<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-3720
FRESENIUS MEDICAL CARE HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-3461988
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
(Jurisdiction of incorporation or organization)
TWO LEDGEMONT CENTER, 95 HAYDEN AVE., LEXINGTON, MA 02420
(Address of principal executive offices)
Registrant's telephone number, including area code: 781-402-9000
------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Class D Special Dividend Preferred Stock, par value $.10 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing. (See
definition of affiliate in Rule 405). $11,132,750 March 5, 1999.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
As of March 26, 1999, 90,000,000 shares of common stock.
<PAGE> 2
TABLE OF CONTENTS
This filing on Form 10-K/A No. 1 amends the Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 of Fresenius Medical Care Holdings, Inc. and
where appropriate includes its subsidiaries. The undersigned Registrant hereby
amends the following items, financial statements, exhibits, or other portions of
its report on Form 10-K for the fiscal year ended December 31, 1998 (the "Form
10-K") as set forth below:
The following items are hereby amended and restated in their entirety as they
appear in this amendment.
Part III
Item 10 - Directors and Officers of the Registrant 3
Item 11 - Executive Compensation 5
Item 12 - Security Ownership of Certain Beneficial Owners 12
and Management
Item 13 - Certain Relationships and Related Transactions 13
2
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ITEM 10 - DIRECTORS AND OFFICERS OF THE REGISTRANT
The Board of Directors, in general, delegates the daily management of the
Company's business to the Company's executive officers. The following tables set
forth information with respect to the directors and executive officers of the
Company.
THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Ben J. Lipps..................... 58 Director, President and Chief Executive Officer
William F. Grieco................ 45 Director, General Counsel, Senior Vice President and Secretary
Hans-Ulrich Sutter............... 50 Director
Udo Werle........................ 54 Chairman of the Board
</TABLE>
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Ben J. Lipps..................... 58 President, Chief Executive Officer and Director
William F. Grieco................ 45 General Counsel, Senior Vice President, Secretary and Director
Jerry A. Schneider............... 51 Vice President, Chief Financial Officer and Treasurer
J. Michael Lazarus, M.D.......... 61 Senior Vice President of Clinical Quality and Medical Director
Jose A. Diaz-Buxo, M.D........... 51 President, Peritoneal Dialysis Services
Roger G. Stoll................... 56 Executive Vice President of Renal Products and Laboratory Services
</TABLE>
Ben J. Lipps has been President, Chief Executive Officer and a Director of
the Company since 1996. Mr. Lipps is a member of the Management Board of
Fresenius Medical Care AG ("Fresenius Medical Care") and was appointed Vice
Chairman of the Management Board in September 1998. Prior to the Merger he
served as President, Chief Executive Officer, Chief Operating Officer and a
director of Fresenius USA since October 1989, and in various capacities with
Fresenius USA's predecessor since 1985. Mr. Lipps joined Dow Chemical Company in
1966 and led the research team that developed the first hollow fiber dialyzer
between 1967 and 1969. Prior to joining Fresenius USA's predecessor, Mr. Lipps
was a Vice President of Research and Development for Cordis Dow Corporation.
Udo Werle has been Chairman of the Board of Directors since January 1998,
a Director of the Company since 1996 and served as Treasurer of the Company
until August 1997. Mr. Werle has served as a member of the Management Board and
Chief Financial Officer of Fresenius Medical Care since 1996 and was appointed
Chairman of the Management Board effective January 1, 1998. Mr. Werle has also
served as a Chief Financial Officer and Labor Relations Director of Fresenius AG
("Fresenius") since January 1994. Mr. Werle was previously a member of the
Management Board of ABB Kraftwerke AG, Mannheim. In his last position as
President of ABB Power Ventures Ltd., Zurich/Mannheim, he was responsible for
all cooperation and joint ventures of the Power Generation segment. Mr. Werle
joined ABB Power Ventures Ltd. in 1970.
William F. Grieco has been a Director, General Counsel and Secretary of
the Company since 1996 and has served as a Vice President of the Company since
April 1, 1998. Mr. Grieco joined NMC in October 1995 as Senior Vice President
and General Counsel. Mr. Grieco is also a director of PHC, Inc., a provider of
inpatient and outpatient alcohol, drug and psychiatric treatment. Prior to
October 1995, Mr. Grieco was a partner in the law firm of Choate, Hall &
Stewart, where he maintained a diversified health care practice. Mr. Grieco
received his undergraduate degree and his law degree from Boston College, and a
graduate degree in health policy and management from Harvard University.
Mr. Schneider has been a Vice President, the Chief Financial Officer and
Treasurer of the Company since August 18, 1997. From January 1995 to July 1997
Mr. Schneider was the Chief Financial Officer of Grancare, Inc., a provider of
long term nursing, rehabilitation and pharmacy services. Prior to his position
with Grancare, Inc., Mr. Schneider was the President of J. & K. Alan Company,
Ltd., a London-based provider of investment and management services, from 1991
to 1994. Mr. Schneider received his undergraduate degree from the University of
California at Berkeley and his J.D. degree from Loyola University of Los
Angeles.
3
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Jose A. Diaz-Buxo, M.D. has been President of Peritoneal Dialysis Services
for the Company since September 1998. Prior to that time, he had served as
Director of Peritoneal Dialysis Services since January 1997 and maintained a
private practice in nephrology from 1975 to 1996. Dr. Diaz-Buxo is board
certified in internal medicine and nephrology. He is an Emeritus Staff Physician
at Carolinas Medical Center in Charlotte, North Carolina and Clinical Professor
in the Department of Medicine at the University of North Carolina. Dr. Diaz-Buxo
received his undergraduate degree from the University of Puerto Rico in 1967 and
his medical degrees from the University of Puerto Rico and the University of
Minnesota in 1970 and 1975, respectively. He completed his residency and
subsequent nephrology fellowship at the Mayo Graduate School of Medicine. Dr.
Diaz-Buxo has published more than 180 papers on dialysis and renal failure and
is a frequent lecturer nationally and internationally. Dr. Diaz-Buxo recently
received the American Kidney Fund 1999 Torchbearer Award.
J. Michael Lazarus, M.D. has been the Senior Vice President of Clinical
Quality and Medical Director of the Company since 1996. Prior to joining the
Company Dr. Lazarus maintained a private practice in internal medicine and
nephrology from 1963 to 1996 and was a senior physician at Brigham and Women's
Hospital in Boston Massachusetts from 1992 to 1996. Dr. Lazarus is board
certified in internal medicine and nephrology and is currently an Associate
Professor of Medicine at Harvard Medical School. Dr. Lazarus is also a director
of Novavax, Inc., a bio-pharmaceutical company focused on the research and
development of proprietary topical and oral drug delivery and encapsulation
technologies and the applications of those technologies. Dr. Lazarus received
his undergraduate degree from the University of North Carolina at Chapel Hill
and is a 1963 graduate of Tulane University School of Medicine.
Roger G. Stoll has been Executive Vice President of Renal Products and
Laboratory Services for the Company since October 5, 1998. Prior to joining the
Company, from January 1994 Mr. Stoll was President and Chief Executive Officer
of Ohmeda, Inc., the healthcare subsidiary of The BOC Group, plc. From May 1987
to October 1991, Mr. Stoll was Executive Vice President and General Manager of
Miles Inc., a subsidiary of Bayer AG. Prior to that time he served in various
management capacities with Baxter Travenol (formerly American Hospital Supply
Corporation) and served as President of Baxter's American Critical Care Division
from June 1982 to February 1986. Mr. Stoll is also a director of St. Jude
Medical, Inc., a developer, manufacturer and distributor of medical devices for
the global cardiovascular market, and RiboGene, Inc., a drug discovery company
concentrating on the identification of novel lead compounds and the development
of drugs for the treatment of infectious diseases. Mr. Stoll received his
undergraduate degree from Ferris State University and his Ph.D. in
Biopharmaceutics from the University of Connecticut. He was a Post Graduate
Research Fellow in Pharmacokinetics-Drug Metabolism at the University of
Michigan, Ann Arbor.
Hans-Ulrich Sutter has been a Director of the Company since April 1, 1998.
Mr. Sutter was appointed as a Member of the Management Board of Fresenius
Medical Care effective July 1, 1997 and has served as Chief Financial Officer of
Fresenius Medical Care since July 1997. Mr. Sutter was previously a member of
the management committee of the German subsidiary of Proctor & Gamble Company
and had served that company in different capacities for more than 24 years. In
his last position with Proctor & Gamble Mr. Sutter was responsible for the
Finance and Controlling function of its European tissue business.
OWNERSHIP AND TRANSACTIONS REPORTS
Under Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company's directors, certain of its officers, and
beneficial owners of more than 10% of the outstanding shares of a class of the
Company's equity securities registered under the Exchange Act are required to
file reports with the SEC concerning their ownership of and transactions in the
shares of such class; such persons are also required to furnish the Company with
copies of such reports. Based solely upon the reports and related information
furnished to the Company, the Company believes that all such filing requirements
were complied with in a timely manner during and with respect to 1998.
4
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ITEM 11 - EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The Company is sometimes referred to as "Grace" below when discussing
compensation plans and policies in existence prior to the Merger, in order to
distinguish such plans and policies from those currently in effect. The
following table summarizes the total compensation paid or to be paid by the
Company and its subsidiaries for services rendered during 1996, 1997 and 1998 to
Ben J. Lipps, Chief Executive Officer of the Company, William F. Grieco, J.
Michael Lazarus, M.D., Jose A. Diaz-Buxo, M.D. and Jerry A. Schneider, the four
other most highly compensated executive officers of the Company and Roger G.
Stoll who commenced employment with the Company in October 1998 (the "Specified
Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------- ---------- --------
OTHER SECURITIES LTIP ALL OTHER
COMPENSATION UNDERLYING PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) OPTIONS(#) ($) ($)
--------------------------- ---- --------- -------- ------------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ben J. Lipps(1).................. 1998 602,933 116,600(11) 31,153(10)
President, Chief Executive 1997 600,000 33,996(10)
Officer and Director 1996 225,000 200,000 34,373(10)
William F. Grieco................ 1998 401,442 146,250(13) 41,667(4) 4,540(2)
General Counsel, Vice 1997 278,942 125,000(3) 1,800(8) 5,056(2)
President, Secretary 1996 225,000 260,000(6) 1,748(2)
and Director
J. Michael Lazarus, M.D.......... 1998 467,308 225,000(13) 33,334(4) 4,540(2)
Senior Vice President of 1997 430,769 2,500(8) 5,056(2)
Clinical Quality and Medical 1996 205,384 235,000(6) 792(2)
Director
Jerry A. Schneider............... 1998 345,622 172,500(13) 189,025(9) 2,923(2)
Vice President, Chief 1997 112,500 175,000(7) 33,303(9) 126,801(5) 352(2)
Financial Officer and
Treasurer
Jose A. Diaz-Buxo, M.D........... 1998 450,000 10,000(4) 5,081(2)
President, Peritoneal Dialysis 1997 454,279 1,917(8) 1,081(2)
Services
Roger G. Stoll(12)............... 1998 137,200 54,100(13) 90,000(4) 540(2)
Executive Vice President of
Renal Products and Laboratory
Services
</TABLE>
- ---------------
(1) During 1996, 1997 and 1998, Seratronics, Inc. ("Seratronics") paid $65,825,
$65,825, and $68,602, respectively, of Mr. Lipps' salary. In each year
listed above, Seratronics was reimbursed by Fresenius USA for such salary
payments.
(2) Represents the value of the group term life insurance premiums paid by the
Company and the Company's contributions to the respective officer's 401(k)
plan. Mr. Schneider and Dr. Diaz-Buxo were not eligible to participate in
the Company's 401(k) plan in 1997. Dr. Lazarus was not eligible to
participate in the Company's 401(k) plan in 1996. Mr. Stoll was not
eligible to participate in the Company's 401(k) plan in 1998.
(3) Represents an incentive bonus payment related to 1997 but paid in 1998.
(4) Represents the number of options to purchase Fresenius Medical Care
Preference Shares which were granted under the Fresenius Medical Care 1998
Stock Incentive Plan, as amended (the "1998 FMC Plan").
(5) Represents 125,001 options with respect to American Depository Shares
("ADSs") representing Fresenius Medical Care Preference Shares, which were
granted to Mr. Schneider under the Fresenius Medical Care 1996 Stock
Incentive Plan (the "1996 FMC Plan") and options with respect to 1,800
Fresenius Medical Care Preference Shares, which were granted to Mr.
Schneider as 1997 bonus compensation under the 1998 FMC Plan.
5
<PAGE> 6
(6) Constitutes payments made in accordance with the Retention Bonus Program
adopted by the Grace Board of Directors on February 4, 1996. See "--
Retention Bonus Program."
(7) $75,000 of this amount represents a signing bonus paid upon Mr. Schneider's
commencement of employment in August 1997 and a $100,000 guaranteed
incentive bonus payment related to 1997 but paid in 1998 See "Executive
Compensation -- Employment Agreements" for additional information
concerning 1997 bonus awards to Mr. Schneider.
(8) Represents the number of options to purchase Fresenius Medical Care
Preference Shares under the 1998 FMC Plan which were granted in 1998 as an
incentive bonus related to 1997.
(9) Represents (a) $33,284 with respect to 1997 and $187,829 with respect to
1998, which amounts are attributable to the value of relocation expenses
paid by the Company in connection with Mr. Schneider's relocation to
Massachusetts; (b) interest in excess of 120% of the applicable federal
long-term rate on compensation payable during 1997 and 1998, respectively,
but deferred at Mr. Schneider's election pursuant to the Company's deferred
compensation plan; and (c) a car allowance paid in 1998 only.
(10) These amounts include the value of (a) the Company's contribution to Mr.
Lipps' 401(k) plan, (b) the Company's payment of group term life insurance
premiums and (c) the Company's payment of premiums attributable to a
supplemental life insurance policy and a supplemental disability insurance
policy in the amount of $30,128 in 1996 and 1997, respectively, and $27,395
in 1998.
(11) Represents 16,600 options (the "FMC AG Options") to purchase Fresenius
Medical Care Preference Shares under the Fresenius Medical Care stock
option plan (non-U.S.) (the "FMC AG Plan") and 100,000 options to purchase
Fresenius Medical Care Preference Shares under the 1998 FMC Plan (referred
to in this footnote as the "North American Plan Options"). The FMC AG
Options vest over a four-year period; provided, however, that if certain
financial targets are not achieved by Fresenius Medical Care during the
initial two years of such vesting period, the options become invalid. The
North America Plan Options were approved by the Supervisory Board of
Fresenius Medical Care in March 1999 and relate to Mr. Lipps performance in
1997 and 1998. The exercise price of the North America Plan Options will
not be determined until June 2, 1999, the proposed effective date for the
grant of such options.
(12) Represents salary earned by Mr. Stoll from October 5, 1998 through December
31, 1998. See "Employment Agreements" for a complete description of Mr.
Stoll's annual compensation.
(13) Represents incentive bonus payments paid under the FMC Bonus Plan which
relate to the achievement of 1998 Company and individual performance
targets, but were paid in April 1999.
6
<PAGE> 7
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The Company does not currently have a stock option plan. However, executive
officers and certain employees of the Company and its subsidiaries are eligible
to participate in the 1996 FMC Plan and the 1998 FMC Stock Plan. Options were
granted in December 1997 under the 1996 FMC Plan to certain executive officers
and employees of the Company, including Mr. Schneider. Options were granted to
Mr. Lipps in August 1998 under the FMC AG Plan. Options were granted in April
1998 under the 1998 FMC Plan to Messrs. Grieco, Schneider, Stoll and Drs.
Diaz-Buxo and Lazarus. See "Certain Relationships and Related Transactions --
Relationships and Transactions with Executive Officers -- Loans to Officers
under the Stock Incentive Plans."
The following table sets forth information concerning stock options granted
in 1998, including the potential realizable value of each grant assuming that
the market value of the Fresenius Medical Care's Preference Share appreciates
from the date of grant to the expiration of the option at annualized rates of
(a) 5% and (b) 10%, in each case compounded annually over the term of the
option. These assumed rates of appreciation have been specified by the SEC for
illustrative purposes only and are not intended to predict future prices of the
Company's Common Stock, which will depend upon various factors, including market
conditions and the Company's future performance and prospects. The options shown
below became exercisable in three approximately equal annual installments
beginning one year after the date of grant.
<TABLE>
<CAPTION>
1998 GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OPTIONS RATES OF STOCK PRICE
OF SHARES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM
OPTIONS IN PRICE EXPIRATION -----------------------
NAME GRANTED(1) 1998(3) ($/SHARE)(2) DATE 5% 10%
---- ---------- ---------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ben J. Lipps................... 16,600 6.4% $48.95 August 2008 $ 511,042 $1,295,080
William F. Grieco.............. 43,467 3.9% $59.87 April, 2008 $1,636,725 $4,147,784
J. Michael Lazarus, M.D........ 35,834 3.3% $59.87 April 2008 $1,349,309 $3,419,414
Jose A. Diaz-Buxo, M.D......... 11,917 1.1% $59.87 April 2008 $ 448,728 $1,137,165
Jerry A. Schneider............. 1,800 0.2% $59.87 April 2008 $ 67,778 $ 171,763
Roger Stoll.................... 90,000 8.3% $49.40 December 2008 $2,795,783 $7,085,062
</TABLE>
- ---------------
(1) Options granted in 1998 to Mr. Lipps under the FMC AG Plan vest over a
four-year period; provided, however, that if certain financial targets are
not achieved by Fresenius Medical Care during the initial two years of such
vesting period, the options become invalid. Options granted in 1998 to
Messrs. Grieco and Schneider and Drs. Diaz-Buxo and Lazarus under the 1998
FMC Plan vest over a three-year period. 15,000 of the options granted to Mr.
Stoll under the 1998 FMC Plan vested on December 7, 1998 (the grant date);
the balance vest over a five-year period. The Supervisory Board of Fresenius
Medical Care has approved the granting of 100,000 options to Mr. Lipps under
the 1998 FMC Plan. The exercise price of these options will not be
determined until June 2, 1999, the proposed effective date of the grant, and
therefore the potential realizable value of these options cannot be
calculated at this time.
(2) Under the FMC AG Plan, options granted to Mr. Lipps were granted with an
exercise price of 87.35 deutsche marks ("DM") per share. Under the 1998 FMC
Plan, options granted to Messrs. Grieco and Schneider and Drs. Diaz-Buxo and
Lazarus were granted with an exercise price of 110 DM per share and options
granted to Mr. Stoll were granted with an exercise price of 83 DM per share.
For the purposes of this table these exercise prices has been converted to
their per share U.S. dollar equivalent based on, in the case of Mr. Lipps,
the August 3, 1998 (i.e. the grant date) conversion rate of 1.7844 DM per
U.S. dollar, in the case of Messrs. Grieco and Schneider and Drs. Diaz-Buxo
and Lazarus, the April 7, 1998 (i.e., the grant date) conversion rate of
1.8372 DM per U.S dollar and in the case of Mr. Stoll, the December 7, 1998
(i.e., the grant date) conversion rate of 1.6803 DM per U.S. dollar (source
for conversion rates: Bloomberg News Service).
(3) Amount represents, with respect to Mr. Lipps, the percentage of total
options granted in 1998 under the FMC AG Plan and with respect to Messrs.
Grieco and Schneider and Drs. Diaz-Buxo and Lazarus, the percentage of total
options granted in 1998 under the 1998 FMC Plan.
7
<PAGE> 8
PENSION ARRANGEMENTS
Most of the Company's employees who work 900 hours or more per year are
covered by the Fresenius Medical Care North America Retirement Plan (the "FMC
Retirement Plan"), effective as of the first day of the month following their
date of hire. Under this basic retirement plan, pension benefits are based upon
(1) the number of years of the covered employee's credited service (subject to a
maximum of 30), (2) the covered employee's final average earnings for the 60
consecutive months in which his or her compensation on any July 1 was highest
during the last 120 months of continuous participation, and (3) the social
security covered compensation (the average social security tax base for the 35
years prior to the covered employee's 65th birthday).
The annual retirement benefit under the FMC Retirement Plan consists of the
sum of (1) 0.85% of the covered employee's final average earnings multiplied by
his or her years of benefit service, and (2) 0.65% of the covered employee's
final average earnings greater than his or her social security covered
compensation base multiplied by his or her years of benefit service.
The following table shows the annual pensions payable under the FMC
Retirement Plan for different levels of compensation and years of credited
service. The amounts shown have been computed on the assumption that the covered
employee retired at age 65 on December 31, 1998, with benefits payable on a
straight life annuity basis.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
--------------------------------------------------------
10 15 20 25 30
YEARS YEARS YEARS YEARS YEARS
-------- -------- -------- -------- --------
<C> <S> <C> <C> <C> <C> <C>
$ 100,000 .................... $ 12,851 $ 19,277 $ 25,702 $ 32,128 $ 38,553
200,000 .................... 27,851 41,777 55,702 69,628 83,553
300,000 .................... 42,851 64,277 85,702 107,128 128,553
400,000 .................... 57,851 86,777 115,702 144,628 173,553
500,000 .................... 72,851 109,277 145,702 182,128 218,553
600,000 .................... 87,851 131,777 175,702 219,628 263,553
700,000 .................... 102,851 154,277 205,702 257,128 308,553
800,000 .................... 117,851 176,777 235,702 294,628 353,553
900,000 .................... 132,851 199,277 265,702 332,128 398,553
1,000,000 .................... 147,851 221,777 295,702 369,628 443,553
1,100,000 .................... 162,851 244,277 325,702 407,128 488,553
1,200,000 .................... 177,851 266,777 355,702 444,628 533,553
1,300,000 .................... 192,851 289,277 385,702 482,128 578,553
1,400,000 .................... 207,851 311,777 415,702 519,628 623,553
1,500,000 .................... 222,851 334,277 445,702 557,128 668,553
</TABLE>
Messrs. Grieco, Schneider and Stoll and Drs. Diaz-Buxo and Lazarus had 3.1,
1.4, 0.0, 2.0 and 2.8 years of credited service, respectively, under the FMC
Retirement Plan at year-end 1998. The average compensation of the highest
consecutive five years of the last ten years of credited service cannot be
computed for Messrs. Grieco, Schneider and Stoll and Drs. Diaz-Buxo and Lazarus
since they have less than five years of credited service. Mr. Lipps is not
presently covered by the FMC Retirement Plan.
DIRECTORS' COMPENSATION AND CONSULTING ARRANGEMENTS
The directors of the Company are not compensated for their services as
such. For information with respect to compensation paid by the Company and its
subsidiaries to Messrs. Lipps and Grieco, see the Summary Compensation Table
above. Information with respect to compensation paid by Fresenius USA to its
non-employee director is provided below. Except as disclosed with respect to
compensation by Fresenius USA below, Mr. Werle did not receive compensation from
the Company and its subsidiaries in 1998. Except as described below regarding
compensation paid to directors of Fresenius USA, Messrs. Sutter and Werle
received all of their
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<PAGE> 9
1998 compensation from Fresenius AG, Fresenius Medical Care, and subsidiaries of
Fresenius Medical Care other than the Company and its subsidiaries.
In 1998 Mr. Werle, as a non-employee director of Fresenius USA, received a
directors fee in the amount of $55,000.
EMPLOYMENT AGREEMENTS
Pursuant to an employment agreement between Fresenius USA and Mr. Lipps,
which became effective as of January 1, 1992 and was modified effective January
1, 1997 (the "Modification"), Mr. Lipps was required to devote substantially all
of his business efforts and time to serving as the President of Fresenius USA,
subject to his also serving as the President and Chief Executive Officer of
Seratronics. Mr. Lipps receives from Fresenius USA an annual base salary of
$600,000, and is eligible to participate in the Company's management bonus plan
(the "FMC Bonus Plan") based on the attainment of certain sales and profits
targets set annually by management and reviewed by the Company's Board of
Directors. Under the FMC Bonus Plan, Mr. Lipps can earn a bonus equal to forty
percent of his base salary with a maximum bonus of one hundred percent of his
base salary. Fresenius USA and Mr. Lipps agreed that Fresenius USA's obligations
in respect of such salary and bonus are decreased by amounts payable to Mr.
Lipps by Seratronics. Seratronics is wholly-owned by Anderson Group, Inc. During
1996, 1997 and 1998 Fresenius USA reimbursed Seratronics for its compensation
related payments to Mr. Lipps. Mr. Francis E. Baker, a member of the Fresenius
USA Board until consummation of the Merger, is the President of Andersen Group,
Inc. In connection with the Merger, Mr. Lipps became President, Assistant
Secretary and a director of the Company, and now performs services for the
Company and its other subsidiaries. Under the terms of his employment agreement,
Mr. Lipps is entitled to reimbursement during 1997 and 1998 only, for (a)
expenses incurred in connection with renting and maintaining a residence in the
State of California and (b) reasonable expense incurred in connection with
commuting to and from his California residence twice each month. Mr. Lipps also
was granted stock options with respect to 120,000 shares of Fresenius USA Common
Stock at an exercise price of $3.125 per share, which were fully vested as of
December 31, 1995. Mr. Lipps' employment agreement is terminable upon 30 days'
advance notice by Fresenius USA, in which event Mr. Lipps is owed one year's
base salary payable over the year following such termination plus $100,000
payable upon such termination. The agreement may also be terminated by Mr. Lipps
upon one year's notice, as well as by Fresenius USA upon termination for cause
and under certain other circumstances. Upon any such termination, Fresenius USA
may require that Mr. Lipps refrain, for up to two years, from carrying on a
business in competition with Fresenius USA's business, in which event Fresenius
USA must pay an additional annual amount to Mr. Lipps equal to his annual salary
(or, if greater, the aggregate premiums on certain life and disability policies
carried by Mr. Lipps). The foregoing description of Mr. Lipps' employment
agreement does not purport to be complete and is qualified in its entirety by
reference to such agreement, which was filed with the SEC as an exhibit to
Fresenius USA's Annual Report on Form 10-K for the year ended December 31, 1992.
A copy of the Modification was filed with the SEC as an exhibit to the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 1998.
Pursuant to the terms of an employment agreement, between Mr. Schneider and
the Company, which became effective August 18, 1997 and was amended effective
September 18, 1997, Mr. Schneider receives an annual base salary of $325,000 and
is eligible to participate in the FMC Bonus Plan. Upon commencement of his
employment Mr. Schneider received a signing bonus of $75,000. Under the FMC
Bonus Plan, Mr. Schneider can earn, subject to the Company's attainment of
specified financial objectives, a bonus of forty percent of his base salary with
a maximum bonus of one hundred percent of his base salary. For 1997 Mr.
Schneider was entitled to a make a one-time election with regard to the payment
of his incentive compensation by electing: (a) to receive either a guaranteed
payment of $100,000 when executive bonus payments were made in 1998 (the
"Guaranteed Payment"); or (b) to fully participate in the FMC Bonus Plan,
without pro-ration for 1997, and to receive such payment in 1998 based on actual
funding of the FMC Bonus Plan; or (c) to have NMC purchase his former residence
for its appraised value not to exceed $75,000 over his adjusted cost basis. Mr.
Schneider elected to receive the Guaranteed Payment. In addition, Mr. Schneider
is entitled to reimbursement for: (a) the difference between the sales price of
his former personal residence and its adjusted cost basis in such property and
(b) certain costs incurred in connection with his relocation to Massachusetts.
Mr. Schneider was granted options under the 1996 FMC Plan to
9
<PAGE> 10
purchase 125,001 ADS's representing Fresenius Medical Care Preference Shares at
$18.53 per ADS, vesting over three years. The term of Mr. Schneider's employment
agreement is two years commencing August 18, 1997 and may be terminated by the
Company for cause and under certain other circumstances. In the event Mr.
Schneider's employment agreement is terminated for any reason other than cause,
or if Mr. Schneider terminates his employment agreement because of a breach of
its terms by the Company, Mr. Schneider is entitled to his base salary and a
continuation of his benefits for a period of two years from the date of such
termination. The foregoing description of Mr. Schneider's employment agreement
does not purport to be complete and is qualified in its entirety by referenced
to such agreement, which was filed with the SEC as an exhibit to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,1998. See "Certain
Relationships and Related Transactions -- Loans to Officers"
Pursuant to an employment agreement between dated November 11, 1998 by and
between Mr. Grieco and National Medical Care, Inc., Mr. Grieco receives an
annual base salary of $450,000 and is eligible to participate in the FMC Bonus
Plan. Under the FMC Bonus Plan, Mr. Grieco can earn, subject to the Company's
attainment of specified financial objectives, a bonus of forty percent of his
base salary with a maximum bonus of eighty percent of his base salary.
Additionally, Mr. Grieco may be eligible for a special bonus based upon his
performance throughout the course of the current investigation being conducted
by the Office of the United States Attorney for the District of Massachusetts
and other U.S. government agencies. Mr. Grieco is also entitled to participate
in the Fresenius Medical Care AG Stock Incentive Plan. In the event Mr. Grieco's
employment agreement is terminated for any reason other than cause, or if Mr.
Grieco terminates his employment agreement because of a breach of its terms by
the Company, Mr. Grieco is entitled to his base salary and a continuation of his
benefits for a period of two years from the date of such termination. In the
event Mr. Grieco's employment agreement is terminated as a result of his
disability, Mr. Grieco is entitled to his base salary and a continuation of his
benefits for a period of up to one and one-half years beginning on the 181st day
of disability. The foregoing description of Mr. Grieco's employment agreement
does not purport to be complete and is qualified in its entirety by referenced
to such agreement, which was filed with the SEC as an exhibit to the Company's
Annual Report on Form 10-K for the period ended December 31,1998.
Pursuant to the terms of an employment agreement, between Mr. Stoll, dated
as of October 23, 1998, Mr. Stoll receives an annual base salary of $541,000 and
is eligible to participate in the FMC Bonus Plan. Under the FMC Bonus Plan, Mr.
Stoll can earn, subject to the Company's attainment of specified financial
objectives, a bonus of forty percent of his base salary with a maximum bonus of
one hundred percent of his base salary. In addition, Mr. Stoll is entitled to
reimbursement for: (a) certain costs incurred in connection with his relocation
to Massachusetts, (b) expenses associated with individual income tax preparation
up to a total of two thousand Dollars each year. Mr. Stoll was granted options
under the 1998 FMC Plan to purchase 90,000 Fresenius Medical Care Preference
Shares at $49.40 per share. 15,000 of the options granted to Mr. Stoll under the
1998 FMC Plan vested on the grant date; the balance vest over a five-year
period. In the event Mr. Stoll's employment agreement is terminated for any
reason other than cause, or if Mr. Stoll terminates his employment agreement
because of a breach of its terms by the Company, Mr. Stoll is entitled to his
base salary and a continuation of his benefits for a period of two years from
the date of such termination. In the event Mr. Stoll's employment agreement is
terminated as a result of his disability, Mr. Stoll is entitled to his base
salary and a continuation of his benefits for a period of up to one and one-half
years beginning on the 181st day of disability. The foregoing description of Mr.
Stoll's employment agreement does not purport to be complete and is qualified in
its entirety by referenced to such agreement, which was filed with the SEC in
March 1999 as an exhibit to the Company's Form 10-K for the period ended
December 31, 1998.
RETENTION BONUS PROGRAM
On February 4, 1996, the Grace Board of Directors adopted a Retention Bonus
Program to encourage certain key employees to stay with the Company through the
closing date of a possible spin-off, merger or sale. There were guaranteed award
and contingent award components to the Retention Bonus Program. For executive
officers, guaranteed awards were set at 75% to 150% of their respective annual
salaries and were subject to the executive officer remaining with the Company
through the above-described closing date. Contingent awards were based on the
achievement of certain cash flow targets and the allocation of the contingent
award pool was based on the relative contribution of the various businesses and
departments to the consolidated results. For 1996, the cash bonus awards paid to
Mr. Grieco and Dr. Lazarus consisted solely of payments under the Retention
Bonus Program. No further amounts are due or payable pursuant to the Retention
Bonus Program.
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<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Lipps and Werle are each directors of the Company and, as such,
participate in the deliberations of the Company's Board of Directors concerning
executive officer compensation. Each of such individuals is also a member of the
Management Board of Fresenius Medical Care, and Mr. Werle is a member of the
Management Board of Fresenius AG. For information regarding certain transactions
between the Company or its subsidiaries on the one hand and Fresenius Medical
Care or Fresenius AG on the other, see Item 13 "Certain Relationships and
Related Transactions."
REPORT OF THE BOARD OF DIRECTORS
REGARDING EXECUTIVE COMPENSATION
OVERALL PHILOSOPHY
The Company's overall executive compensation philosophy is based on the
premise that compensation should be aligned with and support the Company's
business strategy and long-term goals, and that it should give employees
incentives to enhance stockholder value. The key elements of executive
compensation are base salary, annual cash incentive (bonus) awards and/or annual
incentive bonus stock options for non-voting preference shares of Fresenius
Medical Care, the Company's parent corporation. Base salary is intended
primarily to reward past performance; annual cash bonus and stock option
incentives are intended primarily to reward achievement of specific performance
goals during the year; and stock options are designed primarily to foster an
identity of interest between the employee and Fresenius Medical Care.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Lipps' compensation currently consists of a base salary, cash incentive
(bonus) awards and option grants under the 1998 FMC Plan and the FMC AG Plan.
Mr. Lipps' base salary was set under the terms of his employment agreement with
Fresenius USA, Inc., which became a wholly-owned subsidiary of the Company in
connection with the Merger. Mr. Lipps' base compensation under that agreement,
which was increased from $225,000 to $600,000 effective January 1, 1997 was
based on competitive pay practices, his individual experience and breadth of
knowledge and other subjective factors. Future increases to his base salary are
expected to be determined primarily on the basis of his individual performance
and contribution and involve the application of both quantifiable and subjective
criteria. The Management Board of Fresenius Medical Care (with Mr. Lipps
abstaining) granted 16,600 options to Mr. Lipps under the FMC AG Plan and the
Supervisory Board of Fresenius Medical Care has approved the granting of 100,000
options (with a proposed grant date of June 2, 1999) to Mr. Lipps under the 1998
FMC Plan. See "Executive Compensation -- Stock Option Grants in the Last Fiscal
Year." Mr. Lipps abstained from all Board discussions and actions relating to
his compensation.
COMPENSATION OF OTHER EXECUTIVE OFFICERS
Mr. Lipps makes recommendations to the Board of Directors concerning the
base salaries, annual cash and/or stock option incentive awards and stock option
awards for the executive officers of the Company other than himself. Annual cash
and/or stock option incentive awards are granted based on the achievement of
financial targets and individual performance. The number of stock options to be
granted to any particular executive is determined by the Management Board of
Fresenius Medical Care and is based primarily on that person's perceived ability
to help the Company achieve its goals as well as that person's base salary and
potential bonus.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code prohibits the Company from
deducting annual compensation in excess of $1 million paid to executive officers
named in the Summary Compensation Table of the Information Statement, unless
such compensation is performance-based and satisfies certain other conditions.
The Company intends to the extent practicable to qualify all payments of
compensation under Section 162(m).
11
<PAGE> 12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 26, 1999 certain information
with respect to each person who is known by the Company to own beneficially more
than 5% of each class of the voting securities of the Company, each director of
the Company, each nominee for director of the Company, certain executive
officers and all directors and officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNERS OWNED OF CLASS
------------------------------------- ------------ ----------
<S> <C> <C>
COMMON STOCK:
Fresenius Medical Care AG(1)
Else-Kroner-Strasse 1
61352 Bad Homburg v.d.H.
Germany................................................ 90,000,000 100.0%
All directors and executive officers as a group........ 0 0
6% PREFERRED STOCK:
Grace Institute(2)
c/o Marine Midland Bank
P.O. Box 1329
Buffalo, New York 14240................................ 2,949 8.1%
W.R. Grace & Co. Retirement Plan for Salaried
Employees(3)
1750 Clint Moore Road
Boca Raton, Florida 33487.............................. 9,648(T)(S) 26.5%
All directors and executive officers as a group........ 0 0
CLASS A PREFERRED STOCK:
Namanco & Co.
P.O. Box 426
Exchange Place Station
69 Montgomery Street
Jersey City, New Jersey 07303.......................... 2,803 17.3%
All directors and executive officers as a group........ 0 0
CLASS B PREFERRED STOCK:
Namanco & Co.
P.O. Box 426
Exchange Place Station
69 Montgomery Street
Jersey City, New Jersey 07303.......................... 5,143 23.9%
All directors and executive officers as a group........ 0 0
CLASS D PREFERRED STOCK:
Ben J. Lipps........................................... 1 (4)
All directors and executive officers as a group........ 1 (4)
</TABLE>
- ---------------
(1) Fresenius AG owns 50.3% of the outstanding Fresenius Medical Care Ordinary
Shares and none of the Fresenius Medical Care Preference Shares. The share
capital of Fresenius AG consists of Fresenius AG Ordinary Shares and
non-voting preference shares, nominal value DM 5 per share ("Fresenius AG
Preference Shares"), both of which are issued only in bearer form.
Accordingly, Fresenius AG has no way of determining who its shareholders are
or how many shares any particular shareholder owns. However, under the
German Stock Corporation and Securities Law, holders of voting securities of
a German company listed on a stock exchange within the European Union are
obligated to notify the company of certain levels of holdings.
Fresenius AG has been informed that the Else Kroner-Fresenius-Stiftung (the
"Foundation") owns 68% of the Fresenius AG Ordinary Shares. The Foundation
serves to promote medical science, primarily in the fields of research and
treatment of illnesses, including the development of apparatuses and
preparations. The Foundation may promote only those research projects the
results of which will be generally accessible to the public. The Foundation
further serves to promote the education of physicians or of others concerned
with the treatment and care of sick persons, primarily those working in the
field of dialysis, as well as to promote the education of particularly
gifted pupils and students. Fresenius AG has been informed that
Agrar-Inductrie Holdings GmbH ("AIH") owns 9% of the Fresenius AG Ordinary
Shares. Pursuant to a pooling agreement relating to the shares held by AIH,
the Foundation has voting power over the shares held by AIH. In addition
Neunte Heralkes Beteiligungs-Gellschaft & Co.KG informed Fresenius AG that
it owns 9.98% of the Fresenius AG Ordinary Shares.
(2) This entity is not affiliated with the Company.
(3) W.R. Grace & Co. -- Conn. assumed sponsorship of the W.R. Grace & Co.
Retirement Plan for Salaried Employees in connection with the Merger.
(4) The Class D Preferred Stock owned by Mr. Lipps represents less than 1% of
the total number of outstanding Class D Preferred Shares. Mr. Lipps also
owns 10,100 ADSs representing Fresenius Medical Care Ordinary Shares and
5,000 ADSs representing Fresenius Medical Care Preference Shares.
(T) Shares owned by trust and other entities as to which the person has the
power to direct voting and/or investment.
(S) Shares as to which the person shares voting and/or investment power with
others.
12
<PAGE> 13
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Fresenius Medical Care acquired all of the Common Stock of the Company
in connection with the closing of the Merger on September 30, 1996. Accordingly,
the Company has entered into certain relationships and related transactions with
Fresenius Medical Care and Fresenius AG.
INVESTMENTS BY FRESENIUS MEDICAL CARE
Fresenius Medical Care is the beneficial owner of all 90,000,000
outstanding shares of the Company's Common Stock. Fresenius Medical Care owns no
shares of the Company's Preferred Stock.
The practical effect of its ownership of all outstanding shares of the
Company's Common Stock is to give Fresenius Medical Care an absolute majority of
the voting power attributable to the Company's voting securities with respect to
all matters in which the classes vote together. Accordingly, Fresenius Medical
Care possesses the ability, through its voting power and its power to elect a
majority of the Company's directors, to approve any actions requiring the vote
of the Company's shareholders, other than matters which materially affect the
rights of the holders of a particular class.
GUARANTEES OF THE COMPANY
The Company has executed a Subsidiary Guarantee in connection with a Senior
Subordinated Indenture dated as of November 27, 1996 (the "Indenture"), under
which Fresenius Medical Care was the Issuer. The Indenture was executed in
connection with the offering of 9% Trust Preferred Securities of Fresenius
Medical Care Capital Trust, a statutory business trust formed under the laws of
the State of Delaware. The proceeds of
13
<PAGE> 14
the offering of the 9% Trust Preferred Securities were used to purchase 9%
Subordinated Notes of Fresenius Medical Care, and thereafter to repay
indebtedness under a credit facility entered into by NMC and a syndicate of
banks in connection with the Merger (the "Credit Agreement").
The Company has also executed a Subsidiary Guarantee in connection Senior
Subordinated Indentures dated as of February 13, 1998 (together, the "1998
Indentures") under which Fresenius Medical Care was the issuer. The 1998
Indentures were executed in connection with the offering of (a) 7 7/8% USD Trust
Preferred Securities of Fresenius Medical Care Capital Trust II and (b) 7 7/8%
DM Trust Preferred Securities of Fresenius Medical Care Capital Trust III
statutory business trusts formed under the laws of the State of Delaware. The
proceeds of the offering of the 7 7/8% and 7 3/8% Trust Preferred Securities
were used to purchase, respectively, 7 7/8% and 7 3/8% Subordinated Notes of
Fresenius Medical Care and thereafter to repay certain outstanding indebtedness
including an approximately $250 million permanent reduction of the credit
facility under the Credit Agreement and for general corporate purposes.
MATERIAL CONTRACTS BETWEEN FRESENIUS AG AND FRESENIUS USA,
BETWEEN FRESENIUS MEDICAL CARE AND FRESENIUS USA AND
FRESENIUS MEDICAL CARE AND THE COMPANY
Prior to the Merger, Fresenius AG and Fresenius USA were parties to
numerous contracts and transactions with each other, both in the ordinary course
of business and otherwise. Fresenius Medical Care acquired all of Fresenius AG's
rights under such contracts and transactions. The following summarizes such
contracts and transactions during year ended December 31, 1998.
Technology. Pursuant to a technology license and know-how agreement, dated
April 22, 1994, Fresenius AG granted Fresenius USA an exclusive North American
license for the technology, processes and know-how for the manufacture of
polysulfone dialyzers, and Fresenius USA agreed to pay Fresenius AG royalties of
4.5% on Fresenius USA's net sales of dialyzers produced by it for a 10-year
period beginning January 1, 1996. Fresenius USA also obtained the contractual
right to Fresenius AG's know-how relating to certain peritoneal dialysis
products incorporating the Safe-Lock(R) technology in the U.S., Canada and
Mexico. This license was acquired by Fresenius Medical Care in connection with
the Merger.
Products. During 1998, 1997 and 1996 Fresenius USA purchased $56.9, $53.2
million and $41.3 million, respectively of hemodialysis equipment and supplies
from Fresenius Medical Care AG. Such products were initially purchased pursuant
to a distribution agreement entered into in 1991 and under which Fresenius USA
acted as sole North American distributor for Fresenius AG products for treatment
of ESRD by hemodialysis. Prices charged under that agreement were negotiated
each year by the parties based on Fresenius AG's estimated costs and desired
profit margins, taking into account the competitive environment in the U.S.
market, and did not exceed the average of the prices charged to Fresenius AG's
other affiliated distributors. By its terms, this distribution agreement
terminates on the earlier of December 31, 2011 or the date Fresenius AG loses
the power to elect 51% of the Fresenius USA Board. Fresenius AG assigned this
distribution agreement to Fresenius Medical Care in connection with the Merger.
In 1994, Fresenius USA and Fresenius AG entered into a distribution agreement
for certain of Fresenius AG's intensive care and diagnostic products, including
the Fresenius AS 104 Cell Separator. This distribution agreement was terminated
by the parties in December 1998 and Fresenius USA sold certain of its assets
related to this critical care business to Fresenius Pharma (USA), Inc., an
indirect subsidiary of Fresenius AG, for a purchase price of $4.32 million,
which was the fair market value of the business as determined by the independent
appraisal of Valuation Counselors based in Chicago, Illinois. Also during 1998,
1997 and 1996, Fresenius USA sold products to Fresenius AG and certain of its
subsidiaries having aggregate sales prices of approximately $2.2, $2.9 million,
and $1.3 million respectively.
International Operations. Effective as of January 1, 1998, the Company
transferred ownership of substantially all of its international business to
Fresenius Medical Care for a purchase price of 30.2 million deutsche marks
(approximately $16.8 million, based on the conversion rate in effect on January
1, 1998), which was the fair market value of that business as determined by the
independent appraisal of the Valuation Services Practice of KPMG Peat Marwick,
LLP, based in Boston, Massachusetts.
14
<PAGE> 15
RELATIONSHIPS AND TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
The following are descriptions of certain relationships and transactions
between the Company and its directors and executive officers (or members of
their families) and/or businesses with which they are affiliated. See "Executive
Compensation -- Directors' Compensation and Consulting Arrangements" for a
discussion of certain other relationships and related transactions.
Securities Repurchases. In September 1996, Mr. Lipps sold options to
purchase 450,000 shares of Fresenius USA Common Stock to Fresenius USA at a
price of $5.25 per option ($2,362,500 in the aggregate). Such 450,000 options,
together with options exercised prior to his sale of the underlying shares to
Fresenius USA, represented all of the options to purchase Fresenius USA Common
Stock held by him.
Loans to Officers. In connection with Mr. Schneider's hiring as Chief
Financial Officer of the Company in 1997, NMC provided Mr. Schneider with a
bridge loan in the original amount of $450,000 to purchase his personal
residence in Massachusetts. The loan had no stated interest rate. The note was
paid in full by Mr. Schneider in May 1998.
Loans to Officers under Stock Incentive Plans. To comply with German
corporate law requirements, award grants under the 1996 FMC Plan and the 1998
FMC Plan are in the form of non-assignable and non-transferable convertible
bonds ("Bonds") and a corresponding non-recourse employee loan from Fresenius
Medical Care ("Employee Loans") secured solely by the Bonds with respect to
which it was made. The Bonds have a (Deutschemark (DM) denominated) face amount
equal to the aggregate nominal (par) value of the Fresenius Medical Care
Preference Shares into which the Bonds are convertible (in the form of
Preference Shares under the 1998 FMC Plan or ADSs under the 1996 FMC Plan) and
bear interest at a rate equal to 5% per annum. The Employee Loans have a DM
denominated principal amount equal to the related Bonds and bear interest at the
same rate. On conversion of a Bond, the employee (if a U.S. citizen or resident)
will pay a conversion payment equal to the fair market value (determined as of
the day following the date of grant) of the underlying ADSs or Preference Shares
as the case may be. A portion of the conversion payment will be used to repay
the Employee Loan, and interest on the Employee Loan will be offset by interest
payable on the Bonds. Because the terms of the Employee Loan and Bond match in
all respects, award recipients pay nothing and receive nothing with respect to
the Bonds and the Employee Loans. A ruling from the Internal Revenue Service has
been requested that these arrangements are the functional equivalent of
nonqualified employee stock options, and Bonds may not be converted until a
satisfactory ruling has been received. In connection with the grant of awards
under the 1998 FMC Plan in 1998, Employee Loans were made to Messrs. Grieco,
Schneider and Stoll and Drs. Diaz-Buxo and Lazarus in the amounts of 217,335 DM,
9,000 DM, 450,000 DM, 59,585 DM and 179,170 DM, respectively.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 30, 1999 FRESENIUS MEDICAL CARE HOLDINGS, INC.
By: /s/ Ben J. Lipps
Ben J. Lipps, President
(Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Ben J. Lipps President and Director April 30, 1999
Ben J. Lipps (Chief Executive Officer)
/s/ Jerry A. Schneider Chief Financial Officer and Treasurer April 30, 1999
Jerry A. Schneider (Chief Financial and Accounting Officer)
/s/ Udo Werle Director April 30, 1999
Udo Werle
/s/ Hans-Ulrich Sutter Director April 30, 1999
Hans-Ulrich Sutter
</TABLE>
16
