<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
- --------- Exchange Act of 1934
For the fiscal year ended December 31, 1998 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 NO. 0-20619
MATRIA HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-2205984
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1850 Parkway Place
Marietta, Georgia 30067
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 767-4500
The Registrant hereby files this Form 10-K/A to amend its Annual Report on Form
10-K for the fiscal year ended December 31, 1998 to include the information
required by Part III (Items 10, 11, 12 and 13) in lieu of the incorporation
thereof by reference from the Registrant's definitive proxy statement for its
Annual Meeting of Shareholders.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As contemplated by the agreement pursuant to which Matria Healthcare,
Inc. (the "Company" or "Matria") acquired substantially all of the assets of
Gainor Medical Management, L.L.C., the Board of Directors was expanded from
seven (7) to nine (9) directors on January 19, 1999 in order to elect Mark J.
Gainor and Rod F. Dammeyer to the Board effective upon the closing of the
Company's acquisition. Mr. Gainor was elected as a Class II Director for a term
expiring in 2000. Mr. Dammeyer was elected as a Class I Director for a term
expiring at the 1999 Annual Meeting. Also as contemplated by the acquisition
agreement, Mr. Dammeyer has been nominated for re-election as a director for a
term expiring in 2002.
Under the Company's Certificate of Incorporation, the Board is divided
into three classes, with approximately one-third of the directors standing for
election each year. The three nominees for election this year are Donald R.
Millard, Rod F. Dammeyer and Carl E. Sanders. Each has consented to serve for an
additional term. If any director is unable to stand for election, the Board may,
by resolution, provide for a lesser number of directors or designated
substitute. In the latter event, shares represented by proxies may be voted for
a substitute director.
The names of the current directors and executive officers, their ages
as of April 1, 1999 and certain other information about them are set forth
below.
PARKER H. PETIT, age 59, has served as Chairman of the Board of the
Company since the formation of the Company through the merger (the "Merger") of
Tokos Medical Corporation and Healthdyne, Inc. ("Healthdyne") on March 8, 1996
(the "Merger Date"). In addition, he served as a member of the three-person
Office of the President during the period in 1997 preceding the election of
Donald R. Millard as President and Chief Executive Officer of the Company. Mr.
Petit was the founder of Healthdyne and served as its Chairman of the Board of
Directors and Chief Executive Officer from 1970 until the Merger. Mr. Petit is
also Chairman of the Board of Directors of HIE, Inc. and a director of ASA
Holdings, Inc., Intelligent Systems, Inc., Norrell Corporation and Logility,
Inc.
DONALD R. MILLARD, age 51, has served as a director of the Company and
as President, Chief Executive Officer and Chief Financial Officer since October
20, 1997, and prior thereto served as Senior Vice President-Finance, Chief
Financial Officer and Treasurer of the Company since the Merger Date. Mr.
Millard served as Vice President-Finance and Chief Financial Officer of
Healthdyne from July 1987 to March 1996 and, in addition, was Treasurer of
Healthdyne from March 1990 to March 1996. Mr. Millard is also a director of
Coast Dental Services, Inc.
FRANK D. POWERS, age 50, has served as Executive Vice President of the
Company since the Merger Date and also has served as a member of the Board and
as Chief Operating Officer since October 20, 1997. Prior thereto, he served as
President of Healthdyne Maternity Management, a subsidiary of Healthdyne, from
October 1989 until March 1996, and as President of Healthdyne's Home Care Group
from November 1986 to October 1989. In addition, he was President of
Healthdyne's Home Care Products Division from September 1984 to November 1986.
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ROD F. DAMMEYER, age 58, has served as a director of the Company since
January 19, 1999. Mr. Dammeyer is managing partner of Equity Group Corporate
Investments, a privately held investment firm. In addition, he is a director and
vice-chairman of Anixter International, Inc. where he has been employed since
1985. Mr. Dammeyer is also a director of Antec Corporation, CNA Surety Corp.,
Inc., Grupo Azucarero Mexico, IMC Global, Inc., Jacor Communications, Inc.,
Stericycle, Inc., TeleTech Holdings, Inc. and Transmedia Network, Inc. He is
also a trustee of Van Kampen Investments, Inc. Closed-End Funds.
MARK J. GAINOR, age 42, has served as a director of the Company since
January 19, 1999. Pursuant to a management agreement with Lucor Holdings, Inc.,
Mr. Gainor has served as President of the Company's diabetes management services
subsidiaries since January 19, 1999. See "Certain Transactions" herein. Prior
thereto he was President and Chief Executive Officer of Gainor Medical
Management, L.L.C., a company founded by his father in 1969.
CARL E. SANDERS, age 73, has served as a director of the Company since
the Merger Date and previously served as a director of Healthdyne from 1986
until the Merger. Mr. Sanders, a former governor of the State of Georgia, is
Chairman of Troutman Sanders LLP, an Atlanta based law firm which provides legal
services to the Company. Mr. Sanders is also a director of Carmike Cinemas,
Inc., Metromedia International Group, Inc., Norrell Corporation, HIE, Inc. and
World Access, Inc.
JACKIE M. WARD, age 60, has served as a director of the Company since
the Merger Date. Ms. Ward is President and Chief Executive Officer of Computer
Generation Incorporated, a privately-held, Atlanta based corporation engaged in
designing and producing "turnkey" computer hardware and software systems for
telecommunications and other specialized applications, which she founded in
1968. Ms. Ward is also a former Chairperson of the Board of Regents of the
University System of Georgia and former Chairman of the Metro Atlanta Chamber of
Commerce, as well as a director of SCI Systems, Inc., Trigon Healthcare, Inc.,
BankAmerica Corporation, Equifax, Inc. and Premiere Technologies, Inc. and a
member of several other civic and government organizations.
MORRIS S. WEEDEN, age 79, has served as a director of the Company since
the Merger Date and previously served as a director of Healthdyne from 1987
until the Merger. Mr. Weeden, who is retired, was Vice Chairman - Board of
Directors of Morton Thiokol Inc., a salt, chemical, household and aerospace
products manufacturer, from March 1980 to December 1984. Previous positions held
by Mr. Weeden include Executive Vice President of Morton Norwich Products, Inc.
in charge of pharmaceutical operations, President of Morton International, a
pharmaceutical division of Morton Norwich Products, Inc., and President of
Bristol Laboratories, a pharmaceutical division of Bristol Myers Corp.
FREDERICK P. ZUSPAN, M.D., age 77, has served as a director of the
Company since the Merger Date and previously served as a director of Healthdyne
from 1993 until the Merger. Dr. Zuspan, who has been a physician since 1951, has
been Professor and Chairman Emeritus, Department of Obstetrics and Gynecology at
the Ohio State University College of Medicine since July 1991 and
Editor-in-Chief of the American Journal of Obstetrics and Gynecology since 1991.
Dr. Zuspan was previously Professor of the Ohio State University College of
Medicine from 1987 to 1991 and Professor and Chairman of the Department of
Obstetrics and Gynecology at the Ohio State
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University College of Medicine from 1975 to 1987, at the University of Chicago,
Pritzker School of Medicine from 1966 to 1975, and at the Medical College of
Georgia from 1960 to 1966.
THORNTON A. KUNTZ, JR., age 45, has been Vice President-Administration
since February 24, 1998 and previously was Vice President-Human Resources of the
Company from March 8, 1996 to February 24, 1998. Prior thereto, he served as
Vice President-Administration of Healthdyne from August 1992 to March 1996.
ROBERTA L. MCCAW, age 43, has been Vice President-Legal, General
Counsel and Secretary of the Company since April 23, 1998 and previously was
Assistant General Counsel and Assistant Secretary of the Company from December
15, 1997 to April 23, 1998 and Assistant General Counsel from July 1996 to
December 1997. Prior thereto, Ms. McCaw was a partner in Tyler, Cooper & Alcorn,
a Connecticut based law firm from January 1990 to July 1996.
YVONNE V. SCOGGINS, age 49, has been Vice President, Chief Accounting
Officer and Treasurer of the Company since December 15, 1997 and previously was
Vice President and Controller from March 8, 1996 to December 15, 1997. Prior
thereto, Ms. Scoggins was Vice President and Controller of Healthdyne from May
1995 to March 8, 1996; Vice President-Planning and Analysis of Healthdyne from
May 1993 to May 1995; and Vice President, Chief Financial Officer of Home
Nutritional Services, Inc., a former majority owned subsidiary of Healthdyne
from February 1990 to April 1993.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Act") requires the Company's directors and executive officers and persons who
own more than ten percent of a registered class of the Company's equity
securities to file reports with the SEC regarding beneficial ownership of Common
Stock and other equity securities of the Company. To the Company's knowledge,
based solely on a review of copies of such reports furnished to the Company and
written representations that no other reports were required, during the fiscal
year ended December 31, 1998, all officers, directors and greater than ten
percent beneficial owners complied with the Section 16(a) filing requirements
of the Act in all instances with the exception of Form 4 Reports of Changes in
Beneficial Ownership relating to (i) the purchase of common stock by Frederick
P. Zuspan, M.D. and (ii) the exercise of an option to purchase common stock by
Thornton A. Kuntz, Jr.
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth compensation paid to the Company's Chief
Executive Officer and the four other most highly compensated executive officers
(the "Named Executive Officers") for their services in all capacities to the
Company and its subsidiaries in each fiscal year during which such person served
as an executive officer of the Company from the Merger Date to December 31,
1998:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION
-------------------
LONG-TERM
COMPENSATION
AWARDS ALL OTHER
NAME AND SECURITIES UNDERLYING COMPENSA-
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) TION ($) (1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Donald R. Millard 1998 $367,914 $-0- 160,750 $261,324
President and Chief Executive Officer 1997 242,302 243,452 180,000 122,061
1996 170,769 40,000 30,000 4,740
Frank D. Powers 1998 312,892 -0- 96,450 228,437
Executive Vice President and Chief 1997 250,143 223,819 200,000 123,855
Operating Officer 1996 181,923 -0- 40,000 4,413
Roberta L. McCaw (2) 1998 138,184 -0- 18,575 93,521
Vice President - Legal, General
Counsel and Secretary
Thornton A. Kuntz, Jr. 1998 167,523 -0- 19,290 106,958
Vice President-Administration 1997 150,946 95,873 17,250 4,043
1996 138,519 -0- 15,000 3,657
Yvonne V. Scoggins 1998 162,096 -0- 19,290 118,967
Vice President, Chief Accounting Officer 1997 144,713 81,195 14,375 4,648
and Treasurer 1996 131,349 14,000 12,500 4,207
</TABLE>
- -------------------
(1) For 1996, represents the value of group term life insurance, officer
term life insurance and the Company's matching contributions under the
Company's 401(k) Profit Sharing Plan. Details of amounts reported in
"All Other Compensation" column for 1997 and 1998 are provided in the
table below. Effective January 1, 1997, Messrs. Millard and Powers
agreed to forego vested benefits under the Company's non-qualified
retirement plan in exchange for entering into a split-dollar life
insurance arrangement with the Company. See "Pension Plan" herein.
Effective July 1, 1998, the Company entered into split-dollar life
insurance agreements with Mr. Kuntz, Ms. Scoggins and Ms. McCaw. The
amounts shown below as "Split Dollar Insurance Premium Value" represent
the present value of the earnings projected to accrue for the
employee's benefit on the current year's insurance premium paid by the
Company plus the portion of the premium paid allocable to the term life
insurance provided under the policy.
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<TABLE>
<CAPTION>
ITEM MR. MILLARD MR. POWERS MS. MCCAW MR. KUNTZ MS. SCOGGINS
<S> <C> <C> <C> <C> <C> <C>
Officer Term Life
Insurance 1998 $5,942 $4,840 $561 $907 $1,279
1997 1,340 426 N/A 270 648
Split Dollar Insurance
Premium Value 1998 $250,582 $218,797 $88,160 $101,251 $112,888
1997 116,721 119,429 N/A -0- -0-
401(k) Matching
Contributions 1998 $4,800 $4,800 $4,800 $4,800 $4,800
1997 4,000 4,000 N/A 3,773 4,000
Total All Other
Compensation 1998 $261,324 $228,437 $93,521 $106,958 $118,967
1997 122,061 123,855 N/A 4,043 4,648
</TABLE>
(2) Ms. McCaw was promoted to this position on April 27, 1998.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options to the Named Executive Officers of the Company during 1998.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS/SARS EXERCISE STOCK PRICE APPRECI-
UNDERLYING GRANTED TO OR ATION FOR OPTION
OPTIONS/ EMPLOYEES BASE TERM (2)
SARS IN FISCAL PRICE EXPIRATION
NAME GRANTED YEAR ($/SH) DATE 5% ($) 10% ($)
(#) (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Millard 160,750 20.63% $5.25 2/24/2008 $530,748 $1,345,019
Frank D. Powers 96,450 12.38% 5.25 2/24/2008 318,449 807,011
Roberta L. McCaw 16,075 2.06% 5.25 2/24/2008 59,953 151,933
2,500 .32% 4.375 4/23/2008
Thornton A. Kuntz, Jr. 19,290 2.47% 5.25 2/24/2008 63,690 161,402
Yvonne V. Scoggins 19,290 2.47% 5.25 2/24/2008 63,690 161,402
</TABLE>
- -------------------
6
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(1) These options to purchase the Company's Common Stock were granted under
the Company's 1997 Stock Incentive Plan (the "1997 Plan") as follows: On
February 24, 1998, 160,750, 96,450, 16,075, 19,290 and 19,290 option
shares, respectively, to Mr. Millard, Mr. Powers, Ms. McCaw, Mr. Kuntz
and Ms. Scoggins and on April 23, 1998, 2,500 option shares to Ms. McCaw.
For each option granted under the 1997 Plan, full vesting shall occur not
before two years and not later than four years from the date of grant
(the "Vesting Measurement Date"), based on performance vesting
thresholds.
(2) Based on actual option term and annual compounding. These amounts are
calculated pursuant to applicable requirements of the SEC and do not
represent a forecast of the future appreciation of the Company's Common
Stock.
STOCK OPTION EXERCISES
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options in 1998 and unexercised
options held as of the end of the fiscal year:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY - END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR END(#) FISCAL YEAR END($) (1)
----------------------------- ----------------------
SHARES VALUE REALIZED
NAME ACQUIRED (MARKET PRICE AT
ON EXERCISE EXERCISE LESS
(#) EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Millard 20,000 $27,618 175,000 260,750 $26,199 -0-
Frank D. Powers 32,667 52,704 146,667 209,783 -0- -0-
Roberta L. McCaw -0- -0- 5,312 24,888 -0- -0-
Thornton A. Kuntz, Jr. 4,168 2,335 35,293 32,915 5,823 -0-
Yvonne V. Scoggins -0- -0- 15,522 30,643 -0- -0-
</TABLE>
(1) Based on $2.875, the last sale price of the Company's Common Stock on
December 31, 1998.
COMPENSATION OF DIRECTORS
Mr. Gainor and the Directors who are employees of the Company receive
no additional compensation for serving on the Board of Directors. With the
exception of Mr. Gainor, Directors who are not employees of the Company
("Non-Employee Directors") receive a fee of $3,000 per quarter, plus $1,000 for
each Board meeting attended and $750 for each Committee meeting attended on a
day other than a Regular Meeting of the Board, and are reimbursed for any travel
expenses incurred. In lieu of the above retainer and meeting fees, Mr. Petit is
paid a fee of $37,500 per quarter for his services as Chairman of the Board. In
addition, under the 1996 Directors' Non-Qualified Stock Option Plan, all
Non-Employee Directors other than Mr. Gainor are entitled to receive an initial
grant of options to purchase 5,000 shares of the Company's Common Stock and at
each annual meeting of
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stockholders after their first full year serving as a director, an additional
grant of options to purchase 10,000 shares of Common Stock. The option price for
all such options is the fair market value of the underlying Common Stock on the
date of grant. Options have a ten year term and vest monthly over 12 months. In
addition, with the exception of Mr. Petit, each of the Non-Employee Directors
who served during 1998 were awarded non-plan options to purchase 20,000 shares
of Common Stock. Mr. Petit received an award of options to purchase 60,000
shares of Common Stock under the Company's 1997 Stock Incentive Plan. The option
price for these options was $5.25 per share, which was the fair market value of
the underlying Common Stock on the date of grant. These options also have a ten
year term and vest monthly over 12 months.
SEVERANCE AGREEMENTS
At its meeting on April 27, 1999, the Board authorized the Company
to enter into severance agreements with Mr. Millard, Mr. Powers and Ms.
Scoggins. Although formal agreements have yet to be finalized, the
arrangement approved by the Board contemplates a lump sum severance payment
to the executive in the event that the executive's employment is
involuntarily terminated for reasons other than the executive's death,
disability or "cause" (defined as certain acts of criminal or civil fraud),
or if the executive voluntarily terminates employment for "good reason"
(defined as failure to be reelected as an officer of the Company, reduction
in base salary, discontinuance of certain incentive or stock option plans or
actions materially adversely affecting the executive's participation therein,
or failure to honor earned and accrued vacation balances). The severance
payment would be in an amount equal to 2 times the executive's annual base
salary and targeted base bonus as of the date of the agreement (the
"Severance Amount"). Mr. Powers also would be entitled to a lump sum
severance payment if he voluntarily terminates his employment without "good
reason" at any time after the first year of the agreement. In such case, the
severance payment would be equal to the Severance Amount less the amount of
any gain accruing to Mr. Powers after the date of the agreement with respect
to stock options granted to him by the Company (whether the grant date is
before or after the date of the agreement) through the earlier of the date of
exercise or the date of expiration of the option. In addition, in
circumstances in which an executive is entitled to a severance payment, the
executive also will be entitled to receive, for a period of 2 years after the
date of termination, life, disability and health insurance coverage,
automobile allowances and other fringe benefits equivalent to those in effect
at the date of termination of employment. The agreement will require the
executive to comply with certain covenants, which preclude the executive from
competing with the Company or soliciting customers or employees of the
Company for a period of 2 years following termination of employment.
Also at its April 27, 1999 meeting, the Board approved change in
control severance agreements for Mr. Millard, Mr. Powers and Ms. Scoggins.
Although formal agreements have yet to be finalized, the arrangement approved by
the Board contemplates that if the executive's employment with the Company
terminates following the consummation of a "change in control" for reasons other
than the executive's death, disability or retirement, or by the Company for
"cause" (as defined in the preceding paragraph), or if the executive terminates
employment for "good reason" (which is defined to include the reasons set forth
in the preceding paragraph as well as other reasons, such as a reduction in
powers and responsibilities or an adverse change in title), the executive may
elect to receive, in lieu of any severance payments provided in the agreement
described above, a lump sum severance payment equal to 3 times the
executive's annual base salary
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and targeted base bonus as of the date of the agreement. In addition, such
executive shall be entitled to receive, for a period of 3 years after the
date of termination, all life, disability and health insurance coverage,
automobile allowances and other fringe benefits equivalent to those in effect
at the date of termination and will be entitled to receive additional
amounts, if any, relating to any excise taxes imposed on the executive as a
result of Section 280(g) of the Internal Revenue Code of 1986, as amended
(the "Code"). The agreement will require the executive to comply with certain
covenants, which preclude the executive from competing with the Company or
soliciting customers or employees of the Company for a period of 3 years
following termination of employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is responsible for executive compensation
decisions as described above. During 1998, the Compensation Committee consisted
of Morris S. Weeden and Frederick P. Zuspan.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the
beneficial ownership of shares of the Company's Common Stock as of March 12,
1999 by (i) all stockholders known by the Company to be the beneficial owners
of more than five percent of its Common Stock, (ii) each director of the
Company, (iii) each Named Executive Officer (as hereinafter defined), and
(iv) all executive officers and directors as a group. Unless otherwise
indicated, the holders listed below have sole voting and investment power
with respect to all shares beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1) OF CLASS (2)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gainor Medical Management, L.L.C. (3) 6,222,222 14.6%
Goldman, Sachs & Co. (4) 3,679,500 10.0%
Dimensional Fund Advisors, Inc. (5) 2,091,700 5.7%
Parker H. Petit (6) 862,957 2.3%
Donald R. Millard (7) 267,295 -
Frank D. Powers (8) 241,103 -
Thornton A. Kuntz, Jr. (9) 45,846 -
Roberta L. McCaw (10) 15,010 -
Yvonne V. Scoggins (11) 37,083 -
Rod F. Dammeyer (12) 6,253,890 14.6%
Mark J. Gainor (13) 6,222,222 14.6%
Carl E. Sanders (14) 108,667 -
Jackie M. Ward (15) 39,171 -
Morris S. Weeden (16) 59,167 -
Frederick P. Zuspan (17) 68,186 -
All current executive officers and directors
as a group (12 persons) 7,998,375 18.4%
</TABLE>
- --------------------------------------------------
- -- Less than 1%
(1) Under the rules of the Securities and Exchange Commission (the "SEC"),
a person is deemed to be a beneficial owner of a security if he or she
has or shares the power to vote or to direct the voting of such
security or the power to dispose or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any
securities of which that person has the right to acquire beneficial
ownership within 60 days as well as any securities owned by such
person's spouse, children or relatives living in the same house.
Accordingly, more than one person may be deemed to be a beneficial
owner of the same securities.
(2) Based on 36,468,834 shares of Common Stock outstanding on March 12,
1998. With respect to each person in the table, assumes that such
person has exercised all options, warrants and other rights to purchase
Common Stock which he or she beneficially owns and which are
exercisable within 60 days and that no other person has exercised any
such rights.
(3) The number of shares owned is based on information contained in a
report on Schedule 13D filed by Gainor Medical Management, L.L.C., Mark
J. Gainor and Gainor Medical U.S.A. Inc. (the "Acquirers") with the
Securities and Exchange Commission (the "SEC") on January 27, 1999. The
Acquirers' principal business address is at 2205 Highway 42 North, P.
O. Box 353, McDonough, Georgia 30253. Gainor Medical Management, L.L.C.
sold substantially all of its
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assets to Matria in exchange for, among other things, a currently
exercisable warrant to purchase 4,000,000 shares of Matria's common
stock and 10,000 shares of Series A convertible preferred stock which
is currently convertible into 2,222,222 shares of Matria's common
stock. Gainor Medical U.S.A., Inc. beneficially owns 6,222,222 shares
by virtue of the fact that it is the majority member of Gainor Medical
Management, L.L.C. Gainor Medical U.S.A., Inc. disclaims beneficial
ownership of 2,811,822 shares, the ownership of which is attributable
to other members of Gainor Medical Management, L.L.C. Mr. Gainor
beneficially owns 6,222,222 shares of Matria Common Stock by virtue of
the fact that he owns, either directly or through his ownership of
Gainor Medical U.S.A., Inc. common stock, a majority of Gainor Medical
Management, L.L.C. See footnotes 12 and 13 below for a description of
shares of stock disclaimed by Mr. Gainor and Rod F. Dammeyer.
(4) The number of shares owned is based on information contained in a
report on Schedule 13G filed with the SEC on January 10, 1999. The
address of Goldman, Sachs & Co. is 85 Broad Street, New York, New York
10004.
(5) The number of shares owned is based on information contained in a
report on Schedule 13G filed with the SEC on February 11, 1999. The
address of Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue, 11th
Floor, Santa Monica, California 90401.
(6) Represents 711,290 shares owned by Mr. Petit, 52,500 shares held by
Petit Investments Limited Partnership, 10,000 shares held by Petit
Grantor Trust and 89,167 shares which are subject to purchase upon
exercise of options exercisable within 60 days.
(7) Represents 70,255 shares owned by Mr. Millard, 10,000 shares owned by
his adult son who resides at home, 185,000 shares which are subject to
purchase upon exercise of options exercisable within 60 days, and 2,040
shares issuable upon conversion of 8% Convertible Subordinated
Debentures owned by Mr. Millard.
(8) Represents 81,103 shares owned by Mr. Powers and 160,000 shares which
are subject to purchase upon exercise of options exercisable within 60
days.
(9) Represents 5,553 shares owned by Mr. Kuntz and 40,293 shares which are
subject to purchase upon exercise of options exercisable within 60
days.
(10) Represents 8,698 shares owned by Ms. McCaw and 6,312 shares which are
subject to purchase upon exercise of options exercisable within 60
days.
(11) Represents 17,395 shares owned by Ms. Scoggins and 19,688 shares which
are subject to purchase upon exercise of options exercisable within 60
days.
(12) Represents 30,000 shares owned by Mr. Dammeyer and 1,668 shares which
are subject to purchase upon exercise of options exercisable within 60
days. Mr. Dammeyer disclaims ownership of 6,222,222 shares owned by
Gainor Medical Management, L.L.C., a company on which Mr. Dammeyer
serves as a member of the Management Committee and, as such, shares
voting and investment power over the securities it owns.
(13) Represents a currently exercisable warrant to purchase 4,000,000 shares
and 10,000 shares of Series A convertible preferred stock which is
currently convertible into 2,222,222 shares of common stock owned by
Gainor Medical Management, L.L.C. Mr. Gainor is a member of the
Management Committee and owns, either directly or through his ownership
of Gainor Medical U.S.A., Inc. Common Stock, a controlling interest in
Gainor Medical Management, L.L.C. Mr. Gainor disclaims ownership of
801,760 shares of the stock related to the warrant and 445,422 shares
of the stock related to the Series A convertible preferred stock which
are attributable to
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the owners of Gainor Medical Management, L.L.C. other than himself and
companies that he controls.
(14) Represents 64,500 shares owned by Mr. Sanders and 44,167 shares which
are subject to purchase upon exercise of options exercisable within 60
days.
(15) Represents 4 shares issuable upon conversion of 8% Convertible
Subordinated Debentures owned by Ms. Ward and 39,167 shares which are
subject to purchase upon exercise of options exercisable within 60
days.
(16) Represents 15,000 shares owned by Mr. Weeden and 44,167 shares which
are subject to purchase upon exercise of options exercisable within 60
days.
(17) Represents 29,019 shares owned by Dr. Zuspan and 39,167 shares which
are subject to purchase upon exercise of options exercisable within 60
days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Carl E. Sanders, a director of the Company, is also the Chairman of
Troutman Sanders LLP, a law firm based in Atlanta, Georgia, which provided
certain legal services to the Company in fiscal year 1998 and is expected to be
retained by the Company in the future.
Mr. Mark J. Gainor, a director of the Company, is also the President
and Chief Executive Officer of Lucor Holdings, LLC, which entered into an
agreement with the Company, effective January 19, 1999, to provide management
services to the Company's diabetes supplies and services division. The agreement
has a term extending through December 31, 2008, but can be cancelled by either
party on 60 days' notice at the end of each calendar year during the term.
Management fees during 1999 are payable at an annual rate of $800,000. Fees
payable in subsequent years will be established by agreement of Lucor Holdings,
LLC and the Company's Board of Directors.
Mr. Gainor indirectly owns a controlling interest in and is the
President and Chief Executive Officer of Gainor Medical Management, L.L.C.
("Gainor Medical"), and SZ Investments, L.L.C. ("SZI"), a company controlled by
Mr. Sam Zell, owns a minority interest in Gainor Medical. Mr. Rod F. Dammeyer,
also a director of the Company, is the managing partner of Equity Group
Corporate Investments, a privately held investment firm also controlled by Mr.
Zell. Both Mr. Gainor and Mr. Dammeyer serve on Gainor Medical's Management
Committee.
On January 19, 1999, pursuant to the Company's acquisition of Gainor
Medical, the Company entered into a five year standstill agreement (the
"Standstill Agreement") with Mr. Gainor and SZI which allows Mr. Gainor and SZI
to increase their stock ownership in the Company to an aggregate of up to 35% of
the Company's Common Stock, on a fully diluted basis, subject to a requirement
that they refrain from any attempt to gain control of the Company during the
term of the Standstill Agreement. Pursuant to this transaction, the Company
amended its shareholder rights plan to permit the acquisition of shares by Mr.
Gainor, SZI and their respective affiliates and permitted transferees within the
limits set forth in the Standstill Agreement. The acquisition agreement related
to the Gainor Medical transaction also provides for the issuance to Gainor
Medical by the Company in the year 2000 of up to $35 million of contingent
subordinated notes payable up to five years after issuance and bearing interest
at twelve percent per annum, 8% to be paid quarterly and 4% accruing to
maturity, if certain performance thresholds are achieved during 1999.
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On April 2, 1998, the Company made a loan to Mr. Petit, a director of
the Company, in the principal sum of $1,036,287. The loan was repaid with
interest at 6% per annum on January 1, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Form 10-K/A to be signed on its behalf by
the undersigned, thereunto duly authorized.
Matria Healthcare, Inc.
By: /s/ Donald R. Millard
--------------------------------------
Donald R. Millard, President and
Chief Executive Officer
Date: April 28, 1999
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