<PAGE> 1
SCHEDULE 14C INFORMATION
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Information Statement
[X] Definitive Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
Fresenius Medical Care Holdings, Inc.
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g)(4) 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
FRESENIUS MEDICAL CARE HOLDINGS, INC.
------------------------
1999 ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 17, 1999
To the Shareholders:
Notice is hereby given that the 1999 Annual Meeting of Shareholders of
Fresenius Medical Care Holdings, Inc., a New York corporation (the "Company"),
will be held at the Doubletree Guest Suites Hotel, 550 Winter Street, Waltham,
Massachusetts on Friday, December 17, 1999 at 11:00 a.m. for the following
purposes:
1. To elect three directors of the Company to hold office until the next
Annual Meeting of Shareholders or until their respective successors
have been elected or appointed; and
2. To transact any and all other business that may properly come before
the meeting.
All shareholders of record at the close of business on November 24, 1999
are entitled to notice of and to vote at this meeting.
The Company's audited financial statements for the year ended December 31,
1998, together with certain other information concerning the Company, are
included in the Company's Annual Report on Form 10-K, as amended on Form 10-K/A,
which is enclosed herewith.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
By order of the Board of Directors,
RONALD J. KUERBITZ
Senior Vice President, Secretary and
General Counsel
Lexington, Massachusetts
December 3, 1999
<PAGE> 3
TABLE OF CONTENTS
PAGE
----
INTRODUCTION................................................ 1
PROPOSAL 1 -- ELECTION OF DIRECTORS......................... 2
EXECUTIVE COMPENSATION...................................... 5
REPORT OF THE BOARD OF DIRECTORS REGARDING EXECUTIVE
COMPENSATION.............................................. 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 14
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 17
OTHER MATTERS............................................... 17
<PAGE> 4
INFORMATION STATEMENT
INTRODUCTION
This Information Statement, dated December 3, 1999, is furnished in
connection with the 1999 Annual Meeting of Shareholders of Fresenius Medical
Care Holdings, Inc. (the "Company"; as used herein the term the "Company" shall
also include, as required by the context, its subsidiaries) to be held at the
Doubletree Guest Suites Hotel, 550 Winter Street, Waltham, Massachusetts on
Friday, December 17, 1999 at 11:00 a.m., and any adjournments thereof (the
"Annual Meeting"), for the purposes set forth in the notice of such meeting.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
This Information Statement was mailed to shareholders on or about December
2, 1999.
The complete mailing address of the Company's principal executive office is
Two Ledgemont Center, 95 Hayden Avenue, Lexington, Massachusetts 02420-9192
(telephone (781) 402-9000).
Only shareholders of record at the close of business on November 24, 1999
are entitled to vote at the Annual Meeting and any adjournments thereof. At that
record date, the following voting shares of the Company were outstanding:
SHARES VOTES PER
CLASS OUTSTANDING SHARE
- ----- ----------- ---------
6% Preferred Stock................................... 36,460 160
Class A Preferred Stock.............................. 16,176 16
Class B Preferred Stock.............................. 21,483 16
Class D Special Dividend Preferred Stock............. 89,062,316 0.1
Common Stock......................................... 90,000,000 1
Holders of all shares will vote together as a single class on all matters
expected to be acted on at the Annual Meeting.
Appraisal rights are not available to shareholders with respect to any
matter expected to be acted upon at the Annual Meeting.
THE MERGER
All of the Company's common stock (the "Common Stock") is currently held by
Fresenius Medical Care AG ("Fresenius Medical Care"). On September 30, 1996, the
Company consummated a merger (the "Merger") described in detail in the Joint
Proxy Statement-Prospectus of Fresenius Medical Care, the Company and Fresenius
USA, Inc. ("Fresenius USA") dated August 2, 1996, a copy of which was filed with
the Securities and Exchange Commission (the "SEC") on August 2, 1996. The Merger
was accomplished pursuant to the Agreement and Plan of Reorganization dated as
of February 4, 1996, as amended, among the Company, Fresenius Aktiengesellschaft
("Fresenius AG") and Fresenius USA. Shareholders of the Company approved the
Merger on September 16, 1996. On September 27, 1996, pursuant to the
Distribution Agreement, dated February 4, 1996, the Company distributed to its
common shareholders (the "Distribution") 100% of the capital stock of Grace
Holding, Inc., a Delaware corporation and formerly a wholly-owned subsidiary of
the Company ("New Grace"), which holds all of the assets and liabilities
formerly held by the Company, other than those of its wholly-owned subsidiary,
National Medical Care, Inc. ("NMC"). Immediately following the Distribution, (i)
the Company was recapitalized so that each holder of shares of the Company's
Common Stock received one share of Class D Special Dividend Preferred Stock
("Class D Preferred Stock") for each share of the Company's Common Stock held of
record as of the close of business on September 27, 1996 and (ii) the Company's
name was changed to Fresenius National Medical Care Holdings, Inc. Thereafter,
WRG Merger Sub, Inc., a New York corporation and a wholly-owned subsidiary of
Fresenius Medical Care, merged with and into the Company with the Company as the
surviving corporation.
1
<PAGE> 5
As a result of the Merger, the Company became a subsidiary of Fresenius Medical
Care. Following the Merger, Fresenius Medical Care contributed all of the
outstanding common stock of Fresenius USA ("Fresenius USA Common Stock") to the
Company. In June 1997, the Company's name was changed to Fresenius Medical Care
Holdings, Inc.
The Annual Report on Form 10-K of the Company for the year ended December
31, 1998, as amended on Form 10-K/A, including the Company's audited
consolidated financial statements for the year ended December 31, 1998, is being
mailed to the Company's shareholders with this Information Statement (the
"Annual Report"). The Annual Report is not to be regarded as proxy soliciting
material or as a communication by means of which a solicitation of proxies is to
be made.
At the date hereof, management of the Company has no knowledge of any
business other than that described in the notice for the Annual Meeting which
will be presented for consideration at such Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
On June 12, 1997 Article Fifth of the Company's Certificate of
Incorporation was amended to eliminate the classification of the Board of
Directors into three classes with staggered three-year terms. The amendment to
Article Fifth instituted annual elections for directors as and when the terms
for which their respective classes have been elected expire. At the Annual
Meeting, the terms of the Class I and all other directors will expire, the
shareholders will vote on one-year terms for all directors, and directors will
no longer be referred to by class. The name and biography of each nominee are
set forth below under "Nominee."
Under the laws of the State of New York (in which the Company is
incorporated), the election of directors requires the affirmative vote of a
plurality of the shares represented at the Annual Meeting. The holders of all
classes of the Company's Preferred Stock and the Common Stock will vote as a
single class on Proposal 1. Fresenius Medical Care intends to vote in favor of
this proposal. Accordingly, Proposal 1 will be approved even if all other shares
currently outstanding that are not held by Fresenius Medical Care vote against
the proposal. Abstentions will have no effect as to the outcome of Proposal 1.
NOMINEES
At the Annual Meeting it is intended that three directors be elected to
hold office until the 2000 annual meeting and until their successors shall have
been duly elected and qualified. The nominees listed below have been designated
as such by the Board of Directors, and it is anticipated that the nominees will
be candidates when the election is held. However, if for any reason a nominee is
not a candidate at that time, a substitute nominee will be designated by the
Company. The nominees are currently directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Ben J. Lipps................... 59 Chairman of the Board, President and Chief Executive
Officer
Jerry A. Schneider............. 51 Director, Vice President, Chief Financial Officer and
Treasurer
Roger G. Stoll................. 57 Director and 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 has been Chairman of the Board since May 1,
1999. Mr. Lipps has served as a member of the Management Board of Fresenius
Medical Care since 1996 and was appointed Chairman of the Management Board
effective May 1, 1999. 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
2
<PAGE> 6
USA's predecessor, Mr. Lipps was a Vice President of Research and Development
for Cordis Dow Corporation.
Mr. Schneider has been a Vice President, the Chief Financial Officer and
Treasurer of the Company since August 18, 1997 and was appointed a Director of
the Company in August 1999. 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 JD degree from Loyola University of Los Angeles.
Roger G. Stoll has been Executive Vice President of Renal Products and
Laboratory Services for the Company since October 5, 1998 and was appointed a
Director of the Company in August 1999. Prior to joining the Company, Mr. Stoll
was President and CEO of Ohmeda, Inc., a wholly owned subsidiary of The BOC
Group, plc, from November 199l to April, l998. He also served as a Director of
The BOC Group, plc. from April, 1994 to April, 1998. Mr. Stoll was Executive
Vice President of Miles Inc., a subsidiary of Bayer AG, from April 1986 to
November 1991 holding various executive responsibilities including President of
the worldwide Diagnostic Business Group of Bayer, AG. From 1975 through 1986,
Mr. Stoll 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
Questcor Pharmaceuticals, Inc., a drug company concentrating on the
identification of novel lead compounds and the development of drugs for the
treatment of gastrointestinal and neurological disorders. 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.
THE BOARD OF DIRECTORS
The Company's Board of Directors is responsible for the affairs of the
Company.
During 1998, the Board held one meeting and acted by unanimous written
consent of its members on eleven occasions. Mr. Lipps was elected to the Board
in connection with the closing of the Merger and was re-elected to the Board at
the 1998 Annual Meeting of Shareholders. Messrs. Schneider and Stoll were
appointed to the Board in August 1999. The Company has no standing Compensation
Committee, Audit Committee or Nominating Committee.
EXECUTIVE OFFICERS
The current executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Ben J. Lipps................... 59 Chairman of the Board, President and Chief Executive
Officer
Ronald J. Kuerbitz............. 40 Senior Vice President, Secretary and General Counsel
Jerry A. Schneider............. 51 Vice President, Chief Financial Officer and Treasurer
J. Michael Lazarus, M.D........ 62 Senior Vice President of Clinical Quality and Medical
Director
Jose A. Diaz-Buxo, M.D......... 53 Senior Vice President, Home Dialysis Therapies
Development
Roger G. Stoll................. 57 Executive Vice President of Renal Products and
Laboratory Services
</TABLE>
Each corporate officer was elected to hold office until he resigns or is
removed by the Board of Directors.
For a biography of Messrs. Lipps, Schneider and Stoll, see "Nominees"
above.
3
<PAGE> 7
Jose A. Diaz-Buxo, M.D. has been Senior Vice President of Home Dialysis
Therapies Development for the Company since November 1999. Prior to that time,
he had served as President of Peritoneal Dialysis Services since September 1998
and 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.
Ronald J. Kuerbitz has been Senior Vice President, Secretary and General
Counsel since October 1999. Mr. Kuerbitz had previously served as Vice President
for Corporate Development for the Company since April 1997. Prior to joining the
Company, Mr. Kuerbitz was Vice President for Planning and Development for
Neomedica, Inc., a regional privately-held dialysis services provider. Prior to
joining Neomedica, Mr. Kuerbitz was employed by Caremark International, Inc.
from November 1992 to March 1996 initially as corporate counsel and later as
vice president of its nephrology services division. Prior to that time Mr.
Kuerbitz worked as corporate counsel for Baxter International Inc. from March
1992 to November 1992. Mr. Kuerbitz worked for Latham and Watkins, a
Chicago-based national law firm, from September 1986 to March 1992 where he
focused his practice in corporate and securities law. Mr. Kuerbitz received his
undergraduate degree from Albion College and his JD degree from the Yale Law
School.
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.
4
<PAGE> 8
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, and to William F. Grieco,
J. Michael Lazarus, M.D., Jose A. Diaz-Buxo, M.D. and Jerry A. Schneider, the
four most highly compensated executive officers of the Company or its
subsidiaries other than the Chief Executive Officer and Roger G. Stoll whose
employment with the Company commenced October 5, 1998 (collectively, 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 602,933 240,000(13) 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 (14)................... 1998 401,442 146,250(13) 41,667(4) 4,540(2)
Senior Vice President, 1997 278,942 125,000(3) 1,800(8) 5,056(2)
Secretary, General Counsel 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 Clinical 1997 430,769 2,500(8) 5,056(2)
Quality and Medical Director 1996 205,384 235,000(6) 792(2)
Jerry A. Schneider....................... 1998 345,622 232,500(13) 189,025(9) 2,923(2)
Vice President, Chief Financial 1997 112,500 175,000(7) 33,303(9) 126,801(5) 352(2)
Officer and Treasurer
Jose A. Diaz-Buxo, M.D................... 1998 450,000 10,000(4) 5,081(2)
Senior Vice President, Home Dialysis 1997 454,279 1,917(8) 1,081(2)
Therapies Development
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 Stock 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 Stock 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 Stock Plan.
5
<PAGE> 9
(6) Constitute 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 Stock 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
incentive plan (non-U.S.) (the "FMC AG Stock Plan") and 100,000 options to
purchase Fresenius Medical Care Preference Shares under the 1998 FMC Stock
Plan (referred to in this footnote as the "North American Stock 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. For a further description of the FMC AG Stock Plan
see "Notes to Consolidated Financial Statements, Note 18 -- Stock Options"
contained in Fresenius Medical Care's Form 20-F for the period ended
December 31, 1998 which has been filed with the Securities Exchange
Commission. The North America Stock 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.
(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 which were paid in 1999.
(14) William F. Grieco ceased serving as an officer and director of the Company
effective July 2, 1999. See "Resignations of Executive Officers" below.
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 Stock Plan and the 1998 FMC Stock Plan. Options
were granted in December 1997 under the 1996 FMC Stock 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 Stock Plan. Options were
granted in June 1999 to Mr. Lipps and in April 1998 under the 1998 FMC Stock
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 to
purchase Fresenius Medical Care's Preference Shares granted in 1998 and 1999,
including the potential realizable value of each grant assuming that the market
value of the Fresenius Medical Care's Preference Shares 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
Fresenius Medical Care's Preference Shares, which will depend upon various
factors, including market conditions and the
6
<PAGE> 10
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
------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED ANNUAL
NUMBER GRANTED RATES OF STOCK PRICE
OF SHARES TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM
OPTIONS IN PRICE EXPIRATION -----------------------
NAME GRANTED(1) 1998(2) ($/SHARE)(3) 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
Ben J. Lipps.............. 100,000 17.4% $31.57 June, 2009 $1,985,232 $5,030,967
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 G. Stoll............ 90,000 8.3% $49.40 December 2008 $2,795,783 $7,085,062
</TABLE>
- ---------------
(1) 16,600 options granted in 1998 to Mr. Lipps under the FMC AG Stock Plan vest
over a four-year period provided, however, that if certain financial targets
are not achieved by Fresenius Medical Care during the first two years of the
vesting period, the options become invalid. 100,000 options granted to Mr.
Lipps under the 1998 FMC Stock Plan vest over a three-year period and relate
to his performance in 1997 and 1998. Options granted in 1998 Messrs. Grieco
and Schneider and Drs. Diaz-Buxo and Lazarus under the 1998 FMC Stock Plan
vest over a three-year period. 15,000 of the options granted to Mr. Stoll
under the 1998 FMC Stock Plan vested on December 7, 1998 (the grant date)
the balance vest over a five-year period.
(2) Amount represents, with respect to Mr. Lipps' FMC AG Stock Plan options, the
percentage of total options granted in 1998 under the FMC AG Stock Plan and
with respect to his options granted under the 1998 FMC Stock Plan, the
percentage of total options granted in 1999. Amount represents, 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 Stock Plan.
(3) Options granted to Mr. Lipps were granted with an exercise price of 87.35
deutsche marks ("DM") per share, with respect to his FMC AG Stock Plan
options, and with an exercise price of 32.9 Euros per share with respect to
his options under the 1998 FMC Stock Plan. Under the 1998 FMC Stock 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 have 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 with respect to his FMC AG Stock Plan options and the June 14,
1999 (i.e. the grant date) conversion rate of 1.0422 Euros per U.S. Dollar
with respect to his options under the 1998 FMC Stock Plan; 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).
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 January or July after
completing one year of service with the Company. 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
7
<PAGE> 11
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
-------- -------- -------- -------- --------
<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 was not
covered by the FMC Retirement Plan on December 31, 1998. Mr. Lipps commenced
participation in the FMC Retirement Plan in July 1999 and, as of the date of
this Information Statement, had 0.3 years of credited service under 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, Schneider and Stoll, see the Summary Compensation
Table above.
EMPLOYMENT AGREEMENTS
Mr. Lipps has served as Chairman of the Management Board of Fresenius
Medical Care (the "Management Board") since May 1, 1999 and had served as Vice
Chairman of the Management Board since January 1999 and has been a member of the
Management Board since 1996. As Chairman of the Management Board, Mr. Lipps is
responsible for managing the worldwide business of Fresenius Medical Care and
its affiliated companies. In addition, Mr. Lipps also serves as Chairman of the
Board, President and Chief Executive Officer of the Company. Pursuant to an
Employment Contract between Mr. Lipps and Fresenius
8
<PAGE> 12
Medical Care which became effective January 1, 1999 (the "Employment Contract"),
Mr. Lipps receives a material portion of his total compensation from Fresenius
Medical Care in respect of his services as an officer of Fresenius Medical Care.
In his capacity with the Company, Mr. Lipps receives, pursuant to the Employment
Contract, an annual base salary, payable by or on behalf of the Company, of
$600,000 and is eligible to participate in Fresenius Medical Care's management
bonus plan (the "FMC Bonus Plan") based on the attainment of certain sales and
profit targets set annually by Fresenius Medical Care 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 salary. Mr. Lipps is also eligible to receive stock
options under the incentive stock option plans of Fresenius Medical Care,
including the 1998 FMC Stock Plan and the FMC AG Stock Plan which are described
above.
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 annual base
salary with a maximum bonus of one hundred percent of his annual 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 proration 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 its 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 Stock Plan to 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 reference to
such agreement as amended, a copy of 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 the terms of an agreement, between the Company and 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 annual base salary with a
maximum bonus of one hundred percent of his annual base salary. In addition, Mr.
Stoll is entitled to reimbursement for: (a) certain costs incurred in connection
with his relocation to Massachusetts, and (b) expenses associated with
individual income tax preparation up to a total of $2,000 each year. Mr. Stoll
was granted options under the 1998 FMC Stock 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 Stock 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 reference to
such agreement, a copy of which
9
<PAGE> 13
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. 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 received an
annual base salary of $450,000 and was eligible to participate in the FMC Bonus
Plan. Under the FMC Bonus Plan, Mr. Grieco was eligible to earn, subject to the
Company's attainment of specified financial objectives, a bonus of forty percent
of his annual base salary with a maximum bonus of eighty percent of his annual
base salary. Additionally, Mr. Grieco was 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 was also entitled
to participate in the Fresenius Medical Care AG Stock Incentive Plan. In the
event Mr. Grieco's employment agreement was terminated for any reason other than
cause, or if Mr. Grieco terminated his employment agreement because of a breach
of its terms by the Company, Mr. Grieco was 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 was terminated as a
result of his disability, Mr. Grieco was entitled to his annual 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, a copy of 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. Mr. Grieco resigned as an officer and director of the
Company effective July 2, 1999. See "Resignations of Executive Officers".
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
base 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.
RESIGNATIONS OF EXECUTIVE OFFICERS
Mr. Swett resigned as a Vice President and Director of the Company
effective July 31, 1998. Mr. Swett's separation agreement dated as of July 21,
1998 provided that: (a) he would continue to receive his salary and certain
benefits through July 31, 1999; (b) if, despite his good efforts, Mr. Swett was
not secured full-time employment by July 31, 1999, he was eligible for his
salary and a continuation of benefits for up to an additional fifty-two weeks;
(c) he was eligible to participate on a pro-rata basis in the 1998 Management
Bonus Plan; and (d) his stock options under the 1998 FMC Stock Plan vested as of
July 31, 1998 and expired on July 31, 1999 if not exercised. The foregoing
description of Mr. Swett's separation agreement does not purport to be complete
and is qualified in its entirety by referenced to such agreement, a copy of
which was filed with the SEC as an exhibit to the Company's Quarterly Report on
Form 10-Q for the period ended June 30, 1998.
Mr. Grieco resigned as a Senior Vice President, General Counsel and
Secretary of the Company effective July 2, 1999. Mr. Grieco's Separation
Agreement dated as June 30, 1999 (the "Separation Agreement") provides that he
will continue to receive his base salary and certain benefits for two years
through June 30, 2001 (the "Salary Continuation"); provided, however, that Mr.
Grieco may elect to receive the Salary Continuation in a lump sum in which case
the Company shall not be required to pay for his benefits. Mr. Grieco has
elected to receive this lump sum payment effective December 1, 1999. Mr. Grieco
is eligible to participate in the 1999 Management Bonus Plan on a pro-rata basis
for six month's service in 1999. Pursuant to the terms of the Employment
Agreement dated November 11, 1998 by and between Mr. Grieco and
10
<PAGE> 14
National Medical Care, Inc., Mr. Grieco was eligible for a "Special Bonus."
Pursuant to the terms of the Separation Agreement, Mr. Grieco and the Company
have agreed to determine whether such bonus is payable upon the successful
resolution of the Investigation. Mr. Grieco's stock options under the 1998 FMC
Stock Plan vested on July 1, 1999 and he was granted up to three years from that
date to exercise such options; provided, however, that Ben Lipps, or his
successor as President and Chief Executive Officer of the Company, agreed to use
his best efforts to recommend to the Management Board of Fresenius Medical Care
that Mr. Grieco be granted up to ten years from the date of the grant of his
options to exercise them. As further consideration for the terms and conditions
set forth in the Separation Agreement, including a general release of any and
all claims against the Company existing as of the Separation Date, the
Separation Agreement also provides that Mr. Grieco be paid $100,000 in two equal
installments. The first installment of $50,000 was payable on or before the
tenth day following the execution of the Separation Agreement. The second
installment of $50,000 is payable on or before January 1, 2000. Additionally,
pursuant to the terms of the Separation Agreement, the Company and Mr. Grieco
agreed to enter into an agreement pursuant to which Mr. Grieco will provide
consulting services to the Company for up to three years and be paid an amount
equal to $150,000 per year subject to increases as described in the Separation
Agreement. Mr. Grieco and the Company entered into such consulting agreement as
of August 1, 1999. The foregoing description of the Separation Agreement does
not purport to be complete and is qualified in its entirety by reference to such
agreement, a copy of which was filed with the SEC as an exhibit to the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 1999. Except as
noted in this paragraph, capitalized terms used but not defined in this
paragraph shall have the meaning given to them in the Separation Agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no standing Compensation Committee. During the fiscal year
ended December 31, 1998, deliberations concerning executive officer non-stock
option compensation were carried out by the Company's full Board of Directors in
consultation with the Management Board of Fresenius Medical Care. Options to
purchase Fresenius Medical Care Preference Shares were granted to executive
officers of the Company by the Management Board of Fresenius Medical Care on the
recommendation of the Company's full Board of Directors. All members of the
Company's Board of Directors were employees of the Company during the fiscal
year ended December 31, 1998. Mr. Lipps is also Chairman of the Management Board
of Fresenius Medical Care. Until his resignation effective May 12, 1999, Udo
Werle served as a director of the Company and also served as Chairman of the
Management Board of Fresenius Medical Care and as a member of the Management
Board of Fresenius AG. Until his resignation effective May 1, 1999, Hans-Ulrich
Sutter served as a director of the Company and also served as a member of the
Management Board of Fresenius Medical Care. 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 "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, the Company and Fresenius Medical
Care.
11
<PAGE> 15
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 Stock Plan and the FMC AG
Stock Plan. Mr. Lipps' base salary was set under the terms of his employment
contract with Fresenius Medical Care, the parent corporation of the Company, as
discussed above. Mr. Lipps' annual base compensation for his services as an
officer of the Company is $600,000, reflecting his responsibilities for
Fresenius Medical Care and its other subsidiaries, 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. In
1998, the Management Board of Fresenius Medical Care granted 16,600 options to
purchase Fresenius Medical Care Preference Shares to Mr. Lipps under the FMC AG
Stock Plan and, in 1999, the Supervisory Board of Fresenius Medical Care granted
100,000 options to purchase Fresenius Medical Care Preference Shares to Mr.
Lipps under the 1998 FMC Stock Plan. See "Executive Compensation -- Stock Option
Grants in the Last Fiscal Year." Mr Lipps abstained from all Board and
Management Board 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).
Ben J. Lipps
Jerry A. Schneider
Roger G. Stoll
12
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of November 24, 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 SPECIAL DIVIDEND 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
13
<PAGE> 17
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 Stock. 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.
OWNERSHIP AND TRANSACTIONS REPORTS
Under Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company's directors, and executive 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As described above, 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 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
14
<PAGE> 18
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, FRESENIUS MEDICAL
CARE AND FRESENIUS USA, FRESENIUS AG AND THE COMPANY 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 (the "License Agreement"), 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. The License Agreement was assumed by Fresenius
Medical Care in connection with the Merger. Pursuant to a modification of the
License Agreement, the rights and obligations of Fresenius USA and Fresenius
Medical Care were assumed as of January 1, 1999 by, respectively, the Company
and Fresenius Medical Care Deutschland GmbH ("FMC GmbH"), an affiliate of
Fresenius Medical Care. Pursuant to this modification, the Company is required
to pay FMC GmbH a fixed royalty payment of $750,000 per quarter.
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 of Directors. 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.
Intercompany Loans. Pursuant to a Subordinated Loan Note dated as of May
18, 1999 (the "May 1999 Note") NMC, a subsidiary of the Company, and certain of
NMC's subsidiaries, may borrow up to $400 million from Fresenius AG. The
principal amount of each advance under the May 1999 Note is due, as agreed by
the parties, on the date that is one, two or three months after the date of such
advance. The principal
15
<PAGE> 19
amount of each advance under the May 1999 Note bears interest at a fluctuating
rate per annum equal to the Eurocurrency Rate (as defined and calculated in the
Credit Agreement discussed above, a copy of which has been filed by the Company
with the Securities and Exchange Commission) plus a margin. The Company may
borrow under the May 1999 Note until September 30, 2003.
Pursuant to a Loan Agreement dated February 22, 1999, the Company has
borrowed approximately $15.3 million from Fresenius Medical Care (the "February
1999 Loan"). The outstanding principal amount of the February 1999 Loan and
interest accrued at a rate of 5.8% per annum is due and payable on February 19,
2000.
Pursuant to a Loan Agreement dated February 19, 1998, the Company has
borrowed approximately $435.5 million from FMC Trust Finance S.a.r.l. ("FMC
Finance"), an affiliate of Fresenius Medical Care (the "February 1998 Loan").
The outstanding principal amount of the February 1998 Loan is due and payable on
February 1, 2008. Interest on the outstanding principal amount of the February
1998 Loan accrues interest at a rate of 8.43% per annum and is payable on a
quarterly basis.
Pursuant to an Intercompany Account Agreement dated February 1, 1998, NMC
owes approximately $14.9 million to Fresenius Medical Care Finance S.A., an
affiliate of Fresenius Medical Care (the "FMC Finance S.A. Loan"). Interest on
the outstanding principal amount of the FMC Finance S.A. Loan accrues interest
at a rate of 6.375% per annum and is payable annually. The outstanding principal
amount of the FMC Finance S.A. Loan, and any unpaid accrued interest thereon, is
payable on demand upon satisfaction of certain conditions.
Pursuant to a Loan Agreement dated November 27, 1996, the Company has
borrowed approximately $351 million from FMC Finance (the "November 1996 Loan").
The outstanding principal amount of the November 1996 Loan is due and payable on
December 1, 2006 subject, however, to FMC Finance's right to accelerate the
maturity at any time after December 1, 2001. Interest on the outstanding
principal amount of the November 1996 Loan accrues interest at a rate of 9.25%
per annum and is payable on a quarterly basis.
Foreign Exchange Contracts. Pursuant to a Foreign Exchange Contract
between Fresenius USA and Fresenius Medical Care, Fresenius USA agrees to sell
U.S. Dollars to Fresenius Medical Care in exchange for Euros at a rate of 1.1050
U.S. Dollars per Euro. As of the date of this Information Statement, Fresenius
USA has an obligation to sell approximately $15 million in U.S. Dollars to
Fresenius Medical Care at different intervals during the period September 2000
to January 2001.
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 employment 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.
In connection with Mr. Stoll's employment as Executive Vice President of
Renal Products and Laboratory Services in 1998, NMC provided Mr. Stoll with a
bridge loan in the original amount of $340,000 to purchase his personal
residence in Massachusetts. The loan had no stated interest rate. The note was
paid in full by Mr. Stoll in July 1999.
Loans to Officers under Stock Incentive Plans. To comply with German
corporate law requirements, award grants under the 1996 FMC Stock Plan and the
1998 FMC Stock Plan are in the form of non-assignable and non-transferable
convertible bonds ("Bonds") and a corresponding non-recourse employee
16
<PAGE> 20
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 Stock Plan or ADSs under
the 1996 FMC Stock 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 Stock Plan in 1998, Employee Loans were
made to Messrs. Schneider and Stoll and Drs. Diaz-Buxo and Lazarus in the
amounts of 9,000 DM, 450,000 DM, 59,585 DM and 179,170 DM, respectively. In
connection with the grant made in 1999 to Mr. Lipps under the 1998 Stock Plan,
an Employee Loan was made to Mr. Lipps in the amount of 500,00 DM.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP has been selected as the Company's independent public
accountants and auditors for 1999. Management of the Company expects that
representatives of KPMG Peat Marwick LLP will be present at the Annual Meeting
and will have an opportunity to make a statement if they desire to do so and to
respond to appropriate questions.
OTHER MATTERS
FORM 10-K
The Company's Annual Report on Form 10-K for the year ended December 31,
1998, as amended on Form 10-K/A, filed by the Company with the SEC, is being
provided to you with this Information Statement. ADDITIONAL COPIES OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, AS
AMENDED ON FORM 10-K/A, MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING THE
SECRETARY OF THE COMPANY, TWO LEDGEMONT CENTER, 95 HAYDEN AVENUE, LEXINGTON,
MASSACHUSETTS 02420-9192 (TELEPHONE: (781) 402-9000).
OTHER BUSINESS
The Company does not know of any other business that will be presented for
consideration at the Annual Meeting. However, if any other business should come
before the Annual Meeting, management of the Company will have discretion to act
in accordance with its best judgment.
PROPOSALS FOR 2000 ANNUAL MEETING
Any shareholder wishing to submit a proposal for inclusion in the Proxy
Statement for the 2000 Annual Meeting pursuant to the shareholder proposal rules
of the SEC should submit the proposal in writing to Ronald J. Kuerbitz,
Secretary and General Counsel, Fresenius Medical Care Holdings, Inc., Two
Ledgemont Center, 95 Hayden Avenue, Lexington, Massachusetts 02420-9192. The
Company must receive a proposal by March 1, 2000 in order to consider it for
inclusion in the Information Statement with respect to the 2000 annual meeting.
In addition, the Company's By-laws require that shareholders give advance
notice and furnish certain information to the Company in order to bring a matter
of business before an annual meeting or to nominate a person for election as a
director. Any communication relating to those By-law provisions should be
directed to Mr. Kuerbitz at the above address.
17
