-----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, KBwnFubX0xpkwzLXmXCkO8jXfV2PRKvWImtNPuCaxd8lqxrLXeVLfXSnP6nQVw3A 3UT5JtXSK7KNNFSSNv0hPA== 0000950144-97-002942.txt : 19970327 0000950144-97-002942.hdr.sgml : 19970327 ACCESSION NUMBER: 0000950144-97-002942 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970326 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCARE HOLDINGS INC CENTRAL INDEX KEY: 0000882235 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 510331330 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19946 FILM NUMBER: 97563782 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 LINCARE HOLDINGS FORM 10-K 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 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (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 34624 CLEARWATER, FLORIDA (Zip Code) (Address of principal executive office)
Registrant's telephone number, including area code: (813) 530-7700 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Title of Class 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, 1997, as reported in the NASDAQ National Market System, was approximately $1,222,528,890. As of February 28, 1997, there were 28,348,496 outstanding shares of the registrant's common stock, par value $.01, which is the only class of common stock of the registrant. DOCUMENTS INCORPORATED BY REFERENCE The information called for by Part III is incorporated by reference to the definitive Proxy Statement for the 1997 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, 1997. ================================================================================ 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, 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 110,000 customers in 38 states through 261 operating centers. On November 30, 1990, the Company acquired the outstanding capital stock of Lincare Inc. (the "Buyout"). The Company was formed by investment partnerships affiliated with the venture capital firms of Welsh, Carson, Anderson & Stowe and Summit Partners, by Dean Witter Capital Corporation, and by members of the Company's current management for the purpose of effecting the Buyout. THE HOME RESPIRATORY MARKET The Company estimates that the home respiratory therapy market (including home oxygen equipment and respiratory therapy services) had revenues of approximately $3.0 billion in 1996, having grown by an estimated 8% to 10% per year over the last five years. This growth reflects the significant increase in the number of persons afflicted with chronic obstructive pulmonary disease, which is attributable, to a large extent, to the increasing proportion of the population over the age of 65. BUSINESS STRATEGY The Company's strategy is to increase its market share through internal growth and acquisitions. Lincare will focus 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 will expand 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 1996, Lincare acquired 17 local and regional competitors with combined annual revenue of approximately $44.0 million. These acquisitions established Lincare in two new states and expanded its presence in the 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 and an increasingly competitive environment have accelerated 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 1996, oxygen and other respiratory therapy services accounted for over 90% 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 1 3 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 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. 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 ambulatory patients. Oxygen concentrators are stationary units that provide a continuous flow of oxygen by filtering ordinary room air. Concentrators are most commonly used by patients confined to the home or with only minimal mobility. OTHER RESPIRATORY THERAPY SERVICES. The other respiratory therapy services of the Company consist primarily of: Nebulizers and associated respiratory medications therapy provide aerosol therapy; Non-invasive ventilation provides nocturnal ventilatory support for neuromuscular and chronic obstructive pulmonary disease patients. This therapy improves daytime function and decreases incidents of acute illness; and 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. Continuous positive airway pressure devices maintain open airways in patients suffering from obstructive sleep apnea by providing airflow at prescribed pressures during sleep; Oximeters determine oxygen desaturation during exercise and sleep and assess the effectiveness of oxygen and home respiratory modalities. INFUSION THERAPY. Lincare provides a variety of infusion therapies consisting primarily of: 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 with 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. 2 4 Central catheter management provides monitoring and supplies to patients requiring access via a peripherally inserted line into the superior vena cava. Through a limited number of operating centers, the Company provides home sleep studies, prenatal care, and prosthetic care. 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 is managed at the executive level as a portfolio of local businesses. 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 mandates the Company's localized operating structure. Each of the Company's 261 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 regional management layer consisting of 31 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 twelve billing centers which control all 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 and 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 a staff of eleven full-time computer programmers which permits 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 period indicated, the Company's payor mix.
YEAR ENDED DECEMBER 31, PAYORS 1996 ------ ------------ Medicare and Medicaid programs.............................. 61% Private insurance........................................... 27 Direct payment.............................................. 12 --- 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 3 5 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. The Company's net accounts receivable in terms of days sales outstanding was 48 days as of December 31, 1996 and 44 days as of December 31, 1995. 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 Americans is increasing, and as a person ages more health care services are required. The well-documented major structural changes going on in health care are moving more services into the home and out of institutions. 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. 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 provides a steady flow of customers in recognition of the Company's reputation for providing high-quality service to patients. 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 110,000 active customers, and the loss of any single customer or group of customers would not materially impact the Company's business. Joint Commission on Accreditation of Healthcare Organizations, ("JCAHO"). The Company has received accreditation from the JCAHO, a private not-for-profit organization that has established voluntary standards for the provision of home health care services, for all its operating centers. Accreditation by the JCAHO represents a marketing benefit to the Company's operating centers and provides for a recognized quality assurance program throughout the Company. The Company anticipates that referral sources may in the future require accreditation as a prerequisite to referring patients to individual home health care companies. 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, and such a requirement has been adopted by certain private payors. RECENT ACQUISITIONS In 1996, the Company acquired, in unrelated acquisitions, certain operating assets of 8 local and regional competitors, the common stock of 7 companies and, in two separate transactions, the common stock and certain assets of two related companies and the common stock and certain assets of three related companies. The operations acquired in 1996 had aggregate annualized revenues of approximately $44.0 million at the time of acquisition. These acquisitions resulted in the addition of 30 new operating centers. In 1995, the Company acquired, in unrelated acquisitions, certain operating assets of 10 local and regional competitors, the common stock of 10 companies and, in two separate transactions, certain assets of two related companies and substantially all of the assets of a single company and eight of its wholly-owned subsidiaries. The operations acquired in 1995 had aggregate annualized revenues of approximately $45.0 million at the time of acquisition. These acquisitions resulted in the addition of 27 new operating centers. 4 6 QUALITY CONTROL The Company is committed to providing consistently high quality products and services. The Company's quality control procedures are designed to promote greater responsiveness and sensitivity in dealing with individual customer needs and to provide the highest level of quality assurance and convenience to the referring physician. Licensed respiratory therapists and registered nurses provide professional health care support and assist in the Company's sales and marketing efforts. SUPPLIERS The Company purchases its oxygen and equipment needs 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 market that is served by the Company and other national providers and, the Company estimates, by over 2,000 regional and local companies. The 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 normally compete based on service. 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 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. Congress enacted legislation passed as part of the 1987 Omnibus Budget Reconciliation Act ("OBRA 1987") that significantly changed reimbursement for home oxygen, respiratory therapy services and home medical equipment. This legislation changed reimbursement from charge-based pricing by individual suppliers to a single price for each item paid to all suppliers within each Medicare carrier's jurisdiction. Under the provisions of OBRA 1987, home oxygen equipment is generally reimbursed at a set single monthly payment amount, regardless of the type of oxygen equipment provided. OBRA 1987 also defined whether certain home medical equipment would be paid for on a rental or sale basis and established a 15 month rental payment ceiling on certain home medical equipment. The 1990 Omnibus Budget Reconciliation Act ("OBRA 1990") provided that the fee schedules established under OBRA 1987 were to be adjusted annually at a rate equal to the change in the Consumer Price Index less 1 percent through December 31, 1992, and increased by the Consumer Price Index in 1993. OBRA 1990 also made new changes to Medicare Part B reimbursement which were implemented in 1991. These changes included a national standardization of Medicare rates for certain equipment categories, as well as reductions in amounts paid for home medical equipment rentals. 5 7 On August 10, 1993, Congress passed the Omnibus Reconciliation Act of 1993 ("OBRA 93") which required changes to be made effective January 1, 1994, in the Medicare reimbursement of certain items of home medical equipment. The Company estimates that these Medicare price changes resulted in a revenue reduction of approximately $4,100,000 for the year ended December 31, 1994. The OBRA 93 legislation provided for a consumer price index update, effective January 1, 1996 and 1995, which the company estimates increased revenue by $4,900,000 and $3,100,000 respectively. A Medicare fee schedule update of 2.8% has been established effective January 1, 1997. In December 1995, President Clinton vetoed the Balanced Budget Act of 1995 (H.R. 2491), which had been passed by Congress on November 30, 1995. The bill included reductions in the rate of growth of Medicare and Medicaid spending, along with significant tax reductions. The proposal included a $2.5 billion reduction to the home oxygen benefit out of a total seven-year program budget of $10.2 billion. President Clinton subsequently offered an alternative seven-year balanced budget proposal which included home oxygen program reductions of $1.4 billion over the seven year period. Ultimately no agreement was reached regarding Medicare oxygen payment reductions for fiscal years 1996 and 1997. Continuing efforts between Congress and the Administration to reach agreement on a budget have produced lower proposed reductions in Medicare and Medicaid spending. At this time, it is uncertain whether any budget agreement will be reached in 1997 for fiscal year 1998. Federal and state budgetary and other cost-containment pressures will continue to impact the home respiratory care industry. The Company cannot predict what new federal and state budgetary proposals will be adopted and, if adopted, what 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 and dispensing 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 and certain types of home health agency 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 Medicare or Medicaid patients. Violations of these provisions may result in civil and criminal penalties and exclusion from participation in the Medicare and Medicaid programs. Health care is an area of rapid regulatory change. Changes in the law or new interpretations of existing laws can have an effect on permissible activities, the relative costs associated with doing business, and the amount of reimbursement by government and third party payors. The Company cannot predict the future course of federal, state and local regulation or legislation, including Medicare and Medicaid statutes and regulations, and of possible changes in national health care policies, including those pertaining to managed care organization, which are currently the focus of national political discussion. Future legislative and regulatory changes could have an adverse impact on the Company. INSURANCE The Company currently has in force general liability and product liability insurance, each with a coverage limit of $10.0 million. In addition, the Company has professional liability insurance with a coverage limit of $1.0 million per occurrence and $3.0 million in the aggregate. 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. 6 8 EMPLOYEES As of February 28, 1997, the Company had approximately 2,800 employees. None of the Company's employees are currently 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 aspects with applicable federal, state and local statutes and ordinances regulating the discharge of 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 compliance will materially affect its capital expenditures, earnings or competitive position. ITEM 2. PROPERTIES All but one of the Company's 261 operating center locations are under third party lease arrangements. 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 leases a headquarters facility and 11 of its 12 separate billing centers. ITEM 3. LEGAL PROCEEDINGS In October 1996, the Company resolved with the United States Attorney for, the Middle District of Florida an investigation that had been pending since 1991. The United States Attorney had been investigating certain services provided by the Company to a pharmacy that supplied medications to home respiratory patients. Under its contracts with the pharmacy, the Company was responsible for providing various marketing, field administration and patient services to the pharmacy. The contracts were in effect from February 1989 to April 1992, and accounted for less than one percent of the Company's revenues during such period. As part of its settlement with the United States Attorney, the Company, without admitting any wrongdoing or liability, has agreed to pay $1 million to the United States Government. The Company is also involved in certain other claims and legal actions arising in the ordinary course of business. In the opinion of the Company, the ultimate disposition of all matters will not have a material adverse impact on the Company's financial position, results of operations or liquidity. 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 1996. 7 9 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 ------ ------ 1996 First quarter............................................... $34.00 $24.75 Second quarter.............................................. 43.50 32.75 Third quarter............................................... 42.25 36.00 Fourth quarter.............................................. 42.88 35.25 1995 First quarter............................................... $31.25 $24.25 Second quarter.............................................. 35.25 25.25 Third quarter............................................... 35.25 23.25 Fourth quarter.............................................. 28.50 21.00
There were approximately 254 holders of record of the common stock as of February 28, 1997. 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, 1996, 1995, 1994, 1993, and 1992 are derived from the consolidated financial statements of the Company, which consolidated financial statements have been audited by KPMG Peat Marwick LLP, independent certified public accountants. 8 10 The data set forth below are qualified by reference to, and should be read in conjunction with, the consolidated financial statements and related notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report.
YEAR ENDED DECEMBER 31, ---------------------------------------------------- 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENTS OF OPERATIONS DATA: Net revenues....................... $348,870 $274,800 $201,142 $154,506 $117,403 Cost of goods and services......... 53,711 41,329 29,058 21,115 16,215 Operating expenses................. 75,158 60,272 44,347 34,388 28,475 Selling, general and administrative expenses......................... 71,259 57,275 43,249 34,623 28,354 Bad debt expense................... 3,472 2,190 1,546 1,832 1,591 Depreciation expense............... 20,790 16,511 13,403 11,764 10,143 Amortization expense............... 13,128 11,099 7,281 4,695 5,125 Non-recurring expense(1)........... 3,932 1,921 -- -- -- -------- -------- -------- -------- -------- Operating income................... 107,420 84,203 62,258 46,089 27,500 Interest income.................... 153 294 434 611 465 Interest expense................... 497 892 473 387 1,242 Gain (loss) on disposal of property and equipment.................... (80) 68 101 233 16 -------- -------- -------- -------- -------- Income before income taxes and extraordinary loss............... 106,996 83,673 62,320 46,546 26,739 Income tax expense................. 40,422 32,634 24,367 18,294 10,600 -------- -------- -------- -------- -------- Income before extraordinary loss... $ 66,574 51,039 37,953 28,252 16,139 Extraordinary loss, net of taxes(2)......................... -- -- -- -- (1,000) -------- -------- -------- -------- -------- Net income available for common.... $ 66,574 $ 51,039 $ 37,953 $ 28,252 $ 15,139 ======== ======== ======== ======== ======== Income per common share: Income before extraordinary loss.......................... $ 2.31 $ 1.79 $ 1.34 $ 1.01 $ .64 ======== ======== ======== ======== ======== Net income....................... $ 2.31 $ 1.79 $ 1.34 $ 1.01 $ .60 ======== ======== ======== ======== ======== Weighted average common and common equivalent shares outstanding.... 28,876 28,576 28,307 27,911 25,334 ======== ======== ======== ======== ========
- --------------- (1) In 1996 the Company recorded a non-recurring expense of $3,932,000 of which $2,682,000 is related to the restructuring of certain senior management employment agreements and $1,250,000 is related to the resolution of an investigation. In 1995 the Company recorded a non-recurring expense of $1,921,000 related to the abandoned merger between the Company and Coram Healthcare Corporation. Such non-recurring expense is comprised of (a) $1,448,000 of professional fees, (b) $199,000 of printing and mailing expenses, (c) $153,000 filing fees, and (d) $121,000 of other direct costs. (2) Upon the prepayment of the Company's senior and subordinated debt with the proceeds of the Company's March 1992 initial public offering, the Company recorded an extraordinary loss, net of taxes, of $1,000,000, attributable to (i) a prepayment premium ($300,000), (ii) unamortized loan origination fees related to the senior debt ($990,000) and (iii) unamortized discount on the subordinated debt ($357,000). 9 11
AT DECEMBER 31, ---------------------------------------------------- 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital............................. $ 23,633 $ 16,510 $ 18,517 $ 35,642 $ 26,134 Total assets................................ 347,408 260,206 195,778 147,084 108,024 Long-term obligations and revolving credit loan, excluding current installments...... 8,234 7,383 6,717 7,512 6,233 Stockholders' equity........................ 299,248 221,383 162,088 117,058 82,435
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company continues to pursue its strategy of focusing on increasing market share within its existing geographical markets, through internal growth and through selective acquisitions of regional or local 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, and it intends to expand its home infusion therapy services in 1997. 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, ------------------------------ 1996 1995 1994 -------- -------- -------- (IN THOUSANDS) Oxygen and other respiratory therapy................... $316,816 $250,287 $184,927 Home medical equipment and other....................... 32,054 24,513 16,215 -------- -------- -------- Total........................................ $348,870 $274,800 $201,142 ======== ======== ========
Net revenues for the year ended December 31, 1996 increased by $74,070,000 (or 27.0%) over 1995. Net revenues for the year ended December 31, 1995 increased by $73,658,000 (or 36.6%) over 1994. The increases 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 estimates that approximately $37,905,000 of the increase in revenues for year ended December 31, 1996, and $40,627,000 of the increase in revenues for the year ended December 31, 1995, were attributable to the acquired businesses. Approximately $31,265,000 of the net revenue increase for the year ended December 31, 1996 and $29,931,000 for the year ended December 31, 1995, was attributable to volume growth in the Company's business. On August 10, 1993, Congress passed the Omnibus Reconciliation Act of 1993 ("OBRA 93") which required changes to be made effective January 1, 1994, in the Medicare reimbursement of certain items of home medical equipment. The Company estimates that these Medicare price changes resulted in a revenue reduction of approximately $4,100,000 for the year ended December 31, 1994. The OBRA 93 legislation provided for a consumer price index update, effective January 1, 1996 and 1995, which the company estimates increased revenue by $4,900,000 and $3,100,000, respectively. A Medicare fee schedule update of 2.8% has been established effective January 1, 1997. In December 1995, President Clinton vetoed the Balanced Budget Act of 1995 (H.R. 2491), which had been passed by Congress on November 30, 1995. The bill included reductions in the rate of growth of Medicare and Medicaid spending, along with significant tax reductions. The proposal included a $2.5 billion reduction to the home oxygen benefit out of a total seven-year program budget of $10.2 billion. President 10 12 Clinton subsequently offered an alternative seven-year balanced budget proposal, which included home oxygen program reductions of $1.4 billion over the seven year period. Ultimately no agreement was reached regarding Medicare oxygen payment reductions for fiscal years 1996 and 1997. Continuing efforts between Congress and the Administration to reach agreement on a budget have produced lower proposed reductions in Medicare and Medicaid spending. At this time, it is uncertain whether any budget agreement will be reached in 1997 for fiscal year 1998. COST OF GOODS AND SERVICES Cost of goods and services as a percentage of net revenues was 15.4% for the year ended December 31, 1996 and was 15.0% and 14.4% for the years ended December 31, 1995 and 1994, respectively. The increase in 1996 and 1995 is attributable to a change in the product mix related to acquisitions having higher levels of home medical equipment and certain respiratory therapy products. OPERATING AND OTHER EXPENSES Operating expenses for the year ended December 31, 1996 decreased to 21.5% of net revenues, compared to 21.9% and 22.0% for the years ended December 31, 1995 and 1994, respectively. Selling, general and administrative expenses expressed as a percentage of net revenues decreased to 20.4% for the year ended December 31, 1996 compared with 20.8% and 21.5% for the years ended December 31, 1995 and 1994, respectively. This improvement is primarily due to the Company's ability to maintain a cost structure that, with increases in net revenues, has permitted the Company to spread its overhead over a larger base of revenues, resulting in improvement in operating income. Bad debt expense as a percentage of net revenues was 1.0% for the year ended December 31, 1996 and 0.8% for the years ended December 31, 1995 and 1994. The Company's increased depreciation expense reflects increased capital expenditures primarily for additional oxygen equipment to service the Company's growing customer base. Depreciation expense as a percentage of net revenues decreased to 6.0% for the years ended December 31, 1996 and 1995 compared with 6.7% for the year ended December 31, 1994. AMORTIZATION EXPENSE The Company's net intangible assets were $198,162,000 as of December 31, 1996. Of this total, $8,867,000 (consisting of the value assigned to customer lists) is being amortized over a period of 36 months, $4,478,000 (consisting of various covenants not to compete) over a period of three to five years, and $184,817,000 (consisting of goodwill) over a period of 40 years. During 1996, the Company amortized $13,128,000 of its intangible assets compared to $11,099,000 in 1995 and $7,281,000 in 1994. OPERATING INCOME As shown in the table below, operating income before non-recurring expense for the year ended December 31, 1996 increased by $25,228,000 over 1995. The Company recorded a non-recurring expense of $3,932,000 relating to the restructuring of certain senior management employment agreements and the resolution of an investigation. Operating income before non-recurring expense for the year ended December 31, 1995 increased by $23,866,000 over 1994. The Company recognized a non-recurring charge of $1,921,000 related to the Company's abandoned merger with Coram Healthcare Corporation. The percentage 11 13 increases in operating income are attributable to the Company's continued revenue growth, while maintaining effective cost controls over expenses.
YEAR ENDED DECEMBER 31, ------------------------------ 1996 1995 1994 -------- ------- ------- (IN THOUSANDS) Operating income before non-recurring expense............... $111,352 $86,124 $62,258 Percentage of net revenues.................................. 31.9% 31.3% 31.0%
INTEREST EXPENSE Interest expense for the year ended December 31, 1996 was $497,000, compared to $892,000 and $473,000 for the years ended December 31, 1995 and 1994, respectively. The decrease in expense is attributed to a lower revolving credit loan balance throughout 1996 as compared to 1995. INCOME TAXES The Company's effective income tax rate was 37.8% for the year ended December 31, 1996, 39.0% for 1995 and 39.1% for 1994. The Company expects the effective tax rate for 1997 to be 38.5%. ACQUISITIONS For a description of business combinations entered into by the Company during 1996 and 1995, see "Business -- Recent Acquisitions" and Note 13 to the Consolidated Financial Statements. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1996, the Company's working capital was $23,633,000, as compared to $16,510,000 at December 31, 1995, and $18,517,000 at December 31, 1994. Net cash provided by operating activities was $106,883,000 for the year ended December 31, 1996, compared with $79,523,000 for the year ended December 31, 1995, and $66,018,000 for the year ended December 31, 1994. A significant portion of the Company's assets consists of accounts receivables from third party payors that provide reimbursement for the services provided by the Company. Because of the Company's ability to collect its accounts receivable on a timely basis, the Company has not been required to obtain interim financing of its accounts receivable to satisfy operating needs. Net cash used in investing and financing activities amounted to $106,351,000, $94,537,000 and $79,733,000 for the years ended December 31, 1996, 1995 and 1994, respectively. Activity in the year ended December 31, 1996 included the Company's investment of $64,764,000 in business acquisitions, investment in capital equipment of $38,241,000, the borrowing of $58,000,000 from its revolving line of credit, payments of $54,000,000 on the revolving line of credit and payments of $11,772,000 related to long-term obligations. As of December 31, 1996, the Company's principal sources of liquidity consisted of $23,633,000 of working capital and $41,000,000 available under its revolving line of credit. On February 10, 1995, the Company increased the amount it may borrow under the revolving line of credit from $25,000,000 to $50,000,000. The Company believes that internally generated funds, together with funds that may be borrowed under such credit facility, will be sufficient to meet the Company's anticipated capital requirements over the foreseeable future. The Company anticipates that capital expenditures for 1997 will be approximately $45,000,000 and that over the next several years its capital expenditure requirements will grow no faster than the growth in the Company's revenue. The Company believes that it will be able to generate sufficient funds internally to meet its short-term and long-term capital expenditure requirements. The Company's future liquidity will continue to be dependent upon its operating cash flow and management of accounts receivable. Additionally, the Company is not aware of any impact on liquidity due to pending litigation arising in the ordinary course of business. 12 14 INFLATION The Company has not experienced large increases in either the cost of supplies or operating expenses due to inflation. Because of restrictions on reimbursement by government and private medical insurance programs and the pressures to contain the growth in the costs of such programs, the Company bears the risk that reimbursement rates set by such programs will not keep pace with inflation. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements required by this item are listed in Item 14(1)(a) 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. 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 is included in the definitive proxy statement, under "Information Regarding the Board of Directors" for the Annual Meeting of Stockholders to be held May 12, 1997, and is herein incorporated by reference. ITEM 11. EXECUTIVE COMPENSATION The response to this item is included in the definitive proxy statement, under "Executive Compensation" for the Annual Meeting of Stockholders to be held May 12, 1997, and is herein incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The response to this item is included in the definitive proxy statement under "Security Ownership of Principal Stockholders and Management" for the Annual Meeting of Stockholders to be held May 12, 1997, and is herein incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, 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, 1996 and 1995 Consolidated Statements of Operations -- Years ended December 31, 1996, 1995 and 1994. Consolidated Statements of Stockholders' Equity -- Years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows -- Years ended December 31, 1996, 1995 and 1994 13 15 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, 1996. 14 16 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/ JAMES M. EMANUEL -------------------------------------- James M. Emanuel 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 and in the capacities and on the dates indicated.
SIGNATURE POSITION DATE --------- -------- ---- /s/ JAMES T. KELLY Chairman of the Board March 25, 1997 - ------------------------------------------------ James T. Kelly /s/ JAMES M. EMANUEL Director, Chief Financial and March 25, 1997 - ------------------------------------------------ Principal Accounting Officer James M. Emanuel /s/ CHESTER B. BLACK Director March 25, 1997 - ------------------------------------------------ Chester B. Black /s/ FRANK T. CARY Director March 25, 1997 - ------------------------------------------------ Frank T. Cary /s/ HOWARD R. DEUTSCH Director March 25, 1997 - ------------------------------------------------ Howard R. Deutsch /s/ ANDREW M. PAUL Director March 25, 1997 - ------------------------------------------------ Andrew M. Paul /s/ THOMAS O. PYLE Director March 25, 1997 - ------------------------------------------------ Thomas O. Pyle
15 17 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 13. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule listed in the index on page 13. 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 generally accepted auditing standards. 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, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, the related 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 PEAT MARWICK LLP St. Petersburg, Florida January 21, 1997 F-1 18 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995
1996 1995 ---------- ---------- (DOLLARS IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents................................. $ 1,541 $ 1,009 Accounts and notes receivable (note 2).................... 51,090 36,610 Income taxes receivable................................... 187 772 Inventories............................................... 1,689 1,299 Prepaid expenses.......................................... 466 674 -------- -------- Total current assets.............................. 54,973 40,364 -------- -------- Property and equipment (notes 3 and 4)...................... 150,598 121,786 Less accumulated depreciation............................... 57,068 48,534 -------- -------- Net property and equipment........................ 93,530 73,252 -------- -------- Other assets: Goodwill, less accumulated amortization of $11,135 in 1996 and $6,920 in 1995..................................... 184,817 130,491 Intangible assets, less accumulated amortization of $30,036 in 1996 and $27,229 in 1995.................... 8,867 9,510 Covenants not to compete, less accumulated amortization of $7,543 in 1996 and $5,315 in 1995...................... 4,478 6,370 Other..................................................... 743 219 -------- -------- Total other assets................................ 198,905 146,590 -------- -------- $347,408 $260,206 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term obligations (note 6).... $ 5,783 $ 4,992 Accounts payable.......................................... 16,958 10,214 Accrued expenses: Compensation and benefits.............................. 6,895 7,028 Other.................................................. 1,704 1,620 -------- -------- Total current liabilities......................... 31,340 23,854 -------- -------- Revolving credit loan (note 5).............................. 7,500 5,000 Long-term obligations, excluding current installments (note 6)........................................................ 734 2,383 Deferred income taxes (note 7).............................. 7,681 6,707 Minority interest........................................... 905 879 Stockholders' equity (notes 7, 8 and 9): Common stock, $.01 par value. Authorized 50,000,000 shares; issued and outstanding 28,254,996 in 1996 and 27,686,834 shares in 1995.............................. 282 277 Additional paid-in capital................................ 97,335 86,049 Retained earnings......................................... 201,631 135,057 -------- -------- Total stockholders' equity........................ 299,248 221,383 Commitments and contingencies (notes 4 and 14).............. -------- -------- $347,408 $260,206 ======== ========
See accompanying notes to consolidated financial statements. F-2 19 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1996 1995 1994 ----------- ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues (note 10)................................. $348,870 $274,800 $201,142 -------- -------- -------- Costs and expenses: Cost of goods and services........................... 53,711 41,329 29,058 Operating expenses................................... 75,158 60,272 44,347 Selling, general and administrative expenses......... 71,259 57,275 43,249 Bad debt expense..................................... 3,472 2,190 1,546 Depreciation expense................................. 20,790 16,511 13,403 Amortization expense................................. 13,128 11,099 7,281 Non-recurring expense (note 11)...................... 3,932 1,921 -- -------- -------- -------- 241,450 190,597 138,884 -------- -------- -------- Operating income............................. 107,420 84,203 62,258 -------- -------- -------- Other income (expenses): Interest income...................................... 153 294 434 Interest expense..................................... (497) (892) (473) Net gain (loss) on disposal of property and equipment......................................... (80) 68 101 -------- -------- -------- (424) (530) 62 -------- -------- -------- Income before income taxes................... 106,996 83,673 62,320 Income tax expense (note 7)............................ 40,422 32,634 24,367 -------- -------- -------- Net income................................... $ 66,574 $ 51,039 $ 37,953 ======== ======== ======== Income per common share................................ $ 2.31 $ 1.79 $ 1.34 ======== ======== ======== Weighted average number of common shares and common share equivalents outstanding (in thousands)......... 28,876 28,576 28,307 ======== ======== ========
See accompanying notes to consolidated financial statements. F-3 20 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
ADDITIONAL TOTAL COMMON PAID-IN RETAINED STOCKHOLDERS' STOCK CAPITAL EARNINGS EQUITY ------ ---------- -------- ------------- (DOLLARS IN THOUSANDS) Balances at December 31, 1993......................... $264 $70,729 $ 46,065 $117,058 Exercise of stock options (note 9).................... 7 454 -- 461 Tax benefit related to exercise of employee stock options (notes 7 and 9)............................. -- 6,616 -- 6,616 Net income............................................ -- -- 37,953 37,953 ---- ------- -------- -------- Balances at December 31, 1994......................... 271 77,799 84,018 162,088 Exercise of stock options (note 9).................... 6 2,800 -- 2,806 Tax benefit related to exercise of employee stock options (notes 7 and 9)............................. -- 5,450 -- 5,450 Net income............................................ -- -- 51,039 51,039 ---- ------- -------- -------- Balances at December 31, 1995......................... 277 86,049 135,057 221,383 Exercise of stock options (note 9).................... 5 4,895 -- 4,900 Tax benefit related to exercise of employee stock options (notes 7 and 9)............................. -- 6,391 -- 6,391 Net income............................................ -- -- 66,574 66,574 ---- ------- -------- -------- Balances at December 31, 1996......................... $282 $97,335 $201,631 $299,248 ==== ======= ======== ========
See accompanying notes to consolidated financial statements. F-4 21 LINCARE HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1996 1995 1994 --------- -------- -------- (DOLLARS IN THOUSANDS) Cash flows from operating activities: Net income................................................ $ 66,574 $ 51,039 $ 37,953 Adjustments to reconcile net income to net cash provided by operating activities: Increase in provision for losses on accounts and notes receivable........................................... (1,433) (1,989) (491) Depreciation expense................................... 20,790 16,511 13,403 Loss (gain) on disposal of property and equipment...... 80 (68) (101) Amortization expense................................... 13,128 11,099 7,281 Amortization of imputed interest....................... 80 130 219 Deferred income taxes.................................. 1,090 2,369 (2,979) Minority interest in net earnings of subsidiary........ 252 196 122 Change in operating assets and liabilities: (Increase) decrease in accounts and notes receivable........................................ (6,883) (5,524) 911 (Increase) decrease in inventories................... (256) (53) 177 Decrease (increase) in prepaid expenses.............. 81 78 (301) Increase in accounts payable......................... 6,743 336 1,282 (Decrease) increase in accrued expenses.............. (339) 1,927 1,154 Decrease in income taxes............................. 6,976 3,472 7,388 --------- -------- -------- Net cash provided by operating activities......... 106,883 79,523 66,018 --------- -------- -------- Cash flows from investing activities: Proceeds from sale of property and equipment.............. 276 1,269 900 Capital expenditures...................................... (38,241) (30,148) (22,614) Increase in other assets.................................. (524) (13) (7) Business acquisitions, net of cash acquired (note 13)..... (64,764) (58,590) (52,904) --------- -------- -------- Net cash used by investing activities............. (103,253) (87,482) (74,625) --------- -------- -------- Cash flows from financing activities: Proceeds from revolving credit loan....................... 58,000 44,000 8,000 Payment of revolving credit loan.......................... (54,000) (41,000) (6,000) Proceeds from long-term obligations....................... -- 506 -- Payment of long-term obligations.......................... (11,772) (13,247) (8,009) (Decrease) increase in minority interest.................. (226) (120) 440 Proceeds from issuance of common stock.................... 4,900 2,806 461 --------- -------- -------- Net cash used by financing activities............. (3,098) (7,055) (5,108) --------- -------- -------- Net increase (decrease) in cash................... 532 (15,014) (13,715) Cash and cash equivalents, beginning of year................ 1,009 16,023 29,738 --------- -------- -------- Cash and cash equivalents, end of year...................... $ 1,541 $ 1,009 $ 16,023 ========= ======== ========
See accompanying notes to consolidated financial statements. F-5 22 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995, AND 1994 (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 38 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 The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Significant estimates included in these financial statements are related to the allowance for uncollectible accounts and self-insurance accruals. 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) Financial Instruments The Company believes the book value of its cash equivalents, accounts and notes receivable, income taxes receivable, accounts payable and accrued expenses approximates fair value due to their short-term nature. The book value of the Company's revolving credit loan and long-term obligations approximates their fair value as the current interest rates approximate rates at which similar types of borrowing arrangements could be currently obtained by the Company. (e) 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) 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. Land improvements........................................... 15 years Buildings and improvements.................................. 5 to 40 years Equipment and furniture..................................... 3 to 11 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. F-6 23 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (g) 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 thirty-six months. Covenants not to compete are amortized on a straight-line basis over the life of the respective covenants, three to five years. The Company annually evaluates goodwill and other intangible assets by utilizing an operating income realization test for the applicable businesses acquired. 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. (h) 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. (i) 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 $1,362,000 in 1996, $1,271,000 in 1995, and $1,015,000 in 1994. (j) Statement 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. (k) Stock Options Prior to January 1, 1996, the Company accounted for its stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. 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. On January 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based Compensation, which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25, and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. F-7 24 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (2) ACCOUNTS AND NOTES RECEIVABLE Accounts and notes receivable at December 31, 1996 and 1995 consist of:
1996 1995 ------- ------- (IN THOUSANDS) Trade....................................................... $56,697 $41,057 Other....................................................... 310 88 ------- ------- 57,007 41,145 Less allowance for uncollectible accounts................... 5,917 4,535 ------- ------- $51,090 $36,610 ======= =======
(3) PROPERTY AND EQUIPMENT Property and equipment at December 31, 1996 and 1995 consists of:
1996 1995 -------- -------- (IN THOUSANDS) Land and improvements....................................... $ 85 $ 85 Building and improvements................................... 1,344 1,125 Equipment and furniture..................................... 149,169 120,576 -------- -------- $150,598 $121,786 ======== ========
Rental equipment of approximately $118,719,000 in 1996 and $94,785,000 in 1995 are included with equipment and furniture. (4) LEASES The Company has several noncancelable operating leases, primarily for buildings, computer equipment and vehicles, that expire over the next five years and provide for purchase or renewal options. Operating lease expense was approximately $12,617,000 in 1996, $9,781,000 in 1995, and $6,971,000 in 1994. Future minimum lease payments under noncancelable operating leases, net of sublease income, as of December 31, 1996 are as follows:
(IN THOUSANDS) 1997........................................................ $11,172 1998........................................................ 8,326 1999........................................................ 5,077 2000........................................................ 2,440 2001........................................................ 782 ------- Total minimum lease payments...................... $27,797 =======
(5) REVOLVING CREDIT LOAN Under the revolving line of credit, the Company may borrow amounts up to $50,000,000. The maturity date is sixty months from the date of the note. The revolving line of credit bears interest at LIBOR plus 58 basis points (5.96% at December 31, 1996). The line of credit is comprised of three distinct termed loan periods. Each termed loan period commences on the date that is exactly 24, 36 and 48 months from the date of the loan (February 10, 1995). The principal amount outstanding on the first day at each of the three termed loan periods is repaid separately, based on a 60-month amortization plus interest monthly. The unpaid principal on the maturity date (February 10, 2000) will be paid in one final installment. Interest accrued on F-8 25 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the outstanding principal balance that is not termed for repayment is payable monthly. The Loan Agreement contains several financial and other covenants and is secured by, effectively, all of the assets of the Company. At December 31, 1996, $9,000,000 was outstanding under the revolving line of credit. At December 31, 1995, $5,000,000 was outstanding under the revolving line of credit. Amortization of loan origination fees amounted to approximately $5,000 in 1996, $5,000 in 1995, and $4,000 in 1994. (6) LONG-TERM OBLIGATIONS Long-term obligations generally consist of unsecured, non-interest bearing deferred acquisition obligations payable in varying installments through 1998. Unamortized imputed interest at 5.75% to 8.25% was $4,000 in 1996, $45,000 in 1995, and $47,000 in 1994. The aggregate maturities of long-term obligations and the revolving credit loan for each of the five years subsequent to December 31, 1996 are as follows:
(IN THOUSANDS) 1997........................................................ $ 5,783 1998........................................................ 2,534 1999........................................................ 1,800 2000........................................................ 1,800 2001........................................................ 1,800 ------- $13,717 =======
(7) 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, 1996 and 1995 are presented below:
1996 1995 ------- ------- (IN THOUSANDS) Deferred tax assets: Accounts receivable, principally due to allowance for uncollectible accounts............................................... $(1,748) $(1,779) Accrued expenses, principally due to deferral for income tax reporting purposes................................. (2,311) (1,881) Intangible assets and covenants not to compete, principally due to differences in amortization......... (4,431) (2,727) Net operating loss carryforward........................... (489) -- ------- ------- Total gross deferred tax assets................... (8,979) (6,387) ------- ------- Deferred tax liabilities: Property and equipment, principally due to differences in depreciation........................................... 9,291 7,054 Goodwill, principally due to differences in amortization........................................... 4,232 2,430 Other..................................................... 3,137 3,610 ------- ------- Total gross deferred tax liabilities.............. 16,660 13,094 ------- ------- Net deferred tax liability........................ $ 7,681 $ 6,707 ======= =======
F-9 26 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) There was no valuation allowance for deferred tax assets as of January 1, 1995, December 31, 1995 and 1996. The Company expects the results of future operations will generate sufficient taxable income to allow for the utilization of deferred tax assets. Income tax expense attributable to operations consists of:
YEAR ENDED DECEMBER 31, --------------------------- 1996 1995 1994 ------- ------- ------- (IN THOUSANDS) Current: Federal................................................. $35,149 $27,164 $23,224 State................................................... 4,183 3,102 4,147 ------- ------- ------- Total current................................... $39,332 30,266 27,371 ======= ======= ======= Deferred: Federal................................................. 959 2,072 (2,606) State................................................... 131 296 (398) ------- ------- ------- Total deferred.................................. 1,090 2,368 (3,004) ------- ------- ------- $40,422 $32,634 $24,367 ======= ======= ======= Total income tax expense was allocated: Income from operations.................................. $40,422 $32,634 $24,367 Stockholders' equity for compensation expense for tax purposes............................................. (6,391) (5,450) (6,616) ------- ------- ------- $34,031 $27,184 $17,751 ======= ======= =======
Total income tax expense differs from the amounts computed by applying U.S. federal income tax rates (35% in 1996, 1995 and 1994) to income before income taxes as a result of the following:
YEAR ENDED DECEMBER 31, --------------------------- 1996 1995 1994 ------- ------- ------- (IN THOUSANDS) Computed "expected" tax expense........................... $37,449 $29,286 $21,812 State income taxes, net of federal income tax benefit..... 2,804 2,209 2,437 Other..................................................... 169 1,139 118 ------- ------- ------- Total income tax expense........................ $40,422 $32,634 $24,367 ======= ======= =======
(8) STOCKHOLDERS' EQUITY The Company has 4,879,238 authorized and unissued shares of preferred stock. 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. (9) STOCK OPTIONS The Company has four stock option plans that provide for the grant of options to officers and employees. Stock options are 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 2,973,768 shares of common stock for issuance under its Non-Qualified Stock Option Plan (the Plan). At December 31, 1996, there were options for 177,520 shares F-10 27 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) outstanding and options for 979 shares available for issue under the Plan. The Company has reserved a total of 1,600,000 shares of common stock for issuance under its 1991 Stock Plan (the 1991 Plan). At December 31, 1996 there were options for 936,900 shares outstanding and options for 15,800 shares available for issuance under the 1991 Plan. The Company has reserved a total of 500,000 shares of common stock for issuance under its 1994 Stock Plan (the 1994 Plan). At December 31, 1996, there were options for 480,000 shares outstanding and options for 13,000 shares available for issue under the 1994 Plan. The Company has reserved a total of 750,000 shares of common stock for issuance under its 1996 Stock Plan (the 1996 Plan). At December 31, 1996, there were options for 381,000 shares outstanding and options for 369,000 shares available for issue under the 1996 Plan. The per share weighted average fair value of stock options granted during 1996 and 1995 was $17.48 and $11.56 on the date of grant using the Black Scholes option pricing model with the following weighted average assumptions: 1996 -- expected dividend yield 0%, risk-free interest rate of 6.2%, expected life of 7 years, and volatility of 42.2%; 1995 -- expected dividend yield 0%, risk-free interest rate of 6.2%, expected life of 6 years, and volatility of 43.5%. The Company applied APB Opinion No. 25 in accounting for its Plan 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 SFAS No. 123, the Company's net income would have been reduced to the pro forma amounts indicated below:
1996 1995 ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net income: As reported........................................... $66,574 $51,039 Pro forma............................................. 64,093 49,775 ======= ======= Income per common share: As reported........................................... $ 2.31 $ 1.79 Pro forma............................................. 2.22 1.74 ======= =======
Pro forma net income reflects only options granted in 1996 and 1995, therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net income 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 is not considered. F-11 28 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information related to the Plans is as follows:
NUMBER OF WEIGHTED AVERAGE OPTIONS EXERCISE PRICE --------- ---------------- Outstanding at December 31, 1994........................... 2,155,062 $10.49 Exercised in 1995.......................................... (562,704) 4.99 Canceled in 1995........................................... (91,379) 3.83 Options issued in 1995..................................... 542,000 25.05 --------- Outstanding at December 31, 1995........................... 2,042,979 16.17 Exercised in 1996.......................................... (568,159) 8.74 Canceled in 1996........................................... (29,400) 15.78 Options issued in 1996..................................... 530,000 32.44 --------- Outstanding at December 31, 1996........................... 1,975,420 $22.67 =========
At December 31, 1996, the range of exercise prices and weighted average remaining contractual life of outstanding options was as follows:
OPTIONS WEIGHTED OUTSTANDING AS OF AVERAGE RANGE OF DECEMBER 31, REMAINING EXERCISE PRICES 1996 CONTRACTUAL LIFE --------------- ----------------- ---------------- $0.25-$12.125.......................................... 261,720 4.0 years $19.00-$19.00.......................................... 669,700 6.9 years $24.63-$25.00.......................................... 504,000 7.3 years $25.25-$35.25.......................................... 540,000 8.4 years --------- ---------- $0.25-$35.25........................................... 1,975,420 7.0 years
At December 31, 1996 and 1995, the number of options exercisable was 825,920 and 1,074,152, respectively, and the weighted average exercise price of those options was $15.62 and $13.25, respectively. In connection with the exercise of certain stock options in 1996, 1995 and 1994, 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 $6,391,000 in 1996, $5,450,000 in 1995, and $6,616,000 in 1994 has been recorded as a reduction of income taxes payable and an addition to additional paid-in capital. (10) NET REVENUES Included in the Company's net revenues is reimbursement from the federal government under the Medicare and under Medicaid programs which aggregated approximately 61% in 1996, 60% in 1995, and 58% in 1994. (11) NON-RECURRING EXPENSE In 1996, the Company recorded a non-recurring expense of $3,932,000 of which $2,682,000 is related to the restructuring of certain senior management employment agreements and $1,250,000 is related to the resolution of an investigation. In 1995, the Company recorded a non-recurring expense of $1,921,000 related to the abandoned merger between the Company and Coram Healthcare Corporation. Such non-recurring expense is comprised of (a) $1,448,000 of professional fees, (b) $199,000 of printing and mailing expenses, (c) $153,000 of filing fees, and (d) $121,000 of other direct costs. F-12 29 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (12) SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, --------------------------- 1996 1995 1994 ------- ------- ------- (IN THOUSANDS) Cash paid for: Interest.................................................. $ 414 $ 762 $ 254 ======= ======= ======= Income taxes.............................................. $31,566 $25,036 $19,983 ======= ======= =======
(13) BUSINESS COMBINATIONS During 1996, the Company acquired the outstanding stock or certain assets of 17 businesses in 17 separate transactions. During 1995, 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 1996 and 1995 was accounted for as a purchase. The results of operations of the acquired companies are included in the accompanying consolidated statement of operations since the respective date of acquisition. Each of the acquired companies conducted operations similar to that of the Company. The aggregate cost of the above acquisitions was as follows:
1996 1995 ------- ------- (IN THOUSANDS) Cash........................................................ $64,764 $58,865 Deferred acquisition obligations............................ 7,905 9,140 Assumption of liabilities................................... 383 2,929 ------- ------- $73,052 $70,934 ======= =======
The aggregate purchase price was allocated as follows:
1996 1995 ------- ------- (IN THOUSANDS) Current assets (including cash acquired of $275 in 1995).... $ 6,362 $ 8,097 Property and equipment...................................... 3,205 4,731 Intangible assets........................................... 6,379 12,056 Goodwill.................................................... 57,106 46,050 ------- ------- $73,052 $70,934 ======= =======
The following unaudited pro forma supplemental information on the results of operations for the years ended December 31, 1996 and 1995 include the acquisitions as if they had been combined at the beginning of the respective years.
1996 1995 -------- -------- (IN THOUSANDS) Net revenues................................................ $369,127 $318,060 ======== ======== Net income.................................................. $ 70,535 $ 59,626 ======== ======== Net income per common share................................. $ 2.44 $ 2.09 ======== ========
F-13 30 LINCARE HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The 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 the respective years or of future results of operations of the combined companies. (14) CONTINGENCIES In October 1996, the Company resolved with the United States Attorney for the Middle District of Florida an investigation that had been pending since 1991. The United States Attorney had been investigating certain services provided by the Company to a pharmacy that supplied medications to home respiratory patients. Under its contracts with the pharmacy, the Company was responsible for providing various marketing, field administration and patient services to the pharmacy. The contracts were in effect from February 1989 to April 1992, and accounted for less than one percent of the Company's revenues during such period. As part of its settlement with the United States Attorney, the Company, without admitting any wrongdoing or liability, has agreed to pay $1 million to the United States Government. The Company is involved in certain claims and legal actions arising in the ordinary cause of business. In the opinion of management, the ultimate disposition of all matters will not have a material adverse impact on the Company's financial position, results of operations or liquidity. (15) QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of quarterly financial results for the years ended December 31, 1996 and 1995:
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 1996: Net revenues.................................... $79,772 $84,970 $89,633 $94,495 ======= ======= ======= ======= Operating income (1)............................ $25,138 $27,581 $28,787 $25,914 ======= ======= ======= ======= Net income (1).................................. $15,424 $16,945 $17,637 $16,568 ======= ======= ======= ======= Income per common share......................... $ .54 $ .59 $ .61 $ .57 ======= ======= ======= ======= 1995: Net revenues.................................... $61,223 $67,400 $71,876 $74,301 ======= ======= ======= ======= Operating income (2)............................ $19,415 $21,135 $20,649 $23,004 ======= ======= ======= ======= Net income (2).................................. $11,862 $12,778 $12,429 $13,970 ======= ======= ======= ======= Income per common share......................... $ .42 $ .45 $ .43 $ .49 ======= ======= ======= =======
- --------------- (1) The 1996 fourth quarter operating income included a non-recurring expense of $3,932,000 ($1,649,000 or $.06 per share after taxes) (see note 11). (2) The 1995 third quarter operating income included a non-recurring expense of $1,921,000 ($1,172,000 or $.04 per share after taxes) (see note 11). F-14 31 SCHEDULE VIII LINCARE HOLDINGS INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
CHARGED TO BALANCE AT CHARGED TO OTHER BEGINNING COSTS AND ACCOUNTS DEDUCTIONS BALANCE AT DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD ----------- ---------- ---------- ---------- ---------- ------------- (IN THOUSANDS) YEAR ENDED DECEMBER 31, 1996 Deducted from asset accounts: Allowance for uncollectible accounts......................... $4,535 $3,472 $2,788(1) $4,878(2) $5,917 ====== ====== ====== ====== ====== YEAR ENDED DECEMBER 31, 1995 Deducted from asset accounts: Allowance for uncollectible accounts......................... $4,723 $2,190 $1,713(1) $4,091(2) $4,535 ====== ====== ====== ====== ====== YEAR ENDED DECEMBER 31, 1994 Deducted from asset accounts: Allowance for uncollectible accounts......................... $4,596 $1,546 $ 617(1) $2,036(2) $4,723 ====== ====== ====== ====== ======
- --------------- (1) To record allowance on business combinations (2) To record write-offs S-1 32 INDEX OF EXHIBITS
Sequentially Exhibit Numbered Number Exhibit Page - ------ ------- ---- +3.1- Amended and Restated Certificate of Incorporation of Lincare Holdings Inc. . . . . +3.2- Amended and Restated By-Laws of Lincare Holdings Inc. . . . . . . . . . . . . . . . +10.6- Purchase Agreement dated as of September 25, 1991 among the Registrant and the several purchasers named therein . . . . . . . . . . . . . . . . . . . . . . . . . +10.10- Non-Qualified Stock Option Plan of Registrant . . . . . . . . . . . . . . . . . . . +10.11- Lincare Holdings Inc. 1991 Stock Plan . . . . . . . . . . . . . . . . . . . . . . . +10.12- Non-Qualified Stock Option Agreements dated as of November 30, 1990, as amended, between the Registrant and James T. Kelly . . . . . . . . . . . . . . . . . . . . . +10.13- Non-Qualified Stock Option Agreements dated as of November 30, 1990, as amended, between the Registrant and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . +10.14- Non-Qualified Stock Option Agreements dated as of November 30, 1990, as amended, between the Registrant and James M. Emanuel . . . . . . . . . . . . . . . . . . . . +10.15- Lincare Inc. 401(k) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +10.19- Asset Purchase Agreement dated as of September 25, 1991, between Lincare Inc. and Glasrock Home Health Care, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . ++10.20- Asset Purchase Agreement dated as of October 2, 1992, among Lincare Inc., Advance Home Health Services, Inc. and Diversified Diagnostics Inc., Richard Levy and Michael D. Moore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +++10.21- Amendment to Non-Qualified Stock Option Agreement dated December 2, 1992, between the Registrant and James T. Kelly . . . . . . . . . . . . . . . . . . . . . . . . . +++10.22- Amendment to Non-Qualified Stock Option Agreement dated December 2, 1992, between the Registrant and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . . . . .
33
Sequentially Exhibit Numbered Number Exhibit Page - ------ ------- ---- +++10.23- Amendment to Non-Qualified Stock Option Agreement dated December 2, 1992, between the Registrant and James M. Emanuel . . . . . . . . . . . . . . . . . . . ++++10.24- Asset Purchase Agreement effective March 31, 1993, between Lincare Inc. and T2 Medical, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *10.26- Loan Agreement dated February 10, 1995, between Registrant and NationsBank of Florida, N.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *10.27- Employment Agreement dated as of November 1, 1993 between Lincare Holdings Inc. and James T. Kelly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *10.28- Employment Agreement dated as of November 1, 1993 between Lincare Holdings Inc. and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *10.29- Employment Agreement dated as of November 1, 1993 between Lincare Holdings Inc. and James M. Emanuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . **10.30- Asset Purchase Agreement dated as of May 24, 1995 between Lincare Inc. and PrimaCare Health Resources, Inc. . . . . . . . . . . . . . . . . . . . . . . . . ***10.31- Non-Qualified Stock Option Agreements dated as of January 23, 1995, between the Registrant and James T. Kelly . . . . . . . . . . . . . . . . . . . . . . . . ***10.32- Non-Qualified Stock Option Agreements dated as of January 23, 1995, between the Registrant and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . . . . ***10.33- Non-Qualified Stock Option Agreements dated as of January 23, 1995, between the Registrant and James M. Emanuel . . . . . . . . . . . . . . . . . . . . . . . 10.34- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc. and John P. Byrnes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 10.35- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc. and James T. Kelly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 10.36- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc. and Howard R. Deutsch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 10.37- Employment Agreement dated as of January 1, 1997 between Lincare Holdings Inc. and James M. Emanuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 10.38- Non-Qualified Stock Option Agreements dated as of January 26, 1996, between the Registrant and John P. Byrnes . . . . . . . . . . . . . . . . . . . . . . . . 35 10.39- Non-Qualified Stock Option Agreements dated as of July 15, 1996 between the Registrant and John P. Byrnes . . . . . . . . . . . . . . . . . . . . . . . . 36 +++++22.2- List of Subsidiaries of Lincare Holdings Inc. . . . . . . . . . . . . . . . . . . 23.5- Consent of KPMG Peat Marwick LLP . . . . . . . . . . . . . . . . . . . . . . . . 37 27 Financial Data Schedule (for SEC Use Only) . . . . . . . . . . . . . . . . . . .
- --------------- + Incorporated by reference to the corresponding exhibit to the Registrant's Registration Statement on Form S-1 (No. 33-44672) 34 ++ Incorporated by reference to Exhibit A to the Registrant's Form 8-K dated October 14, 1992. +++ Incorporated by reference to the corresponding exhibit to the Registrant's Registration Statement on Form S-1 (No. 33-55260). ++++ Incorporated by reference to the Registrant's Form 8-K dated April 28, 1993. +++++ Incorporated by reference to the Registrant's Form 10-K dated March 22, 1994. * Incorporated by reference to the Registrant's Form 10-K dated March 22, 1995. ** Incorporated by reference to the Registrant's Form 8-K dated May 24, 1995. *** Incorporated by reference to the Registrant's Form 10-K dated March 27, 1996. EX-10.34 2 EMPLOYMENT AGREEMENT / JOHN BYRNES 1 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 1997, by and between LINCARE HOLDINGS INC., a Delaware corporation (the "Company"), and JOHN P. BYRNES (the "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 with the Company, the employment of the Employee 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 31 2 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 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 Chief Executive Officer of the Company, shall faithfully and competently perform such duties as are specified in 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 otherwise be 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 efforts, judgment and energy to improve and advance the business and interests 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 THREE HUNDRED FIFTY THOUSAND DOLLARS ($350,000) (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, 1998, and each January 1 thereafter for the twelve (12) month period then commencing, by an amount -2- 3 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 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. -3- 4 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 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 fully 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 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 -4- 5 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 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. -5- 6 (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 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 word "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 -6- 7 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 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- 8 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 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. -8- 9 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 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 Initial 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 Initial Term, this Agreement is terminated pursuant to the provisions of Section 7(a)(vi) hereof, 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 -9- 10 termination plus an amount equal to his bonus compensation in respect of the immediately preceding calendar year. (iii) If, after the Initial Term, the Employee's employment is terminated by the Company other than for "cause", or this Agreement is terminated pursuant to the provisions of Section 7(a)(vi) hereof, or the Employee voluntarily terminates his employment by the Company for any reason whatsoever (including, without limitation, resignation or retirement), 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 plus an amount equal to his bonus compensation in respect of the immediately preceding calendar year. (iv) If the Employee's employment is terminated by the Company other than for "cause", or if the Employee voluntarily terminates his employment by the Company, 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 provisions hereof shall be binding upon any successor in interest of the Company. It is expressly acknowledged and agreed that the provisions of this Section 7(b) shall supersede any and all payment obligations of Lincare Inc., a wholly-owned subsidiary of the Company, to the Employee under the provisions of Section 3 of that certain "Agreement" by and between the Employee and Lincare Inc., dated December 28, 1990. (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 -10- 11 cessation of employment (including, but to 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 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 dealings with existing or potential -11- 12 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 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 -12- 13 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, 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. -13- 14 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 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 -14- 15 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. It is acknowledged and agreed that this Agreement shall supersede the Employment Agreement between the Employee and Lincare Inc., dated November 30, 1990, which agreement shall be of no further force or effect from the date of this Agreement. 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: /s/ James T. Kelly --------------------------------- Title: Chairman /s/ John P. Byrnes -------------------------------------- JOHN P. BYRNES -15- EX-10.35 3 EMPLOYMENT AGREEMENT / JAMES KELLY 1 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 1997, by and between LINCARE HOLDINGS INC., a Delaware corporation (the "Company"), and JAMES T. KELLY (the "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, 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 with the Company, the employment of the Employee by the Company, or the Employee's undertakings under this Agreement. 32 2 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, 1997 (such period from the date hereof until December 31, 1997 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 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 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 Chairman of the Board of Directors of the Company, shall faithfully and competently perform such duties as are specified in 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 such time as is reasonably necessary for the complete and satisfactory performance of his obligations throughout the Employment Term to the services required of him hereunder. Except as may otherwise be 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 efforts, judgment and energy to improve and advance the business and interests of the Company in a manner consistent with the duties of his position. -2- 3 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 TWO HUNDRED FORTY THOUSAND DOLLARS ($240,000) (said amount, together with any adjustments 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 reviewed annually, as of each January 1 included in the Employment Term, and such Salary amount may be increased by the Board of Directors of the Company in its sole discretion. (b) Bonus. During the Employment Term, in addition to Salary, the Employee shall have the opportunity to earn bonus compensation in respect of each calendar year (or applicable portion thereof) during the Employment Term, such bonus compensation ("Bonus") to be an amount determined pursuant to a bonus plan to be mutually agreed upon by Company and the Employee with respect to each calendar year included in the Employment Term. 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 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. -3- 4 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 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. -4- 5 (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 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 -5- 6 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 word "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 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 -6- 7 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 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 -7- 8 termination to take effect immediately upon written notice from the Company to the Employee; or (v) termination of the Employee's employment hereunder by the Company at any time after December 31, 1997, other than for "cause", such termination to take effect immediately upon written notice from the Company to the Employee. 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. (b) 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: (1) 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 (2) 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 to limited to, payment for any vested but unused vacation); (3) 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 -8- 9 Company's medical and dental plan; and (4) notwithstanding anything to the contrary contained herein or in any stock option agreements between Company and the Employee, in the event that the Employment Term ends upon the occurrence of any of any of the events specified in Section 7(a)(i),(ii) or (v) hereof, then the Employee (or the executor or administrator of the Employee's estate or the Employee's distributee or beneficiary) shall be entitled to exercise and receive the full benefit of all Company stock options granted to the Employee and which would have otherwise vested in accordance with their terms during the twelve (12) month period immediately following the termination of this Agreement. Accordingly, all stock options granted to the Employee which have either vested at the time the Employment Term ends or which may vest pursuant to subsection 7(b)(4) hereof, shall be exercisable in accordance with their terms until the latest date specified in each such option agreement without regard for any time limitation based upon cessation of employment by the Employee. Nothing in this Section 7(b) 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(b) shall survive the expiration or termination of this Agreement and the provisions hereof shall be binding upon any successor in interest of the Company. (c) 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 -9- 10 anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to exclusion, attachment, levy or similar process or assignment 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 dealings 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 -10- 11 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 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. -11- 12 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, 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. -12- 13 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 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. It is acknowledged and agreed that this Agreement shall supersede the Employment Agreement between the -13- 14 Employee and Lincare Inc., dated November 1, 1993, which agreement shall be of no further force or effect from the date of this Agreement. 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: /s/ John P. Byrnes --------------------------------- Title: CEO /s/ James T. Kelly --------------------------------- JAMES T. KELLY -14- EX-10.36 4 EMPLOYMENT AGREEMENT / HOWARD DEUTSCH 1 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 1997, by and between LINCARE HOLDINGS INC., a Delaware corporation (the "Company"), and HOWARD R. DEUTSCH (the "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 with the Company, the employment of the Employee by the Company, or the Employee's undertakings under this Agreement. 33 2 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, 1997 (such period from the date hereof until December 31, 1997 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 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 Executive Vice President and General Counsel of the Company, shall faithfully and competently perform such duties as are specified in 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 otherwise be 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 efforts, judgment and energy to improve and advance the business and interests of the Company in a manner consistent with the duties of his position. -2- 3 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 adjustments 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 reviewed annually, as of each January 1 included in the Employment Term, and such Salary amount may be increased by the Board of Directors of the Company in its sole discretion. (b) Bonus. During the Employment Term, in addition to Salary, the Employee shall have the opportunity to earn bonus compensation in respect of each calendar year (or applicable portion thereof) during the Employment Term, such bonus compensation ("Bonus") to be an amount determined pursuant to a bonus plan to be mutually agreed upon by Company and the Employee with respect to each calendar year included in the Employment Term. 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 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. -3- 4 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 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. -4- 5 (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 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 execute and/or deliver to an appropriate executive officer of the Company (other than the -5- 6 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 word "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 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 -6- 7 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 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 -7- 8 termination to take effect immediately upon written notice from the Company to the Employee; or (v) termination of the Employee's employment hereunder by the Company at any time after December 31, 1997, other than for "cause", such termination to take effect immediately upon written notice from the Company to the Employee. 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. (b) 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: (1) 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 (2) 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 to limited to, payment for any vested but unused vacation); (3) 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 -8- 9 Company's medical and dental plan; and (4) notwithstanding anything to the contrary contained herein or in any stock option agreements between Company and the Employee, in the event that the Employment Term ends upon the occurrence of any of any of the events specified in Section 7(a)(i),(ii) or (v) hereof, then the Employee (or the executor or administrator of the Employee's estate or the Employee's distributee or beneficiary) shall be entitled to exercise and receive the full benefit of all Company stock options granted to the Employee and which would otherwise have vested in accordance with their terms during the twelve (12) month period immediately following the termination of this Agreement. Accordingly, all stock options granted to the Employee which have either vested at the time the Employment Term ends or which may vest pursuant to subsection 7(b)(4) hereof, shall be exercisable in accordance with their terms until the latest date specified in each such option agreement without regard for any time limitation based upon cessation of employment by the Employee. Nothing in this Section 7(b) 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(b) shall survive the expiration or termination of this Agreement and the provisions hereof shall be binding upon any successor in interest of the Company. (c) 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 -9- 10 anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to exclusion, attachment, levy or similar process or assignment 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 dealings 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 -10- 11 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 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. -11- 12 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, 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. -12- 13 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 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. It is acknowledged and agreed that this Agreement shall supersede the Employment Agreement between the -13- 14 Employee and Lincare Inc., dated November 1, 1993, which agreement shall be of no further force or effect from the date of this Agreement. 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: /s/ John P. Byrnes ---------------------------------- Title: CEO /s/ Howard R. Deutsch --------------------------------- HOWARD R. DEUTSCH -14- EX-10.37 5 EMPLOYMENT AGREEMENT / JAMES EMANUEL 1 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated as of January 1, 1997, by and between LINCARE HOLDINGS INC., a Delaware corporation (the "Company"), and JAMES M. EMANUEL (the "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 with the Company, the employment of the Employee by the Company, or the Employee's undertakings under this Agreement. 34 2 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, 1997 (such period from the date hereof until December 31, 1997 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 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 Chief Financial Officer of the Company, shall faithfully and competently perform such duties as are specified in 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 otherwise be 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 efforts, judgment and energy to improve and advance the business and interests of the Company in a manner consistent with the duties of his position. -2- 3 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 SEVENTY FIVE THOUSAND DOLLARS ($175,000) (said amount, together with any adjustments 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 reviewed annually, as of each January 1 included in the Employment Term, and such Salary amount may be increased by the Board of Directors of the Company in its sole discretion. (b) Bonus. During the Employment Term, in addition to Salary, the Employee shall have the opportunity to earn bonus compensation in respect of each calendar year (or applicable portion thereof) during the Employment Term, such bonus compensation ("Bonus") to be an amount determined pursuant to a bonus plan to be mutually agreed upon by Company and the Employee with respect to each calendar year included in the Employment Term. 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 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. -3- 4 (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 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 -4- 5 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 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 -5- 6 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 word "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 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. -6- 7 (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 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 -7- 8 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; or (v) termination of the Employee's employment hereunder by the Company at any time after December 31, 1997, other than for "cause", such termination to take effect immediately upon written notice from the Company to the Employee. 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. (b) 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: (1) 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 (2) 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 to limited to, payment -8- 9 for any vested but unused vacation); (3) 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; and (4) notwithstanding anything to the contrary contained herein or in any stock option agreements between Company and the Employee, in the event that the Employment Term ends upon the occurrence of any of any of the events specified in Section 7(a)(i),(ii) or (v) hereof, then the Employee (or the executor or administrator of the Employee's estate or the Employee's distributee or beneficiary) shall be entitled to exercise and receive the full benefit of all Company stock options granted to the Employee and which would otherwise have vested in accordance with their terms during the twelve (12) month period immediately following the termination of this Agreement. Accordingly, all stock options granted to the Employee which have either vested at the time the Employment Term ends or which may vest pursuant to subsection 7(b)(4) hereof, shall be exercisable in accordance with their terms until the latest date specified in each such option agreement without regard for any time limitation based upon cessation of employment by the Employee. Nothing in this Section 7(b) 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(b) shall survive the expiration or termination of this Agreement and the provisions hereof shall be binding upon any successor in interest of the Company. (c) 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 -9- 10 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 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 dealings 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; -10- 11 (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 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 -11- 12 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, 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 -12- 13 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 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. -13- 14 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. It is acknowledged and agreed that this Agreement shall supersede the Employment Agreement between the Employee and Lincare Inc., dated November 1, 1993, which agreement shall be of no further force or effect from the date of this Agreement. 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: /s/ John P. Brynes --------------------------------- Title: CEO /s/ James M. Emanuel ------------------------------------ JAMES M. EMANUEL -14- EX-10.38 6 STOCK AGREEMENT / JOHN BYRNES- JANUARY 1 NOTICE OF OPTION AWARD UNDER LINCARE HOLDINGS INC.'S NON-QUALIFIED STOCK OPTION PLAN AWARD, made as of the 26th of January, 1996 by LINCARE HOLDINGS INC., a Delaware corporation, having its principal office at 19337 U.S. 19 North, Clearwater, Florida 34624 (hereinafter referred to as "the Corporation"), to John P. Byrnes (hereinafter referred to as "the Employee"). The Corporation hereby grants to the Employee an option to purchase shares of the Common Stock of the Corporation upon the following terms and conditions: 1. The Employee is hereby granted an option to purchase 40,000 shares of the Common Stock of the Corporation. 2. The option price shall be $25.25 per share of the Common Stock. 3. (a) The option shall be exercisable as follows: (i) 50% of the option shares shall be exercisable commencing on January 31, 1998, and (ii) 50% of the option shares shall be exercisable commencing on January 31, 1999. The option shall expire on January 31, 2004, and in no event may the option be exercised after such expiration date. (b) The option shall be exercisable by the Employee only while the Employee is an active employee of the Corporation; provided, however, that if the option is otherwise then-exercisable pursuant to the terms hereof, then: (i) the option shall be exercisable by the Employee within one (1) year after the Employee's employment with the Corporation ceases due to a disability sustained while the Employee was an active employee of the Corporation; and (ii) subject to the provisions of Section 4 hereof, the option shall be exercisable by the executor or administrator of the Employee's estate within one (1) year after the Employee's death, if such death occurred while the Employee was an active employee of the Corporation. 4. The option is not transferable except that in the event of the Employee's death while such option is then-exercisable, the option may be exercised by the executor or administrator of the Employee's estate in accordance with the provisions of Section 3(b) hereof prior to the expiration date of the option. 5. The option may only be exercised at the principal office of the Corporation (or at such other location as determined by the Corporation) with respect to a part or all of the shares covered by such option by sending a completed Stock Option Exercise Form attached hereto as Exhibit A to the Secretary of the Corporation. The option price for the shares 35 2 for which an option is exercised shall be paid in full, in cash, on the date of exercise, or, at the Corporation's sole discretion, within ten (10) business days thereafter. 6. Upon the exercise of the option with respect to a part or all of the shares in the manner and within the time herein provided, the Corporation will issue and deliver to the Employee (or to the Employee's executor or administrator in the event of the death of the Employee) the number of shares of Common Stock with respect to which the option was exercised. 7. The option granted hereby shall constitute and be treated at all times by you and the Corporation as a "non-qualified stock option" for Federal income tax purposes and shall not constitute and shall not be treated as an "incentive stock option" as defined under Section 422A(b) of the Internal Revenue Code of 1986, as amended. 8. This option is awarded pursuant to the Plan, and is subject to all of the terms and conditions of the Plan, a copy of which the Employee has received. 9. The Corporation has discretion to make appropriate adjustments to this option in order to provide for effects of changes in the capital structure of the Corporation by reason of any stock split, stock dividend, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change or in the event of any special distribution to stockholders. 10. This Notice of Award shall be interpreted and construed in accordance with the laws of the State of Delaware. 11. The satisfaction of any and all conditions set forth in this Agreement regarding your right to exercise the option (and purchase any option shares) shall be determined by the Committee. 12. Neither the Plan, this Agreement, or the granting of the options hereunder shall confer upon you any right to continue in the employ of the Corporation, or limit in any respect the right of the Corporation to terminate your employment or other relationship with the Corporation, as the case may be, at any time. 13. Definitions (a) "Committee" means the Non-Qualified Stock Option Plan Committee of the Board of Directors or any other committee of the Board of Directors which is appointed to administer the Lincare Holdings Inc. Non-Qualified Stock Option Plan. -2- 3 (b) "Common Stock" mean the common stock. $.01 par value, of Lincare Holdings Inc. (c) "Corporation" means Lincare Holdings Inc. and its subsidiaries. An individual who is employed by a subsidiary of the Corporation shall be deemed to have ceased employment with the Corporation at such time as the Corporation owns, either directly or indirectly, less than 50% of the total combined voting power of all classes of stock entitled to vote. (d) "Plan" means the Lincare Holdings Inc. Non-Qualified Stock Option Plan IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed by an authorized officer as of the day and year first hereinabove written. LINCARE HOLDINGS INC. By: /s/ Howard R. Deutsch ------------------------------------- AGREED TO AND ACCEPTED AS OF THE DATE FIRST WRITTEN ABOVE: /s/ John P. Byrnes - --------------------------------- John P. Byrnes -3- EX-10.39 7 STOCK AGREEMENT / JOHN BYRNES- JULY 1 NOTICE OF OPTION AWARD UNDER LINCARE HOLDINGS INC.'S 1996 STOCK PLAN AWARD, made as of the 15th of July 1996 by LINCARE HOLDINGS INC., a Delaware corporation, having its principal office at 19337 U.S. 19 North, Clearwater, Florida 34624 (hereinafter referred to as "the Corporation"), to John P. Byrnes (hereinafter referred to as "the Employee"). The Corporation hereby grants to the Employee an option to purchase shares of the Common Stock of the Corporation upon the following terms and conditions: 1. The Employee is hereby granted an option to purchase 150,000 shares of the Common Stock of the Corporation. 2. The option price shall be $35.25 per share of the Common Stock. 3. (a) The option shall be exercisable as follows: (i) 50% of the option shares shall be exercisable commencing on December 1, 1999, and (ii) 50% of the option shares shall be exercisable commencing on December 1, 2000. The option shall expire on December 31, 2005, and in no event may the option be exercised after such expiration date. (b) The option shall be exercisable by the Employee only while the Employee is an active employee of the Corporation; provided, however, that if the option is otherwise then-exercisable pursuant to the terms hereof, then: (i) the option shall be exercisable by the Employee within one (1) year after the Employee's employment with the Corporation ceases due to a disability sustained while the Employee was an active employee of the Corporation; and (ii) subject to the provisions of Section 4 hereof, the option shall be exercisable by the executor or administrator of the Employee's estate within one (1) year after the Employee's death, if such death occurred while the Employee was an active employee of the Corporation. 4. The option is not transferable except that in the event of the Employee's death while such option is then-exercisable, the option may be exercised by the executor or administrator of the Employee's estate in accordance with the provisions of Section 3(b) hereof prior to the expiration date of the option. 36 2 5. The option may only be exercised at the principal office of the Corporation (or at such other location as determined by the Corporation) with respect to a part or all of the shares covered by such option by sending a completed Stock Option Exercise Form attached hereto as Exhibit A to the Secretary of the Corporation. The option price for the shares for which an option is exercised shall be paid in full, in cash, on the date of exercise, or, at the Corporation's sole discretion, within ten (10) business days thereafter. 6. Upon the exercise of the option with respect to a part or all of the shares in the manner and within the time herein provided, the Corporation will issue and deliver to the Employee (or to the Employee's executor or administrator in the event of the death of the Employee) the number of shares of Common Stock with respect to which the option was exercised. 7. The option granted hereby shall constitute and be treated at all times by you and the Corporation as a "non-qualified stock option" for Federal income tax purposes and shall not constitute and shall not be treated as an "incentive stock option" as defined under Section 422A(b) of the Internal Revenue Code of 1986, as amended. 8. This option is awarded pursuant to the Plan, and is subject to all of the terms and conditions of the Plan, a copy of which the Employee has received. 9. The Corporation has discretion to make appropriate adjustments to this option in order to provide for effects of changes in the capital structure of the Corporation by reason of any stock split, stock dividend, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change or in the event of any special distribution to stockholders. 10. This Notice of Award shall be interpreted and construed in accordance with the laws of the State of Delaware. 11. The satisfaction of any and all conditions set forth in this Agreement regarding your right to exercise the option (and purchase any option shares) shall be determined by the Committee. 12. Neither the Plan, this Agreement, or the granting of the options hereunder shall confer upon you any right to continue in the employ of the Corporation, or limit in any respect the right of the Corporation to terminate your employment or other relationship with the Corporation, as the case may be, at any time. -2- 3 13. Definitions (a) "Committee" means the 1996 Stock Plan Committee of the Board of Directors or any other committee of the Board of Directors which is appointed to administer the Lincare Holdings Inc. 1996 Stock Plan. (b) "Common Stock" mean the common stock. $.01 par value, of Lincare Holdings Inc. (c) "Corporation" means Lincare Holdings Inc. and its subsidiaries. An individual who is employed by a subsidiary of the Corporation shall be deemed to have ceased employment with the Corporation at such time as the Corporation owns, either directly or indirectly, less than 50% of the total combined voting power of all classes of stock entitled to vote. (d) "Plan" means the Lincare Holdings Inc. 1996 Stock Plan. IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed by an authorized officer as of the day and year first hereinabove written. LINCARE HOLDINGS INC. By: /s/ James T. Kelly ------------------------------------- AGREED TO AND ACCEPTED AS OF THE DATE FIRST WRITTEN ABOVE: /s/ John P. Byrnes - --------------------------------- John P. Byrnes -3- EX-23.5 8 LINCARE - KPMG PEAT MARWICK CONSENT 1 EXHIBIT 23.5 The Board of Directors Lincare Holdings Inc.: We consent to incorporation by reference in the registration statement (No. 33-55202) on Form S-8, the registration statement (No. 33-59566) on Form S-8 and the registration statement (No. 33906-02) on Form S-8 of Lincare Holdings Inc. of our report dated January 21, 1997, relating to the consolidated balance sheets of Lincare Holdings Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity, and cash flows and related schedule for each of the years in the three-year period ended December 31, 1996, which report appears in the December 31, 1996 annual report on Form 10-K of Lincare Holdings Inc. KPMG PEAT MARWICK LLP St. Petersburg, Florida March 24, 1997 37 EX-27 9 FINANCIAL DATA SCHEDULE (FOR SEC USE ONLY)
5 1,000 YEAR DEC-31-1996 DEC-31-1996 1,541 0 51,090 5,917 1,689 54,973 150,598 57,068 347,408 31,340 0 0 0 282 298,966 347,408 348,870 348,870 53,711 53,711 183,807 3,472 497 106,996 40,422 66,574 0 0 0 66,574 2.31 2.31
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