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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MATRIA HEALTHCARE, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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:
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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(MATRIA LOGO)
1850 PARKWAY PLACE
MARIETTA, GEORGIA 30067
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2001
NOTICE IS HEREBY GIVEN THAT the 2001 Annual Meeting of Stockholders of
Matria Healthcare, Inc. (the "Company" or "Matria"), will be held on Thursday,
May 24, 2001, at 10:30 a.m. local time at 1850 Parkway Place, Suite 320,
Marietta, Georgia 30067, for the following purposes:
(1) To elect four Class III directors of the Company for a three-year
term expiring at the 2004 Annual Meeting of Stockholders and until their
respective successors are duly elected and qualified;
(2) To approve the Matria Healthcare, Inc. 2001 Stock Incentive Plan;
(3) To amend the Company's 2000 Directors' Non-Qualified Stock Option
Plan (the "Directors' Plan") to increase the automatic annual grant of
options to non-employee directors from 2,500 shares to 3,750 shares each
and to increase the number of shares reserved for issuance under such plan
by 50,000 shares; and
(4) To transact such other business as properly may come before the
Annual Meeting and any adjournment or postponement thereof.
Your vote is important regardless of the number of shares you own. Each
stockholder, even though he or she now plans to attend the Annual Meeting, is
requested to sign, date and return the enclosed proxy card without delay in the
enclosed postage-paid envelope. You may revoke your proxy at any time prior to
its exercise. Any stockholder present at the Annual Meeting or any adjournment
or postponement thereof may revoke his or her proxy and vote personally on each
matter brought before the meeting.
I look forward to welcoming you at the meeting.
Very truly yours,
/s/ Roberta L. McCaw
Roberta L. McCaw
Secretary
Marietta, Georgia
April 26, 2001
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MATRIA HEALTHCARE, INC.
1850 PARKWAY PLACE
MARIETTA, GEORGIA 30067
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 2001
GENERAL INFORMATION
This proxy statement and the accompanying proxy card are being furnished to
stockholders in connection with the solicitation of proxies by the Board of
Directors of Matria Healthcare, Inc., a Delaware corporation (the "Company"),
for use at the 2001 Annual Meeting of Stockholders (the "Annual Meeting") to be
held on Thursday, May 24, 2001 at 10:30 a.m. local time at 1850 Parkway Place,
Suite 320, Marietta, Georgia 30067, and at any adjournment or postponement
thereof.
At the Annual Meeting, stockholders will consider and vote upon a proposal
to elect four Class III directors, a proposal to approve the Company's 2001
Stock Incentive Plan, a proposal to amend the Company's Directors' Plan, and
such other matters as properly may come before the Annual Meeting. The Board
unanimously urges stockholders to vote FOR the re-election of the Class III
directors, FOR the adoption of the 2001 Stock Incentive Plan and FOR the
amendment to the Directors' Plan.
It is anticipated that this proxy statement, the accompanying proxy and the
2000 Annual Report to Stockholders will first be mailed to the Company's
stockholders on or about April 27, 2001.
RECORD DATE
The Board of Directors has fixed the close of business on April 6, 2001 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting and at any adjournment
or postponement thereof. At the close of business on the Record Date, 8,800,294
shares of Common Stock were issued and outstanding.
PROXIES
When a proxy card is returned, properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. If a stockholder does not attend the Annual Meeting and does not
return the signed proxy card, such stockholder's shares will not be voted. If a
stockholder returns a signed proxy card but does not indicate how his or her
shares are to be voted, such shares will be voted FOR the election of the four
Class III directors named herein, FOR the adoption of the 2001 Stock Incentive
Plan and FOR the amendment to the Directors' Plan. As of the date of this proxy
statement, the Board of Directors does not know of any other matters that are to
come before the Annual Meeting. If any other matters are properly presented at
the Annual Meeting for consideration, the persons named in the enclosed form of
proxy and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.
Any proxy given may be revoked by the person giving it at any time before
it is voted. Proxies may be revoked by (i) filing with the Secretary of the
Company, at or before the taking of the vote at the Annual Meeting, a written
notice of revocation bearing a later date than the proxy, (ii) duly executing a
later dated proxy relating to the same shares of Common Stock and delivering it
to the Secretary of the Company at or before the taking of the vote at the
Annual Meeting or (iii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
a revocation of a proxy). Any written notice of revocation or subsequent proxy
should be sent so as to be delivered to Matria Healthcare, Inc., 1850 Parkway
Place, Marietta, Georgia 30067, Attention: Secretary, or hand delivered to the
Secretary of the Company at or before the taking of the vote at the Annual
Meeting.
The Company will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers and employees of the Company in person or by
telephone or other means of communication. Such directors, officers and
employees will not be
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additionally compensated, but may be reimbursed for out-of-pocket expenses
incurred in connection with such solicitation. Arrangements also will be made
with custodians, nominees and fiduciaries for the forwarding of proxy
solicitation materials to beneficial owners of shares held of record by such
custodians, nominees and fiduciaries, and the Company will reimburse such
custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith. In addition, D. F. King & Co., Inc. will assist in the
solicitation of proxies by the Company for a fee of $5,500, plus reimbursement
of reasonable out-of-pocket expenses.
QUORUM
The presence, either in person or by properly executed proxies, of the
holders of a majority of the outstanding shares of the Company's Common Stock is
necessary to constitute a quorum at the Annual Meeting. Abstentions and shares
held by a broker as nominee (i.e., in "street name") that are represented by
proxies at the Annual Meeting, but that the broker fails to vote on one or more
matters as a result of incomplete instructions from the beneficial owner of the
shares ("broker non-votes"), also will be treated as present for quorum
purposes.
VOTE REQUIRED
The Company's stockholders are entitled to one vote at the Annual Meeting
for each share of Common Stock held of record by them on the Record Date. The
affirmative vote of the holders of a plurality of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting is required to
elect the Class III directors. The affirmative vote of a majority of the shares
having voting power, present in person or represented by proxy at the Annual
Meeting is required to approve and adopt the 2001 Stock Incentive Plan and the
amendment to the Directors' Plan. Votes may be cast for or withheld from each
nominee for Class III director and for, against or abstained from voting on
approval of the 2001 Stock Incentive Plan and the amendment to the Directors'
Plan. Under applicable Delaware law, broker non-votes represented at the
meeting, but with respect to which such broker or nominee is not empowered to
vote on a particular proposal, and abstentions will have no effect on the vote
for the election of Class III directors. Abstentions will have the effect of a
vote against approval of the 2001 Stock Incentive Plan and the amendment to the
Directors' Plan, while broker non-votes will have no effect on the outcome of
said proposals.
1. ELECTION OF DIRECTORS
BACKGROUND
Under the Company's Certificate of Incorporation, the Board is divided into
three classes, with approximately one-third of the directors standing for
election each year. The four nominees for election this year are Parker H.
Petit, Jeffrey D. Koepsell, Donald W. Weber and Morris S. Weeden. Each has
consented to serve for an additional term. If any director is unable to stand
for election, the Board may, by resolution, provide for a lesser number of
directors or designated substitute. In the latter event, shares represented by
proxies may be voted for a substitute director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE CLASS III NOMINEES SET
FORTH BELOW.
CLASS III NOMINEES FOR THE TERM EXPIRING IN 2004
PARKER H. PETIT, age 61, has served as Chairman of the Board of the Company
since the formation of the Company through the merger (the "Merger") of Tokos
Medical Corporation and Healthdyne, Inc. ("Healthdyne") on March 8, 1996 (the
"Merger Date") and as President and Chief Executive Officer since October 5,
2000. In addition, he served as a member of the three-person Office of the
President during a brief period in 1997. Mr. Petit was the founder of Healthdyne
and served as its Chairman of the Board of Directors and Chief Executive Officer
from 1970 until the Merger. Mr. Petit is also Chairman of the Board of Directors
of Healthcare.com Corporation and a director of Intelligent Systems Corp. and
Logility, Inc.
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JEFFREY D. KOEPSELL, age 54, has served as a director of the Company and as
Executive Vice President and Chief Operating Officer since May 17, 2000. From
1992 to 1998, he was President and Chief Executive Officer of CardioLogic
Systems, Inc., a venture capital-backed company in the cardiopulmonary market
segment formed in cooperation with Johns Hopkins University and Medical Center.
Prior thereto, he served as President and Chief Executive Officer of Physiologic
Diagnostic Services, Inc., a women's health service provider acquired by Tokos
Medical Corporation in 1992. Mr. Koepsell is also a former executive of
Healthdyne.
DONALD W. WEBER, age 64, has served as a director of the Company since May
18, 2000. Mr. Weber is a private investor. He was President and Chief Executive
Officer of Viewstar Entertainment Services, Inc., a distributor of satellite
entertainment systems, from August 1993 until November 1997. Prior thereto, from
1987 to 1991 he was President and Chief Executive Officer of Contel Corporation,
a telecommunications supplier, which was sold in 1991 to GTE Corp. Mr. Weber is
also a director of Healthcare.com Corporation, Powertel, Inc., and Knology
Holdings, Inc.
MORRIS S. WEEDEN, age 81, has served as a director of the Company since the
Merger Date and previously served as a director of Healthdyne from 1987 until
the Merger. Mr. Weeden, who is retired, was Vice Chairman -- Board of Directors
of Morton Thiokol Inc., a salt, chemical, household and aerospace products
manufacturer, from March 1980 to December 1984. Previous positions held by Mr.
Weeden include Executive Vice President of Morton Norwich Products, Inc. in
charge of pharmaceutical operations, President of Morton International, a
pharmaceutical division of Morton Norwich Products, Inc., and President of
Bristol Laboratories, a pharmaceutical division of Bristol Myers Corp. Mr.
Weeden is also a director of Stat-Chem, Inc.
CLASS II DIRECTORS CONTINUING IN OFFICE UNTIL 2003
MARK J. GAINOR, age 45, has served as a director of the Company since
January 19, 1999. Mr. Gainor is an entrepreneur and private investor. Mr. Gainor
previously served as President of the Company's diabetes management services
subsidiaries from January 19, 1999 to October 2000. See "Certain Relationships
and Related Transactions" herein. Prior thereto he was President and Chief
Executive Officer of Gainor Medical Management, L.L.C., a company which he
founded in 1984. Mr. Gainor was initially elected as a director, and was
nominated for re-election in 2000, pursuant to the agreement under which the
Company acquired substantially all of the assets of Gainor Medical Management,
LLC in 1999.
JACKIE M. WARD, age 62, has served as a director of the Company since the
Merger Date. Ms. Ward is Outside Managing Director of Computer Generation
Incorporated, a privately-held, Atlanta based corporation engaged in designing
and producing "turnkey" computer hardware and software systems for
telecommunications and other specialized applications, which she founded in
1968. She also served as its President and Chief Executive Officer until
December 22, 2000, when it was sold to Intec Telecom Systems. Ms. Ward is also a
former Chairperson of the Board of Regents of the University System of Georgia
and former Chairman of the Metro Atlanta Chamber of Commerce, as well as a
director of Trigon Healthcare, Inc., Bank of America Corporation, Equifax, Inc.,
PTEK Holdings, Inc., The Profit Recovery Group International, Inc., SCI Systems,
Inc. and Flowers Industries, Inc. and a member of several other civic and
government organizations.
FREDERICK P. ZUSPAN, M.D., age 79, has served as a director of the Company
since the Merger Date and previously served as a director of Healthdyne from
1993 until the Merger. Dr. Zuspan, who has been a physician since 1951, has been
Professor and Chairman Emeritus, Department of Obstetrics and Gynecology at the
Ohio State University College of Medicine since July 1991 and Editor-in-Chief of
the American Journal of Obstetrics and Gynecology since 1991. Dr. Zuspan was
previously Professor of the Ohio State University College of Medicine from 1987
to 1991 and Professor and Chairman of the Department of Obstetrics and
Gynecology at the Ohio State University College of Medicine from 1975 to 1987,
at the University of Chicago, Pritzker School of Medicine from 1966 to 1975, and
at the Medical College of Georgia from 1960 to 1966.
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CLASS I DIRECTORS CONTINUING IN OFFICE UNTIL 2002
RICHARD F. LEVY, age 70, has been a director of the Company since September
20, 2000. Mr. Levy is a partner at Altheimer & Gray, an international law firm
based in Chicago, Illinois. Mr. Levy also serves as Vice Chairman and Director
of Amalgamated Investments Company, a bank holding company in Chicago, and is
also a director of Danka Business Systems. Prior to 1998, he was a director of
Ambassador Apartments, a large apartment real estate investment trust, and prior
to 1997, he was a senior partner at Kirkland & Ellis. Mr. Levy was elected as a
director pursuant to the agreement under which the Company acquired
substantially all of the assets of Gainor Medical Management, LLC in 1999.
GUY W. MILLNER, age 65, has been a director of the Company since October 4,
2000. Mr. Millner is Chairman of MI Holdings, a private investment firm. Until
the fall of 1997 he was Chairman of Norrell Corporation, a staffing services and
outsourcing firm, which he founded in 1961. From 1997 until July 1999 he served
as a director of Norrell Corporation, at which time Norrell Corporation merged
with Spherion Corporation. Mr. Millner currently serves as a director of
Spherion Corporation.
CARL E. SANDERS, age 75, has served as a director of the Company since the
Merger Date and previously served as a director of Healthdyne from 1986 until
the Merger. Mr. Sanders, a former governor of the State of Georgia, is Chairman
of Troutman Sanders LLP, an Atlanta based law firm that provides legal services
to the Company. Mr. Sanders is also a director of Carmike Cinemas, Inc., First
Union Corporation of Georgia, Healthcare.com Corporation, and World Access, Inc.
THOMAS S. STRIBLING, age 58, has served as a director of the Company since
May 18, 2000. Mr. Stribling is an entrepreneur and private investor. From 1998
to September 1999, he was President, Chief Executive Office and a board member
of Scandipharm, Inc., a privately held pharmaceutical company. Prior thereto, he
was Vice Chairman and Chairman of the Advisory Board of Legacy Securities
Corporation, an investment banking and securities group, from 1997 to 1998, and
from 1994 to 1996, he was President of UCB Pharma, Inc., a division of a
Belgian-based pharmaceutical company.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the beneficial
ownership of shares of the Company's Common Stock as of April 1, 2001 by (i) all
stockholders known by the Company to be the beneficial owners of more than five
percent of its Common Stock, (ii) each director of the Company, (iii) each Named
Executive Officer (as hereinafter defined), and (iv) all executive officers and
directors as a group. Unless otherwise indicated, the holders listed below have
sole voting and investment power with respect to all shares beneficially owned
by them.
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS(2)
------------------------ -------------------------- -----------
Gainor Medical Management, L.L.C.(3)........................ 1,555,555 17.6%
Lord, Abbett & Co.(4)....................................... 1,036,149 11.7
Safeco Corporation(5)....................................... 814,375 9.2
Wellington Management Company, LLP(6)....................... 764,400 8.6
Vanguard Explorer Fund(7)................................... 673,400 7.6
Dimensional Fund Advisors, Inc.(8).......................... 598,050 6.0
Parker H. Petit(9).......................................... 396,270 4.5
Donald R. Millard(10)....................................... 124,358 1.4
Jeffrey D. Koepsell......................................... 2,500 --
Frank D. Powers(11)......................................... 125,228 1.4
George W. Dunaway(12)....................................... 10,383 --
James P. Reichmann(13)...................................... 32,262 --
Mark J. Gainor(14).......................................... 1,556,597 17.7
Richard F. Levy(15)......................................... 937 --
Guy W. Millner(16).......................................... 833 --
Carl E. Sanders(17)......................................... 19,875 --
Thomas S. Stribling(18)..................................... 3,750 --
Jackie M. Ward(19).......................................... 15,001 --
Donald W. Weber(20)......................................... 6,250 --
Morris S. Weeden(21)........................................ 17,500 --
Frederick P. Zuspan(22)..................................... 19,129 --
All current executive officers and directors as a group (17
persons).................................................. 1,937,841 22.0%
---------------
-- Less than 1%
(1) Under the rules of the Securities and Exchange Commission (the "SEC"), a
person is deemed to be a beneficial owner of a security if he or she has or
shares the power to vote or to direct the voting of such security ("voting
power") or the power to dispose or to direct the disposition of such
security ("investment power"). A person is also deemed to be a beneficial
owner of any securities of which that person has the right to acquire
beneficial ownership within 60 days as well as any securities owned by such
person's spouse, children or relatives living in the same house.
Accordingly, more than one person may be deemed to be a beneficial owner of
the same securities.
(2) Based on 8,800,294 shares of Common Stock outstanding on April 1, 2001.
With respect to each person or group in the table, assumes that such person
or group has exercised all options, warrants and other rights to purchase
Common Stock which he or she beneficially owns and which are exercisable
within 60 days and that no other person has exercised any such rights.
(3) The number of shares owned is based on information contained in a report on
Schedule 13D filed by Gainor Medical Management, L.L.C., Mark J. Gainor and
Gainor Medical U.S.A. Inc. (the "Acquirers") with the SEC on January 27,
1999. The Acquirers' principal business address is at 2205 Highway 42
North, P. O. Box 353, McDonough, Georgia 30253. Gainor Medical Management,
L.L.C. sold substantially all of its assets to Matria in exchange for,
among other things, a currently exercisable warrant to purchase 1,000,000
shares of Matria's Common Stock and 10,000 shares of Series A convertible
preferred stock that is currently convertible into 555,555 shares of
Matria's Common Stock. Gainor Medical U.S.A., Inc. beneficially owns
1,555,555 shares by virtue of the fact that it is the
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majority member of Gainor Medical Management, L.L.C. Gainor Medical U.S.A.,
Inc. disclaims beneficial ownership of 702,955 shares, the ownership of
which is attributable to other members of Gainor Medical Management, L.L.C.
Mr. Gainor beneficially owns 1,555,555 shares of Matria Common Stock by
virtue of the fact that he owns, either directly or through his ownership
of Gainor Medical U.S.A., Inc. common stock, a majority of Gainor Medical
Management, L.L.C. See footnote 14 below for a description of shares of
stock disclaimed by Mr. Gainor.
(4) The number of shares owned is based on information contained in a report on
Schedule 13G filed with the SEC on January 12, 2001. The address of Lord,
Abbett & Co. is 90 Hudson Street, Jersey City, New Jersey 07302.
(5) The number of shares owned is based on information contained in a report on
Schedule 13G filed with the SEC on January 12, 2001. The address of Safeco
Corporation is Safeco Plaza, Seattle, Washington 98185.
(6) The number of shares owned is based on information contained in a report on
Schedule 13G filed with the SEC on February 14, 2001. The address of
Wellington Management Company, LLP ("WMC") is 75 State Street, Boston,
Massachusetts 02109. According to its Schedule 13G, WMC, in its capacity as
investment adviser, may be deemed to beneficially own 764,400 shares of the
Company's Common Stock, which shares are held of record by clients of WMC.
WMC reports that it has no power to vote or direct the vote of such shares
and shared power to dispose or direct the disposition of such shares, while
its clients have the right to receive, or direct the receipt of, dividends
from, or proceeds from the sale of, such shares.
(7) The number of shares owned is based on information contained in a report on
Schedule 13G filed with the SEC on February 14, 2001. According to its
Schedule 13G, Vanguard Explorer Fund has the sole power to vote or direct
the vote of such shares and shared power to dispose or direct the
disposition of such shares. The address of Vanguard Explorer Fund is Post
Office Box 2600, Valley Forge, Pennsylvania 19482.
(8) The number of shares owned is based on information contained in a report on
Schedule 13G filed with the SEC on February 2, 2001. The address of
Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue, 11th Floor, Santa
Monica, California 90401.
(9) Represents 341,895 shares owned by Mr. Petit, 13,125 shares held by Petit
Investments Limited Partnership, 2,500 shares held by Petit Grantor Trust
and 38,750 shares which are subject to purchase upon exercise of options
exercisable within 60 days.
(10) Represents 23,106 shares owned by Mr. Millard, 2,500 shares owned by his
adult son who resides at home, 98,242 shares which are subject to purchase
upon exercise of options exercisable within 60 days, and 510 shares
issuable upon conversion of 8% Convertible Subordinated Debentures owned by
Mr. Millard.
(11) Represents 20,275 shares owned by Mr. Powers and 104,953 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
(12) Represents 6,425 shares owned by Mr. Dunaway and 3,958 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
(13) Represents 5,328 shares owned by Mr. Reichmann and 26,934 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
(14) Represents 1,042 shares which are subject to purchase upon exercise of
options exercisable within 60 days, a currently exercisable warrant to
purchase 1,000,000 shares and 2,500 shares of Series A convertible
preferred stock that is currently convertible into 555,555 shares of Common
Stock owned by Gainor Medical Management, L.L.C. Mr. Gainor is a member of
the Management Committee and owns, either directly or through his ownership
of Gainor Medical U.S.A., Inc. common stock, a controlling interest in
Gainor Medical Management, L.L.C. Mr. Gainor disclaims ownership of 212,360
shares of the stock related to the warrant and 117,978 shares of the stock
related to the Series A convertible preferred stock which are attributable
to the owners of Gainor Medical Management, L.L.C. other than himself and
companies that he controls.
(15) Represents shares which are subject to purchase upon exercise of options
exercisable within 60 days.
(16) Represents shares which are subject to purchase upon exercise of options
exercisable within 60 days.
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(17) Represents 6,125 shares owned by Mr. Sanders and 13,750 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
(18) Represents 2,500 shares owned by Mr. Stribling and 1,250 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
(19) Represents 1 share issuable upon conversion of 8% Convertible Subordinated
Debentures owned by Ms. Ward and 15,000 shares which are subject to
purchase upon exercise of options exercisable within 60 days.
(20) Represents 5,000 shares owned by Mr. Weber and 1,250 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
(21) Represents 3,750 shares owned by Mr. Weeden and 13,750 shares which are
subject to purchase upon exercise of options exercisable within 60 days.
(22) Represents 217 shares owned by Dr. Zuspan, 125 shares held by Zuspan &
Associates Partnership, 3,787 shares owned by Dr. Zuspan's wife and 15,000
shares which are subject to purchase upon exercise of options exercisable
within 60 days.
BOARD COMMITTEES AND ATTENDANCE
In addition to an Executive Committee and other single purpose committees
established from time to time to assist the Board of Directors with particular
tasks, the Company's Board of Directors has the following standing committees: a
Compensation and Stock Option Committee (the "Compensation Committee"), an Audit
Committee and a Nominating Committee.
The Compensation Committee is composed of Thomas S. Stribling, Morris S.
Weeden and Frederick P. Zuspan, M.D. The Compensation Committee is responsible
for the recommendation and approval of salaries of executive officers and the
review and approval of incentive plans, including stock options and related
programs. The Compensation Committee held five meetings during the year ended
December 31, 2000.
The Audit Committee is composed of Jackie M. Ward, Richard F. Levy and
Morris S. Weeden. All members of the Audit Committee are "independent" as
defined by the listing standards of the National Association of Securities
Dealers. The Audit Committee evaluates the independence and performance of the
Company's independent accountants, handles relations with the Company's
independent accountants and evaluates the integrity of the Company's financial
reporting process and its policies and procedures relating to internal
accounting functions and controls. The Audit Committee held seven meetings
during the year ended December 31, 2000.
The Nominating Committee is composed of Parker H. Petit, Guy W. Millner and
Carl E. Sanders. The Nominating Committee identifies, screens and recommends
candidates for appointment to the Board of Directors for consideration by the
full Board of Directors of the Company and by the stockholders of the Company.
The Nominating Committee will consider a candidate for a director proposed by a
stockholder. A candidate must be highly qualified and be both willing and
expressly interested in serving on the Board. A stockholder wishing to propose a
candidate for the Nominating Committee's consideration should forward the
candidate's name and information about the candidate's qualifications to Matria
Healthcare, Inc., 1850 Parkway Place, Marietta, Georgia 30067, Attention:
Corporate Secretary. The Nominating Committee held one meeting during the year
ended December 31, 2000.
During the year ended December 31, 2000, the Board of Directors held ten
meetings. Each of the Directors who served as directors during 2000 attended
more than 75% of the total number of Board meetings and meetings of committees
of which he or she was a member during 2000.
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EXECUTIVE COMPENSATION
The following table sets forth compensation paid to the Company's Chief
Executive Officer and the four other most highly compensated executive officers
(the "Named Executive Officers") for their services in all capacities to the
Company and its subsidiaries in fiscal years 2000, 1999, and 1998:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------------- ALL OTHER
---------------------- SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)(1)
--------------------------- ---- ---------- --------- --------------------- ------------
Parker H. Petit(2).................... 2000 $ 96,924 $ -0- 41,250 $ 800,358
Chairman of the Board, President and 1999 -0- -0- 17,500 788,067
Chief Executive Officer 1998 -0- -0- 17,500 768,407
Donald R. Millard(3).................. 2000 317,001 -0- 37,500 1,437,642
President and Chief Executive 381,032 -0- 36,750 189,763
Officer 1999
1998 367,914 -0- 40,188 261,324
Jeffrey D. Koepsell(4)................ 2000 189,231 -0- 22,500 300
Executive Vice President and Chief
Operating Officer
Frank D. Powers....................... 2000 315,599 -0- 21,250 203,270
President, Population Health 1999 320,494 -0- 21,350 179,446
Management 1998 312,892 -0- 24,113 228,437
George W. Dunaway(5).................. 2000 203,355 -0- 1,875 5,288
Vice President -- Finance and Chief 1999 50,000 -0- 10,000 21,821
Financial Officer
James P. Reichmann.................... 2000 205,900 -0- 7,544 127,837
President, Women's Health 1999 188,055 -0- 6,525 118,104
1998 185,758 71,057 8,841 126,896
---------------
(1) Details of amounts reported in "All Other Compensation" column are provided
in the table below.
(2) Mr. Petit was elected President and Chief Executive Officer on October 4,
2000.
(3) Mr. Millard ceased serving as President and Chief Executive Officer
effective October 4, 2000.
(4) Mr. Koepsell was elected to this position on May 17, 2000.
(5) Mr. Dunaway was elected to this position on October 5, 1999.
ITEM MR. PETIT MR. MILLARD MR. KOEPSELL MR. POWERS MR. DUNAWAY MR. REICHMANN
---- --------- ----------- ------------ ---------- ----------- -------------
Officer Term Life
Insurance.......... 2000 $ 30,098 $ 6,560 $300 $ 5,946 $ 188 $ 1,045
1999 29,949 6,577 N/A 5,985 29 988
1998 23,553 5,942 N/A 4,840 N/A 852
Split Dollar
Insurance Premium
Value.............. 2000 $657,760 $ 204,043 $-0- $192,224 $ -0- $121,692
1999 608,118 178,386 N/A 168,661 -0- 112,316
1998 594,854 250,582 N/A 218,797 N/A 101,200
401(k) Matching
Contributions...... 2000 $ -0- $ 5,100 $-0- $ 5,100 $ 5,100 $ 5,100
1999 N/A 4,800 N/A 4,800 -0- 4,800
1998 N/A 4,800 N/A 4,800 N/A 4,800
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ITEM MR. PETIT MR. MILLARD MR. KOEPSELL MR. POWERS MR. DUNAWAY MR. REICHMANN
---- --------- ----------- ------------ ---------- ----------- -------------
Severance Payment.... 2000 N/A $1,170,000 N/A N/A N/A N/A
1999 N/A N/A N/A N/A N/A N/A
1998 N/A N/A N/A N/A N/A N/A
Vacation............. 2000 N/A $ 40,720 N/A N/A N/A N/A
1999 N/A N/A N/A N/A N/A N/A
1998 N/A N/A N/A N/A N/A N/A
Tax Gross-up for
Leased Vehicle..... 2000 N/A $ 11,219 N/A N/A N/A N/A
1999 N/A N/A N/A N/A N/A N/A
1998 N/A N/A N/A N/A N/A N/A
Non-Employee Board
Retainer........... 2000 $112,500 N/A N/A N/A N/A N/A
1999 150,000 N/A N/A N/A N/A N/A
1998 150,000 N/A N/A N/A N/A N/A
Relocation Expenses.. 2000 N/A N/A N/A N/A N/A N/A
1999 N/A N/A N/A N/A $21,792 N/A
1998 N/A N/A N/A N/A N/A $ 20,044
Total All Other
Compensation....... 2000 $800,358 $1,437,642 $300 $203,270 $ 5,288 $127,837
1999 788,067 189,763 N/A 179,446 21,821 118,104
1998 768,407 261,324 N/A 228,437 N/A 126,896
STOCK OPTIONS
The following table contains information concerning the grant of stock
options to the Named Executive Officers of the Company during 2000:
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED (#)(2) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- -------------- ------------ ----------- ---------- -------- ----------
Parker H. Petit.................. 38,750(3) 18.3% $14.00 10/4/2010 $341,175 $ 864,605
1,250(4) N/A $18.00 5/18/2010 28,300 71,718
Donald R. Millard................ 37,500(4) 17.7% $21.50 2/23/2010 507,046 1,284,954
Jeffrey D. Koepsell.............. 22,500(6) 10.6% $18.00 5/18/2010 254,702 645,466
Frank D. Powers.................. 21,250(5) 10.0% $21.50 2/23/2010 287,326 728,141
George W. Dunaway................ 1,875(5) 0.8% $21.50 2/23/2010 25,352 64,248
James P. Reichmann............... 7,544(5) 3.2% $21.50 2/23/2010 102,004 258,499
---------------
(1) Based on actual option term and annual compounding. These amounts are
calculated pursuant to applicable requirements of the SEC and do not
represent a forecast of the future appreciation of the Company's Common
Stock.
(2) Number of securities and exercise price have been adjusted to reflect a
one-for-four reverse stock split that took effect on December 5, 2000 (the
"Reverse Split").
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(3) This option to purchase the Company's Common Stock was granted under the
Company's 2000 Stock Incentive Plan (the "2000 Plan") on October 4, 2000.
Full vesting shall occur not before two years and not later than four years
from the date of grant, based on performance vesting thresholds.
(4) This option to purchase the Company's Common Stock was granted under the
1996 Non-Employee Directors' Non-Qualified Stock Option Plan on May 18,
2000, prior to Mr. Petit becoming an employee of the Company. Vesting is
1/12 a month for 12 months from date of grant.
(5) These options to purchase the Company's Common Stock were granted under the
Company's 1997 Stock Incentive Plan (the "1997 Plan") on February 23, 2000.
For each option granted under the 1997 Plan, full vesting shall occur not
before two years and not later than four years from the date of grant, based
on performance vesting thresholds.
(6) This option to purchase the Company's Common Stock was granted under the
Company's 1996 Stock Incentive Plan (the "1996 Plan") on May 18, 2000. Full
vesting shall occur not before two years and not later than four years from
the date of grant, based on performance vesting thresholds.
STOCK OPTION EXERCISES
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options in 2000 and unexercised
options held as of the end of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE REALIZED END ($)(1) FISCAL YEAR END ($)(1)
ON EXERCISE (MARKET PRICE AT EXERCISE --------------------------- ---------------------------
NAME (#) LESS EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------------------- ----------- ------------- ----------- -------------
Parker H. Petit....... -0- -0- 36,248 41,252 -0- -0-
Donald R. Millard..... 8,750(2) $1,946 78,148 88,791 -0- -0-
Jeffrey D. Koepsell... -0- -0- -0- 22,500 -0- -0-
Frank D. Powers....... -0- -0- 75,156 51,558 -0- -0-
George W. Dunaway..... -0- -0- 11,875 -0- -0- -0-
James P. Reichmann.... -0- -0- 19,998 17,787 -0- -0-
---------------
(1) Based on $9.63, the last sale price of the Company's Common Stock on
December 29, 2000.
(2) Restated to reflect the Reverse Split.
COMPENSATION OF DIRECTORS
The Directors who are employees of the Company receive no additional
compensation for serving on the Board of Directors. Directors who are not
employees of the Company ("Non-Employee Directors") receive a fee of $3,000 per
quarter, plus $1,000 for each Board meeting attended and $750 for each Committee
meeting attended on a day other than a Regular Meeting of the Board, and are
reimbursed for any travel expenses incurred. These fees were not payable to Mr.
Gainor in the year 2000 under the terms of the Management Agreement between the
Company and Lucor Holdings, LLC. See "Certain Relationships and Related
Transactions." Following termination of that agreement on December 31, 2000, Mr.
Gainor became eligible to receive such fees. In lieu of the above retainer and
meeting fees and prior to his becoming an employee on October 5, 2000, Mr. Petit
was paid a fee of $37,500 per quarter for his services as Chairman of the Board.
In addition, under the 1996 and 2000 Directors' Non-Qualified Stock Option
Plans, all Non-Employee Directors are entitled to receive an initial grant of
options to purchase 1,250 shares of the Company's Common Stock and at each
annual meeting of stockholders after their first full year serving as a
director, an additional grant of options to purchase 2,500 shares of Common
Stock. The option price for all such options is the fair market value of the
underlying Common Stock on the date of grant. Options have a ten year term and
vest monthly over 12 months. On May 18, 2000, each Non-Employee Director other
than Messrs. Levy and Millner was awarded an option to purchase 2,500 shares of
Common Stock at a price of $18.00 per share
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under the 1996 Directors' Non-Qualified Stock Option Plan (the predecessor of
the 2000 Plan). Messrs. Levy and Millner received options to purchase 1,250
shares of Common Stock under the 1996 Directors' Non-Qualified Stock Option Plan
due to their election as directors on September 20, 2000 and October 4, 2000,
respectively. The option price for these options was $14.76 and 14.00 per share,
respectively. Upon termination of his employment with the Company on August 11,
2000, Mr. Gainor received options to purchase 1,250 shares of Common Stock under
the 1996 Directors' Non-Qualified Stock Option Plan at a price of $14.00 per
share.
SEVERANCE AGREEMENTS
On April 27, 1999, the Company entered into severance agreements with Mr.
Millard and Mr. Powers. The severance agreements provide for a lump sum
severance payment to the executive in the event that the executive's employment
is involuntarily terminated for reasons other than the executive's death,
disability or "cause" (defined as certain acts of criminal or civil fraud), or
if the executive voluntarily terminates employment for "good reason" (defined as
failure to be reelected as an officer of the Company, reduction in base salary,
discontinuance of certain incentive or stock option plans or actions materially
adversely affecting the executive's participation therein, or failure to honor
earned and accrued vacation balances). The severance payment is in an amount
equal to two times the executive's annual base salary and targeted base bonus as
of the date of the agreement (the "Severance Amount"). Mr. Powers also is
entitled to a lump sum severance payment if he voluntarily terminates his
employment without "good reason" at any time after the first year of the
agreement. In such case, the severance payment is equal to the Severance Amount
less the amount of any gain accruing to Mr. Powers after the date of the
agreement with respect to stock options granted to him by the Company (whether
the grant date is before or after the date of the agreement) through the earlier
of the date of exercise or the date of expiration of the option. In addition, in
circumstances in which an executive is entitled to a severance payment, the
executive also is entitled to receive, for a period of two years after the date
of termination, life, disability and health insurance coverage, automobile
allowances and other fringe benefits equivalent to those in effect at the date
of termination of employment. The agreements require the executive to comply
with certain covenants that preclude the executive from competing with the
Company or soliciting customers or employees of the Company for a period of two
years following termination of employment. Mr. Millard's employment was
terminated on October 4, 2000, thereby entitling him to the severance payments
reflected in the Summary Compensation Table and the other severance benefits
provided for under his agreement. See "Executive Compensation."
In addition to the agreements discussed in the preceding paragraph, the
Company entered into change in control severance agreements with Mr. Millard,
Mr. Powers and Mr. Petit. Mr. Millard's agreement terminated upon termination of
his employment. These agreements provide that if the executive's employment with
the Company terminates following the consummation of a "change in control" for
reasons other than the executive's death, disability or retirement, or by the
Company for "cause" (as defined in the preceding paragraph), or if the executive
terminates employment for "good reason" (which is defined to include the reasons
set forth in the preceding paragraph as well as other reasons, such as a
reduction in powers and responsibilities or an adverse change in title following
a change in control), the executive may elect to receive, in lieu of any
severance payments provided in the agreement described in the preceding
paragraph, a lump sum severance payment equal to a multiple of the executive's
annual base salary and targeted base bonus as of the date of the agreement. The
multiple applicable to Mr. Powers is three and the multiple applicable to Mr.
Petit is one and one-half. In addition, following termination of employment, the
executives are entitled to receive, for a period of three years, in the case of
Mr. Powers, and 18 months, in the case of Mr. Petit, all life, disability and
health insurance coverage, automobile allowances and other fringe benefits
equivalent to those in effect at the date of termination and will be entitled to
receive additional amounts, if any, relating to any excise taxes imposed on the
executive as a result of Section 280(g) of the Internal Revenue Code of 1986, as
amended (the "Code"). The agreements require the executive to comply with
certain covenants that preclude the executive from competing with the Company or
soliciting customers or employees of the Company for a
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period following termination of employment equal to the period for which fringe
benefits are continued under the applicable agreement.
On May 16, 2000, the Company entered into a letter agreement with Mr.
Koepsell providing for 12 months of severance pay and benefits if the Company
terminates Mr. Koepsell's employment for reasons other than "for cause." The
letter agreement also provides that if the Company terminates Mr. Koepsell's
employment other than "for cause" within 24 months of his hire date, the Company
will retain Mr. Koepsell as a consultant on a "prn" basis for the balance of the
24-month period, at compensation to be decided upon at the sole discretion of
the Company and deducted from the 12-month severance pay to which he would
otherwise be entitled.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the Compensation Committee
Report on Corporate Compensation, the Report of the Audit Committee and the
Stock Performance Graph shall not be incorporated by reference into any such
filings.
COMPENSATION COMMITTEE REPORT ON CORPORATE COMPENSATION
The Company's executive compensation program is designed to (1) integrate
pay and incentive plans with the Company's strategic goals, so as to align the
interests of management with the long-term interests of the Company's
stockholders, (2) attract, motivate and retain executives capable of achieving
the Company's strategic business goals (3) recognize outstanding individual
contributions and (4) provide compensation opportunities that are competitive
with those offered by other companies of similar size and performance,
especially within the healthcare industry. To achieve these goals, the Company's
executive compensation program consists of three elements: (i) base salary, (ii)
annual cash bonus, and (iii) long-term incentives in the form of stock options.
Each element of compensation has an integral role in the total executive
compensation program, including the compensation of the Named Executive
Officers.
In making its compensation determinations, the Compensation Committee
evaluates, on both an absolute and relative basis, a variety of Company
financial results (including sales, earnings, return on equity, return on assets
and balance sheet strength), market share and competitive position, the
potential for future growth, the overall importance of the individual to the
organization and the individual and group performance of senior management and
compensation levels at comparable companies, especially within the healthcare
industry. In formulating its determinations, it recognizes and rewards
achievements on an annual basis, while emphasizing the value and importance of
sustained long-term performance and recognition of developing trends within the
healthcare industry. The Compensation Committee reviews information prepared or
compiled by the Company, and also draws on the business experience of the
individual members of the Compensation Committee.
Cash Compensation. Officers and other employees are compensated within
salary ranges that are generally based on similar positions in companies of
comparable size and complexity to the Company. The actual base pay level for
each executive officer is based on a combination of experience, performance and
other factors that are determined to be important by the Committee. The salary
of the executive officers is generally reviewed annually at the beginning of
each year, with the amount of any increases based on factors such as Company
performance, general economic conditions, marketplace compensation trends and
individual performance.
Cash bonuses for management are paid under the Company's incentive bonus
plan (the "MIP Plan"). Bonuses under the MIP Plan are computed as a percentage
of year-end base salary. The amount of and entitlement to bonuses paid under the
MIP Plan are based upon the performance of the Company in comparison to its
operating budget. The Committee determines the participants in the MIP Plan and
sets the target bonus levels and performance criteria in the first quarter of
each year.
Stock Options. The Company grants stock options to certain of its
management employees, based on guidelines that take salary level, tenure,
individual performance rating and importance to the Company into
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account. Stock options have been granted at exercise prices equal to the market
price on the date of grant and typically become exercisable in one of two ways
(either (i) based on the financial performance of the Company or (ii) 50% on the
third anniversary of the grant and 50% on the fourth anniversary of the grant),
and expire on the tenth anniversary.
CEO COMPENSATION
CEO Compensation. Mr. Millard served as the Company's Chief Executive
Officer from October 1997 to October 4, 2000. His compensation consisted of the
same components as that of other senior executives, namely base salary, bonus
and stock options. In establishing Mr. Millard's compensation, the Committee
applied the principles outlined above in essentially the same manner as they
were applied to the other executives. Based on performance, Mr. Millard's base
salary was increased from $390,000 to $410,000 effective March 1, 2000. Also in
2000, Mr. Millard was granted an option to purchase 37,500 shares of the
Company's Common Stock.
Mr. Petit has served as the Company's Chief Executive Officer since October
5, 2000. Mr. Petit's negotiated compensation package was finalized after
extensive discussions between the Compensation Committee and the executive
search firm the Company engaged to assist in recruiting a new chief executive
officer as well as with other candidates for the position, and a review of
comparative data of selected peer companies. The Committee believes that Mr.
Petit's package meets the Company's compensation goals as stated above. Mr.
Petit's initial annual base salary was $400,000, and increased to $430,000
effective March 1, 2001. In addition, upon his acceptance of the position, Mr.
Petit was granted options to purchase 38,750 shares of the Company's Common
Stock, with the promise of a like grant in February 2001. In addition, the
Company made a loan to Mr. Petit in the principal sum of $200,000. The loan
bears interest at a rate of 6% per annum and matures on January 1, 2002. If,
however, at any time prior to maturity and while Mr. Petit is an employee of the
Company, the Company's Common Stock trades at a price that is at least $24 per
share and Mr. Petit is still employed by the Company on the maturity date (or
his employment was previously terminated due to his death or disability), the
principal and interest on the note are forgiven.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Thomas S. Stribling
Morris S. Weeden
Frederick P. Zuspan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is responsible for executive compensation
decisions as described above. Since September 20, 2000, the Compensation
Committee has consisted of Thomas S. Stribling, Morris S. Weeden and Frederick
P. Zuspan. During the remainder of 2000, the Compensation Committee consisted of
Messrs. Weeden and Zuspan. No member of the Compensation Committee is currently
or has served as an executive officer or employee of the Company.
REPORT OF THE AUDIT COMMITTEE AND RELATED MATTERS
REPORT OF THE AUDIT COMMITTEE
The Board's Audit Committee, currently composed of Richard F. Levy, Jackie
M. Ward and Donald W. Weber, evaluates the independence and performance of the
Company's independent accountants, handles relations with the Company's
independent accountants and evaluates the integrity of the Company's financial
reporting process and its policies and procedures relating to internal
accounting functions and controls. This report relates to the activities taken
by the Audit Committee in fulfilling such role.
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. The Company's management has the primary
responsibility for the financial statements and reporting process, including the
Company's systems of internal controls. In fulfilling its oversight
responsibili-
13
16
ties, the Audit Committee reviewed and discussed with management the audited
financial statements included in the Annual Report on Form 10-K for the fiscal
year ended December 31, 2000. This review included a discussion of the quality
and the acceptability of the Company's financial reporting and controls.
The Audit Committee also reviewed with the Company's independent
accountants, KPMG Peat Marwick LLP ("KPMG"), who are responsible for expressing
an opinion on the conformity of the Company's audited financial statements with
generally accepted accounting principles, their judgments as to the quality and
the acceptability of the Company's financial reporting and such other matters as
are required to be discussed with the Audit Committee under generally accepted
auditing standards including Statement on Auditing Standards No. 61. In
addition, the Audit Committee received and reviewed the written disclosures and
the letter from KPMG required by Independence Standards Board Standard No. 1 and
discussed with the independent accountants their independence from management
and the Company.
The Audit Committee further discussed with the Company's independent
accountants the overall scope and plans for their 2001 audit. The Audit
Committee meets periodically with the independent accountants to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Annual Report on Form 10-K for the fiscal year ended December
31, 2000 for filing with the Securities and Exchange Commission.
The foregoing report has been furnished by the Audit Committee of Matria's
Board of Directors.
Richard F. Levy
Jackie M. Ward
Donald W. Weber
AUDIT FEES
KPMG billed the Company $257,500 for professional services rendered for the
audit of the Company's annual financial statements for fiscal year 2000 and the
reviews of the financial statements included in the Company's Quarterly Reports
on Form 10-Q filed for the first three quarters of 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
KPMG rendered no professional services for the design and implementation of
financial information systems for the Company during fiscal year 2000.
ALL OTHER FEES OF KPMG
KPMG billed the Company $221,684 for all professional services rendered
during fiscal year 2000 other than audits, reviews and financial information
systems design and implementation. The Audit Committee believes that such
non-audit services are compatible with maintaining the principal accountant's
independence.
KPMG has been appointed by the Company's Board of Directors to audit the
accounts of the Company and its subsidiaries for the fiscal year ending December
31, 2001. A representative of KPMG will be present at the Annual Meeting and
will have the opportunity to make a statement and will be available to respond
to appropriate questions.
A copy of the written charter of the Audit Committee of Matria, adopted by
the Board of Directors, is attached to this Proxy Statement as Appendix A.
2. APPROVAL OF 2001 STOCK INCENTIVE PLAN
The Board of Directors has approved and recommends that the stockholders of
the Company approve the adoption of the Matria Healthcare, Inc. 2001 Stock
Incentive Plan (the "2001 Stock Incentive Plan").
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Approval of the 2001 Stock Incentive Plan by the stockholders is intended, among
other things, to qualify options, stock grants and stock appreciation rights
("SARs") granted under the 2001 Stock Incentive Plan to certain executive
officers of the Company as "performance-based compensation," which is not
subject to the limits on deductibility of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), described further below, and to enable
the Company to grant incentive stock options ("ISOs") under Section 422 of the
Code. In addition, the Nasdaq Stock Market, on which shares of the Company's
Common Stock are listed, requires stockholder approval of a plan pursuant to
which stock may be acquired by officers or directors.
PURPOSE OF THE 2001 STOCK INCENTIVE PLAN
The Board of Directors believes that stock-based incentives are an
important element of the Company's compensation package, particularly for senior
employees. The purpose of the 2001 Stock Incentive Plan is to attract and retain
selected individuals and provide incentives to selected individuals for
increased efforts and successful achievement on behalf of or in the interest of
the Company. Persons eligible to participate in the plan are such employees,
officers, independent contractors and consultants of the Company or one of its
subsidiaries (or future parent companies) as the Stock Option Committee of the
Board of Directors (the "Committee"), in its discretion, shall designate from
time to time. As of March 30, 2001, the Company employed 926 persons.
SUMMARY OF THE 2001 STOCK INCENTIVE PLAN
The 2001 Stock Incentive Plan has three components: a stock option
component, a stock bonus/stock purchase component and a stock appreciation
rights component. The stock option component of the 2001 Stock Incentive Plan
provides a means whereby participants are given an opportunity to purchase
shares of the Company's Common Stock pursuant to: (i) options that may qualify
as ISOs under Section 422 of the Code, or (ii) nonqualified stock options
("NQSOs"). ISOs may be granted only to persons who are employees of the Company
or any of its subsidiaries. ISOs may not be granted to any person who, at the
time that the ISO is granted owns stock possessing more than 10% of the combined
voting power of all classes of the Company's stock or any of the Company's
subsidiaries stock ("10% Stockholders"), unless the exercise price of the shares
of the Company Common Stock covered by the option is at least 110% of the fair
market value of such shares at the date of grant and such ISO by its terms is
not exercisable after the expiration of five years from the date of grant.
Except for ISOs granted to 10% stockholders, ISOs may be granted under the
stock option component of the 2001 Stock Incentive Plan for terms up to ten
years from the date of grant. Except for ISOs granted to 10% stockholders, the
exercise price of ISOs granted under the 2001 Stock Incentive Plan must be at
least equal to 100% of the fair market value of the Company's Common Stock as of
the date of grant. The exercise price of NQSOs granted under the 2001 Stock
Incentive Plan must be at a price determined by the Committee. However, NQSOs
granted to the chief executive officer or the four other most highly compensated
officers of the Company (referred to herein as "Covered Employees") must have an
exercise price which is not less than the fair market value of the shares
covered by the option on the date the option is granted.
The stock bonus/stock purchase component of the 2001 Stock Incentive Plan
provides a means whereby participants in the 2001 Stock Incentive Plan may
receive bonuses of shares of the Company's Common Stock or the right to purchase
shares of the Company's Common Stock, subject to the restrictions, if any,
imposed by the Committee. The purchase price for rights to purchase shares of
the Company's Common Stock granted under the 2001 Stock Incentive Plan will be
at a price determined by the Committee. Stock bonuses may be granted under the
2001 Stock Incentive Plan with such terms and provisions and for such
consideration, if any, as may be determined by the Committee.
The SARs component of the 2001 Stock Incentive Plan provides a means
whereby participants may receive compensation based on appreciation in value of
the Company's Common Stock after the date of grant. SARs may be granted either
separately or in tandem with stock options, as determined by the Committee.
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Although the Company reserves the right to utilize both the stock
bonus/stock purchase and SAR components of the 2001 Stock Incentive Plan, the
Company, historically has awarded ISOs and NQSOs only, and the Company currently
anticipates that this will continue to be its practice. The 2001 Stock Incentive
Plan is administered by the Committee. The Committee has broad discretion,
subject to the terms of the 2001 Stock Incentive Plan to determine the persons
entitled to receive options, stock bonuses, SARs or the right to purchase shares
of the Company's Common Stock, the timing, terms and conditions thereof, and the
number of shares for which such options, bonuses of stock, SARs and rights to
purchase stock may be granted. Payment of the purchase price and any withholding
amounts upon the exercise of an option or SARs granted under the 2001 Stock
Incentive Plan shall be made in cash or by personal check, certified check, bank
draft, or postal or money order; provided that such payment may, in the case of
options, at the discretion of the Committee, consist of: (i) shares of the
Company's Common Stock; (ii) an irrevocable direction to a broker to sell shares
of the Company's Common Stock and deliver all or a portion of the proceeds to
the Company in payment of the exercise price; (iii) a promissory note with such
terms as the Committee shall approve; or (iv) any combination of the foregoing.
Grants made under the 2001 Stock Incentive Plan to Covered Employees (as defined
in Section 162(m) of the Code) may be made only by a subcommittee (referred to
herein as the "Section 162(m) Subcommittee") of the Committee which is composed
solely of two or more "outside directors," as such term is defined in Section
162(m) of the Code and the Regulations thereunder.
The Company also has the discretion to provide in any stock option, SARs,
stock bonus or stock purchase agreement under the 2001 Stock Incentive Plan
that, in the event of a change of control or a corporate transaction (or in some
cases, the disposition of a subsidiary), any such option or SAR will become
immediately exercisable and any stock covered by a stock bonus or stock purchase
award will become released from any restrictions on transfer and repurchase or
forfeiture rights. Under the 2001 Stock Incentive Plan, a "change of control"
occurs upon (i) the acquisition of more than 50% of the voting power of the
Company by any person or more than one person acting as a group, or (ii) a
change in the composition of the members of the Board over a three-year period
or less to include a majority of persons not serving on the Board at the
beginning of the period or nominated by such persons. Under the 2001 Stock
Incentive Plan, a "corporate transaction" consists of approval by the
Stockholders of (i) a merger or consolidation in which the Company is not the
surviving entity, (ii) the sale of all or substantially all of the assets of the
Company, or (iii) any reverse merger or other acquisition or business
combination in which the Company is the surviving entity in which holders of the
Company's voting securities prior to the merger do not own at least 50% of the
voting power in the Company after the merger.
Options, stock bonuses and rights to purchase the Company's Common Stock
may be granted under the 2001 Stock Incentive Plan to exercise or purchase an
aggregate of not more than 250,000 shares of the Company's Common Stock (subject
to adjustment to reflect certain transactions). The 2001 Stock Incentive Plan
contains a $100,000 limitation on the aggregate fair market value of ISOs which
become exercisable in any calendar year. In addition, under the 2001 Stock
Incentive Plan, the maximum number of shares of Stock with respect to which SARs
or options to acquire Stock may be granted, or sale or bonus grants of Stock may
be made, to any individual per calendar year shall not exceed 100,000 shares
(subject to adjustment to reflect certain corporate transactions).
Awards under the 2001 Stock Incentive Plan will be based on guidelines that
take salary level, tenure, individual performance rating and importance to the
Company into account. Accordingly, future awards ("new plan benefits") under the
2001 Stock Incentive Plan are not determinable at this time. Reference is made
to the sections captioned "Executive Compensation," "Stock Options" and "Stock
Option Exercises" at pages 8 to 10 of this Proxy Statement for detailed
information on stock incentive awards and exercises of such awards by certain
executive officers under former and existing stock incentive plans.
The Board of Directors may at any time amend, suspend or terminate the 2001
Stock Incentive Plan as it deems advisable without stockholder approval (subject
to applicable law), but no such amendment, suspension or termination may impair
any option or SAR previously granted, and the 2001 Stock Incentive Plan cannot
be amended without stockholder approval to materially increase the number of
shares of Common Stock available under the plan or to materially modify the
eligibility requirements for participation
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in the plan, reprice any option by lowering the option exercise price of a
previously granted award, or cancel outstanding options with subsequent
replacement, or regrants of options with lower exercise prices.
INCOME TAX CONSEQUENCES
Incentive Stock Options. If an option under the 2001 Stock Incentive Plan
is treated as an ISO, the optionee generally recognizes no regular taxable
income as the result of the grant or exercise of the option. However, an amount
equal to the difference between the fair market value of the stock on the date
of exercise and the exercise price is classified as an item of alternative
minimum taxable income in the year of exercise for purposes of the alternative
minimum tax.
The Company will not be allowed a deduction for federal income tax purposes
in connection with the grant or exercise of an ISO, regardless of the
applicability of the alternative minimum tax to the optionee. The Company will
be entitled to a deduction, however, to the extent that ordinary income is
recognized by the optionee upon a disqualifying disposition (see below).
Upon a sale or exchange of the shares at least two years after the grant of
an ISO and one year from exercise of the option, gain or loss will be recognized
by the optionee equal to the difference between the sale price and the exercise
price. Such gain or loss will be characterized for federal income tax purposes
as long-term capital gain or loss. The Company is not entitled to any deduction
under these circumstances.
If an optionee disposes of shares acquired upon exercise of an ISO prior to
completion of either of the above holding periods, the optionee will have made a
"disqualifying disposition" of the shares. In such event, the optionee will
recognize ordinary income at the time of disposition equal to the difference
between the exercise price and the lower of the fair market value of the stock
at the date of the option exercise or the sale price of the stock. The Company
generally will be entitled to a deduction in the same amount as the ordinary
income recognized by the optionee on a disqualifying disposition if the
optionee's total compensation is deemed reasonable in amount.
The optionee also will recognize capital gain or loss on such disqualifying
disposition in an amount equal to the difference between (i) the amount realized
by the optionee upon such disqualifying disposition of the stock and (ii) the
exercise price, increased by the total amount of ordinary income, if any,
recognized by the optionee upon such disqualifying disposition (as described in
the second sentence of the preceding paragraph). Any such capital gain or loss
resulting from a disqualifying disposition of shares acquired upon exercise of
an ISO will be long-term capital gain or loss if the shares with respect to
which such gain or loss is realized have been held for more than 12 months.
Nonqualified Stock Options. An optionee generally recognizes no taxable
income as the result of the grant of an NQSO, assuming that the option does not
have a readily ascertainable fair market value at the time it is granted (which
is usually the case with plans of this type). Upon exercise of an NQSO, an
optionee will normally recognize ordinary compensation income for federal tax
purposes equal to the excess, if any, of the then fair market value of the
shares over the exercise price. Optionees who are employees will be subject to
withholding with respect to income recognized upon exercise of a NQSO.
The Company will be entitled to a tax deduction to the extent and in the
year that ordinary income is recognized by the exercising optionee, so long as
the optionee's total compensation is deemed reasonable in amount.
Upon a sale of shares acquired pursuant to the exercise of an NQSO, any
difference between the sale price and the fair market value of the shares on the
date of exercise will be treated as capital gain or loss, and will qualify for
long-term capital gain or loss treatment if the shares have been held for more
than 12 months.
Stock Bonus/Stock Purchase. The federal income tax treatment of
individuals who receive property in connection with the performance of services
is governed by Section 83 of the Code. That section requires that the recipient
of the property recognize income from the transfer in an amount equal to the
excess of the fair market value of the property received over the amount (if
any) paid for the property. Income is recognized by the recipient in the first
year in which the rights of the recipient to the property become "vested," i.e.,
are
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transferable or are no longer subject to a substantial risk of forfeiture,
whichever occurs first. The income is taxable at ordinary income rates and (in
the case of participating individuals who are employees) is subject to
withholding of income and applicable employment taxes at the time of vesting.
Under the 2001 Stock Incentive Plan, participating individuals may or may
not pay any consideration for stock transferred to them under the stock
bonus/stock purchase component of the Plan, and the stock transferred may or may
not be subject to restrictions. If stock is granted to a recipient without
restrictions, the recipient will recognize ordinary income (calculated as
described in the preceding paragraph) in the recipient's taxable year in which
the stock is granted.
If stock granted under the 2001 Stock Incentive Plan is nontransferable and
subject to a substantial risk of forfeiture, then (unless an election is made
under Section 83(b) of the Code, as described in the next paragraph), recipients
of stock will recognize taxable income as of each date on which they become
vested in stock received under the 2001 Stock Incentive Plan in the amount of
the fair market value of the stock then vesting (less the amount, if any, paid
for such stock).
Participating individuals may elect under Section 83(b) of the Code to
report as taxable income in the year of award an amount equal to the stock's
fair market value at the date of award (less the amount, if any, paid for such
stock). If such an election is made, the electing employee is not required
thereafter to report any further compensation income upon becoming vested in the
stock covered by the election. Such an election must be made within 30 days of
receipt of the stock. Such election may not be revoked except with the consent
of the Internal Revenue Service. Participating individuals making this election
who are employees will be subject to withholding with respect to the taxable
income they recognize at the time the stock is awarded to them.
The Company will be entitled to a tax deduction to the extent and in the
year that ordinary income is recognized by the participating individuals, so
long as the individual's total compensation is deemed reasonable in amount.
Dividends paid on stock transferred under the 2001 Stock Incentive Plan are
generally treated as additional compensation prior to vesting, but are treated
as true dividends after vesting (or after a Section 83(b) election). Dividends
are not deductible by the Company.
Participating individuals will recognize gain upon the disposition of their
stock equal to the excess of (a) the amount realized on such disposition over
(b) the ordinary income recognized with respect to their stock under the
principles set forth above (plus the amount, if any, paid for such stock). That
gain will be taxable as long or short term capital gain depending on the period
held.
If a participating individual disposes of his or her stock for an amount
less than the amount of ordinary income recognized with respect to the stock
(plus the amount, if any, paid with respect to the stock), he or she will
generally recognize a capital loss (long or short-term, depending on the holding
period) equal to the difference between any ordinary income recognized with
respect to the stock under the principles described previously (plus the amount,
if any, paid for the stock) and the amount realized upon disposition of the
stock. If a participating individual forfeits unvested stock with respect to
which no Section 83(b) election has been made upon termination of employment, he
or she will generally recognize ordinary income or loss equal to the difference
between the amount, if any, paid by the employee for the stock and the amount
received as a result of the forfeiture. If a participating individual forfeits
unvested stock with respect to which a Section 83(b) election has been made upon
termination of employment, he or she will generally recognize a capital gain or
loss equal to the difference between the amount, if any, paid by the employee
for the stock and the amount received as a result of the forfeiture, but no loss
or deduction is allowed with respect to the amount previously included in income
as a result of the Section 83(b) election.
SARs. Recipients of SARs generally should not recognize income until such
rights are exercised. Upon exercise, the participating individual will normally
recognize ordinary compensation income for federal income tax purposes equal to
the amount of cash and the fair market value of stock, if any, received upon
such exercise. Participating individuals who are employees will be subject to
withholding with respect to income recognized upon exercise of SARs.
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The Company will be entitled to a tax deduction to the extent and in the
year that ordinary income is recognized by the participating individual, so long
as the individual's total compensation is deemed reasonable in amount.
Participating individuals will recognize gain upon the disposition of any
stock received on exercise of SARs equal to the excess of (a) the amount
realized on such disposition over (b) the ordinary income recognized with
respect to such stock under the principles set forth above. That gain will be
taxable as long or short term capital gain depending on whether the stock was
held for at least 12 months.
Section 162(m) of the Code. Under Section 162(m) of the Code, compensation
paid to any Covered Employee is potentially nondeductible by the Company to the
extent that it exceeds $1,000,000. However, certain "performance-based
compensation" is exempt from the $1,000,000 cap on deductibility. The 2001 Stock
Incentive Plan contains provisions designed to qualify options and SARs granted
thereunder to Covered Employees as "performance-based compensation" under
Section 162(m). These provisions include the following: (1) grants to Covered
Employees are made only by the Section 162(m) Subcommittee; (2) the 2001 Stock
Incentive Plan states a maximum number of shares with respect to which options
or SARs may be granted to any individual per calendar year; (3) in the case of
grants to Covered Employees, the option exercise price must be at least equal to
the fair market value of the stock on the date the option is granted; and (4)
the effectiveness of grants to Covered Employees is contingent upon stockholder
approval of the 2001 Stock Incentive Plan.
MARKET PRICE OF THE COMMON STOCK
The closing price of the Company's Common Stock as reported on the Nasdaq
National Market System was $14.00 per share on April 6, 2001. As of such date,
the aggregate market value of the 250,000 shares of Common Stock issuable under
the 2001 Stock Incentive Plan was $3,500,000.
TEXT OF THE PLAN
The preceding summary of the 2001 Stock Incentive Plan is qualified in its
entirety by reference to the complete text of the 2001 Stock Incentive Plan
which is set forth in Appendix B to this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE
2001 STOCK INCENTIVE PLAN
3. PROPOSAL TO AMEND THE 2000 DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
On February 23, 2000, the Board of Directors of the Company adopted the
2000 Directors' Non-Qualified Stock Option Plan (the "Directors' Plan" or the
"Plan") and the stockholders of the Company approved the Plan on May 18, 2000.
On April 24, 2001, the Board of Directors approved amendments to the
Directors' Plan, subject to stockholder approval, to (i) increase the number of
shares of Common Stock for which the directors receive annual option grants from
2,500 shares to 3,750 shares and (ii) to increase the number of shares reserved
for issuance from 62,500 shares to 112,500 shares. The Board adopted the
amendments to enhance the Company's ability to obtain and maintain the services
of knowledgeable and independent directors on the Company's Board of Directors,
to provide an additional incentive for such directors to continue to serve on
the Board and to give them a greater interest as stockholders in the success of
the Company.
At the Annual Meeting, the stockholders are being requested to consider and
approve the foregoing amendments to the Directors' Plan in accordance with the
requirements of the Nasdaq Stock Market.
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PURPOSE OF THE DIRECTORS' PLAN
The purpose of the Directors' Plan is to attract qualified individuals to
serve as members of the Board, to provide additional performance incentives to
such individuals and to encourage their continued service on the Board.
SUMMARY OF THE DIRECTORS' PLAN
The major provisions of the Plan are as follows:
Eligibility. Under the Directors' Plan, each Non-Employee Director is
eligible to receive a non-qualified stock option to purchase 1,250 shares of the
Company's Common Stock (an "Initial Grant") upon his or her first election or
appointment to the Board of Directors. The Company currently has nine non-
employee directors. In addition, the Directors' Plan currently provides that
each Non-Employee Director who is a director immediately prior to an annual
meeting of the Company's stockholders and who continues to be a director after
such meeting will be granted an option to purchase 2,500 shares of the Company's
Common Stock (a "Subsequent Grant"), provided that no Subsequent Grant will be
made to any Non-Employee Director who has not served as an outside director of
the Company as of the time of such annual meeting, for at least one year. Each
Subsequent Grant will be made available on the date of the annual shareholder's
meeting in question.
Number of Shares. As of April 24, 2001, no options to purchase shares of
the 62,500 shares reserved under the Directors' Plan were outstanding. On May
24, 2001, options to purchase an aggregate of 22,500 shares will be
automatically granted under the Directors' Plan (including the increase of the
Subsequent Grant submitted for approval at the Annual Meeting). See
"Compensation of Directors" for a discussion of options granted under the 1996
Directors' Non-qualified Stock Option Plan. The proposed amendments to the
Directors' Plan would increase the number of shares of Common Stock underlying
Subsequent Grant options to Non-Employee Directors who have served as such for
at least one year from 2,500 shares to 3,750 shares and would increase the
number of shares reserved for issuance under the Plan from 62,500 shares to
112,500 shares, subject to adjustment to reflect certain transactions.
Option Price. The exercise price per share of each option granted under
the Directors' Plan is the fair market value of the Company's Common Stock on
the date the option is granted.
Time and Manner of Exercise. Options granted under the Directors' Plan
vest monthly over the 12 months from the date of grant, subject to earlier
vesting upon a change in control or corporate transaction. Under the Plan, a
"change of control" occurs upon (i) the acquisition of more than 50% of the
voting power of the Company by any person, or (ii) a change in the composition
of the members of the Board over a three-year period to include a majority of
persons not serving on the Board at the beginning of the period or nominated by
such persons. Under the Directors' Plan, a "corporate transaction" consists of
approval by the stockholders of (i) a merger or consolidation in which the
Company is not the surviving entity, (ii) the sale of all or substantially all
of the assets of the Company, or (iii) any reverse merger in which the Company
is the surviving entity in which holders of the Company's voting securities
prior to the merger do not own at least 50% of the voting power in the Company
after the merger.
Term of Options. Each option terminates ten years from the date of grant.
Options also terminate no later than three months from the date service on the
Board is discontinued, except that, in the event of death or disability (as
defined in the Plan), the option will terminate no later than 12 months
following the date of such death or disability.
Payment. Payment of the exercise price upon exercise of any option shall
be made in cash or check; provided, however, that the Board, in its sole
discretion, may permit an optionee to pay the option price in whole or in part
(i) with shares of stock owned by the optionee or with shares of stock withheld
from the shares otherwise deliverable to the optionee upon exercise of an option
(in each case only to the extent that such an exercise of the option would not
result in an accounting compensation charge with respect to the shares used to
pay the option price); (ii) by delivery on a form prescribed by the Company of
an irrevocable direction to a securities broker approved by the Company to sell
shares of stock and deliver all or a portion of
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the proceeds to the Company in payment for the stock; (iii) by delivery of the
optionee's promissory note with such recourse, interest, security and redemption
provisions as the Board in its discretion determines appropriate or (iv) in any
combination of the foregoing. Any stock used to exercise options shall be valued
at its fair market value on the date of the exercise of the option.
Termination and Changes to the Plan. The Board of Directors may suspend,
terminate or amend the Directors' Plan from time to time in any manner; provided
that no such action without the approval of the stockholders of the Company may
increase the number of shares subject to the Directors' Plan (except as
contemplated by the express terms of the Directors' Plan) or any option
previously granted, extend the maximum period during which options may be
exercised, materially increase the benefits of the Plan, reprice any option by
lowering the option exercise price of a previously granted award, or cancel
outstanding options with subsequent replacement, or regrants of options with
lower exercise prices.
FEDERAL INCOME TAX CONSEQUENCES OF THE DIRECTORS' PLAN
An optionee generally recognizes no taxable income as the result of the
grant of an option, assuming that the option does not have a readily
ascertainable fair market value at the time it is granted (which is usually the
case with plans of this type). Upon exercise of an option, an optionee will
normally recognize ordinary compensation income for federal tax purposes equal
to the excess, if any, of the then fair market value of the shares over the
exercise price.
The Company will be entitled to a tax deduction to the extent and in the
year that ordinary income is recognized by the exercising optionee, so long as
the optionee's total compensation is deemed reasonable in amount.
Upon a sale of shares acquired pursuant to the exercise of an option, any
difference between the sale price and the fair market value of the shares on the
date of exercise will be treated as capital gain or loss, and will qualify for
long-term capital gain or loss treatment if the shares have been held for more
than 12 months.
NEW PLAN BENEFITS
The benefits set forth below will be received by each of the following
individuals under the Directors' Plan:
NUMBER OF OPTIONS
NAME AND POSITION GRANTED/YEAR EXERCISE PRICE
----------------- ----------------- ---------------
Named Executive Officers.................................... Not eligible N/A
Executive Officers as a group............................... Not eligible N/A
Non-executive Directors as a group.......................... 22,500 Market Price on
May 24, 2001
Non-executive Officer Employees as a group.................. Not eligible N/A
Of this year's nominees for Class III Directors, Messrs. Weber and Weeden
will each receive options to purchase 3,750 shares of Common Stock during each
year they serve as a director of the Company.
MARKET PRICE OF THE COMMON STOCK
The closing price of the Common Stock as reported on the Nasdaq National
Market was $14.00 per share on April 6, 2001. As of such date, the aggregate
market value of the shares of Common Stock reserved for issuance under the
Directors' Plan (assuming the 50,000 shares submitted for approval at the
upcoming Annual Meeting) was $1,575,000.
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PLAN BENEFITS
The only persons eligible to receive options under the Directors' Plan are
Non-Employee Directors. As of April 24, 2001, no options had been granted to the
Company's Non-Employee Directors under the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF THE
AMENDMENTS TO THE 2000 DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns for the
periods indicated for the Company, the S&P 500 Index and the S&P Healthcare
Composite Index. The graph assumes that the value of the investment in the
Company's Common Stock and each index was $100 at April 1, 1996 (the first day
of the first full month of trading of the Common Stock of the Company), and that
all dividends (there were none) were reinvested. The Company has paid no
dividends during such time period. The Company's Common Stock commenced trading
on March 8, 1996, closing at a price of $8.875 on that date and $8.375 on April
1, 1996.
MATRIA HEALTHCARE, INC. S&P 500 INDEX S&P HEALTHCARE COMPOSITE
----------------------- ------------- ------------------------
April 1, 1996 $100.00 $100.00 $100.00
1996 56.72 116.70 116.23
1997 67.17 155.63 167.04
1998 34.33 200.11 240.90
1999 49.26 242.22 221.04
2000 28.73 220.17 300.50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Carl E. Sanders, a director of the Company, is also the Chairman of
Troutman Sanders LLP, a law firm based in Atlanta, Georgia, which provided
certain legal services to the Company in fiscal year 2000 and is expected to be
retained by the Company in the future.
Mr. Mark J. Gainor, a director of the Company, is also the President and
Chief Executive Officer of Lucor Holdings, LLC, which entered into an agreement
with the Company, effective January 19, 1999, to provide management services to
the Company's diabetes supplies and services division. The agreement terminated
on December 31, 2000. Management fees during 2000 were $250,000.
Mr. Gainor indirectly owns a controlling interest in and is the President
and Chief Executive Officer of Gainor Medical Management, L.L.C. ("Gainor
Medical"), and SZ Investments, L.L.C. ("SZI"), a company controlled by Mr. Sam
Zell, owns a minority interest in Gainor Medical. Mr. Gainor also serves on
Gainor Medical's Management Committee.
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On January 19, 1999, pursuant to the Company's acquisition of its diabetes
business from Gainor Medical, the Company entered into a five year standstill
agreement (the "Standstill Agreement") with Mr. Gainor and SZI which allows Mr.
Gainor and SZI to increase their stock ownership in the Company to an aggregate
of up to 35% of the Company's Common Stock, on a fully diluted basis, subject to
a requirement that they refrain from any attempt to gain control of the Company
during the term of the Standstill Agreement. Pursuant to this transaction, the
Company amended its shareholder rights plan to permit the acquisition of shares
by Mr. Gainor, SZI and their respective affiliates and permitted transferees
within the limits set forth in the Standstill Agreement. The acquisition
agreement also provided for the issuance to Gainor Medical by the Company in the
year 2000 of up to $35 million of additional contingent purchase price based on
1999 performance of the acquired companies.
As of December 31, 1999, the Company estimated that approximately $13
million of the additional contingent purchase price would be earned, and such
amount is reflected as additional goodwill and long-term debt on the Company's
consolidated balance sheet for the year ended December 31, 1999. In the first
quarter of 2000, the Company completed its financial review and computed the
additional contingent purchase price to be $13,963,459. The contingent purchase
price was paid by the issuance of subordinated notes to the sellers in 2000.
These notes bear an interest rate of 12% per annum, 8% to be paid quarterly and
4% accruing to maturity, and require principal payments in the amount of
one-third of the original note amount on the third, fourth and fifth
anniversaries of the notes.
Mr. Petit has an outstanding note payable to the Company in the principal
sum of $200,000. See "CEO Compensation".
In 2000, the Company entered into a series of agreements with
MarketRing.com ("MarketRing"), a privately held company located in the Atlanta
area. Mr. Petit and Mr. Weber are members of the Board of Directors of
MarketRing and they are beneficial owners of approximately 14% and 2%,
respectively, of MarketRing's outstanding common stock. In addition, Carl E.
Sanders and Thomas S. Stribling each own a small percentage (less than 1%) of
MarketRing's common stock. Pursuant to the agreements, Matria licenses from
MarketRing certain software, and MarketRing provides certain software
development and website hosting services to the Company. Up to this point, the
services primarily relate to the development of the HerHealthcare.com Internet
community, which supports websites for OB/GYN physicians. This Internet
community is managed by Matria and MarketRing for the support of the Company's
Women's Health division activities. Payments to MarketRing under the agreements
in 2000 totaled $304,018. Hosting and maintenance fees payable to MarketRing in
2001 will approximate $150,000. In 2001, the Company has paid development fees
of $445,706. Future development fees will vary depending on the amount of
development efforts the Company undertakes.
STOCKHOLDER PROPOSALS AT THE COMPANY'S NEXT
ANNUAL MEETING OF STOCKHOLDERS
The 2002 Annual Meeting of Stockholders (the "2002 Annual Meeting") is
anticipated to be held in June 2002. Under the Company's Amended and Restated
Bylaws, a notice of intent of a stockholder to bring a proposal (other than a
director nomination) before the 2002 Annual Meeting must comply with the
requirements of the Company's bylaws and must be received by the Company no
later than December 28, 2001 in order to be presented for a vote at the meeting.
However, if the 2002 Annual Meeting is held on a date more than 30 days before
or after May 24, 2002, notice of a stockholder proposal (other than a director
nomination), to be timely, must be received by the Company within a reasonable
time before the Company begins to print and mail proxy materials. If timely
delivered to the Secretary, such proposals may be included in the Company's
Proxy Statement for the 2002 Annual Meeting, provided the proponent(s) satisfies
all applicable rules of the Securities and Exchange Commission relating to
stockholder proposals.
A director nomination by a stockholder will also only be considered at the
2002 Annual Meeting if received by the Company no later than December 28, 2001.
However, if the 2002 Annual Meeting is held on a date more than 30 days before
or after May 24, 2002, notice of a director nomination must be received not less
than 60 nor more than 75 days prior to the meeting; provided that in the event
less than 70 days notice or prior
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public disclosure of the meeting is given or made to stockholders, notice of
such nomination must be received by the tenth day following the earlier of
public disclosure or mailing of notice of the date of the meeting.
The Company will furnish copies of the bylaw provisions which set forth the
requirements for a stockholder's notice of intent to present proposals upon
written request to the Secretary of the Company at the address set forth in the
following sentence.
Notices of intention to present proposals at the 2002 Annual Meeting or
requests in connection therewith should be addressed to Matria Healthcare, Inc.,
1850 Parkway Place, Marietta, Georgia 30067, Attention: Corporate Secretary.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Act") requires the Company's directors and executive officers and persons who
own more than ten percent of a registered class of the Company's equity
securities to file reports with the SEC regarding beneficial ownership of Common
Stock and other equity securities of the Company. To the Company's knowledge,
based solely on a review of copies of such reports furnished to the Company and
written representations that no other reports were required, during the fiscal
year ended December 31, 2000, all officers, directors and greater than ten
percent beneficial owners complied with the Section 16(a) filing requirements of
the Act in all instances except for late filings with respect to the
dispositions of Common Stock in two instances by Frederick P. Zuspan by gift and
open market sale.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Company will furnish without charge a copy of its Annual Report on Form
10-K filed with the SEC for the fiscal year ended December 31, 2000, including
financial statements and schedules, to any record or beneficial owner of its
Common Stock as of April 6, 2001 upon written or oral request of such person.
Requests for such copies should be directed to:
Matria Healthcare, Inc.
1850 Parkway Place
Marietta, Georgia 30067
Attention: Corporate Secretary
(770) 767-4500
If the person requesting the Form 10-K was not a stockholder of record on
April 6, 2001, the request must include a representation that such person was a
beneficial owner of the Common Stock on that date. Copies of any exhibit(s) to
the Form 10-K will be furnished on request and upon the payment of the Company's
expenses in furnishing such exhibit(s).
GENERAL
Management does not know of any other business to come before the 2001
Annual Meeting. If, however, other matters do properly come before the 2001
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
Roberta L. McCaw
Secretary
April 26, 2001
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APPENDIX A
MATRIA HEALTHCARE, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
ADOPTED MAY 18, 2000
ARTICLE I
PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
Monitor the integrity of the Company's financial reporting process and
system of internal controls regarding finance and accounting compliance.
Monitor the independence and performance of the Company's independent
auditors.
Provide an avenue of communication among the independent auditors,
management and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to the
independent auditors as well as anyone in the organization. The Audit Committee
has the ability to retain, at the Company's expense, special legal, accounting
or other consultants or experts that it deems necessary in the performance of
its duties.
ARTICLE II
AUDIT COMMITTEE COMPOSITION AND MEETINGS
The Audit Committee shall be comprised of at least three directors as
determined by the Board, each of whom shall be independent and free from any
relationship which, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment in carrying out the responsibilities
of a director and an Audit Committee member. All members of the Committee shall
have a basic understanding of finance and accounting and be able to read and
understand fundamental financial statements, and at least one member of the
Committee shall have past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.
The Audit Committee members shall be appointed by the Board. If an Audit
Committee Chair is not designated or present, the members of the Committee may
designate a Chair by majority vote of the Committee membership.
The Committee shall meet at least two times annually, or more frequently as
circumstances dictate. The Audit Committee Chair shall prepare and/or approve an
agenda in advance of each meeting. The Audit Committee may request any officer
or employee of the Company or the Company's outside counsel or outside auditors
to attend a meeting of the Audit Committee or to meet with any members of, or
consultants to, the Audit Committee.
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ARTICLE III
AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
REVIEW PROCEDURES
Review and reassess the adequacy of this Charter at least annually. Submit
the charter to the Board of Directors for approval and have the document
published at least every three years in accordance with SEC regulations.
Review the Company's annual audited financial statements prior to filing or
distribution. Review should include discussion with management and independent
auditors of significant issues regarding accounting principles, practices and
judgments.
Discuss with the management and the independent auditors the integrity of
the Company's financial reporting processes and controls. Review significant
findings prepared by the independent auditors together with management's
responses.
Review should include discussion with the independent auditors any
significant changes to the Company's accounting principles and any other items
communicated by the independent auditors in accordance with SAS 61.
INDEPENDENT AUDITORS
The independent auditors are ultimately accountable to the Audit Committee
and the Board of Directors. The Audit Committee shall review the independence
and performance of the auditors and annually recommend to the Board of Directors
the appointment of the independent auditors or approve any discharge of auditors
when circumstances warrant.
Approve the fees and other significant compensation to be paid to the
independent auditors.
On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the Company
that could impair the auditors' independence. The independent auditors shall
submit to the Company annually a formal written statement delineating all
relationships between the outside auditors and the Company ("Statement as to
Independence"), addressing at least the matters set forth in Independence
Standards Board No. 1.
Review the independent auditors' engagement letter -- discuss scope,
staffing, locations, reliance upon management and general audit approach.
Consider the independent auditor's judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
OTHER AUDIT COMMITTEE RESPONSIBILITIES
Annually prepare a report to shareholders as required by the Securities and
Exchange Commission. The report should be included in the Company's annual proxy
statement.
Perform any other activities consistent with this Charter, the Company's
by-laws and governing law, as the Committee or the Board deems necessary or
appropriate.
Periodically report to the Board of Directors on significant results of the
foregoing activities.
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APPENDIX B
MATRIA HEALTHCARE, INC.
2001 STOCK INCENTIVE PLAN
1. Establishment, Purpose, and Definitions.
(a) Matria Healthcare, Inc. (the "Company") hereby adopts the Matria
Healthcare, Inc. 2001 Stock Incentive Plan (the "Plan").
(b) The purpose of the Plan is to allow the Company to attract and retain
eligible individuals (as defined in Section 5 below) and to provide incentives
to such individuals for their services, increased efforts, and successful
achievements on behalf of or in the interests of the Company and its Affiliates
and to maximize the rewards due them for those efforts and achievements. The
Plan provides employees (including officers and directors who are employees) of
the Company and of its Affiliates an opportunity to purchase shares of common
stock, $0.01 par value per share, of the Company (the "Stock") pursuant to
options which may qualify as incentive stock options (referred to as "incentive
stock options") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and employees, officers, independent contractors, and
consultants of the Company and of its Affiliates an opportunity to purchase
shares of Stock pursuant to options which are not described in Sections 422 or
423 of the Code (referred to as "non-qualified stock options"). The Plan also
provides for the sale or bonus grant of Stock to eligible individuals in
connection with the performance of services for the Company or its Affiliates.
Finally, the Plan authorizes the grant of stock appreciation rights ("SARs"),
either separately or in tandem with stock options, entitling holders to cash
compensation measured by appreciation in the value of the Stock.
(c) The term "Affiliate" as used in the Plan means parent or subsidiary
corporations of the Company, as defined in Sections 424(e) and (f) of the Code
(but substituting "the Company" for "employer corporation"), including parents
or subsidiaries of the Company that become such after adoption of the Plan.
2. Administration of the Plan.
(a) The Plan shall be administered by the Board of Directors of the Company
(the "Board"). Subject to Section 2(f) below, the Board may delegate the
responsibility for administering the Plan to a committee, under such terms and
conditions as the Board shall determine (the "Committee"). To the extent
necessary to exempt transactions under the Plan from Section 16(b): (i) the
Committee shall consist of at least (a) two (2) members of the Board or (b) such
lesser number of members of the Board as permitted by Rule 16b-3; and (ii) each
member of the Committee shall be a Non-Employee Director (as defined in Rule
16b-3), or grants and awards under the Plan to persons subject to Section 16 of
the Exchange Act ("Insiders") shall be determined by a subcommittee consisting
solely of Non-Employee Directors or by the full Board. Members of the Committee
shall serve at the pleasure of the Board. The Committee shall select one of its
members as chair of the Committee and shall hold meetings at such times and
places as it may determine. A majority of the Committee shall constitute a
quorum, and acts of the Committee at which a quorum is present, or acts reduced
to or approved in writing by all members of the Committee, shall be the valid
acts of the Committee. If the Board does not delegate administration of the Plan
to the Committee, then each reference in this Plan to the "Committee" shall be
construed to refer to the Board.
(b) The Committee shall determine which eligible individuals (as defined in
Section 5 below) shall be granted options under the Plan, the timing of such
grants, the terms thereof (including any restrictions on the Stock, and the
number of shares subject to such options.
(c) The Committee shall also determine which eligible individuals (as
defined in Section 5 below) shall be granted or issued SARs or Stock (other than
pursuant to the exercise of options) under the Plan, the timing of such grants
or issuances, the terms thereof (including any restrictions and the
consideration, if any, to be paid therefor), and the number of shares or SARs to
be granted.
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(d) The Committee may amend the terms of any outstanding option or SAR
granted under this Plan, but any amendment that would adversely affect the
holder's rights under an outstanding option or SAR shall not be made without the
holder's written consent. The Committee may, with the holder's written consent,
cancel any outstanding option or SAR or accept any outstanding option or SAR in
exchange for a new option, SAR, or Stock under the Plan on such terms determined
by the Committee. The Committee also may amend any stock purchase agreement or
stock bonus agreement relating to sales or bonuses of Stock under the Plan, but
any amendment that would adversely affect the individual's rights to the Stock
shall not be made without his or her written consent. Notwithstanding the
foregoing, without the prior approval of the Company's shareholders sufficient
to approve the Plan in the first instance: the Committee shall not reprice any
option by lowering the option exercise price of a previously granted award, or
by cancellation of outstanding options with subsequent replacement, or regrant
of options with lower exercise prices.
(e) The Committee shall have the sole authority, in its absolute
discretion, to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan, to construe and
interpret the Plan, the rules and regulations, and the instruments evidencing
options, SARs, or Stock granted or issued under the Plan, and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
All decisions, determinations, and interpretations of the Committee shall be
binding on all participants.
(f) Notwithstanding the foregoing provisions of this Section 2, grants of
options or SARs or Stock to any "Covered Employee," as such term is defined by
Section 162(m) of the Code, shall be made only by a subcommittee of the
Committee which, in addition to meeting other applicable requirements of this
Section 2, is composed solely of two (2) or more outside directors within the
meaning of Section 162(m) of the Code and the regulations thereunder (the
"Subcommittee"), to the extent necessary to qualify such grants as
"performance-based compensation" under Section 162(m) of the Code and the
regulations thereunder. In the case of grants to Covered Employees, references
to the "Committee" shall be deemed to be references to the Subcommittee, as
specified above.
3. Fair Market Value. Where this Plan uses the term "fair market value" in
connection with the Stock, such fair market value shall be determined by the
Committee as follows:
(a) If the Stock is listed on any established stock exchange or a national
market system, including, without limitation, the NASDAQ National Market, its
fair market value shall be the closing selling price for such stock on the
principal securities exchange or national market system on which the Stock is at
the time listed for trading. If there are no sales of Stock on that date, then
the closing selling price for the Stock on the next preceding day for which such
closing price is quoted shall be determinative of fair market value; or
(b) If the Stock is not traded on an exchange or national market system,
its fair market value shall be determined in good faith by the Committee, and
such determination shall be conclusive and binding on all persons.
4. Stock Subject to the Plan.
(a) Subject to adjustment pursuant to Section 4(c) below, the aggregate
number of shares of Stock available for issuance under the Plan and during the
life of the Plan shall be 250,000 shares of Stock (subject to adjustment
pursuant to Section 4(c) below).
(b) If an option is surrendered or for any other reason ceases to be
exercisable in whole or in part, the shares of Stock that were subject to such
option, but as to which the option had not been exercised, shall continue to be
available under the Plan. Any shares of Stock forfeited to the Company pursuant
to the terms of agreements evidencing sales or bonus grants under the Plan shall
continue to be available under the Plan.
(c) If there is any change in the Stock through merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock dividend
(in excess of two percent (2%)), or other change in the corporate structure of
the Company, appropriate adjustments shall be made by the Committee in order to
preserve but not to increase the benefits to the outstanding options, SARs and
stock purchase or stock bonus awards under the Plan, including adjustments to
the aggregate number and kind of shares subject to the Plan, or to
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outstanding stock purchase or stock bonus agreements, or SAR agreements, and the
number and kind of shares and the price per share subject to outstanding
options.
5. Eligible Individuals. Individuals who shall be eligible to have granted
to them options, SARs, or Stock under the Plan shall be such employees,
officers, independent contractors, and consultants of the Company or an
Affiliate as the Committee, in its discretion, shall designate from time to
time. Notwithstanding the foregoing, only employees of the Company or an
Affiliate (including officers and directors who are bona fide employees) shall
be eligible to receive incentive stock options.
6. Terms and Conditions of Options and SARs.
(a) Each option granted pursuant to the Plan will be evidenced by a written
stock option agreement executed by the Company and the person to whom such
option is granted.
(b) The Committee shall determine the term of each option granted under the
Plan; provided, however, that the term of an incentive stock option shall not be
for more than ten (10) years and that, in the case of an incentive stock option
granted to a person possessing more than ten percent (10%) of the combined
voting power of the Company or an Affiliate, the term of each incentive stock
option shall be no more than five (5) years.
(c) In the case of incentive stock options, the aggregate fair market value
(determined as of the time such option is granted) of the Stock with respect to
which incentive stock options are exercisable for the first time by an eligible
employee in any calendar year (under this Plan and any other plans of the
Company or its Affiliates) shall not exceed $100,000. If the aggregate fair
market value of stock with respect to which incentive stock options are
exercisable by an optionee for the first time during any calendar year exceeds
$100,000, such options shall be treated as non-qualified options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking options into account in the order in which
they were granted.
(d) The exercise price of each incentive stock option shall be not less
than the per share fair market value of the Stock subject to such option on the
date the option is granted. The exercise price of each non-qualified stock
option shall be as determined by the Committee. Notwithstanding the foregoing,
(i) in the case of an incentive stock option granted to a person possessing more
than ten percent (10%) of the combined voting power of the Company or an
Affiliate, the exercise price shall be not less than one hundred ten percent
(110%) of the fair market value of the Stock on the date the option is granted;
and (ii) in the case of an option granted to a Covered Employee, the exercise
price shall be not less than the per share fair market value of the Stock
subject to such option on the date the option is granted. The exercise price of
an option or SAR shall be subject to adjustment to the extent provided in
Section 4(c) above, but, in the case of a grant to a Covered Employee, only to
the extent such adjustment does not cause the grant to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code and the regulations thereunder.
(e) The Committee may, under such terms and conditions as it deems
appropriate, authorize the issuance of SARs evidenced by a written SAR agreement
(which, in the case of tandem options, may be part of the option agreement to
which the SAR relates) executed by the Company and the person to whom the SARs
are granted. The SAR agreement shall specify the term for the SARs covered
thereby, the cash amount payable or securities issuable upon exercise of the
SAR, and contain such other terms, provisions, and conditions consistent with
this Plan, as may be determined by the Committee.
(f) Payment of the purchase price and any withholding amounts pursuant to
Section 11 upon the exercise of any option or SAR granted under this Plan shall
be made in cash or by optionee's personal check, a certified check, a bank
draft, or a postal or express money order payable to the order of the Company in
lawful money of the United States; provided, however, that the Committee, in its
sole discretion, may permit an optionee to pay the option price and any such
withholding amounts in whole or in part (i) with shares of Stock owned by the
optionee (provided that any shares of stock tendered for payment shall have been
owned for a period of six (6) months, or such other period as in the opinion of
the Committee shall be sufficient to avoid an accounting compensation charge
with respect to the shares used to pay the option price); (ii) by delivery on a
form prescribed by the Committee of an irrevocable direction to a securities
broker approved by the
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Committee to sell shares of Stock and deliver all or a portion of the proceeds
to the Company in payment for the Stock; (iii) by delivery of the optionee's
promissory note with such recourse, interest, security, and redemption
provisions as the Committee in its discretion determines appropriate; or (iv) in
any combination of the foregoing. Any Stock used to exercise options shall be
valued at its fair market value on the date of the exercise of the option.
(g) In the event that the exercise price is satisfied by shares withheld
from the shares of Stock otherwise deliverable to the optionee, the Committee
may issue the optionee an additional option, with terms identical to the option
agreement under which the option was exercised, entitling the optionee to
purchase additional shares of Stock equal to the number of shares so withheld
but at an exercise price equal to the fair market value of the Stock on the
grant date of the new option. Such additional option shall be subject to the
provisions of Section 6(i) below.
(h) The stock option agreement or SAR agreement may contain such other
terms, provisions, and conditions consistent with this Plan, as may be
determined by the Committee. If an option, or any part thereof, is intended to
qualify as an incentive stock option, the stock option agreement shall contain
those terms and conditions which are necessary to qualify it.
(i) The maximum number of shares of Stock with respect to which SARs or
options to acquire Stock may be granted, or sales or bonus grants of Stock may
be made, to any individual per calendar year under this Plan shall not exceed
100,000 shares (which number may be increased without shareholder approval to
reflect adjustments under Section 4(c) above, to the extent such adjustment, in
the case of a grant to a Covered Employee, does not cause the grant to fail to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code and the regulations thereunder). To the extent required to cause
options granted to Covered Employees to qualify as "performance-based
compensation" under Section 162(m) of the Code and the regulations thereunder,
in applying the foregoing limitation with respect to an employee, if any option
is canceled, the canceled option shall continue to count against the maximum
number of shares for which options may be granted to the employee under this
Section 6(i). For this purpose, the repricing of an option shall be treated as a
cancellation of the existing option and the grant of a new option to the extent
required by Section 162(m) of the Code or the regulations thereunder. The
preceding sentence shall also apply in the case of an SAR, if, after the award
is made, the base amount on which stock appreciation is calculated is reduced to
reflect a reduction in the fair market value of the Stock.
7. Terms and Conditions of Stock Purchases and Bonuses.
(a) Each sale or bonus grant of Stock pursuant to the Plan will be
evidenced by a written stock purchase agreement or stock bonus agreement, as
applicable, executed by the Company and the person to whom such stock is sold or
granted.
(b) The stock purchase agreement or stock bonus agreement may contain such
other terms, provisions, and conditions consistent with this Plan, as may be
determined by the Committee, including, not by way of limitation, the
consideration, if any, to be paid for the Stock, restrictions on transfer,
forfeiture provisions, repurchase provisions, and vesting provisions.
8. Use of Proceeds. Cash proceeds realized from the exercise of options
granted under the Plan or from other sales of Stock under the Plan shall
constitute general funds of the Company.
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9. Amendment, Suspension, or Termination of the Plan.
(a) The Board may at any time amend, suspend, or terminate the Plan as it
deems advisable; provided that such amendment, suspension, or termination
complies with all applicable requirements of state and federal law, including
any applicable requirement that the Plan or an amendment to the Plan be approved
by the shareholders, and provided further that, except as provided in Section
4(c) above and Section 15 below, the Board shall in no event amend the Plan in
the following respects without the approval of shareholders then sufficient to
approve the Plan in the first instance:
(i) to increase the maximum number of shares of Stock provided in
Section 6(i) above, with respect to which restricted stock, SARs, or
options to acquire Stock may be granted to any Covered Employee per
calendar year under the Plan;
(ii) to materially increase the number of shares of Stock available
under the Plan, or to increase the number of shares of Stock available for
grant of incentive stock options under the Plan; or
(iii) to materially modify the eligibility requirements for
participation in the Plan or the class of employees eligible to receive
options under the Plan, or to change the designation or class of persons
eligible to receive incentive stock options under the Plan.
(iv) to permit repricing of options by lowering the option exercise
price of a previously granted award, or by cancellation of outstanding
options with subsequent replacement, or regrants of options with lower
exercise prices.
(b) No option or SAR may be granted nor may any Stock be issued (other than
upon exercise of outstanding options) under the Plan during any suspension or
after the termination of the Plan, and no amendment, suspension, or termination
of the Plan shall, without the affected individual's consent, alter or impair
any rights or obligations under any option or SAR previously granted under the
Plan. The Plan shall terminate with respect to the grant of incentive stock
options on the tenth anniversary of the date of adoption of the Plan, unless
previously terminated by the Board pursuant to this Section 9.
10. Assignability. No option or SAR granted pursuant to this Plan shall be
transferable by the holder except to the extent provided in the option agreement
or the SAR agreement covering the option or the SAR. Stock subject to a stock
purchase agreement or a stock bonus agreement shall be transferable only as
provided in such agreement. Notwithstanding the foregoing, if required by the
Code, each incentive stock option under the Plan shall be transferable by the
optionee only by will or the laws of descent and distribution, and, during the
optionee's lifetime, be exercisable only by the optionee.
11. Withholding Taxes. No Stock shall be granted or sold under the Plan to
any individual, and no option or SAR may be exercised, until the individual has
made arrangements acceptable to the Committee for the satisfaction of federal,
state, and local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Stock under the Plan,
the lapsing of restrictions applicable to such Stock, the failure to satisfy the
conditions for treatment as incentive stock options under the applicable tax
law, or the receipt of cash payments.
12. Restrictions on Transfer of Shares. The Committee may require that the
Stock acquired pursuant to the Plan be subject to such restrictions and
agreements regarding sale, assignment, encumbrances, or other transfer as are in
effect among the shareholders of the Company at the time such Stock is acquired,
as well as to such other restrictions as the Committee shall deem appropriate.
13. Change in Control.
(a) For purposes of this Section 13, a "Change in Control" shall be deemed
to occur upon:
(i) the direct or indirect acquisition by any person or related group
of persons (other than an acquisition from or by the Company or by a
Company-sponsored employee benefit plan) of beneficial ownership (within
the meaning of Rule 13d-3 of the Exchange Act of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Company's outstanding Stock;
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(ii) a change in the composition of the Board over a period of
thirty-six (36) months or less, such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more
contested elections for Board membership or by one or more actions by
written consent of shareholders, to be comprised of individuals who either
(A) have been Board members continuously since the beginning of such
period, or (B) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or nomination
was approved by the Board.
(b) For purposes of this Section 13, a "Corporate Transaction" shall be
deemed to occur upon any of the following transactions to which the Company is a
party:
(i) approval by the Company's shareholders of a merger or
consolidation in which the Company is not the surviving entity, except for
a transaction the principal purpose of which is to change the state in
which the Company is incorporated;
(ii) approval by the Company's shareholders of the sale, transfer, or
other disposition of all or substantially all of the assets of the Company
(including the capital stock of the Company's subsidiary corporations) in
connection with a complete liquidation or dissolution of the Company; or
(iii) approval by the Company's shareholders of any reverse merger in
which the Company is the surviving entity but in which securities
possessing more than fifty percent (50%) of the total combined voting power
of the Company's outstanding securities are transferred to a person or
persons different from those who held such securities immediately prior to
such merger.
(c) In its discretion, the Committee may provide in any stock option, SAR,
Stock bonus, or Stock purchase agreement (or in an amendment thereto) evidencing
an option, SAR, Stock bonus, or Stock purchase agreement hereunder that, in the
event of any Corporate Transaction or an event giving rise to a Change in
Control, any outstanding options or SARs covered by such an agreement shall be
fully vested, non-forfeitable, and become exercisable, and that any restricted
Stock covered by such an agreement shall be released from restrictions on
transfer and repurchase or forfeiture rights, as of the date of the Change in
Control or Corporate Transaction. However, the Committee may provide in any such
agreement that, in the case of a Corporate Transaction, the Committee may
determine that an outstanding option will not be so accelerated if and to the
extent, (i) such option is either to be assumed by the successor or parent
thereof or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation or parent thereof; or (ii) such
option is to be replaced with a cash incentive program of the successor
corporation that preserves the option spread existing at the time of the
Corporate Transaction and provides for subsequent payment in accordance with the
same vesting schedule applicable to such option.
(d) If the Committee determines to incorporate a Change in Control or
Corporate Transaction acceleration provision in any option or SAR agreement
hereunder, the agreement shall provide that, (i) in the event of a Change in
Control or Corporate Transaction described in clauses (a)(i), (a)(ii), and
(b)(iii) of Section 13 above, the option or SAR shall remain exercisable for the
remaining term of the option or SAR; and (ii) in the event of a Corporate
Transaction described in clauses (i) or (ii) of Section 13(b) above, the option
or SAR shall terminate as of the effective date of the Corporate Transaction
described therein, unless such option or SAR is assumed by a successor
corporation in the event of a Corporate Transaction described in clause (i) of
Section 13(b). If an option or SAR is assumed in the event of a Corporate
Transaction described in clause (i) of Section 13(b) above, the option or SAR
shall remain exercisable for the remaining term of the option or SAR. In no
event shall any option or SAR under the Plan be exercised after the expiration
of the term provided for in the related stock option agreement or SAR agreement
pursuant to Section 6(b) or (e).
(e) The Committee may provide in any option or SAR agreement hereunder that
should the Company dispose of its equity holding in any subsidiary effected by,
(i) merger or consolidation involving that subsidiary; (ii) the sale of all or
distribution of substantially all of the assets of that subsidiary; or (iii) the
Company's sale of or distribution to shareholders of substantially all of the
outstanding capital stock of such subsidiary ("Subsidiary Disposition") while a
holder of the option or SAR is engaged in the performance of
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services for the affected subsidiary corporation, then such option or SAR shall,
immediately prior to the effective date of such Subsidiary Disposition, become
fully exercisable with respect to all of the shares at the time represented by
such option or SAR and may be exercised with respect to any or all of such
shares. Any such option or SAR shall remain exercisable until the expiration or
sooner termination of the term of the option or SAR.
14. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Any incentive stock options granted
hereunder and any options, SARs, or Stock granted to Covered Employees hereunder
shall become effective only upon such shareholder approval. The Committee may
grant incentive stock options or may grant options, SARs, or Stock to Covered
Employees under the Plan prior to such shareholder approval, but until
shareholder approval is obtained, no such option or SAR shall be exercisable and
no such Stock grant shall be effective. In the event that such shareholder
approval is not obtained within the period provided above, all options, SARs, or
Stock grants previously granted above shall terminate. If such shareholder
approval is obtained at a duly held shareholders' meeting, the Plan must be
approved by a majority of the votes cast at such shareholders' meeting at which
a quorum, representing a majority of all outstanding voting stock of the
Company, is, either in person or by proxy, present and voting on the Plan. If
such shareholder approval is obtained by written consent, it must be obtained by
the written consent of the holders of a majority of all outstanding voting stock
of the Company. However, approval at a meeting or by written consent may be
obtained to a lesser degree of shareholder approval if the Board determines, in
its discretion after consultation with the Company's legal counsel, that such a
lesser degree of shareholder approval will comply with all applicable laws and
will not adversely affect the qualification of the Plan under either Section
162(m) or 422 of the Code.
15. Rule 16b-3 Compliance.
(a) With respect to Insiders, transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3. To the extent any provision
of the Plan or action by the Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Committee. Moreover, in the event the Plan does not include a provision required
by Rule 16b-3 to be stated therein as a condition to exemption from Section
16(b) of the Exchange Act, such provision (other than one relating to
eligibility requirements or the price and amount of awards) shall be deemed
automatically to be incorporated by reference into the Plan insofar as
transactions with Insiders are concerned.
(b) If, subsequent to the Board's adoption of the Plan, Rule 16b-3 is
amended to delete any of the Rule 16b-3 conditions or requirements addressed by
the provisions of the Plan, the Board may amend the Plan without shareholder
approval (unless such approval is required by Rule 16b-3, as so amended) to
delete or otherwise amend any such provisions no longer required for grants of
options, SARs, and Stock under the Plan to Insiders to be exempt from Section
16(b) liability under the Exchange Act.
16. The Right of the Company to Terminate Employment. No provision in the
Plan or any Option shall confer upon any Optionee any right to continue in the
employment of the Company or an Affiliate or to interfere in any way with the
right of the Company or an Affiliate to terminate his employment at any time.
B-7
36
MATRIA HEALTHCARE, INC.
1850 PARKWAY PLACE
MARIETTA, GEORGIA 30067
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 24, 2001
The undersigned hereby appoints Parker H. Petit and Roberta L. McCaw, and
each of them, proxies, with full power of substitution and with discretionary
authority, to represent and to vote in accordance with the instructions set
forth below, all shares of Common Stock of Matria Healthcare, Inc. held of
record by the undersigned on April 6, 2001 at the 2001 Annual Meeting of
Stockholders to be held at 1850 Parkway Place, Suite 320, Marietta, Georgia, at
10:30 a.m. on Thursday, May 24, 2001 and any adjournments thereof.
1. Election of Class II Directors [ ] FOR all nominees listed below (except as
written to the contrary below)
1. Election of Class II Directors [ ] WITHHOLD AUTHORITY to vote for all
nominees listed below
Parker H. Petit, Jeffrey D. Koepsell, Donald W. Weber and Morris S. Weeden
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
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2. Proposal to approve the Matria Healthcare, Inc. 2001 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve amendments to the 2000 Directors' Non-Qualified Stock
Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued on Reverse Side)
(Continued from other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR"
ITEMS 1, 2 AND 3.
PLEASE SIGN EXACTLY AS NAME APPEARS ON STOCK CERTIFICATE.
If stock is held in the name of
two or more persons, all must
sign. When signing as attorney,
as executor, administrator
trustee, or guardian, please
give full title as such. If a
corporation, please sign in full
corporate name by President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated: , 2001
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Signature
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Signature if Held Jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.