<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 September 30, 1999
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 Identification No.)
incorporation or organization)
2100 West End Avenue, 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 November 9, 1999
---------------------------- -------------------------------
Common Stock, $.01 par value 44,659,947
<PAGE> 2
RENAL CARE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1998 and September 30, 1999 (unaudited) 1
Consolidated Income Statements - (unaudited)
For the three months and nine months ended
September 30, 1998 and 1999 2
Consolidated Statements of Cash Flows - (unaudited)
For the nine months ended September 30, 1998 and 1999 3
Notes to the Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 7
Risk Factors 13
PART II - OTHER INFORMATION
Item 2. Changes in Securities 20
Item 6. Exhibits and Reports on Form 8-K 20
</TABLE>
Note: Item 3 of Part I, and Items 1, 3, 4, and 5 of Part II are omitted because
they are not applicable
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
RENAL CARE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,943 $ 26,748
Accounts receivable, net 84,795 93,434
Inventories 8,553 9,326
Prepaid expenses and other current assets 8,329 10,698
Deferred income taxes 3,381 3,381
-------- --------
Total current assets 125,001 143,587
Property and equipment, net 96,256 116,891
Goodwill and other intangibles, net 205,765 213,447
Other assets 6,355 5,838
-------- --------
Total assets $433,377 $479,763
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,109 $ 20,941
Income taxes payable 1,579 1,626
Current portion of long-term debt 10,742 663
Other current liabilities 46,776 51,401
-------- --------
Total current liabilities 79,206 74,631
Long-term debt, net of current portion 79,507 82,632
Deferred income taxes 3,467 3,467
Minority interest 25,517 32,257
-------- --------
Total liabilities 187,697 192,987
Stockholders' equity:
Preferred stock, $.01 par value, 10,000 shares
authorized, none issued -- --
Common stock, $.01 par value, 90,000 shares authorized,
43,995 and 44,656 shares issued and outstanding at
December 31, 1998 and September 30, 1999, respectively 440 447
Additional paid-in capital 183,817 190,632
Retained earnings 61,423 95,697
-------- --------
Total stockholders' equity 245,680 286,776
-------- --------
Total liabilities and stockholders' equity $433,377 $479,763
======== ========
</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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenue $110,357 $133,484 $304,448 $382,841
Operating costs and expenses:
Patient care costs 72,050 85,733 201,328 247,014
General and administrative expenses 10,414 12,506 29,399 35,644
Provision for doubtful accounts 3,356 3,579 9,195 10,205
Depreciation and amortization 5,497 6,798 15,328 19,488
Merger expenses -- -- 1,000 4,300
-------- -------- -------- --------
Total operating costs and expenses 91,317 108,616 256,250 316,651
-------- -------- -------- --------
Income from operations 19,040 24,868 48,198 66,190
Interest expense, net 1,557 1,284 4,239 3,977
-------- -------- -------- --------
Income before minority interest and income taxes 17,483 23,584 43,959 62,213
Minority interest 1,045 2,350 2,200 5,594
-------- -------- -------- --------
Income before income taxes 16,438 21,234 41,759 56,619
Provision for income taxes 6,126 7,963 15,678 22,345
-------- -------- -------- --------
Net income $ 10,312 $ 13,271 $ 26,081 $ 34,274
======== ======== ======== ========
Net income per share:
Basic $ 0.24 $ 0.30 $ 0.60 $ 0.77
======== ======== ======== ========
Diluted $ 0.22 $ 0.29 $ 0.57 $ 0.74
======== ======== ======== ========
Weighted average shares outstanding:
Basic 43,466 44,571 43,110 44,448
======== ======== ======== ========
Diluted 46,035 46,400 45,643 46,500
======== ======== ======== ========
</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>
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1999
-------- --------
<S> <C> <C>
Operating activities
Net income $ 26,081 $ 34,274
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,328 19,488
Income applicable to minority interest 2,200 5,594
Change in assets and liabilities net of effects from acquisitions (18,462) (2,898)
-------- --------
Net cash provided by operating activities 25,147 56,458
INVESTING ACTIVITIES
Purchases of property and equipment (17,735) (34,218)
Cash paid for acquisitions, net of cash acquired (41,535) (10,502)
Investments, net 3,625 --
Change in other assets (484) 516
-------- --------
Net cash used in investing activities (56,129) (44,204)
FINANCING ACTIVITIES
Net borrowings (payments) under line of credit 41,591 (7,617)
Payments on long-term debt (6,368) --
Proceeds from exercise of stock options 6,487 3,822
Distributions to minority shareholders (400) (1,654)
-------- --------
Net cash provided by (used) in financing activities 41,310 (5,449)
-------- --------
Increase in cash and cash equivalents 10,328 6,805
Cash and cash equivalents, at beginning of period 9,138 19,943
-------- --------
Cash and cash equivalents, at end of period $ 19,466 $ 26,748
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 4,118 $ 4,775
======== ========
Income taxes $ 10,277 $ 22,298
======== ========
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Issuance of common stock in acquisition $ 1,846 $ 2,000
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 6
RENAL CARE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999
(in thousands, except per share data)
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
Overview
Renal Care Group, Inc. ("Renal Care Group" or the "Company") provides
dialysis services to patients with chronic kidney failure also known as
end-stage renal disease ("ESRD"). As of September 30, 1999, the Company provided
dialysis and ancillary services to approximately 14,200 patients through 181
outpatient dialysis centers in 22 states. In addition to its outpatient dialysis
center operations, the Company provides acute dialysis services through
contractual relationships with 103 hospitals. The Company also provides wound
care and diabetes services.
Renal Care Group's net revenue has been derived primarily from the
following sources:
- outpatient hemodialysis services;
- ancillary services associated with dialysis, primarily the
administration of erythropoietin ("EPO");
- home dialysis services;
- inpatient hemodialysis services provided pursuant to contracts
with acute care hospitals and skilled nursing facilities;
- management contracts with hospital-based and medical
university dialysis programs;
- laboratory services; and
- wound care and diabetes services.
ESRD patients typically receive three dialysis treatments each week,
with reimbursement for services provided primarily by the Medicare ESRD program
based on rates established by the Health Care Financing Administration ("HCFA").
For the nine months ended September 30, 1999, approximately 60% 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 increase or reduce payments under the ESRD program.
The Medicare ESRD composite rate applies to a designated group of
dialysis services, including the dialysis treatment, supplies used for such
treatment, certain laboratory tests and medications, and most of the home
dialysis services provided by Renal Care Group. Certain other services and drugs
are eligible for separate reimbursement under Medicare and are not part of the
ESRD composite rate, including specific drugs such as EPO and some
physician-ordered tests provided to dialysis patients.
4
<PAGE> 7
EPO is the commonly-used name for the drug erythropoietin, which is sold under
the brand name EPOGEN(R).
For patients with private health insurance, dialysis was historically
reimbursed at rates higher than Medicare during the first 18 months of
treatment, and after that time Medicare became the primary payor. Effective
August 5, 1997, however, the Balanced Budget Act extended to 30 months of
treatment the health insurance coordination period during which private
insurance must pay for dialysis; after that period Medicare now becomes the
primary payor. The impact of such extension is expected to be fully realized by
the end of first quarter 2000. Reimbursement for dialysis services provided
pursuant to a hospital contract is negotiated with the individual hospital and
generally is higher on a per treatment equivalent basis than the Medicare
composite 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 representation 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.
The Company suggests that persons read these financial statements in conjunction
with the consolidated financial statements and the related notes thereto
included in the Company's Form 10-K, as filed with the SEC on March 31, 1999,
and the supplemental consolidated financial statements and the related notes
thereto included in the Company's Form 8-K, as filed with the Securities and
Exchange Commission on April 22, 1999.
NOTE 2 - SIGNIFICANT EVENTS
In January 1999, Renal Care Group completed a merger with Dialysis
Centers of America, Inc. ("DCA"), an operator of 12 dialysis facilities located
in metropolitan Chicago. The facilities also provide acute, in-patient dialysis
treatment services to six area hospitals. Renal Care Group issued approximately
3,073 shares of common stock in the merger. The DCA Merger was accounted for as
a pooling-of-interests. As a result, the Company's consolidated financial
statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations included herein give retroactive effect to the DCA merger
for all periods presented. The results of operations for the separate companies
and the combined results presented in the condensed consolidated financial
statements for prior periods follow:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1998
-------- --------
<S> <C> <C>
Net revenue
RCG $ 96,807 $266,780
DCA 13,550 37,668
-------- --------
$110,357 $304,448
======== ========
Net income
RCG $ 9,415 $ 24,806
DCA 897 1,275
-------- --------
$ 10,312 $ 26,081
======== ========
</TABLE>
5
<PAGE> 8
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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted income per share $10,312 $13,271 $26,081 $34,274
Denominator:
Denominator for basic net income per share -
weighted-average shares 43,466 44,571 43,110 44,448
Effect of dilutive securities:
Stock Options 2,043 1,410 2,041 1,564
Warrants 526 419 492 488
------- ------- ------- -------
Denominator for diluted net income per share -
adjusted weighted-average shares and assumed
conversions 46,035 46,400 45,643 46,500
======= ======= ======= =======
Net income per share:
Basic $ 0.24 $ 0.30 $ 0.60 $ 0.77
======= ======= ======= =======
Diluted $ 0.22 $ 0.29 $ 0.57 $ 0.74
======= ======= ======= =======
</TABLE>
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
As described in Note 2 to the Consolidated Financial Statements, Renal
Care Group merged with Dialysis Centers of America (DCA) in January 1999 in a
transaction accounted for as a pooling-of-interests. Accordingly, the
Consolidated Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations have been restated to include DCA
for all periods.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
Net revenue. Net revenue increased from $110.4 million for the three
months ended September 30, 1998 to $133.5 million for the three months ended
September 30, 1999, an increase of $23.1 million, or 20.9%. This increase
resulted primarily from a 14.3% increase in the number of treatments from
475,024 in the 1998 period to 543,111 in the 1999 period. This growth in
treatments is the result of the acquisition and development of various dialysis
facilities and an 8.2% increase in same-center treatments for the 1999 period
over the 1998 period. In addition, average net revenue per dialysis treatment
increased 5.3% from $226 in the 1998 period to $238 in the 1999 period. The
remaining revenue increase is a result of wound care and diabetes revenues and
higher management fees. The increase in revenue per treatment was due to an
improvement in Renal Care Group's payor mix, increases in the utilization of EPO
and other drugs, increases in acute hospital services, the continued roll-out of
Renal Care Group'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 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
$72.1 million for the three months ended September 30, 1998 to $85.7 million for
the three months ended September 30, 1999, an increase of $13.6 million, or
18.9%. This increase resulted primarily from an increase in the number of
treatments performed during the period, which caused a corresponding increase in
the cost of labor, drugs and supplies. Patient care costs as a percentage of net
revenue decreased from 65.3% in the 1998 period to 64.2% in the 1999 period
primarily due to an increase in net revenue per treatment. Patient care costs
per treatment increased from $152 in the 1998 period to $158 in the 1999 period,
an increase of $6, or 3.9%. This increase was due to costs associated with the
utilization of EPO and other drugs, the cost of providing acute hospital
services, the cost of providing in-house laboratory services and normal health
care 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
$10.4 million for the three months ended September 30, 1998 to $12.5 million for
the three months ended September 30, 1999, an increase of $2.1 million, or
20.2%. General and administrative expenses as a percentage of net revenue
remained consistent at 9.4% in the 1998 and 1999 periods.
Provision for Doubtful Accounts. The provision for doubtful accounts is
determined as a function of payor mix, billing practices, and other factors.
Renal Care Group reserves 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. Management estimates the net collectibility of
accounts receivable based upon a variety of factors. These factors include, but
are not limited to, analyzing revenues generated from payor sources, performing
subsequent collection testing and continually reviewing detailed accounts
receivable agings. The provision for doubtful accounts increased from $3.4
million for the three months ended September 30, 1998 to $3.6 million for the
three months ended September 30, 1999. The provision for doubtful accounts as a
percentage of net revenue decreased from 3.0% in the 1998 period to 2.7% in the
1999 period. This decrease in provision for doubtful accounts as a percentage of
net revenue resulted
7
<PAGE> 10
primarily from improved collections of accounts receivable that were assumed in
the merger with Dialysis Centers of America, Inc. in January 1999.
Depreciation and Amortization. Depreciation and amortization increased
from $5.5 million for the three months ended September 30, 1998 to $6.8 million
for the three months ended September 30, 1999, an increase of $1.3 million, or
23.6%. This 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
acquisitions accounted for as purchases.
Income from Operations. Income from operations increased from $19.0
million for the three months ended September 30, 1998 to $24.9 million for the
three months ended September 30, 1999, an increase of $5.9 million, or 31.1%.
Income from operations as a percentage of net revenue increased from 17.3% in
the 1998 period to 18.6% in the 1999 period as a result of the factors discussed
above.
Interest Expense. Interest expense decreased from $1.6 million for the
three months ended September 30, 1998 to $1.3 million for the three months ended
September 30, 1999. This decrease was the result of both lower average
borrowings and lower effective interest rates during the 1999 period. The lower
effective interest rates were the result of replacing debt assumed in the DCA
transaction with proceeds from Renal Care Group's credit facility combined with
generally lower market interest rates.
Minority Interest. Minority interest represents the proportionate
equity interest of other partners in entities that are not wholly-owned, whose
financial results are included in Renal Care Group's consolidated results.
Minority Interest as a percentage of net revenue increased to 1.8% in 1999 from
0.9% in 1998. This increase was the result of continued operational improvements
in Renal Care Group's joint ventures, primarily those in Ohio and Oregon.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
Net revenue. Net revenue increased from $304.4 million for the nine
months ended September 30, 1998 to $382.8 million for the nine months ended
September 30, 1999, an increase of $78.4 million, or 25.8%. This increase
resulted primarily from a 17.0% increase in the number of treatments from
1,343,265 in the 1998 period to 1,571,585 in the 1999 period. This growth in
treatments is the result of the acquisition and development of various dialysis
facilities and an 8.6% increase in same-center treatments for the 1999 period
over the 1998 period. In addition, average net revenue per dialysis treatment
increased 7.2% from $221 in the 1998 period to $237 in the 1999 period. The
remaining revenue increase is a result of wound care and diabetes revenues and
higher management fees. The increase in revenue per treatment was due to an
improvement in Renal Care Group's payor mix, increases in the utilization of EPO
and other drugs, increases in acute hospital services, the continued roll-out of
Renal Care Group'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 $201.3 million
for the nine months ended September 30, 1998 to $247.0 million for the nine
months ended September 30, 1999, an increase of $45.7 million, or 22.7%. 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 percentage of net revenue decreased from 66.1% in the 1998
period to 64.5% in the 1999 period. Patient
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<PAGE> 11
care costs per treatment increased from $150 in the 1998 period to $157 in the
1999 period, an increase of $7 or 4.7%. This increase was 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 $29.4 million for the nine months ended September 30,
1998 to $35.6 million for the nine months ended September 30, 1999, an increase
of $6.2 million, or 21.1%. General and administrative expenses as a percentage
of net revenue decreased from 9.7% for the 1998 period to 9.3% in the 1999
period, primarily as a result of the increase of net revenue for the 1999
period.
Provision for Doubtful Accounts. The provision for doubtful accounts
increased from $9.2 million for the nine months ended September 30, 1998 to
$10.2 million for the nine months ended September 30, 1999, an increase of $1.0
million, or 10.9%. The provision for doubtful accounts as a percentage of net
revenue decreased from 3.0% for the 1998 period to 2.7% in the 1999 period. This
decrease in provision for doubtful accounts as a percentage of net revenue
resulted primarily from improved collections of accounts receivable that were
assumed in the merger with Dialysis Centers of America, Inc. in January 1999.
Depreciation and Amortization. Depreciation and amortization increased
from $15.3 million for the nine months ended September 30, 1998 to $19.5 million
for the nine months ended September 30, 1999, an increase of $4.2 million, or
27.5%. This 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
acquisitions accounted for as purchases.
Merger Expenses. Merger expenses of $4.3 million for the nine months
ended September 30, 1999 represent legal, accounting, employee severance costs
and related benefits and other costs associated with the assimilation and
transition of the merger with DCA.
Income from Operations. Income from operations increased from $48.2
million for the nine months ended September 30, 1998 to $66.2 million for the
nine months ended September 30, 1999, an increase of $18.0 million, or 37.3%.
Income from operations as a percentage of net revenue increased from 15.8% in
the 1998 period to 17.3% in the 1999 period based on the factors discussed
above.
Interest Expense, Net. Interest expense decreased from $4.2 million for
the nine months ended September 30, 1998 to $4.0 million for the nine months
ended September 30, 1999. This decrease was the result of both lower average
borrowings and lower effective interest rates during the 1999 period. The lower
effective interest rates were the result of replacing debt assumed in the DCA
transaction with proceeds from Renal Care Group's credit facility combined with
generally lower market interest rates.
Minority Interest. Minority interest represents the proportionate
equity interest of other partners in entities that are not wholly-owned, whose
financial results are included in Renal Care Group's consolidated results.
Minority Interest as a percentage of net revenue increased to 1.5% in 1999 from
0.7% in 1998. This increase was the result of continued operational improvements
in Renal Care Group's joint ventures, primarily those in Ohio and Oregon.
9
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
Renal Care Group requires capital primarily to acquire and develop
dialysis facilities, to purchase property and equipment for existing facilities,
and to finance working capital needs. At September 30, 1999, Renal Care Group's
working capital was $69.0 million, cash and cash equivalents were $26.7 million,
and its current ratio was approximately 1.9 to 1.0.
Net cash provided by operating activities was $56.5 million for the
nine months ended September 30, 1999. Cash provided by operating activities
consists of net income before depreciation and amortization expense, adjusted
for changes in components of working capital, primarily accounts receivable. Net
cash used in investing activities was $44.2 million for the nine months ended
September 30, 1999. Cash used in investing activities consisted primarily of
$10.5 million of cash paid for acquisitions, net of cash acquired, and $34.2
million of purchases of property and equipment. Cash used in financing
activities was $5.4 million for the nine months ended September 30, 1999. Cash
used by financing activities primarily reflects $7.6 million in net repayments
of borrowings under Renal Care Group's line of credit, and $1.7 million in
distributions to minority shareholders and is partially offset by $3.8 million
from the proceeds of stock option exercises.
On June 23, 1999, the Company executed a Second Amendment to its First
Amended and Restated Loan Agreement with a group of banks. The Second Amendment
provides for an increase in the credit facility from $125.0 million to $185.0
million. Borrowings under the credit facility may be used for acquisitions,
capital expenditures, working capital and general corporate purposes. No more
than $25.0 million of the credit facility may be used for working capital
purposes. Within the working capital sublimit, the Company may borrow up to $5.0
million in swing line loans.
Renal Care Group has negotiated loan pricing based on a LIBO rate
margin pursuant to leverage tiers. These leverage tiers extend from 0.75 to 2.25
times and are priced at a LIBO rate margin of 0.60% to 1.35%. Commitment fees
are also priced pursuant to leverage ratio tiers. Commitment fees range from
0.20% to 0.30% pursuant to leverage ratios ranging between 0.75 and 2.25. Under
the loan agreement, commitments range in amounts and dates from the closing date
through August 2003. Renal Care Group has obtained total lender commitments of
$185.0 million through August 2000. Lender commitments are then reduced to
$157.3 million through August 2001, $129.5 million through August 2002 and
$101.8 million through August 2003. All loans under the loan agreement are due
and payable on August 4, 2003. On September 30, 1999, there was $81.0 million
outstanding under this credit facility. In connection with the merger with
Dialysis Centers of America, Inc. in January 1999, Renal Care Group incurred
approximately $32.7 million in indebtedness under this credit facility to repay
certain DCA indebtedness and to fund DCA's working capital needs.
Each of Renal Care Group's subsidiaries has guaranteed all of Renal
Care Group's obligations under the loan agreement. Further, Renal Care Group's
obligations under the loan agreement, and the obligations of each of its
subsidiaries under its guaranty, are secured by a pledge of the equity interests
held by Renal Care Group in each of the subsidiaries. Financial covenants are
customary based on the amount and duration of this commitment.
10
<PAGE> 13
A significant component of Renal Care Group's growth strategy is the
acquisition and development of dialysis facilities. There can be no assurance
that Renal Care Group will be able to identify suitable acquisition candidates
or to close acquisition transactions with them on acceptable terms. Management
of Renal Care Group believes that existing cash and funds from operations,
together with funds available under the line of credit, will be sufficient to
meet Renal Care Group's acquisition, expansion, capital expenditure and working
capital needs for the foreseeable future. However, in order to finance certain
large strategic acquisition opportunities, Renal Care Group 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 any future indebtedness or
securities will depend on market and other conditions. There can be no assurance
that any additional financing, if required, will be available on terms
acceptable to Renal Care Group.
Capital expenditures of approximately $40.0 million, primarily for
equipment replacement, expansion of existing dialysis facilities and
construction of de novo facilities are planned in 1999. Renal Care Group has
made capital expenditures of $34.2 million through September 30, 1999. The
Company expects that remaining capital expenditures in 1999 will be funded with
cash provided by operating activities and the Company's existing credit
facility. Management believes that capital resources available to Renal Care
Group will be sufficient to meet the needs of its business, both on a short- and
long-term basis.
IMPACT OF YEAR 2000
Introduction. The term "year 2000 issue" is a general term used to
describe various problems that may result from the improper processing of dates
and date-sensitive calculations by computers and other machinery as the year
2000 is approached and reached. These problems arise from hardware and software
unable to distinguish dates in the "2000's" from dates in the "1900's" and from
other sources such as the use of special codes and conventions in software that
make use of a date field.
Renal Care Group's State of Readiness. Renal Care Group's efforts in
addressing the year 2000 issue are focused in the following four areas:
- developing awareness and educating employees regarding the
year 2000 issue;
- implementing procedures to determine whether Renal Care
Group's software systems and hardware platforms are year 2000
compliant and communicating with suppliers and third party
payors to determine whether there will be any interruption in
their systems that could affect Renal Care Group's ability to
receive timely shipments of inventory or payment for services
as a result of the year 2000 issue;
- evaluating and making necessary modifications to Renal Care
Group's software and hardware systems and other systems that
contain imbedded chips, such as phone systems, which process
dates and date sensitive materials; and
- testing of systems for year 2000 compliance.
The Company has substantially completed its assessment of key computer
systems and electronic devices and has also completed a detailed inventory of
each facility. Additionally, the Company is in the final stages of its efforts
to remediate year 2000 issues identified in the assessment
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<PAGE> 14
phase. Management expects to complete the remediation phase by November 30,
1999. The education phase will be an on-going process throughout 1999.
Renal Care Group has obtained written confirmation from the majority of
its vendors that Renal Care Group's software applications and hardware platforms
acquired from such vendors will correctly manipulate dates and date-related data
as the year 2000 is approached and reached. Based on an initial assessment of
its core clinical and financial systems, the Company has determined the
following: (1) over 90% of Renal Care Group's core systems are packaged
applications licensed from third-party vendors, thus less than 10% were
developed internally; and (2) substantially all of such third-party applications
have been certified to Renal Care Group by their manufacturers as either Year
2000 compliant or Year 2000 compliant with minor upgrades.
Furthermore, to improve its operating performance and efficiency, Renal
Care Group has undertaken a number of significant information system
initiatives. These initiatives include the selection and implementation of a new
laboratory system, a new human resources and payroll system, a new universal
patient index and registration system, and a new practice management system.
Renal Care Group expects most of these systems to be operational by either the
first or second quarter 2000. The manufacturers of these systems have certified
that the systems are year 2000 compliant. The Company currently believes that
with upgrades or replacements of certain software and hardware, Renal Care
Group's internal systems will be substantially year 2000 compliant.
Nevertheless, there can be no assurance that the software applications and
hardware platforms on which Renal Care Group's business relies will correctly
manipulate dates and date-related information as the year 2000 is approached and
reached. Such failures could have a material adverse effect on Renal Care
Group's financial condition, results of operations and business.
Renal Care Group's business relies heavily upon its ability to obtain
reimbursement from third party payors, including Medicare, Medicaid and private
insurers, and to obtain water, power and other supplies from vendors. Renal Care
Group has obtained written verification from the majority of its major
suppliers, and the majority of its significant third party payors, in order to
determine whether there will be any interruption in the provision of supplies or
reimbursement for services performed resulting from the year 2000 issue. Renal
Care Group substantially completed this process during the second quarter of
1999. At this time, Renal Care Group has received confirmations from a number of
HCFA intermediaries and other third party payors stating that they are now, or
plan soon to be, year 2000 compliant. HCFA has publicly indicated that it plans
to be year 2000 compliant and to be able to process and pay claims without
interruption. HCFA has, however, also indicated that it still has year 2000
issues with third party systems and that it is working to address such issues.
During the week of November 15, 1999, the Company will participate in the
National Medicare Y2K Testing Week by sending sample year 2000 electronic claim
files to the key Medicare intermediaries with which it deals. The failure of
HCFA, Medicare intermediaries, Medicaid payors or any of Renal Care Group's
other significant third party payors to remedy year 2000 related problems could
result in a delay in Renal Care Group's receipt of payments for services which
could have a material adverse impact on the Company's earnings, financial
condition and business. Furthermore, a delay in receiving supplies from certain
vendors could hinder Renal Care Group's ability to provide services to patients,
which could have a material adverse impact on Renal Care Group's earnings,
financial condition and business.
Renal Care Group is aware that some of its systems, such as dialysis
and other medical equipment, phone systems, facsimile machines, heating and air
conditioning, security systems and other non-data processing oriented systems
may include imbedded chips that process dates and date-sensitive
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<PAGE> 15
material. These imbedded chips are both difficult to identify in all instances
and difficult to repair; often, total replacement of the chips is necessary.
Renal Care Group is performing an evaluation of its systems to determine whether
Renal Care Group needs to repair or replace any chips to avoid year 2000
problems. If Renal Care Group fails to identify or remediate any imbedded chips
(either on an individual or an aggregate basis) on which significant business
operations depend, such as phone systems, there could be a material adverse
impact on Renal Care Group's earnings, financial condition and business.
Costs to Address Renal Care Group's Year 2000 Issues. Renal Care Group
has and will continue to utilize both internal and external resources to
complete its year 2000 project. Renal Care Group estimates that the cost to
remediate year 2000 issues that have been identified and to test systems to
verify year 2000 compliance will be between $500,000 and $700,000 and have been
substantially incurred by the end of the third quarter 1999. These costs are
exclusive of contingency plan costs as the total cost of the year 2000 effort is
not known at this time.
Risks Presented by Year 2000 Issues. Renal Care Group is still in the
process of evaluating potential disruptions or complications that might result
from year 2000-related problems. At this time, Renal Care Group has not
identified any specific business functions that will suffer material disruption
as a result of year 2000-related events. The Company may, however, identify
business functions in the future that are specifically at risk of year 2000
disruption. Renal Care Group's failure at this point to identify year 2000 risks
should not be construed to mean that there is no risk of year 2000-related
disruption. Moreover, due to the unique and pervasive nature of the year 2000
issue, Renal Care Group cannot anticipate each of the wide variety of year 2000
events, particularly outside of the Company, that might arise in a worst case
scenario and might have a material adverse effect on Renal Care Group's results
of operations and business.
Renal Care Group's Contingency Plans. Each of Renal Care Group's
regional operations management teams has developed preliminary year 2000
contingency plans and is working to refine those plans in light of year 2000
issues identified in the process of surveying our business and our trading
partners. These plans principally focus on identifying locations (either
centrally located Renal Care Group centers or local hospitals) with appropriate
back-up systems where Renal Care Group's patients can receive care if the
center in which they usually receive care is not functioning due to year 2000
issues. Some of these plans also include obtaining a limited amount of extra
inventory of supplies in case of disruptions in availability. The specifics of
these plans vary between Renal Care Group's regions, and some regions' plans
are more detailed than others. We can give no assurances that these contingency
plans will be adequate to address the issues we have identified or that issues
that we have not identified or addressed in our contingency planning will not
materially and adversely affect our business.
At the corporate level, Renal Care Group has developed contingency
plans to address year 2000 issues in light of the review we have conducted. We
have developed plans to confirm the operational status of each of our centers
and our key computer systems and electronic devices during the weekend of
January 1, 2000, and we plan to have teams of personnel available to work to
resolve any problems that are identified.
RISK FACTORS
You should carefully consider the risks described below before
investing in Renal Care Group. The risks and uncertainties described below ARE
NOT the only ones facing Renal Care Group. Other risks and uncertainties that we
have not predicted or assessed may also adversely affect our company.
If any of the following risks occur, our earnings, financial condition
or business could be materially harmed, and the trading price of our common
stock could decline, resulting in the loss of all or part of your investment.
IF WE FAIL TO INTEGRATE ACQUIRED COMPANIES, WE WILL BE LESS PROFITABLE.
Renal Care Group has grown significantly by acquisitions of other
dialysis providers since its formation in February 1996. We have completed some
of our acquisitions as recently as January and February of 1999, and we intend
to acquire more dialysis businesses in the future. After an acquisition, we face
the challenge of integrating the acquired company's management and other
personnel, clinical operations, and financial and operating systems with ours,
often without the benefit of continued services from key personnel of the
acquired company. We may be unable to integrate the businesses we acquire
successfully or to achieve anticipated benefits from an acquisition in a timely
manner, which could lead
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<PAGE> 16
to substantial costs and delays or other operational, technical or financial
problems, including diverting management's attention from our existing business.
Any of these results could damage our profitability and our prospects for future
growth.
IF MEDICARE OR MEDICAID CHANGE THEIR PROGRAMS FOR DIALYSIS, OUR REVENUE AND
EARNINGS COULD DECREASE.
If the government changes the Medicare, Medicaid or similar government
programs or the rates paid by those programs for our services, then our revenue
and earnings may decline. We estimate that approximately 62% of our net revenue
for 1997, 59% of our net revenue for 1998 and 55% of our net revenue for the
nine months ended September 30, 1999 consisted of reimbursements from Medicare,
including the administration of EPO to treat anemia. We also estimate that
approximately 7% of our net revenue for 1997, 5% of our net revenue for 1998,
and 5% of our net revenue for the nine months ended September 30, 1999,
consisted of reimbursements from Medicaid or comparable state programs. Any of
the following actions in connection with these programs could cause our revenue
and earnings to decline:
- a reduction of the amount paid to us under government
programs;
- an increase in the costs associated with performing our
services that are subject to inflation, such as labor and
supply costs, without a corresponding increase in
reimbursement rates;
- the inclusion of some or all ancillary services, for which we
are now reimbursed separately, in the flat composite rate for
a standard dialysis treatment; or
- changes in laws, or the interpretations of laws, which could
cause us to modify our operations.
IF REIMBURSEMENT FOR EPO DECREASES, ITS COST INCREASES OR IT BECOMES IN SHORT
SUPPLY, THEN WE COULD BE LESS PROFITABLE.
If government or private payors decrease reimbursement rates for EPO,
for which we are currently reimbursed separately outside of the flat composite
rate, our revenue and earnings may decline. EPO is a bio-engineered hormone that
is used to treat anemia. Our revenues from EPO were approximately 20% of net
revenue for 1997, 23% of net revenue for 1998, and 26% of net revenue for the
nine months ended September 30, 1999. Most of our payments for EPO come from
government programs. President Clinton included a proposal to decrease the
reimbursement for EPO by $1 per thousand units in his fiscal year 2000 budget,
which would represent a 10% reduction from the current government reimbursement
rate. For the quarter ended September 30, 1999, government reimbursement
represented approximately 65% of the total revenue we derived from EPO. Because
we are unable to predict accurately the possible effect that the proposed
reduction would have on the cost of EPO or private reimbursement rates, we
cannot quantify what the net effect would be on our revenue and earnings.
Further, EPO is produced by a single manufacturer, and if the manufacturer or
other factors interrupt the supply of EPO or the manufacturer raises its prices,
then our revenue and earnings may decline.
14
<PAGE> 17
IF PAYMENTS BY PRIVATE INSURERS, HOSPITALS OR MANAGED CARE ORGANIZATIONS
DECREASE, THEN OUR REVENUE AND EARNINGS COULD DECREASE.
If private insurers, hospitals or managed care organizations reduce
their rates or we experience a significant shift in our revenue mix toward
additional Medicare or Medicaid reimbursement, then our revenue and earnings may
decline. We estimate that approximately 31% of our net revenue for 1997, 36% of
our net revenue for 1998, and 40% of our net revenue for the nine months ended
September 30, 1999, were derived from sources other than Medicare and Medicaid.
In general, payments we receive from private insurers and hospitals for our
services are at rates significantly higher than the Medicare or Medicaid rates.
As a result, any of the following events could have a material adverse effect on
our revenue and earnings:
- an increase in dialysis procedures reimbursed by private
insurers, hospitals or managed care companies could cause
these payor organizations to reduce the rates they pay us;
- a portion of our business that is currently reimbursed by
private insurers or hospitals may become reimbursed by managed
care organizations, which currently have lower rates for our
services; or
- the scope of coverage by Medicare or Medicaid under the flat
composite rate could expand and, as a result, reduce the
extent of our services being reimbursed at the higher
private-insurance rates.
IF WE ARE UNABLE TO MAKE ACQUISITIONS IN THE FUTURE, OUR RATE OF GROWTH WILL
SLOW.
Much of our historical growth has come from acquisitions, and we expect
to continue to pursue growth through the acquisition and development of dialysis
centers. However, we may be unable to continue to identify and complete suitable
acquisitions or obtain the necessary financing. In addition, since we are a
bigger company, the amount that acquired businesses contribute to our revenue
and profits will likely be smaller on a percentage basis. We also compete with
other companies to identify and complete suitable acquisitions. We expect this
competition to intensify, making it more difficult to acquire suitable companies
on favorable terms. Further, the businesses we acquire may not perform well
enough to justify our investment. If we are unable to make additional
acquisitions on suitable terms, we may not meet our growth expectations.
IF WE COMPLETE FUTURE ACQUISITIONS, WE MAY DILUTE EXISTING STOCKHOLDERS BY
ISSUING MORE OF OUR COMMON STOCK OR WE MAY INCUR ADDITIONAL EXPENSES RELATED TO
DEBT AND GOODWILL, WHICH COULD REDUCE OUR EARNINGS.
We may issue equity securities in future acquisitions that could be
dilutive to our shareholders. We also may incur additional debt and amortization
expense related to goodwill and other intangible assets in future acquisitions.
We have used the pooling-of-interests accounting method for many of our
acquisitions, and as a result we have not recorded goodwill (the excess of
acquisition cost over identifiable tangible assets) in these acquisitions. In
those instances where we have used the purchase accounting method in
acquisitions, we have recorded goodwill and other intangible assets, which are
then amortized yearly against our earnings at a blended average life of 35
years. We had approximately $213.4 million of goodwill and other intangibles,
net as of September 30, 1999. The SEC and
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<PAGE> 18
accounting policy makers have announced that they are considering substantially
or completely curtailing the pooling-of-interests method, which would result in
more goodwill and associated amortization expense for future and, possibly,
prior acquisitions. Further, the SEC and accounting policy makers have announced
that they may reduce the allowable life over which goodwill may be amortized,
which would thereby increase amortization expense in each year. Interest expense
on additional debt and amortization expense from acquisitions may significantly
reduce our profitability.
IF ACQUIRED BUSINESSES HAVE UNKNOWN LIABILITIES THAT ARE NOT COVERED BY AN
INDEMNIFICATION OBLIGATION, THEN WE COULD BE EXPOSED TO LIABILITIES THAT COULD
HARM OUR BUSINESS AND PROFITABILITY.
Businesses we acquire may have unknown or contingent liabilities,
including liabilities for failure to comply with health care laws. Although we
generally attempt to identify any practices that may give rise to unknown or
contingent liabilities and conform them to our standards after the acquisition,
private plaintiffs or governmental agencies may still assert claims. Even though
we generally seek to obtain indemnification from prospective sellers, unknown
and contingent liabilities may not be covered by indemnification or may exceed
contractual limits or the financial capacity of the indemnifying party.
IF OUR REFERRING PHYSICIANS WERE TO CEASE REFERRING TO OUR CENTERS OR WERE
PROHIBITED FROM REFERRING FOR REGULATORY REASONS, OUR REVENUE AND EARNINGS WOULD
DECLINE.
Our dialysis centers depend on referrals from local nephrologists.
Typically, one or a few physicians account for all or a significant portion of
the patient base at a center, and the loss of one or more referring physicians
could have a material adverse effect on the operations of that center. The loss
of a significant number of referring physicians could cause our revenue and
earnings to decline. In many instances, the primary referral sources for our
centers are physicians who are also stockholders of Renal Care Group and serve
as medical directors of our centers. If stock ownership or the medical director
relationship were deemed to violate applicable federal or state law, including
fraud and abuse laws and laws prohibiting self-referrals, the physicians owning
our stock or acting as medical directors may be forced to stop referring to our
centers. Further, we may not be able to renew or renegotiate our medical
director agreements successfully, which could result in a loss of patients since
physicians typically have their patients treated at a center where they serve as
a medical director.
IF OUR BUSINESS IS ALLEGED OR FOUND TO VIOLATE HEATH CARE OR OTHER APPLICABLE
LAWS, OUR REVENUE AND EARNINGS COULD DECREASE.
We are subject to extensive federal, state and local regulation
regarding the following:
- fraud and abuse prohibitions under health care reimbursement
laws;
- prohibitions and limitations on patient referrals;
- false claims prohibitions under health care reimbursement
laws;
- facility licensure;
- health and safety requirements;
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<PAGE> 19
- environmental compliance; and
- medical 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. Due to the
broad application of the statutory provisions and the absence in many instances
of regulations or court decisions addressing the specific arrangements by which
we conduct our business, including our medical director and physician
stockholder and joint venture arrangements, governmental agencies could
challenge some of our practices under these laws. If any of our operations are
found to violate these laws, we may be subject to severe sanctions or be
required to alter or discontinue the challenged conduct or both. If we are
required to alter our practices, we may not be able to do so successfully. If
any of these events occur, it could cause our revenue and earnings to decline.
CHANGES IN THE HEALTH CARE DELIVERY, FINANCING OR REIMBURSEMENT SYSTEMS COULD
ADVERSELY AFFECT OUR BUSINESS.
The health care industry in the United States is in a period of rapid
change and uncertainty. Health care organizations, public or private, may
dramatically change the way they operate and pay for services. Our business is
designed to function within the current health care financing and reimbursement
system. During the past several years, the health care industry has been subject
to increasing levels of government regulation of, among other things,
reimbursement rates and capital expenditures. In addition, proposals to reform
the health care system have been considered by Congress. These proposals, if
enacted, may further increase government regulation of or other involvement in
health care, lower reimbursement rates and otherwise change the operating
environment for health care companies. We cannot predict the likelihood of those
events or what impact they may have on our business.
THE DIALYSIS BUSINESS IS HIGHLY COMPETITIVE AND IF WE DO NOT COMPETE EFFECTIVELY
IN OUR MARKET, WE COULD LOSE MARKET SHARE AND OUR RATE OF GROWTH COULD SLOW.
The dialysis industry is fragmented and rapidly consolidating. There
are several large dialysis companies that compete for the acquisition of
existing dialysis centers and the development of relationships with referring
physicians. Several of our competitors are part of larger companies that also
manufacture dialysis equipment, which allows them to lower equipment costs.
Several of our competitors, including these equipment manufacturers, are much
larger than we are and have substantially greater financial resources and more
established operations and infrastructure than us. We also experience
competition from referring physicians who open their own dialysis centers. There
can be no assurance that we will be able to compete effectively with any of our
competitors.
IF WE LOSE ANY OF OUR EXECUTIVE OFFICERS, OR ARE UNABLE TO ATTRACT AND RETAIN
QUALIFIED MANAGEMENT PERSONNEL AND MEDICAL DIRECTORS, OUR ABILITY TO RUN OUR
BUSINESS COULD BE ADVERSELY AFFECTED AND OUR REVENUE AND EARNINGS COULD DECLINE.
We are dependent upon the services of our executive officers Sam A.
Brooks, Jr., our Chairman, Chief Executive Officer and President, and Raymond
Hakim, M.D., Ph.D., R. Dirk Allison and Gary Brukardt, each an Executive Vice
President. Mr. Brooks, Dr. Hakim and Mr. Brukardt have each been with Renal Care
Group since its formation. We have entered into employment agreements with
Messrs. Brooks, Allison, and Brukardt and Dr. Hakim. The employment agreements
for each of these executive
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<PAGE> 20
officers other than Dr. Hakim contain restrictive covenants prohibiting the
officer from competing with Renal Care Group for a period of one year following
the end of the officer's employment term. The services of these individuals
would be very difficult to replace. We do not carry key-man life insurance on
any of our officers. Further, our growth will depend in part upon our ability to
attract and retain skilled employees, for whom competition is intense. We also
believe that our future success will depend on our ability to attract and retain
qualified physicians to serve as medical directors of our dialysis centers. We
have entered into medical director agreements with the physicians serving as
medical directors of our dialysis centers, most of which contain noncompetition
covenants of varying durations.
IF OUR BOARD OF DIRECTORS DOES NOT APPROVE AN ACQUISITION OR CHANGE IN CONTROL
OF RENAL CARE GROUP, OUR STOCKHOLDERS MAY NOT REALIZE THE FULL VALUE OF THEIR
STOCK.
Our certificate of incorporation and bylaws contain a number of
provisions that may delay, deter or inhibit a future acquisition or change in
control of Renal Care Group that is not first approved by our board of
directors. This could occur even if our stockholders are offered an attractive
value for their shares or if a substantial number or even a majority of our
stockholders believe the takeover may be in their best interest. These
provisions are intended to encourage any person interested in acquiring Renal
Care Group to negotiate with and obtain approval from our board of directors
prior to pursuing the transaction. Provisions that could delay, deter or inhibit
a future acquisition or change in control of Renal Care Group include the
following:
- a staggered board of directors that would require two annual
meetings to replace a majority of the board of directors;
- restrictions on calling special meetings at which an
acquisition or change in control might be brought to a vote of
the stockholders;
- blank check preferred stock that may be issued by our board of
directors without stockholder approval and that may be
substantially dilutive or contain preferences or rights
objectionable to an acquiror; and
- a poison pill that would substantially dilute the interest
sought by an acquiror.
These provisions could also discourage bids for our common stock at a premium
and cause the market price of our common stock to decline.
OUR STOCK PRICE IS VOLATILE AND AS A RESULT, THE VALUE OF YOUR INVESTMENT MAY GO
DOWN FOR REASONS UNRELATED TO THE PERFORMANCE OF OUR BUSINESS
Our common stock is traded on the Nasdaq National Market. The market
price of our common stock has been volatile, ranging from a low of $14.875 per
share to a high of $34.375 per share during the first nine months of 1999, and
could fluctuate substantially based on a variety of factors, including the
following:
- future announcements concerning us, our competitors or the
health care market;
- changes in government regulations; and
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<PAGE> 21
- changes in earnings estimates by analysts.
Furthermore, stock prices for many companies fluctuate widely for
reasons that may be unrelated to their operating results. These fluctuations,
coupled with changes in demand or reimbursement levels for our services and
general economic, political and market conditions, could cause the market price
of our common stock to decline.
YEAR 2000 ISSUES MAY RESULT IN LOSS OF REVENUE OR INCREASE IN COSTS
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century and, if not
corrected, could fail or create erroneous results by or at the year 2000. While
we have substantially completed our assessment of our year 2000 issues, we
cannot be sure that our efforts to address our year 2000 issues are appropriate,
adequate or complete. Our year 2000 issues could reside in our own systems and
in the systems of third parties with whom we have relationships that are
material to our operations, such as reimbursement to us from fiscal
intermediaries and governmental agencies and the provision of significant
utilities and supplies to our centers. Year 2000 issues could cause significant
disruptions in our cash flow and operations, which could cause our costs to
increase and our revenue and earnings to decline.
FORWARD LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "intend," "estimate" and "continue" or similar words.
You should read statements that contain these words carefully for the following
reasons:
- the statements discuss our future expectations;
- the statements contain projections of our future earnings or
of our financial condition; and
- the statements state other "forward-looking" information.
We believe it is important to communicate our expectations to our
investors. There may be events in the future, however, that we are not
accurately able to predict or over which we have no control. The risk factors
listed above, as well as any cautionary language in or incorporated by reference
into this prospectus, provide examples of risks, uncertainties and events that
may cause our actual results to differ materially from the expectations we
describe in our forward-looking statements. The SEC allows us to "incorporate by
reference" the information we file with them, which means we can disclose
important information to you by referring you to those documents. Before you
invest in our common stock, you should be aware that the occurrence of any of
the events described in the above risk factors, elsewhere in or incorporated by
reference into this prospectus and other events that we have not predicted or
assessed could have a material adverse effect on our earnings, financial
condition and business. If the events described above or other unpredicted
events occur, then the trading price of our common stock could decline and you
may lose all or part of your investment.
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<PAGE> 22
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
(a) See Note 2 to Financial Statements concerning the increase in authorized
shares of Common Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.48 Stock Option Agreement between the Company and Sam A. Brooks
10.49 Stock Option Agreement between the Company and Gary A.
Brukardt
10.50 Stock Option Agreement between the Company and Raymond Hakim,
M.D.
10.51 Stock Option Agreement between the Company and Ronald Hinds
10.52 Stock Option Agreement between the Company and Joseph C. Hutts
10.53 Stock Option Agreement between the Company and Harry R.
Jacobson, M.D.
10.54 Stock Option Agreement between the Company and William Lapham
27.1 Financial Data Schedule for the nine months ended September
30, 1999 (filed via Edgar on November 15, 1999)
(b) Reports on Form 8-K
Form 8-K filed August 5, 1999.
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<PAGE> 23
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)
November 15, 1999 BY: /s/ R. Dirk Allison
- -------------------- ---------------------------------------
R. Dirk Allison
Executive Vice President,
Chief Financial Officer, and Principal
Financial Officer and Principal
Accounting Officer
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<PAGE> 24
RENAL CARE GROUP, INC.
EXHIBIT INDEX
Number and
Description of Exhibit
- ----------------------
10.48 Stock Option Agreement between the Company and Sam A. Brooks
10.49 Stock Option Agreement between the Company and Gary A.
Brukardt
10.50 Stock Option Agreement between the Company and Raymond Hakim,
M.D.
10.51 Stock Option Agreement between the Company and Ronald Hinds
10.52 Stock Option Agreement between the Company and Joseph C. Hutts
10.53 Stock Option Agreement between the Company and Harry R.
Jacobson, M.D.
10.54 Stock Option Agreement between the Company and William Lapham
27.1 Financial Data Schedule for the nine months ended September
30, 1999 (filed via Edgar on November 15, 1999)
22
<PAGE> 1
EXHIBIT 10.48
[OFFICERS/EMPLOYEES/CONSULTANTS]
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
(1999 PLAN)
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: August 30, 1999.
B. TYPE OF OPTION: Non-Qualified Stock Option.
C. EXERCISE PRICE PER SHARE: $18.25.
D. OPTION SHARES: 230,000 shares of the Company's Common
Stock, $.01 par value.
E. VESTING SCHEDULE:
The Vesting Schedule shall be as follows:
<TABLE>
<CAPTION>
Percentage of Option
Schedule 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 30th
day of August, 1999.
RENAL CARE GROUP, INC.
By: /s/ Ronald Hinds
--------------------------------
Ronald Hinds, Executive Vice
President
ATTEST:
/s/ Douglas B. Chappell
- --------------------------------------
Douglas B. Chappell, Secretary
OPTIONEE:
/s/ Sam A. Brooks
------------------------------------
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 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 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
3
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[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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
4
<PAGE> 5
[OFFICERS/EMPLOYEES/CONSULTANTS]
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.
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
5
<PAGE> 6
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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
6
<PAGE> 7
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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 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
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<PAGE> 8
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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.
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[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.
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.
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[OFFICERS/EMPLOYEES/CONSULTANTS]
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:
-----------
10
<PAGE> 1
EXHIBIT 10.49
[OFFICERS/EMPLOYEES/CONSULTANTS]
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
(1999 PLAN)
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: August 30, 1999.
B. TYPE OF OPTION: Non-Qualified Stock Option.
C. EXERCISE PRICE PER SHARE: $18.25.
D. OPTION SHARES: 140,000 shares of the Company's Common
Stock, $.01 par value.
E. VESTING SCHEDULE:
The Vesting Schedule shall be as follows:
<TABLE>
<CAPTION>
Percentage of Option
Schedule 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 30th
day of August, 1999.
RENAL CARE GROUP, INC.
By: /s/ Ronald Hinds
--------------------------------
Ronald Hinds, Executive Vice
President
ATTEST:
/s/ Douglas B. Chappell
- --------------------------------------
Douglas B. Chappell, Secretary
OPTIONEE:
/s/ Gary A. Brukardt
------------------------------------
Gary A. Brukardt
WITNESS:
- ---------------------------
2
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[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 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 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
3
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[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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
4
<PAGE> 5
[OFFICERS/EMPLOYEES/CONSULTANTS]
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.
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
5
<PAGE> 6
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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
6
<PAGE> 7
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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 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
7
<PAGE> 8
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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.
8
<PAGE> 9
[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.
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.
9
<PAGE> 10
[OFFICERS/EMPLOYEES/CONSULTANTS]
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:
-----------
10
<PAGE> 1
EXHIBIT 10.50
[OFFICERS/EMPLOYEES/CONSULTANTS]
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
(1999 PLAN)
RAYMOND M. HAKIM
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 M. HAKIM (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: August 30, 1999.
B. TYPE OF OPTION: Non-Qualified Stock Option.
C. EXERCISE PRICE PER SHARE: $18.25.
D. OPTION SHARES: 140,000 shares of the Company's Common
Stock, $.01 par value.
E. VESTING SCHEDULE:
The Vesting Schedule shall be as follows:
<TABLE>
<CAPTION>
Percentage of Option
Schedule 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 30th
day of August, 1999.
RENAL CARE GROUP, INC.
By: /s/ Sam A. Brooks
--------------------------------
Sam A. Brooks President
ATTEST:
/s/ Douglas B. Chappell
- --------------------------------------
Douglas B. Chappell, Secretary
OPTIONEE:
/s/ Raymond M. Hakim
------------------------------------
Raymond M. Hakim
WITNESS:
- ---------------------------
2
<PAGE> 3
[OFFICERS/EMPLOYEES/CONSULTANTS]
ADDITIONAL TERMS AND CONDITIONS
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR RAYMOND M. HAKIM
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 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
3
<PAGE> 4
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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
4
<PAGE> 5
[OFFICERS/EMPLOYEES/CONSULTANTS]
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.
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
5
<PAGE> 6
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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
6
<PAGE> 7
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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 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
7
<PAGE> 8
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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.
8
<PAGE> 9
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.
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.
9
<PAGE> 10
[OFFICERS/EMPLOYEES/CONSULTANTS]
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:
-----------
10
<PAGE> 1
EXHIBIT 10.51
[OFFICERS/EMPLOYEES/CONSULTANTS]
RENAL CARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
(1999 PLAN)
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: August 30, 1999.
B. TYPE OF OPTION: Non-Qualified Stock Option.
C. EXERCISE PRICE PER SHARE: $18.25.
D. OPTION SHARES: 140,000 shares of the Company's Common
Stock, $.01 par value.
E. VESTING SCHEDULE:
The Vesting Schedule shall be as follows:
<TABLE>
<CAPTION>
Percentage of Option
Schedule 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 30th
day of August, 1999.
RENAL CARE GROUP, INC.
By: /s/ Sam A. Brooks
--------------------------------
Sam A. Brooks, President
ATTEST:
/s/ Douglas B. Chappell
- --------------------------------------
Douglas B. Chappell, Secretary
OPTIONEE:
/s/ Ronald Hinds
------------------------------------
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 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 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
3
<PAGE> 4
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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
4
<PAGE> 5
[OFFICERS/EMPLOYEES/CONSULTANTS]
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.
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
5
<PAGE> 6
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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
6
<PAGE> 7
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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 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
7
<PAGE> 8
[OFFICERS/EMPLOYEES/CONSULTANTS]
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 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.
8
<PAGE> 9
[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.
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.
9
<PAGE> 10
[OFFICERS/EMPLOYEES/CONSULTANTS]
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:
-----------
10
<PAGE> 1
EXHIBIT 10.52
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: 5,625
Option Price per Share: $26.875
Date of Grant: June 2, 1999
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
<PAGE> 2
exercised by his or her personal representatives, heirs, or legatees
("Grantee's 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
----------------------------------------
Sam A. Brooks, President
GRANTEE:
/s/ Joseph C. Hutts
- -------------------------------
Joseph C. Hutts
-3-
<PAGE> 1
EXHIBIT 10.53
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: 5,625
Option Price per Share: $26.875
Date of Grant: June 2, 1999
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
<PAGE> 2
exercised by his or her personal representatives, heirs, or legatees ("Grantee's
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
----------------------------------------
Sam A. Brooks, President
GRANTEE:
/s/ Harry R. Jacobson
- -------------------------------
Harry R. Jacobson
-3-
<PAGE> 1
EXHIBIT 10.54
STOCK OPTION AGREEMENT
under the
RENAL CARE GROUP, INC.
1996 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
Grantee: William Lapham
Number of Shares Subject to Option: 11,250
Option Price per Share: $22.75
Date of Grant: July 22, 1999
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
<PAGE> 2
exercised by his or her personal representatives, heirs, or legatees ("Grantee's
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
----------------------------------------
Sam A. Brooks, President
GRANTEE:
/s/ William Lapham
- -------------------------------
William Lapham
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF RENAL CARE GROUP, INC. FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 26,748
<SECURITIES> 0
<RECEIVABLES> 93,434
<ALLOWANCES> 0
<INVENTORY> 9,326
<CURRENT-ASSETS> 143,587
<PP&E> 116,891
<DEPRECIATION> 0
<TOTAL-ASSETS> 479,763
<CURRENT-LIABILITIES> 74,631
<BONDS> 0
0
0
<COMMON> 447
<OTHER-SE> 286,329
<TOTAL-LIABILITY-AND-EQUITY> 479,763
<SALES> 0
<TOTAL-REVENUES> 382,841
<CGS> 0
<TOTAL-COSTS> 247,014
<OTHER-EXPENSES> 65,026
<LOSS-PROVISION> 10,205
<INTEREST-EXPENSE> 3,977
<INCOME-PRETAX> 56,619
<INCOME-TAX> 22,345
<INCOME-CONTINUING> 34,274
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,274
<EPS-BASIC> 0.77
<EPS-DILUTED> 0.74
</TABLE>
