can be no assurance that the proportion of Matria's business
attributable to such contractual arrangements will continue to increase or that
the risk sharing arrangements will be financially successful.
POTENTIAL LIABILITY
Participants in the home healthcare market are subject to lawsuits
alleging negligence, product liability or other similar legal theories, many of
which involve large claims and significant defense costs. From time to time,
Healthdyne and Tokos each were subject to such lawsuits as a result of the
nature of their businesses. Although Matria currently maintains liability
insurance intended to cover such claims, there can be no assurance that the
coverage limits of such insurance policies will be adequate or that all such
claims will be covered by the insurance. In addition, these insurance policies
must be renewed annually. While Matria has been able to obtain liability
insurance, such insurance varies in cost, is difficult to obtain and may not be
available in the future on terms acceptable to Matria, if at all. A successful
claim in excess of the insurance coverage could have a material adverse effect
on the results of operations or financial condition of Matria. Claims,
regardless of their merit or eventual outcome, also may have a material adverse
effect on Matria's business and reputation.
HIE SPINOFF
On October 20, 1995, the Board of Directors of Healthdyne approved a
plan to distribute Healthdyne's 100% owned interest in Healthdyne Information
Enterprises, Inc. ("HIE") to the shareholders of Healthdyne in a taxable
distribution. The HIE Spinoff was effected November 6, 1995. On October 20,
1995, Healthdyne and HIE entered into a Distribution Agreement, which sets
forth their rights and obligations in connection with the Distribution and also
executed related Tax Indemnity and Tax Disaffiliation Agreements, a Corporate
Services Agreement and a License Agreement. On November 7, 1995, the first day
of trading, the HIE stock traded in the over-the-counter market at $1.25 per
share, and Healthdyne utilized that price as the fair market value of HIE's
Common Stock in reporting the HIE Spinoff for federal income tax purposes.
Based on that valuation, the HIE Spinoff would not result in any significant
taxable gain to Healthdyne (or claim against HIE under the Tax Indemnity
Agreement). However, HIE's Common Stock has subsequently closed at prices
ranging from $1.125 to $7.75 per share.
11
<PAGE> 14
If those or any other prices in excess of $1.25 per share were deemed to
represent the fair value of HIE Common Stock on the date of the HIE Spinoff,
Matria could incur approximately $1.3 million of federal income tax liability
for each $0.25 increase in the fair value of HIE's Common Stock. Healthdyne had
net operating losses (NOLs) of approximately $14,100,000 at December 31, 1995,
which may cover any tax liability resulting from the HIE Spinoff. In the event
Matria does incur a federal income tax liability or is required to utilize NOLs
to decrease or eliminate any monetary payment of a federal income tax liability
as a result of the HIE Spinoff, HIE would be obligated under the Tax Indemnity
Agreement to reimburse Matria for such liability or utilization of NOLs, and HIE
would have the option to pay such amounts in HIE Common Stock. Because the full
value of any HIE Common Stock received by Matria in satisfaction of HIE's
indemnity obligation under the Tax Indemnity Agreement may not be realized upon
the sale of such stock by Matria, there is no absolute assurance that Matria
will not incur losses as a result of the HIE Spinoff.
PENDING LITIGATION
A complaint was filed on February 1, 1995 by The Lindner Fund, Inc. in
the Eastern District of Missouri against Healthdyne and its former subsidiary
Home Nutritional Services, Inc. ("HNS") alleging that The Lindner Fund would
not have sold its investment in HNS on February 8, 1994 had Healthdyne and HNS
disclosed the potential sale of HNS. Damages have been requested in the amount
of $1,050,900, representing the aggregate difference between the price received
upon the sale of such stock by The Lindner Fund and the $7.85 per share price
paid by W.R. Grace & Co. on April 6, 1994 for HNS. Healthdyne has denied the
allegations set forth in the complaint and is currently defending the matter
vigorously.
In addition to the foregoing, each of Healthdyne and Tokos was a party
to various legal claims and actions incidental to its business, including
professional and product liability claims. Each of Healthdyne and Tokos
maintained insurance, including insurance covering professional and product
liability claims, with customary deductible amounts. There can be no assurance,
however, that (i) additional suits will not be filed against Matria in the
future, (ii) Healthdyne's or Tokos' prior experience with respect to the
disposition of its litigation accurately indicates the results that will occur
in pending or future cases against Matria, or (iii) adequate insurance coverage
will be available at acceptable prices for incidents arising in the future.
HISTORY OF LOSSES; NET LOSS CARRYOVERS
Tokos had net losses for 1993, 1994 and 1995. Healthdyne also had net
losses from continuing operations for 1993 and 1994, but had net income from
continuing operations of $790,000 for 1995. Matria has had net losses for the
six months ended June 30, 1996. There can be no assurance that Matria will
become or remain profitable in the future.
As of December 31, 1995, Healthdyne and Tokos had accumulated net
operating loss carryovers of approximately $14.1 million and $35.5 million,
respectively, which will carryover to Matria. Under Section 382 of the
Internal Revenue Code of 1986, as amended, certain
12
<PAGE> 15
ownership changes with respect to the stock of a corporation having unused net
operating loss carryovers (a "loss corporation"), or with respect to the stock
of its parent corporation, may result in annual limitations on the utilization
of such loss carryovers to offset future taxable income of the loss corporation.
Although the Section 382 limitations apply to Matria as a result of the Merger,
Matria believes that such limitations will not result in the loss of the
utilization of its loss carryovers.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Certificate of Incorporation and Bylaws of
Matria may make an unsolicited acquisition of control of Matria more difficult
or expensive. In addition, Matria has a stockholders rights plan, which also
may make an unsolicited acquisition of Matria more difficult or expensive.
DEPENDENCE ON KEY PERSONNEL
Matria is dependent on the continued services and management experience
of its executive officers and other key employees. If such executive officers
or other key employees were to leave and Matria was unable to obtain adequate
replacements, Matria's operating results could be adversely affected. In
addition, Matria's growth depends on its ability to attract, retain and motivate
skilled employees, and on the ability of its officers and key employees to
manage growth successfully.
POSSIBLE VOLATILITY OF STOCK PRICES
The market price of the Common Stock may be subject to significant
fluctuations in response to variations in Matria's quarterly operating results,
announcements of developments concerning Matria's or its competitors'
businesses, failures to meet securities analysts' expectations, general trends
in the market for home healthcare products and services and other factors. In
addition, broad market fluctuations, as well as general economic or political
conditions and agendas such as healthcare reform, may adversely affect the
market price of Common Stock, regardless of Matria's actual performance.
DIVIDEND POLICY
Matria's present intention is to retain all earnings for working
capital, capital expenditures, the repayment of outstanding indebtedness and
general corporate purposes. Accordingly, Matria does not anticipate that it
will pay any dividends on the Common Stock in the foreseeable future.
13
<PAGE> 16
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares offered hereby. All of the proceeds from the sale of the Shares offered
hereby will be received by the Selling Stockholders.
THE SELLING STOCKHOLDERS
All of the Shares offered hereby are beneficially owned by the Selling
Stockholders and were acquired by the Selling Stockholders in connection with
the NRMC acquisition. The Selling Stockholders do not beneficially own any
shares of Common Stock or other securities of the Company other than the Shares.
Since the Selling Stockholders may sell all, or some or none of the Shares, no
estimate can be made of the aggregate number of Shares that are to be offered
hereby or that will be beneficially owned by the Selling Stockholders upon
completion of the offering contemplated by this Prospectus.
The following table sets forth the name of each Selling Stockholder,
the number of shares of the Company's Common Stock held by each such person as
of August 23, 1996, the number of shares which may be offered for the account
of each such person, and the number of shares of Common Stock to be owned by
each such person if all the Shares offered hereby are sold.
<TABLE>
<CAPTION>
Number of Shares
Number of Shares Number of Shares to be Owned if All
Selling Held at Which May Shares Offered Are
Stockholders August 23, 1996 be Offered Sold in the Offering
------------ ---------------- ---------------- --------------------
<S> <C> <C> <C>
Geoffrey Sher, M.D. 270,048 270,048 0
IRA of Geoffrey
Sher, M.D. 33,164 33,164 0
Sher 1992 Children's Trust 2,061 2,061 0
Sher 1992 Irrevocable Trust 2,061 2,061 0
Victor Knutzen, M.D. 300,053 300,053 0
Knutzen 1992 Children's
Trust 2,290 2,290 0
Knutzen 1992
Irrevocable Trust 2,290 2,290 0
Fertility Center Partners 136,177 136,177 0
Harley J. Earl, II 1,628 1,628 0
Michael Feinman 14,840 14,840 0
Christo Zouves 7,420 7,420 0
</TABLE>
14
<PAGE> 17
The Company has entered into a Private Placement and Registration
Rights Agreement dated as of June 24, 1996 (the "Registration Rights Agreement")
with certain of the Selling Stockholders pursuant to which the Company has filed
this Registration Statement covering the Shares. Pursuant to the Registration
Rights Agreement, the Company is obligated to file the Registration Statement no
later than August 30, 1996, to cause the Registration Statement to be declared
effective under the Securities Act as soon as practicable thereafter and to keep
the Registration Statement continuously effective until the earlier of (i) July
10, 1998 (two years following the closing date of the Merger) or (ii) 30 days
after Matria gives notice of its intention to terminate such registration (which
notice may not be given earlier than 240 days after the Effective Date of the
Registration Statement). The Company has agreed to pay all expenses incurred in
connection with the registration and sale of the Shares pursuant to the
Registration Rights Agreement, other than commissions, underwriting discounts
and fees of any counsel for the Selling Stockholders. Any of the Shares sold
pursuant to this Prospectus will no longer be entitled to the benefits of the
Registration Rights Agreement.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Stockholders on
the Nasdaq National Market or any national securities exchange or automated
interdealer quotation system on which shares of Common Stock are then listed,
through negotiated transactions or otherwise at prices and on terms then
prevailing or at prices related to the then current market price or at
negotiated prices. The Selling Stockholders may effect sales of the Shares
directly or by or through agents, brokers, dealers or underwriters and the
Shares may be sold by one or more of the following methods: (a) underwritten
public offerings; (b) ordinary brokerage transactions; (c) purchases by a
broker-dealer as principal and resale by such broker-dealer for its account
pursuant to this Prospectus; (d) in "block" sales; and (e) through the writing
of options on the Shares. At the time a particular offer is made, a
supplemental prospectus, if required, will be distributed that sets forth the
name or names of any agents, broker-dealers or underwriters, any commissions and
other terms constituting compensation and any other required information. Any
such supplemental prospectus will be filed by the Company with the Commission
pursuant to Rule 424(c) under the Securities Act. In effecting sales, broker-
dealers engaged by the Selling Stockholders and/or the purchasers of the Shares
may arrange for other broker-dealers to participate. Broker-dealers will receive
commissions, concessions or discounts from the Selling Stockholders and/or the
purchasers of the Shares in amounts to be negotiated immediately prior to the
sale. In addition, any Shares covered by this Prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than pursuant to this Prospectus.
The Selling Stockholders have agreed to pay any underwriting discounts
and commissions and fees of any counsel for the Selling Stockholders in
connection with the registration and sale of the Shares. All other expenses in
connection with the registration and sale of the Shares hereunder will be paid
by the Company.
15
<PAGE> 18
The Selling Stockholders and any broker-dealer who acts in connection
with the sale of the Shares hereunder may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, and any compensation
received by them and any profit on any resale of the Shares as principals might
be deemed to be underwriting discounts and commissions under the Securities Act.
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the Shares may not be sold unless
they have been registered or qualified for sale in such states or an exemption
from such registration or qualification requirement is available and is complied
with.
Pursuant to the Registration Rights Agreement between the Company and
the Selling Stockholders, the Company has filed the Registration Statement, of
which this Prospectus forms a part, with respect to the sale of the Shares.
The Company has agreed to use its reasonable efforts to keep the Registration
Statement continuously effective until the earlier of (i) July 10, 1998 (two
years following the closing date of the Merger), or (ii) 30 days after Matria
gives notice to each Selling Stockholder of its intention to terminate such
registration, which notice may not be given by Matria earlier than 240 days
after the effective date of the Registration Statement.
Pursuant to the terms of the Registration Rights Agreement, the Company
and the Selling Stockholders have agreed to indemnify each other and certain
other parties, including underwriters, if any, for certain liabilities,
including liabilities under the Securities Act, in connection with the
registration of the Shares.
LEGAL MATTERS
The legality of the Shares offered hereby is being passed upon for the
Company by Troutman Sanders LLP, Atlanta, Georgia.
EXPERTS
At December 31, 1995, Matria had no material assets or operations.
Accordingly, and because Tokos was deemed to be the acquiror in the Merger, the
consolidated financial statements of Tokos and its subsidiaries are incorporated
by reference in this Prospectus from the Company's Report on Form 8-K dated
March 7, 1996, as amended by its Report on Form 8-K/A dated March 29, 1996
(together, the "Merger Form 8-K"). Such consolidated financial statements have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference in reliance
upon the authority of said firm as experts in accounting and auditing.
16
<PAGE> 19
The consolidated financial statements of Healthdyne, which was deemed
to be the acquired company in the Merger, as of December 31, 1995 and 1994, and
for each of the years in the three-year period ended December 31, 1995, have
been incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of firm as experts in accounting and
auditing.
The consolidated financial statements of NRMC, which was acquired by
Matria following the Merger, are incorporated by reference to the Company's
Report on Form 8-K, dated July 10, 1996, as amended by its Report on Form 8- K/A
dated August 28, 1996. Such consolidated financial statements have been
audited by Arthur Andersen LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference in reliance
upon the authority of said firm as experts in accounting and auditing.
17
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses to be paid in connection with the issuance and
distribution of the securities being registered, other than underwriting
discounts and commissions, are as follows:
<TABLE>
<S> <C>
SEC Registration Fee . . . . . . . . . . . $ 1,980
Legal and Accounting Fees and Expenses . . 20,000
Miscellaneous . . . . . . . . . . . . . . 1,020
-----------
Total . . . . . . . . . . . . . . $ 23,000
===========
</TABLE>
All of the above items are estimates except the SEC Registration Fee. All of
such estimated expenses will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, as amended (the
"Delaware Code"), gives a corporation power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
The same Section also gives a corporation power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation,
II-1
<PAGE> 21
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper. Also, the Section states that, to the
extent that a director, officer, employee or agent of a corporation has been
successful on the merits or otherwise in defense of any such action, suit or
proceeding, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
The Company's Certificate of Incorporation limits the liability of
directors of the Company for monetary damages to the Company and its
stockholders for breaches of fiduciary duty to the fullest extent permitted
under the Delaware Code. In addition, the Certificate provides that the Company
shall, to the fullest extent permitted by law, indemnify its directors and
officers against any liability, losses or related expenses which they may incur
by reason of serving or having served as directors and officers of the Company.
The Company's Bylaws provide that each person who is involved in any
actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she is or was
a director, officer, employee or agent of the Company, or is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, will be indemnified
by the Company to the fullest extent permitted by the Delaware Code, as the same
exists or may hereafter be amended, against all costs, charges, expenses,
liabilities and losses reasonably incurred or suffered by such person in
connection therewith, and such indemnification will continue as to a person who
has ceased to be a director, officer, employee or agent and will inure to the
benefit or his or her heirs, executors and administrators; provided, however,
that the Company will indemnify any such person seeking indemnification in
connection with a proceeding initiated by such person only if such proceeding
was authorized by the Company's Board of Directors. The right to
indemnification will be a contract right and will include the right to be paid
by the Company the expenses incurred in defending any such proceeding in advance
of its final disposition; provided, however, that if the Delaware Code so
requires, the payment of such expenses incurred by a director or officer in
advance of the final disposition of a proceeding will be made only upon delivery
to the Company of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it will ultimately be determined that such
director or officer is not entitled to be indemnified. The Company may provide
indemnification to employees and agents of the Company with the same scope and
effect as the foregoing indemnification of directors and officers.
II-2
<PAGE> 22
The indemnification rights conferred by the Company's Certificate are
not exclusive of any other right to which a person seeking indemnification may
be entitled under any law, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. The Company may maintain insurance on
behalf of its directors, officers, employees and agents. Additionally, the
Merger Agreement requires such insurance to be maintained by the Company
covering present and former officers, directors, employees, trustees and agents
of Tokos and Healthdyne for a period of at least six years from the closing date
of the Merger, subject to certain limitations.
Reference is made to Section 3.7 of the form of Registration Rights
Agreement for the Company's and the Selling Stockholders' respective agreements
to indemnify each other, and to provide contribution in circumstances where
indemnification is unavailable.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
- ------ --------
<S> <C> <C>
2 - Agreement and Plan of Merger dated June 24, 1996, between the Company, NRMC, NRMC Acquisition Corporation
and certain NRMC stockholders (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K
dated July 10, 1996 (the "Form 8-K") and incorporated herein by reference).
5 - Opinion of Troutman Sanders LLP as to the legality of the securities being registered.
24.1 - Consent of Troutman Sanders LLP (contained in Exhibit 5).
24.2 - Consent of Ernst & Young LLP, independent public accountants
24.3 - Consent of KPMG Peat Marwick LLP, independent public accountants
24.4 - Consent of Arthur Andersen LLP, independent public accountants
25 - Powers of attorney (see pages II-5 and II-6).
99.1 - Shareholders Agreement dated February 28, 1995, among Healthdyne, NRMC and certain NRMC
stockholders (filed as Exhibit 99.3 to the Form 8-K and incorporated herein by reference).
99.2 - Private Placement and Registration Rights Agreement between the Company and the Selling
Stockholders dated as of June 24, 1996.
</TABLE>
II-3
<PAGE> 23
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the Registration Statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change in such information in the Registration
Statement; provided, however, that the registrant need not file a post-effective
amendment to include the information required to be included by subsection (i)
or (ii) if such information is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement; (2) that, for the
purpose of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Marietta, State of Georgia on the 29th day of
August, 1996.
Matria Healthcare, Inc.
By: /s/ Robert F. Byrnes
---------------------
Robert F. Byrnes
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Matria Healthcare, Inc.,
do hereby constitute and appoint Robert F. Byrnes, Donald R. Millard and J.
Brent Burkey, and each and any one of them, our true and lawful
attorneys-in-fact and agents, to do any and all acts and things in our names and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our name in the capacities indicated below, which
said attorneys and agents, or any of them, may deem necessary or advisable to
enable said Corporation to comply with the Securities Act of 1933 and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this registration statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names in the
capacities indicated below, any and all amendments (including post-effective
amendments) hereto; and we do hereby ratify and confirm all that said attorneys
and agents, or any of them, shall do or cause to be done by virtue thereof.
II-5
<PAGE> 25
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated below and as of the date indicated above:
SIGNATURE TITLE
--------- -----
<TABLE>
<S> <C>
/s/ Parker H. Petit Chairman of the Board and Director
- --------------------------------
Parker H. Petit
President and Chief Executive Officer (Principal
/s/ Robert F. Byrnes Executive Officer) and Director
- --------------------------------
Robert F. Byrnes
Senior Vice President-Finance, Chief Financial
/s/ Donald R. Millard Officer and Treasurer (Principal Financial and
- -------------------------------- Accounting Officer)
Donald R. Millard
/s/ Craig T. Davenport Director
- --------------------------------
Craig T. Davenport
/s/ Thomas W. Erickson Director
- --------------------------------
Thomas W. Erickson
/s/ David L. Goldsmith Director
- --------------------------------
David L. Goldsmith
/s/ Gene P. Guselli Director
- --------------------------------
Gene P. Guselli
Director
- --------------------------------
Carl E. Sanders
/s/ Jacquelyn M. Ward Director
- --------------------------------
Jacquelyn M. Ward
/s/ Morris S. Weeden Director
- --------------------------------
Morris S. Weeden
/s/ Frederick P. Zuspan, M.D. Director
- --------------------------------
Frederick P. Zuspan, M.D.
</TABLE>
II-6
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
----------- ---------------------- ------------
<S> <C> <C>
2 Agreement and Plan of Merger dated June 24, 1996, between the Company,
NRMC, NRMC Acquisition Corporation and certain NRMC
stockholders (filed as Exhibit 2.1 to the Company's
Current Report on Form 8-K dated July 10, 1996 (the
"Form 8-K") and incorporated herein by reference).
5 Opinion of Troutman Sanders LLP as to the legality of the
securities being registered.
24.1 Consent of Troutman Sanders LLP (contained in Exhibit 5).
24.2 Consent of Ernst & Young LLP, independent public
accountants
24.3 Consent of KPMG Peat Marwick LLP, independent public
accountants
24.4 Consent of Arthur Andersen LLP, independent public
accountants
25 Powers of attorney (see pages II-5 and II-6).
99.1 Shareholders Agreement dated February 28, 1995, among Healthdyne,
NRMC and certain NRMC stockholders (filed as Exhibit 99.3 to the
Form 8-K and incorporated herein by reference).
99.2 Private Placement and Registration Rights Agreement
between the Company and the Selling Stockholders dated
June 24, 1996.
</TABLE>
II-7
<PAGE> 1
EXHIBIT 5
August 29, 1996
Matria Healthcare, Inc.
1850 Parkway Place
Suite 1200
Marietta, Georgia 30067
Gentlemen:
We have acted as counsel to Matria Healthcare, Inc. (the "Company") in
connection with the proposed offering and sale by certain stockholders of the
Company (the "Selling Stockholders") of 772,032 shares (the "Shares") of the
Company's Common Stock, par value $.01 per share (together with associated
common stock purchase rights, the "Common Stock"), plus such additional
shares (the "Additional Shares") of the Common Stock, if any, as may be issued
to the Selling Stockholders pursuant to Section 3.6 of the Merger Agreement (as
hereinafter defined).
In the capacity described above, we have examined originals (or copies
certified or otherwise identified to our satisfaction) of the Company's
Registration Statement on Form S-3 (the "Registration Statement"), with respect
to the secondary public offering of the Shares and the Additional Shares, if
any, the form of Common Stock certificate, the Certificate of Incorporation and
Bylaws of the Company as in effect on the date hereof, the Agreement and Plan of
Merger dated as of June 24, 1996 (the "Merger Agreement") by and among the
Company, National Reproductive Medical Centers, Inc., NRMC Acquisition
Corporation and the persons and entities referred to as "Investors" therein, the
Private Placement and Registration Rights Agreement dated as of June 24, 1996
between the Company and certain of the Selling Stockholders, corporate and other
documents, records and papers and certificates of public officials. In such
examination, we have also assumed the genuineness of all signatures, the
authenticity of all documents submitted to us and the genuineness and conformity
to original documents of documents submitted to us as certified or photostatic
copies.
<PAGE> 2
Matria Healthcare, Inc.
Page 2
August 29, 1996
On the basis of such examination, it is our opinion that the Shares
are and the Additional Shares will be, when and if issued in accordance with
the provisions of Section 3.6 of the Merger Agreement, duly and validly issued
and outstanding, fully paid and non-assessable shares of Common Stock of the
Company.
We are members of the Bar of the State of Georgia. In expressing the
opinions set forth above, we are not passing on the laws of any jurisdiction
other than the laws of the State of Georgia, the General Corporation Law of the
State of Delaware and the Federal law of the United States of America.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the related prospectus.
Very truly yours,
Troutman Sanders LLP
<PAGE> 1
EXHIBIT 24.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Matria Healthcare,
Inc. for the registration of 772,032 shares of its common stock and to the
incorporation by reference therein of our report dated February 22, 1996,
except for note 13, the date of which is March 8, 1996, with respect to the
consolidated financial statements and schedules of Tokos Medical Corporation
(Delaware) included in its Form 8-K/A Amendment No. 1 To Form 8-K filed March
22, 1996 with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Orange County, California
August 28, 1996
<PAGE> 1
EXHIBIT 24.3
ACCOUNTANTS' CONSENT
The Board of Directors
Matria Healthcare, Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the registration
statement.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
August 28, 1996
<PAGE> 1
EXHIBIT 24.4
ARTHUR ANDERSEN LLP
Suite 3500
Spear Street Tower
One Market
San Francisco, CA 94105-3019
(415) 546-8700
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3, of our report on the
consolidated financial statements of National Reproductive Medical Centers,
Inc., subsidiaries and affiliate dated February 21, 1996 previously filed by
the Company on Form 8-K, dated July 10, as amended by its report on Form 8-K/A
dated August 28, 1996 and to all references to our Firm included in this
registration statement.
Arthur Andersen LLP
San Francisco, California
August 28, 1996
<PAGE> 1
EXHIBIT 99.2
PRIVATE PLACEMENT AND REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made and entered into as of this 24th day of June,
1996, by and among MATRIA HEALTHCARE, INC., a Delaware corporation ("Matria"),
and the persons and entities listed under the heading "Investors" on the
signature pages hereof (individually, an "Investor", and collectively, the
"Investors").
WHEREAS, Matria, National Reproductive Medical Centers, Inc., a
Delaware corporation ("NRMC"), NRMC Acquisition Corporation, a Delaware
corporation ("Acquisition Corporation"), and the Investors entered into an
Agreement and Plan of Merger of even date herewith (the "Merger Agreement")
pursuant to which it is proposed that Matria's wholly-owned subsidiary,
Acquisition Corporation, will merge with and into NRMC (the "Merger"), and all
of the NRMC Securities held by persons other than Matria will be converted in
the Merger into the right to receive either cash and Matria Common Stock or
cash as determined in accordance with the Merger Agreement; and
WHEREAS, the Merger Agreement contemplates that Matria and the
Investors shall enter into this Agreement concurrently with the Merger
Agreement,
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises contained herein and other good and valuable
consideration, the parties hereto covenant and agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the same meaning as provided in the Merger
Agreement.
2.1 Investment Intent. Each Investor and each holder of NRMC
Capital Stock electing to receive Matria Common Stock in the Merger severally,
as to itself, only:
(a) represents that the Matria Common Stock and the
Matria Options are being acquired for its own account for investment and not
with a view to any distribution or public offering within the meaning of the
Securities Act except as contemplated by Section 3 hereof;
(b) acknowledges that neither the Matria Common Stock nor
the Matria Options to be received hereunder have been registered under the
Securities Act;
<PAGE> 2
(c) represents that it is an "accredited investor" within
the meaning of Rule 501 of the Securities Act or that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in Matria Common Stock, and that the
information provided to Matria in the questionnaire completed by such Investor
is true and correct;
(d) acknowledges that it received prior to executing this
Agreement the Matria Disclosure Documents listed in Schedule A to this
Agreement;
(e) acknowledges that Matria has made available to it at
a reasonable time prior to its execution of this Agreement the opportunity to
ask questions and receive answers concerning the terms and conditions of this
Agreement and to obtain any additional information which Matria possesses or
can acquire without unreasonable effort or expense that is necessary to verify
the accuracy of the information referred to in (d) above; and
(f) agrees that it will not sell or otherwise transfer
any of the Matria Common Stock except pursuant to the registered offerings
contemplated by Section 3 hereof or in one or more private transactions if, in
the opinion of counsel reasonably satisfactory to Matria, such transaction or
transactions are not required to be registered under the Securities Act.
2.2 Legend. Each certificate representing the Matria Common Stock
issued pursuant to Article 3 of the Merger Agreement shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM, OR
IN THE ABSENCE OF RECEIPT BY THE COMPANY OF AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT IT MAY BE
SOLD OR TRANSFERRED WITHOUT SUCH REGISTRATION.
3.1 Registration by Matria. As soon as practicable after the
Closing Date but in no event later than August 30, 1996, Matria shall file a
registration statement under the Securities Act (the "Registration Statement")
with respect to resales by the Investors and any other holder of NRMC Capital
Stock electing to receive Matria Common Stock in the Merger (collectively, the
"Holders") of the Matria Common Stock issued pursuant to Article 3 of the
Merger Agreement and shall cause such registration to become effective as soon
as practicable thereafter.
2
<PAGE> 3
3.2 Registration Statement Form. The registration provided
pursuant to Section 3.1 shall be effected by the filing of a Registration
Statement on Form S-3.
3.3 Expenses. Except as otherwise prohibited by applicable law,
Matria will pay all expenses of registration including, without limitation,
fees and disbursements of counsel for Matria, blue sky fees and expenses, and
accountants' expenses including without limitation any special audits or
"comfort" letters incident to or required by any such registration, transfer
taxes, fees of transfer agents and registrars, costs of insurance, and any fees
and disbursements of underwriters, customarily paid by issuers of securities,
but excluding underwriting discounts and commissions and fees of any counsel
for the Holders.
3.4 Obligations with Respect to Registration.
(a) In connection with the registration of the Matria
Common Stock, Matria shall:
(i) promptly prepare and file with the Commission
any amendments (including post-effective amendments) and
supplements to the Registration Statement and to the
prospectus included therein (the "Prospectus") as may be
necessary to keep such Registration Statement continuously
current and effective and to comply with the provisions of the
Securities Act and the rules and regulations promulgated
thereunder with respect to the disposition of all Matria
Common Stock covered by such Registration Statement for the
period required to effect the distribution of such Matria
Common Stock, provided, that such obligation shall expire upon
the earlier of (i) two years following the Closing Date of the
Merger, or (ii) 30 days after Matria gives notice to each
Holder of Matria Common Stock covered by the Registration
Statement of its intention to terminate such registration,
which notice shall not be given earlier than 240 days after
the Effective Date of such registration statement;
(ii) notify the Holders and confirm such advice in
writing, (w) when such Registration Statement becomes
effective, (x) when the filing of any post-effective amendment
to such Registration Statement or supplement to the Prospectus
is required, when the same is filed and, in the case of a
post-effective amendment, when the same becomes effective, (y)
of any request by the Commission for any amendment of or
supplement to such Registration Statement or the Prospectus or
for additional information and (z) of the entry of any stop
order suspending the effectiveness of such Registration
Statement or the initiation of any proceedings for that
purpose, and, if such stop order shall be entered, Matria
shall use its best efforts promptly to obtain the lifting
thereof; and
(iii) furnish at Matria's expense to the Holders (x)
at a reasonable time prior to the filing thereof with the
Commission a copy of the Registration
3
<PAGE> 4
Statement in the form in which Matria proposes to file the same; not
later than one day prior to the filing thereof, a copy of any amendment
(including any post-effective amendment) to such Registration
Statement; and promptly following the effectiveness thereof, a
conformed copy of the Registration Statement as declared effective by
the Commission and of each post-effective amendment thereto, including
financial statements and all exhibits and reports incorporated therein
by reference, and (y) such number of copies of the preliminary, any
amended preliminary, and final Prospectus and of each post-effective
amendment or supplement thereto, as may reasonably be required in order
to facilitate the disposition of the Matria Common Stock covered by
such Registration Statement in conformity with the requirements of the
Securities Act and the rules and regulations promulgated thereunder,
but only while Matria is required under the provisions hereof to cause
the Registration Statement to remain effective.
(b) Each of the Holders receiving Matria Common Stock
hereunder shall furnish to Matria such information regarding such Holder and
the distribution of the Matria Common Stock as Matria may from time to time
reasonably request in writing and as shall be required by law or by the
Commission in connection therewith.
3.5 Holdback Agreements.
(a) Notwithstanding any provision of this Agreement to
the contrary, in the event Matria notifies the Holders that Matria intends to
file a registration statement in connection with an underwritten offering
(other than a shelf offering) (the "Offering") by Matria of any of its Common
Stock after the later of (i) six months from the date of this Agreement and
(ii) three months after the effectiveness of the Registration Statement, the
Holders shall refrain from selling or otherwise distributing any Matria Common
Stock within the period requested in writing by the managing underwriter for
such Offering, which period shall begin no earlier than two days (subject to
prior written notice thereof) prior to the effective date of such registration
statement and shall end no later than 90 days after such effective date (the
"Offering Restricted Period"); provided, however, that the Holders shall not be
required to refrain from selling in connection with any Offering unless (i)
Matria and all of the directors and executive officers of Matria are also
required to refrain from selling for a comparable period with respect to any
shares not registered for sale by them in such Offering pursuant to contractual
registration rights in effect on the date of this Agreement; and (ii) each of
the Holders whose shares of Matria Common Stock are covered by the Registration
Statement shall be given the opportunity to include such Matria Common Stock in
the Registration Statement filed in connection with such Offering unless the
managing underwriter of the Offering in good faith believes that the size of
the Offering should be limited to a number of shares less than that requested
to be registered by Matria and the Holders and all other persons having
contractual rights to include securities in such Registration Statement ("Other
Holders"), in which case the number of shares to be registered on behalf of the
Holders shall be reduced on a proportional basis, together with
4
<PAGE> 5
shares requested to be registered by all Other Holders, it being understood
that the Company shall have priority as to sales over the Holders and each
Other Holder. The foregoing holdback agreement by the Holders shall be
applicable only to the first such underwritten offering in any twelve-month
period. If a Registration Statement filed pursuant to Section 3.1 is in effect
at any time during the Offering Restricted Period and Holders are not permitted
to include in the Registration Statement filed for the Offering all shares
requested by Holders to be included in the Offering, Matria's obligation under
Section 3.4(a) to keep such registration statement current and effective shall
be extended for a number of days equal to the number of days such Registration
Statement was in effect during the Offering Restricted Period, for such or, if
earlier, until (i) the date on which all of the Matria Common Stock initially
covered thereby has been disposed of or (ii) until the date on which the
holding period required under the Commission's Rule 144(d)(1) with respect to
such Common Stock shall have been satisfied.
(b) Notwithstanding anything set forth herein to the
contrary, in the event that Matria notifies the Holders in writing (the
"Disclosure Notice") that Matria desires to amend the Registration Statement or
to supplement the prospectus in order to disclose material information required
to be disclosed in the prospectus included in such registration statement, as
then in effect, in order to correct an untrue statement of a material fact or
to disclose an omitted material fact that is required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, the Holders shall refrain from selling Matria
Common Stock thereunder until Matria notifies the Holders in writing that the
required amendment or supplement has been filed with the Commission or until
120 days following the Disclosure Notice, whichever is earlier (the "Disclosure
Restricted Period"). If a registration statement filed pursuant to Section 3.1
is effective at the time during the Disclosure Restricted Period, Matria's
obligation under Section 3.4(a) to keep such Registration Statement current and
effective shall be extended for a number of days equal to the number of days
such Registration Statement was in effect during the Disclosure Restricted
Period, or, if earlier, until (i) the date on which all of the Matria Common
Stock initially covered thereby has been disposed of or (ii) until the holding
period required under the Commission's Rule 144(d)(1) with respect to such
Common Stock shall have been satisfied.
3.6 SEC Filings. Matria will use commercially reasonable efforts
to timely file all reports required to be filed by it under the Exchange Act
and the rules and regulations adopted thereunder to the extent required to
enable the sale of the Matria Common Stock pursuant to a Registration Statement
filed on Form S-3 or pursuant to Rule 144 promulgated under the Securities Act
for the period commencing on the date hereof and ending on the earlier of (i)
three years from the Closing Date or (ii) the sale by the Holders of all of the
Matria Common Stock referred to in Section 3.1.
5
<PAGE> 6
3.7 Indemnification and Contribution.
(a) By Matria. In connection with the registration under
the Securities Act of the Matria Common Stock pursuant to this Section 3, Matria
shall indemnify and hold harmless the Holders and each other person, if any, who
controls any of the Holders within the meaning of Section 15 of the Securities
Act ("controlling persons"), against any losses, claims, damages or liabilities,
joint or several (or actions in respect thereof) ("Losses"), to which each such
indemnified party may become subject, under the Securities Act or otherwise, but
only to the extent such Losses arise out of or are based upon (1) any untrue
statement or alleged untrue statement of any material fact contained, on the
effective date thereof, in any Registration Statement under which such Matria
Common Stock was registered under the Securities Act, in any preliminary
Prospectus (if used prior to the effective date of such Registration Statement)
or in any final Prospectus or in any post-effective amendment or supplement
thereto (if used during the period Matria is required to keep the Registration
Statement effective) (the "Disclosure Documents"), or (ii) any omission or
alleged omission to state in any of the Disclosure Documents a material fact
required to be stated therein or necessary to make the statements made therein
not misleading, or (iii) any violation of any federal or state securities laws
or rules or regulations thereunder committed by Matria in connection with the
performance of its obligations under this Section 3; and Matria will reimburse
each such indemnified party for all legal and other expenses reasonably incurred
by such party in investigating or defending against any such claims, whether or
not resulting in any liability, or in connection with any investigation or
proceeding by any governmental agency or instrumentality with respect to any
offering of securities pursuant to this Section 3, but excluding any amounts
paid in settlement of any action, suit, arbitration, proceeding, litigation or
investigation (collectively "Litigation"), commenced or threatened, if such
settlement is effected without the prior written consent of Matria; provided,
however, that Matria shall not be liable to an indemnified party or any other
Holder or controlling person of any other Holder in any such case to the extent
that any such Losses arise out of or are based upon (i) an untrue statement or
omission or alleged omission (x) made in any such Disclosure Documents in
reliance upon and in conformity with written information furnished to Matria by
such indemnified party for use therein, or (y) made in any preliminary
Prospectus if a copy of the final Prospectus was not delivered to the person
alleging any loss, claim, damage or liability for which Losses arise at or prior
to the written confirmation of the sale of such Matria Common Stock to such
person and the untrue statement or omission concerned had been corrected in such
final Prospectus and copies thereof had timely been delivered by Matria to such
indemnified party, or (z) made in any Prospectus used by such indemnified party
if a court of competent jurisdiction finally determines that at the time of such
use such indemnified party had actual knowledge of such untrue statement or
omission; or (ii) the use of any Prospectus after such time as Matria has
advised such indemnified party in writing that the filing of a post-effective
amendment or supplement thereto is required, except the Prospectus as so amended
or supplemented, or the use of any Prospectus after such time as the obligation
of Matria to keep the same current and effective has expired. In determining
the actual knowledge of an indemnified party for purposes of clause (i)(z)
above, the actual knowledge (without any requirement of due
6
<PAGE> 7
inquiry) of a controlling person of the Holders who is also a director of
Matria shall be imputed to the Holders (and its other controlling persons).
(b) By the Holders. In connection with the registration
under the Securities Act of the Matria Common Stock of the Holders pursuant to
this Section 3, the Holders receiving such Matria Common Stock shall, severally,
indemnify and hold harmless Matria, each of its directors, each of its officers
who have signed such Registration Statement and each other person, if any, who
controls Matria within the meaning of Section 15 of the Securities Act, and each
other Holder and each controlling person of such Holders against any Losses to
which such indemnified party may become subject under the Securities Act or
otherwise, but only to the extent such Losses arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any of the Disclosure Documents or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, if the statement or omission was made in
reliance upon and in conformity with written information furnished to Matria by
such indemnifying party for use therein; (ii) the use by such indemnifying party
of any Prospectus after such time as Matria has advised such indemnifying party
in writing that the filing of a post-effective amendment or supplement thereto
is required, except the Prospectus as so amended or supplemented, or after such
time as the obligation of Matria to keep the Registration Statement effective
and current has expired, or (iii) any information given or representation made
by such indemnifying party in connection with the sale of Matria Common Stock
which is not contained in and not in conformity with the Prospectus (as amended
or supplemented at the time of the giving of such information or making of such
representation); and such indemnifying party shall reimburse each such
indemnified party for all legal and other expenses reasonably incurred by such
party in investigating or defending against any such claims, whether or not
resulting in any liability, or in connection with any investigation or
proceeding by any governmental agency or instrumentality relating to any such
claims with respect to any offering of securities pursuant to this Section 3,
but excluding any amounts paid in settlement of any Litigation, commenced or
threatened, if such settlement is effected without the prior written consent of
such indemnifying party.
(c) Actions Commenced. If a third party commences any
action or proceeding against an indemnified party related to any of the matters
subject to indemnification under Section 3.7(a) or (b) hereof, such indemnified
party shall promptly give notice to the indemnifying party in writing of the
commencement thereof, but failure so to give notice shall not relieve the
indemnifying party from any liability which it may have hereunder unless the
indemnifying party is prejudiced thereby.
The indemnifying party shall be entitled to control
the defense or prosecution of such claim or demand in the name of the
indemnified party, with counsel satisfactory to the indemnified party, if it
notifies the indemnified party in writing of its intention to do so within 20
days of its receipt of the notice from the indemnified party without prejudice,
however, to the right of the indemnified party to participate therein through
counsel of its own choosing, which participation shall be at the indemnified
party's
7
<PAGE> 8
expense unless (i) the indemnified party shall have been advised by its counsel
that use of the same counsel to represent both the indemnifying party and the
indemnified party would represent a conflict of interest (which shall be deemed
to include any case where there may be a legal defense or claim available to the
indemnified party which is different from or additional to those available to
the indemnifying party), in which case the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified party,
or (ii) the indemnifying party shall fail vigorously to defend or prosecute such
claim or demand within a reasonable time. Whether or not the indemnifying party
chooses to defend or prosecute such claim, the parties hereto shall cooperate in
the prosecution or defense of such claim and shall furnish such records,
information and testimony and attend such conferences, discovery proceedings,
hearings, trials and appeals as may be requested in connection therewith.
(d) Contribution. If the indemnification provided for in
subsections (a) or (b) of this Section 3.7 is unavailable to or insufficient to
hold the indemnified party harmless under subsections (a) or (b) above in
respect of any Losses referred to therein for any reason other than as specified
therein, then the indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses in such proportion
as is appropriate to reflect the relative fault of the indemnifying party on the
one hand and such indemnified party on the other in connection with the
statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by (or omitted to be supplied by) Matria or the
Holders and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
or payable by an indemnified party as a result of the Losses referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) Limitation of Liability of Holders. The
indemnification obligation under Section 3.7(b), and the contribution obligation
under Section 3.7(d), of a Holder shall be limited to the amount of proceeds
received by such Holder upon the sale of Matria Common Stock under the
registration statement filed pursuant to this Section 3.
4.1 Notices. All notices and other communications required to be
given hereunder shall be in writing and shall be deemed to have been duly given
upon delivery, if delivered by hand; if given by mail, three (3) days after the
date of mailing, postage prepaid, certified or registered mail to a party hereto
at the address set forth below; if given by facsimile, upon transmission to the
number set forth below provided written confirmation is sent to the address
below; if given by overnight delivery service addressed to the address set forth
below, the business day following the day on which such notice is sent:
8
<PAGE> 9
If to Matria:
Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30066
Attention: J. Brent Burkey, Esq.
Facsimile: (770) 432-7769
With a copy to:
Troutman Sanders LLP
NationsBank Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: James L. Smith, III, Esq.
Facsimile: (404) 885-3900
If to the Investors:
To the address of such Investor set forth beneath its
signature below.
If to any other Holder:
To the address specified in such Holder's form of
election to receive Matria Common Stock in the
Merger.
Any party hereto may change its address for purposes of receiving notice
pursuant to this Agreement by giving notice of such new address to each other
party hereto.
4.2 Interpretation. The Sections and paragraph headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement. Terms used in the plural include
the singular, and vice versa, unless the context otherwise requires.
4.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Telecopy transmission
of signatures shall be deemed originals.
4.4 Miscellaneous. This Agreement, including its Exhibits (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof; (ii) is not intended to and shall not
confer upon any other person any rights or remedies hereunder or otherwise with
respect to the subject matter hereof; (iii) shall not be assigned by operation
of
9
<PAGE> 10
law or otherwise; and (iv) shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of Delaware.
4.5 Diligence. Each of the parties certifies that he, she or it
has (a) received a copy of this Agreement for review and study before being
asked to execute it; (b) read this Agreement carefully; (c) had sufficient
opportunity before he, she or it executed this Agreement to ask questions about
this Agreement, to which he, she or it has received satisfactory answers to any
such questions; and (d) understands his, her or its rights and obligations
under this Agreement.
4.6 Binding Effect. The terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by or against
the parties and their respective legal representatives, heirs, successors and
permitted assigns.
4.7 Severability. If any part of this Agreement or other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect to the greatest extent permitted by law.
4.8 Preparation of Agreement. This Agreement shall not be
construed more strongly against any party regardless of who is responsible for
its preparation.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the date first above written.
MATRIA
MATRIA HEALTHCARE, INC.
(CORPORATE SEAL)
By: _____________________________
Name:
Title:
INVESTORS
FERTILITY CENTER PARTNERS
By:_______________________________
Title:____________________________
GEOFFREY SHER, M.D.
__________________________________
Address:
__________________________________
__________________________________
__________________________________
IRA of GEOFFREY SHER, M.D.
Address:
__________________________________
__________________________________
__________________________________
[SIGNATURES CONTINUED ON NEXT PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
TRUSTEE,
KNUTZEN 1992 CHILDREN'S TRUST
__________________________________
Address:
__________________________________
__________________________________
__________________________________
TRUSTEE,
KNUTZEN 1992 IRREVOCABLE TRUST
Address:
__________________________________
__________________________________
__________________________________
VICTOR KNUTZEN, M.D.
Address:
__________________________________
__________________________________
__________________________________
[SIGNATURES CONTINUED ON NEXT PAGE]
12
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
TRUSTEE,
SHER 1992 CHILDREN'S TRUST
Address:
__________________________________
__________________________________
__________________________________
TRUSTEE,
SHER 1992 IRREVOCABLE TRUST
Address:
__________________________________
__________________________________
__________________________________
HARLEY J. EARL, II
Address:
__________________________________
__________________________________
__________________________________
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SCHEDULE A
LIST OF DOCUMENTS RECEIVED FROM MATRIA HEALTHCARE, INC. FOR REVIEW
1. Joint Proxy Statement/Prospectus dated February 8, 1996 regarding the
merger among Healthdyne, Inc., Tokos Medical Corporation (Delaware)
and Matria Healthcare, Inc.
2. Form 10-K of Matria Healthcare, Inc. for the fiscal year ended
December 31, 1995.
3. Press Release dated May 1, 1996 issued by Matria Healthcare, Inc. to
announce its results of operations for the first quarter of 1996.
4. Draft of the agreements to be entered into by each of Dr. Geoffrey
Sher and Harley J. Earl, II related to the Matria Healthcare, Inc.
stock they will receive in the proposed transaction.
5. Form 10-Q of Matria Healthcare, Inc. for the three months ended March
31, 1996.
