-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Mfeg5utrRQwljAipFWY5s6pg+JlgFg1ZXkTVUUAfgQd1KidkyJJh+jyf5Je0yIrW CAQJMqsizMRLYeIIjn7dpg== 0000950144-97-004887.txt : 19970501 0000950144-97-004887.hdr.sgml : 19970501 ACCESSION NUMBER: 0000950144-97-004887 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970430 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTHDYNE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000900307 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 521756497 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-21776 FILM NUMBER: 97591804 BUSINESS ADDRESS: STREET 1: 1255 KENNESTONE CIRCLE CITY: MARIETTA STATE: GA ZIP: 30066 BUSINESS PHONE: 4044234500 MAIL ADDRESS: STREET 1: 1255 KENNESTONE CIRCLE CITY: MARIETTA STATE: GA ZIP: 30066 10-K405/A 1 HEALTHDYNE TECHNOLOGIES INC 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _____________ FORM 10-K/A AMENDMENT NO. 1 X Annual Report Pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 for the fiscal year ended December 31, 1996 or Transition Report Pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 for the transition period from ______________ to ______________. COMMISSION FILE NUMBER 0-21776 HEALTHDYNE TECHNOLOGIES, INC. (Exact Name of Registrant as Specified in its Charter) Georgia 52-1756497 (State or other Jurisdiction of (IRS Employer ID No.) Incorporation or Organization) 1255 Kennestone Circle Marietta, Georgia 30066 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (770) 499-1212 Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock $.01 per share Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days: Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: [ X ] The aggregate market value of the Registrant's common stock (based upon the mean of the closing high and low sales price reported by NASDAQ and published in the Wall Street Journal) held by non-affiliates as of March 14, 1997, was approximately $154,528,241. The Registrant had 12,726,866 shares of its common stock outstanding as of March 14, 1997. The Registrant hereby files this Form 10-K/A to amend its Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (the "1996 Form 10-K") (i) to include the information required by Part III (Items, 10, 11, 12 and 13) in lieu of the incorporation thereof by reference from the Registrant's definitive proxy statement for its 1997 Annual Meeting of Shareholders and (ii) to file additional exhibits with the 1996 Form 10-K, as set forth at Item 14. 2 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Pursuant to General Instruction G(3), certain information regarding the executive officers of the Company is included in Part I of this Form 10-K under the caption "Executive Officers of the Registrant." BOARD OF DIRECTORS The following is a brief description of each director's principal occupation and business experience during the last five years, directorships of publicly-held companies presently held by each director and certain other information. CRAIG B. REYNOLDS, age 48, has served as President of the Company since January 1987 and became Chief Executive Officer and a director of the Company in March 1993. Previously, he served as President of the Healthdyne Cardiovascular Division of Healthdyne, Inc. ("Healthdyne"), the former parent of the Company, from January 1985 to December 1986 and as Vice President of Business and Technology Development of the Technologies Division of Healthdyne from January 1981 to December 1984. He joined Healthdyne in 1981. PARKER H. PETIT, age 57, has served as a director of the Company since January 1993. Mr. Petit was the founder of Healthdyne, and acted as its Chairman of the Board and Chief Executive Officer from 1970 until March 1996 when Healthdyne merged with Tokos Medical Corporation (Delaware) and Matria Healthcare, Inc. ("Matria Healthcare"), with Matria Healthcare as the surviving corporation (the "Merger"). He is now the Chairman of the Board of Matria Healthcare. Mr. Petit is also the Chairman of the Board of Healthdyne Information Enterprises, Inc., and a director of Atlantic Southeast Airlines, Inc. He is also a director of the Georgia Research Alliance. J. TERRY DEWBERRY, age 53, has served as a director of the Company since January 1996. Mr. Dewberry was Vice Chairman of Healthdyne from March 1992 until March 1996 when the Merger was completed. From September 1987 to March 1992, Mr. Dewberry served as President and Chief Operating Officer of Healthdyne. Mr. Dewberry served as Executive Vice President of Healthdyne from August 1984 until September 1987. Mr. Dewberry is also a director of Healthdyne Information Enterprises, Inc. ALEXANDER H. LORCH, age 73, has been a director of the Company since March 1993. Mr. Lorch is retired as Executive Vice President of Lockheed-Georgia Co., a division of Lockheed Corporation, and Vice President of Lockheed Corporation, an aerospace manufacturer, which positions he held from 1975 to February 1985. He also was President of Lockheed-Georgia International Service, a subsidiary of Lockheed Corporation, from 1980 to 1985, and Chairman of the Board of Murdock Engineering Co., a subsidiary of Lockheed Corporation, -2- 3 from 1981 to February 1985. Mr. Lorch was also a member of the Board of Directors of Healthdyne until March 1996 when the Merger was completed. J. LELAND STRANGE, age 55, has served as a director of the Company since March 1993. Mr. Strange is, and has been since December 1983, Chairman of the Board, President and Chief Executive Officer of Intelligent Systems Corporation, a diversified company with operations and investments in technology and health care related products and services. Mr. Strange also is a director of IQ Software Corporation and PaySys International, Incorporated. JAMES J. WELLMAN, M.D., age 53, has served as a director of the Company since July 1994. Dr. Wellman has been a physician since 1970 specializing in sleep disorders. He founded Sleep Disorders Center of Georgia, the first sleep disorders center in Georgia, in 1978, and continues as its Medical Director. Dr. Wellman is Clinical Assistant Professor of Medicine (Pulmonary Diseases) at Emory University, a position which he has held since 1976, and was previously an Instructor of Medicine at Harvard Medical School from 1975 to 1976. J. PAUL YOKUBINAS, age 59, has served as a director of the Company since January 1993. Mr. Yokubinas served as President and Chief Operating Officer of Healthdyne from March 1992 until March 1996. From May 1991 until March 1992, he served as Vice President of Business Development of Healthdyne. Mr. Yokubinas was President and principal investor of C.Q.I. International, Inc., a privately held holding company, from February 1987 to January 1991 and was Executive Vice President of that company from July 1985 to January 1987. Prior to that time, he served as Executive Vice President of Healthdyne and was a director of Healthdyne from 1971 until March 1996 when the Merger was completed. ITEM 11. EXECUTIVE COMPENSATION. The following table sets forth compensation paid to the Company's chief executive officer, each of the four most highly compensated executive officers of the Company serving as of December 31, 1996, and one individual who no longer served as an executive officer as of December 31, 1996 (collectively, the "named executive officers") for their services in all capacities to the Company during the past three years: -3- 4 SUMMARY COMPENSATION TABLE
LONG-TERM ANNUAL COMPENSATION COMPENSATION ------------------- ------------ SECURITIES UNDERLYING NAME AND OPTIONS ALL OTHER PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#)(1)(2)(3) COMPENSATION ($)(4) ------------------ ---- --------- -------- ------------ ------------------- Craig B. Reynolds................. 1996 234,081 -- 40,000 2,425 President and 1995 195,147 -- 104,733 2,033 Chief Executive Officer 1994 170,853 -- 81,667 1,767 John L. Miclot.................... 1996 181,492 20,000(6) 24,000 63,127(7) Senior Vice President 1995 25,577(5) 20,000(6) -- 9,293(7) Sales and Marketing Robert E. Tucker.................. 1996 183,127 -- 24,000 3,750 Senior Vice President - 1995 139,133 -- 63,691 3,283 Operations 1994 122,435 -- 61,333 2,055 Leslie R. Jones................... 1996 148,115 -- 24,000 3,750 Vice President, General 1995 95,089(8) -- 37,833 3,483 Counsel and Secretary Robert M. Johnson................. 1996 144,869 -- 10,000 12,663(9) Senior Vice President - 1995 137,288 25,000(10) 14,944 11,628(9) Business Development 1994 102,885 -- 23,333 -- Vincent J. Persano................ 1996 125,423 26,000(11) 5,000 3,750 Vice President - Sales 1995 107,250 41,399(11) 26,724 2,766 (former executive officer) 1994 100,000 20,942(11) 9,333 2,014
- -------------------------- (1) Includes options to purchase common stock of Healthdyne as follows: Mr. Reynolds - 15,000 shares in 1994; Mr. Johnson - 10,000 shares in 1994; Mr. Tucker - 12,000 shares in 1994; Ms. Jones - 15,000 shares in 1995. (2) Includes an adjustment to options to purchase the Company's Common Stock to reflect the Company's Common Stock distribution resulting from a 4 for 3 stock split to shareholders of record on September 6, 1994. (3) Includes options ("Adjustment Options") to purchase the Company's Common Stock issued under the Company's Stock Option Plan II in connection with the Spin-Off (as hereinafter defined) of the Company by Healthdyne in May 1995. (4) All named executive officers except Mr. Miclot participated in Healthdyne's or the Company's 401(K) plan. The amounts shown in this column represent matching contributions made by the Company to the 401(K) plan on behalf of these individuals. (5) Mr. Miclot's 1995 compensation represents amounts earned since he commenced employment with the Company in November of 1995. (6) As an incentive for Mr. Miclot to enter into employment with the Company, the Company agreed to pay Mr. Miclot a bonus in the amount of $40,000, $20,000 of which was paid 30 days following commencement of employment, with the remaining $20,000 paid upon the completion of Mr. Miclot's relocation to the Marietta, Georgia area. (7) As an incentive for Mr. Miclot to enter into employment with the Company, the Company agreed to reimburse Mr. Miclot for certain relocation expenses. (8) Ms. Jones became a full-time employee of the Company on May 22, 1995. Ms. Jones' 1995 compensation includes compensation for services rendered to the Company while she was an employee of Healthdyne. (9) Includes forgiveness of a bridge loan made by the Company in connection with Mr. Johnson's relocation to the Marietta, Georgia area in the amount of $8,913 for both 1995 and 1996. See "Employment Contracts, Termination of Employment, and Change in Control Agreements with Executive Officers and Directors." (10) Represents a bonus paid to Mr. Johnson at the time of his acceptance of employment with the Company. -4- 5 (11) Represents sales commissions paid to Mr. Persano and payable quarterly pursuant to a sales incentive plan based upon the achievement by the Company of certain sales goals established by the President and Chief Executive Officer. STOCK OPTIONS The following table contains information concerning the grant of stock options under the Company's 1993 Stock Option Plan and 1996 Stock Option Plan to the named executive officers of the Company during the last fiscal year. OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS ----------------- % OF TOTAL POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES NUMBER OF OPTIONS EXERCISE OF STOCK PRICE SECURITIES GRANTED TO OR APPRECIATION FOR UNDERLYING EMPLOYEES BASE OPTION TERM OPTIONS IN FISCAL PRICE EXPIRATION ----------- NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($) - ---- ---------- ---------- -------- ---------- ---------- ---------- Craig B. Reynolds... 40,000 14.19% 10.06 4/17/06 253,068 641,320 John L. Miclot...... 24,000 8.51% 10.06 4/17/06 151,841 384,792 Robert E. Tucker.... 24,000 8.51% 10.06 4/17/06 151,841 384,792 Leslie R. Jones..... 24,000 8.51% 10.06 4/17/06 151,841 384,792 Robert M. Johnson... 10,000 3.55% 10.06 4/17/06 63,267 160,330 Vincent J. Persano.. 5,000 1.77% 10.06 4/17/06 31,633 80,165
The options referred to above become exercisable in three annual installments commencing on the first anniversary date of the option grant. The options are not transferable, otherwise than by will or the laws of descent and distribution. Except as provided in each of the option agreements, the options may not be exercisable unless employment with the Company or an affiliate or subsidiary of the Company continues. Prior to their scheduled expiration, options granted under the plans will expire (i) immediately upon the employee's termination for good cause; (ii) three months after the date of termination for reason other than good cause; (iii) three months after the employee's voluntary termination; and (iv) one year after the employee's death or disability. The optionees are obligated to reimburse the Company at the time of any exercise of the options for any taxes required to be withheld by the Company under federal, state or local law as the result of the exercise of the options. See "Employment Contracts, Termination of Employment, and Change in Control Agreements with Executive Officers and Directors." -5- 6 STOCK OPTION EXERCISES The following table sets forth information with respect to the named executive officers concerning the exercise of options for both the Company's Common Stock and Healthdyne's common stock during the last fiscal year and the value of unexercised options for the Company's Common Stock held as of the end of the fiscal year: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY - END OPTION VALUES
Shares Number of Securities Acquired Value Underlying Unexercised Value of Unexercised on Exercise Realized Options at In-the-Money Options Name (#) ($)(1) Fiscal Year End(#) at Fiscal Year End($) - ---- ----------- -------- -------------------------- -------------------------- Exercisable Unexercisable Exercisable Unexercisable ----------- ------------- ----------- ------------- Craig B. Reynolds (2)................. -- -- 140,611 96,474 112,228 2,081 (3)................. 23,334 168,321 -- -- -- -- John L. Miclot (2)................. -- -- 11,666 47,334 -- -- (3)................. -- -- -- -- -- -- Robert E. Tucker (2)................. -- -- 97,739 56,301 78,399 1,526 (3)................. 18,000 131,434 -- -- -- -- Leslie R. Jones (2)................. -- -- 33,474 32,556 19,523 -- (3)................. 27,002 185,015 -- -- -- -- Robert M. Johnson (2)................. -- -- 22,652 15,625 10,392 -- (3)................. 6,667 50,105 -- -- -- -- Vincent J. Persano(2)................. 19,232 78,243 7,497 14,215 7,779 -- (3)................. 10,000 66,387 -- -- -- --
----------------------- (1) Represents the excess of the fair market value of the stock at the time of exercise above the exercise price of the options. (2) Represents options to purchase the Company's Common Stock only. The value of unexercised in-the-money options is based on $8.88, the last sale price of the Company's Common Stock on December 31, 1996. (3) Represents options to purchase Healthdyne's common stock only. PENSION PLAN The following table shows the estimated pension benefits payable to a covered participant at normal retirement age under the Company's nonqualified pension plan, which provides benefits based on remuneration that is covered under the plan and years of service with the Company and its affiliates. PENSION PLAN TABLE
YEARS OF SERVICE -------------------------------------------------------- Remuneration 10 15 20 25 30 35 - ------------ -- -- -- -- -- $ 75,000 $15,300 $22,950 $ 30,600 $ 30,600 $ 30,600 $ 30,600 100,000 22,800 34,200 45,600 45,600 45,600 45,600 125,000 30,300 45,450 60,600 60,600 60,600 60,600 150,000 37,800 56,700 75,600 75,600 75,600 75,600 175,000 45,300 67,950 90,600 90,600 90,600 90,600 200,000 52,800 79,200 105,600 105,600 105,600 105,600
Remuneration covered by the plan is based on the average base salary of the executive for the three years in which his or her base salary is the highest. This amount for each of the named -6- 7 executive officers participating in the plan as of the end of the last fiscal year was $200,027, $178,246, $148,232, $137,614, $128,347 and $110,891, respectively, for Mr. Reynolds, Mr. Miclot, Mr. Tucker, Ms. Jones, Mr. Johnson and Mr. Persano. The estimated years of service for each named executive officer as of the end of the last fiscal year was 16 years for Mr. Reynolds, 1 year for Mr. Miclot, 15 years for Mr. Tucker, 12 years for Ms. Jones, 3 years for Mr. Johnson and 11 years for Mr. Persano. Years during which the named executive officers were employed by Healthdyne are included in the years of service for such named executive officers under the plan. Benefits shown are computed as a diminishing single life annuity beginning at age 65 with annual reductions equal to the annual increases in primary social security benefits. The base salary used to calculate covered compensation is the same figure reported in the "Salary" column of the Summary Compensation Table, except with respect to Ms. Jones, whose base salary for these purposes includes compensation for services rendered to Healthdyne. COMPENSATION OF DIRECTORS Directors who are officers of the Company receive no additional compensation for serving on the Board of Directors. Directors who are not officers receive a fee of $12,000 per annum, plus $1,000 for each Board meeting and $750 for each committee meeting attended, and are reimbursed for any travel expenses incurred. As set forth below, in lieu of the $12,000 director's fee, Mr. Petit receives certain other compensation for his services as Chairman of the Board of Directors. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL AGREEMENTS WITH EXECUTIVE OFFICERS AND DIRECTORS The Company has entered into separate Noncompetition Agreements with certain executive officers, including Mr. Reynolds, Mr. Miclot, Mr. Tucker and Ms. Jones. The terms and conditions of these Noncompetition Agreements are identical for each of these individuals and provide that in the event the individual's employment is terminated or the individual terminates employment for good reason (e.g., loss or reduction of title, responsibility, pay or benefits) within three years following a change in control as defined in the Noncompetition Agreement, the individual agrees not to compete for a period of 12 months, as an owner, employee, consultant or agent of any entity which competes in any material respect with the Company ("Competitor"). The noncompetition provisions do not apply in the event (i) less than thirty percent (30%) of the Competitor's revenue in the last fiscal year was related to Competitor's product lines which compete with the Company ("Competing Products"), or (ii) the individual provides services to a Competitor which are unrelated to the Competitor's Competing Products. Pursuant to the Noncompetition Agreements, these individuals will receive certain benefits in the event their respective employment with the Company is terminated or the individual terminates his or her employment for good cause (as defined in the Noncompetition Agreements) within three years following a change in control of the Company. In such event, the individual will receive three times his or her average annual compensation (as reported on the applicable Forms W-2 from the Company) for the five years ending prior to termination, a continuation of health, life and disability benefits for three years, and use of a Company-provided vehicle for three years (including the cost of repair, maintenance and insurance). -7- 8 On March 1, 1994, Robert M. Johnson became Senior Vice President -- Business Development of the Company. Mr. Johnson entered into a Letter of Agreement, dated January 27, 1994 and amended January 28, 1994, reflecting the terms of his employment with the Company. In an effort to expedite Mr. Johnson's relocation to Marietta, Georgia, the Company advanced a non-interest bearing bridge loan to Mr. Johnson in the amount of $50,800 on April 25, 1994. Of that amount, $15,150 was repaid on June 26, 1994 and the balance was converted into a non-interest bearing promissory note, payable in four equal annual installments on March 1 of each year commencing in 1995 and continuing through 1998. To the extent that Mr. Johnson is an active full-time employee of the Company in good standing on such dates, the payments due thereunder will be forgiven by the Company and reflected as compensation to Mr. Johnson. Mr. Johnson and the Company entered into a Noncompetition Agreement in April 1996 with substantially the same terms and conditions as the Noncompetition Agreements described above, except that the period covered by the no-compete clause is eight rather than 12 months, and the severance payment is two times his average annual compensation for the five years ending prior to termination. On November 1, 1995, Mr. Miclot became Senior Vice President-Sales and Marketing of the Company. Mr. Miclot and the Company entered into a Letter of Agreement dated October 12, 1995 and executed by Mr. Miclot on October 17, 1995, reflecting the terms of his employment with the Company. The Letter of Agreement provides, among other things, for a bonus in the amount of $40,000, $20,000 of which was payable 30 days following commencement of employment and $20,000 of which was payable following completion of Mr. Miclot's relocation to the Marietta, Georgia area. The Company also agreed to reimburse Mr. Miclot for certain relocation expenses. In addition, the Company agreed to reimburse Mr. Miclot up to $25,000 in the event the confirmed sales price for his residence in Powell, Ohio was less than Mr. Miclot's purchase price for such residence. Mr. Miclot was required to repay certain relocation expenses in the event he voluntarily elected to leave the employ of the Company within the 24 months following commencement of his employment. The Letter of Agreement also provided for 12 months severance in the event the Company terminated Mr. Miclot's employment through no fault of Mr. Miclot. This special severance is not payable in the event Mr. Miclot's termination is due to specific events, including but not limited to, a change in control of the Company. In January 1996, the Board of Directors authorized the Company to enter into an Agreement to Purchase Promissory Note (the "Put") with Bank of America Illinois (the "Bank") with respect to a $100,000 bridge loan from the Bank to Mr. Miclot to assist in purchasing a residence in the Marietta, Georgia area. Pursuant to the Put, the Bank has an option to sell the promissory note to the Company upon the occurrence of an event of default. On December 11, 1996, the Board of Directors of the Company agreed to pay Mr. Petit for his services as Chairman of the Board of Directors in the amount of $50,000 per year in lieu of the $12,000 per annum director fee. See "Compensation of Directors." In addition, the Company agreed to reimburse Matria Healthcare 45% of the expenses associated with Mr. Petit's office space and associated overhead, the cost and use of the Matria Board Room for meetings and the cost of Mr. Petit's assistant and related expenses. The Company's portion of these expenses is estimated to be approximately $45,000 per year. -8- 9 On March 20, 1997, the Board of Directors authorized the Company to enter into indemnification agreements (the "Indemnity Agreements") with its directors and executive officers. The Indemnity Agreements are consistent with and are intended to implement the existing provisions of the Company's By-Laws. The Indemnity Agreements provide for indemnification of directors and executive officers to the full extent authorized or permitted by law for all expenses, judgments, fines, penalties and settlement payments incurred by the indemnitee in connection with any act taken in the indemnitee's capacity as a director or executive officer of the Company. The Indemnity Agreements also provide for (i) advancement by the Company of expenses incurred by the director or executive officer in defending certain litigation, (ii) the appointment of independent legal counsel to determine whether the director or officer is entitled to indemnity after a change in control, and (iii) the continued maintenance by the Company of the directors' and officers' liability insurance currently in effect for so long as the indemnitee may be subject to any possible, threatened or pending action, unless the cost of such insurance is more than 150% of the annualized rate of premiums paid by the Company in fiscal year 1996. Additionally, pursuant to the Indemnity Agreements, the Company retains subrogation rights to recover any payments made to the indemnitee by a third party. The Indemnity Agreements are binding on the Company and any successors thereto and shall continue in effect regardless of whether an indemnitee continues to serve as a director or executive officer of the Company. Employees of the Company hold options to purchase shares of the Company's Common Stock pursuant to the Stock Option Plan (the "Option Plan"), the 1996 Stock Option Plan (the "1996 Plan") and the Stock Option Plan II (the "Option Plan II") (collectively the "Plans"). In May 1995, the Stock Option Committee distributed to the holders of outstanding options granted under the Option Plan a notice of acceleration of the exercise date of outstanding options conditional upon a "Change of Control Event" defined as (i) any "person" (as such term is used in Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), becoming a "beneficial owner" (as defined in Rule 13d-3 promulgated pursuant to the Exchange Act), directly or indirectly, of securities representing 50% or more of the combined voting power of the Company's then outstanding securities, or (ii) as a result of, or in combination with, any cash tender offer or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions (a "Transaction"), the persons who are directors of the Company before the Transaction ceasing to constitute a majority of the Board of Directors of the Company or any successor to the Company. On January 30, 1997, the Board of Directors of the Company amended the Option Plan to provide that the Stock Option Committee give at least ten days notice of the potential Change of Control Event and the option will become fully vested on the date of such notice. The 1996 Plan also provides for the acceleration of the exercise date of outstanding options granted under the 1996 Plan. In addition to the definition set forth above, a Change of Control Event is also defined in the 1996 Plan as approval by the Company's shareholders of the sale, transfer or other disposition of all or substantially all of the assets of the Company. Additionally, the option agreement provides that the Stock Option Committee give at least ten days notice of the potential Change in Control Event and the options will become fully vested -9- 10 upon the date of such notice. All options granted under the Option Plan II are fully vested and therefore will not be accelerated upon a Change of Control Event. As of January 1, 1997, employees (or former employees), including executive officers, held options under the Plans to purchase an aggregate of 1,244,282 shares of the Company's Common Stock at a weighted average exercise price of $9.19 per share (based on exercise prices ranging from $6.04 to $11.88 per share). Not included in the foregoing are options granted under the Option Plan II to purchase 683,263 shares of the Company's Common Stock which are held by officers, directors and employees (or former employees) of Healthdyne or its successor Matria Healthcare. The non-employee directors of the Company hold options to purchase the Company's Common Stock pursuant to the Company's Non-Employee Director Stock Option Plan (the "Director Plan"). Pursuant to the Director Plan, if an optionee's service as a member of the Board of Directors is terminated or discontinued as a result of any extraordinary proceeding which results in a change in control of the Company, his option will become immediately exercisable in full for 30 days prior to such proceeding. As of January 1, 1997, non-employee directors held options under the Director Plan to purchase an aggregate of 39,842 shares of the Company's common stock at a weighted average exercise price of $8.05 per share (based on exercise prices ranging from $7.13 to $11.88 per share). The Company's executive officers and certain other employees participate in a Retirement Benefit Award Program. In the event of a "Change in Control" of the Company, all benefits accrued to date under these Retirement Benefit Awards immediately vest and each participant may require the Company to place in trust for the participant's benefit an amount of money equal to the present value of the vested benefits under the retirement program. Benefits upon a Change in Control are calculated to include three additional years of service for executive officers who are also parties to Noncompetition Agreements with the Company. The Company has entered into Split-Dollar Life Insurance Agreements ("Insurance Agreements") with the executive officers and certain other employees. If an employee dies prior to termination of employment with the Company and prior to his or her Security Release Date (as defined in the Insurance Agreements), the employee's designated beneficiary will be entitled to receive as a death benefit an amount equal to two and one-half times the employee's annual base salary at the time of death. To the extent that the death benefit under the Policy exceeds such amount, the balance of the death benefit shall be payable to the Company. The Company retains a security interest in the Policy until the employee's Security Release Date or until the employee terminates his or her employment on account of a "Qualifying Termination." A Qualifying Termination occurs if (i) an employee's employment with the employer is terminated without cause or (ii) an employee terminates his or her employment with the employer for "good reason" within one year of a "Change of Control." After the employee is terminated as a result of a Qualifying Termination, however, the employee is entitled to exercise all of his or her ownership in the Policy without any limitation. Pursuant to the Retirement Benefits Awards, as amended, the value of the Policy is then offset against the Company's obligations under the Retirement Benefit Award under certain circumstances. -10- 11 The definition of Change of Control under the Insurance Agreements is substantially the same as is set forth under the Plans discussed above except that Change of Control under the Insurance Agreements also includes changes in the effective control of the Company which occur on the date that either (i) any one person, or more than one person acting as a group, acquires ownership of stock of the Company possessing 20% or more of the total voting power of the stock of the Company or (ii) a majority of members of the Company's Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company's Board of Directors who were directors prior to the date of the appointment or election of the first of such new directors. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following tables set forth certain information as to the beneficial ownership of shares of the Company's Common Stock. Under the rules of the Securities and Exchange Commission (the "Commission"), 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, or the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities which that person has the right to acquire within sixty (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. Security Ownership of Management. The following table sets forth certain information as to the Common Stock beneficially owned as of March 31, 1997 by each of the Company's directors and nominees for director, each executive officer named in the Summary Compensation Table set forth under the caption "Executive Compensation" and all directors and executive officers as a group. Unless otherwise indicated in a footnote each person listed below possesses sole voting and investment power with respect to the shares indicated as beneficially owned by him or her.
Amount and Nature Percent Name of Beneficial Owner of Beneficial Ownership (1) of Class - ------------------------ --------------------------- -------- Parker H. Petit (2)......................................... 866,859(3) 6.8% Craig B. Reynolds........................................... 165,507 1.3% J. Terry Dewberry........................................... 125,979 * Alexander H. Lorch.......................................... 13,824 * J. Leland Strange........................................... 6,667 * James J. Wellman, M.D....................................... 4,445 * J. Paul Yokubinas........................................... 105,560 * Robert M. Johnson........................................... 25,986 * Leslie R. Jones............................................. 41,860 * John L. Miclot.............................................. 19,848 * Vincent J. Persano.......................................... 14,352 * Robert E. Tucker............................................ 115,411 * All directors and executive officers as a group (13 persons)..................................... 1,593,092 12.50%
- ------------- * Less than 1% -11- 12 (1) Beneficial ownership is determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended. Includes shares that may be acquired through the exercise of stock options exercisable within sixty (60) days for the following individuals: Mr. Petit - 258,814 shares; Mr. Reynolds - 162,834 shares; Mr. Dewberry - 106,333 shares; Mr. Lorch - 6,667 shares; Mr. Strange - 6,667 shares; Dr. Wellman - 4,445 shares; Mr. Yokubinas - 70,922 shares; Mr. Johnson - 25,986 shares; Ms. Jones - 41,475 shares; Mr. Miclot - 19,667 shares; Mr. Persano - 12,275 shares; Mr. Tucker - 112,406 shares; all directors and executive officers as a group - 909,720 shares. (2) Mr. Petit's address is c/o Matria Healthcare, Inc., 1850 Parkway Place, 12th Floor, Marietta, Georgia 30067. (3) Includes 575,510 shares owned by Mr. Petit, 32,535 shares held by Petit Investments Limited Partnership and 258,814 shares that may be acquired through the exercise of stock options exercisable within sixty (60) days. Security Ownership of Certain Beneficial Owners. The following table sets forth certain information with respect to all shareholders other than Mr. Petit, whose beneficial interest is set forth under the caption "Security Ownership of Management," known to the Company to beneficially own as of December 31, 1996 more than five percent (5%) of the outstanding shares of the Common Stock. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment powers with respect to the Common Stock beneficially owned by them.
Name and Address Amount and Nature Percent of Common of Beneficial Owner of Beneficial Ownership Stock Outstanding* - ------------------- ----------------------- ------------------ Wellington Management Company (1)..... 1,325,587 10.5% 75 State Street Boston, Massachusetts 02109 Cowen & Company (2)................... 647,493 5.1% Financial Square New York, New York 10005
- ----------------- (1) Based on information set forth in a Schedule 13G dated January 24, 1997 providing information as of December 31, 1996. Wellington Management Company ("Wellington") may be deemed to be the beneficial owner of 1,325,587 shares owned by numerous investment counseling clients. Wellington has shared voting power as to 254,349 of such shares and shared dispositive power as to all of such shares. (2) Based on information set forth in a Schedule 13G dated February 12, 1997, and filed jointly on behalf of Cowen & Company, Cowen Incorporated and Joseph M. Cohen, providing information as of December 31, 1996. Cowen & Company, in its capacity as a broker-dealer and investment adviser, has shared voting power as to 638,660 of such shares and shared dispositive power as to all of such shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. For purposes of this section, references to Healthdyne shall include, where appropriate, Healthdyne's successor, Matria Healthcare. Mr. Petit was the founder, Chairman of the Board and Chief Executive Officer of Healthdyne, and Mr. Yokubinas, a member of the Compensation Committee, served as President and Chief Operating Officer of Healthdyne. Healthdyne operated the Company as a division of Healthdyne until the Company's June 1993 public offering, after which Healthdyne owned an 81% interest in the Company until Healthdyne distributed its shares of common stock of the Company to Healthdyne shareholders as a dividend (the "Spin-Off"). Healthdyne provided the -12- 13 Company with certain administrative and related services such as accounting, legal, tax, data processing, human resources and certain other services, pursuant to an Administrative Services Agreement dated March 31, 1993, as amended (the "Services Agreement"). The Services Agreement was amended on April 21, 1995, in anticipation of Healthdyne's Spin-Off of its interest in the Company, to reduce the nature and amount of services to be provided by Healthdyne to the Company. As a result of the Merger, Matria Healthcare is now a party to the Services Agreement with the Company. The Services Agreement was extended on a month-to-month basis effective January 1, 1997 and may be terminated upon 30 days prior written notice. Charges for services are made on a monthly basis in an amount which is estimated to equal Matria Healthcare's cost, including overhead, of providing the services. For the years ended December 31, 1994, 1995 and 1996, the Company reimbursed Healthdyne for the cost of the administrative and personnel services provided by employees of Healthdyne in the amounts of $854,000, $918,000 and $235,000, respectively. In addition, the Company paid $693,000, $637,000 and $289,000 to reimburse Healthdyne for the cost of various insurance premiums paid by Healthdyne on behalf of the Company for the years ended December 31, 1994, 1995 and 1996, respectively. The Company is under no obligation to purchase services pursuant to the Services Agreement. In any event, the amounts paid by the Company to Healthdyne for services in the past may not be representative of the amount of services required by the Company in the future. The Company has an arrangement (originally with Healthdyne and now with Matria Healthcare), under which the Company supplies the System 37 Uterine Activity Monitor and certain other products and supplies to Matria Healthcare at a price which is approximately 33% over the Company's manufacturing cost. As a result of this arrangement, without the consent of Matria Healthcare, the Company is prohibited from selling the System 37 monitor and other competing obstetrical care products to other parties. The aggregate amount paid by Matria Healthcare to the Company for equipment purchased by Matria Healthcare from the Company in 1996 was approximately $500,000. In 1996, the Company also provided certain research and development services related to the System 37 and certain other products for which Healthdyne paid the Company $228,000. It is the intention of the Company and Matria Healthcare that all transactions between them, or between the Company and any affiliated party, will be on an arm's length basis on terms no less favorable to the Company than could be obtained from unaffiliated third parties. In addition, the Company intends that any transactions between the Company and any other affiliated party, including Matria Healthcare or its affiliates, that are material to the Company must be approved by the vote of a majority of the independent and disinterested members of the Board of Directors of the Company. As previously indicated, Mr. Petit currently serves as Chairman of the Board of Matria Healthcare. -13- 14 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K. (a)(1) The following consolidated financial statements of the Company and its subsidiaries and report of independent auditors thereon are included as pages F-1 through F-20 of this Annual Report on Form 10-K:
PAGE ---- Independent Auditors' Report........................................... F-1 Consolidated Balance Sheets - December 31, 1996 and 1995............... F-2 Consolidated Statements of Earnings: Years ended December 31, 1996, 1995, and 1994......................... F-3 Consolidated Statements of Shareholders' Equity: Years ended December 31, 1996, 1995, and 1994......................... F-4 Consolidated Statements of Cash Flows: Years ended December 31, 1996, 1995, and 1994......................... F-5 Notes to Consolidated Financial Statements............................. F-7
(a)(2) The following supporting financial statement schedule and report of independent auditors thereon are included as part of this Annual Report on Form 10-K: Independent Auditors' Report. Schedule II - Valuation and Qualifying Accounts. All other Schedules are omitted because the required information is inapplicable or information is presented in the Consolidated Financial Statements or related notes. (a)(3) Exhibits: The following exhibits are incorporated by reference herein from the Company's Registration Statement on Form S-1 (Registration No. 33-60708):
EXHIBIT NUMBER - ------ 3.1(a) Articles of Incorporation of the Company. 3.1(b) Articles of Amendment to Articles of Incorporation of the Company.
-14- 15 10.1 Tax Sharing Agreement, dated March 31, 1993, between the Company and Healthdyne, Inc. 10.2 Administrative Services Agreement, dated March 31, 1993, between the Company and Healthdyne, Inc. 10.4 Stock Purchase Agreement, dated January 5, 1993, between Mr. Didier Michel, Mr. Vincent Brisbois, Healthdyne International, S.A. and Healthdyne, Inc. 10.8 1993 Stock Option Plan. 10.9 1993 Non-employee Director Stock Option Plan. 10.10 Secured Revolving Credit Agreement, dated June 11, 1993, between Healthdyne Technologies, Inc. and Continental Bank, N.A., as agent.
The following exhibits are incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1993 as part of this Report: 10.11 Termination of Lease Agreement, dated December 6, 1993, between MK Management Company, Inc. and Healthdyne, Inc. 10.12 Termination of Lease Agreement, dated December 6, 1993, between Max L. Kuniansky, David L. Kuniansky, Douglas S. Kuniansky, Amy Kuniansky Clark and Healthdyne, Inc. 10.13 Lease Agreement, dated December 20, 1993, between Max L. Kuniansky, David L. Kuniansky, Amy Kuniansky Clark, Douglas S. Kuniansky and the Company.
The following exhibits are incorporated by reference herein from the Company's Annual Report on Form 10-K for the year ended December 31, 1994. 10.14 Amended and Restated Secured Revolving Credit Agreement, dated December 29, 1994, between the Company and Bank of America National Trust and Savings Association. 10.15 Healthdyne Technologies, Inc. Stock Option Plan II, adopted by the Board of Directors on February 9, 1995 and approved by the shareholders of the Company on April 20, 1995.
-15- 16 The following exhibits are incorporated by reference herein from the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 2(a) Stock Purchase Agreement, dated October 1, 1994, between the Company, Health Scan Products, Inc., a New Jersey corporation, and Frank Gargano and Frank Alvino, as shareholders, incorporated by reference from the Company's Current Report on Form 8-K dated November 2, 1994. 3.1(c) Articles of Amendment to Articles of Incorporation of the Company. 10.18 Distribution Agreement dated as of April 21, 1995 by and between Healthdyne, Inc. and Healthdyne Technologies, Inc. incorporated by reference from the Company's current report on Form 8-K dated April 20, 1995. 10.19 Tax Sharing Agreement dated as of April 21, 1995 by and between Healthdyne, Inc. and Healthdyne Technologies, Inc. incorporated by reference from the Company's Current Report on Form 8-K dated April 20, 1995. 10.20 Tax Indemnity Agreement dated as of April 21, 1995 by and between Healthdyne, Inc. and Healthdyne Technologies, Inc., incorporated by reference from the Company's Current Report on Form 8-K dated April 20, 1995. 10.21 Corporate Services Agreement dated as of April 23, 1995 by and between Healthdyne, Inc. and Healthdyne Technologies, Inc. by reference from the Company's Current Report on Form 8-K dated April 20, 1995. 10.22 OEM Design and Manufacturing Agreement dated as of April 21, 1995 by and between Healthdyne, Inc. and Healthdyne Technologies, Inc. incorporated by reference from the Company's Current Report on Form 8-K dated April 20, 1995. 10.23 Tradename License Agreement dated as of April 21, 1995 by and between Healthdyne, Inc. and Healthdyne Technologies, Inc., incorporated by reference from the Company's Current Report on Form 8-K dated April 20, 1995. 10.24 Amendment to Distribution Agreement dated May 4, 1995 between Healthdyne, Inc. and Healthdyne Technologies, Inc. incorporated by reference from the Company's Quarterly Report on Form 10-Q for the period ending March 31, 1995. 10.25 Management and Transition Agreement dated July 1, 1995 between Healthdyne, Inc. and Healthdyne Technologies, Inc. incorporated by reference from the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995. 10.26 Non-Competition Agreement dated May 22, 1995 between Healthdyne Technologies, Inc. and Craig Reynolds incorporated by reference for the
-16- 17 Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995. 10.27 Non-Competition Agreement dated May 22, 1995 between Healthdyne Technologies, Inc. and Bob Tucker incorporated by reference from the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995. 10.28 Non-Competition Agreement dated May 22, 1995 between Healthdyne Technologies, Inc. and Leslie Jones incorporated by reference from the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995. 10.29 Non-Competition Agreement dated May 22, 1995 between Healthdyne Technologies, Inc. and Wayne Boylston incorporated by reference from the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995. 10.30 Non-Competition Agreement dated May 22, 1995 between Healthdyne Technologies, Inc. and Jeff North incorporated by reference from the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995. 10.31 First Amendment to Amended and Restated Revolving Credit Agreement dated December 29, 1994, between the Company and Bank of America National Trust and Savings Association. 10.32 Second Amendment to Amended and Restated Revolving Credit Agreement dated December 29, 1994, between the Company and Bank of America National Trust and Savings Association. 10.33 Non-Competition Agreement dated November 6, 1995 between Healthdyne Technologies, Inc. and John L. Miclot. 10.34 Agreement to Purchase Promissory Note dated January 8, 1996 between Healthdyne Technologies, Inc. and John L. Miclot.
The following exhibits are incorporated by reference herein from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996: 10.1 License Agreement dated April 4, 1996, between the Company and Metran Medical Instrument Mfg., Co. Ltd. 10.2 Stock Purchase Agreement dated June 27, 1996, between the Company and Pasquale J. Costa and Richard W. Holt.
-17- 18 10.3 Third Amendment to Amended and Restated Revolving Credit Agreement dated December 19, 1994, between the Company and Bank of America National Trust and Savings Association.
The following exhibits are incorporated by reference herein from the Company's Schedule 14D-9 filed on January 31, 1997 (the "Schedule 14D-9"): 11 Forms of Retirement Benefit Award Agreement. 12 Amendment to the form of Retirement Benefit Award Agreement. 13 Form of Split-Dollar Life Insurance Agreement.
The following exhibits are incorporated by reference herein from Amendment No. 4 dated March 20, 1997 to the Company's Schedule 14D-9: 20 Form of Indemnity Agreement of Director 30 Form of Indemnity Agreement of Executive Officer
The following exhibits are filed as part of this Report: 3 By-Laws of Healthdyne Technologies, Inc., as amended through March 20, 1997. 10.36 Fourth Amendment to Amended and Restated Revolving Credit Agreement dated December 29, 1994 between the Company and Bank of America National Trust and Savings Association. 10.37 Letter of Employment dated January 27, 1994, as amended, between Robert M. Johnson and Healthdyne. 10.38 Letter of Employment dated October 12, 1995, between John L. Miclot and the Company. 10.39 Addendum dated January 1, 1997 to Administrative Services Agreement. 10.40 Amendment No. 1 to Stock Option Plan. 10.41 Amendment No. 2 to Stock Option Plan. 11 Computation of Earnings per Common share for the Years Ended December 31, 1996, 1995 and 1994. 21 List of Subsidiaries.
-18- 19 23 Accountant's Consent to incorporation by reference in the Company's Registration Statements Nos. 33-80692, 33-80694, 33-91510, 33-92332, 33-92924, and 333-14765 on Form S-8. 27 Financial Data Schedules (b) Reports on Form 8-K. The Company did not file any current reports on Form 8-K during the quarter ended December 31, 1996.
-19- 20 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized. HEALTHDYNE TECHNOLOGIES, INC. By: /s/ M. Wayne Boylston ------------------------------------- M. Wayne Boylston Vice President - Finance, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Date: April 29, 1997 -20- EX-10.37 2 LETTER OF EMPLOYMENT DATED 1/27/94 1 [HEALTHDYNE LOGO] EXHIBIT 10.37 January 27, 1994 Mr. Robert M. Johnson 4160 Coralee Lane Lafayette, California 94549 Re: Offer of Employment Dear Bob: It is my pleasure to confirm our offer to you for the position of Vice President Business Development on behalf of Healthdyne Technologies, Inc. ("Healthdyne Technologies" or "Company"), which employment is to commence on or about February 15, 1994. Your initial base salary will be $4,807.69 (gross before deductions) payable on a bi-weekly basis, which is equivalent to approximately $125,000 per annum. Future salary adjustments and assignment of job responsibilities shall be based upon individual and Company performance. You also will be eligible to participate in any applicable Company bonus program with a base bonus amount equal to twenty-five percent (25%) of the base salary paid to you in accordance with the terms of such program in effect from time to time. As an incentive to enter into the employment of Healthdyne Technologies, the Company also agrees to pay you a bonus in the amount of $15,000 (gross before deductions). This payment will be made to you within thirty (30) days following the commencement of your employment with the Company. This offer of employment also includes a commitment from the Company to guarantee to you an additional bonus in the amount of $10,000 (gross before deductions). This amount will be paid to you upon the completion of your relocation from Lafayette, California to the Marietta, Georgia area, and is conditioned on your status as an active employee on the date of payment. You will be eligible to participate in the customary benefits offered to other employees in similar positions the first pay period following thirty (30) days of employment. A summary of these benefits is enclosed. More detailed enrollment information will be sent to you shortly after you begin employment. If you accept this offer, you may receive copies of Company policies and procedures in effect from time to time and agree to abide by same, realizing that changes can occur at any time and that such policies and procedures are not to be construed as a contract of employment. You will also be reimbursed for your reasonable business expenses in accordance with Company policy. Vacation will accrue at the rate of 1.25 days per month, which is equivalent to 15 days or three (3) weeks per year. 2 Mr. Robert M. Johnson January 27, 1994 Page 2 The Company will also reimburse you for your actual expenses incurred in maintaining your COBRA coverage from your previous employer for a period of thirty (30) days from your date of hire. Depending on whether you have elected individual or family COBRA coverage, the Company will reimburse you up to a maximum of $126.04 for single coverage and $409.61 for family coverage per month. You will be eligible to participate in Healthdyne Technologies Retirement Benefit Award under the terms and conditions of this plan, with the exception that you will become twenty-five percent (25%) vested in the plan following five (5) years of service with the Company, with additional vesting of five percent (5%) for each year of completed service in excess of five (5) years. The Company will make a recommendation to the Company's Stock Option Committee that you be granted a stock option to purchase 10,000 shares of Healthdyne Technologies Common Stock. Such stock option will be subject to the standard terms and conditions of the Company's applicable stock option plan. In connection with your relocation from your current residence located at 4160 Coralee Lane, Lafayette, California to the Marietta, Georgia area, the following relocation benefits will be provided to you as a condition of your employment: - - Reimbursement for expenses associated with movement of household goods, storage, appliance servicing, transportation, house hunting trips, temporary lodging and living expenses, purchase of new residence, and interim house expenses will be in accordance with the Healthdyne Relocation Policy (copy enclosed) as described on Pages 1 and through 6 of the Policy. - - You will also be eligible for reimbursement of expenses associated with the sale of your current residence in Lafayette, California. Eligible expenses are defined on Page 7 Section II.A.2. (Sale of Former Residence) of the Healthdyne Relocation Policy. - - Tax protection will also be offered for relocation expenses resulting in non-deductible taxable income as defined on Page 6 in Section 5. (Tax Effects) of the Healthdyne Relocation Policy. Should you voluntarily elect to leave the employee of Healthdyne Technologies within the first twenty-four (24) months of employment with the Company, you will be required to repay to the Company the relocation expenses incurred and paid on your behalf through the date of your termination of employment. The specific amount of relocation expenses to be repaid to the Company will decline over time in accordance with the following schedule: 3 Mr. Robert M. Johnson January 27, 1994 Page 3
Period of Employment with Percentage of Relocation Expenses Healthdyne Technologies Payable to Healthdyne Technologies 0 - 12 months 100% 13 - 18 months 50% 19 - 24 months 25% Greater than 24 months 0%
A special severance arrangement is included in this offer of employment. This special severance arrangement will become effective and the payments and benefits, described below, will be provided to you only if your employment with the Company is terminated by the Company due to the elimination of your job, through no fault of your own, with no offer of a comparable position within the Company or Healthdyne, Inc. This special severance arrangement will not apply if your employment with the Company is terminated for performance-related reasons, voluntary resignation, death, disability, retirement, discharge for cause, lack of a comparable position upon return from a leave of absence, and change of control of Healthdyne, Inc. Under this special severance arrangement, if such termination of employment occurs during the initial twelve (12) months of your employment with the Company, you are eligible to receive your regular base salary, in effect at the time of your termination, for a period of six (6) months from the date of your termination of employment. If such termination of employment occurs during the subsequent twelve (12) months of your employment with the Company, the severance payments would be made to you for a period of three (3) months from the date of your termination of employment. Following the twenty-fourth (24th) month of your employment, your severance eligibility and amount of severance pay will be consistent with the terms and conditions of the Company's Severance Pay Policy in effect at that time. These severance payments will be made to you in regular installments consistent with our normal payroll cycle. Your existing medical and life insurance benefits will continue at the normal contribution rate for you and your dependents during the period of severance pay. Severance payments will cease prior to the applicable six (6) or three (3) month periods described above if, during the period of severance pay, you violate or do not comply with any of the terms and conditions specified in the Healthdyne Confidentiality Agreement and the Addendum to Healthdyne Confidentiality Agreement, or you do not cooperate with the Company in taking all means reasonably possible to insure the rights and interest of the Company are fully protected and preserved. In order to receive the severance pay and benefits described above, you will be required to release the Company from any and all other claims, demands, or causes of action. This release must be executed prior to the receipt of the first severance pay installment. This offer is contingent upon your signing the Company's Confidentiality Agreement and the Addendum to the Company's Confidentiality Agreement attached hereto. Please indicate your acceptance to the terms stated herein by signing the acceptance below and returning this letter, along with an executed original of the attached Agreements to me in the enclosed self-addressed envelope. Please retain a copy of the fully executed Agreements for your records. 4 Mr. Robert M. Johnson January 27, 1994 Page 4 I look forward to your joining Healthdyne Technologies and believe the relationship will be mutually rewarding. I am confident these arrangements will be satisfactory to you and I look forward to receiving your acceptance of our offer of employment. Sincerely, /s/ Craig B. Reynolds Craig B. Reynolds President and Chief Executive Officer ACCEPTANCE I have read and understand the foregoing which constitutes the complete, entire and exclusive statement of the agreement between the Company and the undersigned and supersedes all prior or contemporaneous proposals, promises, understandings, representations, conditions, oral or written, relating to the subject matter of this agreement. I accept employment at will with the Company subject to the terms and conditions contained herein. /s/ Robert M. Johnson January 29, 1994 - --------------------- ---------------- Robert M. Johnson Date 5 . [HEALTHDYNE LOGO] January 28, 1994 By Federal Express Mr. Robert M. Johnson 4160 Coralee Lane Lafayette, California 94549 Re: Offer of Employment Dear Bob: This correspondence will confirm your conversation with Craig Reynolds and serve as an addendum to Craig's letter to you of January 27, 1994. The offer of employment extended to you on behalf of Healthdyne Technologies ("Company") will be for the position of Senior Vice President Business Development. Healthdyne, Inc. will make a recommendation to the Healthdyne, Inc. Stock Option Committee that you be granted a stock option to purchase 10,000 shares of Healthdyne, Inc. Common Stock. Such stock option will be subject to the standard terms and conditions of the applicable Healthdyne stock option plan. This is in addition to the recommendation to be made to the Healthdyne Technologies, Inc. Stock Option Committee that you be granted a stock option to purchase 10,000 shares of Healthdyne Technologies Common Stock. Reimbursement of expenses associated with temporary lodging, living expenses and periodic trips home will be extended for a period of three (3) months. Should your wife reside with you during this period, her lodging and living expenses will be reimbursed under the same guidelines as your lodging and living expenses. You are eligible for a merit-based salary increase effective on the one-year anniversary date of your employment with the Company. This offer of employment includes a commitment that the amount of salary increase on that date will be twelve percent (12%) of your base salary. The reference of "performance related reasons" will be removed from the special severance arrangement, therefore, the special severance arrangement will not apply if your employment with the company is terminated for reasons of voluntary resignation, death, disability, retirement, discharge for cause, lack of a comparable job upon return from a leave of absence, or change of control of Healthdyne, Inc. The amount of severance pay under this special severance arrangement has been revised as follows: If such termination of employment occurs during the initial twelve (12) months of your - --------------------------- 1850 Parkway Place, Marietta, Georgia 30067-8274 - (404) 423-4500 - FAX: (404) 423-8849 6 Mr. Robert M. Johnson January 28, 1994 Page Two employment with the Company, you are eligible to receive your regular base salary, in effect at the time of your termination, for a period of six (6) months from the date of your termination of employment. If such termination of employment occurs during the thirteenth (13th) through eighteenth (18th) month of your employment, the severance payments would be made to you for a period of four (4) months. If such termination of employment occurs after the eighteenth (18th) month of your employment with the Company, the severance payments would be made to you for a period of three (3) months from the date of your termination of employment. Bob, I am pleased to offer these additional considerations to you as part of your offer of employment. Please indicate your acceptance of these additional terms stated herein by signing the acceptance below and returning this letter to me in the enclosed self-addressed envelope. Please retain a copy of the fully executed letter for your records. I look forward to working with you. Please do not hesitate to contact me at (404) 423-8192 if I can answer any questions you may have. Sincerely, /s/ Thornton A. Kuntz, Jr. Thornton A. Kuntz, Jr. Vice President Administration c. C. Reynolds ACCEPTANCE I have read and understand the foregoing which constitutes the complete, entire and exclusive statement of the agreement between the Company and the undersigned and supersedes all prior or contemporaneous proposals, promises, understandings, representations, conditions, oral or written, relating to the subject manner of this agreement. I accept employment at will with the Company subject to the terms and conditions contained herein. /s/ Robert M. Johnson January 29, 1994 - ----------------------------------- ---------------------------- Robert M. Johnson Date EX-10.38 3 LETTER OF EMPLOYMENT DATED 10/12/95 1 EXHIBIT 10.38 [HEALTHDYNE TECHNOLOGIES LOGO] October 12, 1995 Mr. John L. Miclot 10526 Wellington Boulevard Powell, Ohio 43065 Dear John: This correspondence supersedes my letter to you of October 10, 1995 and confirms our offer to you for the position of Senior Vice President, Sales and Marketing, on behalf of Healthdyne Technologies, Inc. ("Healthdyne Technologies" or "Company"), which employment is to commence on or before November 1, 1995. In this position you will report directly to me. The Company agrees to make a recommendation to the Board of Directors at the next Board meeting to elect you as an executive officer of the Company. Your initial base salary will be $6,730.77 (gross before deductions) payable on a biweekly basis, which is equivalent to approximately $175,000.00 per annum. Future salary adjustments and assignment of job responsibilities shall be based upon individual and Company performance. Your salary will be reviewed by the Compensation Committee of the Board of Directors at the time all other executive officers are reviewed. Executive officers of the Company are reviewed for annual salary consideration effective March 1st of each year. You also will be eligible to participate in any applicable annual Company bonus program with an annual target bonus amount equal to twenty-five percent (25%) of the base salary paid to you in accordance with the terms of such program in effect from time to time. As an incentive to enter into the employment of Healthdyne Technologies, the Company agrees to pay you a bonus in the amount of $40,000.00 (gross before deductions). This bonus will be paid to you in two separate payments of $20,000.00 (gross before deductions) each. The first payment will be made to you within thirty (30) days following the commencement of your employment with the Company. The second payment will be made to you upon the completion of your relocation from Powell, Ohio to the Marietta, Georgia area, and is conditioned on your status as an active ernployee on the date of payment. The Company will make a recommendation to the Company's Stock Option Committee that you be granted a stock option to purchase 35,000 shares of Healthdyne Technologies Common Stock. Such stock option will be subject to the standard terms and conditions of the Company's applicable stock option plan. You will be eligible for ongoing consideration for future stock option grants. In accordance with Company policy, you will receive an automobile allowance in the amount of $700.00 per month. 2 Mr. John Miclot October 12, 1995 Page 2 You will be eligible to participate in the Healthdyne Technologies Retirement Benefit Award under the terms and conditions of this plan. A copy of the Retirement Benefit Award is enclosed. You will be eligible to participate in the customary medical, dental, life insurance and long-term disability benefits offered to other employees in similar positions the first pay period following thirty (30) days of employment. A summary of these benefits is enclosed. More detailed enrollment information will be sent to you shortly after you begin employment. If you accept this offer, you may receive copies of Company policies and procedures in effect from time to time and agree to abide by same, realizing that changes can occur at any time and that such polices and procedures are not to be construed as a contract of employment. You will also be reimbursed for your reasonable business expenses in accordance with policy. Vacation will accrue at the rate of 1.25 days per month, which is equivalent to fifteen (15) days or three (3) weeks per year. The Company will also reimburse you for your actual expenses incurred in maintaining your COBRA coverage from your previous employer for a period of thirty (30) days from your date of hire. Depending on whether you have elected individual or family COBRA coverage, the Company will reimburse you up to a maximum of $156.95 for single coverage and $422.42 for family coverage per month. In connection with your relocation from your current residence located at 10526 Wellington Boulevard, Powell, Ohio to the Marietta, Georgia area, the following relocation benefits will be provided to you as a condition of your employment: - - Reimbursement for expanses associated with movement of household goods, storage, appliance servicing, transportation, house hunting trips, temporary lodging and living expenses, purchase of new residence, and interim house expenses will be in accordance with the Healthdyne Technologies Relocation Policy (copy enclosed) as described on Pages 1 through 6 of the Policy. The limits and duration of such expenses will be extended, when necessary, on a reasonable case-by-case basis. - - You will also be eligible for reimbursement of expenses associated with the sale of your current residence in Powell, Ohio. Eligible expenses are defined on Page 7 Section II.A.2. (Sale of Former Residence) of the Healthdyne Technologies Relocation Policy. - - Full gross-up tax protection (first and second tier) will also be offered for relocation expenses resulting in non-deductible, taxable income as defined on Page 6 in Section 5 (Tax Effects) of the Healthdyne Technologies Relocation Policy. The reimbursement of eligible relocation expenses, including tax protection, will be limited to $85,000.00 in the aggregate. If through your good faith efforts, you are unable to sell your current residence for an amount equal to or greater than your confirmed purchase price of the residence, the Company agrees to reimburse you for the confirmed loss (difference between purchase price and sales price) up to a maximum reimbursement of $25,000.00. 3 Mr. John Miclot October 12, 1995 Page 3 Should you voluntarily elect to leave the employ of Healthdyne Technologies within the first twenty-four (24) months of employment with the Company, you will be required to repay to the Company the relocation expenses incurred and paid on your behalf through the date of your termination of employment. The specific amount of relocation expenses to be repaid to the Company will decline over time in accordance with the following schedule:
Period of Employment with Percentage of Relocation Expenses Healthdyne Technologies Payable to Healthdyne Technologies 0 - 12 months 100% 13 - 18 months 50% 19 - 24 months 25% Greater than 24 months 0%
A special severance arrangement is included in this offer of employment. This special severance arrangement will become effective and the payments and benefits, described below, will be provided to you only if your employment with the Company is terminated by the Company due to the elimination of your job, through no fault of your own, with no offer of a comparable position within the Company. This special severance arrangement will not apply if your employment with the Company is terminated due to voluntary resignation, death, disability, retirement, discharge for cause, lack of a comparable position upon return from a leave of absence, or change of control of Healthdyne Technologies. "Cause" shall be defined as: (i) Your conviction of, or your plea of guilt or nolo contendere to any felony (other than operating a motor vehicle under the influence of alcohol) or any act of fraud or embezzlement of funds; (ii) Your violation of the terms and conditions set forth in the Company's Confidentiality Agreement, which you have executed and acknowledge as binding obligations; (iii) Your engagement in any fraudulent, unlawful or unethical practice adversely affecting the Company or its customers or suppliers, or your engagement in activities outside the ordinary course of business that have a material adverse effect on the Company or its customer or suppliers; (iv) Your refusal to perform reasonable duties required of your position (as designated by the officers and directors of the Company from time to time). Under this special severance arrangement, if such termination of employment occurs, you are eligible to receive your regular base salary, in effect at the time of your termination, for a period of twelve (12) months from the date of your termination of employment These severance payments will be made to you in regular installments consistent with the Company's normal payroll cycle. Your existing medical and life insurance benefits will continue at the normal contribution rate for you and your dependents during the period of severance pay. 4 Mr. John Miclot October 12, 1995 Page 4 Severance payments will cease prior to the twelve (12) month period described above if, during the period of severance pay, you violate or do not comply with any of the terms and conditions specified in the Company's Confidentiality Agreement, or you do not cooperate with the Company in taking all means reasonably possible to ensure the rights and interest of the Company are fully protected and preserved. In order to receive the severance pay and benefits described above, you will be required to release the Company from any and all other claims, demands, or causes of action. This release must be executed prior to the receipt of the first severance pay installment. As we discussed, the enclosed Non-Competition Agreement has been revised and those revisions can be found on Page 6, 4(a)(1) and on Page 8, 5(a). This Agreement is extended to you to ensure you receive reasonable compensation in return for your agreement not to compete with the Company in the event of your termination of employment with the Company following a change in control of the Company as defined in the Agreement. This offer is contingent upon your signing the Company's Confidentiality Agreement attached hereto. Please indicate your acceptance to the terms stated herein by signing the acceptance below and returning this letter, along with an executed original of the attached Agreement to me in the enclosed self-addressed envelope. Please retain a copy of the fully executed Agreements for your records. I look forward to your joining Healthdyne Technologies and believe the relationship will be mutually rewarding. I am confident these arrangements will be satisfactory to you and I look forward to receiving your acceptance of our offer of employment Sincerely, /s/ Craig B. Reynolds Craig B. Reynolds President and Chief Executive Officer ACCEPTANCE I have read and understand the foregoing which constitutes the complete, entire and exclusive statement of the agreement between the Company and the undersigned and supersedes all prior or contemporaneous proposals, promises, understandings, representations, conditions, oral or written, relating to the subject matter of this agreement. I accept employment at will with the Company subject to the terms and conditions contained herein. /s/ John L. Miclot 10/17/95 - ------------------------------------------------------------------------------- John L. Miclot Date EX-10.39 4 ADDENDUM DATED 1/1/97 1 EXHIBIT 10.39 ADDENDUM THIS ADDENDUM ("Addendum") is made effective as of the 1st day of January, 1997, to that certain Corporate Services Agreement dated April 21, 1995 (the "Agreement"), by and between MATRIA HEALTHCARE, INC. (formerly HEALTHDYNE, INC.), a Delaware corporation, and HEALTHDYNE TECHNOLOGIES, INC., a Georgia corporation. The parties hereby amend the Agreement as follows: 1. The term of this Agreement is hereby extended and shall remain in effect on a month-to-month basis until either party terminates the Agreement on thirty (30) days prior written notice to the other party. 2. Unless otherwise amended or changed, all other terms and conditions of the Agreement shall remain as originally stated. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their corporate officers as of the day and year first above written. HEALTHDYNE TECHNOLOGIES, INC. MATRIA HEALTHCARE, INC. By: By: ------------------------------------ --------------------------------- Title: Title: --------------------------------- ------------------------------ Date: Date: --------------------------------- ------------------------------- EX-10.40 5 AMENDMENT NO. 1 TO STOCK OPTION PLAN 1 EXHIBIT 10.40 HEALTHDYNE TECHNOLOGIES, INC. AMENDMENT NO. 1 HEALTHDYNE TECHNOLOGIES, INC. STOCK OPTION PLAN This Amendment No. 1 to the Healthdyne Technologies, Inc. Stock Option Plan ("Plan") amends the terms and provisions of the Plan as follows: I. Amend Section 6.3(i) by deleting such clause in its entirety and substituting in lieu thereof the following language: (i) except as otherwise expressly provided in this Plan, the Committee may, in its discretion, terminate outstanding Options upon 60 days' written notice given to the Optionee or accelerate the exercise date under an Option by giving the Optionee written notice of such acceleration and II. This Amendment No. 1 shall be effective on the date of its adoption by the Board of Directors of Healthdyne Technologies, Inc. EX-10.41 6 AMENDMENT NO. 2 TO STOCK OPTION PLAN 1 EXHIBIT 10.41 HEALTHDYNE TECHNOLOGIES, INC AMENDMENT NO. 2 HEALTHDYNE TECHNOLOGIES, INC. STOCK OPTION PLAN This Amendment No. 2 to the Healthdyne Technologies, Inc. Stock Option Plan ("Plan") amends the terms and provisions of the Plan as follows: I. Amend Section 6.3 by adding at the end thereof the following language: In the event the Committee determines to accelerate the exercise date of an Option upon a change of control event (as defined by the Committee) pursuant to this Section 6.3 or such accelerated vesting is required by the terms of an Option agreement, the Committee shall provide the Optionee at least 10 days notice prior to the change of control event and the Option shall become immediately exercisable on the date of such notice. II. This Amendment No. 2 shall be effective on the date of its adoption by the Board of Directors of Healthdyne Technologies, Inc. -----END PRIVACY-ENHANCED MESSAGE-----