<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
MATRIA HEALTHCARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(MATRIA LOGO)
1850 PARKWAY PLACE
MARIETTA, GEORGIA 30067
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2000
NOTICE IS HEREBY GIVEN THAT the 2000 Annual Meeting of Stockholders of
Matria Healthcare, Inc. (the "Company" or "Matria"), will be held on Thursday,
May 18, 2000, at 10:00 a.m. local time at 1850 Parkway Place, Suite 320,
Marietta, Georgia 30067, for the following purposes:
(1) To elect three Class II directors of the Company for a three year
term expiring at the 2003 Annual Meeting of Stockholders and until their
respective successors are duly elected and qualified;
(2) To approve the Matria Healthcare, Inc. 2000 Stock Incentive Plan;
(3) To approve the Matria Healthcare, Inc. 2000 Director's
Non-Qualified Stock Option Plan; and
(4) To transact such other business as properly may come before the
Annual Meeting and any adjournment or postponement thereof.
Your vote is important regardless of the number of shares you own. Each
stockholder, even though he or she now plans to attend the Annual Meeting, is
requested to sign, date and return the enclosed proxy card without delay in the
enclosed postage-paid envelope. You may revoke your proxy at any time prior to
its exercise. Any stockholder present at the Annual Meeting or any adjournment
or postponement thereof may revoke his or her proxy and vote personally on each
matter brought before the meeting.
I look forward to welcoming you at the meeting.
Very truly yours,
/s/Roberta L. McCaw
Roberta L. McCaw
Secretary
Marietta, Georgia
April 17, 2000
<PAGE> 3
MATRIA HEALTHCARE, INC.
1850 PARKWAY PLACE
MARIETTA, GEORGIA 30067
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 2000
GENERAL INFORMATION
This proxy statement and the accompanying proxy card are being furnished to
stockholders in connection with the solicitation of proxies by the Board of
Directors of Matria Healthcare, Inc., a Delaware corporation (the "Company"),
for use at the 2000 Annual Meeting of Stockholders (the "Annual Meeting") to be
held on Thursday, May 18, 2000 at 10:00 a.m. local time at 1850 Parkway Place,
Suite 320, Marietta, Georgia 30067, and at any adjournment or postponement
thereof.
At the Annual Meeting, stockholders will consider and vote upon a proposal
to elect three Class II directors, proposals to approve the Company's 2000 Stock
Incentive Plan and 2000 Directors' Non-Qualified Stock Option Plan, and upon
such other matters as properly may come before the Annual Meeting. The Board
unanimously urges stockholders to vote FOR the re-election of the Class II
directors, FOR the adoption of the 2000 Stock Incentive Plan and FOR the
adoption of the 2000 Directors' Non-Qualified Stock Option Plan.
It is anticipated that this proxy statement, the accompanying proxy and the
1999 Annual Report to Stockholders will first be mailed to the Company's
stockholders on or about April 18, 2000.
RECORD DATE
The Board of Directors has fixed the close of business on April 6, 2000 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting and at any adjournment
or postponement thereof. At the close of business on the Record Date, 36,873,424
shares of Common Stock were issued and outstanding.
PROXIES
When a proxy card is returned, properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. If a stockholder does not attend the Annual Meeting and does not
return the signed proxy card, such stockholder's shares will not be voted. If a
stockholder returns a signed proxy card but does not indicate how his or her
shares are to be voted, such shares will be voted FOR the election of the three
Class II directors named herein, FOR the adoption of the 2000 Stock Incentive
Plan and FOR the adoption of the 2000 Directors' Non-Qualified Stock Option
Plan. As of the date of this proxy statement, the Board of Directors does not
know of any other matters that are to come before the Annual Meeting. If any
other matters are properly presented at the Annual Meeting for consideration,
the persons named in the enclosed form of proxy and acting thereunder will have
discretion to vote on such matters in accordance with their best judgment.
Any proxy given may be revoked by the person giving it at any time before
it is voted. Proxies may be revoked by (i) filing with the Secretary of the
Company, at or before the taking of the vote at the Annual Meeting, a written
notice of revocation bearing a later date than the proxy, (ii) duly executing a
later dated proxy relating to the same shares of Common Stock and delivering it
to the Secretary of the Company at or before the taking of the vote at the
Annual Meeting or (iii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
a revocation of a proxy). Any written notice of revocation or subsequent proxy
should be sent so as to be delivered to Matria Healthcare, Inc., 1850 Parkway
Place, Marietta, Georgia 30067, Attention: Secretary, or hand delivered to the
Secretary of the Company at or before the taking of the vote at the Annual
Meeting.
The Company will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers and employees of the Company
<PAGE> 4
in person or by telephone or other means of communication. Such directors,
officers and employees will not be additionally compensated, but may be
reimbursed for out-of-pocket expenses incurred in connection with such
solicitation. Arrangements also will be made with custodians, nominees and
fiduciaries for the forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and the Company will reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith. In addition, D. F. King &
Co., Inc. ("D.F. King") will assist in the solicitation of proxies by the
Company for a fee of $5,500, plus reimbursement of reasonable out-of-pocket
expenses.
QUORUM
The presence, either in person or by properly executed proxies, of the
holders of a majority of the outstanding shares of the Company's Common Stock is
necessary to constitute a quorum at the Annual Meeting. Abstentions and shares
held by a broker as nominee (i.e., in "street name") that are represented by
proxies at the Annual Meeting, but that the broker fails to vote on one or more
matters as a result of incomplete instructions from the beneficial owner of the
shares ("broker non-votes"), also will be treated as present for quorum
purposes.
VOTE REQUIRED
The Company's stockholders are entitled to one vote at the Annual Meeting
for each share of Common Stock held of record by them on the Record Date. The
affirmative vote of the holders of a plurality of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting is required to
elect the Class II directors. The affirmative vote of a majority of the shares
of Common Stock having voting power, present in person or represented by proxy
at the Annual Meeting, is required to approve and adopt the 2000 Stock Incentive
Plan and to approve and adopt the 2000 Directors' Non-Qualified Stock Option
Plan. Votes may be cast for or withheld from each nominee for Class II director,
for, against or withheld from approval of the 2000 Stock Incentive Plan, and
for, against or withheld from approval of the 2000 Directors' Non-Qualified
Stock Option Plan. Under applicable Delaware law, broker non-votes represented
at the meeting, but with respect to which such broker or nominee is not
empowered to vote on a particular proposal, and abstentions will have no effect
on the vote for the election of Class II directors. Abstentions will have the
effect of a vote against approval of the 2000 Stock Incentive Plan and the 2000
Directors' Non-Qualified Stock Option Plan, while broker non-votes will have no
effect on the outcome of such proposals.
1. ELECTION OF DIRECTORS
BACKGROUND
As contemplated by the agreement pursuant to which the Company acquired
substantially all of the assets of Gainor Medical Management, L.L.C., Mark J.
Gainor was elected as a Class II director effective January 19, 1999. Also
pursuant to the terms of that agreement, Mr. Gainor has been nominated for re-
election as a Class II director.
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 Mark J.
Gainor, Jackie M. Ward and Frederick P. Zuspan, M.D. 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.
2
<PAGE> 5
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE CLASS II NOMINEES SET
FORTH BELOW.
CLASS II NOMINEES FOR THE TERM EXPIRING IN 2003
MARK J. GAINOR, age 44, 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.
JACKIE M. WARD, age 61, has served as a director 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"). 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 Trigon Healthcare, Inc., Bank of America
Corporation, Equifax, Inc., Premiere Technologies, Inc., Profit Recovery Group
International, Inc., SCI Systems, Inc. and Flowers Industries, Inc. and a member
of several other civic and government organizations.
FREDERICK P. ZUSPAN, M.D., age 78, 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 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.
CLASS I DIRECTORS CONTINUING IN OFFICE UNTIL 2002
DONALD R. MILLARD, age 52, has served as a director of the Company and as
President and Chief Executive Officer since October 20, 1997, and prior thereto
served as Chief Financial Officer from October 1997 to October 1999, and 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.
ROD F. DAMMEYER, age 59, 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 Allied Riser Communications Corp.,
Anixter International, Inc., Antec Corporation, CNA Surety Corporation, Grupo
Azucarero Mexico, IMC Global, Inc., GATX Corporation., Stericycle, Inc.,
TeleTech Holdings, Inc. and Transmedia Network, Inc. He is also a trustee of Van
Kampen Investments, Inc. Closed-End Funds.
CARL E. SANDERS, age 74, 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 that provides legal services
to the Company. Mr. Sanders is also a director of Carmike Cinemas, Inc., First
Union Corporation of Georgia, Healthcare.com Corporation, Learning Technologies,
Ltd. and World Access, Inc.
3
<PAGE> 6
CLASS III NOMINEES CONTINUING IN OFFICE UNTIL 2001
PARKER H. PETIT, age 60, has served as Chairman of the Board of the Company
since 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 Healthcare.com Corporation and a
director of Intelligent Systems Corp. and Logility, Inc.
FRANK D. POWERS, age 51, 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.
MORRIS S. WEEDEN, age 80, 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. Mr.
Weeden is also a director of Stat-Chem, Inc.
4
<PAGE> 7
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 April 1, 2000 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 14.5%
Lord, Abbett & Co.(4)....................................... 4,714,825 12.8
Dimensional Fund Advisors, Inc.(5).......................... 2,224,200 6.0
Wellington Management Company, LLP(6)....................... 2,025,000 5.4
Vanguard Explorer Fund(7)................................... 2,025,000 5.4
Foreign & Colonial Management Limited(8).................... 1,954,000 5.3
Parker H. Petit(9).......................................... 1,535,248 3.5
Donald R. Millard(10)....................................... 258,980 --
Frank D. Powers(11)......................................... 241,103 --
Thornton A. Kuntz, Jr.(12).................................. 47,439 --
Roberta L. McCaw(13)........................................ 19,010 --
Yvonne V. Scoggins(14)...................................... 37,083 --
Rod F. Dammeyer(15)......................................... 6,332,222 14.5
Mark J. Gainor(16).......................................... 6,222,222 14.2
Carl E. Sanders(17)......................................... 118,667 --
Jackie M. Ward(18).......................................... 49,171 --
Morris S. Weeden(19)........................................ 69,167 --
Frederick P. Zuspan(20)..................................... 78,186 --
All current executive officers and directors as a group (14
persons).................................................. 8,851,840 20.2%
</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 ("voting
power") or the power to dispose or to direct the disposition of such
security ("investment power"). 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 36,835,595 shares of Common Stock outstanding on April 1, 2000.
With respect to each person or group in the table, assumes that such person
or group 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 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 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 that 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
5
<PAGE> 8
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 15 and 16 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 February 2, 2000. The address of Lord,
Abbett & Co. is 90 Hudson Street, Jersey City, New Jersey 07302.
(5) The number of shares owned is based on information contained in a report on
Schedule 13G filed with the SEC on February 11, 2000. The address of
Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue, 11th Floor, Santa
Monica, California 90401.
(6) The number of shares owned is based on information contained in a report on
Schedule 13G filed with the SEC on February 9, 2000. The address of
Wellington Management Company, LLP ("WMC") is 75 State Street, Boston,
Massachusetts 02109. According to its Schedule 13G, WMC, in its capacity as
investment adviser, may be deemed to beneficially own 2,025,000 shares of
the Company's Common Stock, which shares are held of record by clients of
WMC. WMC reports that it has no power to vote or direct the vote of such
shares and shared power to dispose or direct the disposition of such
shares, while its clients have the right to receive or direct the receipt
of dividends from or proceeds from the sale of such shares. The shares
reported by WMC are also beneficially owned by Vanguard Explorer Fund (See
footnote 7 below).
(7) The number of shares owned is based on information contained in a report on
Schedule 13G filed with the SEC on February 8, 2000. According to its
Schedule 13G, Vanguard Explorer Fund has the sole power to vote or direct
the vote of such shares and shared power to dispose or direct the
disposition of such shares. The address of Vanguard Explorer Fund is Post
Office Box 2600, Valley Forge, Pennsylvania 19482.
(8) The number of shares owned is based on information contained in a report on
Schedule 13G filed with the SEC on February 10, 1997. The address of
Foreign & Colonial Management Limited is Exchange House, Primrose Street,
London EC2A 2NY England.
(9) Represents 1,328,581 shares owned by Mr. Petit, 52,500 shares held by Petit
Investments Limited Partnership, 10,000 shares held by Petit Grantor Trust
and 144,167 shares which are subject to purchase upon exercise of options
exercisable within 60 days.
(10) Represents 91,940 shares owned by Mr. Millard, 10,000 shares owned by his
adult son who resides at home, 155,000 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.
(11) 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.
(12) Represents 13,814 shares owned by Mr. Kuntz and 33,625 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
(13) Represents 11,698 shares owned by Ms. McCaw and 7,312 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
(14) 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.
(15) Represents 105,000 shares owned by Mr. Dammeyer and 5,000 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 whose Management Committee Mr.
Dammeyer serves as a member giving Mr. Dammeyer voting and investment power
over the securities it owns.
(16) Represents a currently exercisable warrant to purchase 4,000,000 shares and
10,000 shares of Series A convertible preferred stock that 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 849,440 shares of the stock
related to the warrant and 479,344 shares of the stock related to the
Series A
6
<PAGE> 9
convertible preferred stock which are attributable to the owners of Gainor
Medical Management, L.L.C. other than himself and companies that he
controls.
(17) Represents 64,500 shares owned by Mr. Sanders and 54,167 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
(18) Represents 4 shares issuable upon conversion of 8% Convertible Subordinated
Debentures owned by Ms. Ward and 40,000 shares which are subject to
purchase upon exercise of options exercisable within 60 days.
(19) Represents 15,000 shares owned by Mr. Weeden and 49,167 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
(20) Represents 29,019 shares owned by Dr. Zuspan and 49,167 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
BOARD COMMITTEES AND ATTENDANCE
In addition to an Executive Committee and other single purpose committees
established from time to time to assist the Board of Directors with particular
tasks, the Company's Board of Directors has the following standing committees: a
Compensation and Stock Option Committee (the "Compensation Committee"), an Audit
Committee and a Nominating Committee.
The Compensation Committee is composed of Morris S. Weeden and Frederick P.
Zuspan, M.D. The Compensation Committee is responsible for the recommendation
and approval of salaries of executive officers and the review and approval of
incentive plans, including stock options and related programs. The Compensation
Committee held four meetings during the year ended December 31, 1999.
The Audit Committee is composed of Jackie M. Ward, Rod F. Dammeyer and
Morris S. Weeden. The Audit Committee reviews the scope of the audit of the
Company's consolidated financial statements by independent public accountants
and their report on such audit, evaluates audit performance and reports on such
matters to the Board of Directors. The Audit Committee held four meetings during
the year ended December 31, 1999.
The Nominating Committee is composed of Parker H. Petit, Donald R. Millard
and Carl E. Sanders. The Nominating Committee identifies, screens and recommends
candidates for appointment to the Board of Directors for consideration by the
full Board of Directors of the Company and by the stockholders of the Company.
The Committee will consider a candidate for a director proposed by a
stockholder. A candidate must be highly qualified and be both willing and
expressly interested in serving on the Board. A stockholder wishing to propose a
candidate for the Committee's consideration should forward the candidate's name
and information about the candidate's qualifications to Matria Healthcare, Inc.,
1850 Parkway Place, Marietta, Georgia 30067, Attention: Corporate Secretary. The
Nominating Committee held one meeting during the year ended December 31, 1999.
During the year ended December 31, 1999, the Board of Directors held seven
meetings. Each of the Directors who served as directors during 1999 attended
more than 75% of the total number of Board meetings and meetings of committees
of which he or she was a member during 1999.
7
<PAGE> 10
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 fiscal years 1999, 1998 and 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------------- ALL OTHER
---------------------- SECURITIES UNDERLYING COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) TION ($)(1)
- --------------------------- ---- ---------- --------- --------------------- -----------
<S> <C> <C> <C> <C> <C>
Donald R. Millard....................... 1999 $381,032 $ -0- 147,000 $189,763
President and Chief Executive Officer 1998 367,914 -0- 160,750 261,324
1997 242,302 243,452 180,000 122,061
Frank D. Powers......................... 1999 320,494 -0- 85,400 179,446
Executive Vice President and Chief 1998 312,892 -0- 96,450 228,437
Operating Officer 1997 250,143 223,819 200,000 123,855
Roberta L. McCaw(2)..................... 1999 151,846 -0- 17,300 99,782
Vice President -- Legal, General
Counsel 1998 138,184 -0- 18,575 93,521
and Secretary
Thornton A. Kuntz, Jr................... 1999 166,063 -0- 17,300 109,839
Vice President -- Administration 1998 167,523 -0- 19,290 106,958
1997 150,946 95,873 17,250 4,043
Yvonne V. Scoggins...................... 1999 166,039 -0- 17,300 116,334
Vice President, Chief Accounting
Officer 1998 162,096 -0- 19,290 118,967
and Treasurer 1997 144,713 81,195 14,375 4,648
</TABLE>
- ---------------
(1) Details of amounts reported in "All Other Compensation" column 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.
8
<PAGE> 11
<TABLE>
<CAPTION>
ITEM MR. MILLARD MR. POWERS MS. MCCAW MR. KUNTZ MS. SCOGGINS
---- ----------- ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Officer Term Life Insurance... 1999 $ 6,577 $ 5,985 $ 926 $ 1,259 $ 1,784
1998 5,942 4,840 561 907 1,279
1997 1,340 426 N/A 270 648
Split Dollar Insurance Premium
Value....................... 1999 $178,386 $168,661 $94,301 $103,780 $109,750
1998 250,582 218,797 88,160 101,251 112,888
1997 116,721 119,429 N/A -0- -0-
401(k) Matching
Contributions............... 1999 $ 4,800 $ 4,800 $ 4,555 $ 4,800 $ 4,800
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................ 1999 $189,763 $179,446 $99,782 $109,839 $116,334
1998 261,324 228,437 93,521 106,958 118,967
1997 122,061 123,855 N/A 4,043 4,648
</TABLE>
- ---------------
(2) Ms. McCaw was promoted to this position on April 27, 1998.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options to the Named Executive Officers of the Company during 1999:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------ VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL EXERCISE STOCK PRICE
UNDERLYING OPTIONS/SARS OR APPRECIATION FOR
OPTIONS GRANTED TO BASE OPTION TERM(2)
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- ---------- ------------ -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Millard............... 147,000 19.8% $4.125 1/19/2009 $381,346 $966,406
Frank D. Powers................. 85,400 11.5% 4.125 1/19/2009 221,544 561,436
Roberta L. McCaw................ 17,300 2.0% 4.125 1/19/2009 44,879 113,733
Thornton A. Kuntz, Jr........... 17,300 2.0% 4.125 1/19/2009 44,879 113,733
Yvonne V. Scoggins.............. 17,300 2.0% 4.125 1/19/2009 44,879 113,733
</TABLE>
- ---------------
(1) These options to purchase the Company's Common Stock were granted under the
Company's 1997 Stock Incentive Plan (the "1997 Plan") on January 19, 1999.
For each option granted under the 1997 Plan, full vesting shall occur not
before two years and not later than four years from the date of grant (the
"Vesting Measurement Date"), based on performance vesting thresholds.
(2) Based on actual option term and annual compounding. These amounts are
calculated pursuant to applicable requirements of the SEC and do not
represent a forecast of the future appreciation of the Company's Common
Stock.
9
<PAGE> 12
STOCK OPTION EXERCISES
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options in 1999 and unexercised
options held as of the end of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES OPTIONS AT FISCAL YEAR THE-MONEY OPTIONS AT
ACQUIRED VALUE REALIZED END (#) FISCAL YEAR END ($)(1)
ON EXERCISE (MARKET PRICE AT EXERCISE --------------------------- ---------------------------
NAME (#) LESS EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Millard.... 30,000 $48,699 155,000 397,750 $6,321 -0-
Frank D. Powers...... -0- -0- 160,000 281,850 3,612 -0-
Roberta L. McCaw..... -0- -0- 7,312 40,188 -0- -0-
Thornton A. Kuntz,
Jr................. 6,668 21,868 33,625 45,215 1,806 -0-
Yvonne V. Scoggins... -0- -0- 19,688 43,777 -0- -0-
</TABLE>
- ---------------
(1) Based on $4.125, the last sale price of the Company's Common Stock on
December 31, 1999.
COMPENSATION OF DIRECTORS
The Directors who are employees of the Company receive no additional
compensation for serving on the Board of Directors. 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 Director's Non-Qualified
Stock Option Plan, all Non-Employee Directors 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 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. On July 23, 1999, each Non-Employee Director other
than Mr. Dammeyer was awarded an option to purchase 10,000 shares of Common
Stock at a price of $6.00 per share under the 1996 Directors' Non-Qualified
Stock Option Plan. On January 19, 1999, Mr. Petit received an award of options
to purchase 60,000 shares of Common Stock under the Company's 1997 Stock
Incentive Plan and Mr. Dammeyer received an option to purchase 5,000 shares of
Common Stock under the 1996 Directors' Non-Qualified Stock Option Plan due to
his election as a director on that date. The option price for these options was
$4.125 per share, which represented 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
On April 27, 1999, the Company entered into severance agreements with Mr.
Millard, Mr. Powers and Ms. Scoggins. The severance agreements provide for 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 is
in an amount equal to two times the executive's annual base salary and targeted
base bonus as of the date of the agreement (the "Severance Amount"). Mr. Powers
also is 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
10
<PAGE> 13
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 two 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 agreements
require the executive to comply with certain covenants that preclude the
executive from competing with the Company or soliciting customers or employees
of the Company for a period of two years following termination of employment.
In addition to the agreements discussed in the preceding paragraph, the
Company has entered into change in control severance agreements with Mr.
Millard, Mr. Powers and Ms. Scoggins. These agreements provide 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 in the preceding
paragraph, a lump sum severance payment equal to three times the executive's
annual base salary and targeted base bonus as of the date of the agreement. In
addition, such executive shall be entitled to receive, for a period of three
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 agreements require the executive to comply with certain covenants
that preclude the executive from competing with the Company or soliciting
customers or employees of the Company for a period of three years following
termination of employment.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the Stock Performance Graph shall not be incorporated by reference into any such
filings.
COMPENSATION COMMITTEE REPORT ON CORPORATE COMPENSATION
Overall Objectives and Approach. In 1997 the Company engaged William M.
Mercer, Incorporated ("Mercer"), a recognized consulting firm with a specialty
in employee compensation to conduct a review of its overall compensation
program, including base compensation, incentive compensation and stock option
programs, and to compare the compensation of the Named Executive Officers to
that of persons in positions of similar responsibility at other companies both
within and outside of the healthcare industry. A report was presented by Mercer
to the Compensation Committee in April 1997 and, in part, formed the basis for
the Compensation Committee's 1997, 1998 and 1999 compensation recommendations.
In making its compensation determinations, the Compensation Committee
evaluates, on both an absolute and relative basis, a variety of Company
financial results (including sales, earnings, return on equity, return on assets
and balance sheet strength), market share and competitive position, the
potential for future growth, the overall importance of the individual to the
organization, the individual and group performance of senior management and
compensation levels at comparable companies, especially within the healthcare
industry. In formulating its determinations, it recognizes and rewards
achievements on an annual basis, while emphasizing the value and importance of
sustained long-term performance and recognition of developing trends within the
healthcare industry. The Compensation Committee reviews information prepared or
compiled by the Company, as well as draws on the business experience of the
individual members of the Compensation Committee.
Cash Compensation. Officers and other employees are compensated within
salary ranges that are generally based on similar positions in companies of
comparable size and complexity to the Company. The
11
<PAGE> 14
actual base pay level for each executive officer is based on a combination of
experience, performance and other factors that are determined to be important by
the Committee. The salary of the executive officers is generally reviewed
annually at the beginning of each year, with the amount of any increases based
on factors such as Company performance, general economic conditions, marketplace
compensation trends and individual performance.
Cash bonuses for management are paid under the Company's incentive bonus
plan (the "MIP Plan"). Bonuses under the MIP Plan are computed as a percentage
of year-end base salary. The amount of and entitlement to bonuses paid under the
MIP Plan are based upon the performance of the Company in comparison to its
operating budget. The Committee determines the participants in the MIP Plan and
sets the target bonus levels and performance criteria in the first quarter of
each year.
Stock Options. On Mercer's recommendation, the Company grants stock
options to certain of its management employees, based on guidelines that take
salary level, tenure, individual performance rating and importance to the
Company into account. Stock options have been granted at exercise prices equal
to the market price on the date of grant and typically become exercisable in one
of two ways (either (i) based on the financial performance of the Company or
(ii) 50% on the third anniversary of the grant and 50% on the fourth anniversary
of the grant), and expire on the tenth anniversary.
CEO Compensation. Mr. Millard has served as the Company's Chief Executive
Officer since October 1997. His compensation consists of the same components as
that of other senior executives, namely base salary, bonus and stock options. In
establishing the chief executive officer's compensation, the Committee applied
the principles outlined above in essentially the same manner as they were
applied to the other executives. Mr. Millard's compensation was re-evaluated by
the Compensation Committee in October 1997 in connection with Mr. Millard's
promotion to President and Chief Executive Officer. Based on Mr. Millard's
contribution to the Company's strong performance in the first three quarters of
1997 and increased responsibilities, the Compensation Committee increased Mr.
Millard's annual salary rate from $222,000 to $235,320 effective for the period
from February 1, 1997 through October 31, 1997, to $310,000 effective November
1, 1997 and to $331,700 effective March 1, 1998. The Compensation Committee
again reviewed Mr. Millard's compensation in February 1999. Based on Mr.
Millard's success in implementing the Company's diversification strategy through
the acquisitions of the Company's cardiology and diabetes businesses and to
bring Mr. Millard's compensation into line with that of chief executive officers
of similar companies, the Compensation Committee increased Mr. Millard's annual
salary rate to $390,000 effective March 1, 1999. In January 1999, the Board
granted options to Mr. Millard to purchase 147,000 shares of the Company's
Common Stock.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Morris S. Weeden
Frederick P. Zuspan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is responsible for executive compensation
decisions as described above. During 1999, the Compensation Committee consisted
of Morris S. Weeden and Frederick P. Zuspan. No voting member of the
Compensation Committee is currently or has served as an executive officer or
employee of the Company.
12
<PAGE> 15
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns for the
periods in question for the Company, the S&P 500 Index and the S&P Healthcare
Composite Index. The graph assumes that the value of the investment in the
Company's Common Stock and each index was $100 at April 1, 1996 (the first day
of the first full month of trading of the Common Stock of the Company), and that
all dividends were reinvested. The Company has paid no dividends during such
time period. The Company's Common Stock commenced trading on March 8, 1996,
closing at a price of $8.875 on that date and $8.375 on April 1, 1996.
<TABLE>
<CAPTION>
MATRIA S&P 500 S&P HEA
------ ------- -------
<S> <C> <C> <C>
April96 100.00 100.00 100.00
1996 56.72 116.70 116.23
1997 67.17 155.63 167.04
1998 34.33 200.10 240.89
1999 49.25 242.21 221.03
</TABLE>
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 1999 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 were $800,000. Management fees payable in 2000 and subsequent years
will be established by agreement of Lucor Holdings, LLC and the Company's Board
of Directors. In addition, Mr. Gainor became an employee of the Company in 2000
at a salary of $50,000 per year.
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
13
<PAGE> 16
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 payment to Gainor
Medical by the Company in the year 2000 of up to $35 million of additional
contingent purchase price based on 1999 performance of the acquired companies.
As of December 31, 1999, the Company estimated that approximately $13
million of the additional contingent purchase price would be earned and such
amount is reflected as additional goodwill and long-term debt on the Company's
consolidated balance sheet for the year ended December 31, 1999. In the first
quarter of 2000, the Company completed its financial review and computed the
additional contingent purchase price to be $13.319 million. The contingent
purchase price will be payable by the issuance of subordinated notes to the
sellers in 2000. These notes will bear an interest rate of 12% per annum, 8% to
be paid quarterly and 4% accruing to maturity, and principal payments will be
made in the amount of one-third of the original note amount on each of the
third, fourth and fifth anniversaries of the note.
2. APPROVAL OF 2000 STOCK INCENTIVE PLAN
The Board of Directors has approved and recommends the stockholders of the
Company approve the adoption of the Matria Healthcare, Inc. 2000 Stock Incentive
Plan (the "2000 Stock Plan"). Approval of the 2000 Stock Plan by the
stockholders is intended, among other things, to qualify options, stock grants
and stock appreciation rights ("SARs") granted under the 2000 Stock Plan to
certain executive officers of the Company as "performance-based compensation,"
which is not subject to the limits on deductibility of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), described further below,
and to enable the Company to grant incentive stock options ("ISOs") under
Section 422 of the Code. In addition, the Nasdaq Stock Market, on which shares
of the Company's Common Stock are listed, requires stockholder approval of a
plan pursuant to which stock may be acquired by officers or directors.
PURPOSE OF THE 2000 STOCK PLAN
The Board of Directors believes that stock-based incentives are an
important element of the Company's compensation package, particularly for senior
employees. The purpose of the 2000 Stock Plan is to provide incentives to
selected individuals for increased efforts and successful achievement on behalf
of or in the interest of the Company. Persons eligible to participate in the
plan are employees, officers, independent contractors and consultants of the
Company or one of its subsidiaries (or future parent companies) as the
Compensation Committee, in its discretion, shall designate from time to time. As
of March 31, 2000, the Company employed 963 persons and had one non-employee
officer.
The 2000 Stock Plan has three components: a stock option component, a stock
bonus/stock purchase component and a stock appreciation rights component. The
stock option component of the 2000 Stock Plan provides a means whereby
participants are given an opportunity to purchase shares of the Company's Common
Stock pursuant to: (i) options that may qualify as ISOs under Section 422 of the
Code, or (ii) nonqualified stock options ("NQSOs"). ISOs may be granted only to
persons who are employees of the Company or any of its subsidiaries. ISOs may
not be granted to any person who, at the time that the ISO is granted owns stock
possessing more than 10% of the combined voting power of all classes of the
Company's stock or any of the Company's subsidiaries stock ("10% stockholders"),
unless the exercise price of the shares of the Company Common Stock covered by
the option is at least 110% of the fair market value of such shares
14
<PAGE> 17
at the date of grant and such ISO by its terms is not exercisable after the
expiration of five years from the date of grant.
Except for ISOs granted to 10% stockholders, ISOs may be granted under the
stock option component of the 2000 Stock Plan for terms up to ten years from the
date of grant. Except for ISOs granted to 10% stockholders, the exercise price
of ISOs granted under the 2000 Stock Plan must be at least equal to 100% of the
fair market value of the Company's Common Stock as of the date of grant. The
exercise price of NQSOs granted under the 2000 Stock Incentive Plan must be at a
price determined by the Compensation Committee. However, NQSOs granted to the
chief executive officer or the four other most highly compensated officers of
the Company (referred to herein as "Covered Employees") must have an exercise
price which is not less than the fair market value of the shares covered by the
option on the date the option is granted.
The stock bonus/stock purchase component of the 2000 Stock Plan provides a
means whereby participants in the 2000 Stock Plan may receive bonuses of shares
of the Company's Common Stock or the right to purchase shares of the Company's
Common Stock, subject to the restrictions, if any, imposed by the Compensation
Committee. The purchase price for rights to purchase shares of the Company's
Common Stock granted under the 2000 Stock Plan will be at a price determined by
the Compensation Committee. Stock bonuses may be granted under the 2000 Stock
Plan with such terms and provisions and for such consideration, if any, as may
be determined by the Compensation Committee.
The SAR component of the 2000 Stock Plan provides a means whereby
participants may receive compensation based on appreciation in value of the
Company's Common Stock after the date of grant. SARs may be granted either
separately or in tandem with stock options, as determined by the Compensation
Committee.
Although the Company reserves the right to utilize both the stock
bonus/stock purchase and SAR components of the 2000 Stock Plan, the Company,
historically has awarded ISOs and NQSOs only and the Company currently
anticipates that this will continue to be its practice. The 2000 Stock Plan is
administered by the Compensation Committee. The Compensation Committee has broad
discretion, subject to the terms of the 2000 Stock Plan to determine the persons
entitled to receive options, stock bonuses, SARs or the right to purchase shares
of the Company's Common Stock, the timing, terms and conditions thereof, and the
number of shares for which such options, bonuses of stock, SARs and rights to
purchase stock may be granted. Payment of the purchase price and any withholding
amounts upon the exercise of an option or SAR granted under the 2000 Stock Plan
shall be made in cash or by personal check, certified check, bank draft, or
postal or money order; provided that such payment may, in the case of options,
at the discretion of the Compensation Committee, consist of: (i) shares of the
Company's Common Stock; (ii) an irrevocable direction to a broker to sell shares
of the Company's Common Stock and deliver all or a portion of the proceeds to
the Company in payment of the exercise price; (iii) a promissory note with such
terms as the Compensation Committee shall approve; or (iv) any combination of
the foregoing. Grants made under the 2000 Stock Plan to Covered Employees may be
made only by a subcommittee (referred to herein as the "Section 162(m)
Subcommittee") of the Compensation Committee which is composed solely of two or
more "outside directors," as such term is defined in Section 162(m) of the Code
and the Regulations thereunder.
The Company also has the discretion to provide in any stock option, SAR,
stock bonus or stock purchase agreement under the 2000 Stock Plan that, in the
event of a change of control or a corporate transaction (or in some cases, the
disposition of a subsidiary), any such option or SAR will become immediately
exercisable and any stock covered by a stock bonus or stock purchase award will
become released from any restrictions on transfer and repurchase or forfeiture
rights. Under the 2000 Stock Plan, a "change of control" occurs upon (i) the
acquisition of more than 50% of the voting power of the Company by any person or
more than one person acting as a group or (ii) a change in the composition of
the members of the Board over a three-year period or less to include a majority
of persons not serving on the Board at the beginning of the period or nominated
by such persons. Under the plan, a "corporate transaction" consists of approval
by the Stockholders of (i) a merger or consolidation in which the Company is not
the surviving entity, (ii) the sale of all or substantially all of the assets of
the Company or (iii) any reverse merger or other acquisition or business
combination in which the Company is the surviving entity in which holders of the
Company's voting securities prior to the merger do not own at least 50% of the
voting power in the Company after the merger.
15
<PAGE> 18
Options, stock bonuses and rights to purchase the Company's Common Stock
may be granted under the 2000 Stock Plan to exercise or purchase an aggregate of
not more than 2,200,000 shares of the Company's Common Stock (subject to
adjustment to reflect certain transactions). The 2000 Stock Plan contains a
$100,000 limitation on the aggregate fair market value of ISOs which become
exercisable in any calendar year. In addition, under the 2000 Stock Plan, the
maximum number of shares of stock with respect to which SARs or options to
acquire stock may be granted, or sale or bonus grants of stock may be made, to
any individual per calendar year shall not exceed 500,000 shares (subject to
adjustment to reflect certain corporate transactions).
Awards under the 2000 Stock Plan will be based on guidelines that take
salary level, tenure, individual performance rating and importance to the
Company into account. Accordingly, future awards ("new plan benefits") under the
2000 Stock Option Plan are not determinable at this time. Reference is made to
the sections captioned "Executive Compensation," "Stock Options" and "Stock
Option Exercises" at pages 8 to 10 of this Proxy Statement for detailed
information on stock incentive awards and exercises of such awards by certain
executive officers under former stock incentive plans.
The Board of Directors may at any time amend, suspend or terminate the 2000
Stock Plan as it deems advisable without stockholder approval (subject to
applicable law), but no such amendment, suspension or termination may impair any
option or SAR previously granted, and the 2000 Stock Plan cannot be amended
without stockholder approval to materially increase the number of shares of
Common Stock available under the plan or to materially modify the eligibility
requirements for participation in the plan.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. If an option under the 2000 Stock Plan is treated
as an ISO, the optionee generally recognizes no regular taxable income as the
result of the grant or exercise of the option. However, an amount equal to the
difference between the fair market value of the stock on the date of exercise
and the exercise price is classified as an item of alternative minimum taxable
income in the year of exercise for purposes of the alternative minimum tax.
The Company will not be allowed a deduction for federal income tax purposes
in connection with the grant or exercise of an ISO, regardless of the
applicability of the alternative minimum tax to the optionee. The Company will
be entitled to a deduction, however, to the extent that ordinary income is
recognized by the optionee upon a disqualifying disposition (see below).
Upon a sale or exchange of the shares at least two years after the grant of
an ISO and one year from exercise of the option, gain or loss will be recognized
by the optionee equal to the difference between the sale price and the exercise
price. Such gain or loss will be characterized for federal income tax purposes
as long-term capital gain or loss. The Company is not entitled to any deduction
under these circumstances.
If an optionee disposes of shares acquired upon exercise of an ISO prior to
completion of either of the above holding periods, the optionee will have made a
"disqualifying disposition" of the shares. In such event, the optionee will
recognize ordinary income at the time of disposition equal to the difference
between the exercise price and the lower of the fair market value of the stock
at the date of the option exercise or the sale price of the stock. The Company
generally will be entitled to a deduction in the same amount as the ordinary
income recognized by the optionee on a disqualifying disposition if the
optionee's total compensation is deemed reasonable in amount.
The optionee also will recognize capital gain or loss on such disqualifying
disposition in an amount equal to the difference between (i) the amount realized
by the optionee upon such disqualifying disposition of the stock and (ii) the
exercise price, increased by the total amount of ordinary income, if any,
recognized by the optionee upon such disqualifying disposition (as described in
the second sentence of the preceding paragraph). Any such capital gain or loss
resulting from a disqualifying disposition of shares acquired upon exercise of
an ISO will be long-term capital gain or loss if the shares with respect to
which such gain or loss is realized have been held for more than 12 months.
16
<PAGE> 19
Nonqualified Stock Options. An optionee generally recognizes no taxable
income as the result of the grant of an NQSO, assuming that the option does not
have a readily ascertainable fair market value at the time it is granted (which
is usually the case with plans of this type). Upon exercise of an NQSO, an
optionee will normally recognize ordinary compensation income for federal tax
purposes equal to the excess, if any, of the then fair market value of the
shares over the exercise price. Optionees who are employees will be subject to
withholding with respect to income recognized upon exercise of a NQSO.
The Company will be entitled to a tax deduction to the extent and in the
year that ordinary income is recognized by the exercising optionee, so long as
the optionee's total compensation is deemed reasonable in amount.
Upon a sale of shares acquired pursuant to the exercise of an NQSO, any
difference between the sale price and the fair market value of the shares on the
date of exercise will be treated as capital gain or loss, and will qualify for
long-term capital gain or loss treatment if the shares have been held for more
than 12 months.
Stock Bonus/Stock Purchase. The federal income tax treatment of
individuals who receive property in connection with the performance of services
is governed by Section 83 of the Code. That section requires that the recipient
of the property recognize income from the transfer in an amount equal to the
excess of the fair market value of the property received over the amount (if
any) paid for the property. Income is recognized by the recipient in the first
year in which the rights of the recipient to the property become "vested," i.e.,
are transferable or are no longer subject to a substantial risk of forfeiture,
whichever occurs first. The income is taxable at ordinary income rates and (in
the case of participating individuals who are employees) is subject to
withholding of income and applicable employment taxes at the time of vesting.
Under the 2000 Stock Plan, participating individuals may or may not pay any
consideration for stock transferred to them under the stock bonus/stock purchase
component of the Plan, and the stock transferred may or may not be subject to
restrictions. If stock is granted to a recipient without restrictions, the
recipient will recognize ordinary income (calculated as described in the
preceding paragraph) in the recipient's taxable year in which the stock is
granted.
If stock granted under the 2000 Stock Plan is nontransferable and subject
to a substantial risk of forfeiture, then (unless an election is made under
Section 83(b) of the Code, as described in the next paragraph), recipients of
stock will recognize taxable income as of each date on which they become vested
in stock received under the Plan in the amount of the fair market value of the
stock then vesting (less the amount, if any, paid for such stock).
Participating individuals may elect under Section 83(b) of the Code to
report as taxable income in the year of award an amount equal to the stock's
fair market value at the date of award (less the amount, if any, paid for such
stock). If such an election is made, the electing employee is not required
thereafter to report any further compensation income upon becoming vested in the
stock covered by the election. Such an election must be made within 30 days of
receipt of the stock. Such election may not be revoked except with the consent
of the Internal Revenue Service. Participating individuals making this election
who are employees will be subject to withholding with respect to the taxable
income they recognize at the time the stock is awarded to them.
The Company will be entitled to a tax deduction to the extent and in the
year that ordinary income is recognized by the participating individuals, so
long as the individual's total compensation is deemed reasonable in amount.
Dividends paid on stock transferred under the 2000 Stock Plan are generally
treated as additional compensation prior to vesting, but are treated as true
dividends after vesting (or after a Section 83(b) election). Dividends are not
deductible by the Company.
Participating individuals will recognize gain upon the disposition of their
stock equal to the excess of (a) the amount realized on such disposition over
(b) the ordinary income recognized with respect to their stock under the
principles set forth above (plus the amount, if any, paid for such stock). That
gain will be taxable as long or short term capital gain depending on the period
held.
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<PAGE> 20
If a participating individual disposes of his or her stock for an amount
less than the amount of ordinary income recognized with respect to the stock
(plus the amount, if any, paid with respect to the stock), he or she will
generally recognize a capital loss (long or short-term, depending on the holding
period) equal to the difference between any ordinary income recognized with
respect to the stock under the principles described previously (plus the amount,
if any, paid for the stock) and the amount realized upon disposition of the
stock. If a participating individual forfeits unvested stock with respect to
which no Section 83(b) election has been made upon termination of employment, he
or she will generally recognize ordinary income or loss equal to the difference
between the amount, if any, paid by the employee for the stock and the amount
received as a result of the forfeiture. If a participating individual forfeits
unvested stock with respect to which a Section 83(b) election has been made upon
termination of employment, he or she will generally recognize a capital gain or
loss equal to the difference between the amount, if any, paid by the employee
for the stock and the amount received as a result of the forfeiture, but no loss
or deduction is allowed with respect to the amount previously included in income
as a result of the Section 83(b) election.
SARs. Recipients of SARs generally should not recognize income until such
rights are exercised. Upon exercise, the participating individual will normally
recognize ordinary compensation income for federal income tax purposes equal to
the amount of cash and the fair market value of stock, if any, received upon
such exercise. Participating individuals who are employees will be subject to
withholding with respect to income recognized upon exercise of an SAR.
The Company will be entitled to a tax deduction to the extent and in the
year that ordinary income is recognized by the participating individual, so long
as the individual's total compensation is deemed reasonable in amount.
Participating individuals will recognize gain upon the disposition of any
stock received on exercise of an SAR equal to the excess of (a) the amount
realized on such disposition over (b) the ordinary income recognized with
respect to such stock under the principles set forth above. That gain will be
taxable as long or short term capital gain depending on whether the stock was
held for at least 12 months.
Section 162(m) of the Code. Under Section 162(m) of the Code, compensation
paid to any Covered Employee is potentially nondeductible by the Company to the
extent that it exceeds $1,000,000. However, certain "performance-based
compensation" is exempt from the $1,000,000 cap on deductibility. The 2000 Stock
Plan contains provisions designed to qualify options and SARs granted thereunder
to Covered Employees as "performance-based compensation" under Section 162(m).
These provisions include the following: (1) grants to Covered Employees are made
only by the Section 162(m) Subcommittee; (2) the 2000 Stock Plan states a
maximum number of shares with respect to which options or SARs may be granted to
any individual per calendar year; (3) in the case of grants to Covered
Employees, the option exercise price must be at least equal to the fair market
value of the stock on the date the option is granted and (4) the effectiveness
of grants to Covered Employees is contingent upon stockholder approval of the
2000 Stock Plan.
MARKET PRICE OF THE COMMON STOCK
The closing price of the Company's Common Stock as reported on the Nasdaq
National Market System was $5.125 per share on April 6, 2000. As of such date,
the aggregate market value of the 2,200,000 shares of Common Stock issuable
under the 2000 Stock Plan was $11,275,000.
TEXT OF THE PLAN
The preceding summary of the 2000 Stock Plan is qualified in its entirety
by reference to the complete text of the 2000 Stock Plan which is set forth in
Exhibit A to this Proxy Statement.
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<PAGE> 21
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE
2000 INCENTIVE STOCK PLAN
3. APPROVAL OF 2000 DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
On January 24, 2000, the Board of Directors approved the 2000 Non-employee
Director Stock Option Plan (the "Director Plan"), subject to approval by the
stockholders at the 2000 Annual Meeting of Stockholders. The purpose of the
Director Plan is to promote the interests of the Company and its stockholders in
obtaining and maintaining the services of knowledgeable and independent
directors on the Company's Board of Directors (the "Board"), to provide an
additional incentive for such directors to serve on the Board and to give them a
greater interest as stockholders in the success of the Company. An aggregate of
250,000 shares of the Company's Common Stock is reserved for issuance under the
Director Plan (subject to adjustment to reflect certain transactions).
Under the Director Plan each non-employee director of the Company
("Non-Employee Director") will receive a NQSO to purchase 5,000 shares of the
Company's Common Stock (an "Initial Grant") upon his or her first election or
appointment to the Board of Directors. The Company currently has six
non-employee directors. In addition, the Director Plan provides that each
Non-Employee Director who is a director immediately prior to an annual meeting
of the Company's shareholders and who continues to be a director after such
meeting will be granted an option to purchase 10,000 shares of the Company's
Common Stock (a "Subsequent Grant") provided that no Subsequent Grant will be
made to any Non-Employee Director who has not served as a director of the
Company, as of the time of such annual meeting, for at least one year. Each
Subsequent Grant will be made on the date of the annual shareholder's meeting in
question.
The exercise price per share of each option granted under the Director Plan
will be the fair market value of the Company' Common Stock on the date the
option is granted. Payment of the exercise price of any option to purchase the
Company Common Stock granted under the Director Plan may be made in cash, by
personal check, a certified check, bank draft, or postal or express money order
payable to the Company in lawful money of the United States. In addition, the
Company may permit an optionee to pay the option price in whole or in part (i)
with shares of Common Stock owned by the optionee or with shares of Common Stock
withheld from the shares otherwise deliverable to the optionee upon exercise of
an option; (ii) by delivery of any irrevocable direction to a securities broker
to the Company in payment for the Common Stock; (iii) by delivery of the
optionee's promissory note with such recourse, interest, security, and
redemption provisions as the Company determines appropriate or (iv) in any
combination of the foregoing. Any Common Stock used to exercise options shall be
valued at its fair market value on the date of the exercise of the option. The
term of each option granted under the Director Plan shall be ten years from the
date of grant, unless a shorter period is required by applicable law. The Board
of Directors may, subject to certain exceptions, amend, terminate or suspend the
Director Plan without stockholder approval; provided that no such amendment may
impair options already outstanding under the Director Plan.
Options granted under the Director Plan vest monthly over the 12 months
from the date of grant, subject to earlier vesting upon a change in control or
corporate transaction. Under the plan, a "change of control" occurs upon (i) the
acquisition of more than 50% of the voting power of the Company by any person,
or (ii) a change in the composition of the members of the Board over a three
year period to include a majority of persons not serving on the Board at the
beginning of the period or nominated by such persons. Under the plan, a
"corporate transaction" consists of approval by the shareholders of (i) a merger
or consolidation in which the Company is not the surviving entity, (ii) the sale
of all or substantially all of the assets of the Company or (iii) any reverse
merger in which the Company is the surviving entity in which holders of the
Company's voting securities prior to the merger do not own at least 50% of the
voting power in the Company after the merger.
Federal Income Tax Consequences. The federal income tax consequences for
options granted under the Director Plan are the same as those for Non-qualified
Stock options described above under the 2000 Stock Incentive Plan.
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<PAGE> 22
NEW PLAN BENEFITS
The benefits set forth below will be received by each of the following
individuals under the Director Plan:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
NAME AND POSITION GRANTED/YEAR EXERCISE PRICE
- ----------------- ----------------- ---------------
<S> <C> <C>
Named Executive Officers.................................... Not eligible N/A
Executive Officers as a group*.............................. 10,000 Market Price on
May 18, 2000**
Non-executive Directors as a group.......................... 50,000 Market Price on
May 18, 2000
Non-executive Officer Employees as a group.................. Not eligible N/A
</TABLE>
- ---------------
* Mr. Petit is the non-employee Chairman of the Board of Directors.
** See "Market Price of Common Stock" below for market price on April 6, 2000.
Of this year's nominees for Class II Directors, Ms. Ward and Dr. Zuspan
will each receive options to purchase 10,000 shares of Common Stock during each
year they serve as a director of the Company. Mr. Gainor, who is now an employee
of the Company, will not be eligible to participate in the Director Plan.
MARKET PRICE OF COMMON STOCK
The closing price of the Company's Common Stock as reported on the Nasdaq
National Market System was $5.125 per share on April 6, 2000. As of such date,
the aggregate market value of the 250,000 shares of Common Stock issuable under
the Director Plan was $1,281,250.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE ADOPTION OF THE 2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP to audit the
accounts of the Company and its subsidiaries for the fiscal year ending December
31, 2000. A representative of KPMG Peat Marwick LLP will be present at the
Annual Meeting and will have the opportunity to make a statement if he or she so
desires and will be available to respond to appropriate stockholder questions.
STOCKHOLDER PROPOSALS AT THE COMPANY'S NEXT
ANNUAL MEETING OF STOCKHOLDERS
The 2001 Annual Meeting of Stockholders ("2001 Annual Meeting") is
anticipated to be held in June 2001. A notice of intent of a stockholder of the
Company to make a nomination or to bring any other proposal before the 2001
Annual Meeting must comply with the requirements set forth in the Company's
Bylaws and must be received by the Secretary of the Company not more than 90
days and not less than 60 days in advance of the 2001 Annual Meeting. However,
in the event less than 40 days' notice or prior public disclosure of the date of
the 2001 Annual Meeting is given to stockholders, a notice of a stockholder to
bring a matter before the 2001 Annual Meeting, to be timely, must be received no
later than the close of business on the tenth day following the date that notice
of the 2001 Annual Meeting was mailed or such public disclosure was made,
whichever occurs first. The Company will furnish copies of the Bylaw provisions
which set forth the requirements for the notice of intent by a stockholder upon
written request to the Secretary of the Company at the address set forth below.
In order for proposals by stockholders to be considered for inclusion in
the proxy statement and form of proxy to be distributed by the Board in
connection with the 2001 Annual Meeting, stockholders of the Company must submit
such proposals to the Company no later than December 13, 2000. However, if the
2001 Annual Meeting is held on a date more than 30 days before or after May 18,
2001, any stockholder who wishes to have a proposal included in the Company's
proxy statement for the 2001 Annual Meeting must submit the
20
<PAGE> 23
proposal to the Company within a reasonable time before the Company begins to
print and mail its proxy materials.
Notices of intention to present proposals at the 2001 Annual Meeting or
requests in connection therewith should be addressed to Matria Healthcare, Inc.,
1850 Parkway Place, Marietta, Georgia 30067, Attention: Corporate Secretary.
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, 1999, all officers, directors and greater than ten
percent beneficial owners complied with the Section 16(a) filing requirements of
the Act.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Company will furnish without charge a copy of its Annual Report on Form
10-K filed with the SEC for the fiscal year ended December 31, 1999, including
financial statements and schedules, to any record or beneficial owner of its
Common Stock as of April 6, 2000 upon written or oral request of such person.
Requests for such copies should be directed to:
Matria Healthcare, Inc.
1850 Parkway Place
Marietta, Georgia 30067
Attention: Corporate Secretary
(770) 767-4500
If the person requesting the Form 10-K was not a stockholder of record on
April 6, 2000, the request must include a representation that such person was a
beneficial owner of the Common Stock on that date. Copies of any exhibit(s) to
the Form 10-K will be furnished on request and upon the payment of the Company's
expenses in furnishing such exhibit(s).
GENERAL
Management does not know of any other business to come before the 2000
Annual Meeting. If, however, other matters do properly come before the 2000
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
Roberta L. McCaw
Secretary
April 17, 2000
21
<PAGE> 24
EXHIBIT A
MATRIA HEALTHCARE, INC.
2000 STOCK INCENTIVE PLAN
1. Establishment, Purpose, and Definitions.
(a) Matria Healthcare, Inc. (the "Company") hereby adopts the Matria
Healthcare, Inc. 2000 Stock Incentive Plan (the "Plan").
(b) The purpose of the Plan is to allow the Company to attract and retain
eligible individuals (as defined in Section 5 below) and to provide incentives
to such individuals for their services, increased efforts, and successful
achievements on behalf of or in the interests of the Company and its Affiliates
and to maximize the rewards due them for those efforts and achievements. The
Plan provides employees (including officers and directors who are employees) of
the Company and of its Affiliates an opportunity to purchase shares of common
stock, $0.01 par value per share, of the Company (the "Stock") pursuant to
options which may qualify as incentive stock options (referred to as "incentive
stock options") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and employees, officers, independent contractors, and
consultants of the Company and of its Affiliates an opportunity to purchase
shares of Stock pursuant to options which are not described in Sections 422 or
423 of the Code (referred to as "non-qualified stock options"). The Plan also
provides for the sale or bonus grant of Stock to eligible individuals in
connection with the performance of services for the Company or its Affiliates.
Finally, the Plan authorizes the grant of stock appreciation rights ("SARs"),
either separately or in tandem with stock options, entitling holders to cash
compensation measured by appreciation in the value of the Stock.
(c) The term "Affiliate" as used in the Plan means parent or subsidiary
corporations of the Company, as defined in Sections 424(e) and (f) of the Code
(but substituting "the Company" for "employer corporation"), including parents
or subsidiaries of the Company that become such after adoption of the Plan.
2. Administration of the Plan.
(a) The Plan shall be administered by the Board of Directors of the Company
(the "Board"). Subject to Section 2(f) below, the Board may delegate the
responsibility for administering the Plan to a committee, under such terms and
conditions as the Board shall determine (the "Committee"). If required by Rule
16b-3 (or any successor thereto) promulgated under the Securities Exchange Act
of 1934, as amended ("Rule 16b-3"): (i) the Committee shall consist of two (2)
or more members of the Board or such lesser number of members of the Board as
permitted by Rule 16b-3; and (ii) none of the members of the Committee shall
receive, while serving on the Committee, or during the one-year period preceding
appointment to the Committee, a grant or award of equity securities under the
Plan or under any other plan of the Company or its Affiliates under which the
participants are entitled to acquire Stock (including restricted stock), stock
options, stock bonuses, related rights, or stock appreciation rights of the
Company or any of its Affiliates, other than pursuant to transactions in any
such other plan which do not disqualify a director from being a disinterested
person under Rule 16b-3. Members of the Committee shall serve at the pleasure of
the Board. The Committee shall select one of its members as chair of the
Committee and shall hold meetings at such times and places as it may determine.
A majority of the Committee shall constitute a quorum, and acts of the Committee
at which a quorum is present, or acts reduced to or approved in writing by all
members of the Committee, shall be the valid acts of the Committee. If the Board
does not delegate administration of the Plan to the Committee, then each
reference in this Plan to the "Committee" shall be construed to refer to the
Board.
(b) The Committee shall determine which eligible individuals (as defined in
Section 5 below) shall be granted options under the Plan, the timing of such
grants, the terms thereof (including any restrictions on the Stock, and the
number of shares subject to such options.
(c) The Committee shall also determine which eligible individuals (as
defined in Section 5 below) shall be granted or issued SARs or Stock (other than
pursuant to the exercise of options) under the Plan, the
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<PAGE> 25
timing of such grants or issuances, the terms thereof (including any
restrictions and the consideration, if any, to be paid therefor), and the number
of shares or SARs to be granted.
(d) The Committee may amend the terms of any outstanding option or SAR
granted under this Plan, but any amendment that would adversely affect the
holder's rights under an outstanding option or SAR shall not be made without the
holder's written consent. The Committee may, with the holder's written consent,
cancel any outstanding option or SAR or accept any outstanding option or SAR in
exchange for a new option, SAR, or Stock under the Plan on such terms determined
by the Committee. The Committee also may amend any stock purchase agreement or
stock bonus agreement relating to sales or bonuses of Stock under the Plan, but
any amendment that would adversely affect the individual's rights to the Stock
shall not be made without his or her written consent.
(e) The Committee shall have the sole authority, in its absolute
discretion, to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan, to construe and
interpret the Plan, the rules and regulations, and the instruments evidencing
options, SARs, or Stock granted or issued under the Plan, and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
All decisions, determinations, and interpretations of the Committee shall be
binding on all participants.
(f) Notwithstanding the foregoing provisions of this Section 2, grants of
options or SARs or Stock to any "Covered Employee," as such term is defined by
Section 162(m) of the Code, shall be made only by a subcommittee of the
Committee which, in addition to meeting other applicable requirements of this
Section 2, is composed solely of two (2) or more outside directors within the
meaning of Section 162(m) of the Code and the regulations thereunder (the
"Subcommittee") to the extent necessary to qualify such grants as
"performance-based compensation" under Section 162(m) of the Code and the
regulations thereunder. In the case of grants to Covered Employees, references
to the "Committee" shall be deemed to be references to the Subcommittee, as
specified above.
3. Fair Market Value. Where this Plan uses the term "fair market value" in
connection with the Stock, such fair market value shall be determined by the
Committee as follows:
(a) If the Stock is listed on any established stock exchange or a national
market system, including, without limitation, the NASDAQ National Market, its
fair market value shall be the closing selling price for such stock on the
principal securities exchange or national market system on which the Stock is at
the time listed for trading. If there are no sales of Stock on that date, then
the closing selling price for the Stock on the next preceding day for which such
closing price is quoted shall be determinative of fair market value; or
(b) If the Stock is not traded on an exchange or national market system,
its fair market value shall be determined in good faith by the Committee, and
such determination shall be conclusive and binding on all persons.
4. Stock Subject to the Plan.
(a) Subject to adjustment pursuant to Section 4(c) below, the aggregate
number of shares of Stock available for issuance under the Plan and during the
life of the Plan shall be 2,200,000 shares of Stock (subject to adjustment
pursuant to Section 4(c) below).
(b) If an option is surrendered or for any other reason ceases to be
exercisable in whole or in part, the shares of Stock that were subject to such
option, but as to which the option had not been exercised, shall continue to be
available under the Plan. Any shares of Stock forfeited to the Company pursuant
to the terms of agreements evidencing sales or bonus grants under the Plan shall
continue to be available under the Plan.
(c) If there is any change in the Stock through merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock dividend
(in excess of two percent (2%)), or other change in the corporate structure of
the Company, appropriate adjustments shall be made by the Committee in order to
preserve but not to increase the benefits to the outstanding options, SARs and
stock purchase or stock bonus awards under the Plan, including adjustments to
the aggregate number and kind of shares subject to the Plan, or to
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<PAGE> 26
outstanding stock purchase or stock bonus agreements, or SAR agreements, and the
number and kind of shares and the price per share subject to outstanding
options.
5. Eligible Individuals. Individuals who shall be eligible to have granted
to them options, SARs, or Stock under the Plan shall be such employees,
officers, independent contractors, and consultants of the Company or an
Affiliate as the Committee, in its discretion, shall designate from time to
time. Notwithstanding the foregoing, only employees of the Company or an
Affiliate (including officers and directors who are bona fide employees) shall
be eligible to receive incentive stock options.
6. Terms and Conditions of Options and SARs.
(a) Each option granted pursuant to the Plan will be evidenced by a written
stock option agreement executed by the Company and the person to whom such
option is granted.
(b) The Committee shall determine the term of each option granted under the
Plan; provided, however, that the term of an incentive stock option shall not be
for more than ten (10) years and that, in the case of an incentive stock option
granted to a person possessing more than ten percent (10%) of the combined
voting power of the Company or an Affiliate, the term of each incentive stock
option shall be no more than five (5) years.
(c) In the case of incentive stock options, the aggregate fair market value
(determined as of the time such option is granted) of the Stock with respect to
which incentive stock options are exercisable for the first time by an eligible
employee in any calendar year (under this Plan and any other plans of the
Company or its Affiliates) shall not exceed $100,000. If the aggregate fair
market value of stock with respect to which incentive stock options are
exercisable by an optionee for the first time during any calendar year exceeds
$100,000, such options shall be treated as non-qualified options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking options into account in the order in which
they were granted.
(d) The exercise price of each incentive stock option shall be not less
than the per share fair market value of the Stock subject to such option on the
date the option is granted. The exercise price of each non-qualified stock
option shall be as determined by the Committee. Notwithstanding the foregoing,
(i) in the case of an incentive stock option granted to a person possessing more
than ten percent (10%) of the combined voting power of the Company or an
Affiliate, the exercise price shall be not less than one hundred ten percent
(110%) of the fair market value of the Stock on the date the option is granted;
and (ii) in the case of an option granted to a Covered Employee, the exercise
price shall be not less than the per share fair market value of the Stock
subject to such option on the date the option is granted. The exercise price of
an option or SAR shall be subject to adjustment to the extent provided in
Section 4(c) above, but, in the case of a grant to a Covered Employee, only to
the extent such adjustment does not cause the grant to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code and the regulations thereunder.
(e) The Committee may, under such terms and conditions as it deems
appropriate, authorize the issuance of SARs evidenced by a written SAR agreement
(which, in the case of tandem options, may be part of the option agreement to
which the SAR relates) executed by the Company and the person to whom the SARs
are granted. The SAR agreement shall specify the term for the SARs covered
thereby, the cash amount payable or securities issuable upon exercise of the
SAR, and contain such other terms, provisions, and conditions consistent with
this Plan, as may be determined by the Committee.
(f) Payment of the purchase price and any withholding amounts pursuant to
Section 11 upon the exercise of any option or SAR granted under this Plan shall
be made in cash or by optionee's personal check, a certified check, a bank
draft, or a postal or express money order payable to the order of the Company in
lawful money of the United States; provided, however, that the Committee, in its
sole discretion, may permit an optionee to pay the option price and any such
withholding amounts in whole or in part (i) with shares of Stock owned by the
optionee (provided that any shares of stock tendered for payment shall have been
owned for a period of six (6) months, or such other period as in the opinion of
the Committee shall be sufficient to avoid an accounting compensation charge
with respect to the shares used to pay the option price); (ii) by delivery on a
form prescribed by the Committee of an irrevocable direction to a securities
broker approved by the
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<PAGE> 27
Committee to sell shares of Stock and deliver all or a portion of the proceeds
to the Company in payment for the Stock; (iii) by delivery of the optionee's
promissory note with such recourse, interest, security, and redemption
provisions as the Committee in its discretion determines appropriate; or (iv) in
any combination of the foregoing. Any Stock used to exercise options shall be
valued at its fair market value on the date of the exercise of the option.
(g) In the event that the exercise price is satisfied by shares withheld
from the shares of Stock otherwise deliverable to the optionee, the Committee
may issue the optionee an additional option, with terms identical to the option
agreement under which the option was exercised, entitling the optionee to
purchase additional shares of Stock equal to the number of shares so withheld
but at an exercise price equal to the fair market value of the Stock on the
grant date of the new option. Such additional option shall be subject to the
provisions of Section 6(i) below.
(h) The stock option agreement or SAR Agreement may contain such other
terms, provisions, and conditions consistent with this Plan, as may be
determined by the Committee. If an option, or any part thereof, is intended to
qualify as an incentive stock option, the stock option agreement shall contain
those terms and conditions which are necessary to qualify it.
(i) The maximum number of shares of Stock with respect to which SARs or
options to acquire Stock may be granted, or sales or bonus grants of Stock may
be made, to any individual per calendar year under this Plan shall not exceed
500,000 shares (which number may be increased without shareholder approval to
reflect adjustments under Section 4(c) above, to the extent such adjustment, in
the case of a grant to a Covered Employee, does not cause the grant to fail to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code and the regulations thereunder). To the extent required to cause
options granted to Covered Employees to qualify as "performance-based
compensation" under Section 162(m) of the Code and the regulations thereunder,
in applying the foregoing limitation with respect to an employee, if any option
is canceled, the canceled option shall continue to count against the maximum
number of shares for which options may be granted to the employee under this
Section 6(i). For this purpose, the repricing of an option shall be treated as a
cancellation of the existing option and the grant of a new option to the extent
required by Section 162(m) of the Code or the regulations thereunder. The
preceding sentence shall also apply in the case of an SAR, if, after the award
is made, the base amount on which stock appreciation is calculated is reduced to
reflect a reduction in the fair market value of the Stock.
7. Terms and Conditions of Stock Purchases and Bonuses.
(a) Each sale or bonus grant of Stock pursuant to the Plan will be
evidenced by a written stock purchase agreement or stock bonus agreement, as
applicable, executed by the Company and the person to whom such stock is sold or
granted.
(b) The stock purchase agreement or stock bonus agreement may contain such
other terms, provisions, and conditions consistent with this Plan, as may be
determined by the Committee, including, not by way of limitation, the
consideration, if any, to be paid for the Stock, restrictions on transfer,
forfeiture provisions, repurchase provisions, and vesting provisions.
8. Use of Proceeds. Cash proceeds realized from the exercise of options
granted under the Plan or from other sales of Stock under the Plan shall
constitute general funds of the Company.
9. Amendment, Suspension, or Termination of the Plan.
(a) The Board may at any time amend, suspend, or terminate the Plan as it
deems advisable; provided that such amendment, suspension, or termination
complies with all applicable requirements of state and federal law, including
any applicable requirement that the Plan or an amendment to the Plan be approved
by the shareholders, and provided further that, except as provided in Section
4(c) above and Section 15 below,
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the Board shall in no event amend the Plan in the following respects without the
approval of shareholders then sufficient to approve the Plan in the first
instance:
(i) to increase the maximum number of shares of Stock provided in
Section 6(i) above, with respect to which restricted stock, SARs, or
options to acquire Stock may be granted to any Covered Employee per
calendar year under the Plan;
(ii) to materially increase the number of shares of Stock available
under the Plan, or to increase the number of shares of Stock available for
grant of incentive stock options under the Plan; or
(iii) to materially modify the eligibility requirements for
participation in the Plan or the class of employees eligible to receive
options under the Plan, or to change the designation or class of persons
eligible to receive incentive stock options under the Plan.
(b) No option or SAR may be granted nor may any Stock be issued (other than
upon exercise of outstanding options) under the Plan during any suspension or
after the termination of the Plan, and no amendment, suspension, or termination
of the Plan shall, without the affected individual's consent, alter or impair
any rights or obligations under any option or SAR previously granted under the
Plan. The Plan shall terminate with respect to the grant of incentive stock
options on the tenth anniversary of the date of adoption of the Plan, unless
previously terminated by the Board pursuant to this Section 9.
10. Assignability. To the extent required by Rule 16b-3, no option or SAR
granted pursuant to this Plan shall be transferable by the holder except by
operation of law or by will or the laws of descent and distribution; provided
that, if Rule 16b-3 is amended after the date of the Board's adoption of the
Plan to permit broader transferability of options or SARs under that Rule, (i)
any option or SAR granted after such amendment shall be transferable to the
extent provided in the option agreement or the SAR agreement covering the option
or the SAR; and (ii) outstanding options and SARs may, in the Committee's
discretion, be amended to provide for broader transferability of those options
and SARs as the Committee may authorize within the limitations of Rule 16b-3.
Stock subject to a stock purchase agreement or a stock bonus agreement shall be
transferable only as provided in such agreement. Notwithstanding the foregoing,
if required by the Code, each incentive stock option under the Plan shall be
transferable by the optionee only by will or the laws of descent and
distribution, and, during the optionee's lifetime, be exercisable only by the
optionee.
11. Withholding Taxes. No Stock shall be granted or sold under the Plan to
any individual, and no option or SAR may be exercised, until the individual has
made arrangements acceptable to the Committee for the satisfaction of federal,
state, and local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Stock under the Plan,
the lapsing of restrictions applicable to such Stock, the failure to satisfy the
conditions for treatment as incentive stock options under the applicable tax
law, or the receipt of cash payments.
12. Restrictions on Transfer of Shares. The Committee may require that the
Stock acquired pursuant to the Plan be subject to such restrictions and
agreements regarding sale, assignment, encumbrances, or other transfer as are in
effect among the shareholders of the Company at the time such Stock is acquired,
as well as to such other restrictions as the Committee shall deem appropriate.
13. Change in Control.
(a) For purposes of this Section 13, a "Change in Control" shall be deemed
to occur upon:
(i) the direct or indirect acquisition by any person or related group
of persons (other than an acquisition from or by the Company or by a
Company-sponsored employee benefit plan) of beneficial ownership (within
the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") of securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding Stock;
(ii) a change in the composition of the Board over a period of
thirty-six (36) months or less, such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more
contested elections for Board membership or by one or more actions by
written consent of
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shareholders, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period, or (B) have been
elected or nominated for election as Board members during such period by at
least a majority of the Board members described in clause (A) who were
still in office at the time such election or nomination was approved by the
Board.
(b) For purposes of this Section 13, a "Corporate Transaction" shall be
deemed to occur upon any of the following transactions to which the Company is a
party:
(i) approval by the Company's shareholders of a merger or
consolidation in which the Company is not the surviving entity, except for
a transaction the principal purpose of which is to change the state in
which the Company is incorporated;
(ii) approval by the Company's shareholders of the sale, transfer, or
other disposition of all or substantially all of the assets of the Company
(including the capital stock of the Company's subsidiary corporations) in
connection with a complete liquidation or dissolution of the Company; or
(iii) approval by the Company's shareholders of any reverse merger in
which the Company is the surviving entity but in which securities
possessing more than fifty percent (50%) of the total combined voting power
of the Company's outstanding securities are transferred to a person or
persons different from those who held such securities immediately prior to
such merger.
(c) In its discretion, the Committee may provide in any stock option, SAR,
Stock bonus, or Stock purchase agreement (or in an amendment thereto) evidencing
an option, SAR, Stock bonus, or Stock purchase agreement hereunder that, in the
event of any Corporate Transaction or an event giving rise to a Change in
Control, any outstanding options or SARs covered by such an agreement shall be
fully vested, non-forfeitable, and become exercisable, and that any restricted
Stock covered by such an agreement shall be released from restrictions on
transfer and repurchase or forfeiture rights, as of the date of the Change in
Control or Corporate Transaction. However, the Committee may provide in any such
agreement that, in the case of a Corporate Transaction, the Committee may
determine that an outstanding option will not be so accelerated if and to the
extent, (i) such option is either to be assumed by the successor or parent
thereof or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation or parent thereof; or (ii) such
option is to be replaced with a cash incentive program of the successor
corporation that preserves the option spread existing at the time of the
Corporate Transaction and provides for subsequent payment in accordance with the
same vesting schedule applicable to such option.
(d) If the Committee determines to incorporate a Change in Control or
Corporate Transaction acceleration provision in any option or SAR agreement
hereunder, the agreement shall provide that, (i) in the event of a Change in
Control or Corporate Transaction described in clauses (a)(i), (a)(ii), and
(b)(iii) of Section 13 above, the option or SAR shall remain exercisable for the
remaining term of the option or SAR; and (ii) in the event of a Corporate
Transaction described in clauses (i) or (ii) of Section 13(b) above, the option
or SAR shall terminate as of the effective date of the Corporate Transaction
described therein, unless such option or SAR is assumed by a successor
corporation in the event of a Corporate Transaction described in clause (i) of
Section 13(b). If an option or SAR is assumed in the event of a Corporate
Transaction described in clause (i) of Section 13(b) above, the option or SAR
shall remain exercisable for the remaining term of the option or SAR. In no
event shall any option or SAR under the Plan be exercised after the expiration
of the term provided for in the related stock option agreement or SAR agreement
pursuant to Section 6(b) or (e).
(e) The Committee may provide in any option or SAR agreement hereunder that
should the Company dispose of its equity holding in any subsidiary effected by,
(i) merger or consolidation involving that subsidiary; (ii) the sale of all or
distribution of substantially all of the assets of that subsidiary; or (iii) the
Company's sale of or distribution to shareholders of substantially all of the
outstanding capital stock of such subsidiary ("Subsidiary Disposition") while a
holder of the option or SAR is engaged in the performance of services for the
affected subsidiary corporation, then such option or SAR shall, immediately
prior to the effective date of such Subsidiary Disposition, become fully
exercisable with respect to all of the shares at the time represented by such
option or SAR and may be exercised with respect to any or all of such shares.
Any
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<PAGE> 30
such option or SAR shall remain exercisable until the expiration or sooner
termination of the term of the option or SAR.
14. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Any incentive stock options granted
hereunder and any options, SARs, or Stock granted to Covered Employees hereunder
shall become effective only upon such shareholder approval. The Committee may
grant incentive stock options or may grant options, SARs, or Stock to Covered
Employees under the Plan prior to such shareholder approval, but until
shareholder approval is obtained, no such option or SAR shall be exercisable and
no such Stock grant shall be effective. In the event that such shareholder
approval is not obtained within the period provided above, all options, SARs, or
Stock grants previously granted above shall terminate. If such shareholder
approval is obtained at a duly held shareholders' meeting, the Plan must be
approved by a majority of the votes cast at such shareholders' meeting at which
a quorum, representing a majority of all outstanding voting stock of the
Company, is, either in person or by proxy, present and voting on the Plan. If
such shareholder approval is obtained by written consent, it must be obtained by
the written consent of the holders of a majority of all outstanding voting stock
of the Company. However, approval at a meeting or by written consent may be
obtained to a lesser degree of shareholder approval if the Board determines, in
its discretion after consultation with the Company's legal counsel, that such a
lesser degree of shareholder approval will comply with all applicable laws and
will not adversely affect the qualification of the Plan under either Section
162(m) or 422 of the Code.
15. Rule 16b-3 Compliance.
(a) With respect to persons subject to Section 16 of the Exchange Act
("Insiders"), transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3. To the extent any provision of the Plan or
action by the Committee fails to so comply, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Committee. Moreover, in
the event the Plan does not include a provision required by Rule 16b-3 to be
stated therein, such provision (other than one relating to eligibility
requirements or the price and amount of awards) shall be deemed automatically to
be incorporated by reference into the Plan insofar as Insiders are concerned.
(b) If, subsequent to the Board's adoption of the Plan, Rule 16b-3 is
amended to delete any of the Rule 16b-3 requirements addressed by the provisions
of the Plan governing grants or awards to Insiders, the Board may amend the Plan
without shareholder approval (unless such approval is required by Rule 16b-3, as
so amended) to delete or otherwise amend any such provisions no longer required
for grants of options, SARs, and Stock under the Plan to Insiders to be exempt
from Section 16(b) liability under the Exchange Act.
16. The Right of the Company to Terminate Employment. No provision in the
Plan or any Option shall confer upon any Optionee any right to continue in the
employment of the Company or an Affiliate or to interfere in any way with the
right of the Company or an Affiliate to terminate his employment at any time.
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<PAGE> 31
EXHIBIT B
MATRIA HEALTHCARE, INC.
2000 DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
1. Establishment and Purpose. (a) Matria Healthcare, Inc. a Delaware
corporation (the "Company"), hereby adopts its 2000 Directors' Non-Qualified
Stock Option Plan (the "Plan"). The Plan is intended to provide a means whereby
eligible members of the Board may be given an opportunity to purchase shares of
Stock pursuant to options which are not intended to qualify as incentive stock
options under Section 422 of the Code.
(b) The purpose of the Plan is to enable the Company to attract qualified
individuals to serve as members of the Board, to provide additional performance
incentive to such individuals while serving as directors, and to encourage their
continued service on the Board.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Affiliate" shall mean any parent or subsidiary corporations of the
Company, as defined in Sections 424(e) and (f) of the Code (but substituting
"the Company" for "employer corporation"), including parents or subsidiaries of
the Company that become such after adoption of the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Change in Control" shall mean a change in ownership or control of the
Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or related group
of persons (other than an acquisition from or by the Company or by a
Company-sponsored employee benefit plan) of beneficial ownership (within
the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") of securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding Stock;
(ii) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more
contested elections for Board membership or by one or more actions by
written consent of shareholders, to be comprised of individuals who either
(A) have been Board members continuously since the beginning of such period
or (B) have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in clause
(A) who were still in office at the time such election or nomination was
approved by the Board.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Company" shall mean Matria Healthcare, Inc. a Delaware corporation.
(f) "Continuous Status as a Director" shall mean the absence of any
interruption or termination of service as a Director.
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<PAGE> 32
(g) "Corporate Transaction" shall mean any of the following
stockholder-approved transactions to which the Company is a party:
(i) approval by the Company's shareholders of a merger or
consolidation in which the Company is not the surviving entity, except for
a transaction the principal purpose of which is to change the state in
which the Company is incorporated;
(ii) approval by the Company's shareholders of the sale, transfer or
other disposition of all or substantially all of the assets of the Company
(including the capital stock of the Company's subsidiary corporations) in
connection with a complete liquidation or dissolution of the Company; or
(iii) approval by the Company's shareholders of any reverse merger in
which the Company is the surviving entity but in which securities
possessing more than fifty percent (50%) of the total combined voting power
of the Company's outstanding securities are transferred to a person or
persons different from those who held such securities immediately prior to
such merger.
(h) "Director" shall mean a member of the Board.
(i) "Effective Date" shall mean the date this Plan is adopted by the Board.
(j) "Employee" shall mean any person who is an employee of the Company, or
any Affiliate of the Company, for purposes of tax withholding under the Code.
The payment of a director's fee by the Company shall not be sufficient to render
the recipient of such fee an Employee.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" shall mean, as of any date, the value of a share of
Stock determined as follows:
(i) If the Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National
Market, its Fair Market Value shall be the closing selling price for such
stock on the principal securities exchange or national market system on
which the Common Stock is at the time listed for trading. If there are no
sales of Common Stock on that date, then the closing selling price for the
Common Stock on the next preceding day for which such closing selling price
is quoted shall be determinative of Fair Market Value; or
(ii) If the Stock is not traded on any exchange or a national market
system, its Fair Market Value shall be determined in good faith by the
Board, and such determination shall be conclusive and binding on all
persons.
(m) "Option" shall mean an option to purchase shares of Stock granted
pursuant to the Plan.
(n) "Option Agreement" shall mean the written agreement setting forth the
terms of an Option in the form attached as Exhibit A hereto.
(o) "Optionee" shall mean an Outside Director who receives an Option.
(p) "Outside Director" shall mean a Director who is not an Employee.
(q) "Person" shall mean a natural person, corporation, partnership, limited
liability company, joint venture, trust, or any other entity and any government
or instrumentality of government.
(r) "Plan" shall mean this Matria Healthcare, Inc. 2000 Directors'
Non-Qualified Stock Option Plan.
(s) "Securities Act" shall mean the Securities Act of 1933, as amended.
(t) "Stock" shall mean the common stock, $0.01 par value per share, of the
Company.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum number of shares of Stock which may be made subject to
Options and sold under the Plan is 250,000 shares of Stock. If an Option expires
or becomes unexercisable for any reason and has not been exercised in full, the
Stock subject to such Option shall be available for future grant under the Plan.
If Stock which was acquired upon
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exercise of an Option is subsequently repurchased by the Company, such Stock
shall not be available for future grants under the Plan.
4. Interpretation and Administration of the Plan. (a) The Plan is intended
to be self-executing pursuant to the terms hereof. However, any questions
concerning interpretation or execution of the Plan or grants hereunder shall be
decided by the Board. All decisions, determinations and interpretations of the
Board shall be final and binding on all holders of any Options granted under the
Plan.
(b) Subject to the provisions and restrictions of the Plan, the Board shall
have the authority to: (i) authorize any person to execute on behalf of the
Company any agreements or other documents in connection with the grant of an
Option under the Plan; (ii) approve forms of agreement for use under the Plan
consistent with the terms of the Plan; and (iii) make all other determinations
deemed necessary or advisable for the implementation of the Plan.
5. Option Grants. (a) All grants of Options hereunder shall be automatic
and nondiscretionary and shall be made strictly in accordance with the
provisions of this Section 5. Neither the Board nor any person shall have any
discretion to select which Outside Directors shall be granted Options, or to
determine the number of shares of Stock to be covered by Options granted to
Outside Directors, the timing of such Option grants or the exercise price
thereof.
(b) An option to purchase 5,000 shares of Stock shall be granted ("Initial
Grant") to each Outside Director, such Initial Grant to be made to Outside
Directors elected or appointed to the Board upon the date each such Outside
Director becomes an Outside Director of the Company. Beginning with the first
annual meeting of the Company's stockholders following the Initial Grant Date
and thereafter at each subsequent annual meeting of the Company's stockholders,
each Outside Director who continues as an Outside Director immediately following
each such annual meeting shall be granted an option to purchase 10,000 shares of
Stock ("Subsequent Grant"); provided that no Subsequent Grant shall be made to
any Outside Director who has not served as an Outside Director of the Company,
as of the time of such annual meeting, for at least one year. Each Subsequent
Grant shall be made on the date of the annual stockholders' meeting in question.
If any Option ceases to be exercisable in whole or in part, the shares which
were subject to such Option but as to which the Option had not been exercised
shall continue to be available under the Plan.
6. Terms and Conditions of Options. (a) Each Option granted pursuant to
the Plan shall be evidenced by an Option Agreement executed by the Company and
the Optionee.
(b) The exercise price per share of Options granted under the Plan shall be
100% of the Fair Market Value per share of Stock on the date of grant of the
Option, subject to adjustment to the extent provided in Section 12 hereof.
(c) Subject to the provisions in the Option Agreement and Sections 10(e)
and 10(f) hereof, each Option shall vest and become exercisable in twelve (12)
equal monthly installments after the date of grant.
(d) The term of each Option shall be ten (10) years from the date of grant,
unless a shorter period is required to comply with any applicable law, in which
case such shorter period shall apply.
7. Eligibility. Options may be granted only to Outside Directors. No
Optionee shall have any rights as a stockholder of the Company as a result of
the grant of an Option under the Plan or his or her exercise of such Option
pending the actual issuance by the Company of the Stock subject to such Option.
The Plan shall not confer upon any Outside Director any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights that the Director or the Company
may have to terminate his or her directorship at any time.
8. Term of Plan; Effective Date. The Plan shall become effective on the
Effective Date, subject to approval of the Plan by the stockholders of the
Company. If the Effective Date precedes such stockholder approval, any Option
granted under the Plan prior to such approval shall be conditioned upon approval
by stockholders of the Plan. Options may be granted under the Plan at any time
on or before the tenth anniversary of the date of adoption of the Plan.
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<PAGE> 34
9. Payment Upon Exercise. Payment of the exercise price upon exercise of
any Option shall be made in cash, by optionee's personal check, a certified
check, bank draft, or postal or express money order payable to the order of the
Company in lawful money of the United States; provided, however, that the
Committee, in its sole discretion, may permit an optionee to pay the option
price in whole or in part (i) with shares of Stock owned by the optionee or with
shares of Stock withheld from the shares otherwise deliverable to the optionee
upon exercise of an option (in each case only to the extent that such an
exercise of the option would not result in an accounting compensation charge
with respect to the shares used to pay the option price); (ii) by delivery on a
form prescribed by the Committee of an irrevocable direction to a securities
broker approved by the Committee to sell shares of Stock and deliver all or a
portion of the proceeds to the Company in payment for the Stock; (iii) by
delivery of the optionee's promissory note with such recourse, interest,
security, and redemption provisions as the Committee in its discretion
determines appropriate; or (iv) in any combination of the foregoing. Any Stock
used to exercise options shall be valued at its fair market value on the date of
the exercise of the option.
10. Exercise of Option. (a) An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option Agreement by the person entitled to exercise the Option
and full payment for the Stock has been received by the Company in accordance
with Section 9 hereof. An Option may not be exercised for a fraction of a share
of Stock.
(b) If an Optionee ceases to serve as a Director (other than as a result of
disability or death, or following a Change in Control), he or she may, but only
within three (3) months after the date he or she ceases to be a Director,
exercise his or her then outstanding Options to the extent that he or she was
entitled to exercise them at the date of such termination. To the extent that
the Optionee was not entitled to exercise an Option at the date of such
termination, or does not exercise such Option (that he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.
(c) Notwithstanding the provisions of Section 9(b) above, in the event an
Optionee is unable to continue his or her service as a Director as a result of
his or her total and permanent disability (as defined in Section 22(e)(3) of the
Code), he or she may, within twelve (12) months from the date of such
termination, exercise his or her then outstanding Options to the extent he or
she was entitled to exercise them at the date of such termination. To the extent
that the Optionee was not entitled to exercise an Option at the date of such
termination, or does not exercise such Option (that he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.
(d) If during the term of his or her Option, an Optionee (A) dies and had
been in Continuous Status as a Director at the time of his or her death, or (B)
dies within three (3) months after termination of Continuous Status as a
Director, at any time within twelve (12) months following the date of the
Optionee's death the Option may be exercised by the Optionee's personal
representative or by a person who acquired the right to exercise the Option by
bequest or intestate succession, but only to the extent the Optionee was
entitled to exercise the Option at the time of his or her termination of
Continuous Status as a Director. Notwithstanding the foregoing, in no event may
the Option be exercised after the expiration of the term set forth in Section 6.
(e) Should any Corporate Transaction occur while an Optionee remains in
Continuous Status as a Director, then each outstanding Option held by such
Optionee shall become fully exercisable, immediately prior to the specified
effective date of such Corporate Transaction, for all or any portion of the
shares at the time represented by such Option and may be exercised with respect
to any or all of such shares represented by the Option immediately prior to the
specified effective date of such Corporate Transaction. Immediately following
the consummation of the Corporate Transaction, each such option shall terminate
unless assumed by the successor company or its parent, in which case the option
shall remain so exercisable until the expiration or sooner termination of the
Option term.
(f) Should a Change in Control occur while an Optionee remains in
Continuous Status as a Director, then each outstanding Option held by such
Optionee shall become fully exercisable, immediately prior to the effective date
of such Change in Control, for all of the shares at the time subject to such
Option and may be exercised with respect to any or all of such shares
represented by the Option. The Option shall remain so exercisable until the
expiration or sooner termination of the Option term.
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<PAGE> 35
(g) Notwithstanding the provisions of Sections 10(b) through 10(f) above,
in no event may any Option be exercised after expiration of its term set forth
in Section 6.
11. Nontransferability of Options. To the extent required by Rule 16b-3 of
the Exchange Act, no Option shall be transferable by an Optionee other than by
operation of law or by will or by the laws of descent or distribution; provided
that, if Rule 16b-3 is amended after the Board's adoption of the Plan to permit
greater transferability of an Option hereunder, all Options hereunder shall be
transferable to the fullest extent provided by Rule 16b-3 as so amended. In the
event of any Rule 16b-3 permitted transfer of an Option, the transferee shall be
entitled to exercise the Option in the same manner and only to the same extent
as the Optionee (or his personal representative or the person who would have
acquired the right to exercise the Option by bequest or intestate succession)
would have been entitled to exercise the Option under Sections 9 and 10 had the
Option not been transferred.
12. Adjustment Upon Changes in Capitalization. In the event that the
number of outstanding shares of Stock of the Company is changed through merger,
consolidation, reorganization, recapitalization, reincorporation, stock split,
stock dividend (in excess of 2%) or other change in the capital structure of the
Company without consideration, the number of shares of Stock available under the
Plan, the number of shares of Stock deliverable in connection with any Option
and the exercise price per share of such Option shall be proportionately
adjusted; provided, however, that no certificate or scrip representing
fractional shares shall be issued and any resulting fractions of a share shall
be ignored.
13. Amendment and Termination of Plan. (a) The Board may amend the Plan
from time to time in such respects as the Board may deem advisable; provided,
however, that to the extent necessary to comply with Rule 16b-3 under the
Exchange Act (or any other applicable law or regulation), the Company shall
obtain approval by the Company's stockholders to amend the Plan to the extent
and in the manner required by such law or regulation. Notwithstanding the
foregoing, the provisions set forth in Sections 5 and 6 of the Plan (and any
other Sections of the Plan that affect the formula award terms required to be
specified in the Plan by Rule 16b-3 of the Exchange Act and any successor to
such Rule) shall not be amended periodically and in no event more than once
every six (6) months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or any applicable
rules and regulations thereunder.
(b) The Board, without further approval of the stockholders, may at any
time terminate or suspend the Plan. Except as otherwise provided herein, any
such termination or suspension of the Plan shall not affect Options already
granted hereunder, and such Options shall remain in full force and effect as if
the Plan had not been terminated or suspended.
(c) Except as otherwise provided herein, rights and obligations under any
outstanding Option shall not be adversely altered or impaired by amendment,
suspension or termination of the Plan, except with the consent of the person to
whom the Option was granted or transferred.
14. Conditions Upon Issuance of Stock. (a) Stock shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Stock pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, the rules and regulations promulgated thereunder, state
securities laws, and the requirements of any stock exchange or national market
system upon which the Stock may then be listed, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.
(b) Inability of the Company to obtain authority from any regulatory body
having jurisdictional authority deemed by the Company's counsel to be necessary
for the lawful issuance and sale of any Stock hereunder shall relieve the
Company of any liability for failure to issue or sell such Stock.
15. Reservation of Stock. The Company, during the term of the Plan, will
at all times reserve and keep available such number of shares of Stock as shall
be sufficient to satisfy the requirements of the Plan.
16. Rule 16b-3. (a) Transactions under the Plan are intended to comply
with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the Board
fails to comply, it shall be deemed null and void, to the extent permitted by
law and deemed
B-5
<PAGE> 36
advisable by the Board. Moreover, in the event the Plan does not include a
provision required by Rule 16b-3 to be stated therein in order to qualify the
Plan as a formula plan, such provision (other than one relating to eligibility
requirements, or the price and amount of awards) shall be deemed automatically
to be incorporated by reference into the Plan.
(b) If, subsequent to adoption of the Plan, Rule 16b-3 is amended to delete
any of the Rule 16b-3 requirements addressed by the provisions of the Plan
governing grants or awards to persons subject to Section 16(b) of the Exchange
Act ("Insiders"), the Board may amend the Plan without stockholder approval
(unless such approval is required by Rule 16b-3 as so amended) to delete or
otherwise amend any such provisions no longer required for grants of Options
under the Plan to be exempt from Section 16(b) liability under the Exchange Act
or for Outside Directors to be able to make exempt Rule 16b-3 grants of stock
options or other stock awards to Insiders under other stock option or stock
incentive plans of the Company.
B-6
<PAGE> 37
MATRIA HEALTHCARE, INC.
1850 PARKWAY PLACE
MARIETTA, GEORGIA 30067
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 18, 2000
The undersigned hereby appoints Donald R. Millard and Roberta L. McCaw, and
each of them, proxies, with full power of substitution and with discretionary
authority, to represent and to vote in accordance with the instructions set
forth below, all shares of Common Stock of Matria Healthcare, Inc. held of
record by the undersigned on April 6, 2000 at the 2000 Annual Meeting of
Stockholders to be held at 1850 Parkway Place, Suite 320, Marietta, Georgia, at
10:00 a.m. on Thursday, May 18, 2000 and any adjournments thereof.
<TABLE>
<S> <C>
1. Election of Class II Directors [ ] FOR all nominees listed below (except as
written to the contrary below)
<S> <C>
1. Election of Class II Directors [ ] WITHHOLD AUTHORITY to vote for all
nominees listed below
</TABLE>
Mark J. Gainor, Jackie M. Ward and Frederick P. Zuspan, M.D.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. Proposal to approve the Matria Healthcare, Inc. 2000 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve the Matria Healthcare, Inc. 2000 Director's Non-Qualified
Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued on Reverse Side)
(Continued from other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR"
ITEMS 1, 2 AND 3.
PLEASE SIGN EXACTLY AS NAME APPEARS ON STOCK CERTIFICATE.
If stock is held in the name of
two or more persons, all must
sign. When signing as attorney,
as executor, administrator
trustee, or guardian, please
give full title as such. If a
corporation, please sign in full
corporate name by President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated:
--------------------------------,
2000
--------------------------------
Signature
--------------------------------
Signature if Held Jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
