<PAGE> 1
SCHEDULE 14C INFORMATION
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14(c) 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.
------------------------
2000 ANNUAL MEETING OF SHAREHOLDERS
MAY 26, 2000
To the Shareholders:
Notice is hereby given that the 2000 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, May 26, 2000 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 April 24, 2000 are
entitled to notice of and to vote at this meeting.
The Company's audited financial statements for the year ended December 31,
1999, together with certain other information concerning the Company, are
included in the Company's Annual Report on Form 10-K 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
May 1, 2000
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION................................................ 1
PROPOSAL 1 -- ELECTION OF DIRECTORS......................... 1
EXECUTIVE COMPENSATION...................................... 4
REPORT OF THE BOARD OF DIRECTORS REGARDING EXECUTIVE
COMPENSATION.............................................. 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 13
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 16
OTHER MATTERS............................................... 16
</TABLE>
<PAGE> 4
INFORMATION STATEMENT
INTRODUCTION
This Information Statement, dated May 1, 2000, is furnished in connection
with the 2000 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, May 26, 2000
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 May 1,
2000.
The complete mailing address of the Company's principal executive office is
95 Hayden Avenue, Lexington, Massachusetts 02420-9192 (telephone (781)
402-9000).
Only shareholders of record at the close of business on April 24, 2000 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:
<TABLE>
<CAPTION>
SHARES VOTES PER
CLASS OUTSTANDING SHARE
----- ----------- ---------
<S> <C> <C>
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
</TABLE>
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
The Company was formed (the "Merger") as a result of a series of
transactions pursuant to an Agreement and Plan of Reorganization dated as of
February 4, 1996, as amended, among the Company, Fresenius Aktiengesellschaft
("Fresenius AG") and Fresenius USA, Inc. ("Fresenius USA").
The Annual Report on Form 10-K of the Company for the year ended December
31, 1999, including the Company's audited consolidated financial statements for
the year ended December 31, 1999, 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
At the Annual Meeting, the terms of all of the directors will expire. 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 AG
1
<PAGE> 5
("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. The
name and biography of each nominee are set forth below under "Nominee."
NOMINEES
At the Annual Meeting it is intended that three directors be elected to
hold office until the 2001 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................... 52 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.
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. 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 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 1999, the Board held one meeting and acted by unanimous written
consent of its members on nine 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
1999 Annual Meeting of Shareholders. Messrs. Schneider and Stoll were appointed
to the Board in August 1999 and were re-elected to the Board at the 1999 Annual
Meeting of Shareholders. The Company has no standing Compensation Committee,
Audit Committee or Nominating Committee.
2
<PAGE> 6
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
J. Michael Lazarus, M.D.............. 62 Senior Vice President of Clinical Quality and
Medical Director
Jerry A. Schneider................... 52 Vice President, Chief Financial Officer and
Treasurer
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.
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. as
vice president of its nephrology services division. 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 Director of Clinical Services of the
Nephrology Division and 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.
3
<PAGE> 7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table summarizes the total compensation paid or to be paid by
the Company and its subsidiaries for services rendered during 1997, 1998 and
1999 to Ben J. Lipps, Chief Executive Officer of the Company, and to Ronald J.
Kuerbitz, J. Michael Lazarus, M.D., Jerry A. Schneider and Roger G. Stoll, the
four most highly compensated executive officers of the Company or its
subsidiaries other than the Chief Executive Officer and William F. Grieco, who
is no longer serving as an executive officer of the Company (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).................... 1999 601,262 3,680(6) 31,208(10)
President, Chief Executive 1998 602,933 240,000(13) 100,000(11) 31,153(10)
Officer and Director 1997 600,000 33,996(10)
Ronald J. Kuerbitz................. 1999 256,298 114,000(14) 52,176(17) 4,480(2)
Senior Vice President, Secretary 1998 222,919 358,000(3)
and General Counsel 1997 189,516
J. Michael Lazarus, M.D............ 1999 474,148 191,000(14) 4,864(2)
Senior Vice President of Clinical 1998 467,308 225,000(13) 33,334(4) 4,540(2)
Quality and Medical Director 1997 430,769 2,500(8) 5,056(2)
Jerry A. Schneider................. 1999 355,399 150,000(14) 27,474(9) 5,000(4) 4,864(2)
Vice President, Chief Financial 1998 345,622 232,500(13) 189,025(9) 2,923(2)
Officer and Treasurer 1997 112,500 175,000(7) 33,303(9) 126,801(5) 352(2)
Roger G. Stoll(12)................. 1999 547,110 226,000(14) 153,282(18) 864(2)
Executive Vice President of Renal 1998 137,200 54,100(13) 90,000(4) 540(2)
Products and Laboratory Services
William F. Grieco(15).............. 1999 343,556 67,500(14) 902,923(16) 4,792(2)
Former General Counsel, Senior 1998 401,442 146,250(13) 1,482(16) 41,667(4) 4,540(2)
Vice President, Secretary 1997 278,942 125,000(19) 163(16) 1,800(8) 5,056(2)
and Director
</TABLE>
- ---------------
(1) During 1997, 1998 and 1999 Seratronics, Inc. ("Seratronics") paid $65,825,
$68,602 and $66,080, 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 and disability insurance
premiums paid by the Company and the Company's contributions to the
respective officer's 401(k) plan. Mr. Schneider was not eligible to
participate in the Company's 401(k) plan in 1997. Mr. Stoll was not
eligible to participate in the Company's 401(k) plan in 1998 and elected
not to participate in such plan in 1999.
(3) Represents incentive bonus payments related to 1998 and paid in 1998 and
1999.
(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.
(6) Represents interest earned in excess of 120% of the applicable federal
long-term rate on deferred compensation during 1999.
4
<PAGE> 8
(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.
(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, $187,829 with respect to 1998,
and $24,463 with respect to 1999 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 earned in excess of
120% of the applicable federal long-term rate on deferred compensation
during 1997, 1998 and 1999, respectively; 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 in 1997 and 1998, (b) the Company's payment of group
term life and disability 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, 27,395
and $30,128 for 1997, 1998 and 1999, respectively.
(11) Represents the number of options to purchase Fresenius Medical Care
Preference Shares which were granted under the 1998 FMC Stock Plan.
(12) With respect to 1998, amount represents salary earned by Mr. Stoll from the
commencement of his employment on October 5, 1998 through December 31,
1998. See "Executive Compensation 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) Represents incentive bonus payments made under the FMC Bonus Plan which
relate to the achievement of 1999 Company and individual performance
targets, but which were paid in 2000.
(15) Mr. Grieco ceased serving as an officer and director of the Company
effective July 2, 1999.
(16) Amount represents (a) with respect to 1999, $901,730 in severance payments
paid to Mr. Grieco pursuant to his Separation Agreement and (b) interest
earned in excess of 120% of the applicable federal long-term rate on
deferred compensation during 1997, 1998 and 1999. See "Resignations of
Executive Officers."
(17) Represents (a) $106,668 with respect to 1998 and $44,418 with respect to
1999, which amounts are attributable to the value of relocation expenses
paid by the Company in connection with Mr. Kuerbitz's relocation to
Massachusetts (b) interest earned in excess of 120% of the applicable
federal long-term rate on deferred compensation during 1999 and (c) a car
allowance paid in 1999 only.
(18) Represents (a) $144,123 which amount is attributable to the value of
relocation expenses paid by the Company in connection with Mr. Stoll's
relocation to Massachusetts (b) interest earned in excess of 120% of the
applicable federal long-term rate on deferred compensation during 1999 and
(c) a car allowance paid in 1999 only.
(19) Represents an incentive bonus related to 1997 performance but paid in 1998.
5
<PAGE> 9
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. No
options were granted to Messrs. Kuerbitz, Stoll, Grieco and Dr. Lazarus in 1999.
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 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 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>
1999 GRANTS POTENTIAL REALIZABLE
----------------------------------------------------- VALUE AT ASSUMED
NUMBER % OF TOTAL ANNUAL RATES OF STOCK
OF SHARES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTIONS TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(1) 1999 ($/SHARE)(2) DATE 5% 10%
---- ---------- ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ben J. Lipps........... 100,000 17.5% $31.57 June 2009 $1,985,232 $5,030,967
Jerry Schneider........ 5,000 0.87% $31.57 June 2009 $ 99,265 $ 251,556
</TABLE>
- ---------------
(1) Options granted in 1999 to Messrs. Lipps and Schneider under the 1998 FMC
Stock Plan vest over a three-year period.
(2) Options granted to Messrs. Lipps and Schneider were granted with an exercise
price of 32.9 Eurodollars ("Euros") per share. For the purposes of this
table the exercise price has been converted to its per share U.S. dollar
equivalent based on the June 14, 1999 (i.e. the grant date) conversion rate
of 1.0422 Euros per U.S. Dollar. (Source for conversion rates: Bloomberg
News Service)
AGGREGATED OPTION EXERCISES IN 1999
AND DECEMBER 31, 1999 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT 12-31-99(#) AT 12-31-99($)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- ----------- ------------------------------ -------------------------
<S> <C> <C> <C> <C>
Ben J. Lipps.............. 0 0 0/100,000 $0/$845,880
Ronald J. Kuerbitz........ 0 0 11,478/22,955 $0/$0
J. Michael Lazarus........ 0 0 11,945/23,890 $0/$0
Jerry A. Schneider........ 0 0 83,333 ADSs/41,667 ADSs $0/$0
600/1,200 $0/$0
0/5,000 $0/$42,294
Roger G. Stoll............ 0 0 30,000/90,000 $0/$0
William F. Grieco......... 0 0 14,489/28,978 $0/$0
</TABLE>
6
<PAGE> 10
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 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, 1999, 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. Lipps, Kuerbitz, Schneider, Stoll, Grieco and Dr. Lazarus had 0.5,
2.9, 2.4, 1.2, 3.7 and 3.8 years of credited service, respectively, under the
FMC Retirement Plan at year-end 1999. The average compensation of the highest
consecutive five years of the last ten years of credited service cannot be
computed for Messrs. Lipps, Kuerbitz, Schneider, Stoll, Grieco and Dr. Lazarus
since they have less than five years of credited service. Mr. Lipps commenced
participation in the FMC Retirement Plan in July 1999.
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
7
<PAGE> 11
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
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
earnings-after-taxes 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 of up to one hundred percent of his base 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. See "Certain Relationships and Related
Transactions -- Loans to Chief Executive Officer."
Pursuant to the terms of an Employment Agreement, between the Company and
Mr. Kuerbitz, dated as of March 15, 2000, Mr. Kuerbitz receives an annual base
salary of $300,000, subject to annual increases based on satisfactory job
performance, and is eligible to participate in the FMC Bonus Plan. Under the FMC
Bonus Plan, Mr. Kuerbitz can earn, subject to the Company's attainment of
specified individual and company 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. Kuerbitz is paid a monthly car allowance of
$700 and is entitled to reimbursement for expenses associated with financial
planning assistance and/or individual income tax preparation up to a total of
$2,000 each year. The term of the agreement expires on March 15, 2003 unless
terminated earlier as provided for in the agreement. In the event Mr. Kuerbitz's
employment agreement is terminated for any reason other than by the Company for
cause, or if Mr. Kuerbitz terminates his employment agreement for cause, Mr.
Kuerbitz is entitled a lump sum payment equal to his base salary for the period
equal to the greater of (a) the then remaining term of the agreement or (b) 18
months and a pro-rated portion of his annual incentive bonus based on his
termination date. The terms of the agreement impose a non-compete obligation on
Mr. Kuerbitz during the one-year period after he ends his employment with the
Company or stops receiving any salary continuation under the agreement. The
foregoing description of Mr. Kuerbitz's employment agreement does not purport to
be complete and is qualified in its entirety by reference to such agreement, a
copy of which shall be filed with the SEC as an exhibit to the Company's
Quarterly Annual Report on Form 10-Q for the period ended March 31, 2000.
Pursuant to the terms of an Employment Agreement, between the Company and
Dr. Lazarus, dated as of March 15, 2000, Dr. Lazarus receives an annual base
salary of $505,620, subject to annual increases based on satisfactory job
performance, and is eligible to participate in the FMC Bonus Plan. Under the FMC
Bonus Plan, Dr. Lazarus can earn, subject to the Company's attainment of
specified individual and company 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, Dr. Lazarus is paid a monthly car allowance of
$700 and is entitled to reimbursement for expenses associated with financial
planning assistance and/or individual income tax preparation up to a total of
$2,000 each year. The term of the agreement expires on March 15, 2003 unless
terminated earlier as provided for in the agreement. In the event Dr. Lazarus's
employment agreement is terminated for any reason other than by the Company for
cause, or if Dr. Lazarus terminates his employment agreement for cause, Dr.
Lazarus is entitled a lump sum payment equal to his base salary for the period
equal to the greater of (a) the then remaining term of the agreement or (b) 18
months and a pro-rated portion of his annual incentive bonus based on his
termination date. The terms of the agreement impose a non-compete obligation on
Dr. Lazarus during the one-year period after he ends his employment with the
Company or stops receiving any salary continuation under the agreement. The
foregoing description of Dr. Lazarus's employment agreement does not purport to
be complete and is qualified in its entirety by reference to such agreement, a
copy of which shall be filed with the SEC as an exhibit to the Company's
Quarterly Annual Report on Form 10-Q for the period ended March 31, 2000.
8
<PAGE> 12
Pursuant to the terms of an Employment Agreement, between the Company and
Mr. Schneider, dated as of March 15, 2000, Mr. Schneider receives an annual base
salary of $372,600, subject to annual increases based on satisfactory job
performance, and is eligible to participate in the FMC Bonus Plan. Under the FMC
Bonus Plan, Mr. Schneider can earn, subject to the Company's attainment of
specified individual and company 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. Schneider is paid a monthly car allowance
of $700 and is entitled to reimbursement for expenses associated with financial
planning assistance and/or individual income tax preparation up to a total of
$2,000 each year. The term of the agreement expires on March 15, 2003 unless
terminated earlier as provided for in the agreement. In the event Mr.
Schneider's employment agreement is terminated for any reason other than by the
Company for cause, or if Mr. Schneider terminates his employment agreement for
cause, Mr. Schneider is entitled to his base salary and a continuation of his
benefits for a period of equal to the greater of (a) the then remaining term of
the agreement or (b) 18 months and a pro-rated portion of his annual incentive
bonus based on his termination date. The terms of the agreement impose a
non-compete obligation on Mr. Schneider during the one-year period after he ends
his employment with the Company or stops receiving any salary continuation under
the agreement. 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, a copy of which shall be filed with the SEC as an exhibit to the
Company's Quarterly Annual Report on Form 10-Q for the period ended March 31,
2000.
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 by the Company for 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 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.
RESIGNATIONS OF EXECUTIVE OFFICERS
Mr. Grieco resigned as a Director, 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") provided that he
would continue to receive his base salary and certain benefits for two years
through June 30, 2001 (the "Salary Continuation"); provided, however, that Mr.
Grieco could elect to receive the Salary Continuation in a lump sum in which
case the Company would not be required to pay for his benefits. Mr. Grieco
elected to receive this lump sum payment effective December 1, 1999. Mr. Grieco
was 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 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 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, has agreed to use his best efforts
to recommend to the Management Board of Fresenius Medical Care that
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<PAGE> 13
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 provided that Mr. Grieco be paid $100,000 in two equal
installments, which have been paid. Additionally, pursuant to the terms of the
Separation Agreement, the Company and Mr. Grieco entered into a consulting
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 therein. 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, 1999, 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 certain
executive officers of the Company in 1999 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, 1999. 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 the Company's
shareholders.
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
contributions and involve the application of both quantifiable and subjective
criteria. In 1999,
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<PAGE> 14
the Supervisory Board of Fresenius Medical Care granted options to purchase
100,000 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
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<PAGE> 15
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
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<PAGE> 16
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 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, except as set forth in the succeeding sentence the Company believes
that all such filing requirements were complied with in a timely manner during
and with respect to 1999. Mr. Kuerbitz became an executive officer of the
Company on October 29, 1999 and his Form 3 was filed with the SEC on December
17, 1999.
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. 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
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<PAGE> 17
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 with
certain 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, which are 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 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, 1999.
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 1999, 1998 and 1997 the Company purchased $45.8, $56.9
and $53.2 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.
Also during 1999, 1998 and 1997, the Company sold products to Fresenius AG and
certain of its subsidiaries having aggregate sales prices of approximately $5.6
million, $2.2 million and $2.9 million, respectively.
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 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.
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<PAGE> 18
Pursuant to a Promissory Note dated February 19, 1999, the Company 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.
This February 1999 Loan was amended effective February 19, 2000 to increase the
principal amount to $16.2 million, extend the maturity date to February 20, 2001
and increase the annual interest rate to 7.75%.
Pursuant to a Loan Agreement dated February 19, 1998, the Company 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, the
Company 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. This
indebtedness was paid in full in 1999.
Pursuant to a Loan Agreement dated November 27, 1996, the Company 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.
Pursuant to various Loan Agreements dated as of March and April 2000, the
Company borrowed an aggregate amount of approximately $343.4 million from
Franconia Acquisition LLC, an affiliate of Fresenius Medical Care. The
outstanding principal amount, plus accrued interest calculated based on a
fluctuating rate equal to the one-month LIBOR rate plus 25 basis points, is due
and payable on demand. The Company may also prepay these loans at any time
without premium or penalty.
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.
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 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
an Euro 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
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<PAGE> 19
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.
Loan to Chief Executive Officer Pursuant to a loan agreement dated June 7,
1999, Mr. Lipps borrowed $2 million from Fresenius Medical Care to fund the
purchase of his principal residence. The principal amount bears interest at 6%
per annum and is payable, on demand after one month prior notice or in any event
on July 1, 2004. Accrued interest is payable in July of each year, during the
term of the loan. The loan is secured by a mortgage on Mr. Lipp's principal
residence.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP has been selected as the Company's independent public
accountants and auditors for 2000. 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,
1999 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, 1999 MAY BE OBTAINED WITHOUT CHARGE BY
CONTACTING THE SECRETARY OF THE COMPANY, 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 2001 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 December 31, 2000 in order to consider it for
inclusion in the Information Statement with respect to the 2001 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.
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