SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1999.
Or
_ Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from ______ to ______.
Commission file number 0-20619
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, 12th Floor, Marietta, Georgia 30067
(Address of principal executive offices) (Zip Code)
(770) 767-4500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
The number of shares outstanding of the issuer's only class of Common Stock,
$.01 par value, together with associated Common Stock purchase rights, as of
October 31, 1999 was 36,771,099.
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Matria Healthcare, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS ......................................................................... September30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................ $ 5,600 9,109
Short-term investments ................................................... - 2,859
Trade accounts receivable, less allowances of $17,228 and $21,235 at
September 30, 1999 and December 31,
1998, respectively .................................................... 49,426 37,311
Inventories .............................................................. 12,056 1,699
Prepaid expenses and other current assets ................................ 3,181 4,556
------ ------
Total current assets .................................................. 70,263 55,534
Property and equipment, less accumulated depreciation of
$27,452 and $30,238 at September 30,1999 and
December 31, 1998, respectively .......................................... 18,804 16,865
Intangible assets, less accumulated amortization of $8,573 and $612 at September
30, 1999 and December 31, 1998,
respectively ............................................................. 137,486 16,261
Deferred tax asset ............................................................. 31,710 -
Cash surrender value of life insurance ......................................... 7,359 4,425
Other assets ................................................................... 3,192 3,949
-------- ------
$268,814 97,034
======== ======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Matria Healthcare, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY September 30, December 31,
1999 1998
---------------- -------------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt
and obligations under capital leases $ 13,164 718
Accounts payable, principally trade 24,842 8,939
Accrued liabilities 13,508 9,536
-------- ------
Total current liabilities 51,514 19,193
Long-term debt and obligations under capital leases,
excluding current installments 94,757 18,385
Other long-term liabilities 8,269 9,575
-------- ------
Total liabilities 154,540 47,153
Preferred stock, $.01 par value. Authorized 50,000,000 shares:
Series A convertible, redeemable; issued 10,000 shares at
September 30, 1999; none at December 31, 1998;
redemption value $10,000 10,000
-
Series B redeemable; issued 35,000 shares at September 30, 1999; none at
December 31, 1998;
redemption value $35,000 30,893
-
Common shareholders' equity:
Common stock, $.01 par value. Authorized 100,000,000 shares:
issued and outstanding 36,713,683 and 36,409,544 shares
at September 30, 1999 and December 31,1998, respectively 367 364
Additional paid-in capital 293,120 280,585
Accumulated other comprehensive loss (235) -
Accumulated deficit (216,336) (227,533)
Notes receivable and accrued interest from shareholder (3,535) (3,535)
--------- ---------
Total shareholders' equity 73,381 49,881
--------- ---------
$268,814 97,034
======== =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Matria Healthcare, Inc. and Subsidiaries
Consolidated Condensed Statements of Operations
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues $63,899 34,107 185,560 100,399
Cost of revenues 32,047 13,790 93,785 39,914
Selling and administrative expenses 19,432 16,173 61,094 45,994
Provision for doubtful accounts 1,947 1,763 5,887 4,967
Amortization of intangible assets 2,610 9,404 7,810 27,698
Asset impairment charges - 74,496 - 74,496
Acquired in-process research and development - 2,482 - 2,482
Restructuring charges 1,983 - 1,983 -
-------- -------- -------- --------
Operating earnings (loss) 5,880 (84,001) 15,001 (95,152)
Interest(expense, net (2,086) (285) (5,659) (291)
Other income (expense), net (57) 130 104 344
-------- -------- -------- --------
Net earnings (loss) before income taxes 3,737 (84,156) 9,446 (95,099
Income tax benefit (4,000) - (4,000) -
-------- -------- -------- --------
Net earnings (loss) 7,737 (84,156) 13,446 (95,099)
Redeemable preferred stock dividend (800) - (2,249) -
Accretion of Series B redeemable preferred stock (110) - (307) -
-------- -------- -------- --------
Net earnings (loss) available to common shareholders $ 6,827 (84,156) 10,890 (95,099)
======== ========= ======== ========
Net earnings (loss) per common share:
Basic $ 0.19 (2.31) 0.30 (2.60)
======= ======= ======== ========
Diluted $ 0.17 (2.31) 0.28 (2.60)
======= ======= ======== ========
Weighted average shares outstanding:
Basic 36,667 36,461 36,549 36,646
======= ======= ======== ========
Diluted 41,336 36,461 40,378 36,646
======= ======= ======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
Matria Healthcare, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------
1999 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss) $ 13,446 (95,099)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Restructuring charges 1,606 -
Deferred tax asset (4,000) -
Impairment of assets - 74,996
Acquired in-process research and development - 2,482
Depreciation and amortization 12,631 31,489
Provision for doubtful accounts 5,887 4,967
Changes in assets and liabilities, net of effect of acquisitions:
Trade accounts receivable (9,891) (7,496)
Inventories (1,523) (362)
Prepaid expenses and other current assets 711 (1,542)
Other assets (2,964) (2,538)
Accounts payable (1,953) 98
Accrued and other liabilities (7,114) (13,024)
--------- --------
Net cash provided by (used in) operating activities 6,836 (6,529)
--------- --------
Cash Flows from Investing Activities:
Purchases of property and equipment (5,982) (2,561)
Short-term investments 2,859 9,011
Acquisition of businesses, net of cash acquired (93,019) (17,370)
--------- --------
Net cash used in investing activities (96,142) (10,920)
--------- --------
Cash Flows from Financing Activities:
Borrowings under credit agreement 108,000 16,780
Proceeds from issuance of debt 891 781
Principal repayments of debt and obligations under capital lease (22,045) (1,093)
Proceeds from issuance of common stock 635 525
Preferred stock dividend payments (1,449) -
Purchase of treasury stock - (2,397)
Other, net - (60)
--------- --------
Net cash provided by financing activities 86,032 14,536
--------- --------
Effect of exchange rate changes on cash and cash equivalents (235) -
--------- --------
Net decrease in cash and cash equivalents (3,509) (2,913)
Cash and cash equivalents at beginning of period 9,109 9,086
--------- --------
Cash and cash equivalents at end of period $ 5,600 6,173
========= ========
Supplemental disclosures:
Cash payments for interest $ 5,534 498
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Condensed
Financial Statements
(Amounts in thousands, except share and per share amounts)
(Unaudited)
1. General
The consolidated condensed financial statements as of September 30,
1999 and for the three and nine months ended September 30, 1999 and
1998 are unaudited. In the opinion of management, all adjustments,
consisting of normal recurring accruals, necessary for fair
presentation of the consolidated financial position and results of
operations for the periods presented have been included. Certain
reclassifications of prior period information have been made to conform
to the current year presentation. The results for the three and nine
month periods ended September 30, 1999 are not necessarily indicative
of the results for the full year ending December 31, 1999.
The consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and related
notes included in the Annual Report on Form 10-K of Matria Healthcare,
Inc. ("Matria" or the "Company") for the year ended December 31, 1998.
2. Net Earnings (Loss) Per Share of Common Stock
Basic earnings (loss) per common share available to common shareholders
are based on the weighted average number of common shares outstanding.
Diluted earnings (loss) per common share are based on the weighted
average number of common shares outstanding and dilutive potential
common shares, such as dilutive stock options and warrants, determined
using the treasury stock method, and dilutive convertible preferred
shares, determined using the if-converted method.
3. Acquisitions
Effective January 1, 1999, the Company completed the acquisition of
substantially all of the assets of Gainor Medical Management, L.L.C.
("Gainor Medical"), for a purchase price of approximately $130,000. The
acquisition was accounted for under the purchase method of accounting
and resulted in purchased patient lists of $3,300, executive
non-compete agreements of $500 and goodwill of $114,301. The
acquisition agreement also provides for additional contingent purchase
price of up to $35,000 based on the 1999 financial performance of the
Gainor Medical businesses. The assets acquired included the outstanding
capital stock of and membership interests and other equity interests in
the subsidiaries of Gainor Medical. Results of its operations have been
included in the Company's consolidated results of operations effective
January 1, 1999. If earned, the contingent purchase price is payable by
<PAGE>
the issuance of subordinated notes in the year 2000, and would be
recorded as additional goodwill when earned. These notes would bear an
interest rate of 12% per annum and principal payments would be made one
third of the original note amount on the third, fourth and fifth
anniversary of the note.
At the closing of the transaction, the Company paid $83,758 of the
purchase price in cash to the seller, assumed approximately $1,242 in
debt and issued $45,000 in redeemable preferred stock and warrants of
the Company. The transaction also included a cash adjustment payable by
the Company of $6,573, one-half of which was paid at the closing and
the remaining one-half of which was paid during the second quarter of
1999.
In connection with the acquisition of the Gainor Medical business, the
Company recognized a $20,000 deferred tax asset and a corresponding
decrease in goodwill for the estimated tax benefits of the net
operating loss carryforward to be realized in the future as a result of
the acquisition (see Note 8).
The cash portion of the purchase price was financed partially through a
$125,000 five-year bank credit facility, which the Company entered into
in January 1999 (See Note 5).
In January 1998, the Company converted a $250 note receivable from
Diabetes Management Services, Inc. ("DMS") and paid $500 cash to
acquire a 10% equity interest in DMS. During 1998, the Company made
advances to fund working capital of DMS totaling $1,335. In January
1999, the Company converted the notes receivable for these advances and
paid cash of $6,500 to acquire the remaining equity interests of DMS.
The acquisition was accounted for using the purchase method of
accounting and resulted in goodwill of $10,765. Results of DMS's
operations have been included in the Company's consolidated results of
operations effective January 1, 1999.
Summarized below are the unaudited pro forma results of operations of
the Company for the nine months ended September 30, 1998 as if the
acquisitions described above and the Company's acquisition in July 1998
of Quality Diagnostic Services, Inc. ("QDS") had been effective January
1, 1998. The results of operations of the 1998 and 1999 acquisitions
have been included in the consolidated condensed statements of
operations of the Company as of January 1, 1999 and therefore no pro
forma results are presented for the nine months ended September 30,
1999.
Nine Months Ended
September 30, 1998
---------------------
<TABLE>
<CAPTION>
<S> <C>
Revenues 168,173
Net loss available to common shareholders (105,325)
Net loss per common share (2.87)
</TABLE>
<PAGE>
4. Disposition of Assets
During the third quarter of 1999 the Company determined that its
infertility business, National Reproductive Medical Centers, Inc.
("NRMC") no longer fit the Company's diversified disease management
strategy and sold the assets of two of the three clinics, with no gain
or loss recognized on the sale of these assets. The assets of the third
clinic are expected to be sold in the fourth quarter of 1999.
5. Long Term Debt
In January 1999, in connection with the acquisitions of the Gainor
Medical business and DMS, the Company replaced its prior credit
facility with a $125,000 five-year bank credit facility. The new
facility consists of an $80,000 term loan facility, payable $6,000 in
1999, $12,000 in 2000, $14,000 in 2001, $16,000 in 2002, $20,000 in
2003 and $12,000 in 2004 and a $45,000 revolving credit facility. The
facility, which is collateralized by accounts receivable, inventories
and certain assets of the Company, provided, at the Company's option,
interest at the prime rate plus .250% to 1.25% or the LIBOR rate plus
1.5% to 2.5%. Subsequent to September 30, 1999 the Company reached
agreement with the bank to increase the interest rate options to the
prime rate plus 1.25% to 2.25% or LIBOR plus 2.25% to 3.25% in exchange
for the waiver of restrictions on the use of proceeds from the sale of
certain assets and amendment of certain other financial requirements
and covenants. The facility requires a commitment fee payable
quarterly, in arrears, of .375% to .500%, based upon the unused
portion. As of September 30, 1999, the total outstanding under the term
loan facility was $77,000 at an interest rate of 8.50%, and the total
outstanding under the revolving credit facility was $28,000 at an
interest rate of 8.063%. Under this agreement, the Company is required
to maintain certain financial ratios and certain limitations are placed
on cash dividends. At September 30, 1999, the Company was in compliance
with these requirements.
6. Preferred Stock
In connection with the purchase of the Gainor Medical business, the
Company designated 16,500 shares and issued 10,000 shares of 4% Series
A convertible redeemable preferred stock ("Series A CRPS"), and
designated 60,000 shares and issued 35,000 shares of 8% Series B
redeemable preferred stock ("Series B RPS") with attached warrants to
purchase 4,000,000 shares of the Company's common stock at $3.00 per
share.
The Series A CRPS is convertible at any time into 2,222,222 shares of
common stock. At its option, the Company may redeem the Series A CRPS,
at any time beginning two years after the acquisition date, after the
30 day moving average of the closing price of the Company's stock has
exceeded $5.40 per share, at a redemption price of $1,222 per share.
The Series A CRPS has a mandatory redemption feature, which requires
the Company to redeem one third of the shares issued on each of the
eighth, ninth and tenth anniversary dates of the original issuance date
at the redemption price of $1,000 per share. Redemption may occur at
the holder's request, in the event there is a change of control of the
Company, as defined in the applicable shareholder agreement. Dividends
are payable quarterly, in arrears, in cash or additional shares of
Series A CRPS, or a combination thereof, at the option of the Company.
The Series A CRPS has been recorded at the mandatory redemption value.
<PAGE>
At its option, the Company may redeem the Series B RPS in whole or in
part at any time at the redemption price of $1,000 per share. The
Series B RPS has a mandatory redemption feature which requires the
Company to redeem one third of the shares issued on each of the eighth,
ninth and tenth anniversary dates of the original issuance date, at the
redemption price of $1,000 per share. At issuance date, the Company
allocated $4,415 of the $35,000 total redemption value of Series B RPS
to the fair value of the warrants issued, using a Black-Scholes option
pricing model. This amount was recorded as a credit to additional
paid-in capital and is being accreted over the term of the Series B
RPS.
In the event of liquidation, holders of Series A CRPS and Series B RPS
are entitled to receive, from the assets available for distribution to
the shareholders, an amount in cash or property at fair market value,
equal to $1,000 per share plus unpaid dividends. The Company is
restricted from paying dividends on the Company's common stock until
all unpaid dividends on the Series A CRPS and Series B RPS are paid.
7. Restructuring charges
In order to provide for more efficient patient surveillance and to
reduce operating costs, the Company implemented a consolidation plan in
the third quarter of 1999 for the Women's Health segment. The number of
monitoring centers was reduced from 38 to 21. In conjunction with this
consolidation, the Company incurred restructuring charges of $1,983 in
the third quarter. Of these costs, $1,435 related to future lease
payments and other related costs for closed facilities, $318 related to
involuntary severance of employees, and $230 related to the write-down
of capital equipment. Accrued restructuring charges at September 30,
1999 were $1,606.
8. Income Taxes
As of the acquisition date of the Gainor Medical business, the Company
had deferred tax assets of approximately $45,000 with a corresponding
valuation allowance of the same amount. In connection with the
acquisition, the valuation allowance was reduced and a $20,000 deferred
tax asset was recognized, based upon an assessment of combined future
operating results of the combined businesses. A corresponding $20,000
decrease in the goodwill resulting from this acquisition was recorded.
In the third quarter of 1999, the Company further reduced the valuation
allowance and recognized an additional $11,710 of deferred tax assets,
as a result of continued improved operating results. Of this amount,
$7,710 related to the operating loss carryforward generated by exercise
of stock options and was credited to additional paid in capital, with
remaining $4,000 being credited to income.
If the Company achieves sufficient future profitability to assure
utilization of a greater portion of or all of the remaining deferred
tax asset of approximately $13,290, the valuation allowance will be
reduced through a credit to income. The Company will reduce its
deferred tax asset as taxable income is earned and the benefits are
realized.
<PAGE>
9. Business Segment Information
The Company's reportable business segments are the strategic business
units that offer different products and services. They are managed
separately, and the Company evaluates performance based on operating
earnings of the respective business unit.
As a result of the acquisitions in the last half of 1998 and the first
quarter of 1999, the Company's operations have been classified into
three reportable business segments, Women's Health, Diabetes Supplies
and Services and Cardiovascular. The Women's Health segment offers
services designed to assist physicians and payors in the cost effective
management of maternity patients including: specialized home nursing;
risk assessment; patient education and management; home uterine
contraction monitoring; infusion therapy; gestational diabetes
management; and other monitoring and clinical services as prescribed by
the patient's physician. The Diabetes Supplies and Services segment has
two components: diabetes disease management services and microsampling
products, which are products used to obtain and test small samples of
bodily fluids. The Cardiovascular segment provides cardiac event
monitoring, holter monitoring and pacemaker follow-up services. The
Other segments include three business segments that are below the
quantitative threshold for disclosure: respiratory disease management;
infertility practice management services; and clinical record software
and services.
The accounting policies of the segments are the same as those for the
consolidated entity. There are no intersegment sales, and operating
earnings (loss) by business segment excludes interest income, interest
expense, and corporate expenses.
<PAGE>
Summarized financial information as of and for the nine month periods ended
September 30, 1999 and 1998 by business segment follows:
<TABLE>
<CAPTION>
Revenues Operating Earnings (Loss)
---------------------------------- ----------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Women's Health 82,179 87,195 10,822 (12,105)
Diabetes Supplies and Services 81,590 - 7,589 -
Cardiovascular 11,500 3,150 2,041 (1,819)
Other Segments 10,291 10,054 (1,490) (3,852)
-------- -------- ------- --------
Total segments 185,560 100,399 18,962 (17,776)
General Corporate - - (3,961) (2,880)
Asset impairment - - - (74,496)
Interest expense, net - - (5,659) (291)
Other income, net - - 104 344
-------- -------- ------- --------
Consolidated revenues and earnings
(loss) before income taxes $ 185,560 100,399 9,446 (95,099)
========== ========= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Identifiable Assets
----------------------------------
September 30, December 31,
1999 1998
<S> <C> <C>
Women's Health 39,888 57,011
Diabetes Supplies and Services 151,927 39
Cardiovascular 17,225 14,383
Other Segments 3,008 6,543
General Corporate 56,766 19,058
---------- -------
Consolidated Assets $ 268,814 97,034
========== =======
</TABLE>
The Company's revenues from outside the United States were
approximately 15% of total revenues for the nine month period ended
September 30, 1999. The Company had no revenues from outside the United
States for the comparable period in 1998. No single customer accounted
for 10% of consolidated net revenue in either period.
10. Recent Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"). SFAS No. 133, which is effective for 2000, requires all
derivatives to be recorded on the balance sheet at fair value and
establishes accounting treatment for certain hedge transactions. The
Company is analyzing the implementation requirements and currently does
not anticipate there will be a material impact on the results of
operations or financial position after adoption of SFAS No. 133.
<PAGE>
11. Comprehensive Income
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS
No. 130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of financial
statements. For the Company, comprehensive income consists of net earnings
(loss) and foreign currency translation adjustments. The statement
requires only additional disclosures in the financial statements, it does
not affect the Company's financial position or results of operations.
Comprehensive income (loss) for the three and nine month periods ended
September 30, 1999 was $7,774 and $13,211, respectively, and for the
corresponding periods in 1998 was ($84,156) and ($95,099), respectively.
12. Subsequent Event
In connection with the acquisition of QDS (See Note 3), the Company
invested $2,000 in preferred stock of WebMD, Inc. and received options and
warrants to purchase additional shares of WebMD, Inc. for $2,680. As of
September 30, 1999 the Company owned 434,768 shares of WebMD, Inc. In
November 1999, WebMD, Inc. merged with Healtheon Corporation into
Healtheon/WebMD Corporation. Subsequent to the merger, the Company sold
shares of Healtheon/WedMD, Inc. representing approximately 45% of its
investment in Healtheon/WebMD Corporation for $11,085. The gain of
approximately $9,000 on the sale of the investment will be recognized in
the fourth quarter of 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
During 1998 and early 1999, the Company announced several strategic actions to
expand its business focus beyond managing the condition of pregnancy into other
disease management markets. These actions included: (i) the acquisition in July
1998 of Quality Diagnostic Services, Inc. ("QDS"), a cardiac event monitoring
company; (ii) the completion of a licensing agreement in October 1998 with
National Jewish Medical and Research Center ("National Jewish") to provide
services in the respiratory disease management market; and (iii) the acquisition
in January 1999 of the business and assets of Gainor Medical Management, L.L.C.
("Gainor Medical") and Diabetes Management Services, Inc. ("DMS"), diabetes
disease management companies. Disease management is an emerging healthcare
sector receiving a heightened focus in the healthcare industry, and the
competition in this sector is fragmented without a dominant leader. The
Company's management believes that with the successful implementation of its
expansion strategies, the Company will become the dominant market leader in
disease management and that these strategies will result in significant revenue
growth in 1999 and beyond. <PAGE>
During the third quarter of 1999, the Company determined that the infertility
business, National Reproductive Medical Centers, Inc. (NRMC) was a business that
no longer fit this diversified disease management strategy. As a result of this
decision, assets of two of the three NRMC clinics were sold in the third quarter
of 1999 and the assets of the remaining clinic are expected to be sold in the
fourth quarter of 1999.
In connection with the above acquisitions, the Company acquired intangible
assets that are being amortized over various useful lives from 5-15 years. The
amortization periods are based on, among other things, the nature of the
products and markets, the competitive position of the acquired companies and the
adaptability to changing market conditions of the acquired companies.
The following discussion of the results of operations and financial condition of
the Company should be read in conjunction with the consolidated financial
statements and related notes in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 and the Company's Report on Form 8-K/A filed on
April 5, 1999 with the Securities and Exchange Commission. As a result of the
1998 and 1999 strategic actions and acquisitions, the historical results of
operations are not necessarily indicative of the results that will be achieved
by the Company during future periods.
Results of Operations
Revenues increased $29.792 million or 87.3% and $85.161 or 84.8% in the three
and nine month periods ended September 30, 1999 as compared to the same periods
in 1998 primarily due to the acquisitions of the Gainor Medical business and
DMS, the businesses that are included in the Diabetes Supplies and Services
segment, and QDS, the business that is included in the Cardiovascular segment.
Revenues for the Diabetes Supplies and Services and Cardiovascular segments were
$28.958 million and $3.900 million, respectively, in the third quarter of 1999,
and $81.590 million and $11.500 million for the nine month period of 1999. These
increases during the third quarter were partly offset by a decrease in revenues
in the Women's Health segment of 3.7% and 5.8% in the three and nine month
periods, respectively, resulting from the termination of marketing rights of the
fetal fibronectin immunoassay test effective August 31, 1998 as well as a
decline in prescriptions for preterm labor management services.
Cost of revenues as a percentage of revenues increased to 50.2% and 50.5% for
the three month and nine month periods ended September 30, 1999 from 40.4% and
39.8% for the same periods in 1998. This increase resulted primarily from the
acquisition of the Gainor Medical business where cost of revenues was 66.1% and
66.8% for the three and nine months. <PAGE>
Selling and administrative expenses as a percentage of revenues decreased to
30.4% and 32.9% for the three and nine month periods ended September 30, 1999
from 47.4% and 45.8% for the same periods in 1998 due to economies of scale
achieved as a result of the Company's acquisitions of the Gainor Medical
business, QDS and DMS.
The Company provides for estimated uncollectible accounts as revenues are
recognized. The provision for doubtful accounts as a percentage of revenues in
the Women's Health and Cardiovascular segments was 5.5% and 5.0% for the three
and nine month periods ended September 30, 1999 and 1998, respectively. The
provision for doubtful accounts as a percentage of revenues in the Diabetes
Management segment was approximately 1% in the three and nine month periods of
1999. The provision is adjusted periodically based upon the Company's quarterly
evaluation of historical collection experience, recoveries of amounts previously
provided, industry reimbursement trends and other relevant factors. Therefore,
the provision rate could vary on a quarterly basis.
Amortization of intangible assets decreased in the three and nine month periods
ended September 30, 1999 as compared to the same periods in 1998 due to the
writeoffs of intangible assets taken in the third and fourth quarters of 1998.
The impact of the decrease resulting from these writeoffs was partially offset
by the additional amortization of the intangible assets recorded as part of the
acquisitions described above.
During the third quarter of 1999, the Company incurred approximately $1.983
million of restructuring costs related to the implementation of a consolidation
plan for the Women's Health segment to reduce the number of monitoring centers
from 38 to 21 (See Note 7). In 1998, the Company recorded a $74.496 million
charge to write-down goodwill and intangible assets relating to the merger of
Tokos Medical Corporation and Healthdyne, Inc. based upon operating and
marketing specific indicators. Additionally in 1998, the Company recorded a
$2.482 million charge for acquired in-process research and development costs as
a result of the acquisition of QDS.
Interest expense increased in the three and nine month periods ended September
30, 1999 as compared to the same periods in 1998 due to a significant increase
in borrowings related to business acquisitions.
The Company did not record a federal or state income tax provision in the three
or nine month periods ended September 30, 1999 or 1998 due to the Company's
operating loss carryforwards. A $4.000 million income tax benefit was recognized
in the third quarter of 1999 as a result of a reduction in the deferred tax
asset valuation allowance (See Note 8).
<PAGE>
Liquidity and Capital Resources
As of September 30, 1999 the Company had cash and short-term investments of
$5.600 million. Net cash provided by operations increased to $6.836 million for
the nine month period ended September 30, 1999, compared to cash used in
operating activities of $6.529 million for the same period of 1998. Contributing
to this cash flow improvement was a 160% improvement in operating earnings,
excluding amortization of intangibles and one time charges, from $9.524 million
in 1998 to $24.794 million in 1999.
The Company's accounts receivable days sales outstanding were 70 days as of
September 30, 1999 as compared to 96 days as of December 31, 1998. The reduction
is due to lower days sales outstanding of the Gainor Medical business accounts
receivable as well as a reduction of accounts receivable days outstanding in the
Women's Health segment from 111 days at December 31, 1998 to 94 days at
September 30, 1999. Only 30% of the Gainor Medical business' sales are
reimbursed by third party and U.S. Government healthcare payors with the
remaining sales being to original equipment manufacturers, corporate employers
and international healthcare providers. As the sales to third party and U.S.
Government healthcare providers increase, the Company believes that the days
sales outstanding will increase.
In the fourth quarter of 1999, the Company received $11.085 million in cash
proceeds from the sale of its investment in Healtheon/WebMD Corporation (See
Note 12).
The Asset Purchase Agreement for the acquisition of QDS provides for additional
cash payments of up to $6.000 million contingent upon 1999 revenues of the
Company's cardiac monitoring business.
The acquisition agreement for the Gainor Medical business provides for
additional contingent purchase price of up to $35.000 million based upon 1999
financial performance of the Gainor Medical business. If earned, the Gainor
Medical business contingent purchase price is payable by the issuance of
subordinated notes to the sellers in the year 2000.
Capital expenditures of $5.982 million in the first nine months of 1999 relate
primarily to the purchases of patient equipment to support revenue growth in the
Cardiovascular segment and for the upgrade and expansion of computer information
systems in all segments of the Company. The Company expects to expend
approximately $8.500 million for capital items in 1999.
The Company believes that its current cash balances, expected cash flows from
operations and investing activities and amounts available under the existing
credit facility will be sufficient to finance its current operations.
<PAGE>
Year 2000 Issue
The Year 2000 issue refers generally to the data structure and
processing problem that may prevent systems from properly processing
date-sensitive information when the year changes to 2000. The Year 2000
issue affects information technology ("IT") systems, such as computer
programs and various types of electronic equipment that process date
information by using only two digits rather than four digits to define
the applicable year, and thus may recognize a date using "00" as the
year 1900 rather than the year 2000. The issue also affects some non-IT
systems, such as devices which rely on a microcontroller to process
date information. The Year 2000 issue could disrupt a company's
operations by generating erroneous data or causing system failures or
miscalculations.
The Company is involved in an extensive, ongoing program to identify
and correct problems arising from the Year 2000 issues. The program is
broken down into the following categories: (1) application systems; (2)
hardware; (3) monitoring equipment; and (4) computer applications of
its significant suppliers and significant payors.
The Company has evaluated the application systems in two parts: (1)
AS400 applications and (2) client server applications. The AS400
applications are believed to be capable of functioning properly beyond
the year 1999 at this time. Although the Company originally had
intended to replace its client server applications in 1999, because
that project will not be complete by year end 1999, the Company is
remediating the existing client server application systems, a process
that the Company estimates will be completed in November 1999.
Remediation and testing of the AS400 hardware are complete, and the
remediation and testing of the individual personal computers are
approximately 95% complete. The Company expects the remainder of
conversion and testing to be complete in November 1999.
In the first quarter of 1999, the Company completed its review of
embedded computer chips and software applications, which control
certain monitoring and other equipment. Remediation efforts were minor
and were completed in the third quarter of 1999.
In 1998, the Company spent $60,000 for software and consulting fees
associated with the initial Year 2000 evaluation. Budgeted expenditures
in 1999 total $100,000. The Company is primarily addressing all Year
2000 issues with current staffing levels.
In the first quarter of 1999, the Company sent inquiries to its
significant suppliers and payors concerning the Year 2000 compliance of
their significant computer applications. The Company sent second
requests during the second quarter of 1999. The responses received to
date do not disclose any significant issues with respect to
non-compliance. The Company will continue to evaluate Year 2000 risks
with respect to such suppliers and payors as responses are received. In
that connection, it should be noted that substantially all of the
Company's revenues are derived from reimbursement by third-party
<PAGE>
payors, and that the Company is dependent upon such payors' evaluation
of their Year 2000 compliance status to assess such risks. If such
payors are incorrect in their evaluation of their own Year 2000
compliance status, this could result in delays or errors in
reimbursement to the Company, the effects of which could be material to
the Company.
In light of its compliance efforts and based on information currently
available, the Company believes that its risk associated with problems
arising from Year 2000 issues is not significant. However, because of
the many uncertainties associated with Year 2000 compliance issues, and
because the Company's assessment is necessarily based on information
from third-party payors and suppliers, there can be no assurance that
the Company's assessment is correct or as to the materiality or effect
of any failure of such assessment to be correct. The Company will
continue with its assessment process as described above and, to the
extent that changes in such assessment require it, will attempt to
develop alternatives or modifications to its compliance plan described
above. There can, however, be no assurance that such compliance plan,
as it may be changed, augmented or modified from time to time, will be
successful. There can be no assurance that the Year 2000 problem will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
The SEC's recent guidance for Year 2000 disclosure calls for companies
to describe their most likely worst case Year 2000 scenarios.
Notwithstanding the aforementioned issues, the Company does not expect
significant problems at the turn of the century with internal
conversions and remediation. However, the most likely worst case
scenario is that if third-party payors are not able to reimburse the
Company after the turn of the century, the Company would be required to
sustain operations through existing cash balances or through the use of
available borrowings under its credit facilities. Also, the Company
would be required to add additional staff during the time period
leading up to and immediately following January 1, 2000, in order to
address any unexpected Year 2000 issues.
Forward-Looking Information
This Form 10-Q contains forward-looking statements and information that
are based on the Company's beliefs and assumptions, as well as
information currently available to the Company. From time to time, the
Company and its officers, directors or employees may make other oral or
written statements (including statements in press releases or other
announcements) that contain forward-looking statements and information.
Without limiting the generality of the foregoing, the words "believe,"
"anticipate," "estimate," "expect," "intend," "plan," "seek" and
similar expressions, when used in this report and in such other
statements, are intended to identify forward-looking statements. All
forward-looking statements and information in this Form 10-Q are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and are intended to be covered by the
safe harbors created thereby. Such forward-looking statements are not
guarantees of future performance and are subject to risks,
<PAGE>
uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to differ materially from
historical results or from any results expressed or implied by such
forward-looking statements. Such factors include, without limitation,
(i) changes in reimbursement rates, policies or payment practices by
third party payors, whether initiated by the payor or legislatively
maintained; (ii) the loss of major customers; (iii) termination of the
Company's exclusive supply agreement with Nissho Corporation or failure
to continue the agreement on the terms currently in effect; (iv)
impairment of the Company's rights in intellectual property; (v)
increased or more effective competition; (vi) new technologies that
render obsolete or non-competitive products and services offered by the
Company; (vii) changes in regulations applicable to the Company or
failure to comply with existing regulations; (viii) future health care
or budget legislation or other health reform initiatives; (ix)
increased exposure to professional negligence liability; (x)
difficulties in successfully integrating recently acquired businesses
into the Company's operations and uncertainties related to the future
performance of such businesses; (xi) losses due to foreign currency
exchange rate fluctuations or deterioration of economic conditions in
foreign markets; (xii) costs associated with Year 2000 related systems
failures; (xiii) the amount of sales to third parties and U.S.
Government healthcare providers, and (xiv) the risk factors discussed
from time to time in the Company's SEC reports, including but not
limited to, its Annual Report on Form 10-K for the year ended December
31, 1998. Many of such factors are beyond the Company's ability to
control or predict, and readers are cautioned not to put undue reliance
on such forward-looking statements. The Company disclaims any
obligation to update or review any forward-looking statements contained
in this report or in any statement referencing the risk factors and
other cautionary statements set forth in this Report, whether as a
result of new information, future events or otherwise, except as may be
required by the Company's disclosure obligations in filings it makes
with the SEC under Federal Securities laws.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company is exposed to market risk from changes in interest rates
and foreign exchange rates.
The Company's primary interest rate risk relates to its variable rate
bank credit facility. At September 30, 1999, the Company's total
variable rate long-term debt obligation was $105.000 million. A
hypothetical 10% change in the interest rates applied to the September
30, 1999 balance of variable rate debt obligations for a duration of
one year would result in additional interest expense of $880,000.
Based upon overall currency rate exposure at September 30, 1999, a
near-term 10% appreciation or depreciation of the U.S. dollar would
have an insignificant effect on the Company's financial position,
results of operations and cash flow over the next fiscal year.
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.12 Severance Compensation and Restrictive Covenant Agreement dated as of
April 27, 1999 between Matria Healthcare, Inc. and Donald R. Millard.
10.13 Severance Compensation and Restrictive Covenant Agreement dated as of
April 27, 1999 between Matria Healthcare, Inc. and Frank D. Powers.
10.14 Severance Compensation and Restrictive Covenant Agreement dated as of
April 27, 1999 between Matria Healthcare, Inc. and Yvonne V. Scoggins.
10.15 Change in Control Severance Compensation and Restrictive Covenant
Agreement dated as of April 27, 1999 between Matria Healthcare, Inc.
and Donald R. Millard.
10.16 Change in Control Severance Compensation and Restrictive Covenant
Agreement dated as of April 27, 1999 between Matria Healthcare, Inc.
and Frank D. Powers.
10.17 Change in Control Severance Compensation and Restrictive Covenant
Agreement dated as of April 27, 1999 between Matria Healthcare, Inc.
and Yvonne V. Scoggins.
11 Statement Regarding Computation of Earnings (Loss) Per Share
27 Financial Data Schedule (for SEC purposes only)
(b) Reports on Form 8-K.
The Company has not filed any Current Report on Form 8-K for the quarter ended
September 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Matria Healthcare, Inc.
November 12, 1999 By: /s/ Donald R. Millard
Donald R. Millard
Director, President and Chief
Executive Officer
(Principal Executive Officer)
By: __/s/ Yvonne V. Scoggins
Yvonne V. Scoggins
Vice President, Chief Accounting
Officer and Treasurer
SEVERANCE COMPENSATION
AND
RESTRICTIVE COVENANT AGREEMENT
This Severance Compensation and Restrictive Covenant Agreement (the
"Agreement") is dated as of April 27, 1999, between Matria Healthcare, Inc., a
Delaware corporation (the "Company"), and Donald R. Millard (the "Executive").
WHEREAS, the Board of Directors of the Company has determined that it
is appropriate to reward the Executive for his years of service to the Company
and predecessor companies and encourage the Executive to remain in the Company's
employ;
NOW, THEREFORE, in consideration of their respective obligations to one
another set forth in this Agreement, and other good and valuable consideration,
the receipt, sufficiency and adequacy of which the parties hereby acknowledge,
the parties to this Agreement, intending to be legally bound, hereby agree as
follows:
1. Term.
(a) The term of this Agreement shall begin on April 27, 1999 and shall
terminate on April 26, 2002.
2. Termination of Employment during the Term.
(a) The Executive shall be entitled to the compensation and
benefits provided in Section 3 upon the termination of the Executive's
employment with the Company during the term of this Agreement by the Executive
or by the Company, unless such termination is as a result of (i) the Executive's
death; (ii) the Executive's Disability; (iii) the Executive's termination by the
Company for Cause; or (iv) the Executive's decision to terminate employment
other than for Good Reason.
(b) Disability. The term "Disability" as used in this
Agreement shall mean termination of the Executive's employment by the Company as
a result of the Executive's incapacity due to physical or mental illness,
provided that the Executive shall have been absent from his duties with the
Company on a full-time basis for six consecutive months and such absence shall
have continued unabated for 30 days after Notice of Termination as described in
Section 2(e) is thereafter given to the Executive by the Company.
(c) Cause. The term "Cause" for purposes of this Agreement
shall mean the Company's termination of the Executive's employment by the
Company on the basis of criminal or civil fraud on the part of the Executive
involving a material amount of funds of the Company. For purposes of this
Agreement only, the preparation and filing of fictitious, false or misleading
claims in connection with any federal, state or other third party medical
reimbursement program, or any other violation of any rule or regulation in
<PAGE>
respect of any federal, state or other third party medical reimbursement program
by the Company or any subsidiary of the Company shall not be deemed to
constitute "criminal fraud" or "civil fraud".
(d) Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any of the following actions taken by the Company without the
Executive's express written consent:
(i) Failure to re-elect the Executive as an officer of the Company, or removal
of the Executive as an officer of the Company, except in connection with
the termination of his employment for Disability or Cause or as a result of
the Executive's death or by the Executive;
(ii) A reduction in the Executive's base salary as in effect on the date hereof;
(iii) Any failure by the Company to continue in
effect any incentive plan or arrangement (including,
without limitation, any bonus or contingent bonus arrangements and credits and
the right to receive performance awards and similar incentive compensation
benefits) in which the Executive is participating on the date of this Agreement
(hereinafter referred to as "Incentive Plans") or the taking of any action by
the Company which would adversely affect the Executive's participation in any
such Incentive Plan or reduce the Executive's benefits under any such Incentive
Plan, expressed as a percentage of his base salary, by more than five percentage
points in any fiscal year as compared to the immediately preceding fiscal year;
(iv) Any failure by the Company to continue in effect
any plan or arrangement to receive securities of the
Company (including, without limitation, the Company's 1981 Incentive Stock
Option Plan, 1983 Incentive Stock Option Plan, 1984 Nonqualified Stock Option
Plan, 1985 Nonqualified Stock Option Plan, 1991 Stock Option Plan and 1993 Stock
Option Plan, 1996 Stock Incentive Plan, 1997 Stock Incentive Plan, Employee
Stock Purchase Plan and any other plan or arrangement to receive and exercise
stock options, stock appreciation rights, restricted stock or grants thereof) in
which the Executive is participating or has the right to participate on the date
of this Agreement (hereinafter referred to as "Securities Plans") or the taking
of any action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under any such
Securities Plan, provided that a diminution in the number of option shares
granted under any such Securities Plan shall not constitute Good Reason so long
as the diminution in total grants to all key executives is apportioned ratably
among all such key executives;
(v) Any failure by the Company to allow the Executive to participate in any
benefit plan, program or arrangement (including, without limitation, any
profit sharing plan, group annuity contract, group life insurance
supplement, or medical, dental, accident and disability plans, but
excluding Incentive Plans and Securities Plans) to the
same extent as other key executives of the Company;
(vi) Any failure by the Company to provide the Executive with the number of
paid vacation days (or compensation therefor at termination of
employment) accrued to the Executive through the Date of Termination
(as defined in Section 2(f) below; or
<PAGE>
(vii) Any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 2(e), and for purposes of
this Agreement, no such purported termination shall be effective.
(e) Notice of Termination. Any termination of the Executive's
employment by the Company for a reason specified in Section 2(b) or 2(c) shall
be communicated to the Executive by a Notice of Termination prior to the
effective date of the termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate whether such
termination is for the reason set forth in Section 2(b) or 2(c) and which sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. For purposes of this Agreement, no termination of the Executive's
employment by the Company shall constitute a termination for Disability or Cause
unless such termination is preceded by a Notice of Termination.
(f) Date of Termination. "Date of Termination" shall mean (a)
if the Executive's employment is terminated by the Company for Disability, 30
days after a Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the Executive's duties
on a full-time basis during such 30-day period) or (b) if the Executive's
employment is terminated by the Company or the Executive for any other reason,
the date on which the Executive's termination is effective.
3. Compensation and Benefits upon Termination of Employment.
(a) If the Company shall terminate the Executive's employment
other than pursuant to Section 2(b) or 2(c) and Section 2(e), or if the
Executive shall terminate his employment for Good Reason, then the Company shall
pay to the Executive, as severance compensation and in consideration of the
Executive's adherence to the terms of Section 4 hereof, the following:
(i) On the Date of Termination, the Company shall become liable to the
Executive for an amount equal to two times the Executive's annual base
compensation and targeted base bonus on the date of this Agreement, which
amount shall be paid to the Executive in cash
on or before the fifth day following the Date of Termination.
(ii) For a period of two years following the Date of Termination, the Executive
and anyone entitled to claim under or through the Executive shall be
entitled to all benefits under the group hospitalization plan, health care
plan, dental care plan, life or other
insurance or death benefit plan, or other present or future similar group
employee benefit plan or program of the Company for which key executives are
eligible at the Date of Termination to the same extent and at the same cost as
if the Executive had continued to be an employee of the Company during such
period.
<PAGE>
(iii) For a period of two years after the Date of
Termination, the Company shall allow the Executive to
utilize for his business and personal use any Company leased automobile
previously furnished to him or an equivalent type and style of automobile and
shall reimburse the Executive for the maintenance and repair costs of such
automobile and extend full insurance coverage relating to such automobile in
favor of the Executive, as additional named insured, during such two-year
period. In addition, the Executive shall be entitled, at the Executive's sole
discretion, to exercise any option to acquire such automobile pursuant to the
terms which may be provided in the lease agreement for the automobile in
question.
(b) The parties hereto agree that the payments provided in
Section 3(a) hereof are reasonable compensation in light of the Executive's
services rendered to the Company and in consideration of the Executive's
adherence to the terms of Section 4 hereof.
(c) The payments provided in Section 3(a) above shall be in
lieu of any other severance compensation otherwise payable to Executive under
the Company's established severance compensation policies; provided, however,
that nothing in this Agreement shall affect or impair Executive's vested rights
under any other employee benefit plan or policy of the Company.
4. Protective Covenants.
(a) Definitions.
This Subsection sets forth the definition of certain
capitalized terms used in Subsections (a) through (f) of this Section 4.
(i) "Competing Business" shall mean a business (other
than the Company) that, directly or through a
controlled subsidiary or through an affiliate, (a) develops, markets and/or
sells computerized patient record software for obstetricians and/or
gynecologists, diabetes supplies, products for uterine contraction monitoring in
the home and/or products that would be used in lieu of or in competition with
uterine contraction monitoring products ("Competing Products"), and/or (b)
provides obstetrical home care services, including, without limitation, programs
for monitoring patients who are at risk of preterm delivery, programs for
managing patients suffering from obstetrical hypertension or diabetes, infusion
therapy services involving drugs to control preterm labor, nursing services and
maternity management services for both low and high risk pregnancies, diabetes
or respiratory disease management services, including, without limitation,
patient education, risk screening and stratification, case management and
clinical services, or cardiac event monitoring services ("Competing Services").
Notwithstanding the foregoing, no business shall be deemed a "Competing
Business" unless, within at least one of the business's three most recently
concluded fiscal years, that business, or a division of that business, derived
more than twenty percent (20%) of its gross revenues or more than $2,000,000 in
gross revenues from the development, marketing or sale of Competing Products
and/or the provision of Competing Services
<PAGE>
<PAGE>
(ii) "Competitive Position" shall mean: (A) the Executive's direct or indirect
equity ownership (excluding ownership of less than one percent (1%) of the
outstanding common stock of any publicly held corporation) or control of
any portion of any Competing Business; or (B) any employment, consulting,
partnership, advisory, directorship, agency,
promotional or independent contractor arrangement between the Executive and any
Competing Business where the Executive performs services for the Competing
Business substantially similar to those the Executive performed for the Company,
provided, however, that the Executive shall not be deemed to have a Competitive
Position solely because of the Executive's services for a Competing Business
that are not directly related to the sale of Competing Products or the provision
of Competing Services, unless more than thirty-five percent (35%) of the gross
revenues of the Competing Business are derived from the sale of Competing
Products and/or the provision of Competing Services.
(iii) "Covenant Period" shall mean the period of time
from the date of this Agreement to the date that is
two (2) years after the Date of Termination.
(iv) "Customers" shall mean actual customers,
clients, referral sources or managed care organizations or
actively sought prospective customers, clients, referral sources or managed care
organizations of the Company (A) during the one (1) year prior to the date of
this Agreement and (B) during the Covenant Period.
(v) "Restricted Territory" shall mean the United
States.
(b) Limitation on Competition. In consideration of the
Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, anywhere within the Restricted Territory, either directly or
indirectly, alone or in conjunction with any other party, accept, enter into or
take any action in conjunction with or in furtherance of a Competitive Position
(other than action to reject an unsolicited offer of a Competitive Position).
(c) Limitation on Soliciting Customers. In consideration of
the Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, alone or in conjunction with any other party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate on behalf of a
Competing Business with which Executive has a Competitive Position any Customer
located in the Restricted Territory (or any other Customer with which the
Executive had any direct contact on behalf of the Company) for the purpose of
providing the Customer or having the Customer provided with a Competing Product
or Competing Service.
<PAGE>
(d) Limitation on Soliciting Personnel or Other Parties. In
consideration of the Company's entering into this Agreement, the Executive
hereby agrees that he will not, without the prior written consent of the
Company, alone or in conjunction with any other party, solicit or attempt to
solicit any employee, consultant, contractor, independent broker or other
personnel of the Company to terminate, alter or lessen that party's affiliation
with the Company or to violate the terms of any agreement or understanding
between such employee, consultant, contractor or other person and the Company.
(e) Acknowledgement. The parties acknowledge and agree that
the Protective Covenants are reasonable as to time, scope and territory given
the Company's need to protect its trade secrets and confidential business
information and given the substantial payments and benefits to which the
Executive may be entitled pursuant to this Agreement.
(f) Remedies. The parties acknowledge that any breach or
threatened breach of a Protective Covenant by the Executive is reasonably likely
to result in irreparable injury to the Company, and therefore, in addition to
all remedies provided at law or in equity, the Executive agrees that the Company
shall be entitled to a temporary restraining order and a permanent injunction to
prevent a breach or contemplated breach of the Protective Covenant. If the
Company seeks an injunction, the Executive waives any requirement that the
Company post a bond or any other security.
5. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) All compensation and benefits provided to the Executive
under this Agreement are in consideration of the Executive's services rendered
to the Company and of the Executive's adhering to the terms set forth in Section
4 hereof and the Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Incentive Plan or Securities Plan, or
other contract, plan or arrangement.
6. Binding Effect.
(a) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or the designee
or, if there be no such designee, to the Executive's estate.
<PAGE>
7. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt required, postage prepaid, as follows:
If to Company: Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attention: General Counsel
If to Executive: Donald R. Millard
3266 Hunterdon Way
Marietta, Georgia 30067
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
8. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
9. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in one 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.
11. Severability; Modification. All provisions of this Agreement are
severable from one another, and the unenforceability or invalidity of any
provision of this Agreement shall not affect the validity or enforceability of
the remaining provisions of this Agreement, but such remaining provisions shall
be interpreted and construed in such a manner as to carry out fully the
intention of the parties. Should any judicial body interpreting this Agreement
deem any provision of this Agreement to be unreasonably broad in time,
territory, scope or otherwise, it is the intent and desire of the parties that
such judicial body, to the greatest extent possible, reduce the breadth of such
provision to the maximum legally allowable parameters rather than deeming such
provision totally unenforceable or invalid.
<PAGE>
12. Confidentiality. The Executive acknowledges that he or she has
previously entered into, and continues to be bound by the terms of, a
Confidentiality Agreement with the Company.
13. Agreement Not an Employment Contract. This Agreement shall not be
deemed to constitute or be deemed ancillary to an employment contract between
the Company and the Executive, and nothing herein shall be deemed to give the
Executive the right to continue in the employ of the Company or to eliminate the
right of the Company to discharge the Executive at any time.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
MATRIA HEALTHCARE, INC.
By: _________________________________
Its Chairman of the Board
-----------------------------------
Donald R. Millard
Executive
SEVERANCE COMPENSATION
AND
RESTRICTIVE COVENANT AGREEMENT
This Severance Compensation and Restrictive Covenant Agreement (the
"Agreement") is dated as of April 27, 1999, between Matria Healthcare, Inc., a
Delaware corporation (the "Company"), and Frank D. Powers (the "Executive").
WHEREAS, the Board of Directors of the Company has determined that it
is appropriate to reward the Executive for his years of service to the Company
and predecessor companies and encourage the Executive to remain in the Company's
employ;
NOW, THEREFORE, in consideration of their respective obligations to one
another set forth in this Agreement, and other good and valuable consideration,
the receipt, sufficiency and adequacy of which the parties hereby acknowledge,
the parties to this Agreement, intending to be legally bound, hereby agree as
follows:
1. Term.
(a) The term of this Agreement shall begin on April 27, 1999 and shall
terminate on April 26, 2002.
2. Termination of Employment during the Term.
(a) The Executive shall be entitled to the compensation and
benefits provided in Section 3 upon the termination of the Executive's
employment with the Company during the term of this Agreement by the Executive
or by the Company, unless such termination is as a result of (i) the Executive's
death; (ii) the Executive's Disability; (iii) the Executive's termination by the
Company for Cause; or (iv) the Executive's decision to terminate employment in
the first year of the term of this Agreement other than for Good Reason.
(b) Disability. The term "Disability" as used in this
Agreement shall mean termination of the Executive's employment by the Company as
a result of the Executive's incapacity due to physical or mental illness,
provided that the Executive shall have been absent from his duties with the
Company on a full-time basis for six consecutive months and such absence shall
have continued unabated for 30 days after Notice of Termination as described in
Section 2(e) is thereafter given to the Executive by the Company.
<PAGE>
(c) Cause. The term "Cause" for purposes of this Agreement
shall mean the Company's termination of the Executive's employment by the
Company on the basis of criminal or civil fraud on the part of the Executive
involving a material amount of funds of the Company. For purposes of this
Agreement only, the preparation and filing of fictitious, false or misleading
claims in connection with any federal, state or other third party medical
reimbursement program, or any other violation of any rule or regulation in
respect of any federal, state or other third party medical reimbursement program
by the Company or any subsidiary of the Company shall not be deemed to
constitute "criminal fraud" or "civil fraud".
(d) Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any of the following actions taken by the Company without the
Executive's express written consent:
(i) Failure to re-elect the Executive as an officer of the Company, or removal
of the Executive as an officer of the Company, except in connection with
the termination of his employment for Disability or Cause or as a result of
the Executive's death or by the Executive; (ii) A reduction in the
Executive's base salary as in effect on the date hereof;
(iii)Any failure by the Company to continue in effect any incentive plan or
arrangement (including, without limitation, any bonus or contingent bonus
arrangements and credits and the right to receive performance awards and
similar incentive compensation
benefits) in which the Executive is participating on the date of this Agreement
(hereinafter referred to as "Incentive Plans") or the taking of any action by
the Company which would adversely affect the Executive's participation in any
such Incentive Plan or reduce the Executive's benefits under any such Incentive
Plan, expressed as a percentage of his base salary, by more than five percentage
points in any fiscal year as compared to the immediately preceding fiscal year;
(iv) Any failure by the Company to continue in effect
any plan or arrangement to receive securities of the
Company (including, without limitation, the Company's 1981 Incentive Stock
Option Plan, 1983 Incentive Stock Option Plan, 1984 Nonqualified Stock Option
Plan, 1985 Nonqualified Stock Option Plan, 1991 Stock Option Plan and 1993 Stock
Option Plan, 1996 Stock Incentive Plan, 1997 Stock Incentive Plan, Employee
Stock Purchase Plan and any other plan or arrangement to receive and exercise
stock options, stock appreciation rights, restricted stock or grants thereof) in
which the Executive is participating or has the right to participate on the date
of this Agreement (hereinafter referred to as "Securities Plans") or the taking
of any action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under any such
Securities Plan, provided that a diminution in the number of option shares
granted under any such Securities Plan shall not constitute Good Reason so long
as the diminution in total grants to all key executives is apportioned ratably
among all such key executives;
<PAGE>
(v) Any failure by the Company to allow the Executive to participate in any
benefit plan, program or arrangement (including, without limitation, any
profit sharing plan, group annuity contract, group life insurance
supplement, or medical, dental, accident and disability plans, but
excluding Incentive Plans and Securities Plans) to the same extent as other
key executives of the Company;
(vi) Any failure by the Company to provide the Executive with the number of paid
vacation days (or compensation therefor at termination of employment)
accrued to the Executive through the Date of Termination (as defined in
Section 2(f) below; or (vii) Any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 2(e), and for purposes of
this Agreement, no such purported termination shall be effective.
(e) Notice of Termination. Any termination of the Executive's
employment by the Company for a reason specified in Section 2(b) or 2(c) shall
be communicated to the Executive by a Notice of Termination prior to the
effective date of the termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate whether such
termination is for the reason set forth in Section 2(b) or 2(c) and which sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. For purposes of this Agreement, no termination of the Executive's
employment by the Company shall constitute a termination for Disability or Cause
unless such termination is preceded by a Notice of Termination.
(f) Date of Termination. "Date of Termination" shall mean (a)
if the Executive's employment is terminated by the Company for Disability, 30
days after a Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the Executive's duties
on a full-time basis during such 30-day period) or (b) if the Executive's
employment is terminated by the Company or the Executive for any other reason,
the date on which the Executive's termination is effective.
3. Compensation and Benefits upon Termination of Employment.
(a) If the Company shall terminate the Executive's employment
other than pursuant to Section 2(b) or 2(c) and Section 2(e), or if the
Executive shall terminate his employment for Good Reason or after the first year
of the term of this Agreement, then the Company shall pay to the Executive, as
severance compensation and in consideration of the Executive's adherence to the
terms of Section 4 hereof, the following:
(i) On the Date of Termination, the Company shall become liable to the
Executive for an amount equal to two times the Executive's annual base
compensation and targeted base bonus on the date of this Agreement, which
amount shall be paid to the Executive in cash
<PAGE>
on or before the fifth day following the Date of Termination; provided that, if
the Executive terminates his employment without Good Reason, (A) the amount
otherwise payable under this Section 3(a)(i) shall be reduced by an amount equal
to the gains realized by the Executive on options to purchase the Company's
Common Stock (whether issued before or after the date of this Agreement) during
the period commencing on the date of this Agreement and ending on the earlier of
the date of exercise or the date of expiration of the applicable option, and (B)
payment of the amount as so reduced shall be paid to the Executive in cash on
the later of the date set forth above or the fifth day following the date of
expiration or exercise, as the case may be, of the last applicable outstanding
option.
(ii) For a period of two years following the Date of Termination, the Executive
and anyone entitled to claim under or through the Executive shall be
entitled to all benefits under the group hospitalization plan, health care
plan, dental care plan, life or other insurance or death benefit plan, or
other present or future similar group employee benefit plan or program of
the Company for which key executives are eligible at the Date of
Termination to the same extent and at the same cost as
if the Executive had continued to be an employee of the Company during such
period.
(iii) For a period of two years after the Date of
Termination, the Company shall allow the Executive to
utilize for his business and personal use any Company leased automobile
previously furnished to him or an equivalent type and style of automobile and
shall reimburse the Executive for the maintenance and repair costs of such
automobile and extend full insurance coverage relating to such automobile in
favor of the Executive, as additional named insured, during such two-year
period. In addition, the Executive shall be entitled, at the Executive's sole
discretion, to exercise any option to acquire such automobile pursuant to the
terms which may be provided in the lease agreement for the automobile in
question.
(b) The parties hereto agree that the payments provided in
Section 3(a) hereof are reasonable compensation in light of the Executive's
services rendered to the Company and in consideration of the Executive's
adherence to the terms of Section 4 hereof.
(c) The payments provided in Section 3(a) above shall be in
lieu of any other severance compensation otherwise payable to Executive under
the Company's established severance compensation policies; provided, however,
that nothing in this Agreement shall affect or impair Executive's vested rights
under any other employee benefit plan or policy of the Company.
4. Protective Covenants.
(a) Definitions.
This Subsection sets forth the definition of certain
capitalized terms used in Subsections (a) through (f) of this Section 4.
(i) "Competing Business" shall mean a business (other
than the Company) that, directly or through a
<PAGE>
controlled subsidiary or through an affiliate, (a) develops, markets and/or
sells computerized patient record software for obstetricians and/or
gynecologists, diabetes supplies, products for uterine contraction monitoring in
the home and/or products that would be used in lieu of or in competition with
uterine contraction monitoring products ("Competing Products"), and/or (b)
provides obstetrical home care services, including, without limitation, programs
for monitoring patients who are at risk of preterm delivery, programs for
managing patients suffering from obstetrical hypertension or diabetes, infusion
therapy services involving drugs to control preterm labor, nursing services and
maternity management services for both low and high risk pregnancies, diabetes
or respiratory disease management services, including, without limitation,
patient education, risk screening and stratification, case management and
clinical services, or cardiac event monitoring services ("Competing Services").
Notwithstanding the foregoing, no business shall be deemed a "Competing
Business" unless, within at least one of the business's three most recently
concluded fiscal years, that business, or a division of that business, derived
more than twenty percent (20%) of its gross revenues or more than $2,000,000 in
gross revenues from the development, marketing or sale of Competing Products
and/or the provision of Competing Services
(ii) "Competitive Position" shall mean: (A) the Executive's direct or indirect
equity ownership (excluding ownership of less than one percent (1%) of the
outstanding common stock of any publicly held corporation) or control of
any portion of any Competing Business; or (B) any employment, consulting,
partnership, advisory, directorship, agency, promotional or independent
contractor arrangement between the Executive and any
Competing Business where the Executive performs services for the Competing
Business substantially similar to those the Executive performed for the Company,
provided, however, that the Executive shall not be deemed to have a Competitive
Position solely because of the Executive's services for a Competing Business
that are not directly related to the sale of Competing Products or the provision
of Competing Services, unless more than thirty-five percent (35%) of the gross
revenues of the Competing Business are derived from the sale of Competing
Products and/or the provision of Competing Services.
(iii) "Covenant Period" shall mean the period of time
from the date of this Agreement to the date that is two (2) years after the Date
of Termination.
(iv) "Customers" shall mean actual customers,
clients, referral sources or managed care organizations or
actively sought prospective customers, clients, referral sources or managed care
organizations of the Company (A) during the one (1) year prior to the date of
this Agreement and (B) during the Covenant Period.
(v) "Restricted Territory" shall mean the United
States.
(b) Limitation on Competition. In consideration of the
Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, anywhere within the Restricted Territory, either directly or
indirectly, alone or in conjunction with any other party, accept, enter into or
take any action in conjunction with or in furtherance of a Competitive Position
(other than action to reject an unsolicited offer of a Competitive Position).
<PAGE>
(c) Limitation on Soliciting Customers. In consideration of
the Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, alone or in conjunction with any other party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate on behalf of a
Competing Business with which Executive has a Competitive Position any Customer
located in the Restricted Territory (or any other Customer with which the
Executive had any direct contact on behalf of the Company) for the purpose of
providing the Customer or having the Customer provided with a Competing Product
or Competing Service.
(d) Limitation on Soliciting Personnel or Other Parties. In
consideration of the Company's entering into this Agreement, the Executive
hereby agrees that he will not, without the prior written consent of the
Company, alone or in conjunction with any other party, solicit or attempt to
solicit any employee, consultant, contractor, independent broker or other
personnel of the Company to terminate, alter or lessen that party's affiliation
with the Company or to violate the terms of any agreement or understanding
between such employee, consultant, contractor or other person and the Company.
(e) Acknowledgement. The parties acknowledge and agree that
the Protective Covenants are reasonable as to time, scope and territory given
the Company's need to protect its trade secrets and confidential business
information and given the substantial payments and benefits to which the
Executive may be entitled pursuant to this Agreement.
(f) Remedies. The parties acknowledge that any breach or
threatened breach of a Protective Covenant by the Executive is reasonably likely
to result in irreparable injury to the Company, and therefore, in addition to
all remedies provided at law or in equity, the Executive agrees that the Company
shall be entitled to a temporary restraining order and a permanent injunction to
prevent a breach or contemplated breach of the Protective Covenant. If the
Company seeks an injunction, the Executive waives any requirement that the
Company post a bond or any other security.
5. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) All compensation and benefits provided to the Executive
under this Agreement are in consideration of the Executive's services rendered
to the Company and of the Executive's adhering to the terms set forth in Section
4 hereof and the Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Incentive Plan or Securities Plan, or
other contract, plan or arrangement.
<PAGE>
6. Binding Effect.
(a) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or the designee
or, if there be no such designee, to the Executive's estate.
7. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt required, postage prepaid, as follows:
If to Company: Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attention: General Counsel
If to Executive: Frank D. Powers
5469 Brooke Ridge Drive
Dunwoody, Georgia 30338
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
8. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
9. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in one 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.
<PAGE>
12. Severability; Modification. All provisions of this Agreement are
severable from one another, and the unenforceability or invalidity of any
provision of this Agreement shall not affect the validity or enforceability of
the remaining provisions of this Agreement, but such remaining provisions shall
be interpreted and construed in such a manner as to carry out fully the
intention of the parties. Should any judicial body interpreting this Agreement
deem any provision of this Agreement to be unreasonably broad in time,
territory, scope or otherwise, it is the intent and desire of the parties that
such judicial body, to the greatest extent possible, reduce the breadth of such
provision to the maximum legally allowable parameters rather than deeming such
provision totally unenforceable or invalid.
13. Confidentiality. The Executive acknowledges that he or she has
previously entered into, and continues to be bound by the terms of, a
Confidentiality Agreement with the Company.
14. Agreement Not an Employment Contract. This Agreement shall not be
deemed to constitute or be deemed ancillary to an employment contract between
the Company and the Executive, and nothing herein shall be deemed to give the
Executive the right to continue in the employ of the Company or to eliminate the
right of the Company to discharge the Executive at any time.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
MATRIA HEALTHCARE, INC.
By: _________________________________
Its Chairman of the Board
-----------------------------------
Frank D. Powers
Executive
SEVERANCE COMPENSATION
AND
RESTRICTIVE COVENANT AGREEMENT
This Severance Compensation and Restrictive Covenant Agreement (the
"Agreement") is dated as of April 27, 1999, between Matria Healthcare, Inc., a
Delaware corporation (the "Company"), and Yvonne V. Scoggins (the "Executive").
WHEREAS, the Board of Directors of the Company has determined that it
is appropriate to reward the Executive for her years of service to the Company
and predecessor companies and encourage the Executive to remain in the Company's
employ;
NOW, THEREFORE, in consideration of their respective obligations to one
another set forth in this Agreement, and other good and valuable consideration,
the receipt, sufficiency and adequacy of which the parties hereby acknowledge,
the parties to this Agreement, intending to be legally bound, hereby agree as
follows:
1. Term.
(a) The term of this Agreement shall begin on April 27, 1999 and shall
terminate on April 26, 2002.
2. Termination of Employment during the Term.
(a) The Executive shall be entitled to the compensation and
benefits provided in Section 3 upon the termination of the Executive's
employment with the Company during the term of this Agreement by the Executive
or by the Company, unless such termination is as a result of (i) the Executive's
death; (ii) the Executive's Disability; (iii) the Executive's termination by the
Company for Cause; or (iv) the Executive's decision to terminate employment
other than for Good Reason.
(b) Disability. The term "Disability" as used in this
Agreement shall mean termination of the Executive's employment by the Company as
a result of the Executive's incapacity due to physical or mental illness,
provided that the Executive shall have been absent from her duties with the
Company on a full-time basis for six consecutive months and such absence shall
have continued unabated for 30 days after Notice of Termination as described in
Section 2(e) is thereafter given to the Executive by the Company.
(c) Cause. The term "Cause" for purposes of this Agreement
shall mean the Company's termination of the Executive's employment by the
Company on the basis of criminal or civil fraud on the part of the Executive
involving a material amount of funds of the Company. For purposes of this
<PAGE>
Agreement only, the preparation and filing of fictitious, false or misleading
claims in connection with any federal, state or other third party medical
reimbursement program, or any other violation of any rule or regulation in
respect of any federal, state or other third party medical reimbursement program
by the Company or any subsidiary of the Company shall not be deemed to
constitute "criminal fraud" or "civil fraud".
(d) Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any of the following actions taken by the Company without the
Executive's express written consent:
(i) Failure to re-elect the Executive as an officer of the Company, or removal
of the Executive as an officer of the Company, except in connection with
the termination of her employment for Disability or Cause or as a result of
the Executive's death or by the Executive;
(ii) A reduction in the Executive's base salary as in effect on the date hereof;
(iii)Any failure by the Company to continue in effect any incentive plan or
arrangement (including, without limitation, any bonus or contingent bonus
arrangements and credits and the right to receive performance awards and similar
incentive compensation benefits) in which the Executive is participating on the
date of this Agreement (hereinafter referred to as "Incentive Plans") or the
taking of any action by the Company which would adversely affect the Executive's
participation in any such Incentive Plan or reduce the Executive's benefits
under any such Incentive Plan, expressed as a percentage of her base salary, by
more than five percentage points in any fiscal year as compared to the
immediately preceding fiscal year;
(iv) Any failure by the Company to continue in effect any plan or arrangement to
receive securities of the Company (including, without limitation, the
Company's 1981 Incentive Stock Option Plan, 1983 Incentive Stock Option
Plan, 1984 Nonqualified Stock Option Plan, 1985 Nonqualified Stock Option
Plan, 1991 Stock Option Plan and 1993 Stock Option Plan, 1996 Stock
Incentive Plan, 1997 Stock
Incentive Plan, Employee Stock Purchase Plan and any other plan or arrangement
to receive and exercise stock options, stock appreciation rights, restricted
stock or grants thereof) in which the Executive is participating or has the
right to participate on the date of this Agreement (hereinafter referred to as
"Securities Plans") or the taking of any action by the Company which would
adversely affect the Executive's participation in or materially reduce the
Executive's benefits under any such Securities Plan, provided that a diminution
in the number of option shares granted under any such Securities Plan shall not
constitute Good Reason so long as the diminution in total grants to all key
executives is apportioned ratably among all such key executives;
(v) Any failure by the Company to allow the Executive to participate in any
benefit plan, program or arrangement (including, without limitation, any
profit sharing plan, group annuity contract, group life insurance
supplement, or medical, dental, accident and disability plans, but
excluding Incentive Plans and
Securities Plans) to the same extent as other key executives of the Company;
(vi) Any failure by the Company to provide the Executive with the number of paid
vacation days (or compensation therefor at termination of employment)
accrued to the Executive through the Date of Termination (as defined in
Section 2(f) below;
or
<PAGE>
(vii) Any purported termination of Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 2)e), and for purposes of this Agreement, no such purported termination
shall be effective.
(e) Notice of Termination. Any termination of the Executive's
employment by the Company for a reason specified in Section 2(b) or 2(c) shall
be communicated to the Executive by a Notice of Termination prior to the
effective date of the termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate whether such
termination is for the reason set forth in Section 2(b) or 2(c) and which sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. For purposes of this Agreement, no termination of the Executive's
employment by the Company shall constitute a termination for Disability or Cause
unless such termination is preceded by a Notice of Termination.
(f) Date of Termination. "Date of Termination" shall mean (a)
if the Executive's employment is terminated by the Company for Disability, 30
days after a Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the Executive's duties
on a full-time basis during such 30-day period) or (b) if the Executive's
employment is terminated by the Company or the Executive for any other reason,
the date on which the Executive's termination is effective.
3. Compensation and Benefits upon Termination of Employment.
(a) If the Company shall terminate the Executive's employment
other than pursuant to Section 2(b) or 2(c) and Section 2(e), or if the
Executive shall terminate her employment for Good Reason, then the Company shall
pay to the Executive, as severance compensation and in consideration of the
Executive's adherence to the terms of Section 4 hereof, the following:
(i) On the Date of Termination, the Company shall become liable to the
Executive for an amount equal to two times the Executive's annual base
compensation and targeted base bonus on the date of this Agreement, which
amount shall be paid to
the Executive in cash on or before the fifth day following the Date of
Termination.
(ii) For a period of two years following the Date of Termination, the Executive
and anyone entitled to claim under or through the Executive shall be
entitled to all benefits under the group hospitalization plan, health care
plan, dental care plan, life or other insurance or death benefit plan, or
other present or future similar group employee benefit plan or program of
the Company for which key executives are eligible at the Date of
Termination to the same extent and at the
same cost as if the Executive had continued to be an employee of the Company
during such period.
<PAGE>
(iii)For a period of two years after the Date of Termination, the Company shall
allow the Executive to utilize for her business and personal use any
Company leased automobile previously furnished to her or an equivalent type
and style of automobile and shall reimburse the Executive for the
maintenance and repair costs of such automobile and extend full insurance
coverage relating to such automobile in favor of the Executive, as
additional named insured, during such two-year period. In addition, the
Executive shall be entitled, at the Executive's sole discretion, to
exercise any option to acquire such automobile pursuant to the terms which
may be provided in the lease agreement for the automobile in question.
(b) The parties hereto agree that the payments provided in
Section 3(a) hereof are reasonable compensation in light of the Executive's
services rendered to the Company and in consideration of the Executive's
adherence to the terms of Section 4 hereof.
(c) The payments provided in Section 3(a) above shall be in
lieu of any other severance compensation otherwise payable to Executive under
the Company's established severance compensation policies; provided, however,
that nothing in this Agreement shall affect or impair Executive's vested rights
under any other employee benefit plan or policy of the Company.
4. Protective Covenants.
(a) Definitions.
This Subsection sets forth the definition of certain
capitalized terms used in Subsections (a) through (f) of this Section 4.
(i) "Competing Business" shall mean a business (other than the Company) that,
directly or through a controlled subsidiary or through an affiliate, (a)
develops, markets and/or sells computerized patient record software for
obstetricians and/or gynecologists, diabetes supplies, products for uterine
contraction monitoring in the home and/or products that would be used in
lieu of or in competition with uterine contraction monitoring products
("Competing Products"), and/or (b) provides obstetrical home care services,
including, without limitation, programs for monitoring patients who are at
risk of preterm delivery, programs for managing patients suffering from
obstetrical hypertension or diabetes, infusion therapy services involving
drugsto control preterm labor,nursing services and maternity management
services for both low and high risk pregnancies, diabetes or
respiratory disease management services, including, without
limitation, patient education, risk screening and stratification, case
management and clinical services, or cardiac event monitoring services
("Competing Services"). Notwithstanding the foregoing, no business
shall be deemed a "Competing Business" unless, within at least one of
the business's three most recently concluded fiscal years, that
business, or a division of that business, derived more than twenty
percent (20%) of its gross revenues or more than $2,000,000 in gross
revenues from the development, marketing or sale of Competing Products
and/or the provision of Competing Services
<PAGE>
(ii) "Competitive Position" shall mean: (A) the Executive's direct or
indirect equity ownership (excluding ownership of less than one
percent (1%) of the outstanding common stock of any publicly held
corporation) or control of any portion of any Competing Business; or
(B) any employment, consulting, partnership, advisory, directorship,
agency, promotional or independent contractor arrangement between the
Executive and any Competing Business where the Executive performs
services for the Competing Business substantially similar to those the
Executive
performed for the Company, provided, however, that the Executive shall not be
deemed to have a Competitive Position solely because of the Executive's services
for a Competing Business that are not directly related to the sale of Competing
Products or the provision of Competing Services, unless more than thirty-five
percent (35%) of the gross revenues of the Competing Business are derived from
the sale of Competing Products and/or the provision of Competing Services.
(iii) "Covenant Period" shall mean the period of time
from the date of this Agreement
to the date that is two (2) years after the Date of Termination.
(iv) "Customers" shall mean actual customers,
clients, referral sources or managed
care organizations or actively sought prospective customers, clients, referral
sources or managed care organizations of the Company (A) during the one (1) year
prior to the date of this Agreement and (B) during the Covenant Period.
(v) "Restricted Territory" shall mean the United
States.
(b) Limitation on Competition. In consideration of the
Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, anywhere within the Restricted Territory, either directly or
indirectly, alone or in conjunction with any other party, accept, enter into or
take any action in conjunction with or in furtherance of a Competitive Position
(other than action to reject an unsolicited offer of a Competitive Position).
(c) Limitation on Soliciting Customers. In consideration of
the Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, alone or in conjunction with any other party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate on behalf of a
Competing Business with which Executive has a Competitive Position any Customer
located in the Restricted Territory (or any other Customer with which the
Executive had any direct contact on behalf of the Company) for the purpose of
providing the Customer or having the Customer provided with a Competing Product
or Competing Service.
<PAGE>
(d) Limitation on Soliciting Personnel or Other Parties. In
consideration of the Company's entering into this Agreement, the Executive
hereby agrees that he will not, without the prior written consent of the
Company, alone or in conjunction with any other party, solicit or attempt to
solicit any employee, consultant, contractor, independent broker or other
personnel of the Company to terminate, alter or lessen that party's affiliation
with the Company or to violate the terms of any agreement or understanding
between such employee, consultant, contractor or other person and the Company.
(e) Acknowledgement. The parties acknowledge and agree that
the Protective Covenants are reasonable as to time, scope and territory given
the Company's need to protect its trade secrets and confidential business
information and given the substantial payments and benefits to which the
Executive may be entitled pursuant to this Agreement.
(f) Remedies. The parties acknowledge that any breach or
threatened breach of a Protective Covenant by the Executive is reasonably likely
to result in irreparable injury to the Company, and therefore, in addition to
all remedies provided at law or in equity, the Executive agrees that the Company
shall be entitled to a temporary restraining order and a permanent injunction to
prevent a breach or contemplated breach of the Protective Covenant. If the
Company seeks an injunction, the Executive waives any requirement that the
Company post a bond or any other security.
5. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) All compensation and benefits provided to the Executive
under this Agreement are in consideration of the Executive's services rendered
to the Company and of the Executive's adhering to the terms set forth in Section
4 hereof and the Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Incentive Plan or Securities Plan, or
other contract, plan or arrangement.
6. Binding Effect.
(a) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to her hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or the designee
or, if there be no such designee, to the Executive's estate.
<PAGE>
7. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt required, postage prepaid, as follows:
If to Company: Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attention: General Counsel
If to Executive: Yvonne V. Scoggins
1249 Fairfield East
Dunwoody, Georgia 30338
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
8. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
9. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in one 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.
12. Severability; Modification. All provisions of this Agreement are
severable from one another, and the unenforceability or invalidity of any
provision of this Agreement shall not affect the validity or enforceability of
the remaining provisions of this Agreement, but such remaining provisions shall
be interpreted and construed in such a manner as to carry out fully the
intention of the parties. Should any judicial body interpreting this Agreement
deem any provision of this Agreement to be unreasonably broad in time,
territory, scope or otherwise, it is the intent and desire of the parties that
such judicial body, to the greatest extent possible, reduce the breadth of such
provision to the maximum legally allowable parameters rather than deeming such
provision totally unenforceable or invalid.
<PAGE>
13. Confidentiality. The Executive acknowledges that he or she has
previously entered into, and continues to be bound by the terms of, a
Confidentiality Agreement with the Company.
14. Agreement Not an Employment Contract. This Agreement shall not be
deemed to constitute or be deemed ancillary to an employment contract between
the Company and the Executive, and nothing herein shall be deemed to give the
Executive the right to continue in the employ of the Company or to eliminate the
right of the Company to discharge the Executive at any time.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
MATRIA HEALTHCARE, INC.
By: _________________________________
Its Chairman of the Board
-----------------------------------
Yvonne V. Scoggins
Executive
CHANGE IN CONTROL
SEVERANCE COMPENSATION
AND
RESTRICTIVE COVENANT AGREEMENT
THIS SEVERANCE COMPENSATION AND RESTRICTIVE COVENANT AGREEMENT
("Agreement") is dated as of April 27, 1999 between MATRIA HEALTHCARE, INC., a
Delaware corporation (the "Company"), and DONALD R. MILLARD (the "Executive").
WHEREAS, the Company, has determined that it is appropriate to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including the Executive, to their assigned duties without
distraction in potentially disturbing circumstances arising from the possibility
of a Change in Control (as hereinafter defined) of the Company; and
WHEREAS, the severance benefits payable by the Company to Executive as
provided herein are in part intended to ensure that Executive receives
reasonable compensation given the specific circumstances of Executive's
employment history with the Company;
NOW, THEREFORE, in consideration of their respective obligations to one
another set forth in this Agreement, and other good and valuable consideration,
the receipt, sufficiency and adequacy of which the parties hereby acknowledge,
the parties to this Agreement, intending to be legally bound, hereby agree as
follows:
1. Term. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) April 26, 2002 if a Change in Control of the Company has not
occurred between the date hereof and April 26, 2002; (ii) the Date of
Termination (as hereinafter defined) of the Executive's employment with the
Company as a result of the Executive's death, Disability (as defined in Section
3(b)) or Retirement (as defined in Section 3(c)), by the Company for Cause (as
defined in Section 3(d)) or by the Executive other than for Good Reason (as
defined in Section 3(e)); or (iii) three years from the date of a Change in
Control if the Executive's employment with the Company has not terminated as of
such time.
2. Change in Control. For purposes of this Agreement, "Change in
Control" shall mean changes in the ownership of a corporation, changes in the
effective control of a corporation, changes in ownership of a substantial
portion of a corporation's assets and a disposition of a substantial portion of
a corporation's assets, all as defined below:
(a) A change in the ownership of a corporation occurs on the date that
any one person, or more than one person acting as a group, acquires ownership of
stock of that corporation which, together with stock held by such person or
group, represents more than fifty percent (50%) of the total fair market value
or total voting power of the stock of such corporation. An increase in the
percentage of stock owned by any one person, or persons acting as a group, as a
result of a transaction in which the corporation acquires its stock in exchange
for property will be treated as an acquisition of stock.
<PAGE>
(b) A change in the effective control of a corporation occurs on the
date that either: any one person, or more than one person acting as a group
becomes the beneficial owner of stock of the corporation possessing twenty
percent (20%) or more of the total voting power of the stock of such
corporation; or a majority of members of the corporation's board of directors is
replaced during any 24 month period by directors whose appointment or election
is not endorsed by at least two-thirds (2/3) of the members of the corporation's
board of directors who were directors prior to the date of the appointment or
election of the first of such new directors.
(c) A change in the ownership of a substantial portion of a
corporation's assets occurs on the date that any one person, or more than one
person acting as a group, acquires (or has acquired during the 12 month period
ending on the date of the most recent acquisition by such person or persons)
assets from the corporation that have a total fair market value equal to or more
than one-half (1/2) of the total fair market value of all of the assets of the
corporation immediately prior to such acquisition or acquisitions. The transfer
of assets by a corporation is not treated as a change in the ownership of such
assets if the assets are transferred: to a shareholder of the corporation
(immediately before the asset transfer) in exchange for such shareholder's
capital stock of the corporation having a fair market value approximately equal
to the fair market value of such assets; or to an entity, fifty percent (50%) or
more of the total value or voting power of which is owned, directly or
indirectly, by the corporation.
(d) A disposition of a substantial portion of a corporation's assets
occurs on the date that the corporation transfers assets by sale, lease,
exchange, distribution to shareholders, assignment to creditors, foreclosure or
otherwise, in a transaction or transactions not in the ordinary course of the
corporation's business (or has made such transfers during the 12 month period
ending on the date of the most recent transfer of assets) that have a total fair
market value equal to or more than one-half (1/2) of the total fair market value
of all of the assets of the corporation as of the date immediately prior to the
first such transfer or transfers. The transfer of assets by a corporation is not
treated as a disposition of a substantial portion of the corporation's assets if
the assets are transferred to an entity, fifty percent (50%) or more of the
total value or voting power of which is owned, directly or indirectly, by the
corporation.
For purposes of the provision of this Agreement defining "Change in Control,"
(i) references to the Company in this Agreement include the Delaware corporation
known as Matria Healthcare, Inc. as of the date of execution of this Agreement,
and any corporation which is the legal successor to such corporation by virtue
of merger or share exchange; and (ii) the terms "person," "acting as a group"
and "ownership" shall have the meanings prescribed in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3
promulgated thereunder; provided, however, that in any merger, consolidation or
share exchange in which less than fifty percent (50%) of the outstanding voting
securities of the Company or its successor corporation are held by the former
shareholders of the Company, the shareholders of the other parties to the
transaction shall be deemed to have acted as a group that acquired ownership of
more than fifty percent (50%) of the outstanding voting securities of the
Company, resulting in a change in ownership under Section 2(a) above.
<PAGE>
3. Termination Following Change in Control.
(a) If the Executive is still an employee of the Company at
the time of a Change in Control, the Executive shall be entitled to the
compensation and benefits provided in Section 4 upon the subsequent termination
of the Executive's employment with the Company by the Executive or by the
Company during the term of this Agreement, unless such termination is as a
result of (i) the Executive's death; (ii) the Executive's Disability; (iii) the
Executive's Retirement; (iv) the Executive's termination by the Company for
Cause; or (v) the Executive's decision to terminate employment other than for
Good Reason.
(b) Disability. The term "Disability" as used in this
Agreement shall mean termination of the Executive's employment by the Company as
a result of the Executive's incapacity due to physical or mental illness,
provided that the Executive shall have been absent from his duties with the
Company on a full-time basis for six consecutive months and such absence shall
have continued unabated for 30 days after Notice of Termination as described in
Section 3(f) is thereafter given to the Executive by the Company.
(c) Retirement. The term "Retirement" as used in this
Agreement shall mean termination of the Executive's employment by the Company
based on the Executive's having attained age 65 or such later retirement age as
shall have been established pursuant to a written agreement between the Company
and the Executive. Termination of Executive's employment at a time when
Executive is eligible to receive benefits under the Company's Retirement Benefit
Award or the Company's Protective Umbrella for Lifelong Security of Employees
Program shall not constitute Retirement unless Executive shall have attained
such age.
(d) Cause. The term "Cause" for purposes of this Agreement
shall mean the Company's termination of the Executive's employment on the basis
of criminal or civil fraud on the part of the Executive involving a material
amount of funds of the Company. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Company's Board of Directors at a meeting of the Board called and held
for such purpose (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board) finding that in the good faith opinion of the Board the Executive was
guilty of conduct set forth in the first sentence of this Section 3(d) and
specifying the particulars thereof in detail. For purposes of this Agreement
only, the preparation and filing of fictitious, false or misleading claims in
connection with any federal, state or other third party medical reimbursement
program, or any other violation of any rule or regulation in respect of any
federal, state or other third party medical reimbursement program by the Company
or any subsidiary of the Company shall not be deemed to constitute "criminal
fraud" or "civil fraud".
(e) Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any of the following actions taken by the Company without the
Executive's express written consent:
<PAGE>
(i) The assignment to the Executive by the Company of duties inconsistent
with, or a material adverse alteration of the powers and functions
associated with, the Executive's position, duties, responsibilities
and status with the Company prior to a Change in Control, or an
adverse change in the Executive's titles or offices as in effect prior
to a Change in Control, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions, except in
connection with the termination of his employment for Disability,
Retirement or Cause or as a result of the Executive's death or by the
Executive other than for Good Reason;
(ii) A reduction in the Executive's base salary as in effect on the date
hereof or as the same may be increased from time to time during the
term of this Agreement or the Company's failure to increase (within 12
months of the Executive's last increase in base salary) the
Executive's base salary after a Change in Control in an amount which
at least equals, on a percentage basis, the average annual percentage
increase in base salary for all corporate officers of the Company
effected in the preceding 36 months;
(iii)Any failure by the Company to continue in effect any benefit plan,
program or arrangement (including, without limitation, any profit
sharing plan, group annuity contract, group life insurance supplement,
or medical, dental, accident and disability plans) in which the
Executive was eligible to participate at the time of a Change in
Control (hereinafter referred to as "Benefit Plans"), or the taking of
any action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
any such Benefit Plan, unless a comparable substitute Benefit Plan
shall be made available to the Executive, or deprive the Executive of
any fringe benefit enjoyed by the Executive at the time of a Change in
Control;
(iv) Any failure by the Company to continue in effect any incentive plan or
arrangement (including, without limitation, any bonus or contingent
bonus arrangements and credits and the right to receive performance
awards and similar incentive compensation benefits) in which the
Executive is participating at the time of a Change in Control (or any
other plans or arrangements providing him with substantially similar
benefits) (hereinafter referred to as "Incentive Plans") or the taking
of any action by the Company which would adversely affect the
Executive's participation in any such Incentive Plan or reduce the
Executive's benefits under any such Incentive Plan, expressed as a
percentage of his base salary, by more than five percentage points in
any fiscal year as compared to the immediately preceding fiscal year,
or any action to reduce Executive's bonuses under any Incentive Plan
by more than 20% of the average annual bonus previously paid to
Executive with respect to the preceding three fiscal years;
\
(v) Any failure by the Company to continue in effect any plan or
arrangement to receive securities of the Company (including, without
limitation, the Company's 1997 Stock Incentive Plan, Employee Stock
Purchase Plan and any other plan or arrangement to receive and
exercise stock options, stock appreciation rights, restricted stock or
grants thereof) in which the Executive is participating or has the
right to participate in prior to a Change in Control (or plans or
arrangements providing him with substantially similar benefits)
(hereinafter referred to as "Securities Plans") or the taking of any
action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
any such Securities Plan, unless a comparable substitute Securities
Plan shall be made available to the Executive;
<PAGE>
(vi) A relocation of
the Company's principal executive offices to a location more
than ten (10) miles outside of Marietta, Georgia, or the Executive's relocation
to any place other than the Company's principal executive offices, except for
required travel by the Executive on the Company's business to an extent
substantially consistent with the Executive's business travel obligations
immediately prior to a Change in Control;
(vii)Any failure by the Company to provide the Executive with the number
of paid vacation days (or compensation therefor at termination of
employment) accrued to the Executive through the Date of Termination,
together with any earned but unused vacation days for the vacation
year in question;
(viii) Any material breach by the Company of any provision of this
Agreement;
(ix) Any failure by the Company to obtain the assumption of this Agreement
by any successor or assign of the Company effected in accordance with
the provisions of Section 7(a) hereof;
(x) Any purported termination of the Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(f), and for purposes of this Agreement, no
such purported termination shall be effective; or
(xi) Any proposal or request by the Company after the
Effective Date to require that
the Executive enter into a non-competition agreement with the Company where the
terms of such agreement as to its scope or duration are greater than the terms
set forth in Section 5 hereof .
(f) Notice of Termination. Any termination of the Executive's
employment by the Company for a reason specified in Section 3(b), 3(c) or 3(d)
shall be communicated to the Executive by a Notice of Termination prior to the
effective date of the termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate whether such
termination is for the reason set forth in Section 3(b), 3(c) or 3(d) and which
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. For purposes of this Agreement, no termination of the Executive's
employment by the Company shall constitute a termination for Disability,
Retirement or Cause unless such termination is preceded by a Notice of
Termination.
(g) Date of Termination. "Date of Termination" shall mean (a)
if the Executive's employment is terminated by the Company for Disability, 30
days after a Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the Executive's duties
on a full-time basis during such 30-day period) or (b) if the Executive's
employment is terminated by the Company or the Executive for any other reason,
the date on which the Executive's termination is effective; provided that, if
within 30 days after any Notice of Termination is given to the Executive by the
Company the Executive notifies the Company that a dispute exists concerning the
termination, the Date of Termination shall be the date the dispute is finally
determined whether by mutual agreement by the parties or upon final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
<PAGE>
4. Compensation and Benefits upon Termination of Employment.
(a) If the Company shall terminate the Executive's employment
after a Change in Control other than pursuant to Section 3(b), 3(c) or 3(d) and
Section 3(f), or if the Executive shall terminate his employment for Good
Reason, then the Company shall pay to the Executive, as severance compensation
and in consideration of the Executive's adherence to the terms of Section 5
hereof, the following:
(1) On the Date of Termination, the Company shall become liable to the
Executive for an amount equal to three times the Executive's annual
base compensation and targeted base bonus on the date of the Change in
Control, which amount shall be paid to the Executive in cash on or
before the fifth day following the Date of Termination.
(2) For a period of three years following the Date of Termination, the
Executive and anyone entitled to claim under or through the Executive
shall be entitled to all benefits under the group hospitalization
plan, health care plan, dental care plan, life or other insurance or
death benefit plan, or other present or future similar group employee
benefit plan or program of the Company for which key executives are
eligible at the date of a Change in Control, to the same extent as if
the Executive had continued to be an employee of the Company during
such period and such benefits shall, to the extent not fully paid
under any such plan or program, be paid by the Company.
(3) For a period of three years after the Date of Termination, the Company
shall allow the Executive to utilize for his business and personal use
any Company leased automobile previously furnished to him or an
equivalent type and style of automobile and shall reimburse the
Executive for the maintenance and repair costs of such automobile and
extend full insurance coverage relating to such automobile in favor of
the Executive, as additional named insured, during such three-year
period. In addition, the Executive shall be entitled, at the
Executive's sole discretion, to exercise any option to acquire such
automobile pursuant to the terms which may be provided in the lease
agreement for the automobile in question.
(b) The parties hereto agree that the payments provided in
Section 4(a) hereof are reasonable compensation in light of the Executive's
services rendered to the Company and in consideration of the Executive's
adherence to the terms of Section 5 hereof. Neither party shall contest the
payment of such benefits as constituting an "excess parachute payment" within
the meaning of Section 280G(b)(1) of the Code. In the event that the Executive
becomes entitled to the compensation and benefits described in Section 4(a)
hereof (the "Compensation Payments") and the Company has determined, based upon
the advise of tax counsel selected by the Company's independent auditors and
<PAGE>
acceptable to the Executive, that, as a result of such Compensation Payments and
any other benefits or payments required to be taken into account under Code
Section 280G(b)(2) ("Parachute Payments"), any of such Parachute Payments must
be reported by the Company as "excess parachute payments" and are therefore not
deductible by the Company, the Company shall pay to the Executive at the time
specified in Section 4(a) above an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any of
the tax imposed on the Executive by Section 4999 of the Code (the "Excise Tax")
and any Federal, state and local income tax and Excise Tax upon the Gross-Up
Payment, shall be equal to the Parachute Payments determined prior to the
application of this paragraph. The value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's independent
auditors. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay Federal income taxes at the highest marginal
rate of Federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rates of taxation in the state and locality of the Executive's residence on the
Date of Termination, net of the maximum reduction in Federal income taxes which
could be obtained from deduction of such state and local taxes. In the event
that the Excise Tax payable by the Executive is subsequently determined to be
less than the amount, if any, taken into account hereunder at the time of
termination of the Executive's employment, the Executive shall repay to the
Company at the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such reduction
plus interest on the amount of such repayment at the rate provided for in
Section 1274(b)(2)(B) of the Code ("Repayment Amount"). In the event that the
Excise Tax payable by the Executive is determined to exceed the amount, if any,
taken into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any interest
and penalty payable with respect to such excess) immediately prior to the time
that the amount of such excess is required to be paid by Executive ("Additional
Gross-up"), such that the net amount retained by the Executive, after deduction
of any Excise Tax on the Parachute Payments and any Federal, state and local
income tax and Excise Tax upon the Additional Gross-Up Payment, shall be equal
to the Parachute Payments determined prior to the application of this paragraph.
The obligation to pay any Repayment Amount or Additional Gross-up shall remain
in effect under this Agreement for the entire period during which the Executive
remains liable for the Excise Tax, including the period during which any
applicable statute of limitation remains open.
(c) The payments provided in Section 4(a) above shall be in
lieu of any other severance compensation otherwise payable to Executive under
the Company's established severance compensation policies and, unless the
Executive elects, that certain Severance Compensation and Restrictive Covenant
Agreement of even date between the Executive and the Company; provided, however,
that nothing in this Agreement shall affect or impair Executive's vested rights
under any other employee benefit plan or policy of the Company.
(d) Unless the Company determines that any Parachute Payments
made hereunder must be reported as "excess parachute payments" in accordance
with the third sentence of Section 4(b) above, neither party shall file any
return taking the position that the payment of such benefits constitutes an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the Code.
If the Internal Revenue Service proposes an assessment of Excise Tax against the
Executive in excess of the amount, if any, taken into account at the time
specified in Section 4(a), then, if the Company notifies Executive in writing
that the Company elects to contest such assessment at its expense, unless the
Executive waives the right to an Additional Gross-Up Payment, the Executive (i)
shall in good faith cooperate with the Company in contesting such proposed
assessment; and (ii) such Executive shall not settle such contest without the
written consent of the Company. Any such contest shall be controlled by the
Company, provided, however, that the Executive may participate in such contest.
5. Protective Covenants.
(a) Definitions.
This Subsection sets forth the definition of certain
capitalized terms used in Subsections (a) through (f) of this Section 4.
(i) "Competing Business" shall mean a business (other than the Company)
that, directly or through a controlled subsidiary or through an
affiliate, (a) develops, markets and/or sells computerized patient
record software for obstetricians and/or gynecologists, diabetes
supplies, products for uterine contraction monitoring in the home
and/or products that would be used in lieu of or in competition with
uterine contraction monitoring products ("Competing Products"), and/or
(b) provides obstetrical home care services, including, without
limitation, programs for monitoring patients who are at risk of
preterm delivery, programs for managing patients suffering from
obstetrical hypertension or diabetes, infusion therapy services
involving drugs to control preterm labor, nursing services and
maternity management services for both low and high risk pregnancies,
diabetes or respiratory disease management services, including,
without limitation, patient education, risk screening and
stratification, case management and clinical services, or cardiac
event monitoring services ("Competing Services"). Notwithstanding the
foregoing, no business shall be deemed a "Competing Business" unless,
within at least one of the business's three most recently concluded
fiscal years, that business, or a division of that business, derived
more than twenty percent (20%) of its gross revenues or more than
$2,000,000 in gross revenues from the development, marketing or sale
of Competing Products and/or the provision of Competing Services.
(ii)
"Competitive Position" shall mean: (A) the Executive's direct or
indirect equity
ownership (excluding ownership of less than one percent (1%) of the outstanding
common stock of any publicly held corporation) or control of any portion of any
Competing Business; or (B) any employment, consulting, partnership, advisory,
directorship, agency, promotional or independent contractor arrangement between
the Executive and any Competing Business where the Executive performs services
for the Competing Business substantially similar to those the Executive
performed for the Company, provided, however, that the Executive shall not be
deemed to have a Competitive Position solely because of the Executive's services
for a Competing Business that are not directly related to the sale of Competing
Products or the provision of Competing Services, unless more than thirty-five
percent (35%) of the gross revenues of the Competing Business are derived from
the sale of Competing Products and/or the provision of Competing Services.
(iii) "Covenant Period" shall mean the period of time
from the date of this Agreement
to the date that is two (2) years after the Date of Termination.
<PAGE>
(iv) "Customers" shall mean actual customers,
clients, referral sources or managed
care organizations or actively sought prospective customers, clients, referral
sources or managed care organizations of the Company (A) during the one (1) year
prior to the date of this Agreement and (B) during the Covenant Period.
(v) "Restricted Territory" shall mean the United
States.
(b) Limitation on Competition. In consideration of the
Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, anywhere within the Restricted Territory, either directly or
indirectly, alone or in conjunction with any other party, accept, enter into or
take any action in conjunction with or in furtherance of a Competitive Position
(other than action to reject an unsolicited offer of a Competitive Position).
(c) Limitation on Soliciting Customers. In consideration of
the Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, alone or in conjunction with any other party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate on behalf of a
Competing Business with which Executive has a Competitive Position any Customer
located in the Restricted Territory (or any other Customer with which the
Executive had any direct contact on behalf of the Company) for the purpose of
providing the Customer or having the Customer provided with a Competing Product
or Competing Service.
(d) Limitation on Soliciting Personnel or Other Parties. In
consideration of the Company's entering into this Agreement, the Executive
hereby agrees that he will not, without the prior written consent of the
Company, alone or in conjunction with any other party, solicit or attempt to
solicit any employee, consultant, contractor, independent broker or other
personnel of the Company to terminate, alter or lessen that party's affiliation
with the Company or to violate the terms of any agreement or understanding
between such employee, consultant, contractor or other person and the Company.
(e) Acknowledgement. The parties acknowledge and agree that
the Protective Covenants are reasonable as to time, scope and territory given
the Company's need to protect its trade secrets and confidential business
information and given the substantial payments and benefits to which the
Executive may be entitled pursuant to this Agreement.
(f) Remedies. The parties acknowledge that any breach or
threatened breach of a Protective Covenant by the Executive is reasonably likely
to result in irreparable injury to the Company, and therefore, in addition to
all remedies provided at law or in equity, the Executive agrees that the Company
shall be entitled to a temporary restraining order and a permanent injunction to
prevent a breach or contemplated breach of the Protective Covenant. If the
Company seeks an injunction, the Executive waives any requirement that the
Company post a bond or any other security.
<PAGE>
6. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) All compensation and benefits provided to the Executive
under this Agreement are in consideration of the Executive's services rendered
to the Company and of the Executive's adhering to the terms set forth in Section
5 hereof and the Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreement or other contract, plan or arrangement.
7. Successor to the Company.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor or assign to its business and/or assets as aforesaid, including
without limitation, the Surviving Company in the Merger. If at any time during
the term of this Agreement the Executive is employed by any corporation a
majority of the voting securities of which is then owned by the Company,
"Company" as used in Sections 3, 4, 12 and 14 hereof shall in addition include
such employer. In such event, the Company agrees that it shall pay or shall
cause such employer to pay any amounts owed to the Executive pursuant to Section
4 hereof.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or the designee
or, if there be no such designee, to the Executive's estate.
8. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt required, postage prepaid, as follows:
<PAGE>
If to Company:
Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attention: General Counsel
If to Executive:
Donald R. Millard
3266 Hunterdon Way
Marietta, Georgia 30067
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. Neither this Agreement nor the
Merger shall diminish or waive in any way the rights of Executive under the
Prior Agreement, which as amended by this Agreement, shall continue to be
applicable to Executive's employment by the Surviving Company after the Merger.
No agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia.
10. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. Counterparts. This Agreement may be executed in one 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.
12. Legal Fees and Expenses. The Company shall pay all legal fees,
expenses and damages which the Executive may incur as a result of the
Executive's instituting legal action to enforce his rights hereunder, or in the
event the Company contests the validity, enforceability or the Executive's
interpretation of, or determinations under, this Agreement. If the Executive is
the prevailing party or recovers any damages in such legal action, the Executive
shall be entitled to receive in addition thereto pre-judgment and post-judgment
interest on the amount of such damages.
<PAGE>
13. Severability; Modification. All provisions of this Agreement are
severable from one another, and the unenforceability or invalidity of any
provision of this Agreement shall not affect the validity or enforceability of
the remaining provisions of this Agreement, but such remaining provisions shall
be interpreted and construed in such a manner as to carry out fully the
intention of the parties. Should any judicial body interpreting this Agreement
deem any provision of this Agreement to be unreasonably broad in time,
territory, scope or otherwise, it is the intent and desire of the parties that
such judicial body, to the greatest extent possible, reduce the breadth of such
provision to the maximum legally allowable parameters rather than deeming such
provision totally unenforceable or invalid.
14. Confidentiality. The Executive acknowledges that he has previously
entered into, and continues to be bound by the terms of, a Confidentiality
Agreement with the Company.
15. Agreement Not an Employment Contract. This Agreement shall not be
deemed to constitute or be deemed ancillary to an employment contract between
the Company and the Executive, and nothing herein shall be deemed to give the
Executive the right to continue in the employ of the Company or to eliminate the
right of the Company to discharge the Executive at any time.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
MATRIA HEALTHCARE, INC.
By: ___________________________________
-----------------------------------------
Executive
CHANGE IN CONTROL
SEVERANCE COMPENSATION
AND
RESTRICTIVE COVENANT AGREEMENT
THIS SEVERANCE COMPENSATION AND RESTRICTIVE COVENANT AGREEMENT
("Agreement") is dated as of April 27, 1999 between MATRIA HEALTHCARE, INC., a
Delaware corporation (the "Company"), and FRANK D. POWERS (the "Executive").
WHEREAS, the Company, has determined that it is appropriate to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including the Executive, to their assigned duties without
distraction in potentially disturbing circumstances arising from the possibility
of a Change in Control (as hereinafter defined) of the Company; and
WHEREAS, the severance benefits payable by the Company to Executive as
provided herein are in part intended to ensure that Executive receives
reasonable compensation given the specific circumstances of Executive's
employment history with the Company;
NOW, THEREFORE, in consideration of their respective obligations to one
another set forth in this Agreement, and other good and valuable consideration,
the receipt, sufficiency and adequacy of which the parties hereby acknowledge,
the parties to this Agreement, intending to be legally bound, hereby agree as
follows:
1. Term. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) April 26, 2002 if a Change in Control of the Company has not
occurred between the date hereof and April 26, 2002; (ii) the Date of
Termination (as hereinafter defined) of the Executive's employment with the
Company as a result of the Executive's death, Disability (as defined in Section
3(b)) or Retirement (as defined in Section 3(c)), by the Company for Cause (as
defined in Section 3(d)) or by the Executive other than for Good Reason (as
defined in Section 3(e)); or (iii) three years from the date of a Change in
Control if the Executive's employment with the Company has not terminated as of
such time.
2. Change in Control. For purposes of this Agreement, "Change in
Control" shall mean changes in the ownership of a corporation, changes in the
effective control of a corporation, changes in ownership of a substantial
portion of a corporation's assets and a disposition of a substantial portion of
a corporation's assets, all as defined below:
(a) A change in the ownership of a corporation occurs on the date that
any one person, or more than one person acting as a group, acquires ownership of
stock of that corporation which, together with stock held by such person or
group, represents more than fifty percent (50%) of the total fair market value
or total voting power of the stock of such corporation. An increase in the
percentage of stock owned by any one person, or persons acting as a group, as a
result of a transaction in which the corporation acquires its stock in exchange
for property will be treated as an acquisition of stock.
<PAGE>
(b) A change in the effective control of a corporation occurs on the
date that either: any one person, or more than one person acting as a group
becomes the beneficial owner of stock of the corporation possessing twenty-five
percent (25%) or more of the total voting power of the stock of such
corporation; or a majority of members of the corporation's board of directors is
replaced during any 24 month period by directors whose appointment or election
is not endorsed by at least two-thirds (2/3) of the members of the corporation's
board of directors who were directors prior to the date of the appointment or
election of the first of such new directors.
(c) A change in the ownership of a substantial portion of a
corporation's assets occurs on the date that any one person, or more than one
person acting as a group, acquires (or has acquired during the 12 month period
ending on the date of the most recent acquisition by such person or persons)
assets from the corporation that have a total fair market value equal to or more
than one-half (1/2) of the total fair market value of all of the assets of the
corporation immediately prior to such acquisition or acquisitions. The transfer
of assets by a corporation is not treated as a change in the ownership of such
assets if the assets are transferred: to a shareholder of the corporation
(immediately before the asset transfer) in exchange for such shareholder's
capital stock of the corporation having a fair market value approximately equal
to the fair market value of such assets; or to an entity, fifty percent (50%) or
more of the total value or voting power of which is owned, directly or
indirectly, by the corporation.
(d) A disposition of a substantial portion of a corporation's assets
occurs on the date that the corporation transfers assets by sale, lease,
exchange, distribution to shareholders, assignment to creditors, foreclosure or
otherwise, in a transaction or transactions not in the ordinary course of the
corporation's business (or has made such transfers during the 12 month period
ending on the date of the most recent transfer of assets) that have a total fair
market value equal to or more than one-half (1/2) of the total fair market value
of all of the assets of the corporation as of the date immediately prior to the
first such transfer or transfers. The transfer of assets by a corporation is not
treated as a disposition of a substantial portion of the corporation's assets if
the assets are transferred to an entity, fifty percent (50%) or more of the
total value or voting power of which is owned, directly or indirectly, by the
corporation.
For purposes of the provision of this Agreement defining "Change in Control,"
(i) references to the Company in this Agreement include the Delaware corporation
known as Matria Healthcare, Inc. as of the date of execution of this Agreement,
and any corporation which is the legal successor to such corporation by virtue
of merger or share exchange; and (ii) the terms "person," "acting as a group"
and "ownership" shall have the meanings prescribed in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3
promulgated thereunder; provided, however, that in any merger, consolidation or
share exchange in which less than fifty percent (50%) of the outstanding voting
securities of the Company or its successor corporation are held by the former
shareholders of the Company, the shareholders of the other parties to the
transaction shall be deemed to have acted as a group that acquired ownership of
more than fifty percent (50%) of the outstanding voting securities of the
Company, resulting in a change in ownership under Section 2(a) above.
<PAGE>
3. Termination Following Change in Control.
(a) If the Executive is still an employee of the Company at
the time of a Change in Control, the Executive shall be entitled to the
compensation and benefits provided in Section 4 upon the subsequent termination
of the Executive's employment with the Company by the Executive or by the
Company during the term of this Agreement, unless such termination is as a
result of (i) the Executive's death; (ii) the Executive's Disability; (iii) the
Executive's Retirement; (iv) the Executive's termination by the Company for
Cause; or (v) the Executive's decision to terminate employment other than for
Good Reason.
(b) Disability. The term "Disability" as used in this
Agreement shall mean termination of the Executive's employment by the Company as
a result of the Executive's incapacity due to physical or mental illness,
provided that the Executive shall have been absent from his duties with the
Company on a full-time basis for six consecutive months and such absence shall
have continued unabated for 30 days after Notice of Termination as described in
Section 3(f) is thereafter given to the Executive by the Company.
(c) Retirement. The term "Retirement" as used in this
Agreement shall mean termination of the Executive's employment by the Company
based on the Executive's having attained age 65 or such later retirement age as
shall have been established pursuant to a written agreement between the Company
and the Executive. Termination of Executive's employment at a time when
Executive is eligible to receive benefits under the Company's Retirement Benefit
Award or the Company's Protective Umbrella for Lifelong Security of Employees
Program shall not constitute Retirement unless Executive shall have attained
such age.
(d) Cause. The term "Cause" for purposes of this Agreement
shall mean the Company's termination of the Executive's employment on the basis
of criminal or civil fraud on the part of the Executive involving a material
amount of funds of the Company. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Company's Board of Directors at a meeting of the Board called and held
for such purpose (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board) finding that in the good faith opinion of the Board the Executive was
guilty of conduct set forth in the first sentence of this Section 3(d) and
specifying the particulars thereof in detail. For purposes of this Agreement
only, the preparation and filing of fictitious, false or misleading claims in
connection with any federal, state or other third party medical reimbursement
program, or any other violation of any rule or regulation in respect of any
federal, state or other third party medical reimbursement program by the Company
or any subsidiary of the Company shall not be deemed to constitute "criminal
fraud" or "civil fraud".
(e) Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any of the following actions taken by the Company without the
Executive's express written consent:
<PAGE>
(i) The assignment to the Executive by the Company of duties inconsistent
with, or a material adverse alteration of the powers and functions
associated with, the Executive's position, duties, responsibilities
and status with the Company prior to a Change in Control, or an
adverse change in the Executive's titles or offices as in effect prior
to a Change in Control, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions, except in
connection with the termination of his employment for Disability,
Retirement or Cause or as a result of the Executive's death or by the
Executive other than for Good Reason;
(ii) A reduction in the Executive's base salary as in effect on the date
hereof or as the same may be increased from time to time during the
term of this Agreement or the Company's failure to increase (within 12
months of the Executive's last increase in base salary) the
Executive's base salary after a Change in Control in an amount which
at least equals, on a percentage basis, the average annual percentage
increase in base salary for all corporate officers of the Company
effected in the preceding 36 months;
(iii)Any failure by the Company to continue in effect any benefit plan,
program or arrangement (including, without limitation, any profit
sharing plan, group annuity contract, group life insurance supplement,
or medical, dental, accident and disability plans) in which the
Executive was eligible to participate at the time of a Change in
Control (hereinafter referred to as "Benefit Plans"), or the taking of
any action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
any such Benefit Plan, unless a comparable substitute Benefit Plan
shall be made available to the Executive, or deprive the Executive of
any fringe benefit enjoyed by the Executive at the time of a Change in
Control;
(iv) Any failure by the Company to continue in effect any
incentive plan or
arrangement (including, without limitation, any bonus or contingent bonus
arrangements and credits and the right to receive performance awards and similar
incentive compensation benefits) in which the Executive is participating at the
time of a Change in Control (or any other plans or arrangements providing him
with substantially similar benefits) (hereinafter referred to as "Incentive
Plans") or the taking of any action by the Company which would adversely affect
the Executive's participation in any such Incentive Plan or reduce the
Executive's benefits under any such Incentive Plan, expressed as a percentage of
his base salary, by more than five percentage points in any fiscal year as
compared to the immediately preceding fiscal year, or any action to reduce
Executive's bonuses under any Incentive Plan by more than 20% of the average
annual bonus previously paid to Executive with respect to the preceding three
fiscal years;
(v) Any failure by the Company to continue in effect any plan or
arrangement to receive securities of the Company (including, without
limitation, the Company's 1997 Stock Incentive Plan, Employee Stock
Purchase Plan and any other plan or arrangement to receive and
exercise stock options, stock appreciation rights, restricted stock or
grants thereof) in which the Executive is participating or has the
right to participate in prior to a Change in Control (or plans or
arrangements providing him with substantially similar benefits)
(hereinafter referred to as "Securities Plans") or the taking of any
action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
any such Securities Plan, unless a comparable substitute Securities
Plan shall be made available to the Executive;
<PAGE>
(vi) A relocation of
the Company's principal executive offices to a location more
than ten (10) miles outside of Marietta, Georgia, or the Executive's relocation
to any place other than the Company's principal executive offices, except for
required travel by the Executive on the Company's business to an extent
substantially consistent with the Executive's business travel obligations
immediately prior to a Change in Control;
(vii)Any failure by the Company to provide the Executive with the number
of paid vacation days (or compensation therefor at termination of
employment) accrued to the Executive through the Date of Termination;
(viii) Any material breach by the Company of any provision of this
Agreement;
(ix) Any failure by the Company to obtain the assumption of this Agreement
by any successor or assign of the Company effected in accordance with
the provisions of Section 7(a) hereof;
(x) Any purported termination of the Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(f), and for purposes of this Agreement, no
such purported termination shall be effective; or
(xi) Any proposal or
request by the Company after the
Effective Date to require that
the Executive enter into a non-competition agreement with the Company where the
terms of such agreement as to its scope or duration are greater than the terms
set forth in Section 5 hereof .
(f) Notice of Termination. Any termination of the Executive's
employment by the Company for a reason specified in Section 3(b), 3(c) or 3(d)
shall be communicated to the Executive by a Notice of Termination prior to the
effective date of the termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate whether such
termination is for the reason set forth in Section 3(b), 3(c) or 3(d) and which
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. For purposes of this Agreement, no termination of the Executive's
employment by the Company shall constitute a termination for Disability,
Retirement or Cause unless such termination is preceded by a Notice of
Termination.
(g) Date of Termination. "Date of Termination" shall mean (a)
if the Executive's employment is terminated by the Company for Disability, 30
days after a Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the Executive's duties
on a full-time basis during such 30-day period) or (b) if the Executive's
employment is terminated by the Company or the Executive for any other reason,
the date on which the Executive's termination is effective; provided that, if
within 30 days after any Notice of Termination is given to the Executive by the
Company the Executive notifies the Company that a dispute exists concerning the
termination, the Date of Termination shall be the date the dispute is finally
determined whether by mutual agreement by the parties or upon final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
<PAGE>
4. Compensation and Benefits upon Termination of Employment.
(a) If the Company shall terminate the Executive's employment
after a Change in Control other than pursuant to Section 3(b), 3(c) or 3(d) and
Section 3(f), or if the Executive shall terminate his employment for Good
Reason, then the Company shall pay to the Executive, as severance compensation
and in consideration of the Executive's adherence to the terms of Section 5
hereof, the following:
(1) On the Date of Termination, the Company shall become liable to the
Executive for an amount equal to three times the Executive's annual
base compensation and targeted base bonus on the date of the Change in
Control, which amount shall be paid to the Executive in cash on or
before the fifth day following the Date of
Termination.
(2) For a period of three years following the Date of Termination, the
Executive and anyone entitled to claim under or through the Executive
shall be entitled to all benefits under the group hospitalization
plan, health care plan, dental care plan, life or other insurance or
death benefit plan, or other present or future similar group employee
benefit plan or program of the Company for which key executives are
eligible at the date of a Change in Control, to the same extent
as if the Executive had continued to be an employee of the Company during such
period and such benefits shall, to the extent not fully paid under any such plan
or program, be paid by the Company.
(3) For a period of three years after the Date of Termination, the Company
shall allow the Executive to utilize for his business and personal use
any Company leased automobile previously furnished to him or an
equivalent type and style of automobile and shall reimburse the
Executive for the maintenance and repair costs of such automobile and
extend full insurance coverage relating to such automobile in favor of
the Executive, as additional named insured, during such
three-year period. In addition, the Executive shall be entitled, at the
Executive's sole discretion, to exercise any option to acquire such automobile
pursuant to the terms which may be provided in the lease agreement for the
automobile in question.
(b) The parties hereto agree that the payments provided in
Section 4(a) hereof are reasonable compensation in light of the Executive's
services rendered to the Company and in consideration of the Executive's
adherence to the terms of Section 5 hereof. Neither party shall contest the
payment of such benefits as constituting an "excess parachute payment" within
the meaning of Section 280G(b)(1) of the Code. In the event that the Executive
becomes entitled to the compensation and benefits described in Section 4(a)
hereof (the "Compensation Payments") and the Company has determined, based upon
the advise of tax counsel selected by the Company's independent auditors and
acceptable to the Executive, that, as a result of such Compensation Payments and
any other benefits or payments required to be taken into account under Code
Section 280G(b)(2) ("Parachute Payments"), any of such Parachute Payments must
be reported by the Company as "excess parachute payments" and are therefore not
deductible by the Company, the Company shall pay to the Executive at the time
<PAGE>
specified in Section 4(a) above an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any of
the tax imposed on the Executive by Section 4999 of the Code (the "Excise Tax")
and any Federal, state and local income tax and Excise Tax upon the Gross-Up
Payment, shall be equal to the Parachute Payments determined prior to the
application of this paragraph. The value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's independent
auditors. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay Federal income taxes at the highest marginal
rate of Federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rates of taxation in the state and locality of the Executive's residence on the
Date of Termination, net of the maximum reduction in Federal income taxes which
could be obtained from deduction of such state and local taxes. In the event
that the Excise Tax payable by the Executive is subsequently determined to be
less than the amount, if any, taken into account hereunder at the time of
termination of the Executive's employment, the Executive shall repay to the
Company at the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such reduction
plus interest on the amount of such repayment at the rate provided for in
Section 1274(b)(2)(B) of the Code ("Repayment Amount"). In the event that the
Excise Tax payable by the Executive is determined to exceed the amount, if any,
taken into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any interest
and penalty payable with respect to such excess) immediately prior to the time
that the amount of such excess is required to be paid by Executive ("Additional
Gross-up"), such that the net amount retained by the Executive, after deduction
of any Excise Tax on the Parachute Payments and any Federal, state and local
income tax and Excise Tax upon the Additional Gross-Up Payment, shall be equal
to the Parachute Payments determined prior to the application of this paragraph.
The obligation to pay any Repayment Amount or Additional Gross-up shall remain
in effect under this Agreement for the entire period during which the Executive
remains liable for the Excise Tax, including the period during which any
applicable statute of limitation remains open.
(c) The payments provided in Section 4(a) above shall be in
lieu of any other severance compensation otherwise payable to Executive under
the Company's established severance compensation policies and, unless the
Executive elects, that certain Severance Compensation and Restrictive Covenant
Agreement of even date between the Executive and the Company; provided, however,
that nothing in this Agreement shall affect or impair Executive's vested rights
under any other employee benefit plan or policy of the Company.
(d) Unless the Company determines that any Parachute Payments
made hereunder must be reported as "excess parachute payments" in accordance
with the third sentence of Section 4(b) above, neither party shall file any
return taking the position that the payment of such benefits constitutes an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the Code.
If the Internal Revenue Service proposes an assessment of Excise Tax against the
Executive in excess of the amount, if any, taken into account at the time
specified in Section 4(a), then, if the Company notifies Executive in writing
that the Company elects to contest such assessment at its expense, unless the
Executive waives the right to an Additional Gross-Up Payment, the Executive (i)
shall in good faith cooperate with the Company in contesting such proposed
assessment; and (ii) such Executive shall not settle such contest without the
written consent of the Company. Any such contest shall be controlled by the
Company, provided, however, that the Executive may participate in such contest.
<PAGE>
5. Protective Covenants.
(a) Definitions.
This Subsection sets forth the definition of certain
capitalized terms used in Subsections (a) through (f) of this Section 4.
(i) "Competing Business" shall mean a business (other than the Company)
that, directly or through a controlled subsidiary or through an
affiliate, (a) develops, markets and/or sells computerized patient
record software for obstetricians and/or gynecologists, diabetes
supplies, products for uterine contraction monitoring in the home
and/or products that would be used in lieu of or in competition with
uterine contraction monitoring products ("Competing Products"), and/or
(b) provides obstetrical home care services, including, without
limitation, programs for monitoring patients who are at risk of
preterm
delivery, programs for managing patients suffering from obstetrical hypertension
or diabetes, infusion therapy services involving drugs to control preterm labor,
nursing services and maternity management services for both low and high risk
pregnancies, diabetes or respiratory disease management services, including,
without limitation, patient education, risk screening and stratification, case
management and clinical services, or cardiac event monitoring services
("Competing Services"). Notwithstanding the foregoing, no business shall be
deemed a "Competing Business" unless, within at least one of the business's
three most recently concluded fiscal years, that business, or a division of that
business, derived more than twenty percent (20%) of its gross revenues or more
than $2,000,000 in gross revenues from the development, marketing or sale of
Competing Products and/or the provision of Competing Services.
(ii) "Competitive Position" shall mean: (A) the Executive's direct or
indirect equity ownership (excluding ownership of less than one
percent (1%) of the outstanding common stock of any publicly held
corporation) or control of any portion of any Competing Business; or
(B) any employment, consulting, partnership, advisory, directorship,
agency, promotional or independent contractor arrangement between the
Executive and any Competing Business where the Executive performs
services
for the Competing Business substantially similar to those the Executive
performed for the Company, provided, however, that the Executive shall not be
deemed to have a Competitive Position solely because of the Executive's services
for a Competing Business that are not directly related to the sale of Competing
Products or the provision of Competing Services, unless more than thirty-five
percent (35%) of the gross revenues of the Competing Business are derived from
the sale of Competing Products and/or the provision of Competing Services.
(iii)"Covenant Period" shall mean the period of time from the date of this
Agreement to the date that is two (2) years after the Date of
Termination.
<PAGE>
(iv) "Customers" shall mean actual customers,
clients, referral sources or managed
care organizations or actively sought prospective customers, clients, referral
sources or managed care organizations of the Company (A) during the one (1) year
prior to the date of this Agreement and (B) during the Covenant Period.
(v) "Restricted Territory" shall mean the United
States.
(b) Limitation on Competition. In consideration of the
Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, anywhere within the Restricted Territory, either directly or
indirectly, alone or in conjunction with any other party, accept, enter into or
take any action in conjunction with or in furtherance of a Competitive Position
(other than action to reject an unsolicited offer of a Competitive Position).
(c) Limitation on Soliciting Customers. In consideration of
the Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, alone or in conjunction with any other party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate on behalf of a
Competing Business with which Executive has a Competitive Position any Customer
located in the Restricted Territory (or any other Customer with which the
Executive had any direct contact on behalf of the Company) for the purpose of
providing the Customer or having the Customer provided with a Competing Product
or Competing Service.
(d) Limitation on Soliciting Personnel or Other Parties. In
consideration of the Company's entering into this Agreement, the Executive
hereby agrees that he will not, without the prior written consent of the
Company, alone or in conjunction with any other party, solicit or attempt to
solicit any employee, consultant, contractor, independent broker or other
personnel of the Company to terminate, alter or lessen that party's affiliation
with the Company or to violate the terms of any agreement or understanding
between such employee, consultant, contractor or other person and the Company.
(e) Acknowledgement. The parties acknowledge and agree that
the Protective Covenants are reasonable as to time, scope and territory given
the Company's need to protect its trade secrets and confidential business
information and given the substantial payments and benefits to which the
Executive may be entitled pursuant to this Agreement.
(f) Remedies. The parties acknowledge that any breach or
threatened breach of a Protective Covenant by the Executive is reasonably likely
to result in irreparable injury to the Company, and therefore, in addition to
all remedies provided at law or in equity, the Executive agrees that the Company
shall be entitled to a temporary restraining order and a permanent injunction to
prevent a breach or contemplated breach of the Protective Covenant. If the
Company seeks an injunction, the Executive waives any requirement that the
Company post a bond or any other security.
<PAGE>
6. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) All compensation and benefits provided to the Executive
under this Agreement are in consideration of the Executive's services rendered
to the Company and of the Executive's adhering to the terms set forth in Section
5 hereof and the Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreement or other contract, plan or arrangement.
7. Successor to the Company.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor or assign to its business and/or assets as aforesaid, including
without limitation, the Surviving Company in the Merger. If at any time during
the term of this Agreement the Executive is employed by any corporation a
majority of the voting securities of which is then owned by the Company,
"Company" as used in Sections 3, 4, 12 and 14 hereof shall in addition include
such employer. In such event, the Company agrees that it shall pay or shall
cause such employer to pay any amounts owed to the Executive pursuant to Section
4 hereof.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or the designee
or, if there be no such designee, to the Executive's estate.
<PAGE>
8. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt required, postage prepaid, as follows:
If to Company:
Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attention: General Counsel
If to Executive:
Donald R. Millard
3266 Hunterdon Way
Marietta, Georgia 30067
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. Neither this Agreement nor the
Merger shall diminish or waive in any way the rights of Executive under the
Prior Agreement, which as amended by this Agreement, shall continue to be
applicable to Executive's employment by the Surviving Company after the Merger.
No agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia.
10. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. Counterparts. This Agreement may be executed in one 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.
12. Legal Fees and Expenses. The Company shall pay all legal fees,
expenses and damages which the Executive may incur as a result of the
Executive's instituting legal action to enforce his rights hereunder, or in the
event the Company contests the validity, enforceability or the Executive's
interpretation of, or determinations under, this Agreement. If the Executive is
the prevailing party or recovers any damages in such legal action, the Executive
shall be entitled to receive in addition thereto pre-judgment and post-judgment
interest on the amount of such damages.
<PAGE>
13. Severability; Modification. All provisions of this Agreement are
severable from one another, and the unenforceability or invalidity of any
provision of this Agreement shall not affect the validity or enforceability of
the remaining provisions of this Agreement, but such remaining provisions shall
be interpreted and construed in such a manner as to carry out fully the
intention of the parties. Should any judicial body interpreting this Agreement
deem any provision of this Agreement to be unreasonably broad in time,
territory, scope or otherwise, it is the intent and desire of the parties that
such judicial body, to the greatest extent possible, reduce the breadth of such
provision to the maximum legally allowable parameters rather than deeming such
provision totally unenforceable or invalid.
14. Confidentiality. The Executive acknowledges that he has previously
entered into, and continues to be bound by the terms of, a Confidentiality
Agreement with the Company.
15. Agreement Not an Employment Contract. This Agreement shall not be
deemed to constitute or be deemed ancillary to an employment contract between
the Company and the Executive, and nothing herein shall be deemed to give the
Executive the right to continue in the employ of the Company or to eliminate the
right of the Company to discharge the Executive at any time.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
MATRIA HEALTHCARE, INC.
By: ___________________________________
-----------------------------------------
Executive
CHANGE IN CONTROL
SEVERANCE COMPENSATION
AND
RESTRICTIVE COVENANT AGREEMENT
THIS SEVERANCE COMPENSATION AND RESTRICTIVE COVENANT AGREEMENT
("Agreement") is dated as of April 27, 1999 between MATRIA HEALTHCARE, INC., a
Delaware corporation (the "Company"), and YVONNE V. SCOGGINS (the "Executive").
WHEREAS, the Company, has determined that it is appropriate to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including the Executive, to their assigned duties without
distraction in potentially disturbing circumstances arising from the possibility
of a Change in Control (as hereinafter defined) of the Company; and
WHEREAS, the severance benefits payable by the Company to Executive as
provided herein are in part intended to ensure that Executive receives
reasonable compensation given the specific circumstances of Executive's
employment history with the Company;
NOW, THEREFORE, in consideration of their respective obligations to one
another set forth in this Agreement, and other good and valuable consideration,
the receipt, sufficiency and adequacy of which the parties hereby acknowledge,
the parties to this Agreement, intending to be legally bound, hereby agree as
follows:
1. Term. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) April 26, 2002 if a Change in Control of the Company has not
occurred between the date hereof and April 26, 2002; (ii) the Date of
Termination (as hereinafter defined) of the Executive's employment with the
Company as a result of the Executive's death, Disability (as defined in Section
3(b)) or Retirement (as defined in Section 3(c)), by the Company for Cause (as
defined in Section 3(d)) or by the Executive other than for Good Reason (as
defined in Section 3(e)); or (iii) three years from the date of a Change in
Control if the Executive's employment with the Company has not terminated as of
such time.
2. Change in Control. For purposes of this Agreement, "Change in
Control" shall mean changes in the ownership of a corporation, changes in the
effective control of a corporation, changes in ownership of a substantial
portion of a corporation's assets and a disposition of a substantial portion of
a corporation's assets, all as defined below:
(a) A change in the ownership of a corporation occurs on the date that
any one person, or more than one person acting as a group, acquires ownership of
stock of that corporation which, together with stock held by such person or
group, represents more than fifty percent (50%) of the total fair market value
or total voting power of the stock of such corporation. An increase in the
percentage of stock owned by any one person, or persons acting as a group, as a
result of a transaction in which the corporation acquires its stock in exchange
for property will be treated as an acquisition of stock.
<PAGE>
(b) A change in the effective control of a corporation occurs on the
date that either: any one person, or more than one person acting as a group
becomes the beneficial owner of stock of the corporation possessing twenty-five
percent (25%) or more of the total voting power of the stock of such
corporation; or a majority of members of the corporation's board of directors is
replaced during any 24 month period by directors whose appointment or election
is not endorsed by at least two-thirds (2/3) of the members of the corporation's
board of directors who were directors prior to the date of the appointment or
election of the first of such new directors.
(c) A change in the ownership of a substantial portion of a
corporation's assets occurs on the date that any one person, or more than one
person acting as a group, acquires (or has acquired during the 12 month period
ending on the date of the most recent acquisition by such person or persons)
assets from the corporation that have a total fair market value equal to or more
than one-half (1/2) of the total fair market value of all of the assets of the
corporation immediately prior to such acquisition or acquisitions. The transfer
of assets by a corporation is not treated as a change in the ownership of such
assets if the assets are transferred: to a shareholder of the corporation
(immediately before the asset transfer) in exchange for such shareholder's
capital stock of the corporation having a fair market value approximately equal
to the fair market value of such assets; or to an entity, fifty percent (50%) or
more of the total value or voting power of which is owned, directly or
indirectly, by the corporation.
(d) A disposition of a substantial portion of a corporation's assets
occurs on the date that the corporation transfers assets by sale, lease,
exchange, distribution to shareholders, assignment to creditors, foreclosure or
otherwise, in a transaction or transactions not in the ordinary course of the
corporation's business (or has made such transfers during the 12 month period
ending on the date of the most recent transfer of assets) that have a total fair
market value equal to or more than one-half (1/2) of the total fair market value
of all of the assets of the corporation as of the date immediately prior to the
first such transfer or transfers. The transfer of assets by a corporation is not
treated as a disposition of a substantial portion of the corporation's assets if
the assets are transferred to an entity, fifty percent (50%) or more of the
total value or voting power of which is owned, directly or indirectly, by the
corporation.
For purposes of the provision of this Agreement defining "Change in Control,"
(i) references to the Company in this Agreement include the Delaware corporation
known as Matria Healthcare, Inc. as of the date of execution of this Agreement,
and any corporation which is the legal successor to such corporation by virtue
of merger or share exchange; and (ii) the terms "person," "acting as a group"
and "ownership" shall have the meanings prescribed in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3
promulgated thereunder; provided, however, that in any merger, consolidation or
share exchange in which less than fifty percent (50%) of the outstanding voting
securities of the Company or its successor corporation are held by the former
shareholders of the Company, the shareholders of the other parties to the
transaction shall be deemed to have acted as a group that acquired ownership of
more than fifty percent (50%) of the outstanding voting securities of the
Company, resulting in a change in ownership under Section 2(a) above.
<PAGE>
3. Termination Following Change in Control.
(a) If the Executive is still an employee of the Company at
the time of a Change in Control, the Executive shall be entitled to the
compensation and benefits provided in Section 4 upon the subsequent termination
of the Executive's employment with the Company by the Executive or by the
Company during the term of this Agreement, unless such termination is as a
result of (i) the Executive's death; (ii) the Executive's Disability; (iii) the
Executive's Retirement; (iv) the Executive's termination by the Company for
Cause; or (v) the Executive's decision to terminate employment other than for
Good Reason.
(b) Disability. The term "Disability" as used in this
Agreement shall mean termination of the Executive's employment by the Company as
a result of the Executive's incapacity due to physical or mental illness,
provided that the Executive shall have been absent from her duties with the
Company on a full-time basis for six consecutive months and such absence shall
have continued unabated for 30 days after Notice of Termination as described in
Section 3(f) is thereafter given to the Executive by the Company.
(c) Retirement. The term "Retirement" as used in this
Agreement shall mean termination of the Executive's employment by the Company
based on the Executive's having attained age 65 or such later retirement age as
shall have been established pursuant to a written agreement between the Company
and the Executive. Termination of Executive's employment at a time when
Executive is eligible to receive benefits under the Company's Retirement Benefit
Award or the Company's Protective Umbrella for Lifelong Security of Employees
Program shall not constitute Retirement unless Executive shall have attained
such age.
(d) Cause. The term "Cause" for purposes of this Agreement
shall mean the Company's termination of the Executive's employment on the basis
of criminal or civil fraud on the part of the Executive involving a material
amount of funds of the Company. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Company's Board of Directors at a meeting of the Board called and held
for such purpose (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board) finding that in the good faith opinion of the Board the Executive was
guilty of conduct set forth in the first sentence of this Section 3(d) and
specifying the particulars thereof in detail. For purposes of this Agreement
only, the preparation and filing of fictitious, false or misleading claims in
connection with any federal, state or other third party medical reimbursement
program, or any other violation of any rule or regulation in respect of any
federal, state or other third party medical reimbursement program by the Company
or any subsidiary of the Company shall not be deemed to constitute "criminal
fraud" or "civil fraud".
(e) Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any of the following actions taken by the Company without the
Executive's express written consent:
<PAGE>
(i) The assignment to the Executive by the Company of duties inconsistent
with, or a material adverse alteration of the powers and functions
associated with, the Executive's position, duties, responsibilities
and status with the Company prior to a Change in Control, or an
adverse change in the Executive's titles or offices as in effect prior
to a Change in Control, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions, except in
connection with the termination of her employment for Disability,
Retirement or Cause or as a result of the Executive's death or by the
Executive other than for Good Reason;
(ii) A reduction in the Executive's base salary as in effect on the date
hereof or as the same may be increased from time to time during the
term of this Agreement or the Company's failure to increase (within 12
months of the Executive's last increase in base salary) the
Executive's base salary after a Change in Control in an amount which
at least equals, on a percentage basis, the average annual percentage
increase in base salary for all corporate officers of the Company
effected in the preceding 36 months;
(iii)Any failure by the Company to continue in effect any benefit plan,
program or arrangement (including, without limitation, any profit
sharing plan, group annuity contract, group life insurance supplement,
or medical, dental, accident and disability plans) in which the
Executive was eligible to participate at the time of a Change in
Control (hereinafter referred to as "Benefit Plans"), or the taking of
any action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
any such Benefit Plan, unless a comparable substitute Benefit Plan
shall be made available to the Executive, or deprive the Executive of
any fringe benefit enjoyed by the Executive at the time of a Change in
Control;
(iv) Any failure by the Company to continue in effect any incentive plan or
arrangement (including, without limitation, any bonus or contingent
bonus arrangements and credits and the right to receive performance
awards and similar incentive compensation benefits) in which the
Executive is participating at the time of a Change in Control (or any
other plans or arrangements providing him with substantially similar
benefits) (hereinafter referred to as "Incentive Plans") or the taking
of any action by the Company which would adversely affect the
Executive's participation in any such Incentive Plan or reduce the
Executive's benefits under any such Incentive Plan, expressed as a
percentage of her base salary, by more than five percentage points in
any fiscal year as compared to the immediately preceding fiscal year,
or any action to reduce Executive's bonuses under any Incentive Plan
by more than 20% of the average annual bonus previously paid to
Executive with respect to the preceding three fiscal years;
(v) Any failure by the Company to continue in effect any plan or
arrangement to receive securities of the Company (including, without
limitation, the Company's 1997 Stock Incentive Plan, Employee Stock
Purchase Plan and any other plan or arrangement to receive and
exercise stock options, stock appreciation rights, restricted stock or
grants thereof) in which the Executive is participating or has the
right to participate in prior to a Change in Control (or plans or
arrangements providing him with substantially similar benefits)
(hereinafter referred to as "Securities Plans") or the taking of any
action by the Company which would adversely affect the Executive's
participation in or materially reduce the Executive's benefits under
any such Securities Plan, unless a comparable substitute Securities
Plan shall be made available to the Executive;
<PAGE>
(vi) A relocation of
the Company's principal executive offices to a location more
than ten (10) miles outside of Marietta, Georgia, or the Executive's relocation
to any place other than the Company's principal executive offices, except for
required travel by the Executive on the Company's business to an extent
substantially consistent with the Executive's business travel obligations
immediately prior to a Change in Control;
(vii)Any failure by the Company to provide the Executive with the number
of paid vacation days (or compensation therefor at termination of
employment) accrued to the Executive through the Date of Termination;
(viii) Any material breach by the Company of any provision of this
Agreement;
(ix) Any failure by the Company to obtain the assumption of this Agreement
by any successor or assign of the Company effected in accordance with
the provisions of Section 7(a) hereof;
(x) Any purported termination of the Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(f), and for purposes of this Agreement, no
such purported termination shall be effective; or
(xi) Any proposal or request by the Company after the Effective Date to
require that the Executive enter into a non-competition agreement with
the Company where the terms of such agreement as to its scope or
duration are greater than the terms set forth in Section 5 hereof .
(f) Notice of Termination. Any termination of the Executive's
employment by the Company for a reason specified in Section 3(b), 3(c) or 3(d)
shall be communicated to the Executive by a Notice of Termination prior to the
effective date of the termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate whether such
termination is for the reason set forth in Section 3(b), 3(c) or 3(d) and which
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. For purposes of this Agreement, no termination of the Executive's
employment by the Company shall constitute a termination for Disability,
Retirement or Cause unless such termination is preceded by a Notice of
Termination.
(g) Date of Termination. "Date of Termination" shall mean (a)
if the Executive's employment is terminated by the Company for Disability, 30
days after a Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the Executive's duties
on a full-time basis during such 30-day period) or (b) if the Executive's
employment is terminated by the Company or the Executive for any other reason,
the date on which the Executive's termination is effective; provided that, if
within 30 days after any Notice of Termination is given to the Executive by the
Company the Executive notifies the Company that a dispute exists concerning the
termination, the Date of Termination shall be the date the dispute is finally
determined whether by mutual agreement by the parties or upon final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
<PAGE>
4. Compensation and Benefits upon Termination of Employment.
(a) If the Company shall terminate the Executive's employment
after a Change in Control other than pursuant to Section 3(b), 3(c) or 3(d) and
Section 3(f), or if the Executive shall terminate her employment for Good
Reason, then the Company shall pay to the Executive, as severance compensation
and in consideration of the Executive's adherence to the terms of Section 5
hereof, the following:
(1) On the Date of Termination, the Company shall become liable to the
Executive for an amount equal to three times the Executive's annual
base compensation and targeted base bonus on the date of the Change in
Control, which amount shall be paid to the Executive in cash on or
before the fifth day following the Date of Termination.
(2) For a period of three years following the Date of Termination, the
Executive and anyone entitled to claim under or through the Executive
shall be entitled to all benefits under the group hospitalization
plan, health care plan, dental care plan, life or other insurance or
death benefit plan, or other present or future similar group employee
benefit plan or program of the Company for which key executives are
eligible at the date of a Change in Control, to the same extent as if
the Executive had continued to be an employee of the Company during
such period and such benefits shall, to the extent not fully paid
under any such plan or program, be paid by the Company.
(3) For a period of three years after the Date of Termination, the Company
shall allow the Executive to utilize for her business and personal use
any Company leased automobile previously furnished to him or an
equivalent type and style of automobile and shall reimburse the
Executive for the maintenance and repair costs of such automobile and
extend full insurance coverage relating to such automobile in favor of
the Executive, as additional named insured, during such three-year
period. In addition, the Executive shall be entitled, at the
Executive's sole discretion, to exercise any option to acquire such
automobile pursuant to the terms which may be provided in the lease
agreement for the automobile in question.
(b) The parties hereto agree that the payments provided in
Section 4(a) hereof are reasonable compensation in light of the Executive's
services rendered to the Company and in consideration of the Executive's
adherence to the terms of Section 5 hereof. Neither party shall contest the
payment of such benefits as constituting an "excess parachute payment" within
the meaning of Section 280G(b)(1) of the Code. In the event that the Executive
becomes entitled to the compensation and benefits described in Section 4(a)
hereof (the "Compensation Payments") and the Company has determined, based upon
the advise of tax counsel selected by the Company's independent auditors and
acceptable to the Executive, that, as a result of such Compensation Payments and
any other benefits or payments required to be taken into account under Code
Section 280G(b)(2) ("Parachute Payments"), any of such Parachute Payments must
be reported by the Company as "excess parachute payments" and are therefore not
<PAGE>
deductible by the Company, the Company shall pay to the Executive at the time
specified in Section 4(a) above an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any of
the tax imposed on the Executive by Section 4999 of the Code (the "Excise Tax")
and any Federal, state and local income tax and Excise Tax upon the Gross-Up
Payment, shall be equal to the Parachute Payments determined prior to the
application of this paragraph. The value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's independent
auditors. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay Federal income taxes at the highest marginal
rate of Federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rates of taxation in the state and locality of the Executive's residence on the
Date of Termination, net of the maximum reduction in Federal income taxes which
could be obtained from deduction of such state and local taxes. In the event
that the Excise Tax payable by the Executive is subsequently determined to be
less than the amount, if any, taken into account hereunder at the time of
termination of the Executive's employment, the Executive shall repay to the
Company at the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such reduction
plus interest on the amount of such repayment at the rate provided for in
Section 1274(b)(2)(B) of the Code ("Repayment Amount"). In the event that the
Excise Tax payable by the Executive is determined to exceed the amount, if any,
taken into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any interest
and penalty payable with respect to such excess) immediately prior to the time
that the amount of such excess is required to be paid by Executive ("Additional
Gross-up"), such that the net amount retained by the Executive, after deduction
of any Excise Tax on the Parachute Payments and any Federal, state and local
income tax and Excise Tax upon the Additional Gross-Up Payment, shall be equal
to the Parachute Payments determined prior to the application of this paragraph.
The obligation to pay any Repayment Amount or Additional Gross-up shall remain
in effect under this Agreement for the entire period during which the Executive
remains liable for the Excise Tax, including the period during which any
applicable statute of limitation remains open.
(c) The payments provided in Section 4(a) above shall be in
lieu of any other severance compensation otherwise payable to Executive under
the Company's established severance compensation policies and, unless the
Executive elects, that certain Severance Compensation and Restrictive Covenant
Agreement of even date between the Executive and the Company; provided, however,
that nothing in this Agreement shall affect or impair Executive's vested rights
under any other employee benefit plan or policy of the Company.
(d) Unless the Company determines that any Parachute Payments
made hereunder must be reported as "excess parachute payments" in accordance
with the third sentence of Section 4(b) above, neither party shall file any
return taking the position that the payment of such benefits constitutes an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the Code.
If the Internal Revenue Service proposes an assessment of Excise Tax against the
Executive in excess of the amount, if any, taken into account at the time
<PAGE>
specified in Section 4(a), then, if the Company notifies Executive in writing
that the Company elects to contest such assessment at its expense, unless the
Executive waives the right to an Additional Gross-Up Payment, the Executive (i)
shall in good faith cooperate with the Company in contesting such proposed
assessment; and (ii) such Executive shall not settle such contest without the
written consent of the Company. Any such contest shall be controlled by the
Company, provided, however, that the Executive may participate in such contest.
5. Protective Covenants.
(a) Definitions.
This Subsection sets forth the definition of certain
capitalized terms used in Subsections (a) through (f) of this Section 4.
(i) "Competing Business" shall mean a business (other than the Company)
that, directly or through a controlled subsidiary or through an
affiliate, (a) develops, markets and/or sells computerized patient
record software for obstetricians and/or gynecologists, diabetes
supplies, products for uterine contraction monitoring in the home
and/or products that would be used in lieu of or in competition with
uterine contraction monitoring products ("Competing Products"), and/or
(b) provides obstetrical home care services, including, without
limitation, programs for monitoring patients who are at risk of
preterm delivery, programs for managing patients suffering from
obstetrical hypertension or diabetes, infusion therapy services
involving drugs to control preterm labor, nursing services and
maternity management services for both low and high risk pregnancies,
diabetes or respiratory disease management services, including,
without limitation, patient education, risk screening and
stratification, case management and clinical services, or cardiac
event monitoring services ("Competing Services"). Notwithstanding the
foregoing, no business shall be deemed a "Competing Business" unless,
within at least one of the business's three most recently concluded
fiscal years, that business, or a division of that business, derived
more than twenty percent (20%) of its gross revenues or more than
$2,000,000 in gross revenues from the development, marketing or sale
of Competing Products and/or the provision of Competing Services.
(ii) "Competitive Position" shall mean: (A) the Executive's direct or
indirect equity ownership (excluding ownership of less than one
percent (1%) of the outstanding common stock of any publicly held
corporation) or control of any portion of any Competing Business; or
(B) any employment, consulting, partnership, advisory, directorship,
agency, promotional or independent contractor arrangement between the
Executive and any Competing Business where the Executive performs
services for the Competing Business substantially similar to those the
Executive performed for the Company, provided, however, that the
Executive shall not be deemed to have a Competitive Position solely
because of the Executive's services for a Competing Business that are
not directly related to the sale of Competing Products or the
provision of Competing Services, unless more than thirty-five percent
(35%) of the gross revenues of the Competing Business are derived from
the sale of Competing Products and/or the provision of Competing
Services.
(iii) "Covenant Period" shall mean the period of time
from the date of this Agreement
to the date that is two (2) years after the Date of Termination.
<PAGE>
(iv) "Customers" shall mean actual customers,
clients, referral sources or managed
care organizations or actively sought prospective customers, clients, referral
sources or managed care organizations of the Company (A) during the one (1) year
prior to the date of this Agreement and (B) during the Covenant Period.
(v) "Restricted Territory" shall mean the United
States.
(b) Limitation on Competition. In consideration of the
Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, anywhere within the Restricted Territory, either directly or
indirectly, alone or in conjunction with any other party, accept, enter into or
take any action in conjunction with or in furtherance of a Competitive Position
(other than action to reject an unsolicited offer of a Competitive Position).
(c) Limitation on Soliciting Customers. In consideration of
the Company's entering into this Agreement, the Executive agrees that during the
Covenant Period, the Executive will not, without the prior written consent of
the Company, alone or in conjunction with any other party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate on behalf of a
Competing Business with which Executive has a Competitive Position any Customer
located in the Restricted Territory (or any other Customer with which the
Executive had any direct contact on behalf of the Company) for the purpose of
providing the Customer or having the Customer provided with a Competing Product
or Competing Service.
(d) Limitation on Soliciting Personnel or Other Parties. In
consideration of the Company's entering into this Agreement, the Executive
hereby agrees that she will not, without the prior written consent of the
Company, alone or in conjunction with any other party, solicit or attempt to
solicit any employee, consultant, contractor, independent broker or other
personnel of the Company to terminate, alter or lessen that party's affiliation
with the Company or to violate the terms of any agreement or understanding
between such employee, consultant, contractor or other person and the Company.
(e) Acknowledgement. The parties acknowledge and agree that
the Protective Covenants are reasonable as to time, scope and territory given
the Company's need to protect its trade secrets and confidential business
information and given the substantial payments and benefits to which the
Executive may be entitled pursuant to this Agreement.
(f) Remedies. The parties acknowledge that any breach or
threatened breach of a Protective Covenant by the Executive is reasonably likely
to result in irreparable injury to the Company, and therefore, in addition to
all remedies provided at law or in equity, the Executive agrees that the Company
shall be entitled to a temporary restraining order and a permanent injunction to
prevent a breach or contemplated breach of the Protective Covenant. If the
Company seeks an injunction, the Executive waives any requirement that the
Company post a bond or any other security.
<PAGE>
6. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) All compensation and benefits provided to the Executive
under this Agreement are in consideration of the Executive's services rendered
to the Company and of the Executive's adhering to the terms set forth in Section
5 hereof and the Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreement or other contract, plan or arrangement.
7. Successor to the Company.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor or assign to its business and/or assets as aforesaid, including
without limitation, the Surviving Company in the Merger. If at any time during
the term of this Agreement the Executive is employed by any corporation a
majority of the voting securities of which is then owned by the Company,
"Company" as used in Sections 3, 4, 12 and 14 hereof shall in addition include
such employer. In such event, the Company agrees that it shall pay or shall
cause such employer to pay any amounts owed to the Executive pursuant to Section
4 hereof.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to her hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or the designee
or, if there be no such designee, to the Executive's estate.
8. Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt required, postage prepaid, as follows:
<PAGE>
If to Company:
Matria Healthcare, Inc.
1850 Parkway Place, 12th Floor
Marietta, Georgia 30067
Attention: General Counsel
If to Executive:
Donald R. Millard
3266 Hunterdon Way
Marietta, Georgia 30067
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. Neither this Agreement nor the
Merger shall diminish or waive in any way the rights of Executive under the
Prior Agreement, which as amended by this Agreement, shall continue to be
applicable to Executive's employment by the Surviving Company after the Merger.
No agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia.
10. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. Counterparts. This Agreement may be executed in one 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.
12. Legal Fees and Expenses. The Company shall pay all legal fees,
expenses and damages which the Executive may incur as a result of the
Executive's instituting legal action to enforce her rights hereunder, or in the
event the Company contests the validity, enforceability or the Executive's
interpretation of, or determinations under, this Agreement. If the Executive is
the prevailing party or recovers any damages in such legal action, the Executive
shall be entitled to receive in addition thereto pre-judgment and post-judgment
interest on the amount of such damages.
<PAGE>
13. Severability; Modification. All provisions of this Agreement are
severable from one another, and the unenforceability or invalidity of any
provision of this Agreement shall not affect the validity or enforceability of
the remaining provisions of this Agreement, but such remaining provisions shall
be interpreted and construed in such a manner as to carry out fully the
intention of the parties. Should any judicial body interpreting this Agreement
deem any provision of this Agreement to be unreasonably broad in time,
territory, scope or otherwise, it is the intent and desire of the parties that
such judicial body, to the greatest extent possible, reduce the breadth of such
provision to the maximum legally allowable parameters rather than deeming such
provision totally unenforceable or invalid.
14. Confidentiality. The Executive acknowledges that she has previously
entered into, and continues to be bound by the terms of, a Confidentiality
Agreement with the Company.
15. Agreement Not an Employment Contract. This Agreement shall not be
deemed to constitute or be deemed ancillary to an employment contract between
the Company and the Executive, and nothing herein shall be deemed to give the
Executive the right to continue in the employ of the Company or to eliminate the
right of the Company to discharge the Executive at any time.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
MATRIA HEALTHCARE, INC.
By: ___________________________________
-----------------------------------------
Executive
Matria Healthcare, Inc. and Subsidiaries EXHIBIT 11
Computation of Earnings (Loss) per Share
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Basic
Net earnings (loss) $ 7,737 (84,156) 13,446 (95,099)
Accretion of preferred stock (110) - (307) -
Preferred stock dividend requirements (800) - (2,249) -
--------- -------- ------- --------
Net earnings (loss) available to common shareholders $ 6,827 (84,156) 10,890 (95,099)
========= ======== ======= ========
Shares:
Weighted average number of common shares outstanding 36,667 36,461 36,549 36,646
========= ======== ======= ========
Net earnings (loss) per common share $ 0.19 (2.31) 0.30 (2.60)
========= ======== ======= ========
Diluted
Net earnings (loss) available to common shareholders 6,827 (84,156) 10,890 (95,099
Interest on convertable preferred shares 102 - 303 -
--------- -------- ------- --------
Net earnings (loss) for diluted calculation $ 6,929 (84,156) 11,193 (95,099)
========= ======== ======= ========
Shares:
Weighted average number of common shares outstanding 36,667 36,461 36,549 36,646
Shares issuable from assumed exercise of options and 2,447 - 1,607 -
warrants
Convertible preferred stock 2,222 - 2,222 -
--------- -------- ------- --------
41,336 36,461 40,378 36,646
========= ======== ======= ========
Net earnings (loss) per common share $ 0.17 (2.31) 0.28 (2.60)
========= ======== ======= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Quarterly Report on Form 10-Q for the period ended September 30, 1999
</LEGEND>
<CIK> 0001007228
<NAME> Matria Healthcare, Inc.
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Sep-30-1999
<EXCHANGE-RATE> 1
<CASH> 5,600
<SECURITIES> 0
<RECEIVABLES> 66,654
<ALLOWANCES> (17,228)
<INVENTORY> 12,056
<CURRENT-ASSETS> 70,263
<PP&E> 46,256
<DEPRECIATION> (27,452)
<TOTAL-ASSETS> 268,814
<CURRENT-LIABILITIES> 51,514
<BONDS> 0
40,893
0
<COMMON> 367
<OTHER-SE> 73,014
<TOTAL-LIABILITY-AND-EQUITY> 268,814
<SALES> 0
<TOTAL-REVENUES> 185,560
<CGS> 0
<TOTAL-COSTS> 93,785
<OTHER-EXPENSES> 70,783
<LOSS-PROVISION> 5,887
<INTEREST-EXPENSE> 5,659
<INCOME-PRETAX> 9,446
<INCOME-TAX> (4,000)
<INCOME-CONTINUING> 13,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,446
<EPS-BASIC> .30
<EPS-DILUTED> .28
</TABLE>
