<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission File No. 0-27640
RENAL CARE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1622383
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 West End Ave., Suite 800, Nashville, Tennessee 37203
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (615) 345-5500
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days).
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding at August 5, 1998
----- -----------------------------
Common Stock, $.01 par value 26,902,584
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RENAL CARE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1997 and June 30, 1998 (unaudited) 1
Consolidated Income Statements - (unaudited)
For the three months and six months ended
June 30, 1997 and 1998 2
Consolidated Statements of Cash Flows - (unaudited)
For the six months ended June 30, 1997 and 1998 3
Notes to the Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 7
PART II - OTHER INFORMATION
Item 2. Changes in Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Note: Item 3 of Part I, and items 1 and 3 of Part II are omitted because they are not applicable
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RENAL CARE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,138 $ 16,026
Investments 3,625 --
Accounts receivable, net 45,199 68,869
Inventories 4,516 5,618
Prepaid expenses and other current assets 3,327 6,284
-------- --------
Total current assets 65,805 96,797
Property and equipment, net 60,974 71,716
Goodwill, net 116,721 156,216
Intangible assets, net 1,266 2,014
Other assets 3,317 3,897
-------- --------
Total assets $248,083 $330,640
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,580 $ 13,487
Income taxes payable 1,653 6,643
Other current liabilities 30,103 37,928
-------- --------
Total current liabilities 41,336 58,058
Long-term debt, net of current portion 15,470 50,855
Minority interest 14,597 21,998
Deferred income taxes 1,921 2,721
-------- --------
Total liabilities 73,324 133,632
Stockholders' equity:
Preferred stock, $.01 par value, 10,000 shares
authorized, none issued -- --
Common stock, $.01 par value, 60,000 shares authorized,
24,897 and 26,860 shares issued and outstanding at
December 31, 1997 and June 30, 1998, respectively 249 269
Additional paid-in capital 150,748 157,586
Retained earnings 23,762 39,153
-------- --------
Total stockholders' equity 174,759 197,008
-------- --------
Total liabilities and stockholders' equity $248,083 $330,640
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
1
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RENAL CARE GROUP, INC.
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1998 1997 1998
------- -------- ------- ---------
<S> <C> <C> <C> <C>
Net revenue $51,666 $ 89,510 $97,775 $ 169,973
Operating costs and expenses:
Patient care costs 35,635 59,183 67,569 112,723
General and administrative expenses 5,206 8,579 10,008 16,428
Provision for doubtful accounts 1,230 2,319 2,172 4,420
Depreciation and amortization 2,141 4,538 4,105 8,475
Merger expenses 300 300 300 1,000
------- -------- ------- ---------
Total operating costs and expenses 44,512 74,919 84,154 143,046
------- -------- ------- ---------
Income from operations 7,154 14,591 13,621 26,927
Interest income (expense), net 99 (780) 503 (1,342)
------- -------- ------- ---------
Income before minority interest and income taxes 7,253 13,811 14,124 25,585
Minority interest 218 608 218 1,155
------- -------- ------- ---------
Income before income taxes 7,035 13,203 13,906 24,430
Provision for income taxes 2,603 4,885 5,180 9,039
------- -------- ------- ---------
Net income $ 4,432 $ 8,318 $ 8,726 $ 15,391
======= ======== ======= =========
Net income per share:
Basic $ 0.20 $ 0.31 $ 0.40 $ 0.58
======= ======== ======= =========
Diluted $ 0.19 $ 0.29 $ 0.38 $ 0.55
======= ======== ======= =========
Weighted average shares outstanding:
Basic 22,022 26,810 21,817 26,560
======= ======== ======= =========
Diluted 23,127 28,450 22,908 28,200
======= ======== ======= =========
</TABLE>
See accompanying notes to consolidated financial statements
2
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RENAL CARE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,726 $ 15,391
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,105 8,475
Equity in earnings of subsidiaries 218 1,155
Change in assets and liabilities net of effects from acquisitions (12,319) (15,917)
-------- --------
Net cash provided by operating activities 730 9,104
INVESTING ACTIVITIES
Purchases of property and equipment (10,259) (10,090)
Cash paid for acquisitions, net of cash acquired (35,414) (32,238)
Investments, net 3,035 3,625
-------- --------
Net cash used in investing activities (42,638) (38,703)
FINANCING ACTIVITIES
Net borrowings under line of credit -- 35,385
Payments on long-term debt (1,661) (2,717)
Proceeds from exercise of stock options 446 4,069
Distributions to minority shareholders -- (250)
-------- --------
Net cash provided by (used in) financing activities (1,215) 36,487
-------- --------
Increase (decrease) in cash and cash equivalents (43,123) 6,888
Cash and cash equivalents, at beginning of period 47,624 9,138
-------- --------
Cash and cash equivalents, at end of period $ 4,501 $ 16,026
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ -- $ 1,478
======== ========
Income taxes $ 7,702 $ 4,383
======== ========
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Issuance of common stock in acquisition $ 6,008 $ 1,846
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
3
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RENAL CARE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
(in thousands, except per share data)
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
Overview
Renal Care Group, Inc. (the "Company") is a specialized provider of
nephrology services to patients with kidney disease, including patients
suffering from chronic kidney failure also known as end-stage renal disease
("ESRD"). As of June 30, 1998, the Company provided dialysis and ancillary
services to approximately 10,500 patients through 151 outpatient dialysis
centers in 18 states, and acute dialysis services in 87 hospitals.
The Company's net revenue has been derived primarily from the following
sources: (i) outpatient hemodialysis services; (ii) ancillary services
associated with dialysis, primarily the administration of erythropoietin
("EPO"), a bio-engineered hormone used to treat anemia; (iii) home dialysis
services; (iv) inpatient hemodialysis services provided pursuant to contracts
with acute care hospitals and skilled nursing facilities; (v) management
contracts with hospital-based and medical university dialysis programs; and (vi)
laboratory services. ESRD patients typically receive 156 dialysis treatments per
year, with reimbursement for services provided primarily through the Medicare
ESRD program based on rates that are established by the Health Care Financing
Administration ("HCFA"). For the six months ended June 30, 1998, approximately
67% of the Company's net revenue was derived from reimbursement under the
Medicare and Medicaid programs. Medicare reimbursement is subject to rate and
other legislative changes by Congress and periodic changes in regulations,
including changes that may reduce payments under the ESRD program. For patients
with private health insurance, effective September 1, 1997, the health insurance
coordination period was extended to 30 months of treatment, after which time
Medicare becomes the primary payor. Reimbursement for dialysis services provided
pursuant to a hospital contract is negotiated with the individual hospital and
generally is greater on a per treatment equivalent basis than the Medicare rate.
Because dialysis is a life-sustaining therapy used to treat this chronic
disease, utilization is predictable and is not subject to seasonal fluctuations.
Interim Financial Statements
In the opinion of management, the information contained herein reflects
all adjustments necessary to make the results of operations for the interim
periods a fair statement of such operations. All such adjustments are of a
normal recurring nature. Operating results for interim periods are not
necessarily indicative of results which may be expected for the year as a whole.
It is suggested that these financial statements be read in conjunction with the
consolidated financial statements and the related notes thereto included in the
Company's Form 10-K as filed with the Securities and Exchange Commission on
March 31, 1998.
4
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RENAL CARE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 - SUBSEQUENT EVENTS
On July 23, 1998, the Board of Directors approved a three-for-two stock
split to be effected in the form of a 50% stock dividend. One additional share
of Common Stock will be issued for every two shares held by shareholders of
record at the close of business on August 7, 1998. The additional shares will be
distributed on August 24, 1998. Financial data included in this filing has
not been retroactively adjusted for this stock split.
NOTE 3 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
income per share in accordance with SFAS 128.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1998 1997 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted income per share $ 4,432 $ 8,318 $ 8,726 $15,391
Denominator:
Denominator for basic net income per share -
weighted-average shares 22,022 26,810 21,817 26,560
Effect of dilutive securities:
Warrants 260 287 260 285
Stock options 845 1,353 831 1,355
------- ------- ------- -------
Denominator for diluted net income per share -
adjusted weighted-average shares and assumed
conversions 23,127 28,450 22,908 28,200
======= ======= ======= =======
Net income per share:
Basic $ 0.20 $ 0.31 $ 0.40 $ 0.58
======= ======= ======= =======
Diluted $ 0.19 $ 0.29 $ 0.38 $ 0.55
======= ======= ======= =======
</TABLE>
5
<PAGE> 8
RENAL CARE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("Statement 131"). Statement
131 establishes standards for the way public business enterprises are to report
information about operating segments in annual financial statements and requires
those enterprises to report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. Statement 131 is effective for the fiscal years beginning after
December 15, 1997. Management of the Company is currently reviewing the impact
of Statement 131. The Company will adopt Statement 131 on December 31, 1998 and
will report interim information effective in the first quarter of 1999.
6
<PAGE> 9
Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Net revenue. Net revenue increased from $51,666,000 for the three
months ended June 30, 1997 to $89,510,000 for the three months ended June 30,
1998, an increase of $37,844,000, or 73.2%. This increase resulted primarily
from a 57.5% increase in the number of treatments from 249,139 in the 1997
period to 392,498 in the 1998 period. This growth in treatments is the result of
the acquisition and development of various dialysis facilities and a 10.1%
increase in same-center treatments for the 1998 period over the 1997 period. In
addition, average patient revenue per treatment increased 7.8% from $206 in the
1997 period to $222 in the 1998 period. The remaining revenue increase is a
result of wound care revenues from the December 1997 acquisition of STAT
Healthcare, higher management fees and earnings of 50% owned partnerships in the
1998 period compared to the 1997 period. The revenue per treatment increase is
due to an improvement in the Company's payor mix, increases in EPO and other
drug utilization, the implementation of the Company's in-house laboratory
services and the positive impact of commercial payments of the Medicare
secondary payor provisions of the Balanced Budget Act.
Patient Care Costs. Patient care costs consist of costs directly
related to the care of patients, including direct labor, drugs and other medical
supplies and operational costs of facilities. Patient care costs increased from
$35,635,000 for the three months ended June 30, 1997 to $59,183,000 for the
three months ended June 30, 1998, an increase of $23,548,000, or 66.1%. This
increase resulted primarily from an increase in the number of treatments
performed during the period which caused a corresponding increase in the use of
labor, drugs and supplies. Patient care costs as a percent of net revenue
decreased from 69.0% in the 1997 period to 66.1% in the 1998 period primarily
due to an increase in net revenues. Patient care costs per treatment increased
from $143 in the 1997 period to $151 in the 1998 period, an increase of $8,
or 5.6%. This increase is due to EPO and other drug utilization costs, the cost
of providing in-house laboratory services and normal healthcare inflation.
General and Administrative Expenses. General and administrative
expenses include corporate office costs and facility costs not directly related
to the care of patients, including facility administration, accounting, billing
and information systems. General and administrative expenses increased from
$5,206,000 for the three months ended June 30, 1997 to $8,579,000 for the three
months ended June 30, 1998, an increase of $3,373,000, or 64.8%. General and
administrative expenses as a percent of net revenue decreased from 10.1% in the
1997 period to 9.6% in the 1998 period, primarily due to an increase in net
revenue for the 1998 period.
Provision for Doubtful Accounts. It is the Company's practice to
reserve for doubtful accounts in the period in which the revenue is recognized
based on management's estimate of the net collectibility of the accounts
receivable based upon an analysis of payor mix, billing practices and other
factors. The provision for doubtful accounts increased from $1,230,000 for the
three months ended June 30, 1997 to $2,319,000 for the three months ended June
30, 1998. The provision for doubtful accounts as a percent of net revenue
increased from 2.4% in the 1997 period to 2.6% in the 1998 period, or 0.2%. This
increase in provision for doubtful accounts was due to an increase in reserves
related to the amount of
7
<PAGE> 10
RENAL CARE GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
net operating revenues generated from non-governmental payor sources, and the
temporary degradation of accounts receivable collections associated with the
conversion of patient billing systems.
Depreciation and Amortization. Depreciation and amortization increased
from $2,141,000 for the three months ended June 30, 1997 to $4,538,000 for the
three months ended June 30, 1998, an increase of $2,397,000, or 111.9%. This net
increase was due to the start-up of dialysis facilities, the normal replacement
costs of dialysis facilities and equipment, the purchase of information systems
and the amortization of the goodwill associated with the acquisitions accounted
for under the purchase method of accounting.
Merger Expenses. Merger expenses of $300,000 represented legal,
accounting, employee severance and related benefits and other assimilation and
transitional costs related to the Company's merger with four dialysis facilities
located in Missouri, Kansas and Oklahoma.
Income from Operations. Income from operations increased from
$7,154,000 for the three months ended June 30, 1997 to $14,591,000 for the three
months ended June 30, 1998, an increase of $7,437,000, or 103.9%. Income from
operations as a percent of net revenue increased from 13.8% in the 1997 period
to 16.3% in the 1998 period. Income from operations increased due to the
increase in net revenue in excess of patient care costs, which was primarily due
to an increase in the number of treatments performed during the period.
Interest, Net. Interest income was $99,000 for the three months ended
June 30, 1997 and interest expense was $780,000 for the three months ended June
30, 1998. Interest expense is a result of borrowings from the Company's credit
facility. The use of the credit facility increased due to the use of cash in
acquisitions and de novo facilities, the replacement of dialysis facilities and
equipment and the purchase of information systems.
Minority Interest. Minority interest represents the proportionate
equity interest of other partners in the Company's consolidated entities which
are not wholly-owned. As of June 30, 1998, this was primarily comprised of three
joint venture partnerships.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net revenue. Net revenue increased from $97,775,000 for the six months
ended June 30, 1997 to $169,973,000 for the six months ended June 30, 1998, an
increase of $72,198,000, or 73.8%. This increase resulted primarily from a 59.6%
increase in the number of treatments from 473,307 in the 1997 period to 755,403
in the 1998 period. This growth in treatments is the result of the acquisition
and development of various dialysis facilities and a 10.1% increase in
same-center treatments for the 1998 period over the 1997 period. In addition,
average patient revenue per treatment increased 6.8% from $205 in the 1997
period to $219 in the 1998 period. The remaining revenue increase is a result of
hyperbaric and wound care revenues as a result of the STAT acquisition, higher
management fees and earnings of 50% owned partnerships in the 1998 period
compared to the 1997 period. The revenue per
8
<PAGE> 11
RENAL CARE GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
treatment increase is due to an improvement in the Company's payor mix,
increases in EPO and other drug utilization, the implementation
of the Company's in-house laboratory services and the positive impact on
commercial payments of the Medicare Secondary Payor Provisions of the Balanced
Budget Act.
Patient Care Costs. Patient care costs increased from $67,569,000 for
the six months ended June 30, 1997 to $112,723,000 for the six months ended June
30, 1998, an increase of $45,154,000, or 66.8%. This increase was due to the
increase in the number of associated treatments, which caused a corresponding
increase in the use of labor, drugs and supplies. Patient care costs as a
percent of net revenue decreased from 69.1% in the 1997 period to 66.3% in the
1998 period. Patient care costs per treatment increased from $143 in the 1997
period to $149 in the 1998 period, an increase of $6 or 4.2%. This increase is
due to greater EPO and other drug utilization costs, the cost of providing
in-house laboratory services and normal healthcare inflation.
General and Administrative Expenses. General and administrative
expenses increased from $10,008,000 for the six months ended June 30, 1997 to
$16,428,000 for the six months ended June 30, 1998, an increase of $6,420,000,
or 64.1%. General and administrative expenses as a percent of net revenue
decreased from 10.2% for the 1997 period to 9.7% in the 1998 period, primarily
as a result of higher net revenues for the 1998 period.
Provision for Doubtful Accounts. The provision for doubtful accounts
increased from $2,172,000 for the six months ended June 30, 1997 to $4,420,000
for the six months ended June 30, 1998, an increase of $2,248,000, or 103.5%.
The provision for doubtful accounts as a percent of net revenue increased from
2.2% for the six months ended June 30, 1997 to 2.6% for the six months ended
June 30, 1998, or 0.4%. The increase in the provision for doubtful accounts was
influenced by the amount of net operating revenues generated from
non-governmental payor sources and the temporary degradation of accounts
receivable collections due to the conversion of patient billing systems.
Depreciation and Amortization. Depreciation and amortization increased
from $4,105,000 for the six months ended June 30, 1997 to $8,475,000 for the six
months ended June 30, 1998, an increase of $4,370,000, or 106.5%. This net
increase was due to the acquisition and start-up of dialysis facilities, the
normal replacement costs of dialysis facilities and equipment, the purchase of
information systems and the amortization of the goodwill associated with
the acquisitions accounted for under the purchase method of accounting.
Merger Expenses. Merger expenses of $1,000,000 represented legal,
accounting, employee severance and related benefits and other assimilation and
transitional costs related to the Company's merger of the operations of thirteen
dialysis facilities located in Arkansas, Missouri, Kansas and Oklahoma.
Income from Operations. Income from operations increased from
$13,621,000 for the six months ended June 30, 1997 to $26,927,000 for the six
months ended June 30, 1998, an increase of $13,306,000, or 97.7%. Income from
operations as a percent of net revenue increased from 13.9% in the 1997 period
to 15.8% in the 1998 period. Income from operations increased due to the
increase in net
9
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RENAL CARE GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
revenue in excess of patient care costs, which was primarily due to an increase
in the number of treatments performed during the period.
Interest, Net. Interest income was $503,000 for the six months ended
June 30, 1997 and interest expense was $1,342,000 for the six months ended June
30, 1998. Interest expense is a result of borrowings from the Company's credit
facility. The use of the credit facility increased due to the use of cash in
acquisitions and de novo facilities, the replacement of dialysis facilities and
equipment and the purchase of information systems.
Minority Interest. Minority interest represents the proportionate
equity interest of other partners in the Company's consolidated entities which
are not wholly-owned. As of June 30, 1998, this was primarily comprised of three
joint venture partnerships.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital primarily for the acquisition and the
development of dialysis facilities, the purchase of property and equipment for
existing facilities and to finance working capital requirements. At June 30,
1998, the Company's working capital was $38,739,000, cash and cash equivalents
were $16,026,000 and the Company's current ratio was 1.7 to 1.
The Company's net cash provided by operating activities was $9,104,000
for the six months ended June 30, 1998. Cash provided by operating activities
consists of net income before depreciation and amortization expense, partially
offset by increases in accounts receivable and other current assets. The
Company's net cash used in investing activities was $38,703,000 for the six
months ended June 30, 1998. Cash used in investing activities resulted primarily
from $32,238,000 of cash paid for acquisitions, net of cash acquired, and
$10,090,000 of capital expenditures, partially offset by a $3,625,000 decrease
in investments.
Cash provided by financing activities was $36,487,000 for the six
months ended June 30, 1998. Cash provided by financing activities resulted
primarily from $35,385,000 in net borrowings under the line of credit in
connection with certain acquisitions and $4,069,000 in proceeds from the
exercise of stock options, offset by $2,717,000 in debt paid in connection with
merger transactions.
A significant component of the Company's growth strategy is the
acquisition and development of dialysis facilities. The Company believes that
existing cash and funds from operations, together with funds available under the
line of credit, will be sufficient to meet the Company's acquisition, expansion,
capital expenditure and working capital needs for the foreseeable future.
However, in order to finance certain large strategic acquisition opportunities,
the Company may incur from time to time additional short- and long-term bank
indebtedness and may issue equity or debt securities, the availability and terms
of which will depend on market and other conditions. There can be no assurance
that such additional financing, if required, will be available on terms
acceptable to the Company.
10
<PAGE> 13
RENAL CARE GROUP, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Capital expenditures of approximately $28,000,000, primarily for
equipment replacement, expansion of existing dialysis facilities and
construction of de novo facilities are planned in 1998. The Company has made
capital expenditures to date of $10,090,000. The Company expects that such
capital expenditures will be funded with cash provided by operating activities
and available lines of credit. The Company believes that capital resources
available to it will be sufficient to meet the needs of its business, both on a
short- and long-term basis.
RISK FACTORS
In evaluating the Company and its business, prospective investors
should carefully consider the following risk factors in addition to the other
information contained herein. This quarterly report contains statements that
constitute "forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements relate
to future events or the future financial performance of the Company and involve
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, those discussed below, and such factors could cause actual results to
differ materially from those indicated by such forward-looking statements. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks and uncertainties, there can be no
assurance that the forward-looking information contained in this quarterly
report or the materials incorporated herein by reference will in fact transpire.
Limited Combined Operating History. The Company has conducted
operations as a combined entity only since February 1996, upon the closing of
its initial public offering. Since the initial public offering, the Company has
made several additional acquisitions of entities that, in some cases, have been
part of the Company's combined operations for only a few weeks or months. There
can be no assurance that the Company will be able to integrate the dialysis
centers, information systems and related operations of the entities acquired by
it or to continue operating them profitably. Nor can there be any assurance that
the Company's management group will be able to implement effectively the
Company's operating and growth strategy while it is engaged in acquisition
activity. Failure to integrate successfully the centers and other operations
acquired by the Company or to implement effectively the Company's operating and
growth strategy could have a material adverse effect on the Company's results of
operations, financial condition or business.
Dependence On Government Reimbursement. The Company estimates that
approximately 68%, 63% and 61% of its net revenue for the years ended December
31, 1996 and 1997, and the six months ended June 30, 1998, respectively,
consisted of reimbursements from Medicare under the ESRD program, including
revenue for the reimbursement of the administration of EPO. Since 1983,
Congressional actions have resulted in occasional changes in the Medicare
composite reimbursement rate, and the Company is not able to predict whether
future rate changes will be made. Legislation or regulations may be enacted in
the future that may significantly modify the ESRD program or otherwise affect
the amount paid for the Company's services. Any such action could have a
material adverse effect on the Company's results of operations, financial
condition and business. Furthermore, increases in operating costs that are
subject to inflation, such as labor and supply costs, without a compensating
11
<PAGE> 14
increase in prescribed rates, may have a material adverse effect on the
Company's earnings in the future. The Company is also unable to predict whether
certain ancillary services, for which the Company currently is reimbursed
separately, may in the future be included in the Medicare composite rate.
Revenues from the administration of EPO (the substantial majority of
which are reimbursed through Medicare and Medicaid programs) were approximately
19%, 21% and 23% of the net revenue of the Company for the years ended December
31, 1996 and 1997, and the six months ended June 30, 1998, respectively. EPO
reimbursement significantly affects the Company's earnings. The President has
included in his 1999 budget a proposal to decrease Medicare reimbursement for
EPO. Any reduction in reimbursement rates for EPO could have a material adverse
effect on the Company's results of operations, financial condition or business.
EPO is produced by a single manufacturer, and any interruption of supply or
product cost increases could have a material adverse effect on the Company's
results of operations, financial condition or business.
The Company estimates that approximately 6%, 7% and 6% of the Company's
net revenue for the years ended December 31, 1996 and 1997, and the six months
ended June 30, 1998, respectively, were funded by Medicaid or comparable state
programs. The Medicaid programs are subject to statutory and regulatory changes,
administrative rulings, interpretations of policy and governmental funding
restrictions, all of which may have the effect of decreasing program payments,
increasing costs or modifying the way the Company operates its dialysis
business.
Dependence On Other Sources Of Reimbursement. The Company estimates
that approximately 26%, 30% and 33% of its net revenue for the years ended
December 31, 1996 and 1997, and the six months ended June 30, 1998,
respectively, were derived from sources other than Medicare and Medicaid.
Substantially all of this revenue comes from private insurance for chronic
dialysis treatments and payments from hospitals with which the Company has
contracts for the provision of acute dialysis services. In general, private
insurance reimbursement and payments for treatments performed at hospitals are
at rates significantly higher than Medicare and Medicaid rates. The Company
believes that if Medicare reimbursement for dialysis treatment is reduced in the
future, these private payors may be required to assume a greater percentage of
the costs of dialysis care and, as a result, may focus on reducing dialysis
payments as their overall costs increase. In addition, the Company believes that
health maintenance organizations ("HMOs") and other managed care providers may
have a strong incentive to reduce further the costs of specialty care and may
seek to reduce amounts paid for dialysis. The Company is unable to predict
whether and to what extent changes in these private reimbursement rates may be
made in the future. Any reduction in the rates paid by private insurers and
hospitals or a significant change in the Company's payor mix toward additional
Medicare or Medicaid reimbursement could have a material adverse effect on the
Company's results of operations, financial condition and business. Similarly,
increases in operating costs that are subject to inflation, such as labor and
supply costs, without a compensating increase in private reimbursement rates,
could have a material adverse effect on the Company's results of operations,
financial condition or business.
Risks Associated With Growth Strategy. The Company's strategy includes
expanding its dialysis business through the acquisition and development of
dialysis centers and the management of nephrology practices. Competition for
acquisitions in the dialysis industry has increased significantly in recent
years and, as a result, the cost of acquiring dialysis centers has increased.
There can be no assurance that the Company will be able to identify, acquire or
profitably integrate acquired dialysis centers and nephrology practices.
Acquisitions involve a number of risks related to integration, including adverse
short-term effects on the Company's reported operating results, diversion of
management's attention, dependence on retention, hiring and training of key
personnel, including Medical Directors for each
12
<PAGE> 15
dialysis center, some or all of which could have a material adverse effect on
the Company's results of operations, financial condition or business. In
addition, there can be no assurance that acquired or managed dialysis centers
will achieve net revenue and earnings that justify the Company's investment
therein or expenses related thereto. In order to implement its growth strategy,
the Company may require substantial capital resources and need to incur, from
time to time, short- and long-term bank indebtedness. The Company also may need
to issue in public or private transactions, equity or debt securities, the terms
of which will depend on market and other conditions. There can be no assurance
that any such additional financing will be available on terms acceptable to the
Company, if at all. To the extent that the Company is unable to acquire dialysis
centers or acquire or manage nephrology practices, to integrate such centers and
practices successfully, or to obtain financing on terms acceptable to the
Company, its ability to expand its business could be reduced significantly.
Risks Associated With Liabilities Of Acquired Businesses. The Company
has acquired and will continue to acquire businesses with prior operating
histories. Acquired companies may have unknown or contingent liabilities,
including liabilities for failure to comply with health care laws and
regulations, such as billing and reimbursement, fraud and abuse and similar
anti-referral laws. The Company has from time to time identified certain past
practices of acquired companies that do not conform to its standards. Although
the Company institutes policies designed to conform such practices to its
standards following completion of acquisitions, there can be no assurance that
the Company will not become liable for past activities that may later be
asserted to be improper by private plaintiffs or government agencies. Although
the Company generally seeks to obtain indemnification from prospective sellers
covering such matters, there can be no assurance that any such matter will be
covered by indemnification or, if covered, that the liability sustained will not
exceed contractual limits or the financial capacity of the indemnifying party.
Dependence On Physician Referrals. The Company's dialysis centers
depend upon local nephrologists for referrals of ESRD patients for treatment and
one or a few physicians typically account for all or a significant portion of
the patient referral base at a center. The loss of one or more referring
physicians at a particular center could have a material adverse effect on the
operations of such center, and the loss of a significant number of referring
physicians could have a material adverse effect on the Company's results of
operations, financial conditions and business. In many instances stockholders of
the Company are the primary referral sources for the dialysis centers operated
by the Company. If such ownership is deemed to violate applicable federal or
state law, such as the illegal remuneration provisions of the Social Security
Act and similar state laws which prohibit the payment of remuneration to induce
referrals, such physician owners may be forced to dispose of their stock in the
Company.
Operations Subject To Extensive Government Regulation. The Company is
subject to extensive federal, state and local regulation regarding, among other
things, fraud and abuse, patient referral, false claims, health and safety,
environmental compliance and toxic waste disposal. Much of this regulation,
particularly in the areas of fraud and abuse and patient referral, is complex
and open to differing interpretations. First, the illegal remuneration
provisions of the Anti-Kickback Statute make it illegal for any person to, among
other things, solicit, offer, receive or pay any remuneration in exchange for
referring, or to induce the referral of, a patient for treatment which may be
paid for by Medicare, Medicaid or a similar state program. Second, the Stark Law
prohibits physician referrals for "designated health services" (including some
of the specific services offered by the Company) to entities with which a
physician or an immediate family member has a "financial relationship." These
laws contain certain statutory exemptions, and federal agencies have promulgated
regulations clarifying certain of these provisions and exceptions and creating
certain additional exceptions or "safe harbors" from such prohibitions. Many
states have enacted similar provisions of law, which may not have identical
13
<PAGE> 16
prohibitions or exceptions, but which may apply regardless of whether Medicare
or Medicaid funds are involved. However, due to the breadth of the statutory
provisions and the absence in many instances of regulations or court decisions
addressing the specific arrangements by which the Company conducts its business,
it is possible that some of the Company's practices might be challenged under
these laws. Sanctions for violating these federal and state laws may include
civil monetary fines, disqualification from participation in the Medicare or
Medicaid programs and criminal sanctions. There can be no assurance that the
Company's practices will not be challenged by governmental authorities, or that
the Company will not be subject to sanctions under such laws or be required to
alter or discontinue certain of its practices. In addition, there can be no
assurance that if the Company is required to alter its practices, that it will
be able to do so successfully. The occurrence of any of these events could
result in a material adverse effect on the Company's results of operations,
financial condition or business.
A number of proposals for health care reform have been made recently to
provide greater governmental control of health care spending and to provide
broader access to health care services. For example, HIPAA, among other things,
provides for insurance portability for individuals who lose or change jobs,
limits exclusions for pre-existing conditions and establishes a pilot program
for medical savings accounts. HIPAA also amends existing crimes and criminal
penalties for Medicare fraud and enacts new federal health care fraud crimes. It
is uncertain what additional health care reform legislation, if any, ultimately
will be implemented or whether other changes in the administration or
interpretation of governmental health care programs will occur. The Company
cannot predict what effect future health care legislation or other changes in
the administration or interpretation of governmental health care statutes,
regulations, or programs may have on the Company's operations.
Substantial Competition. The dialysis industry is fragmented and is
consolidating rapidly. Accordingly, the industry is highly competitive,
particularly from the standpoint of competition for the acquisition of existing
dialysis centers and the development of relationships with referring physicians.
Many of the Company's competitors have substantially greater financial resources
and more established operations and infrastructure than the Company and may
compete with the Company for acquisitions of dialysis centers and nephrology
practices. In addition, the Company may also experience competition from
referring physicians who open their own dialysis centers. There can be no
assurance that the Company will be able to compete effectively with any such
competitors.
Dependence On Key Personnel. The Company is dependent upon the services
of certain key executive officers. The Company's growth will depend in part upon
its ability to attract and retain skilled employees, for whom competition is
intense. The Company believes that its future success will also depend on its
ability to attract and retain qualified physicians to serve as Medical Directors
of its dialysis centers. The Company does not carry key-man life insurance on
any of its officers. The loss by the Company of any of its executive officers,
or the inability to attract and retain qualified management personnel and
Medical Directors, could have a material adverse effect on the Company's results
of operations, financial condition or business.
CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
THIS REPORT, PRESS RELEASES AND OTHER PUBLIC STATEMENTS BY THE COMPANY CONTAIN
"FORWARD-LOOKING STATEMENTS," WITHIN THE MEANING OF VARIOUS PROVISIONS OF THE
FEDERAL SECURITIES LAWS, THAT ADDRESS ACTIVITIES, EVENTS OR DEVELOPMENTS THAT
WILL OR MAY OCCUR IN THE FUTURE. THESE STATEMENTS ARE BASED ON ASSUMPTIONS AND
ANALYSES MADE BY THE COMPANY IN LIGHT OF ITS EXPERIENCE AND PERCEPTION OF
HISTORICAL
14
<PAGE> 17
TRENDS, CURRENT CONDITIONS AND EXPECTED FUTURE DEVELOPMENTS, AND OTHER FACTORS
BELIEVED APPROPRIATE IN THE CIRCUMSTANCES. ACTUAL RESULTS AND DEVELOPMENTS ARE
SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES, INCLUDING GENERAL ECONOMIC,
MARKET OR BUSINESS CONDITIONS; OPPORTUNITIES (OR LACK THEREOF) THAT MAY BE
PRESENTED TO AND PURSUED BY THE COMPANY; COMPETITIVE ACTIONS BY OTHER COMPANIES;
CHANGES IN LAWS OR REGULATIONS; AND OTHER FACTORS AS MAY BE DISCUSSED FROM TIME
TO TIME IN THE COMPANY'S SEC REPORTS AND OTHER FILINGS, MANY OF WHICH ARE BEYOND
THE CONTROL OF THE COMPANY. ACCORDINGLY, READERS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON SUCH FORWARD LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE
DATE MADE AND WHICH THE COMPANY UNDERTAKES NO OBLIGATION TO REVISE TO REFLECT
EVENTS AFTER THE DATE MADE.
15
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
(a) None.
(b) See Note 2 to Financial Statements concerning the three-for-two
stock split in the form of a dividend.
(c) On April 1, 1998, the Company issued 258,656 shares of Common Stock to
the former owners of Four State Regional Dialysis Center, Inc., Fort
Scott Regional Dialysis Center, Inc. and Miami Regional Dialysis
Center, Inc. in a private placement pursuant to the exemption from
registration set forth in Section 4(2) of the Securities Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 4, 1998, the Annual Meeting of Stockholders of Renal Care Group, Inc.
was held in Nashville, Tennessee for the following purposes:
1. To elect Joseph C. Hutts and Thomas A. Lowery, M.D. as Class II
Directors to serve for a term of three (3) years and until their
successors are elected;
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
Election of Joseph C. Hutts
as Class II Director 20,412,462 -- 227,196
Election of Thomas A. Lowery, M.D.
as Class II Director 20,536,902 -- 102,756
</TABLE>
The terms of Mr. Brooks, Dr. McMurray, Dr. Jacobson, Dr. Bower, Dr.
Johnson and Dr. Meredith have not expired and therefore were not up for
reelection.
2. To consider and vote upon a proposal to approve an amendment to the
Renal Care Group, Inc. 1996 Third Amended and Restated Stock Incentive
Plan (the "Plan") to increase the number of shares available for
issuance thereunder;
FOR AGAINST ABSTAIN
15,612,129 4,901,478 14,822
ITEM 5. OTHER INFORMATION
STOCKHOLDER PROPOSALS
The proxy statement solicited by management of the Company with respect to the
1999 Annual Meeting of Stockholders will confer discretionary authority to vote
on proposals of stockholders of the Company intended to be presented for
consideration at such Annual Meeting that are submitted to the Company after
April 29, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<S> <C>
10.16 Fourth Amended and Restated 1996 Stock Incentive Plan
(incorporated herein by reference to Appendix A to the Company's
Proxy Statement relating to the 1998 Annual Meeting of Stockholders,
filed on April 27, 1998)
10.38 Stock Option Agreement between the Company and Sam A. Brooks
10.39 Stock Option Agreement between the Company and Gary A. Brukardt
10.40 Stock Option Agreement between the Company and Raymond Hakim, M.D.
10.41 Stock Option Agreement between the Company and Ronald Hinds
10.42 Stock Option Agreement between the Company and Joseph C. Hutts
10.43 Stock Option Agreement between the Company and Harry R. Jacobson, M.D.
27.1 Financial Data Schedule for the six months ended June 30, 1998 (filed
via Edgar on August 14, 1998)
27.2 Financial Data Schedule for the six months ended June 30, 1997 (filed
via Edgar on August 14, 1998)
</TABLE>
(b) Reports on Form 8-K
None
16
<PAGE> 19
SIGNATURE
Pursuant to the requirements 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.
RENAL CARE GROUP, INC.
---------------------
(Registrant)
August 14, 1998 BY: /s/ Ronald Hinds
---------------------------------------------
Ronald Hinds
Executive Vice President,
Chief Financial Officer, Secretary/Treasurer
and Principal Financial Officer and Principal
Accounting Officer
17
<PAGE> 20
EXHIBIT INDEX
<TABLE>
Exhibit
Number Description of Exhibits Page No.
- ------ ----------------------- --------
<S> <C> <C>
10.16 Fourth Amended and Restated 1996 Stock Incentive Plan
(incorporated herein by reference to Appendix A to the Company's
Proxy Statement relating to the 1998 Annual Meeting of Stockholders,
filed on April 27, 1998)
10.38 Stock Option Agreement between the Company and Sam A. Brooks
10.39 Stock Option Agreement between the Company and Gary A. Brukardt
10.40 Stock Option Agreement between the Company and Raymond Hakim, M.D.
10.41 Stock Option Agreement between the Company and Ronald Hinds
10.42 Stock Option Agreement between the Company and Joseph C. Hutts
10.43 Stock Option Agreement between the Company and Harry R. Jacobson, M.D.
27.1 Financial Data Schedule for the six months ended June 30, 1998 (filed
via Edgar on August 14, 1998)
27.2 Financial Data Schedule for the six months ended June 30, 1997 (filed
via Edgar on August 14, 1998)
</TABLE>
18
<PAGE> 1
EXHIBIT 10.38
[OFFICERS/EMPLOYEES/CONSULTANTS]
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
SAM A. BROOKS
THIS AGREEMENT is made as of the Date of Grant, by RENAL CARE GROUP,
INC., a corporation organized and existing under the laws of the State of
Delaware (the "Company"), to SAM A. BROOKS (the "Optionee").
Upon and subject to the Additional Terms and Conditions attached hereto
and incorporated herein by reference as part of this Agreement, the Company
hereby awards as of the Date of Grant to Optionee an option (the "Option"), as
described below, to purchase the Option Shares.
A. DATE OF GRANT: May 27, 1998.
B. TYPE OF OPTION: Non-Qualified Stock Option.
C. EXERCISE PRICE PER SHARE: $33.00.
D. OPTION SHARES: 200,000 shares of the Company's Common Stock,
$.01 par value.
E. VESTING SCHEDULE:
The Vesting Schedule shall be as follows:
<TABLE>
<CAPTION>
Schedule Percentage of Option Shares Vested
-------- ----------------------------------
<S> <C>
Date of Grant 20%
1st anniversary of 40%
the Date of Grant
2nd anniversary of 60%
the Date of Grant
3rd anniversary of 80%
the Date of Grant
4th anniversary of 100%
the Date of Grant
</TABLE>
<PAGE> 2
[OFFICERS/EMPLOYEES/CONSULTANTS]
F. EXPIRATION DATE: This Option may be exercised at any time
after the Date of Grant through 5:00 p.m., Nashville,
Tennessee time, on the 10th anniversary of the Date of Grant,
provided that this Option may be exercised as to no more than
the vested Option Shares, determined pursuant to the Vesting
Schedule or as modified as provided herein.
IN WITNESS WHEREOF, the Company has executed this Agreement the 1st day
of June, 1998.
RENAL CARE GROUP, INC.
By: /s/ Ronald Hinds
----------------------------------
Ronald Hinds, EVP and Secretary
ATTEST:
/s/ David M. Dill
- ----------------------------------
Assistant Secretary
OPTIONEE:
/s/ Sam A. Brooks
----------------------------------
WITNESS:
- ----------------------------------
2
<PAGE> 3
[OFFICERS/EMPLOYEES/CONSULTANTS]
ADDITIONAL TERMS AND CONDITIONS
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR SAM A. BROOKS
1. Exercise of Option. This Option may be exercised in whole or in
part, but in no less than one hundred (100) share lots, by written notice, in
substantially the form as Exhibit 1hereto, directed to the Secretary of the
Company at its principal place of business, accompanied by payment of the
Exercise Price for the number of shares purchased. Payment shall be made in
cash, by check, or in shares of Common Stock already held by the Optionee prior
to the exercise of the Option. In the event that all or part of the Exercise
Price is paid in shares of Common Stock, the value of such shares shall be equal
to the Fair Market Value of such shares on the date of exercise of the Option,
and the Optionee shall deliver to the Company a certificate or certificates for
such shares.
2. Issuance of Option Shares. Upon a valid exercise of this Option, the
Company shall, or shall direct its transfer agent to, make delivery of the
Option Shares as soon as reasonably possible; provided, however, that the
Company shall not be required to issue or deliver any certificates for Option
Shares pursuant to this Option prior to (a) the completion of any registration
or qualification of such shares under any federal or state law, or any ruling or
regulation of any governmental body which the Board shall, in its sole
discretion, determine to be necessary or advisable, and/or (b) the Optionee
making at the time of exercise any reasonable representations and warranties
requested by the Company in order to qualify the issuance of the Option Shares
for exemptions from registration under state or federal securities laws. The
Option Shares issued on the exercise of this Option, when paid for as herein
provided, will be fully paid and non-assessable.
3. Termination of Employment or Death.
(a) In the event of a termination of Optionee's employment or
consulting services for any reason (other than a termination of an Optionee
employee by his or her death or disability), (i) except as provided in clause
(ii) of this sentence this Option shall
3
<PAGE> 4
[OFFICERS/EMPLOYEES/CONSULTANTS]
terminate as of the day of notice of such termination by either party, but in no
event later than the Expiration Date, and (ii) any unexercised portion of this
Option which is otherwise exercisable on the date of termination may be
exercised by Optionee at any time within three (3) months following the date of
such termination, unless Optionee dies during such three (3) month period, but
in no event later than the Expiration Date. If Optionee is an employee, whether
military, government or other service by Optionee or other leave of absence
granted to Optionee shall constitute such a termination shall be determined in
each case by the Board at its discretion, and any determination by the Board
shall be final and conclusive. If the Board determines that such absence does
not constitute such a termination, however, Optionee may exercise his or her
option only with the consent of the Board.
(b) If Optionee is an employee, upon termination of Optionee's
employment with the Company (including its subsidiaries) as result of a
permanent disability (as defined by Section 22(e)(3) of the Code), (i) except as
provided in clause (ii) of this sentence, this Option shall terminate and be
unexercisable on the date of such termination, but in no event later than the
Expiration Date, and (ii) any unexercised portion of this Option which is
otherwise exercisable on the date of such termination may be exercised by
Optionee at any time within six (6) months following the date of such
termination, unless Optionee dies during such six (6) month period, but in no
event later than the Expiration Date.
(c) If Optionee is an employee, upon termination of his or her
employment by the Company without Cause, if there is a written employment
agreement between Optionee and the Company, this Option shall cease to vest in
accordance with the Vesting Schedule regardless of any salary continuation
specified by such employment agreement as a result of such termination. Upon
termination of his or her employment with the Company, (i) except as provided in
clause (ii) of this sentence, this Option shall terminate and be unexercisable
as to unvested options on the date of termination, but in no event later than
the Expiration Date, and (ii) any unexercised portion of this Option which is
otherwise exercisable as of such termination date may be exercised by Optionee
at any time within three (3) months following such termination date, unless
Optionee dies during such three (3) month period such option may be exercised
pursuant to subparagraph (d) below, but in no event later than the Expiration
Date. If there is no
4
<PAGE> 5
[OFFICERS/EMPLOYEES/CONSULTANTS]
written employment agreement between Optionee and the Company, upon termination
of his or her employment by the Company without Cause any unexercised portion of
this Option shall terminate in accordance with Section 3(a) above, but in no
event later than the Expiration Date.
(d) If Optionee dies, (i) except as provided in clause (ii) of
this sentence, this Option shall terminate and be unexercisable on the date of
death, and (ii) any unexercised portion of this Option, if otherwise exercisable
at the date of death, may be exercised by his or her personal representatives,
heirs, or legatees at any time prior to the expiration of one (1) year after the
date of Optionee's death, but in no event later than the Expiration Date.
4. Full Information. Optionee represents that he or she is familiar
with the business and affairs of the Company and realizes that the receipt of
the Option and Option Shares is a speculative investment and that any possible
profit therefrom is uncertain. Optionee further represents that he or she has
had the opportunity to ask questions of and receive answers from the Company and
any person acting on its behalf and to obtain all information available with
respect to the Company and its affairs, and has received all information and
data with respect to the Company that he or she has requested and which he or
she has deemed relevant in connection with his or her receipt of the Option and
the Option Shares subject to the Option.
5. No Rights in Option Stock. Optionee shall have no rights as a
stockholder with respect to any of the Option Shares prior to the date of
issuance to the Optionee of a certificate or certificates for such shares.
Optionee shall have no rights with respect to such shares not expressly
conferred by this Agreement.
6. Stock Reserved. The Company shall at all times during the term of
this Agreement reserve and keep available such number of shares of the Common
Stock as will be sufficient to satisfy the requirements of this Agreement, and
shall pay all original issue taxes on the exercise of this Option, and all other
fees and expenses necessarily incurred by the Company in connection therewith.
5
<PAGE> 6
[OFFICERS/EMPLOYEES/CONSULTANTS]
7. Nonassignability. This Option shall not be encumbered or transferred
in whole or in part except by will or the laws of descent and distribution and
is exercisable during the lifetime of the Optionee only by the Optionee.
8. No Employment. This Agreement shall not give Optionee a right to
employment by, or membership on the board of directors of, the Company or its
subsidiaries.
9. Non-Qualified Option. It is the intent of the parties hereto that
this Option be a non-qualified stock option and subject to all of the applicable
provisions of the Internal Revenue Code of 1986, as amended. The Company
recognizes that the Optionee may be subject to restrictions regarding his or her
right to trade Common Stock under applicable securities laws. Accordingly, the
Optionee may want to consider making an election to be taxed upon exercise of
this Option under Section 83(b) of the Code. The Optionee shall have sole
discretion to make such an election and shall be solely responsible for
complying with the Code and all relevant rules and regulations in connection
with such election. The Optionee shall provide written notice to the Company of
such election immediately after making such election.
10. Share Adjustments. If the Company's outstanding shares of Common
Stock are increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split, combination of shares, stock
dividend, or transaction having similar effect, the Board shall proportionately
and appropriately adjust the number and kind of shares that are subject to this
Option and the Exercise Price Per Share, without any change in the aggregate
price to be paid therefor upon exercise of this Option.
11. Changes in Control.
(a) Change in Control. Subject to Section 12, in the event
that a Change in Control shall occur, then (i) this Option (whether vested or
not vested) shall automatically become one hundred percent (100%) vested
immediately, and (ii) no other terms, conditions, restrictions or limitations
shall be imposed upon this Option after such
6
<PAGE> 7
[OFFICERS/EMPLOYEES/CONSULTANTS]
date, and in no circumstance shall this Option be forfeited on or after such
date.
(b) Automatic Acceleration and Cash-Out. Subject to Section
12, upon a Change in Control that results directly or indirectly in the Common
Stock (or the stock of any successor the Company received in exchange for Common
Stock) ceasing to be publicly traded on a national securities market at any
time, (i) this Option shall automatically become one hundred percent (100%)
vested immediately with respect to the Option Shares, (ii) no other terms,
conditions, restrictions or limitations shall be imposed upon this Option after
such date, and in no circumstance shall this Option be forfeited on or after
such date, and (iii) this Option shall be valued and cashed out on the basis of
the Change in Control Price.
(c) Section 16 Insider. Notwithstanding anything herein to the
contrary, if the Optionee is subject to the reporting requirements of Section 16
of the Exchange Act with respect to the Company, and on the date of the Change
in Control this Option has not been outstanding for a period of at least six
months from the Date of Grant, the Optionee shall not be paid the consideration
described in this Section 11 above until the first day next following the end of
such six-month period.
12. Modification, Extension and Renewal. The Board may modify, renew or
accept the surrender of this Option, including the acceleration or waiver of any
vesting or other restrictions or limitations, or the conversion of this Option
(with appropriate adjustments) to be applicable to the securities of any
successor corporation to the Company or parent of any such successor, and the
Board may authorize new options in substitution for the Option. Any substituted,
modified or converted options may bear such different or additional terms and
conditions as the Board shall deem appropriate. The determination of the Board
as to the terms of any of the foregoing may be made without regard to whether a
Change in Control has or has not occurred (or whether the Board has determined
that any event shall not be considered to be a Change in Control) and shall be
conclusive and binding notwithstanding the provisions hereof regarding
exercisability. Any fractional shares resulting from any of the foregoing
adjustments under this Section shall be disregarded and eliminated. However, no
modification of this Option shall, without the consent of
7
<PAGE> 8
[OFFICERS/EMPLOYEES/CONSULTANTS]
the Optionee, adversely affect the rights or obligations of the Optionee with
respect to this Option.
13. Administration. This Agreement shall be administered, construed and
interpreted by the Board.
14. Definitions.
"Board" means the Board of Directors of the Company.
"Change in Control" means a change in control of the Company
of a nature that would be required to be reported (assuming such event has not
been "previously reported") in response to Item 1(a) of a Current Report on Form
8-K pursuant to Section 13 or 15(d) of the Exchange Act; provided that, without
limitation, a Change in Control shall also be deemed to have occurred at such
time as:
(i) any "person" within the meaning of Section 14(d) of
the Exchange Act, other than the Company, a Subsidiary, or any employee
benefit plan(s) sponsored by the Company or any Subsidiary, is or has
become the "beneficial owner," as defined in Rule l3d-3 under the
Exchange Act, directly or indirectly, of 25% or more of the combined
voting power of the outstanding securities of the Company ordinarily
having the right to vote at the election of directors;
(ii) individuals who constitute the Board immediately
prior to any meeting of stockholders (the "Incumbent Board") have
ceased for any reason to constitute at least a majority thereof after
such shareholder meeting, provided that any person becoming a director
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least three-quarters (3/4)
of the directors comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director without objection to such
nomination) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board;
(iii) upon approval by the Company's stockholders of a
reorganization, merger, share exchange or
8
<PAGE> 9
[OFFICERS/EMPLOYEES/CONSULTANTS]
consolidation, other than one with respect to which those persons who
were the beneficial owners, immediately prior to such reorganization,
merger, share exchange or consolidation, of outstanding securities of
the Company ordinarily having the right to vote in the election of
directors own, immediately after such transaction, more than 75% of the
outstanding securities of the resulting corporation ordinarily having
the right to vote in the election of directors; or
(iv) upon approval by the Company's stockholders of a
complete liquidation and dissolution of the Company or the sale or
other disposition of all or substantially all of the assets of the
Company other than to a Subsidiary.
Notwithstanding the occurrence of any of the foregoing, the
Board may determine, if it deems it to be in the best interest of the Company,
that an event or events otherwise constituting a Change in Control shall not be
so considered. Such determination shall be effective if it is made by the Board
prior to the occurrence of an event that otherwise would be or probably will
lead to a Change in Control or after such event if made by the Board a majority
of which is composed of directors who were members of the Board immediately
prior to the event that otherwise would be or probably will lead to a Change in
Control. Upon such determination, such event or events shall not be deemed to be
a Change in Control for any purposes hereunder, including but not limited to,
Section 12.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, $.01 par value, of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Fair Market Value" means the closing price of the shares of
Common Stock on a national securities exchange on the day on which such value is
to be determined or, if no shares were traded on such day, on the next preceding
day on which shares were traded, as reported by the National Quotation Bureau,
Inc. or other national quotation service. If the shares are not traded on an
exchange but are
9
<PAGE> 10
[OFFICERS/EMPLOYEES/CONSULTANTS]
traded in the over-the-counter market, on the day on which such value is to be
determined or, if such "asked" price is not available, the last sales price on
such day or, if no shares were traded on such day, on the next preceding day on
which the shares were traded, as reported by the National Association of
Securities Dealers Automatic Quotation System (NASDAQ) or other national
quotation service.
"Subsidiary" means any corporation that qualifies as a
subsidiary of a corporation under the definition of "subsidiary corporation"
contained in Section 424(f) of the Code.
* * * * *
10
<PAGE> 11
[OFFICERS/EMPLOYEES/CONSULTANTS]
EXHIBIT 1
NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
RENAL CARE GROUP, INC.
Name:
------------------------------
Address:
---------------------------
---------------------------
Date:
------------------------------
Renal Care Group, Inc.
Attention: [Secretary]
2100 West End, Suite 800
Nashville, Tennessee 37203
Re: Exercise of Non-Qualified Stock Option
Ladies and Gentlemen:
Subject to acceptance hereof in writing by Renal Care Group, Inc. (the
"Company"), I hereby give at least ten days but not more than thirty (30) days
prior notice of my election to exercise options granted to me to purchase
_____________ shares of Common Stock of the Company under the Renal Care Group,
Inc. Non-Qualified Stock Option Agreement granted on ______________________,
______. The purchase shall take place as of ______________________, ______ (the
"Exercise Date").
On or before the Exercise Date, I will pay the applicable purchase
price by delivery of a certified check for $__________ for the full purchase
price payable to the order of Renal Care Group, Inc.
The required federal, state and local income tax withholding, if any,
on the exercise of the option shall be paid on or before the Exercise Date.
11
<PAGE> 12
[OFFICERS/EMPLOYEES/CONSULTANTS]
I hereby reaffirm that the representations made in Additional Terms and
Conditions of the Agreement are true and correct as of the date of exercising
this Option.
As soon as the stock certificate is registered in my name, please
deliver it to me at the above address.
Very truly yours,
AGREED TO AND ACCEPTED:
RENAL CARE GROUP, INC.
By:
-----------------------------------
Title:
-------------------------------
Number of Shares Exercised:
-------------
Number of Shares Remaining:
-------------
Date:
----------------
12
<PAGE> 1
EXHIBIT 10.39
[OFFICERS/EMPLOYEES/CONSULTANTS]
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
GARY A. BRUKARDT
THIS AGREEMENT is made as of the Date of Grant, by RENAL CARE GROUP,
INC., a corporation organized and existing under the laws of the State of
Delaware (the "Company"), to GARY A. BRUKARDT (the "Optionee").
Upon and subject to the Additional Terms and Conditions attached hereto
and incorporated herein by reference as part of this Agreement, the Company
hereby awards as of the Date of Grant to Optionee an option (the "Option"), as
described below, to purchase the Option Shares.
A. DATE OF GRANT: May 27, 1998.
B. TYPE OF OPTION: Non-Qualified Stock Option.
C. EXERCISE PRICE PER SHARE: $33.00.
D. OPTION SHARES: 125,000 shares of the Company's Common Stock,
$.01 par value.
E. VESTING SCHEDULE:
The Vesting Schedule shall be as follows:
<TABLE>
<CAPTION>
Schedule Percentage of Option Shares Vested
-------- ----------------------------------
<S> <C>
Date of Grant 20%
1st anniversary of 40%
the Date of Grant
2nd anniversary of 60%
the Date of Grant
3rd anniversary of 80%
the Date of Grant
4th anniversary of 100%
the Date of Grant
</TABLE>
<PAGE> 2
[OFFICERS/EMPLOYEES/CONSULTANTS]
F. EXPIRATION DATE: This Option may be exercised at any time
after the Date of Grant through 5:00 p.m., Nashville,
Tennessee time, on the10th anniversary of the Date of Grant,
provided that this Option may be exercised as to no more than
the vested Option Shares, determined pursuant to the Vesting
Schedule or as modified as provided herein.
IN WITNESS WHEREOF, the Company has executed this Agreement the 1st day
of June, 1998.
RENAL CARE GROUP, INC.
By: /s/ Sam A. Brooks
--------------------------------
Sam A. Brooks, President
ATTEST:
/s/ Ronald Hinds
- -----------------------------
Ronald Hinds, Secretary
OPTIONEE:
/s/ Gary Brukardt
--------------------------------
WITNESS:
- ------------------------------
2
<PAGE> 3
[OFFICERS/EMPLOYEES/CONSULTANTS]
ADDITIONAL TERMS AND CONDITIONS
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR GARY A. BRUKARDT
1. Exercise of Option. This Option may be exercised in whole or in
part, but in no less than one hundred (100) share lots, by written notice, in
substantially the form as Exhibit 1hereto, directed to the Secretary of the
Company at its principal place of business, accompanied by payment of the
Exercise Price for the number of shares purchased. Payment shall be made in
cash, by check, or in shares of Common Stock already held by the Optionee
prior to the exercise of the Option. In the event that all or part of the
Exercise Price is paid in shares of Common Stock, the value of such shares
shall be equal to the Fair Market Value of such shares on the date of exercise
of the Option, and the Optionee shall deliver to the Company a certificate or
certificates for such shares.
2. Issuance of Option Shares. Upon a valid exercise of this Option,
the Company shall, or shall direct its transfer agent to, make delivery of the
Option Shares as soon as reasonably possible; provided, however, that the
Company shall not be required to issue or deliver any certificates for Option
Shares pursuant to this Option prior to (a) the completion of any registration
or qualification of such shares under any federal or state law, or any ruling
or regulation of any governmental body which the Board shall, in its sole
discretion, determine to be necessary or advisable, and/or (b) the Optionee
making at the time of exercise any reasonable representations and warranties
requested by the Company in order to qualify the issuance of the Option Shares
for exemptions from registration under state or federal securities laws. The
Option Shares issued on the exercise of this Option, when paid for as herein
provided, will be fully paid and non-assessable.
3. Termination of Employment or Death.
(a) In the event of a termination of Optionee's employment
or consulting services for any reason (other than a termination of an Optionee
employee by his or her death or disability), (i) except as provided in clause
(ii) of this sentence this Option shall
3
<PAGE> 4
[OFFICERS/EMPLOYEES/CONSULTANTS]
terminate as of the day of notice of such termination by either party, but in
no event later than the Expiration Date, and (ii) any unexercised portion of
this Option which is otherwise exercisable on the date of termination may be
exercised by Optionee at any time within three (3) months following the date
of such termination, unless Optionee dies during such three (3) month period,
but in no event later than the Expiration Date. If Optionee is an employee,
whether military, government or other service by Optionee or other leave of
absence granted to Optionee shall constitute such a termination shall be
determined in each case by the Board at its discretion, and any determination
by the Board shall be final and conclusive. If the Board determines that such
absence does not constitute such a termination, however, Optionee may exercise
his or her option only with the consent of the Board.
(b) If Optionee is an employee, upon termination of
Optionee's employment with the Company (including its subsidiaries) as result
of a permanent disability (as defined by Section 22(e)(3) of the Code), (i)
except as provided in clause (ii) of this sentence, this Option shall
terminate and be unexercisable on the date of such termination, but in no
event later than the Expiration Date, and (ii) any unexercised portion of this
Option which is otherwise exercisable on the date of such termination may be
exercised by Optionee at any time within six (6) months following the date of
such termination, unless Optionee dies during such six (6) month period, but
in no event later than the Expiration Date.
(c) If Optionee is an employee, upon termination of his or
her employment by the Company without Cause, if there is a written employment
agreement between Optionee and the Company, this Option shall cease to vest in
accordance with the Vesting Schedule regardless of any salary continuation
specified by such employment agreement as a result of such termination. Upon
termination of his or her employment with the Company, (i) except as provided
in clause (ii) of this sentence, this Option shall terminate and be
unexercisable as to unvested options on the date of termination, but in no
event later than the Expiration Date, and (ii) any unexercised portion of this
Option which is otherwise exercisable as of such termination date may be
exercised by Optionee at any time within three (3) months following such
termination date, unless Optionee dies during such three (3) month period such
option may be exercised pursuant to subparagraph (d) below, but in no event
later than the Expiration Date. If there is no
4
<PAGE> 5
[OFFICERS/EMPLOYEES/CONSULTANTS]
written employment agreement between Optionee and the Company, upon
termination of his or her employment by the Company without Cause any
unexercised portion of this Option shall terminate in accordance with Section
3(a) above, but in no event later than the Expiration Date.
(d) If Optionee dies, (i) except as provided in clause (ii)
of this sentence, this Option shall terminate and be unexercisable on the date
of death, and (ii) any unexercised portion of this Option, if otherwise
exercisable at the date of death, may be exercised by his or her personal
representatives, heirs, or legatees at any time prior to the expiration of one
(1) year after the date of Optionee's death, but in no event later than the
Expiration Date.
4. Full Information. Optionee represents that he or she is familiar
with the business and affairs of the Company and realizes that the receipt of
the Option and Option Shares is a speculative investment and that any possible
profit therefrom is uncertain. Optionee further represents that he or she has
had the opportunity to ask questions of and receive answers from the Company
and any person acting on its behalf and to obtain all information available
with respect to the Company and its affairs, and has received all information
and data with respect to the Company that he or she has requested and which he
or she has deemed relevant in connection with his or her receipt of the Option
and the Option Shares subject to the Option.
5. No Rights in Option Stock. Optionee shall have no rights as a
stockholder with respect to any of the Option Shares prior to the date of
issuance to the Optionee of a certificate or certificates for such shares.
Optionee shall have no rights with respect to such shares not expressly
conferred by this Agreement.
6. Stock Reserved. The Company shall at all times during the term of
this Agreement reserve and keep available such number of shares of the Common
Stock as will be sufficient to satisfy the requirements of this Agreement, and
shall pay all original issue taxes on the exercise of this Option, and all
other fees and expenses necessarily incurred by the Company in connection
therewith.
5
<PAGE> 6
[OFFICERS/EMPLOYEES/CONSULTANTS]
7. Nonassignability. This Option shall not be encumbered or
transferred in whole or in part except by will or the laws of descent and
distribution and is exercisable during the lifetime of the Optionee only by
the Optionee.
8. No Employment. This Agreement shall not give Optionee a right to
employment by, or membership on the board of directors of, the Company or its
subsidiaries.
9. Non-Qualified Option. It is the intent of the parties hereto that
this Option be a non-qualified stock option and subject to all of the
applicable provisions of the Internal Revenue Code of 1986, as amended. The
Company recognizes that the Optionee may be subject to restrictions regarding
his or her right to trade Common Stock under applicable securities laws.
Accordingly, the Optionee may want to consider making an election to be taxed
upon exercise of this Option under Section 83(b) of the Code. The Optionee
shall have sole discretion to make such an election and shall be solely
responsible for complying with the Code and all relevant rules and regulations
in connection with such election. The Optionee shall provide written notice to
the Company of such election immediately after making such election.
10. Share Adjustments. If the Company's outstanding shares of Common
Stock are increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split, combination of shares, stock
dividend, or transaction having similar effect, the Board shall
proportionately and appropriately adjust the number and kind of shares that
are subject to this Option and the Exercise Price Per Share, without any
change in the aggregate price to be paid therefor upon exercise of this
Option.
11. Changes in Control.
(a) Change in Control. Subject to Section 12, in the event
that a Change in Control shall occur, then (i) this Option (whether vested or
not vested) shall automatically become one hundred percent (100%) vested
immediately, and (ii) no other terms, conditions, restrictions or limitations
shall be imposed upon this Option after such
6
<PAGE> 7
[OFFICERS/EMPLOYEES/CONSULTANTS]
date, and in no circumstance shall this Option be forfeited on or after such
date.
(b) Automatic Acceleration and Cash-Out. Subject to Section
12, upon a Change in Control that results directly or indirectly in the Common
Stock (or the stock of any successor the Company received in exchange for
Common Stock) ceasing to be publicly traded on a national securities market at
any time, (i) this Option shall automatically become one hundred percent
(100%) vested immediately with respect to the Option Shares, (ii) no other
terms, conditions, restrictions or limitations shall be imposed upon this
Option after such date, and in no circumstance shall this Option be forfeited
on or after such date, and (iii) this Option shall be valued and cashed out on
the basis of the Change in Control Price.
(c) Section 16 Insider. Notwithstanding anything herein to
the contrary, if the Optionee is subject to the reporting requirements of
Section 16 of the Exchange Act with respect to the Company, and on the date of
the Change in Control this Option has not been outstanding for a period of at
least six months from the Date of Grant, the Optionee shall not be paid the
consideration described in this Section 11 above until the first day next
following the end of such six-month period.
12. Modification, Extension and Renewal. The Board may modify, renew
or accept the surrender of this Option, including the acceleration or waiver
of any vesting or other restrictions or limitations, or the conversion of this
Option (with appropriate adjustments) to be applicable to the securities of
any successor corporation to the Company or parent of any such successor, and
the Board may authorize new options in substitution for the Option. Any
substituted, modified or converted options may bear such different or
additional terms and conditions as the Board shall deem appropriate. The
determination of the Board as to the terms of any of the foregoing may be made
without regard to whether a Change in Control has or has not occurred (or
whether the Board has determined that any event shall not be considered to be
a Change in Control) and shall be conclusive and binding notwithstanding the
provisions hereof regarding exercisability. Any fractional shares resulting
from any of the foregoing adjustments under this Section shall be disregarded
and eliminated. However, no modification of this Option shall, without the
consent of
7
<PAGE> 8
[OFFICERS/EMPLOYEES/CONSULTANTS]
the Optionee, adversely affect the rights or obligations of the Optionee with
respect to this Option.
13. Administration. This Agreement shall be administered, construed
and interpreted by the Board.
14. Definitions.
"Board" means the Board of Directors of the Company.
"Change in Control" means a change in control of the Company
of a nature that would be required to be reported (assuming such event has not
been "previously reported") in response to Item 1(a) of a Current Report on
Form 8-K pursuant to Section 13 or 15(d) of the Exchange Act; provided that,
without limitation, a Change in Control shall also be deemed to have occurred
at such time as:
(i) any "person" within the meaning of Section
14(d) of the Exchange Act, other than the Company, a Subsidiary, or
any employee benefit plan(s) sponsored by the Company or any
Subsidiary, is or has become the "beneficial owner," as defined in
Rule l3d-3 under the Exchange Act, directly or indirectly, of 25% or
more of the combined voting power of the outstanding securities of
the Company ordinarily having the right to vote at the election of
directors;
(ii) individuals who constitute the Board immediately
prior to any meeting of stockholders (the "Incumbent Board") have
ceased for any reason to constitute at least a majority thereof after
such shareholder meeting, provided that any person becoming a
director whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least three-quarters (3/4)
of the directors comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director without objection to
such nomination) shall be, for purposes of this Agreement, considered
as though such person were a member of the Incumbent Board;
(iii) upon approval by the Company's stockholders
of a reorganization, merger, share exchange or
8
<PAGE> 9
[OFFICERS/EMPLOYEES/CONSULTANTS]
consolidation, other than one with respect to which those persons who
were the beneficial owners, immediately prior to such reorganization,
merger, share exchange or consolidation, of outstanding securities of
the Company ordinarily having the right to vote in the election of
directors own, immediately after such transaction, more than 75% of
the outstanding securities of the resulting corporation ordinarily
having the right to vote in the election of directors; or
(iv) upon approval by the Company's stockholders of
a complete liquidation and dissolution of the Company or the sale or
other disposition of all or substantially all of the assets of the
Company other than to a Subsidiary.
Notwithstanding the occurrence of any of the foregoing, the
Board may determine, if it deems it to be in the best interest of the Company,
that an event or events otherwise constituting a Change in Control shall not
be so considered. Such determination shall be effective if it is made by the
Board prior to the occurrence of an event that otherwise would be or probably
will lead to a Change in Control or after such event if made by the Board a
majority of which is composed of directors who were members of the Board
immediately prior to the event that otherwise would be or probably will lead
to a Change in Control. Upon such determination, such event or events shall
not be deemed to be a Change in Control for any purposes hereunder, including
but not limited to, Section 12.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, $.01 par value, of
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Fair Market Value" means the closing price of the shares of
Common Stock on a national securities exchange on the day on which such value
is to be determined or, if no shares were traded on such day, on the next
preceding day on which shares were traded, as reported by the National
Quotation Bureau, Inc. or other national quotation service. If the shares are
not traded on an exchange but are
9
<PAGE> 10
[OFFICERS/EMPLOYEES/CONSULTANTS]
traded in the over-the-counter market, on the day on which such value is to be
determined or, if such "asked" price is not available, the last sales price on
such day or, if no shares were traded on such day, on the next preceding day
on which the shares were traded, as reported by the National Association of
Securities Dealers Automatic Quotation System (NASDAQ) or other national
quotation service.
"Subsidiary" means any corporation that qualifies as a
subsidiary of a corporation under the definition of "subsidiary corporation"
contained in Section 424(f) of the Code.
* * * * *
10
<PAGE> 11
[OFFICERS/EMPLOYEES/CONSULTANTS]
EXHIBIT 1
NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
RENAL CARE GROUP, INC.
Name:
-----------------------------------
Address:
-----------------------------------
-----------------------------------
Date:
-----------------------------------
Renal Care Group, Inc.
Attention: [Secretary]
2100 West End, Suite 800
Nashville, Tennessee 37203
Re: Exercise of Non-Qualified Stock Option
Ladies and Gentlemen:
Subject to acceptance hereof in writing by Renal Care Group, Inc.
(the "Company"), I hereby give at least ten days but not more than thirty (30)
days prior notice of my election to exercise options granted to me to purchase
_____________ shares of Common Stock of the Company under the Renal Care
Group, Inc. Non-Qualified Stock Option Agreement granted on
______________________, ______. The purchase shall take place as of
______________________, ______ (the "Exercise Date").
On or before the Exercise Date, I will pay the applicable purchase
price by delivery of a certified check for $__________ for the full purchase
price payable to the order of Renal Care Group, Inc.
The required federal, state and local income tax withholding, if any,
on the exercise of the option shall be paid on or before the Exercise Date.
11
<PAGE> 12
[OFFICERS/EMPLOYEES/CONSULTANTS]
I hereby reaffirm that the representations made in Additional Terms
and Conditions of the Agreement are true and correct as of the date of
exercising this Option.
As soon as the stock certificate is registered in my name, please
deliver it to me at the above address.
Very truly yours,
AGREED TO AND ACCEPTED:
RENAL CARE GROUP, INC.
By:
--------------------------------
Title:
-------------------------------
Number of Shares Exercised:
-------------
Number of Shares Remaining:
-------------
Date:
----------------
12
<PAGE> 1
EXHIBIT 10.40
[OFFICERS/EMPLOYEES/CONSULTANTS]
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
RAYMOND HAKIM, M.D.
THIS AGREEMENT is made as of the Date of Grant, by RENAL CARE GROUP,
INC., a corporation organized and existing under the laws of the State of
Delaware (the "Company"), to RAYMOND HAKIM, M.D. (the "Optionee").
Upon and subject to the Additional Terms and Conditions attached hereto
and incorporated herein by reference as part of this Agreement, the Company
hereby awards as of the Date of Grant to Optionee an option (the "Option"), as
described below, to purchase the Option Shares.
A. DATE OF GRANT: May 27, 1998.
B. TYPE OF OPTION: Non-Qualified Stock Option.
C. EXERCISE PRICE PER SHARE: $33.00.
D. OPTION SHARES: 125,000 shares of the Company's Common Stock,
$.01 par value.
E. VESTING SCHEDULE:
The Vesting Schedule shall be as follows:
<TABLE>
<CAPTION>
Schedule Percentage of Option Shares Vested
-------- ----------------------------------
<S> <C>
Date of Grant 20%
1st anniversary of 40%
the Date of Grant
2nd anniversary of 60%
the Date of Grant
3rd anniversary of 80%
the Date of Grant
4th anniversary of 100%
the Date of Grant
</TABLE>
<PAGE> 2
[OFFICERS/EMPLOYEES/CONSULTANTS]
F. EXPIRATION DATE: This Option may be exercised at any time
after the Date of Grant through 5:00 p.m., Nashville,
Tennessee time, on the 10th anniversary of the Date of Grant,
provided that this Option may be exercised as to no more than
the vested Option Shares, determined pursuant to the Vesting
Schedule or as modified as provided herein.
IN WITNESS WHEREOF, the Company has executed this Agreement the 1st day
of June, 1998.
RENAL CARE GROUP, INC.
By: /s/ Sam A. Brooks
--------------------------------
Sam A. Brooks, President
ATTEST:
/s/ Ronald Hinds
- ------------------------------
Ronald Hinds, Secretary
OPTIONEE:
/s/ Raymond Hakim, M.D.
------------------------------------
WITNESS:
- ------------------------------
2
<PAGE> 3
[OFFICERS/EMPLOYEES/CONSULTANTS]
ADDITIONAL TERMS AND CONDITIONS
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR RAYMOND HAKIM, M.D.
1. Exercise of Option. This Option may be exercised in whole or in
part, but in no less than one hundred (100) share lots, by written notice, in
substantially the form as Exhibit 1 hereto, directed to the Secretary of the
Company at its principal place of business, accompanied by payment of the
Exercise Price for the number of shares purchased. Payment shall be made in
cash, by check, or in shares of Common Stock already held by the Optionee
prior to the exercise of the Option. In the event that all or part of the
Exercise Price is paid in shares of Common Stock, the value of such shares
shall be equal to the Fair Market Value of such shares on the date of exercise
of the Option, and the Optionee shall deliver to the Company a certificate or
certificates for such shares.
2. Issuance of Option Shares. Upon a valid exercise of this Option,
the Company shall, or shall direct its transfer agent to, make delivery of the
Option Shares as soon as reasonably possible; provided, however, that the
Company shall not be required to issue or deliver any certificates for Option
Shares pursuant to this Option prior to (a) the completion of any registration
or qualification of such shares under any federal or state law, or any ruling
or regulation of any governmental body which the Board shall, in its sole
discretion, determine to be necessary or advisable, and/or (b) the Optionee
making at the time of exercise any reasonable representations and warranties
requested by the Company in order to qualify the issuance of the Option Shares
for exemptions from registration under state or federal securities laws. The
Option Shares issued on the exercise of this Option, when paid for as herein
provided, will be fully paid and non-assessable.
3. Termination of Employment or Death.
(a) In the event of a termination of Optionee's employment
or consulting services for any reason (other than a termination of an Optionee
employee by his or her death or disability), (i) except as provided in clause
(ii) of this sentence this Option shall
3
<PAGE> 4
[OFFICERS/EMPLOYEES/CONSULTANTS]
terminate as of the day of notice of such termination by either party, but in
no event later than the Expiration Date, and (ii) any unexercised portion of
this Option which is otherwise exercisable on the date of termination may be
exercised by Optionee at any time within three (3) months following the date
of such termination, unless Optionee dies during such three (3) month period,
but in no event later than the Expiration Date. If Optionee is an employee,
whether military, government or other service by Optionee or other leave of
absence granted to Optionee shall constitute such a termination shall be
determined in each case by the Board at its discretion, and any determination
by the Board shall be final and conclusive. If the Board determines that such
absence does not constitute such a termination, however, Optionee may exercise
his or her option only with the consent of the Board.
(b) If Optionee is an employee, upon termination of
Optionee's employment with the Company (including its subsidiaries) as result
of a permanent disability (as defined by Section 22(e)(3) of the Code), (i)
except as provided in clause (ii) of this sentence, this Option shall
terminate and be unexercisable on the date of such termination, but in no
event later than the Expiration Date, and (ii) any unexercised portion of this
Option which is otherwise exercisable on the date of such termination may be
exercised by Optionee at any time within six (6) months following the date of
such termination, unless Optionee dies during such six (6) month period, but
in no event later than the Expiration Date.
(c) If Optionee is an employee, upon termination of his or
her employment by the Company without Cause, if there is a written employment
agreement between Optionee and the Company, this Option shall cease to vest in
accordance with the Vesting Schedule regardless of any salary continuation
specified by such employment agreement as a result of such termination. Upon
termination of his or her employment with the Company, (i) except as provided
in clause (ii) of this sentence, this Option shall terminate and be
unexercisable as to unvested options on the date of termination, but in no
event later than the Expiration Date, and (ii) any unexercised portion of this
Option which is otherwise exercisable as of such termination date may be
exercised by Optionee at any time within three (3) months following such
termination date, unless Optionee dies during such three (3) month period such
option may be exercised pursuant to subparagraph (d) below, but in no event
later than the Expiration Date. If there is no
4
<PAGE> 5
[OFFICERS/EMPLOYEES/CONSULTANTS]
written employment agreement between Optionee and the Company, upon
termination of his or her employment by the Company without Cause any
unexercised portion of this Option shall terminate in accordance with Section
3(a) above, but in no event later than the Expiration Date.
(d) If Optionee dies, (i) except as provided in clause (ii)
of this sentence, this Option shall terminate and be unexercisable on the date
of death, and (ii) any unexercised portion of this Option, if otherwise
exercisable at the date of death, may be exercised by his or her personal
representatives, heirs, or legatees at any time prior to the expiration of one
(1) year after the date of Optionee's death, but in no event later than the
Expiration Date.
4. Full Information. Optionee represents that he or she is familiar
with the business and affairs of the Company and realizes that the receipt of
the Option and Option Shares is a speculative investment and that any possible
profit therefrom is uncertain. Optionee further represents that he or she has
had the opportunity to ask questions of and receive answers from the Company
and any person acting on its behalf and to obtain all information available
with respect to the Company and its affairs, and has received all information
and data with respect to the Company that he or she has requested and which he
or she has deemed relevant in connection with his or her receipt of the Option
and the Option Shares subject to the Option.
5. No Rights in Option Stock. Optionee shall have no rights as a
stockholder with respect to any of the Option Shares prior to the date of
issuance to the Optionee of a certificate or certificates for such shares.
Optionee shall have no rights with respect to such shares not expressly
conferred by this Agreement.
6. Stock Reserved. The Company shall at all times during the term of
this Agreement reserve and keep available such number of shares of the Common
Stock as will be sufficient to satisfy the requirements of this Agreement, and
shall pay all original issue taxes on the exercise of this Option, and all
other fees and expenses necessarily incurred by the Company in connection
therewith.
5
<PAGE> 6
[OFFICERS/EMPLOYEES/CONSULTANTS]
7. Nonassignability. This Option shall not be encumbered or
transferred in whole or in part except by will or the laws of descent and
distribution and is exercisable during the lifetime of the Optionee only by
the Optionee.
8. No Employment. This Agreement shall not give Optionee a right to
employment by, or membership on the board of directors of, the Company or its
subsidiaries.
9. Non-Qualified Option. It is the intent of the parties hereto that
this Option be a non-qualified stock option and subject to all of the
applicable provisions of the Internal Revenue Code of 1986, as amended. The
Company recognizes that the Optionee may be subject to restrictions regarding
his or her right to trade Common Stock under applicable securities laws.
Accordingly, the Optionee may want to consider making an election to be taxed
upon exercise of this Option under Section 83(b) of the Code. The Optionee
shall have sole discretion to make such an election and shall be solely
responsible for complying with the Code and all relevant rules and regulations
in connection with such election. The Optionee shall provide written notice to
the Company of such election immediately after making such election.
10. Share Adjustments. If the Company's outstanding shares of Common
Stock are increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split, combination of shares, stock
dividend, or transaction having similar effect, the Board shall
proportionately and appropriately adjust the number and kind of shares that
are subject to this Option and the Exercise Price Per Share, without any
change in the aggregate price to be paid therefor upon exercise of this
Option.
11. Changes in Control.
(a) Change in Control. Subject to Section 12, in the event
that a Change in Control shall occur, then (i) this Option (whether vested or
not vested) shall automatically become one hundred percent (100%) vested
immediately, and (ii) no other terms, conditions, restrictions or limitations
shall be imposed upon this Option after such
6
<PAGE> 7
[OFFICERS/EMPLOYEES/CONSULTANTS]
date, and in no circumstance shall this Option be forfeited on or after such
date.
(b) Automatic Acceleration and Cash-Out. Subject to Section
12, upon a Change in Control that results directly or indirectly in the Common
Stock (or the stock of any successor the Company received in exchange for
Common Stock) ceasing to be publicly traded on a national securities market at
any time, (i) this Option shall automatically become one hundred percent
(100%) vested immediately with respect to the Option Shares, (ii) no other
terms, conditions, restrictions or limitations shall be imposed upon this
Option after such date, and in no circumstance shall this Option be forfeited
on or after such date, and (iii) this Option shall be valued and cashed out on
the basis of the Change in Control Price.
(c) Section 16 Insider. Notwithstanding anything herein to
the contrary, if the Optionee is subject to the reporting requirements of
Section 16 of the Exchange Act with respect to the Company, and on the date of
the Change in Control this Option has not been outstanding for a period of at
least six months from the Date of Grant, the Optionee shall not be paid the
consideration described in this Section 11 above until the first day next
following the end of such six-month period.
12. Modification, Extension and Renewal. The Board may modify, renew
or accept the surrender of this Option, including the acceleration or waiver
of any vesting or other restrictions or limitations, or the conversion of this
Option (with appropriate adjustments) to be applicable to the securities of
any successor corporation to the Company or parent of any such successor, and
the Board may authorize new options in substitution for the Option. Any
substituted, modified or converted options may bear such different or
additional terms and conditions as the Board shall deem appropriate. The
determination of the Board as to the terms of any of the foregoing may be made
without regard to whether a Change in Control has or has not occurred (or
whether the Board has determined that any event shall not be considered to be
a Change in Control) and shall be conclusive and binding notwithstanding the
provisions hereof regarding exercisability. Any fractional shares resulting
from any of the foregoing adjustments under this Section shall be disregarded
and eliminated. However, no modification of this Option shall, without the
consent of
7
<PAGE> 8
[OFFICERS/EMPLOYEES/CONSULTANTS]
the Optionee, adversely affect the rights or obligations of the Optionee with
respect to this Option.
13. Administration. This Agreement shall be administered, construed
and interpreted by the Board.
14. Definitions.
"Board" means the Board of Directors of the Company.
"Change in Control" means a change in control of the Company
of a nature that would be required to be reported (assuming such event has not
been "previously reported") in response to Item 1(a) of a Current Report on
Form 8-K pursuant to Section 13 or 15(d) of the Exchange Act; provided that,
without limitation, a Change in Control shall also be deemed to have occurred
at such time as:
(i) any "person" within the meaning of Section
14(d) of the Exchange Act, other than the Company, a Subsidiary, or
any employee benefit plan(s) sponsored by the Company or any
Subsidiary, is or has become the "beneficial owner," as defined in
Rule l3d-3 under the Exchange Act, directly or indirectly, of 25% or
more of the combined voting power of the outstanding securities of
the Company ordinarily having the right to vote at the election of
directors;
(ii) individuals who constitute the Board immediately
prior to any meeting of stockholders (the "Incumbent Board") have
ceased for any reason to constitute at least a majority thereof after
such shareholder meeting, provided that any person becoming a
director whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least three-quarters (3/4)
of the directors comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director without objection to
such nomination) shall be, for purposes of this Agreement, considered
as though such person were a member of the Incumbent Board;
(iii) upon approval by the Company's stockholders
of a reorganization, merger, share exchange or
8
<PAGE> 9
[OFFICERS/EMPLOYEES/CONSULTANTS]
consolidation, other than one with respect to which those persons who
were the beneficial owners, immediately prior to such reorganization,
merger, share exchange or consolidation, of outstanding securities of
the Company ordinarily having the right to vote in the election of
directors own, immediately after such transaction, more than 75% of
the outstanding securities of the resulting corporation ordinarily
having the right to vote in the election of directors; or
(iv) upon approval by the Company's stockholders of
a complete liquidation and dissolution of the Company or the sale or
other disposition of all or substantially all of the assets of the
Company other than to a Subsidiary.
Notwithstanding the occurrence of any of the foregoing, the
Board may determine, if it deems it to be in the best interest of the Company,
that an event or events otherwise constituting a Change in Control shall not
be so considered. Such determination shall be effective if it is made by the
Board prior to the occurrence of an event that otherwise would be or probably
will lead to a Change in Control or after such event if made by the Board a
majority of which is composed of directors who were members of the Board
immediately prior to the event that otherwise would be or probably will lead
to a Change in Control. Upon such determination, such event or events shall
not be deemed to be a Change in Control for any purposes hereunder, including
but not limited to, Section 12.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, $.01 par value, of
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Fair Market Value" means the closing price of the shares of
Common Stock on a national securities exchange on the day on which such value
is to be determined or, if no shares were traded on such day, on the next
preceding day on which shares were traded, as reported by the National
Quotation Bureau, Inc. or other national quotation service. If the shares are
not traded on an exchange but are
9
<PAGE> 10
[OFFICERS/EMPLOYEES/CONSULTANTS]
traded in the over-the-counter market, on the day on which such value is to be
determined or, if such "asked" price is not available, the last sales price on
such day or, if no shares were traded on such day, on the next preceding day
on which the shares were traded, as reported by the National Association of
Securities Dealers Automatic Quotation System (NASDAQ) or other national
quotation service.
"Subsidiary" means any corporation that qualifies as a
subsidiary of a corporation under the definition of "subsidiary corporation"
contained in Section 424(f) of the Code.
* * * * *
10
<PAGE> 11
[OFFICERS/EMPLOYEES/CONSULTANTS]
EXHIBIT 1
NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
RENAL CARE GROUP, INC.
Name:
-----------------------------------
Address:
-----------------------------------
-----------------------------------
Date:
-----------------------------------
Renal Care Group, Inc.
Attention: [Secretary]
2100 West End, Suite 800
Nashville, Tennessee 37203
Re: Exercise of Non-Qualified Stock Option
Ladies and Gentlemen:
Subject to acceptance hereof in writing by Renal Care Group, Inc.
(the "Company"), I hereby give at least ten days but not more than thirty (30)
days prior notice of my election to exercise options granted to me to purchase
_____________ shares of Common Stock of the Company under the Renal Care
Group, Inc. Non-Qualified Stock Option Agreement granted on
______________________, ______. The purchase shall take place as of
______________________, ______ (the "Exercise Date").
On or before the Exercise Date, I will pay the applicable purchase
price by delivery of a certified check for $__________ for the full purchase
price payable to the order of Renal Care Group, Inc.
The required federal, state and local income tax withholding, if any,
on the exercise of the option shall be paid on or before the Exercise Date.
11
<PAGE> 12
[OFFICERS/EMPLOYEES/CONSULTANTS]
I hereby reaffirm that the representations made in Additional Terms
and Conditions of the Agreement are true and correct as of the date of
exercising this Option.
As soon as the stock certificate is registered in my name, please
deliver it to me at the above address.
Very truly yours,
AGREED TO AND ACCEPTED:
RENAL CARE GROUP, INC.
By:
--------------------------------
Title:
----------------------------
Number of Shares Exercised:
------------------
Number of Shares Remaining:
------------------
Date:
-----------------------
12
<PAGE> 1
EXHIBIT 10.41
[OFFICERS/EMPLOYEES/CONSULTANTS]
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
RONALD HINDS
THIS AGREEMENT is made as of the Date of Grant, by RENAL CARE GROUP,
INC., a corporation organized and existing under the laws of the State of
Delaware (the "Company"), to RONALD HINDS (the "Optionee").
Upon and subject to the Additional Terms and Conditions attached hereto
and incorporated herein by reference as part of this Agreement, the Company
hereby awards as of the Date of Grant to Optionee an option (the "Option"), as
described below, to purchase the Option Shares.
A. DATE OF GRANT: May 27, 1998.
B. TYPE OF OPTION: Non-Qualified Stock Option.
C. EXERCISE PRICE PER SHARE: $33.00.
D. OPTION SHARES: 125,000 shares of the Company's Common Stock,
$.01 par value.
E. VESTING SCHEDULE:
The Vesting Schedule shall be as follows:
<TABLE>
<CAPTION>
Schedule Percentage of Option Shares Vested
-------- ----------------------------------
<S> <C>
Date of Grant 20%
1st anniversary of 40%
the Date of Grant
2nd anniversary of 60%
the Date of Grant
3rd anniversary of 80%
the Date of Grant
4th anniversary of 100%
the Date of Grant
</TABLE>
<PAGE> 2
[OFFICERS/EMPLOYEES/CONSULTANTS]
F. EXPIRATION DATE: This Option may be exercised at any time
after the Date of Grant through 5:00 p.m., Nashville,
Tennessee time, on the10th anniversary of the Date of Grant,
provided that this Option may be exercised as to no more than
the vested Option Shares, determined pursuant to the Vesting
Schedule or as modified as provided herein.
IN WITNESS WHEREOF, the Company has executed this Agreement the 1st day
of June, 1998.
RENAL CARE GROUP, INC.
By: /s/ Sam A. Brooks
------------------------------
Sam A. Brooks, President
ATTEST:
/s/ David M. Dill
- ----------------------------------
Assistant Secretary
OPTIONEE:
/s/ Ronald Hinds
------------------------------------
WITNESS:
- -----------------------------------
2
<PAGE> 3
[OFFICERS/EMPLOYEES/CONSULTANTS]
ADDITIONAL TERMS AND CONDITIONS
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR RONALD HINDS
1. Exercise of Option. This Option may be exercised in whole or in
part, but in no less than one hundred (100) share lots, by written notice, in
substantially the form as Exhibit 1 thereto, directed to the Secretary of the
Company at its principal place of business, accompanied by payment of the
Exercise Price for the number of shares purchased. Payment shall be made in
cash, by check, or in shares of Common Stock already held by the Optionee
prior to the exercise of the Option. In the event that all or part of the
Exercise Price is paid in shares of Common Stock, the value of such shares
shall be equal to the Fair Market Value of such shares on the date of exercise
of the Option, and the Optionee shall deliver to the Company a certificate or
certificates for such shares.
2. Issuance of Option Shares. Upon a valid exercise of this Option,
the Company shall, or shall direct its transfer agent to, make delivery of the
Option Shares as soon as reasonably possible; provided, however, that the
Company shall not be required to issue or deliver any certificates for Option
Shares pursuant to this Option prior to (a) the completion of any registration
or qualification of such shares under any federal or state law, or any ruling
or regulation of any governmental body which the Board shall, in its sole
discretion, determine to be necessary or advisable, and/or (b) the Optionee
making at the time of exercise any reasonable representations and warranties
requested by the Company in order to qualify the issuance of the Option Shares
for exemptions from registration under state or federal securities laws. The
Option Shares issued on the exercise of this Option, when paid for as herein
provided, will be fully paid and non-assessable.
3. Termination of Employment or Death.
(a) In the event of a termination of Optionee's employment
or consulting services for any reason (other than a termination of an Optionee
employee by his or her death or disability), (i) except as provided in clause
(ii) of this sentence this Option shall
3
<PAGE> 4
[OFFICERS/EMPLOYEES/CONSULTANTS]
terminate as of the day of notice of such termination by either party, but in
no event later than the Expiration Date, and (ii) any unexercised portion of
this Option which is otherwise exercisable on the date of termination may be
exercised by Optionee at any time within three (3) months following the date
of such termination, unless Optionee dies during such three (3) month period,
but in no event later than the Expiration Date. If Optionee is an employee,
whether military, government or other service by Optionee or other leave of
absence granted to Optionee shall constitute such a termination shall be
determined in each case by the Board at its discretion, and any determination
by the Board shall be final and conclusive. If the Board determines that such
absence does not constitute such a termination, however, Optionee may exercise
his or her option only with the consent of the Board.
(b) If Optionee is an employee, upon termination of
Optionee's employment with the Company (including its subsidiaries) as result
of a permanent disability (as defined by Section 22(e)(3) of the Code), (i)
except as provided in clause (ii) of this sentence, this Option shall
terminate and be unexercisable on the date of such termination, but in no
event later than the Expiration Date, and (ii) any unexercised portion of this
Option which is otherwise exercisable on the date of such termination may be
exercised by Optionee at any time within six (6) months following the date of
such termination, unless Optionee dies during such six (6) month period, but
in no event later than the Expiration Date.
(c) If Optionee is an employee, upon termination of his or
her employment by the Company without Cause, if there is a written employment
agreement between Optionee and the Company, this Option shall cease to vest in
accordance with the Vesting Schedule regardless of any salary continuation
specified by such employment agreement as a result of such termination. Upon
termination of his or her employment with the Company, (i) except as provided
in clause (ii) of this sentence, this Option shall terminate and be
unexercisable as to unvested options on the date of termination, but in no
event later than the Expiration Date, and (ii) any unexercised portion of this
Option which is otherwise exercisable as of such termination date may be
exercised by Optionee at any time within three (3) months following such
termination date, unless Optionee dies during such three (3) month period such
option may be exercised pursuant to subparagraph (d) below, but in no event
later than the Expiration Date. If there is no
4
<PAGE> 5
[OFFICERS/EMPLOYEES/CONSULTANTS]
written employment agreement between Optionee and the Company, upon
termination of his or her employment by the Company without Cause any
unexercised portion of this Option shall terminate in accordance with Section
3(a) above, but in no event later than the Expiration Date.
(d) If Optionee dies, (i) except as provided in clause (ii)
of this sentence, this Option shall terminate and be unexercisable on the date
of death, and (ii) any unexercised portion of this Option, if otherwise
exercisable at the date of death, may be exercised by his or her personal
representatives, heirs, or legatees at any time prior to the expiration of one
(1) year after the date of Optionee's death, but in no event later than the
Expiration Date.
4. Full Information. Optionee represents that he or she is familiar
with the business and affairs of the Company and realizes that the receipt of
the Option and Option Shares is a speculative investment and that any possible
profit therefrom is uncertain. Optionee further represents that he or she has
had the opportunity to ask questions of and receive answers from the Company
and any person acting on its behalf and to obtain all information available
with respect to the Company and its affairs, and has received all information
and data with respect to the Company that he or she has requested and which he
or she has deemed relevant in connection with his or her receipt of the Option
and the Option Shares subject to the Option.
5. No Rights in Option Stock. Optionee shall have no rights as a
stockholder with respect to any of the Option Shares prior to the date of
issuance to the Optionee of a certificate or certificates for such shares.
Optionee shall have no rights with respect to such shares not expressly
conferred by this Agreement.
6. Stock Reserved. The Company shall at all times during the term of
this Agreement reserve and keep available such number of shares of the Common
Stock as will be sufficient to satisfy the requirements of this Agreement, and
shall pay all original issue taxes on the exercise of this Option, and all
other fees and expenses necessarily incurred by the Company in connection
therewith.
5
<PAGE> 6
[OFFICERS/EMPLOYEES/CONSULTANTS]
7. Nonassignability. This Option shall not be encumbered or
transferred in whole or in part except by will or the laws of descent and
distribution and is exercisable during the lifetime of the Optionee only by
the Optionee.
8. No Employment. This Agreement shall not give Optionee a right to
employment by, or membership on the board of directors of, the Company or its
subsidiaries.
9. Non-Qualified Option. It is the intent of the parties hereto that
this Option be a non-qualified stock option and subject to all of the
applicable provisions of the Internal Revenue Code of 1986, as amended. The
Company recognizes that the Optionee may be subject to restrictions regarding
his or her right to trade Common Stock under applicable securities laws.
Accordingly, the Optionee may want to consider making an election to be taxed
upon exercise of this Option under Section 83(b) of the Code. The Optionee
shall have sole discretion to make such an election and shall be solely
responsible for complying with the Code and all relevant rules and regulations
in connection with such election. The Optionee shall provide written notice to
the Company of such election immediately after making such election.
10. Share Adjustments. If the Company's outstanding shares of Common
Stock are increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split, combination of shares, stock
dividend, or transaction having similar effect, the Board shall
proportionately and appropriately adjust the number and kind of shares that
are subject to this Option and the Exercise Price Per Share, without any
change in the aggregate price to be paid therefor upon exercise of this
Option.
11. Changes in Control.
(a) Change in Control. Subject to Section 12, in the event
that a Change in Control shall occur, then (i) this Option (whether vested or
not vested) shall automatically become one hundred percent (100%) vested
immediately, and (ii) no other terms, conditions, restrictions or limitations
shall be imposed upon this Option after such
6
<PAGE> 7
[OFFICERS/EMPLOYEES/CONSULTANTS]
date, and in no circumstance shall this Option be forfeited on or after such
date.
(b) Automatic Acceleration and Cash-Out. Subject to Section
12, upon a Change in Control that results directly or indirectly in the Common
Stock (or the stock of any successor the Company received in exchange for
Common Stock) ceasing to be publicly traded on a national securities market at
any time, (i) this Option shall automatically become one hundred percent
(100%) vested immediately with respect to the Option Shares, (ii) no other
terms, conditions, restrictions or limitations shall be imposed upon this
Option after such date, and in no circumstance shall this Option be forfeited
on or after such date, and (iii) this Option shall be valued and cashed out on
the basis of the Change in Control Price.
(c) Section 16 Insider. Notwithstanding anything herein to
the contrary, if the Optionee is subject to the reporting requirements of
Section 16 of the Exchange Act with respect to the Company, and on the date of
the Change in Control this Option has not been outstanding for a period of at
least six months from the Date of Grant, the Optionee shall not be paid the
consideration described in this Section 11 above until the first day next
following the end of such six-month period.
12. Modification, Extension and Renewal. The Board may modify, renew
or accept the surrender of this Option, including the acceleration or waiver
of any vesting or other restrictions or limitations, or the conversion of this
Option (with appropriate adjustments) to be applicable to the securities of
any successor corporation to the Company or parent of any such successor, and
the Board may authorize new options in substitution for the Option. Any
substituted, modified or converted options may bear such different or
additional terms and conditions as the Board shall deem appropriate. The
determination of the Board as to the terms of any of the foregoing may be made
without regard to whether a Change in Control has or has not occurred (or
whether the Board has determined that any event shall not be considered to be
a Change in Control) and shall be conclusive and binding notwithstanding the
provisions hereof regarding exercisability. Any fractional shares resulting
from any of the foregoing adjustments under this Section shall be disregarded
and eliminated. However, no modification of this Option shall, without the
consent of
7
<PAGE> 8
[OFFICERS/EMPLOYEES/CONSULTANTS]
the Optionee, adversely affect the rights or obligations of the Optionee with
respect to this Option.
13. Administration. This Agreement shall be administered, construed
and interpreted by the Board.
14. Definitions.
"Board" means the Board of Directors of the Company.
"Change in Control" means a change in control of the Company
of a nature that would be required to be reported (assuming such event has not
been "previously reported") in response to Item 1(a) of a Current Report on
Form 8-K pursuant to Section 13 or 15(d) of the Exchange Act; provided that,
without limitation, a Change in Control shall also be deemed to have occurred
at such time as:
(i) any "person" within the meaning of Section
14(d) of the Exchange Act, other than the Company, a Subsidiary, or
any employee benefit plan(s) sponsored by the Company or any
Subsidiary, is or has become the "beneficial owner," as defined in
Rule l3d-3 under the Exchange Act, directly or indirectly, of 25% or
more of the combined voting power of the outstanding securities of
the Company ordinarily having the right to vote at the election of
directors;
(ii) individuals who constitute the Board immediately
prior to any meeting of stockholders (the "Incumbent Board") have
ceased for any reason to constitute at least a majority thereof after
such shareholder meeting, provided that any person becoming a
director whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least three-quarters (3/4)
of the directors comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director without objection to
such nomination) shall be, for purposes of this Agreement, considered
as though such person were a member of the Incumbent Board;
(iii) upon approval by the Company's stockholders
of a reorganization, merger, share exchange or
8
<PAGE> 9
[OFFICERS/EMPLOYEES/CONSULTANTS]
consolidation, other than one with respect to which those persons who
were the beneficial owners, immediately prior to such reorganization,
merger, share exchange or consolidation, of outstanding securities of
the Company ordinarily having the right to vote in the election of
directors own, immediately after such transaction, more than 75% of
the outstanding securities of the resulting corporation ordinarily
having the right to vote in the election of directors; or
(iv) upon approval by the Company's stockholders of
a complete liquidation and dissolution of the Company or the sale or
other disposition of all or substantially all of the assets of the
Company other than to a Subsidiary.
Notwithstanding the occurrence of any of the foregoing, the
Board may determine, if it deems it to be in the best interest of the Company,
that an event or events otherwise constituting a Change in Control shall not
be so considered. Such determination shall be effective if it is made by the
Board prior to the occurrence of an event that otherwise would be or probably
will lead to a Change in Control or after such event if made by the Board a
majority of which is composed of directors who were members of the Board
immediately prior to the event that otherwise would be or probably will lead
to a Change in Control. Upon such determination, such event or events shall
not be deemed to be a Change in Control for any purposes hereunder, including
but not limited to, Section 12.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, $.01 par value, of
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Fair Market Value" means the closing price of the shares of
Common Stock on a national securities exchange on the day on which such value
is to be determined or, if no shares were traded on such day, on the next
preceding day on which shares were traded, as reported by the National
Quotation Bureau, Inc. or other national quotation service. If the shares are
not traded on an exchange but are
9
<PAGE> 10
[OFFICERS/EMPLOYEES/CONSULTANTS]
traded in the over-the-counter market, on the day on which such value is to be
determined or, if such "asked" price is not available, the last sales price on
such day or, if no shares were traded on such day, on the next preceding day
on which the shares were traded, as reported by the National Association of
Securities Dealers Automatic Quotation System (NASDAQ) or other national
quotation service.
"Subsidiary" means any corporation that qualifies as a
subsidiary of a corporation under the definition of "subsidiary corporation"
contained in Section 424(f) of the Code.
* * * * *
10
<PAGE> 11
EXHIBIT 1
NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
RENAL CARE GROUP, INC.
Name:
-----------------------------------
Address:
-----------------------------------
-----------------------------------
Date:
-----------------------------------
Renal Care Group, Inc.
Attention: [Secretary]
2100 West End, Suite 800
Nashville, Tennessee 37203
Re: Exercise of Non-Qualified Stock Option
Ladies and Gentlemen:
Subject to acceptance hereof in writing by Renal Care Group, Inc.
(the "Company"), I hereby give at least ten days but not more than thirty (30)
days prior notice of my election to exercise options granted to me to purchase
_____________ shares of Common Stock of the Company under the Renal Care
Group, Inc. Non-Qualified Stock Option Agreement granted on
______________________, ______. The purchase shall take place as of
______________________, ______ (the "Exercise Date").
On or before the Exercise Date, I will pay the applicable purchase
price by delivery of a certified check for $__________ for the full purchase
price payable to the order of Renal Care Group, Inc.
The required federal, state and local income tax withholding, if any,
on the exercise of the option shall be paid on or before the Exercise Date.
11
<PAGE> 12
[OFFICERS/EMPLOYEES/CONSULTANTS]
I hereby reaffirm that the representations made in Additional Terms
and Conditions of the Agreement are true and correct as of the date of
exercising this Option.
As soon as the stock certificate is registered in my name, please
deliver it to me at the above address.
Very truly yours,
AGREED TO AND ACCEPTED:
RENAL CARE GROUP, INC.
By:
------------------------------------------
Title:
---------------------------------------
Number of Shares Exercised:
------------------------
Number of Shares Remaining:
------------------------
Date:
-----------------------
12
<PAGE> 1
EXHIBIT 10.42
STOCK OPTION AGREEMENT
under the
RENAL CARE GROUP, INC.
1996 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
Grantee: Joseph C. Hutts
Number of Shares Subject to Option: 3,750
Option Price per Share: $37.50
Date of Grant: June 5, 1998
1. Grant of Option. Renal Care Group, Inc. (the "Corporation") hereby
grants to the Grantee named above (the "Grantee"), under the Renal Care Group,
Inc. 1996 Stock Option Plan for Outside Directors (the "Plan"), a non-qualified
stock option to purchase, upon the terms and conditions set forth in this
agreement (this "Stock Option Agreement"), the number of shares indicated above
of the Corporation's $.01 par value common stock (the "Common Stock"), at the
option price per share set forth above, which is the Fair Market Value per share
of Common Stock on the date of grant. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned such terms in the Plan.
2. Period of Option and Limitations on Right to Exercise. The option
granted hereby will, to the extent not previously exercised, expire on the date
ten (10) years after the date of grant of the option (the "Expiration Date"),
unless sooner terminated in whole or in part as follows:
(a) Termination of Directorship. Upon termination of the Grantee's
membership on the Board of Directors of the Corporation for any reason (other
than death), the option granted hereby shall terminate as of the date of
termination of the Grantee's membership on the Board, but in no event later than
the date of expiration of the option as provided above in this Section 2,
provided that any unexpired portion of the option granted hereby which is
otherwise exercisable on the date of such termination may be exercised by the
Grantee at any time within three (3) months following the date of such
termination, unless the Grantee dies during such three (3) month period, but in
no event later than the date of expiration of this option as provided above in
this Section 2. Such exercise otherwise shall be subject to the terms and
conditions of the Plan and this Stock Option Agreement.
(b) Death. Upon death of the Grantee, the option granted hereby shall
terminate and be unexercisable on the date of death, provided that any
unexercised portion of the option granted hereby which is otherwise exercisable
at the date of death may be exercised by his or her personal representatives,
heirs, or legatees ("Grantee's
<PAGE> 2
Successors") at any time prior to the expiration of one (1) year after the
Grantee's death, but in no event later than the date of expiration of this
option as provided above in this Section 2. Such exercise otherwise shall be
subject to the terms and conditions of the Plan and this Stock Option Agreement.
3. Exercise of Option. The terms, times and conditions of exercise of
the option granted hereby are as follows:
The option shall be immediately exercisable, in whole or in part.
The option price shall be payable in full upon the exercise of the
option in cash, by check, in shares of Common Stock, or in any combination
thereof.
The option granted hereby shall be exercised by an irrevocable written
notice directed to the Secretary of the Corporation at the Corporation's
principal place of business.
In addition, the terms contained in the Plan are incorporated into and
made a part of this Stock Option Agreement and this Stock Option Agreement shall
be governed by and construed in accordance with the Plan.
4. Nontransferability. The option granted hereby is not assignable or
transferable by the Grantee except by will, the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined in
Title I of the Employee Retirement Income Security Act of 1974, as amended, and
the Internal Revenue Code of 1986, as amended. The option may be exercised
during the lifetime of the Grantee only by the Grantee.
5. Limitation of Rights. Neither the Grantee nor the Grantee's
Successors shall have rights as a stockholder of the Corporation with respect to
shares of Common Stock covered by this option until the Grantee or the Grantee's
Successors become the holder of record of such shares.
6. Common Stock Reserve. The Corporation shall at all times during the
term of this Stock Option Agreement reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements of this
Stock Option Agreement.
7. Plan Controls. In the event of any actual or alleged conflict
between the provisions of the Plan and the provisions of this Stock Option
Agreement, the provisions of the Plan shall be controlling and determinative.
-2-
<PAGE> 3
8. Successors. This Stock Option Agreement shall be binding upon any
successor of the Corporation, in accordance with the terms of this Stock Option
Agreement and the Plan.
IN WITNESS WHEREOF, Renal Care Group, Inc., acting by and through its
duly authorized officers, has caused this Stock Option Agreement to be executed,
and the Grantee has executed this Stock Option Agreement, all as of the day and
year first above written.
RENAL CARE GROUP, INC.
By: /s/ Sam A. Brooks
--------------------------------------
President
GRANTEE:
/s/ Joseph C. Hutts
- ---------------------------------
-3-
<PAGE> 1
EXHIBIT 10.43
STOCK OPTION AGREEMENT
under the
RENAL CARE GROUP, INC.
1996 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
Grantee: Harry R. Jacobson, M.D.
Number of Shares Subject to Option: 3,750
Option Price per Share: $37.50
Date of Grant: June 5, 1998
1. Grant of Option. Renal Care Group, Inc. (the "Corporation") hereby
grants to the Grantee named above (the "Grantee"), under the Renal Care Group,
Inc. 1996 Stock Option Plan for Outside Directors (the "Plan"), a non-qualified
stock option to purchase, upon the terms and conditions set forth in this
agreement (this "Stock Option Agreement"), the number of shares indicated above
of the Corporation's $.01 par value common stock (the "Common Stock"), at the
option price per share set forth above, which is the Fair Market Value per share
of Common Stock on the date of grant. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned such terms in the Plan.
2. Period of Option and Limitations on Right to Exercise. The option
granted hereby will, to the extent not previously exercised, expire on the date
ten (10) years after the date of grant of the option (the "Expiration Date"),
unless sooner terminated in whole or in part as follows:
(a) Termination of Directorship. Upon termination of the Grantee's
membership on the Board of Directors of the Corporation for any reason (other
than death), the option granted hereby shall terminate as of the date of
termination of the Grantee's membership on the Board, but in no event later than
the date of expiration of the option as provided above in this Section 2,
provided that any unexpired portion of the option granted hereby which is
otherwise exercisable on the date of such termination may be exercised by the
Grantee at any time within three (3) months following the date of such
termination, unless the Grantee dies during such three (3) month period, but in
no event later than the date of expiration of this option as provided above in
this Section 2. Such exercise otherwise shall be subject to the terms and
conditions of the Plan and this Stock Option Agreement.
(b) Death. Upon death of the Grantee, the option granted hereby shall
terminate and be unexercisable on the date of death, provided that any
unexercised portion of the option granted hereby which is otherwise exercisable
at the date of death may be exercised by his or her personal representatives,
heirs, or legatees ("Grantee's
<PAGE> 2
Successors") at any time prior to the expiration of one (1) year after the
Grantee's death, but in no event later than the date of expiration of this
option as provided above in this Section 2. Such exercise otherwise shall be
subject to the terms and conditions of the Plan and this Stock Option Agreement.
3. Exercise of Option. The terms, times and conditions of exercise of
the option granted hereby are as follows:
The option shall be immediately exercisable, in whole or in part.
The option price shall be payable in full upon the exercise of the
option in cash, by check, in shares of Common Stock, or in any combination
thereof.
The option granted hereby shall be exercised by an irrevocable written
notice directed to the Secretary of the Corporation at the Corporation's
principal place of business.
In addition, the terms contained in the Plan are incorporated into and
made a part of this Stock Option Agreement and this Stock Option Agreement shall
be governed by and construed in accordance with the Plan.
4. Nontransferability. The option granted hereby is not assignable or
transferable by the Grantee except by will, the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined in
Title I of the Employee Retirement Income Security Act of 1974, as amended, and
the Internal Revenue Code of 1986, as amended. The option may be exercised
during the lifetime of the Grantee only by the Grantee.
5. Limitation of Rights. Neither the Grantee nor the Grantee's
Successors shall have rights as a stockholder of the Corporation with respect to
shares of Common Stock covered by this option until the Grantee or the Grantee's
Successors become the holder of record of such shares.
6. Common Stock Reserve. The Corporation shall at all times during the
term of this Stock Option Agreement reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements of this
Stock Option Agreement.
7. Plan Controls. In the event of any actual or alleged conflict
between the provisions of the Plan and the provisions of this Stock Option
Agreement, the provisions of the Plan shall be controlling and determinative.
-2-
<PAGE> 3
8. Successors. This Stock Option Agreement shall be binding upon any
successor of the Corporation, in accordance with the terms of this Stock Option
Agreement and the Plan.
IN WITNESS WHEREOF, Renal Care Group, Inc., acting by and through its
duly authorized officers, has caused this Stock Option Agreement to be executed,
and the Grantee has executed this Stock Option Agreement, all as of the day and
year first above written.
RENAL CARE GROUP, INC.
By: /s/ Sam A. Brooks
----------------------------------
President
GRANTEE:
/s/ Harry R. Jacobson, M.D.
- ---------------------------------
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RENAL CARE GROUP, INC. FOR THE SIX MONTHS ENDED JUNE 30,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 16,026
<SECURITIES> 0
<RECEIVABLES> 68,869
<ALLOWANCES> 0
<INVENTORY> 5,618
<CURRENT-ASSETS> 96,797
<PP&E> 71,716
<DEPRECIATION> 0
<TOTAL-ASSETS> 330,640
<CURRENT-LIABILITIES> 58,058
<BONDS> 0
0
0
<COMMON> 269
<OTHER-SE> 196,739
<TOTAL-LIABILITY-AND-EQUITY> 330,640
<SALES> 169,973
<TOTAL-REVENUES> 169,973
<CGS> 112,723
<TOTAL-COSTS> 112,723
<OTHER-EXPENSES> 27,058
<LOSS-PROVISION> 4,420
<INTEREST-EXPENSE> 1,342
<INCOME-PRETAX> 24,430
<INCOME-TAX> 9,039
<INCOME-CONTINUING> 15,391
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,391
<EPS-PRIMARY> .58
<EPS-DILUTED> .55
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OR RENAL CARE GROUP, INC. FOR THE SIX MONTHS ENDED JUNE 30,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 4,501
<SECURITIES> 2,779
<RECEIVABLES> 39,179
<ALLOWANCES> 0
<INVENTORY> 3,413
<CURRENT-ASSETS> 51,735
<PP&E> 45,567
<DEPRECIATION> 0
<TOTAL-ASSETS> 152,485
<CURRENT-LIABILITIES> 34,007
<BONDS> 0
0
0
<COMMON> 226
<OTHER-SE> 110,099
<TOTAL-LIABILITY-AND-EQUITY> 152,485
<SALES> 97,775
<TOTAL-REVENUES> 97,775
<CGS> 67,569
<TOTAL-COSTS> 67,569
<OTHER-EXPENSES> 14,631
<LOSS-PROVISION> 2,172
<INTEREST-EXPENSE> (503)
<INCOME-PRETAX> 13,906
<INCOME-TAX> 5,180
<INCOME-CONTINUING> 8,726
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,726
<EPS-PRIMARY> .40
<EPS-DILUTED> .38
</TABLE>
