-----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, DmBaUZW/3iuVYqvYyBdWdD1TyolqYnXFRGzkVxi4/OzMUzx//UNLfc+Qwt+gIBPD UWu9cyupOvyEa31j0MoD9g== 0000950144-01-004206.txt : 20010330 0000950144-01-004206.hdr.sgml : 20010330 ACCESSION NUMBER: 0000950144-01-004206 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCARE HOLDINGS INC CENTRAL INDEX KEY: 0000882235 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOME HEALTH CARE SERVICES [8082] IRS NUMBER: 510331330 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-19946 FILM NUMBER: 1583216 BUSINESS ADDRESS: STREET 1: 19337 US 19 N STE 500 CITY: CLEARWATER STATE: FL ZIP: 34624 BUSINESS PHONE: 8135307700 MAIL ADDRESS: STREET 1: 19337 US 19 NORTH STE 500 CITY: CLEARWATER STATE: FL ZIP: 34624 10-K 1 g66313e10-k.txt LINCARE HOLDINGS INC. 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) COMMISSION FILE NUMBER 0-19946 LINCARE HOLDINGS INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 51-0331330 - ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 19337 US 19 NORTH, SUITE 500 CLEARWATER, FLORIDA 33764 - ------------------------------------------------ ---------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (727) 530-7700 -------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.01 par value 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. [X] Yes [ ] 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. [ ] The aggregate market value of the registrant's common stock, $.01 par value, held by non-affiliates of the registrant, based on the closing sale price of the common stock on February 28, 2001, as reported in the NASDAQ National Market System, was approximately $3,153,207,990. As of February 28, 2001, there were 53,589,867 outstanding shares of the registrant's common stock, par value $.01, which is the only class of capital stock of the registrant outstanding. DOCUMENTS INCORPORATED BY REFERENCE The information called for by Part III of this Form 10-K is incorporated by reference to the definitive Proxy Statement for the 2001 Annual Meeting of Stockholders of Lincare Holdings Inc. which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2000. ================================================================================ 2 PART I ITEM 1. BUSINESS GENERAL Lincare Holdings Inc. and subsidiaries ("Lincare" or the "Company") is one of the nation's largest providers of oxygen and other respiratory therapy services to patients in the home. The Company's customers typically suffer from chronic obstructive pulmonary disease ("COPD"), such as emphysema, chronic bronchitis or asthma, and require supplemental oxygen or other respiratory therapy services in order to alleviate the symptoms and discomfort of respiratory dysfunction. Lincare currently serves over 275,000 customers in 44 states through 510 operating centers. THE HOME RESPIRATORY MARKET The Company estimates that the home respiratory therapy market (including home oxygen equipment and respiratory therapy services) represents approximately $4.0 billion in annual sales, with growth in services estimated at approximately 7% per year over the last five years. This growth reflects the significant increase in the number of persons afflicted with COPD, which is largely attributable to the increasing proportion of the population over the age of 65 years. Growth in the home respiratory market is further driven by the continued trend towards treatment of patients in the home as a lower cost alternative to the acute care setting. BUSINESS STRATEGY The Company's strategy is to increase its market share through internal growth and acquisitions. Lincare focuses primarily on growth within its existing geographic markets, which the Company believes is generally more profitable than adding additional operating centers in new markets. In addition, the Company expands into new geographic markets on a selective basis, either through acquisitions or by opening new operating centers, when it believes such expansion will enhance its business. In 2000, Lincare acquired 15 local and regional competitors with combined annual revenues of approximately $82.0 million. These acquisitions expanded the Company's presence in states where the Company had existing locations. Revenue growth will be dependent upon the overall growth rate of the home respiratory care market, as well as on opportunities to increase market share through effective marketing efforts and selective acquisitions of local or regional competitors. The Company believes that the growing cost containment efforts of government and private insurance reimbursement programs have created an increasingly competitive environment, accelerating consolidation trends within the home health care industry. The Company will continue to concentrate on providing oxygen and other respiratory therapy services to patients in the home and to provide home medical equipment and other services where it believes such services will enhance the Company's primary business. In 2000, oxygen and other respiratory therapy services accounted for approximately 86% of the Company's revenues. PRODUCTS AND SERVICES OF LINCARE Lincare primarily provides oxygen and other respiratory therapy services to patients in the home. Lincare also provides a variety of infusion therapies in certain geographic markets. When a patient is referred to one of the Company's operating centers by a physician, hospital discharge planner or other source, the Company's customer representative obtains the necessary medical and insurance coverage information and coordinates the delivery of patient care. The prescribed therapy is administered by one of the Company's representatives in the customer's home, where instructions and training are given to the customer and the customer's family regarding appropriate equipment use and maintenance and the therapy to be administered. Following the initial setup, Company representatives make periodic visits to the customer's home, the frequency of which is dictated by the type of therapy. The Company's services are coordinated with the customer's physician. During the period that the Company performs services for a customer, the customer remains under the physician's care and medical supervision. The Company employs respiratory therapists and nurses to perform 1 3 certain training and other functions in connection with the Company's services. The respiratory therapists and nurses are licensed where required by applicable law. HOME OXYGEN EQUIPMENT. The major types of oxygen delivery equipment are liquid oxygen systems and oxygen concentrators. Each method of delivery has different characteristics that make it more or less suitable to specific patient applications. Oxygen concentrators are stationary units that provide a continuous flow of oxygen by filtering ordinary room air. Concentrators are most commonly used by patients as their primary source of stationary oxygen. These systems are often supplemented with portable gaseous oxygen cylinders, to meet the ambulatory needs of the patient. Liquid oxygen systems are thermally insulated containers of liquid oxygen, consisting of a stationary unit and a portable unit, which are most commonly used by patients with significant ambulatory requirements. OTHER RESPIRATORY THERAPY SERVICES. Other respiratory therapy services offered by the Company include the following: Nebulizers and associated respiratory medications provide aerosol therapy for patients suffering from COPD and asthma; Non-invasive ventilation provides nocturnal ventilatory support for neuromuscular and COPD patients. This therapy improves daytime function and decreases incidents of acute illness; Apnea monitors provide respiratory alarm systems for infants at risk for sudden infant death syndrome; Ventilators support respiratory function in severe cases of respiratory failure where the patient can no longer sustain the mechanics of breathing without the assistance of a machine; and Continuous positive airway pressure devices maintain open airways in patients suffering from obstructive sleep apnea by providing airflow at prescribed pressures during sleep; INFUSION THERAPY. Lincare provides a variety of infusion therapies including the following: Parenteral nutrition involves the intravenous feeding of life-sustaining nutrients to patients with impaired or altered digestive tracts or conditions that prohibit adequate oral nutritional support; Intravenous antibiotic therapy is the infusion of anti-infective medications into the patient's bloodstream for the treatment of a variety of infectious diseases; Enteral nutrition is administered to patients who cannot eat as a result of an obstruction to the upper gastrointestinal tract or other medical condition; Chemotherapy is the administration of cytotoxic drugs to patients suffering from various types of cancer; Dobutamine infusions are provided to patients to treat chronic end-stage congestive heart failure that has not responded to standard drug therapy. These patients require a long-term venous access device and frequent blood chemistry monitoring; Immune globulin (IVIG) therapy is utilized for a variety of immune disorders such as B-cell and T-cell immune deficiency, acute infections, post transplant immunodeficiency and burns; Continuous pain management is the administration of analgesic drugs to patients suffering from acute or chronic pain; and Central catheter management provides monitoring and supplies to patients requiring access via a peripherally inserted line into the superior vena cava. 2 4 Lincare also supplies home medical equipment, such as hospital beds, wheelchairs and other supplies that may be required by patients. COMPANY OPERATIONS Management. The Company maintains a decentralized approach to management of its local business operations. Decentralization of managerial decision-making enables the Company's operating centers to respond promptly and effectively to local market demands and opportunities. The Company believes that the personalized nature of customer requirements and referral relationships characteristic of the home health care business mandate the Company's localized operating structure. Each of the Company's 510 operating centers is managed by a center manager who has responsibility and accountability for the operating and financial performance of the center. Service and marketing functions are performed at the local operating level, while strategic development, financial control and operating policies are administered at the executive level. Reporting mechanisms are in place at the operating center level to monitor performance and ensure field accountability. A team of area managers directly supervises individual operating center managers, serving as an additional mechanism for assessing and improving performance of the Company's operations. The Company's operating centers are served by 24 billing centers which control all of the Company's billing and reimbursement functions. MIS Systems. The Company believes that the proprietary management information systems developed by the Company are one of its key competitive advantages. These systems provide management with a critical asset in measuring and evaluating performance levels throughout the Company. Management reviews monthly reports containing information critical to the evaluation process, including revenues and profitability by individual center, accounts receivable and cash collection management, equipment controls and utilization, customer activity, and manpower trends. The Company has an in-house staff of computer programmers which enables the Company to continually enhance its computer systems in order to provide timely financial and operational information and to respond promptly to changes in reimbursement regulations and policies. Accounts Receivable Management. The Company derives a majority of its revenues from reimbursement by third party payors. The Company accepts assignment of insurance benefits from customers and, in most instances, invoices and collects payments directly from Medicare, Medicaid and private insurance carriers, as well as directly from customers under co-insurance provisions. The following table sets forth, for the periods indicated, the Company's payor mix.
YEAR ENDED DECEMBER 31, ------------------------- 2000 1999 1998 PAYORS ----- ----- ----- Medicare and Medicaid programs.............................. 61% 62% 62% Private insurance........................................... 30 29 29 Direct payment.............................................. 9 9 9 --- --- --- 100% 100% 100% === === ===
Reimbursement is a complicated process which involves submission of claims to multiple payors, each having its own claims requirements. To operate effectively in this environment, the Company has designed and implemented proprietary computer systems to decrease the time required for the submission and processing of third party payor claims. The Company's systems are capable of tailoring the submission of claims to the specifications of the individual payors. The Company's in-house MIS capability also enables it to adjust quickly to any regulatory or reimbursement changes. These features serve to decrease the processing time of claims by payors, resulting in a more rapid turnover of accounts receivable. In addition, the Company is capable of submitting claims electronically to any Medicare carrier or other third party payor that can receive electronic claims submissions. 3 5 SALES AND MARKETING Favorable trends affecting the U.S. population and home health care have created an environment which should produce increasing demand for the services provided by Lincare. The average age of the American population is increasing and, as a person ages, more health care services are generally required. Further, well-documented changes occurring in the health care industry show a trend toward home care rather than institutional care as a matter of patient preference and cost containment. Sales activities are generally carried out by the Company's full-time sales representatives located at the Company's operating centers with assistance from the center managers. In addition to promoting the high quality of the Company's services, the sales representatives are trained to provide information concerning the advantages of home respiratory care. Sales representatives are often licensed respiratory therapists who are highly knowledgeable in the provision of supplemental oxygen and other respiratory therapies. The Company primarily acquires new customers through referrals. The Company's principal sources of referrals are physicians, hospital discharge planners, prepaid health plans, clinical case managers and nursing agencies. The Company's sales representatives maintain continual contact with these medical professionals in order to strengthen these relationships. The Company's current base of referral sources recognizes the Company's reputation for providing high-quality service to patients and provides a steady flow of customers. While the Company views its referral sources as fundamental to its business, no single referral source accounts for more than 1.0% of the Company's revenues. The Company has more than 275,000 active customers, and the loss of any single customer or group of customers would not materially impact the Company's business. The Company has received accreditation from the Community Health Accreditation Program ("CHAP"). CHAP is one of only two national accrediting bodies in the nation to receive deeming authority from the federal government. By approving CHAP for deeming authority, the government certified that CHAP's Standards of Excellence met or exceeded the government's own standards for Medicare certification. Accreditation by a national accrediting body represents a marketing benefit to the Company's operating centers and provides for a recognized quality assurance program throughout the Company. Several proposals have been made to require health care providers to be accredited or licensed by independent agencies in order to participate in government reimbursement programs. Many private payors already require such accreditation. ACQUISITIONS In 2000, the Company acquired, in unrelated acquisitions, certain operating assets of 15 local and regional competitors. The operations acquired in 2000 had aggregate annualized revenues of approximately $82.0 million at the time of acquisition. These acquisitions resulted in the addition of 48 new operating centers. In 1999, the Company acquired, in unrelated acquisitions, certain operating assets of 18 local and regional competitors and the common stock of four companies. The operations acquired in 1999 had aggregate annualized revenues of approximately $61.0 million at the time of acquisition. These acquisitions resulted in the addition of 21 new operating centers. QUALITY CONTROL The Company is committed to providing consistently high quality products and services. The Company's quality control procedures and training programs are designed to promote greater responsiveness and sensitivity to individual customer needs and to provide the highest level of quality assurance and convenience to the customer and the referring physician. Licensed respiratory therapists and registered nurses provide professional health care support and assist in the Company's sales and marketing efforts. 4 6 SUPPLIERS The Company purchases its oxygen and equipment from a variety of suppliers. The Company is not dependent upon any single supplier and believes that its oxygen and equipment needs can be provided by several manufacturers. COMPETITION The home respiratory care market is a fragmented and highly competitive industry that is served by the Company, other national providers and, by Company estimates, over 2,000 regional and local providers. Quality of service is the single most important competitive factor within the home respiratory care market. The relationships between a home respiratory care company and its customers and referral sources are highly personal. There is no incentive for either the physician or the patient to alter this relationship so long as the home respiratory care company is providing responsive, professional and high-quality service. Other key competitive factors are strength of local ties to the referral community and efficiency of reimbursement and accounts receivable management systems. Home respiratory care companies compete primarily on the basis of service since reimbursement levels are established by the fee schedules promulgated by Medicare, Medicaid or by the individual determinations of private insurance companies. Furthermore, marketing efforts by home respiratory care companies are directed toward referral sources which generally do not share financial responsibility for the payment of services provided to customers. MEDICARE REIMBURSEMENT As a supplier of home oxygen and other respiratory therapy services for the home health care market, the Company participates in Medicare Part B, the Supplementary Medical Insurance Program, which was established by the Social Security Act of 1965. Suppliers of home oxygen and other respiratory therapy services have historically been heavily dependent on Medicare reimbursement due to the high proportion of elderly suffering from respiratory disease. On December 21, 2000, an approximately $35 billion Medicare "giveback" package was signed into law as part of H.R. 4577, the "Consolidated Appropriations Act, 2001." The appropriations act incorporates by reference the text of H.R. 5661, the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 ("BIPA"), which includes sweeping reimbursement and other policy changes intended to mitigate the effects of reimbursement cuts contained in the Balanced Budget Act of 1997. Among other things, BIPA: (1) modifies payments for durable medical equipment ("DME") items. Specifically, for items provided in 2001, BIPA updates payments by the full increase in the consumer price index for urban consumers ("CPI-U") during the 12-month period ending June 2000. The update is implemented in two steps: for the period January 1, 2001 through June 30, 2001, DME payments will remain the same as were in effect before enactment of BIPA, and for the period of July 1, 2001 through December 31, 2001, DME items will receive the full CPI-U update increased by a "transitional allowance" of 3.28 percent. As provided under BIPA, the transitional allowance will not be taken into account in calculating payment amounts after 2001. No DME payment increase is authorized for 2002. The DME payment update specifically does not apply to oxygen and oxygen equipment. (2) requires the U.S. General Accounting Office ("GAO") to study Medicare reimbursement for drugs and biologicals and for related services. The study, which the GAO is directed to complete within nine months of enactment of BIPA, must include specific recommendations for revised payment methodologies. The Department of Health and Human Services ("HHS") is required to revise the current payment methodologies based on the GAO's recommendations; however, total payments may not exceed the aggregate payments that would otherwise have been made under current law. BIPA imposes a temporary moratorium on reductions in Medicare reimbursement for drugs and biologicals until GAO submits its findings to Congress. 5 7 On November 29, 1999, the Balanced Budget Refinement Act of 1999 ("BBA Refinement Act") was signed into law. This legislation was designed to mitigate the effects of the Balanced Budget Act of 1997 ("BBA") on health care providers. The BBA Refinement Act restores approximately $1.2 billion in funding in 2000 and $16 billion over five years, and affects a wide range of health care providers. With respect to the services provided by the Company, the BBA Refinement Act provides for temporary increases in Medicare payment rates for durable medical equipment (including oxygen equipment) of 0.3% in 2001 and 0.6% in 2002. Furthermore, the BBA Refinement Act temporarily prohibits the HHS from exercising its inherent reasonableness authority to reduce payments for non-physician Part B services, including durable medical equipment, and excludes durable medical equipment from the home health consolidated billing requirements established in the BBA. On August 5, 1997, the Balanced Budget Act of 1997 ("BBA") was signed into law. The legislation, among other things, was intended to reduce Medicare expenditures by $115 billion over five years. The BBA reduced Medicare reimbursement amounts for oxygen and oxygen equipment furnished after January 1, 1998, to 75 percent of the fee schedule amounts in effect during 1997. Reimbursement amounts for oxygen and oxygen equipment furnished after January 1, 1999, and each subsequent year thereafter, were reduced to 70 percent of the fee schedule amounts in effect during 1997. The BBA also reduced payment amounts for covered drugs and biologicals furnished after January 1, 1998 to 95 percent of the average wholesale price of such covered items. The BBA authorizes HHS to conduct up to five competitive bidding demonstration projects for the acquisition of durable medical equipment and requires that one such project be established for oxygen and oxygen equipment. Each demonstration project is to be operated over a three-year period and is to be conducted in not more than three competitive acquisition areas. The first demonstration project became effective in Polk County, Florida on October 1, 1999. A second demonstration site was established in the three counties surrounding San Antonio, Texas and became effective on February 1, 2001. The BBA also includes provisions designated to reduce health care fraud and abuse including a surety bond requirement, which has not yet been implemented, for durable medical equipment providers. Federal and state budgetary and other cost-containment pressures will continue to impact the home respiratory care industry. The Company cannot predict whether new federal and state budgetary proposals will be adopted or the effect, if any, such proposals would have on the Company's business. GOVERNMENT REGULATION The federal government and all states in which the Company currently operates regulate various aspects of its business. In particular, the Company's operating centers are subject to federal laws covering the repackaging of drugs (including oxygen) and regulating interstate motor-carrier transportation. The Company's locations also are subject to state laws governing, among other things, pharmacies, nursing services, distribution of medical equipment and certain types of home health activities. Certain of the Company's employees are subject to state laws and regulations governing the ethics and professional practice of respiratory therapy, pharmacy and nursing. As a supplier of services under the Medicare and Medicaid programs, the Company is subject to the Medicare and Medicaid fraud and abuse laws. These laws, among other things, prohibit any payment, kickback or rebate in return for the referral of patients receiving benefits from Medicare, Medicaid or other federally funded health care programs. Violations of these provisions may result in civil and criminal penalties and exclusion from participation in such programs. Health care is an area of rapid regulatory change. Changes in the law and new interpretations of existing laws may affect permissible activities, the relative costs associated with doing business, and reimbursement amounts paid by federal, state and other third party payors. The Company cannot predict the future of federal, state and local regulation or legislation, including Medicare and Medicaid statutes and regulations, or possible changes in national health care policies. Future legislative and regulatory changes could have an adverse impact on the Company. 6 8 INSURANCE The Company currently has in force general liability, product liability and professional liability insurance with primary and excess coverage limits of $10.0 million. The Company's product liability insurance provides coverage on a claims-made basis, while its general and professional liability insurance are on an occurrence basis. All policies are subject to annual renewal and the Company anticipates adequate amounts of insurance coverage to be available at such renewal dates. EMPLOYEES As of February 28, 2001, the Company had approximately 5,500 employees. None of the Company's employees are covered by collective bargaining agreements. The Company believes that the relations between the Company's management and its employees are good. ENVIRONMENTAL MATTERS Management believes that the Company is currently in compliance, in all material respects, with applicable federal, state and local statutes and ordinances regulating the discharge of hazardous materials into the environment. Management does not believe it will be required to expend any material amounts in order to remain in compliance with these laws and regulations or that such compliance will materially affect its capital expenditures, earnings or competitive position. ITEM 2. PROPERTIES All but one of the Company's 510 operating center locations are leased from unrelated third parties. Each operating center is a combination warehouse and office, with warehouse space generally comprising approximately 50% of the facility. Warehouse space is used for storage of adequate supplies of equipment necessary to conduct the Company's business. The Company also currently leases its headquarters facility and 24 separate billing centers from unrelated third parties. ITEM 3. LEGAL PROCEEDINGS From time to time, the Company receives inquiries from various government agencies requesting patient records and other documents. It has been Lincare's policy to cooperate with all such requests for information. The government has not instituted any proceedings or served Lincare with any complaints as a result of these inquiries. Private litigants may also make claims against the Company for violations of health care laws in actions known as qui tam suits and the government may intervene in, and take control of, such actions. The Company is a defendant in certain qui tam proceedings. Lincare intends to vigorously defend these suits should they proceed. The government has declined to intervene in all unsealed qui tam actions of which the Company is aware. As a health care provider, Lincare is subject to extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating reimbursement under various government programs. The marketing, billing, documentation and other practices of health care companies are all subject to government scrutiny. To ensure compliance with Medicare and other regulations, regional carriers often conduct audits and request patient records and other documents to support claims submitted by the Company for payment of services rendered to patients. Similarly, government agencies periodically open investigations and obtain information from health care providers pursuant to legal process. Violations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs. The Company is also involved in certain other claims and legal actions arising in the ordinary course of its business. The ultimate disposition of all such matters is not expected to have a material adverse impact on the Company's financial position, results of operations or liquidity. 7 9 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's stockholders during the fourth quarter of 2000. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the NASDAQ National Market System under the symbol LNCR. The following table sets forth the high and low closing sale prices as reported by NASDAQ for the periods indicated.
HIGH LOW ------ ------ 2000 First quarter............................................... $39.00 $21.31 Second quarter.............................................. 34.75 23.31 Third quarter............................................... 29.88 24.44 Fourth quarter.............................................. 61.06 28.19 1999 First quarter............................................... $39.94 $19.38 Second quarter.............................................. 31.44 23.25 Third quarter............................................... 32.94 23.50 Fourth quarter.............................................. 34.69 24.44
There were approximately 194 holders of record of the common stock as of February 28, 2001. The Company has not paid any cash dividends on its capital stock and does not anticipate paying cash dividends in the foreseeable future. It is the present intention of the Company's Board of Directors to retain all earnings in the Company in order to support the future growth of the Company's business. ITEM 6. SELECTED FINANCIAL DATA The selected consolidated financial data presented below under the caption "Statements of Operations Data" for the years ended December 31, 2000, 1999, 1998, 1997 and 1996, are derived from the consolidated financial statements of the Company audited by KPMG LLP, independent certified public accountants. 8 10 The data set forth below is qualified by reference to, and should be read in conjunction with, the consolidated financial statements, accompanying notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report.
YEAR ENDED DECEMBER 31, ---------------------------------------------------- 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENTS OF OPERATIONS DATA: Net revenue................................. $702,484 $581,786 $487,407 $443,181 $348,870 Cost of goods and services.................. 112,949 89,592 76,367 65,932 53,711 Operating expenses.......................... 158,794 131,240 111,222 93,830 75,158 Selling, general and administrative expenses.................................. 147,699 128,345 107,691 90,225 71,259 Bad debt expense............................ 10,537 6,981 5,849 4,432 3,472 Depreciation expense........................ 47,960 41,178 34,430 27,603 20,790 Amortization expense........................ 19,495 15,954 12,745 14,229 13,128 Non-recurring expense(1).................... -- -- -- 15,557 3,932 -------- -------- -------- -------- -------- Operating income............................ 205,050 168,496 139,103 131,373 107,420 Interest income............................. 1,763 468 447 202 153 Interest expense............................ 18,019 5,940 1,177 1,161 497 Gain (loss) on disposal of property and equipment................................. 8 (277) (113) (93) (80) -------- -------- -------- -------- -------- Income before income taxes.................. 188,802 162,747 138,260 130,321 106,996 Income tax expense.......................... 71,934 62,007 52,954 50,173 40,422 -------- -------- -------- -------- -------- Net income.................................. $116,868 $100,740 $ 85,306 $ 80,148 $ 66,574 ======== ======== ======== ======== ======== Income per common share: Basic..................................... $ 2.20 $ 1.77 $ 1.47 $ 1.41 $ 1.19 ======== ======== ======== ======== ======== Diluted................................... $ 2.16 $ 1.74 $ 1.44 $ 1.37 $ 1.15 ======== ======== ======== ======== ======== Weighted average number of common shares outstanding............................... 53,087 56,942 57,992 56,837 55,999 ======== ======== ======== ======== ======== Weighted average number of common shares and common share equivalents outstanding...... 54,151 57,989 59,435 58,655 57,726 ======== ======== ======== ======== ========
- --------------- (1) In 1997, the Company recorded a non-recurring expense of $15,557,000, of which $11,849,000 was related to the write down of impaired capital equipment and $3,708,000 was related to the write down of impaired intangible assets. In 1996, the Company recorded a non-recurring expense of $3,932,000, of which $2,682,000 was related to the restructuring of certain senior management employment agreements and $1,250,000 was related to the resolution of an investigation and associated legal expenses.
AT DECEMBER 31, ---------------------------------------------------- 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital............................. $ 84,475 $ 70,179 $ 49,078 $ 42,106 $ 23,633 Total assets................................ 877,595 716,824 582,639 440,388 347,408 Long-term obligations, excluding current installments.............................. 204,024 159,000 22,258 4,602 8,234 Stockholders' equity........................ 584,450 486,111 495,656 393,067 299,248
9 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company continues to pursue its strategy of increasing market share within its existing geographical markets through internal growth and selective acquisitions of local and regional competitors. In addition, the Company will continue to expand into new geographical markets on a selective basis, either through acquisitions or by opening new operating centers, when the Company believes it will enhance its business. The Company's focus remains primarily on oxygen and other respiratory therapy services, which represent approximately 86% of the Company's revenues. NET REVENUES The following table sets forth for the periods indicated a summary of the Company's net revenues by source:
YEAR ENDED DECEMBER 31, -------------------------------- 2000 1999 1998 -------- -------- -------- (IN THOUSANDS) Oxygen and other respiratory therapy............... $607,071 $521,870 $433,594 Home medical equipment and other................... 95,413 59,916 53,813 -------- -------- -------- Total.................................... $702,484 $581,786 $487,407 ======== ======== ========
Net revenues for the year ended December 31, 2000 increased by $120,698,000 (20.8%)over 1999. Net revenues for the year ended December 31, 1999 increased by $94,379,000 (or 19.4%) over 1998. The increases in net revenues are attributable to the Company's sales and marketing efforts that emphasize quality and customer service, and the effect of the acquisitions completed by the Company. The Company's revenues were adversely impacted in 1999 and 1998 by provisions contained in the Balanced Budget Act of 1997 (the "BBA") which reduced Medicare payment amounts for certain equipment and supplies provided by the Company. The BBA provisions resulted in a reduction of the Company's revenues by approximately $19,343,000 (or 3.9%) and $73,221,000 (or 16.5%) for the years ended December 31, 1999 and 1998, respectively. The BBA reduced Medicare payment amounts for oxygen and oxygen equipment furnished after January 1, 1998, to 75 percent of the fee schedule amounts in effect during 1997. Payment amounts for oxygen and oxygen equipment furnished after January 1, 1999 were reduced to 70 percent of the fee schedule amounts in effect during 1997. The BBA also reduced payment amounts for covered drugs and biologicals furnished after January 1, 1998 to 95 percent of the average wholesale price of such covered items. COST OF GOODS AND SERVICES Cost of goods and services as a percentage of net revenues was 16.1% for the year ended December 31, 2000 and was 15.4% and 15.7% for the years ended December 31, 1999 and 1998, respectively. The increase in cost of goods for the year ended December 31, 2000 was the result of the Company's purchase of the assets of United Medical, Inc. ("UMI") on June 28, 2000. The UMI locations operated by the Company provide a more broad base of durable medical equipment and supplies which have lower gross margins than the Company's traditional respiratory care business. OPERATING AND OTHER EXPENSES The Company continues to maintain a cost structure that, with increased net revenues, has permitted the Company to spread its fixed operating expenses and overhead over a larger base of revenues, resulting in improvement in operating income. Operating expenses expressed as a percentage of net revenues for the years ended December 31, 2000, 1999 and 1998 were 22.6%, 22.6% and 22.8%, respectively. Selling, general and administrative expenses expressed as a percentage of net revenues for the years ended December 31, 2000, 1999 and 1998 were 21.0%, 22.1% and 22.1%. Bad debt expense as a percentage of net revenues was 1.5% for the year ended December 31, 2000 and 1.2% for each of the years ended December 31, 1999 and 1998. Continued growth in the pace of the 10 12 Company's acquisition program has contributed to the increase in the Company's bad debt expense. The integration of these acquired companies into the Company's regional billing and collections offices can disrupt the operations of these offices and adversely impact the amount of accounts receivable written off as uncollectable. Depreciation expense as a percentage of net revenues was 6.8% for the year ended December 31, 2000 compared with 7.1% for each of the years ended December 31, 1999 and 1998, respectively. The decrease in depreciation expense as a percentage of net revenues in 2000 is attributable to reduced capital expenditures for respiratory assist devices resulting from changes in Medicare coverage guidelines on October 1, 1999. AMORTIZATION EXPENSE The Company's net intangible assets were $550,291,000 as of December 31, 2000. Of this total, $8,501,000 (consisting of the value assigned to customer lists) is being amortized over a period of three years, $1,153,000 (consisting of various covenants not to compete) over a period of one to five years and $540,637,000 (consisting of goodwill) over a period of 40 years. During 2000, the Company amortized $19,495,000 of its intangible assets compared to $15,954,000 in 1999 and $12,745,000 in 1998. The increase in amortization expense in 2000 is attributed to the amortization of intangible assets associated with business combinations in 2000. OPERATING INCOME As shown in the table below, operating income for the year ended December 31, 2000 increased by $36,554,000 from 1999.
YEAR ENDED DECEMBER 31, -------------------------------- 2000 1999 1998 -------- -------- -------- (IN THOUSANDS) Operating income........................................... $205,050 $168,496 $139,103 Percentage of net revenues................................. 29.2% 29.0% 28.5%
INTEREST EXPENSE Interest expense for the year ended December 31, 2000 was $18,019,000, compared to $5,940,000 and $1,177,000 for the years ended December 31, 1999 and 1998, respectively. The increase in interest expense in 2000 is primarily attributable to additional borrowings utilized for the Company's open market repurchases of approximately 6.7 million shares of its outstanding common stock during 2000 and the purchase of the assets of United Medical, Inc. on June 28, 2000. INCOME TAXES The Company's effective income tax rate was 38.1% for the year ended December 31, 2000, 38.1% for 1999 and 38.3% for 1998. ACQUISITIONS In 2000, the Company acquired, in unrelated acquisitions, certain operating assets of 15 local and regional competitors. The operations acquired in 2000 had aggregate annualized revenues of approximately $82,000,000 at the time of acquisition. The cost of these acquisitions was $162,387,000 and was allocated to acquired assets as follows: $7,318,000 to current assets, $6,562,000 to property and equipment, $6,142,000 to intangible assets and $142,365,000 to goodwill. These acquisitions resulted in the addition of 48 new operating centers. In 1999, the Company acquired, in unrelated acquisitions, certain operating assets of 18 local and regional competitors and the common stock of four other companies. The operations acquired in 1999 had aggregate annualized revenues of approximately $61,000,000 at the time of acquisition. The cost of these acquisitions was $103,356,000 and was allocated to acquired assets as follows: $2,969,000 to current assets, $6,097,000 to 11 13 property and equipment, $7,132,000 to intangible assets, and $87,158,000 to goodwill. These acquisitions resulted in the addition of 21 new operating centers. LIQUIDITY AND CAPITAL RESOURCES At December 31, 2000, the Company's working capital was $84,475,000, as compared to $70,179,000 at December 31, 1999 and $49,078,000 at December 31, 1998. Net cash provided by operating activities was $215,029,000 for the year ended December 31, 2000, compared with $149,155,000 for the year ended December 31, 1999 and $145,442,000 for the year ended December 31, 1998. A significant portion of the Company's assets consists of accounts receivables from third party payors that are responsible for payment for the services provided by the Company. The Company's net accounts receivable in terms of days sales outstanding was 56 days as of December 31, 2000 and 62 days as of December 31, 1999. Net cash used in investing and financing activities was $215,527,000, $150,556,000 and $144,420,000 for the years ended December 31, 2000, 1999 and 1998, respectively. Activity in the year ended December 31, 2000 included the Company's investment of $150,326,000 in business acquisitions, investment in capital equipment of $58,622,000, proceeds of $314,018,000 from its revolving credit loan and other long-term obligations, and payments of $283,663,000 related to long-term obligations. The Company anticipates that capital expenditures for 2001 will be approximately $70,000,000 to $80,000,000 which includes construction costs of a headquarters building on the land purchased in 1999. As of December 31, 2000, the Company's principal sources of liquidity consisted of $84,475,000 of working capital and $158,000,000 available under its three year bank credit facility. The Company's $60,000,000 364-day revolving credit facility expired on August 22, 2000 and was replaced on September 6, 2000 by $125,000,000 of senior secured notes offered through a private placement. The senior secured notes have a fixed interest rate and mature over three, four and five years as follows: $30,000,000 at 8.91% due September 15, 2003, $50,000,000 at 9.01% due September 15, 2004 and $45,000,000 at 9.11% due September 15, 2005. Upon entering into the senior secured note agreement a placement fee of $893,000 was paid and is being amortized over the periods of the notes. The Company believes that internally generated funds, together with funds that may be borrowed under its three year bank credit facility, will be sufficient to meet the Company's anticipated capital requirements and financial obligations for the foreseeable future. On June 11, 1999, the Company's Board of Directors authorized the Company to repurchase up to $200,000,000 of its outstanding common stock. Purchases are made through open market or privately negotiated transactions, subject to market conditions and trading restrictions. As of December 31, 2000, $178,007,000 of common stock had been repurchased under this program. The total common stock held in treasury was $176,845,000 as of December 31, 2000. The Company's future liquidity will continue to be dependent upon its operating cash flow and management of accounts receivable. The Company does not expect any impact on liquidity due to pending litigation. NEW ACCOUNTING STANDARDS In June 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of SFAS No. 133," which deferred, for one year, the effective date for the implementation of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 requires that an entity recognize all derivative instruments as either assets or liabilities on the balance sheet and measure those instruments at fair values. The Company manages interest rate risk by using derivative instruments. During 2000, the Company entered into an interest rate swap agreement whereby the interest rate on its $125,000,000 senior secured notes was effectively converted to a variable interest rate based on three month LIBOR plus a fixed spread. In addition, the Company entered into an interest rate collar transaction with an initial notional amount of $125,000,000. The collar has a floor rate of 5.81% and a cap rate 12 14 of 8.00% with a floating rate option based on three month LIBOR. The collar contract matures from 2003 - 2005. The collar is used to offset variability with respect to the Company's variable rate debt. During the fourth quarter of 2000, the Company terminated the swap agreement prior to its maturity at a gain of $3,018,000. The gain was deferred and will be recognized over the original term of the swap contract provided the senior notes remain outstanding. The collar contract was recorded at a fair value by the Company at December 31, 2000 for $1,961,000. Upon adoption of SFAS No. 133, changes in the fair value of the collar over its remaining term that are effective hedges of the variability in the Company's variable rate debt will be recorded in other comprehensive income. Changes in fair value that are not effective hedges will be recorded in earnings. The Company believes that a portion of the changes in fair value may qualify for hedge accounting under SFAS No. 133. In December 1999, the Securities and Exchange Commission (the "Commission") issued Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB 101"), which summarized certain views of the Commission in applying generally accepted accounting principles to revenue recognition in financial statements. The Company believes that its current revenue recognition policies are consistent with the guidance of SAB 101. In September 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and Services of Financial Assets and Extinguishments of Liabilities", which is effective for transfers after March 31, 2001. It is effective for disclosures about securitizations and collateral and for recognition and reclassification of collateral for fiscal years ending after December 15, 2000. SFAS No. 140 replaces SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosure, but it carries over most of SFAS No. 125's provisions without reconsideration. The Company does not believe the adoption of SFAS No. 140 will have any effect on its financial statements. INFLATION The Company has not experienced large increases in either the cost of supplies or operating expenses due to inflation. Because of reductions in reimbursement by government and private medical insurance programs and pressure to contain the costs of such programs, the Company bears the risk that reimbursement rates set by such programs will not keep pace with inflation. QUANTITATIVE AND QUALITATIVE DISCLOSURE REGARDING MARKET RISK During September 1999 as part of the Company's stock repurchase program, the Company sold European Put Options ("Puts") on underlying shares of the Company's common stock. The Puts had a six-month maturity period and the Company was paid a $4,454,000 premium in advance which was accounted for as additional paid-in capital. The Company had the option to settle the Puts in cash or in shares of common stock. In March 2000, the Company amended the terms of the Puts to extend the maturity date of the Puts by two months. In connection with extending the maturity period of the Puts, the Company was paid an additional cash premium of $280,000. In May 2000, the Puts expired out-of-the-money with no obligation to the Company. The fair value of the Company's long-term obligations and interest rate collar are subject to change as a result of changes in market prices or interest rates. The Company estimates potential changes in the fair value of interest rate sensitive financial instruments based on a hypothetical increase (or decrease) in interest rates. The Company's use of this methodology to quantify the market risk of such instruments should not be construed as an endorsement of its accuracy or the accuracy of the related assumptions. The quantitative information about market risk is necessarily limited because it does not take into account anticipated operating and financial transactions. 13 15 The following table sets forth the Company's estimated impact on the fair value of its long-term obligations and interest rate collar plus the impact on earnings resulting from a 10% decrease in interest rates. Estimated fair value of financial instruments (in thousands):
(ASSUMING 10% DECREASE IN INTEREST RATES) ------------------------------- HYPOTHETICAL HYPOTHETICAL FACE CARRYING FAIR CHANGE IN CHANGE IN AMOUNT AMOUNT VALUE FAIR VALUE INTEREST EXPENSE -------- -------- -------- ------------ ---------------- December 31, 2000: Three year revolving bank credit agreement......................... $ 78,000 $ 78,000 $ 78,000 $ 0 $ (624) Senior secured notes................. 125,000 125,000 125,820 447 0 Interest rate collar................. 0 1,961 1,961 1,717 635 December 31, 1999: Three year revolving bank credit agreement......................... $159,000 $159,000 $159,000 $ 0 $(1,034)
FORWARD LOOKING STATEMENTS Statements contained herein that are not based on historical facts are forward-looking statements that are based on projections and estimates regarding the economy in general, the health care industry and other factors which impact the Company. These statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statements. The estimates relate to reimbursement by government and third party payors for the Company's products and services, the costs associated with government regulation of the health care industry and the effects of competition and industry consolidation. In some cases, forward-looking statements that involve risks and uncertainties contain terminology such as "may," "will," "should," "could," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or variations of these terms or other comparable terminology. Key factors that have an impact on the Company's ability to attain these estimates include potential reductions in reimbursement rates by government and third party payors, changes in reimbursement policies, demand for the Company's products and services, the availability of appropriate acquisition candidates and the Company's ability to successfully complete acquisitions, efficient operations of the Company's existing and future operating facilities, regulation and/or regulatory action affecting the Company or its business, economic and competitive conditions and access to borrowed and/or equity capital on favorable terms. In developing its forward-looking statements, the Company has made certain assumptions relating to reimbursement rates and policies, internal growth and acquisitions and the outcome of various legal and regulatory proceedings. If the assumptions used by the Company differ materially from what actually occurs, then actual results could vary significantly from the performance projected in the forward-looking statements. The Company is under no duty to update any of the forward-looking statements after the date of this Form 10-K. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements required by this item are listed in Item 14(a)(1) and are submitted at the end of this Annual Report on Form 10-K. The supplementary data required by this Item is included on page S-1. The financial statements and supplementary data are herein incorporated by reference. 14 16 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The response to this item will be included in the definitive proxy statement for the Annual Meeting of Stockholders to be held May 7, 2001, under "Information Regarding the Board of Directors and Executive Officers" and is herein incorporated by reference. ITEM 11. EXECUTIVE COMPENSATION The response to this item will be included in the definitive proxy statement for the Annual Meeting of Stockholders to be held May 7, 2001, under "Executive Compensation" and is herein incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The response to this item will be included in the definitive proxy statement for the Annual Meeting of Stockholders to be held May 7, 2001, under "Security Ownership of Principal Stockholders and Management" and is herein incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K (a) (1) The following consolidated financial statements of Lincare Holdings Inc. and subsidiaries are filed as part of this Form 10-K starting at page F-1: Independent Auditors' Report Consolidated Balance Sheets -- December 31, 2000 and 1999 Consolidated Statements of Operations -- Years ended December 31, 2000, 1999 and 1998. Consolidated Statements of Stockholders' Equity -- Years ended December 31, 2000, 1999 and 1998 Consolidated Statements of Cash Flows -- Years ended December 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements (2) The following consolidated financial statement schedule of Lincare Holdings Inc. and subsidiaries is included in this Form 10-K at page S-1: Schedule VIII -- Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. (3) Exhibits included or incorporated herein: See Exhibit Index. (b) The Company did not file a Current Report on Form 8-K during the three months ended December 31, 2000. 15 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LINCARE HOLDINGS INC. /s/ PAUL G. GABOS -------------------------------------- Paul G. Gabos Secretary, Chief Financial and Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
SIGNATURE POSITION DATE --------- -------- ---- /s/ JOHN P. BYRNES Director, President, Chief Executive March 29, 2001 - ------------------------------------------------ Officer and Principal Executive John P. Byrnes Officer /s/ PAUL G. GABOS Secretary, Chief Financial and March 29, 2001 - ------------------------------------------------ Principal Accounting Officer Paul G. Gabos * Director March 29, 2001 - ------------------------------------------------ Chester B. Black * Director March 29, 2001 - ------------------------------------------------ Frank T. Cary * Director March 29, 2001 - ------------------------------------------------ William F. Miller, III * Director March 29, 2001 - ------------------------------------------------ Frank D. Byrne
*By: /s/ JOHN P. BYRNES -------------------------- Attorney in fact 16 18 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Lincare Holdings Inc.: We have audited the consolidated financial statements of Lincare Holdings Inc. and subsidiaries as listed in the index on page 15. In connection with our audits of the consolidated financial statements, we also have audited the consolidated financial statement schedule listed in the index on page 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used, and significant estimates made, by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lincare Holdings Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP St. Petersburg, Florida February 6, 2001 F-1 19 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999
2000 1999 ---------- ---------- (DOLLARS IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents................................. $ 3,201 $ 3,699 Accounts and notes receivable (note 2).................... 116,838 104,762 Income taxes receivable................................... 5,210 5,837 Inventories............................................... 3,882 3,612 Other..................................................... 7,121 1,700 -------- -------- Total current assets.............................. 136,252 119,610 -------- -------- Property and equipment (notes 3 and 4)...................... 364,819 305,168 Less accumulated depreciation............................... 176,770 134,041 -------- -------- Net property and equipment........................ 188,049 171,127 -------- -------- Other assets: Goodwill, less accumulated amortization of $48,644 in 2000 and $35,166 in 1999.................................... 540,637 413,856 Intangible assets, less accumulated amortization of $49,819 in 2000 and $44,491 in 1999.................................... 8,501 8,577 Covenants not to compete, less accumulated amortization of $12,673 in 2000 and $11,984 in 1999.................................... 1,153 951 Other..................................................... 3,003 2,703 -------- -------- Total other assets................................ 553,294 426,087 -------- -------- $877,595 $716,824 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term obligations (note 5).... $ 6,328 $ 12,436 Accounts payable.......................................... 23,499 20,598 Accrued expenses: Compensation and benefits.............................. 15,455 10,859 Other.................................................. 6,495 5,538 -------- -------- Total current liabilities......................... 51,777 49,431 -------- -------- Long-term obligations, excluding current installments (note 5)........................................................ 204,024 159,000 Interest rate derivative financial instrument (note 1)...... 1,961 -- Deferred income taxes (note 6).............................. 34,585 21,493 Minority interest........................................... 798 789 Stockholders' equity (notes 6, 7, and 8): Common stock, $.01 par value. Authorized 200,000,000 shares; issued and outstanding: 59,983,332 and 53,317,717 in 2000, 58,397,702 and 54,069,202 in 1999................................................... 600 584 Additional paid-in capital................................ 176,002 135,741 Retained earnings......................................... 584,693 467,825 Less treasury stock, at cost: 6,665,615 shares in 2000 and 4,328,500 shares in 1999............................... 176,845 118,039 -------- -------- Total stockholders' equity........................ 584,450 486,111 Commitments and contingencies (notes 4 and 13).............. -------- -------- $877,595 $716,824 ======== ========
See accompanying notes to consolidated financial statements. F-2 20 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998 --------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues (note 9)................................. $ 702,484 $581,786 $487,407 --------- -------- -------- Costs and expenses: Cost of goods and services.......................... 112,949 89,592 76,367 Operating expenses.................................. 158,794 131,240 111,222 Selling, general and administrative expenses........ 147,699 128,345 107,691 Bad debt expense.................................... 10,537 6,981 5,849 Depreciation expense................................ 47,960 41,178 34,430 Amortization expense................................ 19,495 15,954 12,745 --------- -------- -------- 497,434 413,290 348,304 --------- -------- -------- Operating income............................ 205,050 168,496 139,103 --------- -------- -------- Other income (expenses): Interest income..................................... 1,763 468 447 Interest expense.................................... (18,019) (5,940) (1,177) Net gain (loss) on disposal of property and equipment........................................ 8 (277) (113) --------- -------- -------- (16,248) (5,749) (843) --------- -------- -------- Income before income taxes.................. 188,802 162,747 138,260 Income tax expense (note 6)........................... 71,934 62,007 52,954 --------- -------- -------- Net income.................................. $ 116,868 $100,740 $ 85,306 ========= ======== ======== Income per common share (note 10): Basic............................................... $ 2.20 $ 1.77 $ 1.47 ========= ======== ======== Diluted............................................. $ 2.16 $ 1.74 $ 1.44 ========= ======== ======== Weighted average number of common shares outstanding......................................... 53,087 56,942 57,992 ========= ======== ======== Weighted average number of common shares and common share equivalents outstanding....................... 54,151 57,989 59,435 ========= ======== ========
See accompanying notes to consolidated financial statements. F-3 21 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
ADDITIONAL TOTAL COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS' STOCK CAPITAL EARNINGS STOCK EQUITY ------ ---------- -------- -------- ------------- (DOLLARS IN THOUSANDS) Balances at December 31, 1997............... $574 $110,714 $281,779 -- $393,067 Exercise of stock options (note 8).......... 9 9,412 -- -- 9,421 Tax benefit related to exercise of employee stock options (notes 6 and 8)............. -- 8,702 -- -- 8,702 Net income.................................. -- -- 85,306 -- 85,306 Treasury stock issued....................... -- -- -- 891 891 Treasury stock acquired..................... -- -- -- 1,731 1,731 ---- -------- -------- -------- -------- Balances at December 31, 1998............... 583 128,828 367,085 840 495,656 Exercise of stock options (note 8).......... 1 1,847 -- -- 1,848 Proceeds from sale of put options (note 7)........................................ -- 4,454 -- -- 4,454 Tax benefit related to exercise of employee stock options (notes 6 and 8)............. -- 612 -- -- 612 Net income.................................. -- -- 100,740 -- 100,740 Treasury stock issued....................... -- -- -- 1,061 1,061 Treasury stock acquired..................... -- -- -- 118,260 118,260 ---- -------- -------- -------- -------- Balances at December 31, 1999............... 584 135,741 467,825 118,039 486,111 Exercise of stock options (note 8).......... 16 21,839 -- -- 21,855 Proceeds from sale of put options (note 7)........................................ -- 280 -- -- 280 Tax benefit related to exercise of employee stock options (notes 6 and 8)............. -- 18,142 -- -- 18,142 Net income.................................. -- -- 116,868 -- 116,868 Treasury stock issued....................... -- -- -- 941 941 Treasury stock acquired..................... -- -- -- 59,747 59,747 ---- -------- -------- -------- -------- Balances at December 31, 2000............... $600 $176,002 $584,693 $176,845 $584,450 ==== ======== ======== ======== ========
See accompanying notes to consolidated financial statements. F-4 22 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998 --------- --------- --------- (DOLLARS IN THOUSANDS) Cash flows from operating activities: Net income................................................ $ 116,868 $ 100,740 $ 85,306 Adjustments to reconcile net income to net cash provided by operating activities: Increase in provision for losses on accounts and notes receivable........................................... (1,390) (6,260) (2,080) Depreciation expense................................... 47,960 41,178 34,430 Gain/loss on disposal of property and equipment........ (8) 277 113 Amortization expense................................... 19,495 15,954 12,745 Amortization of imputed interest....................... -- 15 67 Amortization of interest swap contracts................ (33) -- -- Deferred income taxes.................................. 13,092 8,539 8,790 Minority interest in net earnings of subsidiary........ 137 83 264 Change in operating assets and liabilities: Increase in accounts and notes receivable............ (3,939) (9,302) (8,377) (Increase) decrease in inventories................... 1,685 (225) (1,103) Increase in other current assets..................... (5,456) (1,435) (113) Increase in accounts payable......................... 2,901 1,430 4,779 Increase (decrease) in accrued expenses.............. 4,948 (167) 2,942 (Increase) decrease in income taxes.................. 18,769 (1,672) 7,679 --------- --------- --------- Net cash provided by operating activities......... 215,029 149,155 145,442 --------- --------- --------- Cash flows from investing activities: Proceeds from sale of property and equipment.............. 310 632 158 Capital expenditures...................................... (58,622) (66,882) (62,188) (Increase) decrease in other assets....................... (445) (1,884) 498 Business acquisitions, net of cash acquired (note 12)..... (150,326) (73,426) (95,704) --------- --------- --------- Net cash used by investing activities............. (209,083) (141,560) (157,236) --------- --------- --------- Cash flows from financing activities: Proceeds from long-term obligations....................... 314,018 273,000 64,000 Payment of long-term obligations.......................... (283,663) (170,879) (59,512) Decrease in minority interest............................. (128) (220) (253) Proceeds from issuance of common stock.................... 21,855 1,848 9,421 Proceeds from put options................................. 280 4,454 -- Proceeds from issuance of treasury stock.................. 941 1,061 891 Payment to acquire treasury stock......................... (59,747) (118,260) (1,731) --------- --------- --------- Net cash provided (used) by financing activities...................................... (6,444) (8,996) 12,816 --------- --------- --------- Net increase (decrease) in cash and cash equivalents..................................... (498) (1,401) 1,022 Cash and cash equivalents, beginning of year................ 3,699 5,100 4,078 --------- --------- --------- Cash and cash equivalents, end of year...................... $ 3,201 $ 3,699 $ 5,100 ========= ========= =========
See accompanying notes to consolidated financial statements. F-5 23 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000, 1999 AND 1998 (1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Description of Business Lincare Holdings Inc. and subsidiaries (the "Company") provides oxygen, respiratory therapy services, and infusion therapy services to the home health care market and also supplies home medical equipment, such as hospital beds, wheelchairs and other medical supplies. The Company's customers are located in 44 states. The Company's supplies are readily available and the Company is not dependent on a single supplier or even a few suppliers. (b) Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (c) Principles of Consolidation The consolidated financial statements include the accounts of Lincare Holdings Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. (d) Revenue Recognition Revenues are recognized on an accrual basis in the period in which services and related products are provided to patients and are recorded at net realizable amounts estimated to be received from patients and third party payors. (e) Financial Instruments The Company believes the book value of its cash equivalents, accounts and notes receivable, income taxes receivable, accounts payable and accrued expenses approximate fair value due to their short-term nature. The book value of the Company's bank revolving credit facility and deferred acquisition obligations approximate their fair value as the current interest rates approximate rates at which similar types of borrowing arrangements could be currently obtained by the Company. The fair value of the Company's senior secured notes are estimated based on the discounted value of the future cash flows expected to be paid over the maturity period of the notes. The estimated fair value of the senior secured notes at December 31, 2000 was $125,820,000. (f) Inventories Inventories, consisting of equipment, supplies and replacement parts, are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. F-6 24 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (g) Property and Equipment Property and equipment is stated at cost. Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of the assets as set forth in the table below. Building and improvements................................... 5 to 40 years Equipment and furniture..................................... 3 to 20 years
Leasehold improvements are amortized on the straight-line method over the lesser of the lease term or estimated useful life of the asset. Amortization is included with depreciation expense. (h) Other Assets Goodwill results from the excess of cost over net assets of acquired businesses and is amortized on a straight-line basis over 40 years. Intangible assets (customer base) are amortized on a straight-line basis over the estimated life of three years. Covenants not to compete are amortized on a straight-line basis over the life of the respective covenants, one to five years. The Company periodically evaluates the ability to recover goodwill and other intangible assets by utilizing a cash flow from operating income test. In addition, the Company considers the effects of external changes to the Company's business environment, including competitive pressures, market changes and technological and regulatory changes. (i) Income Taxes Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The effect on deferred taxes of a change in tax rate is recognized in income in the period that includes the enactment date. (j) Pension Plan The Company has a defined contribution pension plan covering substantially all employees. The Company makes monthly contributions to the plan equal to the amount accrued for pension expense. Employer contributions (net of applied forfeitures) were approximately $4,093,000 in 2000, $3,537,000 in 1999, and $2,248,000 in 1998. (k) Statements of Cash Flows For purposes of the statements of cash flows, the Company considers all short-term investments with a purchased maturity of three months or less to be cash equivalents. (l) Stock Options The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations, in accounting for its fixed plan stock options. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Statement of Financial Accounting Standards ("SFAS") No. 123 "Accounting for Stock-Based Compensation", estab- F-7 25 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) lished accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 123. (m) Segment Information The Company follows Financial Accounting Standards Board Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS No. 131 utilizes the "management" approach for determining reportable segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company's reportable segments. The Company maintains a decentralized approach to management of its local business operations. Decentralization of managerial decision-making enables the Company's operating centers to respond promptly and effectively to local market demands and opportunities. As a result, the Company has one reportable segment. (n) New Accounting Standards In June 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of SFAS No. 133," which deferred, for one year, the effective date for the implementation of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 requires that an entity recognize all derivative instruments as either assets or liabilities on the balance sheet and measure those instruments at fair values. The Company manages interest rate risk by using derivative instruments. During 2000, the Company entered into an interest rate swap agreement whereby the interest rate on its $125,000,000 senior secured notes was effectively converted to a variable interest rate based on three month LIBOR plus a fixed spread. In addition, the Company entered into an interest rate collar transaction with an initial notional amount of $125,000,000. The collar has a floor rate of 5.81% and a cap rate of 8.00% with a floating rate option based on three month LIBOR. The collar contract matures from 2003 -- 2005. The collar is used to offset variability with respect to the Company's variable rate debt. During the fourth quarter of 2000, the Company terminated the swap agreement prior to its maturity at a gain of $3,018,000. The gain was deferred and will be recognized over the original term of the swap contract provided the senior notes remain outstanding. The collar contract was recorded at a fair value by the Company at December 31, 2000 for $1,961,000. Upon adoption of SFAS No. 133, changes in the fair value of the collar over its remaining term that are effective hedges of the variability in the Company's variable rate debt will be recorded in other comprehensive income. Changes in fair value that are not effective hedges will be recorded in earnings. The Company believes that a portion of the changes in fair value may qualify for hedge accounting under SFAS No. 133. In December 1999, the Securities and Exchange Commission (the "Commission") issued Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB 101"), which summarized certain views of the Commission in applying generally accepted accounting principles to revenue recognition in financial statements. The Company believes that its current revenue recognition policies are consistent with the guidance of SAB 101. In September 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and Services of Financial Assets and Extinguishments of Liabilities", which is effective for transfers after March 31, 2001. It is effective for disclosures about securitizations and collateral and for recognition and reclassification of collateral for fiscal F-8 26 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) years ending after December 15, 2000. SFAS No. 140 replaces SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosure, but it carries over most of SFAS No. 125's provisions without reconsideration. The Company does not believe the adoption of SFAS No. 140 will have any effect on its financial statements. (2) ACCOUNTS AND NOTES RECEIVABLE Accounts and notes receivable at December 31, 2000 and 1999 consist of:
2000 1999 -------- -------- (IN THOUSANDS) Trade....................................................... $126,069 $109,310 Other....................................................... 258 349 -------- -------- 126,327 109,659 Less allowance for uncollectible accounts................... 9,489 4,897 -------- -------- $116,838 $104,762 ======== ========
(3) PROPERTY AND EQUIPMENT Property and equipment at December 31, 2000 and 1999 consist of:
2000 1999 -------- -------- (IN THOUSANDS) Land and improvements $3,063... $ 3,170 Building and improvements 9,483... 1,901 Equipment and furniture 352,273.. 300,097 -------- -------- $364,819 $305,168 ======== ========
Rental equipment of approximately $267,812,000 in 2000 and $227,928,000 in 1999 are included with equipment and furniture. (4) LEASES The Company has several noncancelable operating leases, primarily for buildings, office equipment and vehicles, that expire over the next five years and provide for purchase or renewal options. Operating lease expense was approximately $27,763,000 in 2000, $24,118,000 in 1999 and $18,739,000 in 1998. Future minimum lease payments under noncancelable operating leases as of December 31, 2000 are as follows:
(IN THOUSANDS) 2001........................................................ $21,425 2002........................................................ 14,393 2003........................................................ 6,547 2004........................................................ 2,009 2005........................................................ 671 ------- Total minimum lease payments...................... $45,045 =======
F-9 27 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (5) LONG-TERM OBLIGATIONS Long-term obligations at December 31, 2000 and 1999 consist of:
2000 1999 -------- -------- (IN THOUSANDS) Borrowings under three year revolving bank credit agreement bearing interest (8.02% at December 31, 2000) at the Interbank Offered Rate, adjusted for changes in reserve requirements, plus an applicable margin based upon the Company's consolidated leverage ratio (consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation and amortization) payable in 2002..... $ 78,000 $159,000 Borrowings under private placement senior secured notes bearing fixed interest maturing over three, four and five years: $30,000,000 at 8.91% due 2003, $50,000,000 at 9.01% due 2004 and $45,000,000 at 9.11% due 2005 and proceeds from the sale of interest swap contracts.................. 126,024 -- Unsecured, deferred acquisition obligations net of imputed interest, payable in various installments through 2001.... 6,328 12,201 Computer equipment purchases financed through installment loans; interest (4.17% to 4.52%) and principal paid in full in 2000.............................................. -- 235 -------- -------- Total long-term obligations....................... 210,352 171,436 Less current installments......................... 6,328 12,436 -------- -------- Long-term debt, excluding current installments.... $204,024 $159,000 ======== ========
The bank credit facility with several lenders and Bank of America N.A. as agent dated August 23, 1999 and amended June 7, 2000 permits the Company to borrow amounts up to $240,000,000 on a three year revolving credit facility. The three year revolving credit facility contains a $20,000,000 letter of credit sub facility which reduces the principal amount available under the three year credit facility by the amount of outstanding letters of credit. As of December 31, 2000, $4,000,000 was outstanding under the letter of credit sub facility. The three year revolving credit facility has a termination date of August 22, 2002. Upon entering into the credit agreement, an origination fee of $1,840,000 was paid and is being amortized over three years. Commitment fees on the unused portion of the facility (.48% at December 31, 2000) are based upon the Company's consolidated leverage ratio for the most recent four fiscal quarters. Interest accrued on the outstanding principal balance that is not termed for repayment is payable monthly. The credit agreement contains several financial and other covenants and is secured by a pledge of the stock of the wholly-owned subsidiaries of Lincare Holdings Inc. The Company's $60,000,000 364-day revolving bank credit facility expired on August 22, 2000 and was replaced on September 6, 2000 by $125,000,000 of senior secured notes offered through a private placement. The senior secured notes have a fixed interest rate and mature over three, four and five years: $30,000,000 at 8.91% due September 15, 2003, $50,000,000 at 9.01% due September 15, 2004 and $45,000,000 at 9.11% due September 15, 2005. Upon entering into the senior secured note agreement a placement fee of $893,000 was paid and is being amortized over the periods of the notes. The senior secured notes contain several financial and other covenants and is secured by a pledge of the stock of the wholly-owned subsidiaries of Lincare Holdings Inc. Interest swap agreements entered into on September 6, 2000 were sold on December 14, 2000 for $3,018,000. The proceeds are being amortized over the maturity period of the senior secured notes. Unamortized imputed interest on the deferred acquisition obligations and installment loans at 4.17% to 6.0% were zero in 2000 and $35,000 in 1999. F-10 28 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The aggregate maturities of long-term obligations for each of the five years subsequent to December 31, 2000 are as follows:
(IN THOUSANDS) 2001........................................................ $ 6,577 2002........................................................ 78,249 2003........................................................ 30,243 2004........................................................ 50,196 2005........................................................ 45,087 -------- $210,352 ========
(6) INCOME TAXES The tax effects of temporary differences that account for significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2000 and 1999 are presented below:
2000 1999 -------- -------- (IN THOUSANDS) Deferred tax assets: Accrued expenses, principally due to deferral for income tax reporting purposes................................. $ (3,728) $ (4,516) Intangible assets and covenants not to compete, principally due to differences in amortization......... (8,713) (7,587) Net operating loss carryforward........................... (73) (145) -------- -------- Total gross deferred tax assets................... (12,514) (12,248) -------- -------- Deferred tax liabilities: Accounts receivable, principally due to valuation adjustment............................................. 1 4 Property and equipment, principally due to differences in depreciation........................................... 25,798 18,308 Goodwill, principally due to differences in amortization........................................... 19,141 12,615 Other..................................................... 754 2,814 -------- -------- Total gross deferred tax liabilities.............. 45,694 33,741 -------- -------- Net deferred tax liability........................ $ 33,180 $ 21,493 ======== ========
There is no valuation allowance for deferred tax assets. The Company expects that the results of future operations will generate sufficient taxable income to allow for the utilization of deferred tax assets. F-11 29 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Income tax expense attributable to operations consists of:
YEAR ENDED DECEMBER 31, ---------------------------- 2000 1999 1998 -------- ------- ------- (IN THOUSANDS) Current: Federal................................................ $ 55,345 $47,574 $36,423 State.................................................. 4,902 4,215 3,850 -------- ------- ------- Total current.................................. 60,247 51,789 40,273 -------- ------- ------- Deferred: Federal................................................ 10,737 9,387 11,535 State.................................................. 950 831 1,146 -------- ------- ------- Total deferred................................. 11,687 10,218 12,681 -------- ------- ------- Total income tax expense....................... $ 71,934 $62,007 $52,954 ======== ======= ======= Total income tax expense was allocated: Income from operations................................. $ 71,934 $62,007 $52,954 Stockholders' equity for compensation expense for tax purposes............................................ (18,142) (612) (8,702) -------- ------- ------- $ 53,792 $61,395 $44,252 ======== ======= =======
Total income tax expense differs from the amounts computed by applying a U.S. federal income tax rate of 35% to income before income taxes as a result of the following:
YEAR ENDED DECEMBER 31, --------------------------- 2000 1999 1998 ------- ------- ------- (IN THOUSANDS) Computed "expected" tax expense........................... $66,081 $56,961 $48,391 State income taxes, net of federal income tax benefit..... 3,804 3,280 3,247 Other..................................................... 2,049 1,766 1,316 ------- ------- ------- Total income tax expense........................ $71,934 $62,007 $52,954 ======= ======= =======
(7) STOCKHOLDERS' EQUITY The Company has 5,000,000 authorized shares of preferred stock, all of which are unissued. The Board of Directors has the authority to issue up to such number of shares of preferred stock in one or more series and to fix the rights, preferences, privileges, qualifications, limitations and restrictions thereof without any further vote or action by the stockholders. During September 1999 as part of the Company's stock repurchase program, the Company sold European Put Options ("Puts") on underlying shares of the Company's common stock. The Puts had a six-month maturity period and the Company was paid a $4,454,000 premium in advance which was accounted for as additional paid in capital. The Company had the option to settle the Puts in cash or in shares of common stock. In March 2000, the Company amended the terms of the Puts to extend the maturity date of the Puts by two months. In connection with extending the maturity period of the Puts, the Company was paid an additional cash premium of $280,000. In May 2000, the Puts expired out-of-the-money with no obligation to the Company. F-12 30 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (8) STOCK OPTIONS The Company has six stock option plans that provide for the grant of options to directors, officers and employees. To date, stock options have been granted with an exercise price equal to the stock's fair value at the date of grant. Stock options generally have ten-year terms and generally vest over four years. The Company has reserved a total of 5,947,536 shares of common stock for issuance under its Non-Qualified Stock Option Plan (the "Plan"). At December 31, 2000, there were options for 80,000 shares outstanding and no options available for issuance under the Plan. The Company has reserved a total of 3,200,000 shares of common stock for issuance under its 1991 Stock Plan (the "1991 Plan"). At December 31, 2000, there were options for 129,400 shares outstanding and no options available for issuance under the 1991 Plan. The Company has reserved a total of 1,000,000 shares of common stock for issuance under its 1994 Stock Plan (the "1994 Plan"). At December 31, 2000, there were options for 178,500 shares outstanding and 24,000 options available for issuance under the 1994 Plan. The Company has reserved a total of 2,000,000 shares of common stock for issuance under its 1996 Stock Plan (the "1996 Plan"). At December 31, 2000, there were options for 1,252,350 shares outstanding and options for 131,000 shares available for issue under the 1996 Plan. The Company has reserved a total of 1,500,000 shares of common stock for issuance under its 1998 stock plan (the "1998 Plan"). At December 31, 2000, there were options for 1,394,250 shares outstanding and options for 72,000 shares available for issue under the 1998 Plan. The Company has reserved a total of 1,000,000 shares of common stock for issuance under the 2000 Stock Plan (the "2000 Plan"). At December 31, 2000, there were options for 1,000,000 shares outstanding and no options available for issuance under the 2000 Plan. The per share weighted average fair value of stock options granted during 2000, 1999, and 1998 was $16.70, $17.61 and $23.61 on the date of grant using the Black Scholes option pricing model with the following weighted average assumptions: 2000 -- expected dividend yield 0%, risk-free interest rate of 4.9%, expected life of 7 years, and volatility of 62.6%; 1999 -- expected dividend yield 0%, risk-free interest rate of 6.9%, expected life of 8 years, and volatility of 60.6%; 1998 -- expected dividend yield 0%, risk-free interest rate of 5.3%, expected life of 9 years, and volatility of 59.0%. The Company applies Accounting Principles Board Opinion No. 25 in accounting for its stock plans and, accordingly, no compensation cost has been recognized for its stock options in the financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under Statement of Financial Accounting Standards No. 123, the Company's net income would have been reduced to the pro forma amounts indicated below:
2000 1999 1998 -------- -------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net income: As reported................................... $116,868 $100,740 $85,306 ======== ======== ======= Pro forma..................................... $106,207 $ 93,103 $78,689 ======== ======== ======= Income per common share: Basic -- as reported.......................... $ 2.20 $ 1.77 $ 1.47 ======== ======== ======= Diluted -- as reported........................ $ 2.16 $ 1.74 $ 1.44 ======== ======== ======= Basic -- pro forma............................ $ 2.00 $ 1.64 $ 1.36 ======== ======== ======= Diluted -- pro forma.......................... $ 1.96 $ 1.61 $ 1.32 ======== ======== =======
F-13 31 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Pro forma net income reflects only options granted since December 31, 1994. Therefore, the full impact of calculating compensation cost for stock options under Statement of Financial Accounting Standards No. 123 is not reflected in the pro forma net income or per share amounts presented above because compensation cost is reflected over the options vesting period of four years and compensation cost for options granted prior to January 1, 1995 are not considered. Information related to the plans is as follows:
WEIGHTED NUMBER OF AVERAGE OPTIONS EXERCISE PRICE ---------- ---------------- Outstanding at December 31, 1997.......................... 3,935,742 $14.22 Exercised in 1998......................................... (903,942) 10.42 Canceled in 1998.......................................... (83,000) 21.34 Options issued in 1998.................................... 1,090,000 33.83 ---------- Outstanding at December 31, 1998.......................... 4,038,800 19.88 Exercised in 1999......................................... (114,800) 16.40 Canceled in 1999.......................................... (53,500) 28.79 Options issued in 1999.................................... 681,000 24.50 ---------- Outstanding at December 31, 1999.......................... 4,551,500 20.56 Exercised in 2000......................................... (1,523,500) 14.32 Canceled in 2000.......................................... (75,000) 32.12 Options issued in 2000.................................... 1,081,500 24.78 ---------- Outstanding at December 31, 2000.......................... 4,034,500 $24.00 ==========
At December 31, 2000, the range of exercise prices and weighted average remaining contractual life of outstanding options were as follows:
OPTIONS WEIGHTED OUTSTANDING AVERAGE AS OF REMAINING RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE PRICES 2000 LIFE --------------- ------------ ---------------- $ 9.50 -$18.91 ........................................... 1,101,250 4.1 years $19.50 -$24.50 ........................................... 1,005,000 6.9 years $24.63 -$24.63 ........................................... 1,013,000 7.1 years $29.38 -$35.63 ........................................... 915,250 6.6 years --------- $ 9.50 -$35.63 ........................................... 4,034,500 6.1 years =========
At December 31, 2000, 1999 and 1998, the number of options exercisable was 1,380,750, 2,074,000 and 1,535,800, respectively, and the weighted average exercise price of those options was $19.18, $14.09 and $12.61, respectively. In connection with the exercise of certain stock options, the Company receives a tax deduction for the difference between the fair value of the common stock at the date of exercise and the exercise price. The related income tax benefit of approximately $18,142,000 in 2000, $612,000 in 1999 and $8,702,000 in 1998 has been recorded as a reduction of income taxes payable and an increase to additional paid-in capital. F-14 32 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (9) NET REVENUES Included in the Company's net revenues is reimbursement from the federal government under Medicare, Medicaid and other federally funded programs, which aggregated approximately 61% in 2000, 62% in 1999, and 62% in 1998 of such net revenues. (10) INCOME PER COMMON SHARE Basic income per common share is computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted income per common share reflects the potential dilution of securities that could share in earnings, including stock options. When the exercise of stock options is antidilutive, they are excluded from the calculation. A reconciliation of the numerators and the denominators of the basic and diluted per common share computations is as follows:
INCOME SHARES PER SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) YEAR ENDED DECEMBER 31, 2000 Basic: Income available to common stockholders.... $116,868 53,087 $2.20 ===== Effect of dilutive securities: Stock options.............................. -- 1,064 -------- ------ Diluted: Income available to common stockholders and holders of dilutive securities........... $116,868 54,151 $2.16 ======== ====== ===== YEAR ENDED DECEMBER 31, 1999 Basic: Income available to common stockholders.... $100,740 56,942 $1.77 ===== Effect of dilutive securities: Stock options.............................. -- 1,047 -------- ------ Diluted: Income available to common stockholders and holders of dilutive securities........... $100,740 57,989 $1.74 ======== ====== ===== YEAR ENDED DECEMBER 31, 1998 Basic: Income available to common stockholders.... $ 85,306 57,992 $1.47 ===== Effect of dilutive securities: Stock options.............................. -- 1,443 -------- ------ Diluted: Income available to common stockholders and holders of dilutive securities........... $ 85,306 59,435 $1.44 ======== ====== =====
F-15 33 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (11) SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, --------------------------- 2000 1999 1998 ------- ------- ------- (IN THOUSANDS) Cash paid for: Interest.................................................. $14,434 $ 5,823 $ 1,106 ======= ======= ======= Income taxes.............................................. $44,451 $53,461 $37,699 ======= ======= =======
(12) BUSINESS COMBINATIONS During 2000, the Company acquired the outstanding stock or certain assets of 15 businesses in 15 separate transactions. During 1999, the Company acquired the outstanding stock or certain assets of 22 businesses in 22 separate transactions. Consideration for the acquisitions generally included cash, unsecured non-interest bearing obligations and the assumption of certain liabilities. None of the businesses acquired were related to the Company prior to acquisition. Each acquisition during 2000 and 1999 was accounted for as a purchase. The results of operations of the acquired companies are included in the accompanying consolidated statements of operations since the respective dates of acquisition. Each of the acquired companies conducted operations similar to that of the Company. The aggregate cost of the acquisitions described above was as follows:
2000 1999 -------- -------- (IN THOUSANDS) Cash........................................................ $150,326 $ 73,426 Deferred acquisition obligations............................ 9,261 11,988 Assumption of liabilities................................... 2,800 17,942 -------- -------- $162,387 $103,356 ======== ========
The aggregate purchase price of the acquisitions described above was allocated as follows:
2000 1999 -------- -------- (IN THOUSANDS) Current assets.............................................. $ 7,318 $ 2,969 Property and equipment...................................... 6,562 6,097 Intangible assets........................................... 6,142 7,132 Goodwill.................................................... 142,365 87,158 -------- -------- $162,387 $103,356 ======== ========
The following unaudited pro forma supplemental information on the results of operations for the years ended December 31, 2000 and 1999 include the acquisitions as if they had been combined at the beginning of 1999.
2000 1999 ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues................................................ $740,655 $664,158 ======== ======== Net income.................................................. $118,404 $108,773 ======== ======== Basic -- income per common share............................ $ 2.23 $ 1.91 ======== ======== Diluted -- income per common share.......................... $ 2.19 $ 1.88 ======== ========
F-16 34 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) This unaudited pro forma financial information is not necessarily indicative of either the results of operations that would have occurred had the transactions been effected at the beginning of 1999 or of future results of operations of the combined companies. (13) CONTINGENCIES From time to time, the Company receives inquiries from various government agencies requesting patient records and other documents. It has been Lincare's policy to cooperate with all such requests for information. The government has not instituted any proceedings or served Lincare with any complaints as a result of these inquiries. Private litigants may also make claims against the Company for violations of health care laws in actions known as qui tam suits and the government may intervene in, and take control of, such actions. The Company is a defendant in certain qui tam proceedings. Lincare intends to vigorously defend these suits should they proceed. The government has declined to intervene in all unsealed qui tam actions of which the Company is aware. As a health care provider, Lincare is subject to extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating reimbursement under various government programs. The marketing, billing, documentation and other practices of health care companies are all subject to government scrutiny. To ensure compliance with Medicare and other regulations, regional carriers often conduct audits and request patient records and other documents to support claims submitted by the Company for payment of services rendered to patients. Similarly, government agencies periodically open investigations and obtain information from health care providers pursuant to legal process. Violations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs. The Company is also involved in certain other claims and legal actions in the ordinary course of its business. The ultimate disposition of all such matters is not expected to have a material adverse impact on the Company's financial position, results of operations or liquidity. F-17 35 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (14) QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of quarterly financial results for the years ended December 31, 2000 and 1999:
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 2000: Net revenues................................ $159,497 $167,621 $186,022 $189,344 ======== ======== ======== ======== Operating income............................ $ 47,113 $ 48,956 $ 53,386 $ 55,595 ======== ======== ======== ======== Net income.................................. $ 27,136 $ 28,217 $ 29,671 $ 31,844 ======== ======== ======== ======== Income per common share: Basic....................................... $ .51 $ .53 $ .56 $ .61 ======== ======== ======== ======== Diluted..................................... $ .50 $ .52 $ .55 $ .59 ======== ======== ======== ======== 1999: Net revenues................................ $136,081 $143,025 $150,247 $152,433 ======== ======== ======== ======== Operating income............................ $ 38,579 $ 40,806 $ 43,500 $ 45,611 ======== ======== ======== ======== Net income.................................. $ 23,503 $ 24,810 $ 26,021 $ 26,406 ======== ======== ======== ======== Income per common share: Basic....................................... $ .40 $ .43 $ .46 $ .49 ======== ======== ======== ======== Diluted..................................... $ .40 $ .42 $ .45 $ .47 ======== ======== ======== ========
F-18 36 SCHEDULE VIII LINCARE HOLDINGS INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD - ----------- ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS) YEAR ENDED DECEMBER 31, 2000 Deducted from asset accounts Allowance for uncollectible accounts........................... $4,897 $10,537 $5,816(1) $11,761(2) $9,489 ====== ======= ====== ======= ====== YEAR ENDED DECEMBER 31, 1999 Deducted from asset accounts: Allowance for uncollectible accounts........................... $9,353 $ 6,981 $1,891(1) $$13,328(2) $4,897 ====== ======= ====== ======= ====== YEAR ENDED DECEMBER 31, 1998 Deducted from asset accounts: Allowance for uncollectible accounts........................... $7,951 $ 5,849 $2,632(1) $ 7,079(2) $9,353 ====== ======= ====== ======= ======
- --------------- (1) To record allowance on business combinations (2) To record write-offs S-1 37 INDEX OF EXHIBITS
SEQUENTIALLY EXHIBIT NUMBERED NUMBER EXHIBIT PAGE - ------- ------- ------------ A 3.10 -- Amended and Restated Certificate of Incorporation of Lincare Holdings Inc................... B 3.11 -- Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Lincare Holdings Inc................................................................................ A 3.20 -- Amended and Restated By-Laws of Lincare Holdings Inc........................................ A 10.20 -- Non-Qualified Stock Option Plan of Registrant............................................... A 10.21 -- Lincare Holdings Inc. 1991 Stock Plan....................................................... 10.22 -- Lincare Holdings Inc. 1994 Stock Plan....................................................... 10.23 -- Lincare Holdings Inc. 1996 Stock Plan....................................................... 10.24 -- Lincare Holdings Inc. 1998 Stock Plan....................................................... 10.25 -- Lincare Holdings Inc. 2000 Stock Plan....................................................... A 10.30 -- Lincare Inc. 401(k) Plan.................................................................... C 10.31 -- Employment Stock Purchase Plan.............................................................. C 10.40 -- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc. and John P. Byrnes.............................................................................. C 10.41 -- Employment Agreement dated as of June 1, 1997 between Lincare Holdings Inc. and Paul G. Gabos............................................................................... H 10.42 -- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc. and James T. Kelly.............................................................................. 10.43 -- Employment Agreement dated as of January 1, 1998 between Lincare Holdings Inc. and Shawn S. Schabel............................................................................ C 10.50 -- Form of Non-employee Director Stock Option Agreement........................................ C 10.51 -- Form of Non-qualified Stock Option Agreement................................................ G 10.52 -- Non-Qualified Stock Option Agreements dated as of January 23, 1995 between the Registrant and James M. Emanuel........................................................................ H 10.53 -- Non-Qualified Stock Option Agreements dated as of January 26, 1996 between the Registrant and John P. Byrnes.......................................................................... H 10.54 -- Non-Qualified Stock Option Agreements dated as of July 15, 1996 between the Registrant and John P. Byrnes.......................................................................... D 10.60 -- Three-Year Credit Agreement among Lincare Holdings Inc., as Borrower, Certain Subsidiaries of Borrower from time to time party thereto, as Guarantors, the several Lenders from time to time party thereto and Bank of America, N.A., as Agent................................... E 10.61 -- First Amendment to the Three-Year Credit Agreement dated June 20, 2000...................... E 10.62 -- Second Amendment to the Three-Year Credit Agreement dated August 21, 2000................... E 10.70 -- Senior Secured Note Purchase Agreement among Lincare Holdings Inc., as Borrower, and several note holders with Bank of America, N.A., as Agent........................................... E 10.71 -- Form of Series A Note....................................................................... E 10.72 -- Form of Series B Note....................................................................... E 10.73 -- Form of Series C Note....................................................................... F 22.10 -- List of Subsidiaries of Lincare Holdings Inc................................................ 23.10 -- Consent of KPMG LLP......................................................................... 99.0 -- Powers of Attorney..........................................................................
38 A Incorporate by reference to the corresponding exhibit to the Registrant's Registration Statement on Form S-1 (No. 33-44672) B Incorporated by reference to the Registrant's Form 10-Q dated August 12, 1998. C Incorporate by reference to the Registrant's Form 10-K dated March 26, 1998. D Incorporate by reference to the Registrant's Form 10-Q dated November 12, 1999. E Incorporate by reference to the Registrant's 10-Q dated November 13, 2000. F Incorporate by reference to the Registrant's Form 10-K dated March 22, 1994. G Incorporate by reference to the Registrant's Form 10-K dated March 27, 1996. H Incorporate by reference to the Registrant's Form 10-K dated March 25, 1997. EX-10.22 2 g66313ex10-22.txt LINCARE 1994 STOCK PLAN 1 EXHIBIT 10.22 LINCARE HOLDINGS INC 1994 STOCK PLAN Section 1. Purpose. The purpose of the Lincare Holdings Inc. 1994 Stock Plan (the "Plan") is to promote the interests of Lincare Holdings Inc., a Delaware corporation (the "Company"), and any Subsidiary thereof and the interests of the Company's stockholders by providing an opportunity to selected employees, officers and directors of the Company or any Subsidiary thereof as of the date of the adoption of the Plan or at any time thereafter to purchase Common Stock of the Company. By encouraging such stock ownership, the Company seeks to attract, retain and motivate such employees and persons and to encourage such employees and persons to devote their best efforts to the business and financial success of the Company. It is intended that this purpose will be effected by the granting of "non-qualified stock options" and/or "incentive stock options" to acquire the Common Stock of the Company and/or by the granting of rights to purchase the Common Stock of the Company on a "restricted stock" basis. Under the Plan, the Committee shall have the authority (in its sole discretion) to grant "incentive stock options" within the meaning of Section 422(b) of the Code, "non-qualified stock options" as described in Treasury Regulation Section 1.83-7 or any successor regulation thereto, or "restricted stock" awards. Section 2. Definitions. For purposes of the Plan, the following terms used herein shall have the following meanings, unless a different meaning is clearly required by the context. 2.1. "Award" shall mean an award of the right to purchase Common Stock granted under the provisions of Section 7 of the Plan. 2.2. "Board of Directors" shall mean the Board of Directors of the Company. 2.3. "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.4. "Committee" shall mean the committee of the Board of Directors referred to in Section 5 hereof. 2.5. "Common Stock" shall mean the Common Stock, $.01 par value, of the Company. 2 2.6. "Employee" shall mean (i) with respect to an ISO, any person, including an officer or director of the Company, who, at the time an ISO is granted to such person hereunder, is employed on a full-time basis by the Company or any Subsidiary of the Company, and (ii) with respect to a Non-Qualified Option and/or an Award, any person employed by, or performing services for, the Company or any Subsidiary of the Company, including, without limitation, directors and officers. 2.7. "ISO" shall mean an Option granted to a Participant pursuant to the Plan that constitutes and shall be treated as an "incentive stock option" as defined in Section 422(b) of the Code. 2.8. "Non-Qualified Option" shall mean an Option granted to a Participant pursuant to the Plan that is intended to be, and qualifies as, a "non-qualified stock option" as described in Treasury Regulation Section 1.83-7 or any successor regulation thereto and that shall not constitute nor be treated as an ISO. 2.9. "Option" shall mean any ISO or Non-Qualified Option granted to an Employee pursuant to the Plan. 2.10. "Participant" shall mean any Employee to whom an Award and/or an Option is granted under the Plan. 2.11. "Parent of the Company" shall have the meaning set forth in Section 424(e) of the Code. 2.12. "Subsidiary of the Company" shall have the meaning set forth in Section 424(f) of the Code. Section 3. Eligibility. Awards and/or Options may be granted to any Employee. The Committee shall have the sole authority to select the persons to whom Awards and/or Options are to be granted hereunder, and to determine whether a person is to be granted a Non-Qualified Option, an ISO or an Award or any combination thereof. No person shall have any right to participate in the Plan. Any person selected by the Committee for participation during any one period will not by virtue of such participation have the right to be selected as a Participant for any other period. Section 4. Common Stock Subject to the Plan. 4.1. Number of Shares. The total number of shares of Common Stock for which Options and/or Awards may be granted under the Plan shall not exceed in the aggregate Five Hundred Thousand (500,000) shares of Common Stock (subject to adjustment as provided in Section 8 hereof). The total number of shares of 2 3 Common Stock for which Options and/or Awards may be granted under the Plan to any individual in any fiscal year shall not exceed One Hundred Thousand (100,000) shares of Common Stock (subject to adjustment as provided in Section 8 hereof). 4.2. Reissuance. The shares of Common Stock that may be subject to Options and/or Awards granted under the Plan may be either authorized and unissued shares or shares reacquired at any time and now or hereafter held as treasury stock as the Board of Directors may determine. In the event that any outstanding Option expires or is terminated for any reason, the shares allocable to the unexercised portion of such Option may again be subject to an Option and/or Award granted under the Plan. If any shares of Common Stock acquired pursuant to an Award or the exercise of an Option shall have been repurchased by the Company, then such shares shall again become available for issuance pursuant to the Plan. 4.3. Special ISO Limitations. (a) The aggregate fair market value (determined as of the date an ISO is granted) of the shares of Common Stock with respect to which ISOs are exercisable for the first time by an Employee during any calendar year (under all Incentive Stock Option Plans of the Company or any Parent or Subsidiary of the Company) shall not exceed $100,000. (b) No ISO shall be granted to an Employee who, at the time the ISO is granted, owns (actually or constructively under the provisions of Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, unless the option price is at least 110% of the fair market value (determined as of the time the ISO is granted) of the shares of Common Stock subject to the ISO and the ISO by its terms is not exercisable more than five years from the date it is granted. 4.4. Limitations Not Applicable to Non-Qualified Options or Awards. Notwithstanding any other provision of the Plan, the provisions of Sections 4.3(a) and (b) shall not apply, nor shall be construed to apply, to any Non-Qualified Option or Award granted under the Plan. Section 5. Administration of the Plan. 5.1. Administration. The Plan shall be administered by a committee of the Board of Directors (the "Committee") established by the Board of Directors and consisting of no less than two persons. All members of the Committee shall be "disinterested persons" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the 3 4 "Exchange Act"). The Committee shall be appointed from time to time by, and shall serve at the pleasure of, the Board of Directors. 5.2. Grant of Options/Awards. (a) Options. The Committee shall have the sole authority and discretion under the Plan (i) to select the Employees who are to be granted Options hereunder; (ii) to designate whether any Option to be granted hereunder is to be an ISO or a Non-Qualified Option; (iii) to establish the number of shares of Common Stock that may be issued under each Option; (iv) to determine the time and the conditions subject to which Options may be exercised in whole or in part; (v) to determine the form of the consideration that may be used to purchase shares of Common Stock upon exercise of any Option (including the circumstances under which the Company's issued and outstanding shares of Common Stock may be used by a Participant to exercise an Option); (vi) to impose restrictions and/or conditions with respect to shares of Common Stock acquired upon exercise of an Option; (vii) to determine the circumstances under which shares of Common Stock acquired upon exercise of any Option may be subject to repurchase by the Company; (viii) to determine the circumstances and conditions subject to which shares acquired upon exercise of an Option may be sold or otherwise transferred, including, without limitation, the circumstances and conditions subject to which a proposed sale of shares of Common Stock acquired upon exercise of an Option may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (ix) to establish a vesting provision for any Option relating to the time when (or the circumstances under which) the Option may be exercised by a Participant, including, without limitation, vesting provisions that may be contingent upon (A) the Company's meeting specified financial goals, (B) a change of control of the Company or (C) the occurrence of other specified events; (x) to accelerate the time when outstanding Options may be exercised, provided, however, that any ISOs shall be "accelerated" within the meaning of Section 424(h) of the Code; and (xi) to establish any other terms, restrictions and/or conditions applicable to any Option not inconsistent with the provisions of the Plan. Notwithstanding anything in the Plan to the contrary, in no event shall any Option granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such Option is granted to such director or officer. (b) Awards. The Committee shall have the sole authority and discretion under the Plan (i) to select the Employees who are to be granted Awards hereunder; (ii) to determine the amount to be paid by a Participant to acquire shares 4 5 of Common Stock pursuant to an Award, which amount may be equal to, more than, or less than 100% of the fair market value of such shares on the date the Award is granted (but in no event less than the par value of such shares); (iii) to determine the time or times and the conditions subject to which Awards may be made; (iv) to determine the time or times and the conditions subject to which the shares of Common Stock subject to an Award are to become vested and no longer subject to repurchase by the Company; (v) to establish transfer restrictions and the terms and conditions on which any such transfer restrictions with respect to shares of Common Stock acquired pursuant to an Award shall lapse; (vi) to establish vesting provisions with respect to any shares of Common Stock subject to an Award, including, without limitation, vesting provisions which may be contingent upon (A) the Company's meeting specified financial goals, (B) a change of control of the Company or (C) the occurrence of other specified events; (vii) to determine the circumstances under which shares of Common Stock acquired pursuant to an Award may be subject to repurchase by the Company; (viii) to determine the circumstances and conditions subject to which any shares of Common Stock acquired pursuant to an Award may be sold or otherwise transferred, including, without limitation, the circumstances and conditions subject to which a proposed sale of shares of Common Stock acquired pursuant to an Award may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (ix) to determine the form of consideration that may be used to purchase shares of Common Stock pursuant to an Award (including the circumstances under which the Company's issued and outstanding shares of Common Stock may be used by a Participant to purchase the Common Stock subject to an Award); (x) to accelerate the time at which any or all restrictions imposed with respect to any shares of Common Stock subject to an Award will lapse; and (xi) to establish any other terms, restrictions and/or conditions applicable to any Award not inconsistent with the provisions of the Plan. 5.3. Interpretation. The Committee shall be authorized to interpret the Plan and may, from time to time, adopt such rules and regulations, not inconsistent with the provisions of the Plan, as it may deem advisable to carry out the purposes of the Plan. 5.4. Finality. The interpretation and construction by the Committee of any provision of the Plan, any Option and/or Award granted hereunder or any agreement evidencing any such Option and/or Award shall be final and conclusive upon all parties. 5.5. Voting. Members of the Committee may vote on any matter affecting the administration of the Plan or the granting of Options and/or Awards under the Plan. 5 6 5.6. Expenses, Etc. All expenses and liabilities incurred by the Committee in the administration of the Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants or other persons in connection with the administration of the Plan. The Company, and its officers and directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons. No member of the Committee shall be liable for any action, determination or interpretation taken or made in good faith with respect to the Plan or any Option and/or Award granted hereunder. Section 6. Terms and Conditions of Options. 6.1. ISOs. The terms and conditions of each ISO granted under the Plan shall be specified by the Committee and shall be set forth in an ISO agreement between the Company and the Participant in such form as the Committee shall approve. The terms and conditions of each ISO shall be such that each ISO issued hereunder shall constitute and shall be treated as an "incentive stock option" as defined in Section 422(b) of the Code. The terms and conditions of any ISO granted hereunder need not be identical to those of any other ISO granted hereunder. The terms and conditions of each ISO shall include the following: (a) The option price shall be fixed by the Committee but shall in no event be less than 100% (or 110% in the case of an Employee referred to in Section 4.3(b) hereof) of the fair market value of the shares of Common Stock subject to the ISO on the date the ISO is granted. For purposes of the Plan, the fair market value per share of Common Stock as of any day shall mean the average of the closing prices of sales of shares of Common Stock on all national securities exchanges on which the Common Stock may at the time be listed or, if there shall have been no sales on any such day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock shall not be so listed, the average of the representative bid and asked prices quoted in the NASDAQ system as of 3:30 p.m., New York time, on such day, or, if on any day the Common Stock shall not be quoted in the NASDAQ system, the average of the high and low bid and asked prices on such day in the over-the-counter market as reported by National Quotation Bureau Incorporated, or any similar successor organization. If at any time the Common Stock is not listed on any national securities exchange or quoted in the NASDAQ system or the over-the-counter market, the fair market value of the shares of Common Stock subject to an Option on the date the ISO is granted shall be the fair market value thereof determined in good faith by the Board of Directors. 6 7 (b) ISOs, by their terms, shall not be transferable otherwise than by will or the laws of descent and distribution, and, during an Optionee's lifetime, an ISO shall be exercisable only by the Optionee. (c) The Committee shall fix the term of all ISOs granted pursuant to the Plan (including the date on which such ISO shall expire and terminate), provided, however, that such term shall in no event exceed ten years from the date on which such ISO is granted (or, in the case of an ISO granted to an Employee referred to in Section 4.3(b) hereof, such term shall in no event exceed five years from the date on which such ISO is granted). Each ISO shall be exercisable in such amount or amounts, under such conditions and at such times or intervals or in such installments as shall be determined by the Committee in its sole discretion, provided, however, that in no event shall any ISO granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such ISO is granted to such director or officer. (d) To the extent that the Company or any Parent or Subsidiary of the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by any Participant as a result of any "disqualifying disposition" of any shares of Common Stock acquired upon exercise of an ISO granted hereunder, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors in its sole discretion. (e) In the sole discretion of the Committee the terms and conditions of any ISO may (but need not) include any of the following provisions: (i) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis for any reason other than as a result of his death or "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one month after the date on which the Participant ceased to be so employed, and only to the extent 7 8 that the Participant could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (ii) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis by reason of his "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one year after the date on which the Participant ceased to be so employed, and only to the extent that the Participant could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (iii) In the event a Participant shall die while in the full-time employ of the Company or a Parent or Subsidiary of the Company (or within a period of one month after ceasing to be an Employee for any reason other than his "disability" or within a period of one year after ceasing to be an Employee by reason of such "disability"), the unexercised portion of any ISO held by such Participant at the time of his death may only be exercised within one year after the date of such Participant's death, and only to the extent that the Participant could have otherwise exercised such ISO at the time of his death. In such event, such ISO may be exercised by the executor or administrator of the Participant's estate or by any person or persons who shall have acquired the ISO directly from the Participant by bequest or inheritance. 6.2. Non-Qualified Options. The terms and conditions of each Non-Qualified Option granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written option agreement between the Company and the Participant in such form as the Committee shall approve. The terms and conditions of each Non-Qualified Option will be such (and each Non-Qualified Option Agreement shall expressly so state) that each Non-Qualified Option issued hereunder shall not constitute nor be treated as an "incentive stock option" as defined in Section 422(b) of the Code but will be a "non-qualified stock option" for Federal, state and local income tax purposes. The terms and conditions of any Non-Qualified Option granted hereunder need not be identical to those of any other Non-Qualified Option granted hereunder. The terms and conditions of each Non-Qualified Option Agreement shall include the following: (a) The option (exercise) price shall be fixed by the Committee and may be equal to, more than or less than 100% of the fair market value of the shares of Common Stock subject to the Non-Qualified Option on the date such Non-Qualified Option is 8 9 granted; provided, however, that with respect to a grant to an Employee subject to Section 16 of the Exchange Act, such price shall be equal to or greater than 50% of the fair market value of such shares on the date of grant. (b) The Committee shall fix the term of all Non-Qualified Options granted pursuant to the Plan (including the date on which such Non-Qualified Option shall expire and terminate). Such term may be more than ten years from the date on which such Non-Qualified Option is granted. Each Non-Qualified Option shall be exercisable in such amount or amounts, under such conditions (including provisions governing the rights to exercise such Non-Qualified Option), and at such times or intervals or in such installments as shall be determined by the Committee in its sole discretion, provided, however, that in no event shall any Non-Qualified Option granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such Non-Qualified Option is granted to such director or officer. (c) Non-Qualified Options shall not be transferable otherwise than by will or the laws of descent and distribution, and during a Participant's lifetime a Non-Qualified Option shall be exercisable only by the Participant. (d) To the extent that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by any Participant in respect of a Non-Qualified Option granted hereunder or in respect of any shares of Common Stock acquired upon exercise of a Non-Qualified Option, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, or if no such payments are due or to become due to such Participant, then, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors in its sole discretion. 7. Terms and Conditions of Awards. The terms and conditions of each Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Participant and the Company, in such form as the Committee shall approve. The terms and provisions of any Award granted hereunder need not be identical to those of any other Award granted hereunder. 9 10 The terms and conditions of each Award shall include the following: (a) The amount to be paid by a Participant to acquire the shares of Common Stock pursuant to an Award shall be fixed by the Board of Directors (or the Committee) and may be equal to, more than or less than 100% of the fair market value of the shares of Common Stock subject to the Award on the date the Award is granted. The Award may provide for the issuance of shares of common stock as a stock bonus for no consideration other than services rendered. In the event of an Award under which shares of Common Stock are issued to an Employee subject to Section 16 of the Exchange Act for any other type of consideration, the amount of such consideration shall be equal to or greater than 50% of the fair market value of such shares on the date of grant of such Award. (b) Each Award shall contain such vesting provisions, such transfer restrictions and such other restrictions and conditions as the Committee, in its sole discretion, may determine, including, without limitation, the circumstances under which the Company shall have the right and option to repurchase shares of Common Stock acquired pursuant to an Award. (c) Stock certificates representing Common Stock acquired pursuant to an Award shall bear a legend referring to the restrictions imposed on such Stock and such other matters as the Committee may determine. (d) To the extent that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by the Participant in respect of an Award granted hereunder, or in respect of any shares acquired pursuant to an Award, or in respect of the vesting of any such shares of Common Stock, then the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, or if no such payments are due or to become due to such Participant, then, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Committee in its sole discretion. 10 11 Section 8. Adjustments. In the event that, after the adoption of the Plan by the Board of Directors, the outstanding shares of the Company's Common Stock shall be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation through reorganization, merger or consolidation, recapitalization, reclassification, stock split, split-up, combination or exchange of shares or declaration of any dividends payable in Common Stock, the Board of Directors shall appropriately adjust (i) the number of shares of Common Stock (and the option price per share) subject to the unexercised portion of any outstanding Option (to the nearest possible full share), provided, however, that the limitations of Section 424 of the Code shall apply with respect to adjustments made to ISOs; (ii) the number of shares of Common Stock to be acquired pursuant to an Award which have not become vested, and (iii) the number of shares of Common Stock for which Options and/or Awards may be granted under the Plan, as set forth in Section 4.1 hereof, and such adjustments shall be effective and binding for all purposes of the Plan. Section 9. Effect of the Plan on Employment Relationship. Neither the Plan nor any Option and/or Award granted hereunder to a Participant shall be construed as conferring upon such Participant any right to continue in the employ of (or otherwise provide services to) the Company or any Subsidiary or Parent thereof, or limit in any respect the right of the Company or any Subsidiary or Parent thereof to terminate such Participant's employment or other relationship with the Company or any Subsidiary or Parent, as the case may be, at any time. Section 10. Amendments of the Plan. The Board of Directors may amend, alter or discontinue the Plan, except that (i) no amendment of alteration that would impair the rights of any Optionee under any Option granted hereunder shall be made without his or her consent, and (ii) without the approval of the holders of a majority of the shares of Common Stock present or represented and entitled to vote thereon at a meeting of stockholders, no amendment of alteration shall be made that would: (a) modify the terms of ISOs in any manner that would require shareholder approval under Section 422 of the Code; (b) materially increase the total number of shares of Common Stock issuable under the Plan, except in accordance with Section 8 hereof; (c) materially modify the requirements as to eligibility for participation in the Plan; 11 12 (d) materially increase the benefits accruing to Participants; or (e) cause the Plan not to comply with the rules and regulations promulgated under Section 16(b) of the Securities Exchange Act of 1934, as amended; except to conform the Plan to changes in the Code or other applicable law. Section 11. Termination of the Plan. The Board of Directors may terminate the Plan at any time. Unless the Plan shall theretofore have been terminated by the Board of Directors, the Plan shall terminate ten years after the date of its initial adoption by the Board of Directors. No Option and/or Award may be granted hereunder after termination of the Plan. The termination or amendment of the Plan shall not alter or impair any rights or obligations under any Option and/or Award theretofore granted under the Plan. Section 12. Effective Date of the Plan. The Plan shall be effective as of May 31, 1994. 12 EX-10.23 3 g66313ex10-23.txt LINCARE 1996 STOCK PLAN 1 EXHIBIT 10.23 LINCARE HOLDINGS INC. 1996 STOCK PLAN, as amended 1. Purpose. The purpose of the Lincare Holdings Inc. 1996 Stock Plan (the "Plan") is to promote the interests of Lincare Holdings Inc., a Delaware corporation (the "Company"), and any Subsidiary thereof and the interests of the Company's stockholders by providing an opportunity to selected employees, officers and directors of the Company or any Subsidiary thereof as of the date of the adoption of the Plan or at any time thereafter to purchase Common Stock of the Company. By encouraging such stock ownership, the Company seeks to attract, retain and motivate such employees and persons and to encourage such employees and persons to devote their best efforts to the business and financial success of the Company. It is intended that this purpose will be effected by the granting of "non-qualified stock options" and/or "incentive stock options" to acquire the Common Stock of the Company and/or by the granting of rights to purchase the Common Stock of the Company on a "restricted stock" basis. Under the Plan, the Committee shall have the authority (in its sole discretion) to grant "incentive stock options" within the meaning of Section 422(b) of the Code, "non-qualified stock options" as described in Treasury Regulation Section 1.83-7 or any successor regulation thereto, or "restricted stock" awards. 2. Definitions. For purposes of the Plan, the following terms used herein shall have the following meanings, unless a different meaning is clearly required by the context. 2.1. "Award" shall mean an award of the right to purchase Common Stock granted under the provisions of Section 7 of the Plan. 2.2. "Board of Directors" shall mean the Board of Directors of the Company. 2.3. "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.4. "Committee" shall mean the committee of the Board of Directors referred to in Section 5 hereof. 2.5. "Common Stock" shall mean the Common Stock, $.01 par value, of the Company. 2.6. "Employee" shall mean (i) with respect to an ISO, any person, including an officer or director of the Company, who, at the time an ISO is granted to 2 such person hereunder, is employed on a full-time basis by the Company or any Subsidiary of the Company, and (ii) with respect to a Non-Qualified Option and/or an Award, any person employed by, or performing services for, the Company or any Subsidiary of the Company, including, without limitation, directors and officers. 2.7. "ISO" shall mean an Option granted to a Participant pursuant to the Plan that constitutes and shall be treated as an "incentive stock option" as defined in Section 422(b) of the Code. 2.8. "Non-Qualified Option" shall mean an Option granted to a Participant pursuant to the Plan that is intended to be, and qualifies as, a "non-qualified stock option" as described in Treasury Regulation Section 1.83-7 or any successor regulation thereto and that shall not constitute nor be treated as an ISO. 2.9. "Option" shall mean any ISO or Non-Qualified Option granted to an Employee pursuant to the Plan. 2.10. "Participant" shall mean any Employee to whom an Award and/or an Option is granted under the Plan. 2.11. "Parent of the Company" shall have the meaning set forth in Section 424(e) of the Code. 2.12. "Subsidiary of the Company" shall have the meaning set forth in Section 424(f) of the Code. 3. Eligibility. Awards and/or Options may be granted to any Employee. The Committee shall have the sole authority to select the persons to whom Awards and/or Options are to be granted hereunder, and to determine whether a person is to be granted a Non-Qualified Option, an ISO or an Award or any combination thereof. No person shall have any right to participate in the Plan. Any person selected by the Committee for participation during any one period will not by virtue of such participation have the right to be selected as a Participant for any other period. 4. Common Stock Subject to the Plan. 4.1. Number of Shares. The total number of shares of Common Stock for which Options and/or Awards may be granted under the Plan shall not exceed in the aggregate Seven Hundred Fifty Thousand (1,000,000) shares of Common Stock (subject to adjustment as provided in Section 8 hereof). The total number of shares of Common Stock for which Options and/or Awards may be granted under the Plan to any 2 3 individual in any fiscal year shall not exceed One Hundred Thousand (100,000) shares of Common Stock (subject to adjustment as provided in Section 8 hereof). 4.2. Reissuance. The shares of Common Stock that may be subject to Options and/or Awards granted under the Plan may be either authorized and unissued shares or shares reacquired at any time and now or hereafter held as treasury stock as the Board of Directors may determine. In the event that any outstanding Option expires or is terminated for any reason, the shares allocable to the unexercised portion of such Option may again be subject to an Option and/or Award granted under the Plan. If any shares of Common Stock acquired pursuant to an Award or the exercise of an Option shall have been repurchased by the Company, then such shares shall again become available for issuance pursuant to the Plan. 4.3. Special ISO Limitations. (a) The aggregate fair market value (determined as of the date an ISO is granted) of the shares of Common Stock with respect to which ISOs are exercisable for the first time by an Employee during any calendar year (under all Incentive Stock Option Plans of the Company or any Parent or Subsidiary of the Company) shall not exceed $100,000. (b) No ISO shall be granted to an Employee who, at the time the ISO is granted, owns (actually or constructively under the provisions of Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, unless the option price is at least 110% of the fair market value (determined as of the time the ISO is granted) of the shares of Common Stock subject to the ISO and the ISO by its terms is not exercisable more than five years from the date it is granted. 4.4. Limitations Not Applicable to Non-Qualified Options or Awards. Notwithstanding any other provision of the Plan, the provisions of Sections 4.3(a) and (b) shall not apply, nor shall be construed to apply, to any Non-Qualified Option or Award granted under the Plan. 5. Administration of the Plan. 5.1. Administration. The Plan shall be administered by a committee of the Board of Directors (the "Committee") established by the Board of Directors and consisting of no less than two persons. All members of the Committee shall be "disinterested persons" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"). The Committee shall be 3 4 appointed from time to time by, and shall serve at the pleasure of, the Board of Directors. 4 5 5.2. Grant of Options/Awards. (a) Options. The Committee shall have the sole authority and discretion under the Plan (i) to select the Employees who are to be granted Options hereunder; (ii) to designate whether any Option to be granted hereunder is to be an ISO or a Non-Qualified Option; (iii) to establish the number of shares of Common Stock that may be issued under each Option; (iv) to determine the time and the conditions subject to which Options may be exercised in whole or in part; (v) to determine the form of the consideration that may be used to purchase shares of Common Stock upon exercise of any Option (including the circumstances under which the Company's issued and outstanding shares of Common Stock may be used by a Participant to exercise an Option); (vi) to impose restrictions and/or conditions with respect to shares of Common Stock acquired upon exercise of an Option; (vii) to determine the circumstances under which shares of Common Stock acquired upon exercise of any Option may be subject to repurchase by the Company; (viii) to determine the circumstances and conditions subject to which shares acquired upon exercise of an Option may be sold or otherwise transferred, including, without limitation, the circumstances and conditions subject to which a proposed sale of shares of Common Stock acquired upon exercise of an Option may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (ix) to establish a vesting provision for any Option relating to the time when (or the circumstances under which) the Option may be exercised by a Participant, including, without limitation, vesting provisions that may be contingent upon (A) the Company's meeting specified financial goals, (B) a change of control of the Company or (C) the occurrence of other specified events; (x) to accelerate the time when outstanding Options may be exercised, provided, however, that any ISOs shall be "accelerated" within the meaning of Section 424(h) of the Code; and (xi) to establish any other terms, restrictions and/or conditions applicable to any Option not inconsistent with the provisions of the Plan. Notwithstanding anything in the Plan to the contrary, in no event shall any Option granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such Option is granted to such director or officer. (b) Awards. The Committee shall have the sole authority and discretion under the Plan (i) to select the Employees who are to be granted Awards hereunder; (ii) to determine the amount to be paid by a Participant to acquire shares of Common Stock pursuant to an Award, which amount may be equal to, more than, or less than 100% of the fair market value of such shares on the date the Award is granted (but in no event less than the par value of such shares); (iii) to determine the time or times and the conditions subject to which Awards may be made; (iv) to determine the time or times and the conditions subject to which the shares of Common Stock subject to an Award are to become vested and no longer subject to repurchase by the Company; (v) to establish transfer restrictions and the terms and conditions on which any such transfer restrictions 5 6 with respect to shares of Common Stock acquired pursuant to an Award shall lapse; (vi) to establish vesting provisions with respect to any shares of Common Stock subject to an Award, including, without limitation, vesting provisions which may be contingent upon (A) the Company's meeting specified financial goals, (B) a change of control of the Company or (C) the occurrence of other specified events; (vii) to determine the circumstances under which shares of Common Stock acquired pursuant to an Award may be subject to repurchase by the Company; (viii) to determine the circumstances and conditions subject to which any shares of Common Stock acquired pursuant to an Award may be sold or otherwise transferred, including, without limitation, the circumstances and conditions subject to which a proposed sale of shares of Common Stock acquired pursuant to an Award may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (ix) to determine the form of consideration that may be used to purchase shares of Common Stock pursuant to an Award (including the circumstances under which the Company's issued and outstanding shares of Common Stock may be used by a Participant to purchase the Common Stock subject to an Award); (x) to accelerate the time at which any or all restrictions imposed with respect to any shares of Common Stock subject to an Award will lapse; and (xi) to establish any other terms, restrictions and/or conditions applicable to any Award not inconsistent with the provisions of the Plan. 5.3. Interpretation. The Committee shall be authorized to interpret the Plan and may, from time to time, adopt such rules and regulations, not inconsistent with the provisions of the Plan, as it may deem advisable to carry out the purposes of the Plan. 5.4. Finality. The interpretation and construction by the Committee of any provision of the Plan, any Option and/or Award granted hereunder or any agreement evidencing any such Option and/or Award shall be final and conclusive upon all parties. 5.5. Voting. Members of the Committee may vote on any matter affecting the administration of the Plan or the granting of Options and/or Awards under the Plan. 5.6. Expenses, Etc. All expenses and liabilities incurred by the Committee in the administration of the Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants or other persons in connection with the administration of the Plan. The Company, and its officers and directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons. No member of the Committee shall be liable for any action, determination or interpretation taken or made in good faith with respect to the Plan or any Option and/or Award granted hereunder. 6 7 6. Terms and Conditions of Options. 6.1. ISOs. The terms and conditions of each ISO granted under the Plan shall be specified by the Committee and shall be set forth in an ISO agreement between the Company and the Participant in such form as the Committee shall approve. The terms and conditions of each ISO shall be such that each ISO issued hereunder shall constitute and shall be treated as an "incentive stock option" as defined in Section 422(b) of the Code. The terms and conditions of any ISO granted hereunder need not be identical to those of any other ISO granted hereunder. The terms and conditions of each ISO shall include the following: (a) The option price shall be fixed by the Committee but shall in no event be less than 100% (or 110% in the case of an Employee referred to in Section 4.3(b) hereof) of the fair market value of the shares of Common Stock subject to the ISO on the date the ISO is granted. For purposes of the Plan, the fair market value per share of Common Stock as of any day shall mean the average of the closing prices of sales of shares of Common Stock on all national securities exchanges on which the Common Stock may at the time be listed or, if there shall have been no sales on any such day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock shall not be so listed, the average of the representative bid and asked prices quoted in the NASDAQ system as of 3:30 p.m., New York time, on such day, or, if on any day the Common Stock shall not be quoted in the NASDAQ system, the average of the high and low bid and asked prices on such day in the over-the-counter market as reported by National Quotation Bureau Incorporated, or any similar successor organization. If at any time the Common Stock is not listed on any national securities exchange or quoted in the NASDAQ system or the over-the-counter market, the fair market value of the shares of Common Stock subject to an Option on the date the ISO is granted shall be the fair market value thereof determined in good faith by the Board of Directors. (b) ISOs, by their terms, shall not be transferable otherwise than by will or the laws of descent and distribution, and, during an Optionee's lifetime, an ISO shall be exercisable only by the Optionee. (c) The Committee shall fix the term of all ISOs granted pursuant to the Plan (including the date on which such ISO shall expire and terminate), provided, however, that such term shall in no event exceed ten years from the date on which such ISO is granted (or, in the case of an ISO granted to an Employee referred to in Section 4.3(b) hereof, such term shall in no event exceed five years from the date on which such ISO is granted). Each ISO shall be exercisable in such amount or amounts, under such conditions and at such times or intervals or in such installments as shall be 7 8 determined by the Committee in its sole discretion, provided, however, that in no event shall any ISO granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such ISO is granted to such director or officer. (d) To the extent that the Company or any Parent or Subsidiary of the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by any Participant as a result of any "disqualifying disposition" of any shares of Common Stock acquired upon exercise of an ISO granted hereunder, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors in its sole discretion. (e) In the sole discretion of the Committee the terms and conditions of any ISO may (but need not) include any of the following provisions: (i) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis for any reason other than as a result of his death or "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one month after the date on which the Participant ceased to be so employed, and only to the extent that the Participant could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (ii) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis by reason of his "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one year after the date on which the Participant ceased to be so employed, and only to the extent that the Participant could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (iii) In the event a Participant shall die while in the full-time employ of the Company or a Parent or Subsidiary of the Company (or within a period of one month after ceasing to be an Employee for any reason other than his "disability" or within a period of one year after ceasing to be an Employee by reason of such 8 9 "disability"), the unexercised portion of any ISO held by such Participant at the time of his death may only be exercised within one year after the date of such Participant's death, and only to the extent that the Participant could have otherwise exercised such ISO at the time of his death. In such event, such ISO may be exercised by the executor or administrator of the Participant's estate or by any person or persons who shall have acquired the ISO directly from the Participant by bequest or inheritance. 6.2. Non-Qualified Options. The terms and conditions of each Non-Qualified Option granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written option agreement between the Company and the Participant in such form as the Committee shall approve. The terms and conditions of each Non-Qualified Option will be such (and each Non-Qualified Option Agreement shall expressly so state) that each Non-Qualified Option issued hereunder shall not constitute nor be treated as an "incentive stock option" as defined in Section 422(b) of the Code but will be a "non-qualified stock option" for Federal, state and local income tax purposes. The terms and conditions of any Non-Qualified Option granted hereunder need not be identical to those of any other Non-Qualified Option granted hereunder. The terms and conditions of each Non-Qualified Option Agreement shall include the following: (a) The option (exercise) price shall be fixed by the Committee and may be equal to, more than or less than 100% of the fair market value of the shares of Common Stock subject to the Non-Qualified Option on the date such Non-Qualified Option is granted; provided, however, that with respect to a grant to an Employee subject to Section 16 of the Exchange Act, such price shall be equal to or greater than 50% of the fair market value of such shares on the date of grant. (b) The Committee shall fix the term of all Non-Qualified Options granted pursuant to the Plan (including the date on which such Non-Qualified Option shall expire and terminate). Such term may be more than ten years from the date on which such Non-Qualified Option is granted. Each Non-Qualified Option shall be exercisable in such amount or amounts, under such conditions (including provisions governing the rights to exercise such Non-Qualified Option), and at such times or intervals or in such installments as shall be determined by the Committee in its sole discretion, provided, however, that in no event shall any Non-Qualified Option granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such Non-Qualified Option is granted to such director or officer. 9 10 (c) Non-Qualified Options shall not be transferable otherwise than by will or the laws of descent and distribution, and during a Participant's lifetime a Non-Qualified Option shall be exercisable only by the Participant. (d) To the extent that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by any Participant in respect of a Non-Qualified Option granted hereunder or in respect of any shares of Common Stock acquired upon exercise of a Non-Qualified Option, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, or if no such payments are due or to become due to such Participant, then, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors in its sole discretion. 7. Terms and Conditions of Awards. The terms and conditions of each Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Participant and the Company, in such form as the Committee shall approve. The terms and provisions of any Award granted hereunder need not be identical to those of any other Award granted hereunder. The terms and conditions of each Award shall include the following: (a) The amount to be paid by a Participant to acquire the shares of Common Stock pursuant to an Award shall be fixed by the Board of Directors (or the Committee) and may be equal to, more than or less than 100% of the fair market value of the shares of Common Stock subject to the Award on the date the Award is granted. The Award may provide for the issuance of shares of common stock as a stock bonus for no consideration other than services rendered. In the event of an Award under which shares of Common Stock are issued to an Employee subject to Section 16 of the Exchange Act for any other type of consideration, the amount of such consideration shall be equal to or greater than 50% of the fair market value of such shares on the date of grant of such Award. (b) Each Award shall contain such vesting provisions, such transfer restrictions and such other restrictions and conditions as the Committee, in its sole discretion, may determine, including, without limitation, the circumstances under which the Company shall have the right and option to repurchase shares of Common Stock acquired pursuant to an Award. 10 11 (c) Stock certificates representing Common Stock acquired pursuant to an Award shall bear a legend referring to the restrictions imposed on such Stock and such other matters as the Committee may determine. (d) To the extent that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by the Participant in respect of an Award granted hereunder, or in respect of any shares acquired pursuant to an Award, or in respect of the vesting of any such shares of Common Stock, then the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, or if no such payments are due or to become due to such Participant, then, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Committee in its sole discretion. 8. Adjustments. In the event that, after the adoption of the Plan by the Board of Directors, the outstanding shares of the Company's Common Stock shall be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation through reorganization, merger or consolidation, recapitalization, reclassification, stock split, split-up, combination or exchange of shares or declaration of any dividends payable in Common Stock, the Board of Directors shall appropriately adjust (i) the number of shares of Common Stock (and the option price per share) subject to the unexercised portion of any outstanding Option (to the nearest possible full share), provided, however, that the limitations of Section 424 of the Code shall apply with respect to adjustments made to ISOs; (ii) the number of shares of Common Stock to be acquired pursuant to an Award which have not become vested, and (iii) the number of shares of Common Stock for which Options and/or Awards may be granted under the Plan, as set forth in Section 4.1 hereof, and such adjustments shall be effective and binding for all purposes of the Plan. 9. Effect of the Plan on Employment Relationship. Neither the Plan nor any Option and/or Award granted hereunder to a Participant shall be construed as conferring upon such Participant any right to continue in the employ of (or otherwise provide services to) the Company or any Subsidiary or Parent thereof, or limit in any respect the right of the Company or any Subsidiary or Parent thereof to terminate such Participant's employment or other relationship with the Company or any Subsidiary or Parent, as the case may be, at any time. 11 12 10. Amendments of the Plan. The Board of Directors may amend, alter or discontinue the Plan, except that (i) no amendment of alteration that would impair the rights of any Optionee under any Option granted hereunder shall be made without his or her consent, and (ii) without the approval of the holders of a majority of the shares of Common Stock present or represented and entitled to vote thereon at a meeting of stockholders, no amendment of alteration shall be made that would: (a) modify the terms of ISOs in any manner that would require shareholder approval under Section 422 of the Code; (b) materially increase the total number of shares of Common Stock issuable under the Plan, except in accordance with Section 8 hereof; (c) materially modify the requirements as to eligibility for participation in the Plan; (d) materially increase the benefits accruing to Participants; or (e) cause the Plan not to comply with the rules and regulations promulgated under Section 16(b) of the Securities Exchange Act of 1934, as amended; except to conform the Plan to changes in the Code or other applicable law. 11. Termination of the Plan. The Board of Directors may terminate the Plan at any time. Unless the Plan shall theretofore have been terminated by the Board of Directors, the Plan shall terminate ten years after the date of its initial adoption by the Board of Directors. No Option and/or Award may be granted hereunder after termination of the Plan. The termination or amendment of the Plan shall not alter or impair any rights or obligations under any Option and/or Award theretofore granted under the Plan. 12. Effective Date of the Plan. The Plan shall be effective as of May 31, 1996. 12 EX-10.24 4 g66313ex10-24.txt LINCARE 1998 STOCK PLAN 1 EXHIBIT 10.24 AMENDED AND RESTATED LINCARE HOLDINGS INC. 1998 STOCK PLAN 1. Purpose. The purpose of the Lincare Holdings Inc. 1998 Stock Plan (the "Plan") is to promote the interests of Lincare Holdings Inc., a Delaware corporation (the "Company"), and any Subsidiary thereof and the interests of the Company's stockholders by providing an opportunity to selected employees, officers and directors of the Company or any Subsidiary thereof as of the date of the adoption of the Plan or at any time thereafter to purchase Common Stock of the Company. By encouraging such stock ownership, the Company seeks to attract, retain and motivate such employees and persons and to encourage such employees and persons to devote their best efforts to the business and financial success of the Company. It is intended that this purpose will be effected by the granting of "non-qualified stock options" and/or "incentive stock options" to acquire the Common Stock of the Company and/or by the granting of rights to purchase the Common Stock of the Company on a "restricted stock" basis. Under the Plan, the Committee shall have the authority (in its sole discretion) to grant "incentive stock options" within the meaning of Section 422(b) of the Code, "non-qualified stock options" as described in Treasury Regulation Section 1.83-7 or any successor regulation thereto, or "restricted stock" awards. 2. Definitions. For purposes of the Plan, the following terms used herein shall have the following meanings, unless a different meaning is clearly required by the context. 2.1. "Award" shall mean an award of the right to purchase Common Stock granted under the provisions of Section 7 of the Plan. 2.2. "Board of Directors" shall mean the Board of Directors of the Company. 2.3. "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.4. "Committee" shall mean the committee of the Board of Directors referred to in Section 5 hereof. 2.5. "Common Stock" shall mean the Common Stock, $.01 par value, of the Company. 2.6. "Employee" shall mean (i) with respect to an ISO, any person, including an officer or director of the Company, who, at the time an ISO is granted to 2 such person hereunder, is employed on a full-time basis by the Company or any Subsidiary of the Company, and (ii) with respect to a Non-Qualified Option and/or an Award, any person employed by, or performing services for, the Company or any Subsidiary of the Company, including, without limitation, directors and officers. 2.7. "ISO" shall mean an Option granted to a Participant pursuant to the Plan that constitutes and shall be treated as an "incentive stock option" as defined in Section 422(b) of the Code. 2.8. "Non-Qualified Option" shall mean an Option granted to a Participant pursuant to the Plan that is intended to be, and qualifies as, a "non-qualified stock option" as described in Treasury Regulation Section 1.83-7 or any successor regulation thereto and that shall not constitute nor be treated as an ISO. 2.9. "Option" shall mean any ISO or Non-Qualified Option granted to an Employee pursuant to the Plan. 2.10. "Participant" shall mean any Employee to whom an Award and/or an Option is granted under the Plan. 2.11. "Parent of the Company" shall have the meaning set forth in Section 424(e) of the Code. 2.12. "Subsidiary of the Company" shall have the meaning set forth in Section 424(f) of the Code. 3. Eligibility. Awards and/or Options may be granted to any Employee. The Committee shall have the sole authority to select the persons to whom Awards and/or Options are to be granted hereunder, and to determine whether a person is to be granted a Non-Qualified Option, an ISO or an Award or any combination thereof. No person shall have any right to participate in the Plan. Any person selected by the Committee for participation during any one period will not by virtue of such participation have the right to be selected as a Participant for any other period. 4. Common Stock Subject to the Plan. 4.1. Number of Shares. The total number of shares of Common Stock for which Options and/or Awards may be granted under the Plan shall not exceed in the aggregate One Million Five Hundred Thousand (1,500,000) shares of Common Stock (subject to adjustment as provided in Section 8 hereof). The total number of shares of Common Stock for which Options and/or Awards may be granted under the Plan to any 2 3 individual in any fiscal year shall not exceed Two Hundred Thousand (200,000) shares of Common Stock (subject to adjustment as provided in Section 8 hereof). 4.2. Reissuance. The shares of Common Stock that may be subject to Options and/or Awards granted under the Plan may be either authorized and unissued shares or shares reacquired at any time and now or hereafter held as treasury stock as the Board of Directors may determine. In the event that any outstanding Option expires or is terminated for any reason, the shares allocable to the unexercised portion of such Option may again be subject to an Option and/or Award granted under the Plan. If any shares of Common Stock acquired pursuant to an Award or the exercise of an Option shall have been repurchased by the Company, then such shares shall again become available for issuance pursuant to the Plan. 4.3. Special ISO Limitations. (a) The aggregate fair market value (determined as of the date an ISO is granted) of the shares of Common Stock with respect to which ISOs are exercisable for the first time by an Employee during any calendar year (under all Incentive Stock Option Plans of the Company or any Parent or Subsidiary of the Company) shall not exceed $100,000. (b) No ISO shall be granted to an Employee who, at the time the ISO is granted, owns (actually or constructively under the provisions of Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, unless the option price is at least 110% of the fair market value (determined as of the time the ISO is granted) of the shares of Common Stock subject to the ISO and the ISO by its terms is not exercisable more than five years from the date it is granted. 4.4. Limitations Not Applicable to Non-Qualified Options or Awards. Notwithstanding any other provision of the Plan, the provisions of Sections 4.3(a) and (b) shall not apply, nor shall be construed to apply, to any Non-Qualified Option or Award granted under the Plan. 5. Administration of the Plan. 5.1. Administration. The Plan shall be administered by a committee of the Board of Directors (the "Committee") established by the Board of Directors and consisting of no less than two persons. All members of the Committee shall be "disinterested persons" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"). The Committee shall be 3 4 appointed from time to time by, and shall serve at the pleasure of, the Board of Directors. 4 5 5.2. Grant of Options/Awards. (a) Options. The Committee shall have the sole authority and discretion under the Plan (i) to select the Employees who are to be granted Options hereunder; (ii) to designate whether any Option to be granted hereunder is to be an ISO or a Non-Qualified Option; (iii) to establish the number of shares of Common Stock that may be issued under each Option; (iv) to determine the time and the conditions subject to which Options may be exercised in whole or in part; (v) to determine the form of the consideration that may be used to purchase shares of Common Stock upon exercise of any Option (including the circumstances under which the Company's issued and outstanding shares of Common Stock may be used by a Participant to exercise an Option); (vi) to impose restrictions and/or conditions with respect to shares of Common Stock acquired upon exercise of an Option; (vii) to determine the circumstances under which shares of Common Stock acquired upon exercise of any Option may be subject to repurchase by the Company; (viii) to determine the circumstances and conditions subject to which shares acquired upon exercise of an Option may be sold or otherwise transferred, including, without limitation, the circumstances and conditions subject to which a proposed sale of shares of Common Stock acquired upon exercise of an Option may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (ix) to establish a vesting provision for any Option relating to the time when (or the circumstances under which) the Option may be exercised by a Participant, including, without limitation, vesting provisions that may be contingent upon (A) the Company's meeting specified financial goals, (B) a change of control of the Company or (C) the occurrence of other specified events; (x) to accelerate the time when outstanding Options may be exercised, provided, however, that any ISOs shall be "accelerated" within the meaning of Section 424(h) of the Code; and (xi) to establish any other terms, restrictions and/or conditions applicable to any Option not inconsistent with the provisions of the Plan. Notwithstanding anything in the Plan to the contrary, in no event shall any Option granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such Option is granted to such director or officer. (b) Awards. The Committee shall have the sole authority and discretion under the Plan (i) to select the Employees who are to be granted Awards hereunder; (ii) to determine the amount to be paid by a Participant to acquire shares of Common Stock pursuant to an Award, which amount may be equal to, more than, or less than 100% of the fair market value of such shares on the date the Award is granted (but in no event less than the par value of such shares); (iii) to determine the time or times and the conditions subject to which Awards may be made; (iv) to determine the time or times and the conditions subject to which the shares of Common Stock subject to an Award are to become vested and no longer subject to repurchase by the Company; (v) to establish transfer restrictions and the terms and conditions on which any such transfer restrictions 5 6 with respect to shares of Common Stock acquired pursuant to an Award shall lapse; (vi) to establish vesting provisions with respect to any shares of Common Stock subject to an Award, including, without limitation, vesting provisions which may be contingent upon (A) the Company's meeting specified financial goals, (B) a change of control of the Company or (C) the occurrence of other specified events; (vii) to determine the circumstances under which shares of Common Stock acquired pursuant to an Award may be subject to repurchase by the Company; (viii) to determine the circumstances and conditions subject to which any shares of Common Stock acquired pursuant to an Award may be sold or otherwise transferred, including, without limitation, the circumstances and conditions subject to which a proposed sale of shares of Common Stock acquired pursuant to an Award may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (ix) to determine the form of consideration that may be used to purchase shares of Common Stock pursuant to an Award (including the circumstances under which the Company's issued and outstanding shares of Common Stock may be used by a Participant to purchase the Common Stock subject to an Award); (x) to accelerate the time at which any or all restrictions imposed with respect to any shares of Common Stock subject to an Award will lapse; and (xi) to establish any other terms, restrictions and/or conditions applicable to any Award not inconsistent with the provisions of the Plan. 5.3. Interpretation. The Committee shall be authorized to interpret the Plan and may, from time to time, adopt such rules and regulations, not inconsistent with the provisions of the Plan, as it may deem advisable to carry out the purposes of the Plan. 5.4. Finality. The interpretation and construction by the Committee of any provision of the Plan, any Option and/or Award granted hereunder or any agreement evidencing any such Option and/or Award shall be final and conclusive upon all parties. 5.5. Voting. Members of the Committee may vote on any matter affecting the administration of the Plan or the granting of Options and/or Awards under the Plan. 5.6. Expenses, Etc. All expenses and liabilities incurred by the Committee in the administration of the Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants or other persons in connection with the administration of the Plan. The Company, and its officers and directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons. No member of the Committee shall be liable for any action, determination or interpretation taken or made in good faith with respect to the Plan or any Option and/or Award granted hereunder. 6 7 6. Terms and Conditions of Options. 6.1. ISOs. The terms and conditions of each ISO granted under the Plan shall be specified by the Committee and shall be set forth in an ISO agreement between the Company and the Participant in such form as the Committee shall approve. The terms and conditions of each ISO shall be such that each ISO issued hereunder shall constitute and shall be treated as an "incentive stock option" as defined in Section 422(b) of the Code. The terms and conditions of any ISO granted hereunder need not be identical to those of any other ISO granted hereunder. The terms and conditions of each ISO shall include the following: (a) The option price shall be fixed by the Committee but shall in no event be less than 100% (or 110% in the case of an Employee referred to in Section 4.3(b) hereof) of the fair market value of the shares of Common Stock subject to the ISO on the date the ISO is granted. For purposes of the Plan, the fair market value per share of Common Stock as of any day shall mean the average of the closing prices of sales of shares of Common Stock on all national securities exchanges on which the Common Stock may at the time be listed or, if there shall have been no sales on any such day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock shall not be so listed, the average of the representative bid and asked prices quoted in the NASDAQ system as of 3:30 p.m., New York time, on such day, or, if on any day the Common Stock shall not be quoted in the NASDAQ system, the average of the high and low bid and asked prices on such day in the over-the-counter market as reported by National Quotation Bureau Incorporated, or any similar successor organization. If at any time the Common Stock is not listed on any national securities exchange or quoted in the NASDAQ system or the over-the-counter market, the fair market value of the shares of Common Stock subject to an Option on the date the ISO is granted shall be the fair market value thereof determined in good faith by the Board of Directors. (b) ISOs, by their terms, shall not be transferable otherwise than by will or the laws of descent and distribution, and, during an Optionee's lifetime, an ISO shall be exercisable only by the Optionee. (c) The Committee shall fix the term of all ISOs granted pursuant to the Plan (including the date on which such ISO shall expire and terminate), provided, however, that such term shall in no event exceed ten years from the date on which such ISO is granted (or, in the case of an ISO granted to an Employee referred to in Section 4.3(b) hereof, such term shall in no event exceed five years from the date on which such ISO is granted). Each ISO shall be exercisable in such amount or amounts, under such conditions and at such times or intervals or in such installments as shall be 7 8 determined by the Committee in its sole discretion, provided, however, that in no event shall any ISO granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such ISO is granted to such director or officer. (d) To the extent that the Company or any Parent or Subsidiary of the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by any Participant as a result of any "disqualifying disposition" of any shares of Common Stock acquired upon exercise of an ISO granted hereunder, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors in its sole discretion. (e) In the sole discretion of the Committee the terms and conditions of any ISO may (but need not) include any of the following provisions: (i) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis for any reason other than as a result of his death or "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one month after the date on which the Participant ceased to be so employed, and only to the extent that the Participant could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (ii) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis by reason of his "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one year after the date on which the Participant ceased to be so employed, and only to the extent that the Participant could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (iii) In the event a Participant shall die while in the full-time employ of the Company or a Parent or Subsidiary of the Company (or within a period of one month after ceasing to be an Employee for any reason other than his "disability" or within a period of one year after ceasing to be an Employee by reason of such 8 9 "disability"), the unexercised portion of any ISO held by such Participant at the time of his death may only be exercised within one year after the date of such Participant's death, and only to the extent that the Participant could have otherwise exercised such ISO at the time of his death. In such event, such ISO may be exercised by the executor or administrator of the Participant's estate or by any person or persons who shall have acquired the ISO directly from the Participant by bequest or inheritance. 6.2. Non-Qualified Options. The terms and conditions of each Non-Qualified Option granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written option agreement between the Company and the Participant in such form as the Committee shall approve. The terms and conditions of each Non-Qualified Option will be such (and each Non-Qualified Option Agreement shall expressly so state) that each Non-Qualified Option issued hereunder shall not constitute nor be treated as an "incentive stock option" as defined in Section 422(b) of the Code but will be a "non-qualified stock option" for Federal, state and local income tax purposes. The terms and conditions of any Non-Qualified Option granted hereunder need not be identical to those of any other Non-Qualified Option granted hereunder. The terms and conditions of each Non-Qualified Option Agreement shall include the following: (a) The option (exercise) price shall be fixed by the Committee and may be equal to, more than or less than 100% of the fair market value of the shares of Common Stock subject to the Non-Qualified Option on the date such Non-Qualified Option is granted; provided, however, that with respect to a grant to an Employee subject to Section 16 of the Exchange Act, such price shall be equal to or greater than 50% of the fair market value of such shares on the date of grant. (b) The Committee shall fix the term of all Non-Qualified Options granted pursuant to the Plan (including the date on which such Non-Qualified Option shall expire and terminate). Such term may be more than ten years from the date on which such Non-Qualified Option is granted. Each Non-Qualified Option shall be exercisable in such amount or amounts, under such conditions (including provisions governing the rights to exercise such Non-Qualified Option), and at such times or intervals or in such installments as shall be determined by the Committee in its sole discretion, provided, however, that in no event shall any Non-Qualified Option granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such Non-Qualified Option is granted to such director or officer. 9 10 (c) To the extent that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by any Participant in respect of a Non-Qualified Option granted hereunder or in respect of any shares of Common Stock acquired upon exercise of a Non-Qualified Option, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, or if no such payments are due or to become due to such Participant, then, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors in its sole discretion. 7. Terms and Conditions of Awards. The terms and conditions of each Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Participant and the Company, in such form as the Committee shall approve. The terms and provisions of any Award granted hereunder need not be identical to those of any other Award granted hereunder. The terms and conditions of each Award shall include the following: (a) The amount to be paid by a Participant to acquire the shares of Common Stock pursuant to an Award shall be fixed by the Board of Directors (or the Committee) and may be equal to, more than or less than 100% of the fair market value of the shares of Common Stock subject to the Award on the date the Award is granted. The Award may provide for the issuance of shares of common stock as a stock bonus for no consideration other than services rendered. In the event of an Award under which shares of Common Stock are issued to an Employee subject to Section 16 of the Exchange Act for any other type of consideration, the amount of such consideration shall be equal to or greater than 50% of the fair market value of such shares on the date of grant of such Award. (b) Each Award shall contain such vesting provisions, such transfer restrictions and such other restrictions and conditions as the Committee, in its sole discretion, may determine, including, without limitation, the circumstances under which the Company shall have the right and option to repurchase shares of Common Stock acquired pursuant to an Award. (c) Stock certificates representing Common Stock acquired pursuant to an Award shall bear a legend referring to the restrictions imposed on such Stock and such other matters as the Committee may determine. 10 11 (d) To the extent that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by the Participant in respect of an Award granted hereunder, or in respect of any shares acquired pursuant to an Award, or in respect of the vesting of any such shares of Common Stock, then the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, or if no such payments are due or to become due to such Participant, then, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Committee in its sole discretion. 8. Adjustments. In the event that, after the adoption of the Plan by the Board of Directors, the outstanding shares of the Company's Common Stock shall be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation through reorganization, merger or consolidation, recapitalization, reclassification, stock split, split-up, combination or exchange of shares or declaration of any dividends payable in Common Stock, the Board of Directors shall appropriately adjust (i) the number of shares of Common Stock (and the option price per share) subject to the unexercised portion of any outstanding Option (to the nearest possible full share), provided, however, that the limitations of Section 424 of the Code shall apply with respect to adjustments made to ISOs; (ii) the number of shares of Common Stock to be acquired pursuant to an Award which have not become vested, and (iii) the number of shares of Common Stock for which Options and/or Awards may be granted under the Plan, as set forth in Section 4.1 hereof, and such adjustments shall be effective and binding for all purposes of the Plan. 9. Effect of the Plan on Employment Relationship. Neither the Plan nor any Option and/or Award granted hereunder to a Participant shall be construed as conferring upon such Participant any right to continue in the employ of (or otherwise provide services to) the Company or any Subsidiary or Parent thereof, or limit in any respect the right of the Company or any Subsidiary or Parent thereof to terminate such Participant's employment or other relationship with the Company or any Subsidiary or Parent, as the case may be, at any time. 10. Amendments of the Plan. The Board of Directors may amend, alter or discontinue the Plan, except that (i) no amendment of alteration that would impair the rights of any Optionee under any Option granted hereunder shall be made without his or her consent, and (ii) without the approval of the holders of a majority of the shares of 11 12 Common Stock present or represented and entitled to vote thereon at a meeting of stockholders, no amendment of alteration shall be made that would: (a) modify the terms of ISOs in any manner that would require shareholder approval under Section 422 of the Code; (b) materially increase the total number of shares of Common Stock issuable under the Plan, except in accordance with Section 8 hereof; (c) materially modify the requirements as to eligibility for participation in the Plan; (d) materially increase the benefits accruing to Participants; or (e) cause the Plan not to comply with the rules and regulations promulgated under Section 16(b) of the Securities Exchange Act of 1934, as amended; except to conform the Plan to changes in the Code or other applicable law. 11. Termination of the Plan. The Board of Directors may terminate the Plan at any time. Unless the Plan shall theretofore have been terminated by the Board of Directors, the Plan shall terminate ten years after the date of its initial adoption by the Board of Directors. No Option and/or Award may be granted hereunder after termination of the Plan. The termination or amendment of the Plan shall not alter or impair any rights or obligations under any Option and/or Award theretofore granted under the Plan. 12. Effective Date of the Plan. The Plan shall be effective upon shareholder approval. 12 EX-10.25 5 g66313ex10-25.txt LINCARE 2000 STOCK PLAN 1 EXHIBIT 10.25 LINCARE HOLDINGS INC. 2000 STOCK PLAN 1. Purpose. The purpose of the Lincare Holdings Inc. 2000 Stock Plan (the "Plan") is to promote the interests of Lincare Holdings Inc., a Delaware corporation (the "Company"), and any Subsidiary thereof and the interests of the Company's stockholders by providing an opportunity to selected employees, officers and directors of the Company or any Subsidiary thereof as of the date of the adoption of the Plan or at any time thereafter to purchase Common Stock of the Company. By encouraging such stock ownership, the Company seeks to attract, retain and motivate such employees and persons and to encourage such employees and persons to devote their best efforts to the business and financial success of the Company. It is intended that this purpose will be effected by the granting of "non-qualified stock options" and/or "incentive stock options" to acquire the Common Stock of the Company and/or by the granting of rights to purchase the Common Stock of the Company on a "restricted stock" basis. Under the Plan, the Committee shall have the authority (in its sole discretion) to grant "incentive stock options" within the meaning of Section 422(b) of the Code, "non-qualified stock options" as described in Treasury Regulation Section 1.83-7 or any successor regulation thereto, or "restricted stock" awards. 2. Definitions. For purposes of the Plan, the following terms used herein shall have the following meanings, unless a different meaning is clearly required by the context. 2.1. "Award" shall mean an award of the right to purchase Common Stock granted under the provisions of Section 7 of the Plan. 2.2. "Board of Directors" shall mean the Board of Directors of the Company. 2.3. "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.4. "Committee" shall mean the committee of the Board of Directors referred to in Section 5 hereof. 2.5. "Common Stock" shall mean the Common Stock, $.01 par value, of the Company. 2.6. "Employee" shall mean (i) with respect to an ISO, any person, including an officer or director of the Company, who, at the time an ISO is granted to such person hereunder, is employed on a full-time basis by the Company or any 2 Subsidiary of the Company, and (ii) with respect to a Non-Qualified Option and/or an Award, any person employed by, or performing services for, the Company or any Subsidiary of the Company, including, without limitation, directors and officers. 2.7. "ISO" shall mean an Option granted to a Participant pursuant to the Plan that constitutes and shall be treated as an "incentive stock option" as defined in Section 422(b) of the Code. 2.8. "Non-Qualified Option" shall mean an Option granted to a Participant pursuant to the Plan that is intended to be, and qualifies as, a "non-qualified stock option" as described in Treasury Regulation Section 1.83-7 or any successor regulation thereto and that shall not constitute nor be treated as an ISO. 2.9. "Option" shall mean any ISO or Non-Qualified Option granted to an Employee pursuant to the Plan. 2.10. "Participant" shall mean any Employee to whom an Award and/or an Option is granted under the Plan. 2.11. "Parent of the Company" shall have the meaning set forth in Section 424(e) of the Code. 2.12. "Subsidiary of the Company" shall have the meaning set forth in Section 424(f) of the Code. 3. Eligibility. Awards and/or Options may be granted to any Employee. The Committee shall have the sole authority to select the persons to whom Awards and/or Options are to be granted hereunder, and to determine whether a person is to be granted a Non-Qualified Option, an ISO or an Award or any combination thereof. No person shall have any right to participate in the Plan. Any person selected by the Committee for participation during any one period will not by virtue of such participation have the right to be selected as a Participant for any other period. 4. Common Stock Subject to the Plan. 4.1 Number of Shares. The total number of shares of Common Stock for which Options and/or Awards may be granted under the Plan shall not exceed in the aggregate One Million (1,000,000) shares of Common Stock (subject to adjustment as provided in Section 8 hereof). The total number of shares of Common Stock for which Options and/or Awards may be granted under the Plan to any individual in any fiscal year shall not exceed Two Hundred Thousand (200,000) shares of Common Stock (subject to adjustment as provided in Section 8 hereof). 2 3 4.2 Reissuance. The shares of Common Stock that may be subject to Options and/or Awards granted under the Plan may be either authorized and unissued shares or shares reacquired at any time and now or hereafter held as treasury stock as the Board of Directors may determine. In the event that any outstanding Option expires or is terminated for any reason, the shares allocable to the unexercised portion of such Option may again be subject to an Option and/or Award granted under the Plan. If any shares of Common Stock acquired pursuant to an Award or the exercise of an Option shall have been repurchased by the Company, then such shares shall again become available for issuance pursuant to the Plan. 4.3 Special ISO Limitations. (a) The aggregate fair market value (determined as of the date an ISO is granted) of the shares of Common Stock with respect to which ISOs are exercisable for the first time by an Employee during any calendar year (under all Incentive Stock Option Plans of the Company or any Parent or Subsidiary of the Company) shall not exceed $100,000. (b) No ISO shall be granted to an Employee who, at the time the ISO is granted, owns (actually or constructively under the provisions of Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, unless the option price is at least 110% of the fair market value (determined as of the time the ISO is granted) of the shares of Common Stock subject to the ISO and the ISO by its terms is not exercisable more than five years from the date it is granted. 4.4 Limitations Not Applicable to Non-Qualified Options or Awards. Notwithstanding any other provision of the Plan, the provisions of Sections 4.3(a) and (b) shall not apply, nor shall be construed to apply, to any Non-Qualified Option or Award granted under the Plan. 5. Administration of the Plan. 5.1. Administration. The Plan shall be administered by a committee of the Board of Directors (the "Committee") established by the Board of Directors and consisting of no less than two persons. All members of the Committee shall be "disinterested persons" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"). The Committee shall be appointed from time to time by, and shall serve at the pleasure of, the Board of Directors. 3 4 5.2. Grant of Options/Awards. (a) Options. The Committee shall have the sole authority and discretion under the Plan (i) to select the Employees who are to be granted Options hereunder; (ii) to designate whether any Option to be granted hereunder is to be an ISO or a Non-Qualified Option; (iii) to establish the number of shares of Common Stock that may be issued under each Option; (iv) to determine the time and the conditions subject to which Options may be exercised in whole or in part; (v) to determine the form of the consideration that may be used to purchase shares of Common Stock upon exercise of any Option (including the circumstances under which the Company's issued and outstanding shares of Common Stock may be used by a Participant to exercise an Option); (vi) to impose restrictions and/or conditions with respect to shares of Common Stock acquired upon exercise of an Option; (vii) to determine the circumstances under which shares of Common Stock acquired upon exercise of any Option may be subject to repurchase by the Company; (viii) to determine the circumstances and conditions subject to which shares acquired upon exercise of an Option may be sold or otherwise transferred, including, without limitation, the circumstances and conditions subject to which a proposed sale of shares of Common Stock acquired upon exercise of an Option may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (ix) to establish a vesting provision for any Option relating to the time when (or the circumstances under which) the Option may be exercised by a Participant, including, without limitation, vesting provisions that may be contingent upon (A) the Company's meeting specified financial goals, (B) a change of control of the Company or (C) the occurrence of other specified events; (x) to accelerate the time when outstanding Options may be exercised, provided, however, that any ISOs shall be "accelerated" within the meaning of Section 424(h) of the Code; and (xi) to establish any other terms, restrictions and/or conditions applicable to any Option not inconsistent with the provisions of the Plan. Notwithstanding anything in the Plan to the contrary, in no event shall any Option granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such Option is granted to such director or officer. (b) Awards. The Committee shall have the sole authority and discretion under the Plan (i) to select the Employees who are to be granted Awards hereunder; (ii) to determine the amount to be paid by a Participant to acquire shares of Common Stock pursuant to an Award, which amount may be equal to, more than, or less than 100% of the fair market value of such shares on the date the Award is granted (but in no event less than the par value of such shares); (iii) to determine the time or times and the conditions subject to which Awards may be made; (iv) to determine the time or times and the conditions subject to which the shares of Common Stock subject to an Award are to become vested and no longer subject to repurchase by the Company; (v) to establish transfer restrictions and the terms and conditions on which any such transfer restrictions 4 5 with respect to shares of Common Stock acquired pursuant to an Award shall lapse; (vi) to establish vesting provisions with respect to any shares of Common Stock subject to an Award, including, without limitation, vesting provisions which may be contingent upon (A) the Company's meeting specified financial goals, (B) a change of control of the Company or (C) the occurrence of other specified events; (vii) to determine the circumstances under which shares of Common Stock acquired pursuant to an Award may be subject to repurchase by the Company; (viii) to determine the circumstances and conditions subject to which any shares of Common Stock acquired pursuant to an Award may be sold or otherwise transferred, including, without limitation, the circumstances and conditions subject to which a proposed sale of shares of Common Stock acquired pursuant to an Award may be subject to the Company's right of first refusal (as well as the terms and conditions of any such right of first refusal); (ix) to determine the form of consideration that may be used to purchase shares of Common Stock pursuant to an Award (including the circumstances under which the Company's issued and outstanding shares of Common Stock may be used by a Participant to purchase the Common Stock subject to an Award); (x) to accelerate the time at which any or all restrictions imposed with respect to any shares of Common Stock subject to an Award will lapse; and (xi) to establish any other terms, restrictions and/or conditions applicable to any Award not inconsistent with the provisions of the Plan. 5.3. Interpretation. The Committee shall be authorized to interpret the Plan and may, from time to time, adopt such rules and regulations, not inconsistent with the provisions of the Plan, as it may deem advisable to carry out the purposes of the Plan. 5.4. Finality. The interpretation and construction by the Committee of any provision of the Plan, any Option and/or Award granted hereunder or any agreement evidencing any such Option and/or Award shall be final and conclusive upon all parties. 5.5. Voting. Members of the Committee may vote on any matter affecting the administration of the Plan or the granting of Options and/or Awards under the Plan. 5.6. Expenses, Etc. All expenses and liabilities incurred by the Committee in the administration of the Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants or other persons in connection with the administration of the Plan. The Company, and its officers and directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons. No member of the Committee shall be liable for any action, determination or interpretation taken or made in good faith with respect to the Plan or any Option and/or Award granted hereunder. 5 6 6. Terms and Conditions of Options. 6.1. ISOs. The terms and conditions of each ISO granted under the Plan shall be specified by the Committee and shall be set forth in an ISO agreement between the Company and the Participant in such form as the Committee shall approve. The terms and conditions of each ISO shall be such that each ISO issued hereunder shall constitute and shall be treated as an "incentive stock option" as defined in Section 422(b) of the Code. The terms and conditions of any ISO granted hereunder need not be identical to those of any other ISO granted hereunder. The terms and conditions of each ISO shall include the following: (a) The option price shall be fixed by the Committee but shall in no event be less than 100% (or 110% in the case of an Employee referred to in Section 4.3(b) hereof) of the fair market value of the shares of Common Stock subject to the ISO on the date the ISO is granted. For purposes of the Plan, the fair market value per share of Common Stock as of any day shall mean the average of the closing prices of sales of shares of Common Stock on all national securities exchanges on which the Common Stock may at the time be listed or, if there shall have been no sales on any such day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock shall not be so listed, the average of the representative bid and asked prices quoted in the NASDAQ system as of 3:30 p.m., New York time, on such day, or, if on any day the Common Stock shall not be quoted in the NASDAQ system, the average of the high and low bid and asked prices on such day in the over-the-counter market as reported by National Quotation Bureau Incorporated, or any similar successor organization. If at any time the Common Stock is not listed on any national securities exchange or quoted in the NASDAQ system or the over-the-counter market, the fair market value of the shares of Common Stock subject to an Option on the date the ISO is granted shall be the fair market value thereof determined in good faith by the Board of Directors. (b) ISOs, by their terms, shall not be transferable otherwise than by will or the laws of descent and distribution, and, during an Optionee's lifetime, an ISO shall be exercisable only by the Optionee. (c) The Committee shall fix the term of all ISOs granted pursuant to the Plan (including the date on which such ISO shall expire and terminate), provided, however, that such term shall in no event exceed ten years from the date on which such ISO is granted (or, in the case of an ISO granted to an Employee referred to in Section 4.3(b) hereof, such term shall in no event exceed five years from the date on which such ISO is granted). Each ISO shall be exercisable in such amount or amounts, under such conditions and at such times or intervals or in such installments as shall be 6 7 determined by the Committee in its sole discretion, provided, however, that in no event shall any ISO granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such ISO is granted to such director or officer. (d) To the extent that the Company or any Parent or Subsidiary of the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by any Participant as a result of any "disqualifying disposition" of any shares of Common Stock acquired upon exercise of an ISO granted hereunder, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors in its sole discretion. (e) In the sole discretion of the Committee the terms and conditions of any ISO may (but need not) include any of the following provisions: (i) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis for any reason other than as a result of his death or "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one month after the date on which the Participant ceased to be so employed, and only to the extent that the Participant could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (ii) In the event a Participant shall cease to be employed by the Company or any Parent or Subsidiary of the Company on a full-time basis by reason of his "disability" (within the meaning of Section 22(e)(3) of the Code), the unexercised portion of any ISO held by such Participant at that time may only be exercised within one year after the date on which the Participant ceased to be so employed, and only to the extent that the Participant could have otherwise exercised such ISO as of the date on which he ceased to be so employed. (iii) In the event a Participant shall die while in the full-time employ of the Company or a Parent or Subsidiary of the Company (or within a period of one month after ceasing to be an Employee for any reason other than his "disability" or within a period of one year after ceasing to be an Employee by reason of such 7 8 "disability"), the unexercised portion of any ISO held by such Participant at the time of his death may only be exercised within one year after the date of such Participant's death, and only to the extent that the Participant could have otherwise exercised such ISO at the time of his death. In such event, such ISO may be exercised by the executor or administrator of the Participant's estate or by any person or persons who shall have acquired the ISO directly from the Participant by bequest or inheritance. 6.2. Non-Qualified Options. The terms and conditions of each Non-Qualified Option granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written option agreement between the Company and the Participant in such form as the Committee shall approve. The terms and conditions of each Non-Qualified Option will be such (and each Non-Qualified Option Agreement shall expressly so state) that each Non-Qualified Option issued hereunder shall not constitute nor be treated as an "incentive stock option" as defined in Section 422(b) of the Code but will be a "non-qualified stock option" for Federal, state and local income tax purposes. The terms and conditions of any Non-Qualified Option granted hereunder need not be identical to those of any other Non-Qualified Option granted hereunder. The terms and conditions of each Non-Qualified Option Agreement shall include the following: (a) The option (exercise) price shall be fixed by the Committee and may be equal to, more than or less than 100% of the fair market value of the shares of Common Stock subject to the Non-Qualified Option on the date such Non-Qualified Option is granted; provided, however, that with respect to a grant to an Employee subject to Section 16 of the Exchange Act, such price shall be equal to or greater than 50% of the fair market value of such shares on the date of grant. (b) The Committee shall fix the term of all Non-Qualified Options granted pursuant to the Plan (including the date on which such Non-Qualified Option shall expire and terminate). Such term may be more than ten years from the date on which such Non-Qualified Option is granted. Each Non-Qualified Option shall be exercisable in such amount or amounts, under such conditions (including provisions governing the rights to exercise such Non-Qualified Option), and at such times or intervals or in such installments as shall be determined by the Committee in its sole discretion, provided, however, that in no event shall any Non-Qualified Option granted to any director or officer of the Company who is subject to Section 16 of the Exchange Act become exercisable, in whole or in part, prior to the date that is six months after the date such Non-Qualified Option is granted to such director or officer. 8 9 (c) To the extent that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by any Participant in respect of a Non-Qualified Option granted hereunder or in respect of any shares of Common Stock acquired upon exercise of a Non-Qualified Option, the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, or if no such payments are due or to become due to such Participant, then, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Board of Directors in its sole discretion. 7. Terms and Conditions of Awards. The terms and conditions of each Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Participant and the Company, in such form as the Committee shall approve. The terms and provisions of any Award granted hereunder need not be identical to those of any other Award granted hereunder. The terms and conditions of each Award shall include the following: (a) The amount to be paid by a Participant to acquire the shares of Common Stock pursuant to an Award shall be fixed by the Board of Directors (or the Committee) and may be equal to, more than or less than 100% of the fair market value of the shares of Common Stock subject to the Award on the date the Award is granted. The Award may provide for the issuance of shares of common stock as a stock bonus for no consideration other than services rendered. In the event of an Award under which shares of Common Stock are issued to an Employee subject to Section 16 of the Exchange Act for any other type of consideration, the amount of such consideration shall be equal to or greater than 50% of the fair market value of such shares on the date of grant of such Award. (b) Each Award shall contain such vesting provisions, such transfer restrictions and such other restrictions and conditions as the Committee, in its sole discretion, may determine, including, without limitation, the circumstances under which the Company shall have the right and option to repurchase shares of Common Stock acquired pursuant to an Award. (c) Stock certificates representing Common Stock acquired pursuant to an Award shall bear a legend referring to the restrictions imposed on such Stock and such other matters as the Committee may determine. 9 10 (d) To the extent that the Company is required to withhold any Federal, state or local taxes in respect of any compensation income realized by the Participant in respect of an Award granted hereunder, or in respect of any shares acquired pursuant to an Award, or in respect of the vesting of any such shares of Common Stock, then the Company shall deduct from any payments of any kind otherwise due to such Participant the aggregate amount of such Federal, state or local taxes required to be so withheld or, if such payments are insufficient to satisfy such Federal, state or local taxes, or if no such payments are due or to become due to such Participant, then, such Participant will be required to pay to the Company, or make other arrangements satisfactory to the Company regarding payment to the Company of, the aggregate amount of any such taxes. All matters with respect to the total amount of taxes to be withheld in respect of any such compensation income shall be determined by the Committee in its sole discretion. 8. Adjustments. In the event that, after the adoption of the Plan by the Board of Directors, the outstanding shares of the Company's Common Stock shall be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation through reorganization, merger or consolidation, recapitalization, reclassification, stock split, split-up, combination or exchange of shares or declaration of any dividends payable in Common Stock, the Board of Directors shall appropriately adjust (i) the number of shares of Common Stock (and the option price per share) subject to the unexercised portion of any outstanding Option (to the nearest possible full share), provided, however, that the limitations of Section 424 of the Code shall apply with respect to adjustments made to ISOs; (ii) the number of shares of Common Stock to be acquired pursuant to an Award which have not become vested, and (iii) the number of shares of Common Stock for which Options and/or Awards may be granted under the Plan, as set forth in Section 4.1 hereof, and such adjustments shall be effective and binding for all purposes of the Plan. 9. Effect of the Plan on Employment Relationship. Neither the Plan nor any Option and/or Award granted hereunder to a Participant shall be construed as conferring upon such Participant any right to continue in the employ of (or otherwise provide services to) the Company or any Subsidiary or Parent thereof, or limit in any respect the right of the Company or any Subsidiary or Parent thereof to terminate such Participant's employment or other relationship with the Company or any Subsidiary or Parent, as the case may be, at any time. 10. Amendments of the Plan. The Board of Directors may amend, alter or discontinue the Plan, except that (i) no amendment of alteration that would impair the rights of any Optionee under any Option granted hereunder shall be made without his or her consent, and (ii) without the approval of the holders of a majority of the shares of 10 11 Common Stock present or represented and entitled to vote thereon at a meeting of stockholders, no amendment of alteration shall be made that would: (a) modify the terms of ISOs in any manner that would require shareholder approval under Section 422 of the Code; (b) materially increase the total number of shares of Common Stock issuable under the Plan, except in accordance with Section 8 hereof; (c) materially modify the requirements as to eligibility for participation in the Plan; (d) materially increase the benefits accruing to Participants; or (e) cause the Plan not to comply with the rules and regulations promulgated under Section 16(b) of the Securities Exchange Act of 1934, as amended; except to conform the Plan to changes in the Code or other applicable law. 11. Termination of the Plan. The Board of Directors may terminate the Plan at any time. Unless the Plan shall theretofore have been terminated by the Board of Directors, the Plan shall terminate ten years after the date of its initial adoption by the Board of Directors. No Option and/or Award may be granted hereunder after termination of the Plan. The termination or amendment of the Plan shall not alter or impair any rights or obligations under any Option and/or Award theretofore granted under the Plan. 12. Effective Date of the Plan. The Plan shall be effective upon shareholder approval. 11 EX-10.43 6 g66313ex10-43.txt SHAWN S. SCHABEL EMPLOYMENT AGREEMENT 1 EXHIBIT 10.43 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 1998, by and between LINCARE HOLDINGS INC., a Delaware corporation (the "Company"), and SHAWN S. SCHABEL ("Employee"). W I T N E S S E T H: WHEREAS, prior to the date hereof, the Employee has been an employee of the Company; and WHEREAS, the Company desires to induce the Employee to continue in the employ of the Company for the period provided in this Agreement, and the Employee is willing to accept such employment with the Company on a full-time basis, all in accordance with the terms and conditions set forth below. NOW THEREFORE, for and in consideration of the premises hereof and the mutual covenants contained herein, the parties hereto do hereby covenant and agree as follows: 1. Employment. (a) The Company hereby employs the Employee, and the Employee hereby accepts such employment with the Company, for the period set forth in Section 2 hereof, all upon the terms and conditions hereinafter set forth. (b) The Employee affirms and represents that he is under no obligation to any former employer or other party which is in any way inconsistent with, or which imposes any restriction upon, the Employee's acceptance of employment hereunder by the Company, or the Employee's undertakings under this Agreement. 2. Term of Employment. Unless earlier terminated as hereinafter provided, the initial term of the Employee's employment under this Agreement shall be for a period beginning on the date hereof and ending on December 31, 2001 (such period from the date hereof until December 31, 2001 or, if the Employee's employment hereunder is earlier terminated, such shorter period, being hereinafter called the "Initial Employment Term"). In the event that the Employee continues in the full-time employ of the Company after the end of the Initial Employment Term (it being expressly understood and agreed that the Company does not now, nor hereafter shall, have any obligation to continue the Employee in its employ, whether or not on a full-time basis), then, unless otherwise 2 expressly agreed to by the Employee and the Company in writing, the Employee's continued employment with the Company shall, notwithstanding anything to the contrary expressed or implied herein, continue to be subject to the terms and conditions of this Agreement. As used in this Agreement, the term "Employment Term" shall mean the period beginning on the date hereof and ending on the date of the Employee's cessation of employment with the Company, whether such date is before, on or after the expiration of the Initial Employment Term. 3. Duties. The Employee shall be employed as the Senior Vice President of the Company, shall faithfully and competently perform such duties as are specified by the By-laws of the Company and shall also perform and discharge such other reasonable employment duties and responsibilities as the Board of Directors of the Company may from time to time prescribe. The Employee shall perform his duties at such places and times as the Board of Directors of the Company may reasonably prescribe. Except as may otherwise be approved in advance by the Company, and except during vacation periods and reasonable periods of absence due to sickness, personal injury or other disability, the Employee shall devote his full time throughout the Employment Term to the services required of him hereunder. Except as may be otherwise approved in advance by the Company, the Employee shall render his services exclusively to the Company during the Employment Term and shall use his best effort, judgment and energy to improve and advance the business and interest of the Company in a manner consistent with the duties of his position. 4. Salary and Bonus. (a) Salary. As compensation for the complete and satisfactory performance by the Employee of the services to be performed by the Employee hereunder during the Employment Term, the Company shall pay the Employee a base salary at the annual rate of ONE HUNDRED EIGHTY THOUSAND DOLLARS ($180,000) (said amount, together with any increases thereto during the Employment Term, being hereinafter referred to as the "Salary"). Any Salary payable hereunder shall be paid in regular intervals in accordance with the Company's payroll practices. The Salary payable to the Employee pursuant to this Section 4(a) shall be increased annually as of January 1, 1999 and each January 1 thereafter for the twelve (12) month period then commencing, by an amount equal to: (i) the annual percentage increase in the Consumer Price Index for all Urban Consumers, All Items, for the most recent twelve (12) month period for which such figures are then available as reported in the Monthly Labor Review published by the Bureau of Labor Statistics of the U.S. Department of Labor or (ii) such higher amount as may be 2 3 determined from time to time by the Board of Directors of the Company in its sole discretion. (b) Bonus. During the Employment Term, in addition to Salary, the Company shall also pay bonus compensation to the Employee in respect of each calendar year (or applicable portion thereof) during the Employment Term, such bonus compensation ("Bonus") to be an amount equal to the Bonus Amount (as hereinafter defined) for such calendar year (or applicable portion thereof). For the purposes of this Agreement, the following terms shall have the meanings set forth below: "Bonus Amount" for any full calendar year shall mean an amount equal to: (a) the Employee's Salary for such calendar year; MULTIPLIED BY (b) the percentage set forth on the table below which corresponds to the increase in the Company's fully diluted earnings per share in respect of such calendar year over the fully diluted earnings per share of the Company during the immediately preceding calendar year.
FULLY DILUTED BONUS AS % OF EPS GROWTH BASE SALARY ---------- ----------- Less than 20% 0% 20% or more but less than 21% 40% 21% or more but less than 22% 46% 22% or more but less than 23% 52% 23% or more but less than 24% 58% 24% or more but less than 25% 64% 25% or more but less than 26% 70% 26% or more but less than 27% 76% 27% or more but less than 28% 82% 28% or more but less than 29% 88% 29% or more but less than 30% 94% 30% 100%*
*If the fully diluted EPS growth is greater than 30%, then the Employee shall receive an additional 6% of his Base Salary for each full percentage point of EPS growth achieved. In the event that the Employment Terms ends at any time other than the conclusion of a full calendar year, the Employee's Bonus Amount in respect of such Calendar year shall be prorated, and shall be an amount equal to: (a) the Employee's Salary for such calendar year; MULTIPLIED BY (b) the percentage set forth on the table above which corresponds to the increase in the Company's year-to-date fully diluted earnings per share (as determined by the then-most recently 3 4 announced fully diluted earnings per share of the Company) over the fully diluted earnings per share of the Company during the comparable period in the immediately preceding calendar year; MULTIPLIED BY (c) a percentage equal to the number of full calendar months included in the Employment Term for the current calendar year divided by twelve. The Company's Board of Directors (or an authorized committee thereof) shall have the discretion to adjust upward or downward the Bonus Amount for any applicable period to account equitably for: (a) any extraordinary charges; (b) any unusual non-recurring items; or (c) changes after the date hereof in accounting principles required under generally accepted accounting principles; which events impacted the Company's full diluted earnings per share in respect of any such applicable period or comparable prior year period. Nothing contained herein and no action taken in respect of any Bonus (or otherwise in respect of this Section 4(b)) shall create or be construed to create a trust of any kind. The Employee's right to receive any Bonus pursuant to this Section (b)) shall create or be construed to create a trust of any kind. The Employee's right to receive any Bonus pursuant to this Section 4(b) shall be no greater than the right of an unsecured general creditor of the Company to receive payment from the Company. All bonuses under this Section 4(b) shall be paid from the general funds of the Company, and no special or separate fund shall be established, and no segregation of assets shall be made, to assure payment of any Bonuses hereunder. (c) Withholding. The payment of any Salary and Bonus hereunder shall be subject to applicable withholding and payroll taxes, and such other deductions as may be required under the Company's employee benefit plans. 5. Benefits. During the Employment Term, the Employee shall: (a) be eligible to participate in all employee fringe benefits and any pension and/or profit sharing plans that may be provided by the Company for its key executive employees in accordance with the provisions of any such plans, as same may be in effect on and after the date hereof; (b) be eligible to participate in any medical and health plans or other employee welfare benefit plans that may be provided by the Company for its key executive employees in accordance with the provisions of 4 5 any such plans, as same may be in effect on and after the date hereof; (c) be entitled to annual paid vacation in accordance with the Company policy that may be applicable on and after the date hereof to key executive employees; (d) be entitled to sick leave, sick pay and disability benefits in accordance with any Company policy that may be applicable on and after the date hereof to key executive employees; and (e) be entitled to reimbursement for all reasonable and necessary out-of-pocket living and travel expenses incurred by the Employee while away from his usual place of business in the performance of his duties hereunder in accordance with the Company's policies applicable on and after the date hereof in respect thereto. 6. Inventions and Confidential Information. The Employee hereby covenants, agrees and acknowledges as follows: (a) The Company is engaged in a continuous program of research, design, development, production, marketing and servicing with respect to its business and that as part of the Employee's employment by the Company the Employee is (or may be) expected to make new contributions and inventions of value to the Company. (b) The Employee's employment hereunder creates a relationship of confidence and trust between the Employee and the Company with respect to certain information pertaining to the business of the Company and its Affiliates (as hereinafter defined) or pertaining to the business of any client or customer of the Company or its Affiliates which may be made known to the Employee by the Company or any of its Affiliates or by any client or customer of the Company or any of its Affiliates or learned by the Employee during the period of his employment. (c) The Company possesses and will continue to possess information that has been created, discovered or developed by, or otherwise become known to it (including, without limitation, information created, discovered, developed or made known by the Employee during the period of or arising out of his employment 5 6 hereunder) or in which property rights have been or may be assigned or otherwise conveyed to the Company, which information has commercial value in the business in which the Company is engaged and is treated by the Company as confidential. (d) Any and all inventions, products, discoveries, improvements, processes, manufacturing, marketing and service methods or techniques, formulae, designs, styles, specifications, data bases, computer programs (whether in source code or object code), know-how, strategies and data, whether or not patentable or registrable under copyright or similar statutes, made, developed or created by the Employee (whether at the request or suggestion of the Company, any of its Affiliates, or otherwise, whether alone or in conjunction with others, and whether during regular hours of work or otherwise) during the period of his employment by the Company (collectively, hereinafter referred to as "Inventions"), which may pertain to the business, products, or processes of the Company or any of its Affiliates, will be promptly and fully disclosed by the Employee to an appropriate executive officer of the Company (other than the Employee) and shall be the Company's exclusive property, and the Employee will promptly execute and/or deliver to an appropriate executive officer of the Company (other than the Employee) without any additional compensation therefor, all papers, drawings, models, data, documents and other material pertaining to or in any way relating to any Inventions made, developed or created by him as aforesaid. For the purposes of this Agreement, the term "Affiliate" or "Affiliates" of the Company shall mean any corporation or other entity which is controlled, directly or indirectly, by the Company. As used in the preceding sentence, the work "control" shall mean, with respect to any entity, the power to vote or direct the voting of more than 50% of the voting equity interests in such entity. (e) The Employee will keep confidential and will hold for the Company's sole benefit any Invention which is to be the exclusive property of the Company under this Section 6 for which no patent, copyright, trademark or other right or protection is issued. (f) The Employee also agrees that he will not without the prior written consent of an appropriate executive officer of the Company (other than the Employee) use for his benefit or disclose at any time 6 7 during his employment by the Company, or thereafter, except to the extent required by the performance by him of his duties as an employee of the Company, any information obtained or developed by him while in the employ of the Company with respect to any Inventions or with respect to any customers, clients, suppliers, products, employees, financial affairs, or methods of design, distribution, marketing, service, procurement or manufacture of the Company or any of its Affiliates, or any confidential matter, except information which at the time is generally known to the public other than as a result of disclosure by him not permitted hereunder, or if such information is required to be disclosed under court order or other applicable law. (g) The Employee acknowledges and agrees that a remedy at law for any breach or threatened breach of the provisions of this Section 6 would be inadequate and, therefore, agrees that the Company and its Affiliates shall be entitled to injunctive relief in addition to any other available rights and remedies in case of any such breach or threatened breach; provided, however, that nothing contained herein shall be construed as prohibiting the Company or any of its Affiliates from pursuing any other rights and remedies available for any such breach or threatened breach. (h) The Employee agrees that upon termination of his employment hereunder for any reason, the Employee shall forthwith return to the Company all documents and other property in his possession belonging to the Company or any of its Affiliates. (i) Without limiting the generality of Section 10 hereof, the Employee hereby expressly agrees that the foregoing provisions of this Section 6 shall be binding upon the Employee's heirs, successors and legal representatives. 7. Termination. (a) The Employment Term shall end and the Employee's employment hereunder shall be terminated upon the occurrence of any of the following: (i) the death of the Employee; (ii) termination of the Employee's employment hereunder by the Company based upon the inability of the Employee to perform his duties on account of disability or incapacity for a period of one hundred eighty (180) or more days, whether or not consecutive, occurring 7 8 within any period of twelve (12) consecutive months; provided, however, that such employment shall not be terminated by the Company if it can reasonably accommodate the Employee's disability or incapacity; (iii) the termination of the Employee's employment hereunder by the Employee at any time for any reason whatsoever (including, without limitation, resignation or retirement); (iv) termination of the Employee's employment hereunder by the Company at any time "for cause", such termination to take effect immediately upon written notice from the Company to the Employee; (v) termination of the Employee's employment hereunder by the Company at any time other than for "cause", such termination to take effect immediately upon written notice from the Company to the Employee; or (vi) upon a Change of Control of the Company. The following actions, failures or events by or affecting the Employee shall constitute "cause" for termination within the meaning of clause (iv) above: (1) conviction of having committed a felony; (2) determination by at least two-thirds of the members of the Board of Directors that the Employee has committed acts of dishonesty or moral turpitude; (3) failure to follow reasonable and lawful directives of the Board of Directors of the Company; or (4) gross negligence or willful misconduct by the Employee in the performance of his obligations hereunder. The term "willful" shall mean any act or failure to act taken or omitted to be taken by the Employee not in good faith and without reasonable belief that the act or omission was in the best interest of the Company. As used herein the term "Change of Control of the Company" shall mean any of the following: (i) sale or other disposition (or the last such sale or other disposition) resulting in the transfer of more than 50% of the outstanding common stock of the Company to an unrelated and unaffiliated third party purchaser; or (ii) the consolidation or merger of the Company with or into any other entity (other than a merger in which the Company is the surviving corporation and which does not result in more than 50% of the capital stock of the Company outstanding immediately after the effective date of 8 9 such merger being owned of record or beneficially by persons other than the holders of its capital stock immediately prior to such merger); or (iii) a sale of substantially all of the properties and assets of the Company as an entirety to an unrelated and unaffiliated third party purchaser; or (iv) the time at which any person (including a person's affiliates and associates) or group (as that term is understood under Section 13(d) of the Exchange Act and the rules and regulations thereunder), files a Schedule 13-D or 14D-1 (or any successor schedule, form or report under the Exchange Act) disclosing that such person or group has become the beneficial owner (as defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of shares of capital stock of the Company giving such person or group a majority of the voting power of all outstanding capital stock of the Company with the right to vote generally in an election for directors or other capital stock of the Company into which the common stock or other voting stock is reclassified or changed. (b) (i) If, during the Employment Term, the Employee's employment is terminated by the Company other than for "cause", then the Company shall pay to the Employee, as severance pay or liquidated damages or both, an amount equal to his then-current annual Salary at the time of such termination. (ii) If, during the Employment Term, this agreement is terminated pursuant to the provisions of Section 7(a)(vi) hereof, the Company shall pay to the Employee, as severance pay or liquidated damages or both, an amount equal to his then-current annual Salary at the time of such termination plus an amount equal to his bonus compensation in respect of the immediately preceding calendar year. (iii) If the Employee's employment is terminated by the Company other than for "cause", then any such payable amounts shall be paid in twelve (12) equal monthly installments commencing on the first day of the calendar month immediately following the termination of the Employment Term. If the Employee's employment is terminated pursuant to the provisions of Section 7(a)(vi) hereof, then such amounts shall be payable no later than ten (10) business days after the end of the Employment Term. It is understood and agreed that this Section 7(b) shall survive the expiration or termination of this Agreement and the 9 10 provisions hereof shall be binding upon any successor in interest of the Company. (c) Notwithstanding anything to the contrary expressed or implied herein, and except as set forth in Section 7(b) hereof, the Company (and its Affiliates) shall not be obligated to make any payments to the Employee or on his behalf of whatever kind or nature by reason of the Employee's cessation of employment other than: (A) such amounts, if any, of his Salary and bonus compensation as shall have accrued and remained unpaid as of the date of said cessation (including, but not limited to, the amount of any bonus compensation payable in respect of the then-current calendar year); and (B) such other amounts which may be otherwise payable to the Employee from the Company's retirement plans or other benefit plans on account of such cessation of employment (including, but not limited to, payment for any vested but unused vacation); and (C) Company shall cover the Employee under its medical and dental plan, and life insurance through the end of the last calendar day of the month during which the Employment Term ends, thereafter, the Employee shall be given COBRA conversion rights for the Company's medical and dental plan. Nothing in this Section 7(c) shall limit the Employee's right to contest any termination of the Employee's employment hereunder by appropriate legal proceedings. It is understood and agreed that this Section 7(c) shall survive the expiration or termination of this Agreement and the provisions hereof shall be binding upon any successor in interest of the Company. (d) No interest shall accrue on or be paid with respect to any portion of any payments hereunder paid in accordance with the terms of this Agreement. 8. Non-Assignability. (a) Neither this Agreement nor any right or interest hereunder shall be assignable by the Employee, his beneficiaries, or legal representatives without the Company's prior written consent; provided, however, that nothing in this Section 8(a) shall preclude the Employee from designating a beneficiary to receive any benefit payable hereunder upon his death. Neither this Agreement nor any right or interest hereunder shall be assignable by the Company, nor shall any obligations of the Company hereunder be delegated. (b) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to exclusion, attachment, levy or similar process or assignment 10 11 by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. 9. Competition. During the Employee's employment by the Company and during the twelve (12) month period commencing on the date of cessation of the Employee's employment for any reason whatsoever: (a) The Employee will not make any statement or perform any act intended to advance an interest of any existing or prospective competitor of the Company or any of its Affiliates in any way that will or may injure an interest of the Company or any of its Affiliates in its relationship and dealing with existing or potential customers or clients, or solicit or encourage any other employee of the Company or any of its Affiliates to do any act that is disloyal to the Company or any of its Affiliates or inconsistent with the interest of the Company or any of its Affiliate's interests or in violation of any provision of this Agreement; (b) the Employee will not discuss with any existing or potential customers or clients of the Company or any of its Affiliates the present or future availability of services or products by a business, if the Employee has or expects to acquire a proprietary interest in such business or is or expects to be an employee, officer or director of such business, where such services or products are competitive with services or products which the Company or any of its Affiliates provides during the Employment Term; (c) The Employee will not make any statement or do any act intended to cause any existing or potential customers (with whom the Company has made contact) or clients of the Company or any of its Affiliates to make use of the services or purchase the products of any competitive business in which the Employee has or expects to acquire a proprietary interest or in which the Employee is or expects to be made an employee, officer or director, if such services or products in any way relate to or arise out of the services or products sold or provided by the Company or any of its Affiliates to any such existing customer or client during the Employment Term; (d) the Employee will not directly or indirectly (as a director, officer, employee, manager, consultant, independent contractor, advisor or otherwise) engage in 11 12 competition with, or own any interest in, perform any services for, participate in or be connected with (i) any business or organization which engages in competition with the Company or any of its Affiliates in any geographical area where any business is presently carried on by the Company or any of its Affiliates, or (ii) any business or organization which engages in competition with the Company or any of its Affiliates in any geographical area where any business shall be hereafter, during the period of the Employee's employment by the Company, carried on by the Company or any of its Affiliates, if such business is then being carried on by the Company or any of its Affiliates in such geographical area; provided, however, that the provisions of this Section 9(d) shall not be deemed to prohibit the Employee's ownership of not more than 1% of the total shares of all classes of stock outstanding of any publicly held company; (e) The Employee will not directly or indirectly solicit for employment, or advise or recommend to any other person that they employ or solicit for employment, any employee of the Company or any of its Affiliates; and (f) The Employee will not directly or indirectly hire, engage, send any work to, place orders with, or in any manner be associated with any supplier, contractor, subcontractor or other person or firm which rendered manufacturing or other services, or sold any products, to the Company or any of its Affiliates if such action by him would have a material adverse effect on the business, assets or financial condition of the Company or any of its Affiliates. For purposes of this Section 9, a person or entity (including, without limitation, the Employee) shall be deemed to be a competitor of the Company or any of its Affiliates, or a person or entity (including, without limitation, the Employee) shall be deemed to be engaging in competition with the Company or any of its Affiliates, if such person or entity in any way conducts, operates, carries out or engages (i) in the business of delivering medical oxygen, respiratory therapy services, or durable medical equipment to customers in their homes or (ii) in any other business engaged in by the Company or any of its Affiliates on or prior to the date upon which such Employee ceases to be employed hereunder. In connection with the foregoing provisions of this Section 9, the Employee represents that his experience, 12 13 capabilities and circumstances are such that such provisions will not prevent him from earning a livelihood. The Employee further agrees that the limitations set forth in this Section 9 (including, without limitation, any time or territorial limitations) are reasonable and properly required for the adequate protection of the business of the Company (and of its Affiliates). It is understood and agreed that the covenants made by the Employee in this Section 9 (and in Section 6 hereof) shall survive the expiration or termination of this Agreement. For purposes of this Section 9, proprietary interest in a business is ownership, whether through direct or indirect stock holdings or otherwise, of one percent (1%) or more of such business. The Employee acknowledges and agrees that a remedy at law for any breach or threatened breach of the provisions of this Section 9 would be inadequate and, therefore, agrees that the Company and any of its Affiliates shall be entitled to injunctive relief in addition to any other available rights and remedies in cases of any such breach or threatened breach; provided, however, that nothing contained herein shall be construed as prohibiting the Company or any of its Affiliates from pursuing any other rights and remedies available for any such breach or threatened breach. 10. Binding Effect. Without limiting or diminishing the effect of Section 8 hereof, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, legal representatives and permitted assigns. 11. Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and either delivered in person or sent by first class certified or registered mail, postage prepaid, if to the Company, at the Company's principal place of business, and if to the Employee, at his home address most recently filed with the Company, or to such other address or addresses as either party shall have designated in writing to the other party hereto. 12. Law Governing. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. 13. Severability. If any provision of this Agreement shall be determined to be invalid, illegal or unenforceable in whole or in part, neither the validity of 13 14 the remaining part of such provision nor the validity of any other provision of this Agreement shall in any way be affected thereby. 14. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times. 15. Entire Agreement; Modifications. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements, oral and written, between the parties hereto with respect to the subject matter hereof. This Agreement may be modified or amended only by an instrument in writing signed by both parties hereto 16. Survival. The provisions of Sections 6, 7 and 9 hereof shall survive and continue after the expiration or termination of this Agreement. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Employee have duly executed and delivered this Agreement as of the day and year first above written. LINCARE HOLDINGS INC. By: --------------------------------------- Title: ------------------------------------ ------------------------------------------ SHAWN S. SCHABEL 14 EX-23.10 7 g66313ex23-10.txt KPMG CONSENT 1 EXHIBIT 23.10 INDEPENDENT AUDITORS' CONSENT The Board of Directors Lincare Holdings Inc.: We consent to incorporation by reference in the Registration Statements Nos. 33-55202, 33-595656, 33-90602, 333-46969, 333-71159 and 333-78719 on Form S-8 of Lincare Holdings Inc. of our report dated February 6, 2001, relating to the consolidated balance sheets of Lincare Holdings Inc. and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity and cash flows and related consolidated financial statement schedule for each of the years in the three-year period ended December 31, 2000, which report appears in the December 31, 2000 annual report on Form 10-K of Lincare Holdings Inc. KPMG LLP St. Petersburg, Florida March 29, 2001 EX-99.0 8 g66313ex99-0.txt POWERS OF ATTORNEY 1 Exhibit 99.0 SPECIAL POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that I, CHESTER B. BLACK, a legal resident of the State of Massachusetts, desiring to execute a SPECIAL POWER OF ATTORNEY, have made, constituted and appointed, and by these presents do make, constitute and appoint JOHN P. BYRNES and PAUL G. GABOS, or either of them, with full power of substitution, my Attorney-In-Fact for me and in my name, place and stead to do and perform the following acts, deeds, matters and things as he deems advisable in the judgment of my said Attorney-In-Fact as fully and effectually to all intents and purposes as I could do if personally present and acting: ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000 To execute and deliver all documents and to carry out with full power and authority every act whatsoever requisite or necessary to be done by or on behalf of the undersigned, including the execution of the Lincare Holdings Inc. Annual Report on Form 10-K for the year ended December 31, 2000. GENERAL PROVISIONS All business transacted hereunder for me shall be transacted in my name, and all endorsements and instruments executed by my Attorney-In-Fact for the purpose of carrying out any of the foregoing powers, shall contain my name, followed by that of my Attorney-In-Fact and the designation "Attorney-In-Fact." I hereby ratify and confirm all lawful acts done by my said Attorney-In-Fact pursuant to this Special Power of Attorney, and I direct that this Special Power of Attorney shall continue in effect until terminated by me in writing or by operation of law. If the authority contained herein shall be revoked or terminated by operation of law without notice, I hereby agree for myself, executors, administrators, heirs and assigns, in consideration of my Attorney-In-Fact's willingness to act pursuant to this Special Power of Attorney, to save and hold my Attorney-In-Fact harmless from any loss suffered or any liability incurred by him in so acting after such revocation or termination without notice. ------------------------------ CHESTER B. BLACK 2 SPECIAL POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that I, FRANK T. CARY, a legal resident of the State of Connecticut, desiring to execute a SPECIAL POWER OF ATTORNEY, have made, constituted and appointed, and by these presents do make, constitute and appoint JOHN P. BYRNES and PAUL G. GABOS, or either of them, with full power of substitution, my Attorney-In-Fact for me and in my name, place and stead to do and perform the following acts, deeds, matters and things as he deems advisable in the judgment of my said Attorney-In-Fact as fully and effectually to all intents and purposes as I could do if personally present and acting: ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000 To execute and deliver all documents and to carry out with full power and authority every act whatsoever requisite or necessary to be done by or on behalf of the undersigned, including the execution of the Lincare Holdings Inc. Annual Report on Form 10-K for the year ended December 31, 2000. GENERAL PROVISIONS All business transacted hereunder for me shall be transacted in my name, all endorsements and instruments executed by my Attorney-In-Fact for the purpose of carrying out any of the foregoing powers, shall contain my name, followed by that of my Attorney-In-Fact and the designation "Attorney-In-Fact." I hereby ratify and confirm all lawful acts done by my said Attorney-In-Fact pursuant to this Special Power of Attorney, and I direct that this Special Power of Attorney shall continue in effect until terminated by me in writing or by operation of law. If the authority contained herein shall be revoked or terminated by operation of law without notice, I hereby agree for myself, executors, administrators, heirs and assigns, in consideration of my Attorney-In-Fact's willingness to act pursuant to this Special Power of Attorney, to save and hold my Attorney-In-Fact harmless from any loss suffered or any liability incurred by him in so acting after such revocation or termination without notice. ------------------------------ FRANK T. CARY 3 SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, WILLIAM F. MILLER, III, a legal resident of the State of Texas, desiring to execute a SPECIAL POWER OF ATTORNEY, have made, constituted and appointed, and by these presents do make, constitute and appoint JOHN P. BYRNES and PAUL G. GABOS, or either of them, with full power of substitution, my Attorney-In-Fact for me and in my name, place and stead to do and perform the following acts, deeds, matters and things as he deems advisable in the judgment of my said Attorney-In-Fact as fully and effectually to all intents and purposes as I could do if personally present and acting: ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000 To execute and deliver all documents and to carry out with full power and authority every act whatsoever requisite or necessary to be done by or on behalf of the undersigned, including the execution of the Lincare Holdings Inc. Annual Report on Form 10-K for the year ended December 31, 2000. GENERAL PROVISIONS All business transacted hereunder for me shall be transacted in my name, and all endorsements and instruments executed by my Attorney-In-Fact for the purpose of carrying out any of the foregoing powers, shall contain my name, followed by that of my Attorney-In-Fact and the designation "Attorney-In-Fact." I hereby ratify and confirm all lawful acts done by my said Attorney-In-Fact pursuant to this Special Power of Attorney, and I direct that this Special Power of Attorney shall continue in effect until terminated by me in writing or by operation of law. If the authority contained herein shall be revoked or terminated by operation of law without notice, I hereby agree for myself, executors, administrators, heirs and assigns, in consideration of my Attorney-In-Fact's willingness to act pursuant to this Special Power of Attorney, to save and hold my Attorney-In-Fact harmless from any loss suffered or any liability incurred by him in so acting after such revocation or termination without notice. --------------------------------- WILLIAM F. MILLER, III 4 SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Frank D. Byrne, M.D., a legal resident of the State of Indiana, desiring to execute a SPECIAL POWER OF ATTORNEY, have made, constituted and appointed, and by these presents do make, constitute and appoint JOHN P. BYRNES and PAUL G. GABOS, or either of them, with full power of substitution, my Attorney-In-Fact for me and in my name, place and stead to do and perform the following acts, deeds, matters and things as he deems advisable in the judgment of my said Attorney-In-Fact as fully and effectually to all intents and purposes as I could do if personally present and acting: ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000 To execute and deliver all documents and to carry out with full power and authority every act whatsoever requisite or necessary to be done by or on behalf of the undersigned, including the execution of the Lincare Holdings Inc. Annual Report on Form 10-K for the year ended December 31, 2000. GENERAL PROVISIONS All business transacted hereunder for me shall be transacted in my name, and all endorsements and instruments executed by my Attorney-In-Fact for the purpose of carrying out any of the foregoing powers, shall contain my name, followed by that of my Attorney-In-Fact and the designation "Attorney-In-Fact." I hereby ratify and confirm all lawful acts done by my said Attorney-In-Fact pursuant to this Special Power of Attorney, and I direct that this Special Power of Attorney shall continue in effect until terminated by me in writing or by operation of law. If the authority contained herein shall be revoked or terminated by operation of law without notice, I hereby agree for myself, executors, administrators, heirs and assigns, in consideration of my Attorney-In-Fact's willingness to act pursuant to this Special Power of Attorney, to save and hold my Attorney-In-Fact harmless from any loss suffered or any liability incurred by him in so acting after such revocation or termination without notice. --------------------------------- THOMAS O. PYLE -----END PRIVACY-ENHANCED MESSAGE-----