EX-10.2 2 dex102.htm EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT
EXHIBIT 10.2
This Employment Agreement (this “Agreement”) is entered into effective August 16, 2004 (the “Effective Date”), by and between DaVita Inc. (“Employer”) and Xxx Xxxxxxx (“Employee”).
In consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the parties hereto, intending to be legally bound hereby, agree as follows:
(a) Employee shall be eligible to receive a discretionary performance bonus (the “Bonus”) between zero and $300,000, payable in a manner consistent with Employer’s practices and procedures. The amount of the Bonus, if any, will be decided by the Chief Executive Officer and/or the Board of Directors or the Compensation Committee of the Board in his/its sole discretion. If Employee starts any time prior to August 31, 2004, he will be
guaranteed a minimum Bonus of $50,000 for the year 2004; however, Employee may elect to forego a Bonus for the year 2004 and have Employer consider his performance during 2004 when considering his Bonus rating for the year 2005. Employee must advise Employer how he wants his Bonus for the year 2004 treated before the end of 2004.
(b) Employee shall be eligible to receive a discretionary Touchdown Bonus between zero and $300,000, payable in a manner consistent with Employer’s practices and procedures. The amount of the Touchdown Bonus awarded will be decided based on a set of pre-determined goals determined by the Chief Executive Officer, who retains the sole and absolute discretion to change, modify, or add to the set of goals based on changes in the Company or changes in the dialysis or healthcare industry. Employee has the right to appeal any decision of the Chief Executive Officer to the Compensation Committee of Employer’s Board of Directors. Employer may reduce the amount of any Bonus potential by the amount of any Touchdown Bonus that Employee receives; however, Employer may not reduce the amount of the Bonus potential by more than 33%.
(c) Employee must be employed by Employer (or an affiliate) on the date any Bonus or Touchdown Bonus is paid to be eligible to receive such bonus and, if Employee is not employed by Employer (or an affiliate) on the date any bonus is paid for any reason whatsoever, Employee shall not be entitled to receive such bonus.
2.4 Vacation. Employee shall have vacation, subject to the approval of the Chief Executive Officer.
2.7 Sign On Bonus. Upon your hire, Employer will provide Employee with the following benefits:
(a) Employer will pay Employee a one-time bonus in the amount of $75,000 to allow Employee to repay a loan from his former employer.
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(b) Employer will reimburse Employee and Employee’s assistant for their COBRA insurance costs from their former employer until they are eligible to participate in Employer’s health benefit plan.
Section 3. Provisions Relating to Termination of Employment.
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During the Severance Period, Employee agrees to make himself available to answer questions and to cooperate in the transition of his duties. In addition, Employee agrees to cooperate with Employer in the prosecution and/or defense of any claim, including making himself available for any interviews, appearing at depositions, and producing requested documents. Employer shall reimburse Employee for any out-of-pocket expenses he may incur, including travel costs. To the extent that Employee is required to travel, he is required to work with Employer’s travel department to arrange his travel plans.
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termination of Employee’s employment, Employee shall be entitled to a lump-sum payment equal to his Base Salary in effect as of the date of the termination of Employee’s employment multiplied by 2.
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(a) “Change of Control” shall mean (i) any transaction or series of transactions in which any person or group (within the meaning of Rule 13d-5 under the Exchange Act and Sections 13(d) and 14(d) of the Exchange Act) becomes the direct or indirect “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), by way of a stock issuance, tender offer, merger, consolidation, other business combination or otherwise, of greater than 40% of the total voting power (on a fully diluted basis as if all convertible securities had been converted and all warrants and options had been exercised) entitled to vote in the election of directors of Employer (including any transaction in which Employer becomes a wholly-owned or majority-owned subsidiary of another corporation), (ii) any merger or consolidation or reorganization in which Employer does not survive, (iii) any merger or consolidation in which Employer survives, but the shares of Employer’s Common Stock outstanding immediately prior to such merger or consolidation represent 40% or less of the voting power of Employer after such merger or consolidation, and (iv) any transaction in which more than 40% of Employer’s assets are sold. However, despite the occurrence of any of the above-described events, a Change of Control will not have occurred if Xxxx Xxxxx remains the Chief Executive Officer of Employer for at least one (1) year after the Change of Control or becomes the Chief Executive Officer of the surviving company with which Employer has merged or consolidated and remains in that position for at least one (1) year after the Change of Control.
(b) “Constructive Discharge” shall mean the occurrence of any of the following events after the date of a Change of Control without Employee’s express written consent: (i) the scope of Employee’s authority, duties and responsibilities are materially diminished or are not (A) in the same general level of seniority, or (B) of the same general nature as Employee’s authority, duties, and responsibilities with Employer immediately before such Change of Control; (ii) the failure by Employer to provide Employee with office accommodations and assistance substantially equivalent to the accommodations and assistance provided to Employee immediately before such Change of Control; (iii) the principal office to which Employee is required to report is changed to a location that is more than twenty (20) miles from the principal office to which Employee is required to report immediately before such Change of Control; or (iv) a reduction by Employer in Employee’s Base Salary, bonus arrangement, or other material benefits as in effect on the date of such Change of Control.
(c) “Disability” shall mean the inability, for a period of three (3) months, to adequately perform Employee’s regular duties, with or without reasonable accommodation, due to a physical or mental illness, condition, or disability.
(d) “Material Cause” shall mean any of the following: (i) conviction of a felony; (ii) the adjudication by a court of competent jurisdiction that Employee has committed any act of fraud or dishonesty resulting or intended to result directly or indirectly in personal enrichment at the expense of Employer; (iii) repeated failure or refusal by Employee to follow
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policies or directives reasonably established by the Chief Executive Officer of Employer or his designee that goes uncorrected for a period of thirty (30) consecutive days after written notice has been provided to Employee; (iv) a material breach of this Agreement that goes uncorrected for a period of (30) consecutive days after written notice has been provided to Employee; (v) an act of unlawful discrimination, including sexual harassment; (vi) a violation of the duty of loyalty or of any fiduciary duty; or (vii) exclusion of Employee from participating in any federal health care program.
Section 4. Certain Covenants of Executive.
(a) Employee acknowledges and agrees that in the course of his employment by Employer, it will or may be necessary for Employee to create, use, or have access Confidential Information. “Confidential Information” shall mean any and all information and materials concerning Employer that is confidential, proprietary, or private, including, but not limited to, information relating to customers, business development, sales, marketing, finances, technology, trade secrets, proprietary information, services, products, strategies, business policies, and other business affairs concerning current, planned, and proposed businesses by the Company. Employee further acknowledges and agrees that (i) all Confidential Information is the property of Employer; (ii) the misuse, misappropriation, or disclosure of any Confidential Information would constitute a breach of trust and would cause serious and irreparable injury to Employer; and (iii) it is essential to the protection of Employer’s goodwill and maintenance of Employer’s competitive position that all Confidential Information be kept confidential and that Employee not disclose any Confidential Information to others or use Confidential Information to Employee’s own advantage or the advantage of others.
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(b) In recognition of the acknowledgment contained in Section 4.1(a) above, Employee agrees that, during the term of this Agreement and subsequent to the termination of this Agreement for any reason whatsoever, Employee shall: (i) hold and safeguard all Confidential Information in trust for Employer, its successors, and assigns; (ii) not directly or indirectly appropriate, disclose, divulge, or make available any Confidential Information or allow Confidential Information to be appropriate, disclosed, divulged, or made available by any person within Employee’s control, except in accordance with Employer’s policies and as required in the performance of Employee’s duties to Employer; and (iii) keep in strictest confidence any Confidential Information. Employee may disclose Confidential Information in response to a valid order by a court or other governmental body, as otherwise required by law, or in connection with the enforcement of this Agreement. Before making any such required disclosure, Employee will notify Employer so that Employer may seek a protective order or apply for confidential treatment of the information to be disclosed.
(c) Employee agrees that all lists, materials, records, books, data, plans, files, reports, correspondence, manuals, notebooks, photographs, drawings, plans, computer programs, tapes, diskettes, electronic media, and any other media now known or hereinafter developed (“Employer material”) used or prepared by, or made available to, Employee shall be and remain property of Employer. Upon termination of employment, Employee shall immediately return all Employer material to Employer, and Employee shall not make or retain any copies or extracts thereof.
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services, peritoneal dialysis of any type, staff-assisted hemodialysis, home hemodialysis, dialysis-related laboratory and pharmacy services, access-related services, Method II dialysis supplies and services, nephrology practice management, vascular access services, disease management services, pre-dialysis education, ckd services, or renal physician/center network management, and any other services or treatment for persons diagnosed as having end stage renal disease (“ESRD”) or pre-end stage renal disease, including any dialysis services provided in an acute hospital. The term “ESRD” shall have the same meaning as set forth in Title 42, Code of Federal Regulations 405.2101 et seq. or any successor thereto. Employee acknowledges that the nature of Employer’s activities is such that competitive activities could be conducted effectively regardless of the geographic distance between Employer’s place of business and the place of any competitive business. Notwithstanding anything herein to the contrary, such activities shall not include the ownership of 1% or less of the issued and outstanding stock, which is purchased in the open market, of a public company that conducts business that is similar to or competitive with the business carried on by the Employer or any of its subsidiaries or affiliates.
Employee acknowledges and agrees that the geographical limitations and duration of this covenant not to compete is reasonable. In particular, Employee agrees that his position is national in scope and that he will have an impact on every location where Employer currently conducts and will conduct business. Therefore, Employee acknowledges and agrees that, like his position, this covenant cannot be limited to any particular geographic region.
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physician) affiliated with Employer; (vi) disparage Employer or any of its agents, employees, or affiliated physicians in any fashion; or (vii) take any other action that results or may reasonable result in any interference, disruption, diversion of any actual or prospective relationship, business or business opportunity, contractual or otherwise, between Employer and any party, including, but not limited to, any employee, independent contractor, consultant, patient, doctor, customer, vendor, supplier, or seller.
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other payment, coverage or benefit due and owing, an amount determined by (i) multiplying the rate of excise tax then imposed by Code Section 4999 by the amount of the “Excess Parachute Payment” received by Employee (determined without regard to any payments made to Employee pursuant to this Section 6) and (ii) dividing the product so obtained by the amount obtained by subtracting (A) the aggregate local, state and Federal income and employment tax rates (including the value of the loss of itemized deductions under Section 68 of the Internal Revenue Code and the phase-out of the personal exemption) applicable to the receipt by Employee of the “Excess Parachute Payment” (taking into account the deductibility for Federal income tax purposes of the payment of state and local income taxes thereon) from (B) the amount obtained by subtracting from 1.00 the rate of excise tax then imposed by Section 4999 of the Code. It is Employer’s intention that Employee’s net after-tax position be identical to that which would have obtained had Sections 280G and 4999 not been part of the Code. For purposes of implementing this Section 6, (i) no portion, if any, of the Total Payments, the receipt or enjoyment of which Employee shall have effectively waived in writing prior to the date of payment of the Total Payments, shall be taken into account, and (ii) the value of any non-cash benefit or any deferred cash payment included in the Total Payments shall be determined by Employer’s independent auditors in accordance with the principles of Sections 280G of the Code.
The calculation of the excess parachute payment is as follows: X = Y ) (1 - (A + B + C)), where X is the total dollar amount of the Tax Gross-Up Payment, Y is the total Excise Tax imposed with respect to such Change in Control Benefit, A is the Excise Tax rate in effect at the time, B is the highest combined marginal federal income and applicable state income tax rate in effect, after taking into account the deductibility of state income taxes against federal income taxes to the extent allowable, for the calendar year in which the Tax Gross-Up Payment is made, and C is the combined federal and state employment tax rate in effect for the calendar year in which the Tax Gross-Up Payment is made.
Subject to the provisions of this Section 5, all determinations required to be made under this Section 5, including (i) whether and when a Tax Gross-Up Payment is required, (ii) the amount of such Tax Gross-Up Payment, and (iii) the assumptions to be utilized in arriving at such determination, shall be made by independent auditors of Employer (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to Employer and Employee within 15 business days of the receipt of notice from Employee that there has been an Excess Parachute Payment, or such earlier time as is requested by Employer. All fees and expenses of the Accounting Firm shall be borne solely by Employer.
Any Tax Gross-Up Payment, as determined pursuant to this Section 5, shall be paid by Employer to Employee within thirty (30) days of the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by Employee, it shall furnish Employee with a written opinion that failure to report the Excise Tax on Employee’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon Employer and Employee.
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In the event that a Tax Gross-Up Payment was not made but should have been made (“Underpayment”), and Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment (including, without limitation, penalties and interest), and Employer shall promptly pay the Underpayment to or for the benefit of Employee.
In the event that a Tax Gross-Up Payment was made but should not have been made (“Overpayment”), the Accounting Firm shall determine the amount of the Overpayment and Employee shall promptly pay the Overpayment to Employer.
Employee shall notify Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Employer of the Tax Gross-Up Payment (“Gross-Up Notice”). Employee shall give Employer the Gross-Up Notice as soon as practicable, but no later than 10 business days after Employee is informed in writing of such claim and shall apprise Employer of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the 30-day period following the date of the Gross-Up Notice (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Employer notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall:
(i) | give Employer any information reasonably requested by Employer relating to such claim, |
(ii) | take such action in connection with contesting such claim as Employer shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by Employer, |
(iii) | cooperate with Employer in good faith in order effectively to contest such claim, and |
(iv) | permit Employer to participate in any proceedings relating to such claim. |
Employer shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed on Employee as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 5, Employer shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and xxx for a refund or contest the claim in any permissible manner. In the event that Employer elects to contest the tax, Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial
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jurisdiction and in one or more appellate courts, as Employer shall determine. If Employer directs Employee to pay such claim and xxx for a refund, Employer shall advance the amount of such payment to Employee, on an interest–free basis, for any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance. In the event that the Internal Revenue Service requests an extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due, such an extension may, at the election of Employee, be limited solely to such contested amount. Furthermore, Employer’s control of the contest shall be limited to issues with respect to which a Tax Gross-Up Payment would be payable hereunder, and Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
If, after the receipt by Employee of an amount advanced by Employer pursuant to Section 5, Employee becomes entitled to receive any refund with respect to such claim, Employee shall promptly pay Employer the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of an amount advanced by Employer pursuant to this Section 5, a determination is made that Employee shall not be entitled to any refund with respect to such claim and Employer does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Tax Gross-Up Payment to be paid.
Notwithstanding anything to the contrary in this Section 5, in the event that a Tax Gross-Up Payment is made before the date on which Employee actually owes the Excise Tax, then the amount of the payment shall be discounted using the applicable interest rate, i.e., the prime rate, used to compute the present value of an amount at the same time in the future for purposes of computing the Excise Tax.
6.3 Applicable Law. This Agreement shall be governed by the laws of the State of California, without regard to the principles of conflicts of laws.
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DAVITA INC. | EMPLOYEE | |||
By | /s/ XXXX X. XXXXX | /s/ XXX XXXXXXX | ||
Xxxx X. Xxxxx | Xxx Xxxxxxx | |||
Chief Executive Officer and | ||||
Chairman of the Board |
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