EXHIBIT 10.4
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Consulting Agreement") effective as of October 1,
1998, (the "Effective Date") by and between Total Renal Care, Inc., a
California corporation having offices at 00000 Xxxxxxxxx Xxxx., Xxxxx 000,
Xxxxxxxx, XX 00000-0000 (hereinafter "TRC") and, Xxxxx X. Xxxxxx, M.D.
(hereinafter "Consultant").
RECITALS
A. TRC and Consultant are parties to an agreement entered into on December 30,
1994 (hereinafter the "Agreement"); and
B. TRC and Consultant are parties to the First Amendment to the Agreement dated
July 1, 1996 (hereinafter the "First Amendment"); and
C. TRC and Consultant are parties to the Second Amendment to the Agreement
dated October 1, 1997 (hereinafter the "Second Amendment") (The Agreement, the
First Amendment and the Second Amendment are referred to herein jointly as the
"Agreements"); and
D. Under the Agreements, Consultant had initiated discussions with certain
acquisition and affiliation targets in specific markets which are listed on
Exhibit 1 attached hereto ("Targets"); and
E. TRC and Consultant wish to terminate the Agreements and enter into this new
Consulting Agreement which shall govern the continued work Consultant shall
perform for TRC in the future and compensation that Consultant shall be paid
for said work;
NOW THEREFORE, in consideration of the premises and the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Recitals. The Recitals of this Consulting Agreement shall be included and
incorporated herein as if fully set forth below.
2. Term and Termination
A. Term. The term of this Agreement shall commence on October 1, 1998, and
shall terminate on September 30, 2003 (the "Term"). After the initial Term,
this Consulting Agreement shall continue on a month-to-month basis without
any further action by the parties.
B. Termination. This Agreement may be terminated upon ninety (90) days
prior written notice by either party for no cause. Furthermore, this
Agreement may be terminated upon thirty (30) days prior written notice for
cause upon a material breach by either party. The notice provided by the
party alleging the breach shall describe the breach with reasonable
specificity and the alleged breaching party shall utilize said thirty
(30) days to cure the alleged breach. If the alleged breach is cured during
the thirty (30) day period or the alleged breaching party commences curing
and continues to diligently pursue a cure, the Agreement shall continue. In
the event TRC terminates Consultant without cause during the Term,
Consultant shall be entitled to receive, as his sole and exclusive remedy
for such a termination, nine (9) months worth of the Cash Fee (defined
below) payable on a monthly basis during said year.
C. Effect of Termination. Upon any termination of this Agreement in
accordance with any provision hereof, or upon expiration of this Agreement
at the end of the Term or any applicable renewal term, all obligations of
TRC to Consultant shall immediately terminate, including without limitation
all obligations to compensate Consultant as set forth in Section 5 hereof
except that the Options granted to Consultant in Section 5 shall continue
to vest pursuant to the Stock Option Agreements. Upon any such termination,
TRC shall have no further liability or obligation to Consultant of any kind
in connection with this Agreement or any relationship established hereby,
except for payment of any unpaid compensation due with respect to periods
prior to such termination. Consultant's obligations under Sections 10 and
11 shall survive any termination or expiration of this Agreement for a
period of one (1) years.
3. No Agency. At all times during the performance of any services hereunder,
Consultant shall be acting and discharging his duties and responsibilities as
an independent contractor. TRC shall have no responsibility for withholding
taxes or employee benefits of any kind. Consultant shall indemnify and hold TRC
harmless from, and shall pay to TRC upon demand the amount of, all taxes,
interest and penalties that TRC is required to pay because of a determination
that Consultant is not an independent contractor. Consultant shall allow TRC to
participate in any audit proceeding with respect to each instance in which a
taxing authority asserts that Consultant is not an independent contractor under
this Agreement. The relationship between TRC and Consultant established by this
Agreement is solely that of an independent contractor, and neither party is in
any way the legal representative or agent of the other. Neither party is
authorized or empowered to assume any obligation of any kind, implied or
expressed, on behalf of the other party, without the express written consent of
the other.
4. Duties. Consultant shall assist TRC in developing and closing acquisitions
domestically, in Sicily, Italy and other regions of Europe and Asia as are
mutually agreed upon in writing by Consultant and the Chief Executive Officer
of TRC. Consultant shall also assist TRC in developing alliances with and the
acquiring of, dialysis centers affiliated with academic institutions in the
United States. Furthermore, Consultant shall function as a senior advisor to
the Chief Executive Officer of TRC and shall provide selected strategic and
clinical consultative services as mutually agreed upon by Consultant and the
Chief Executive Officer of TRC. Finally, Consultant shall be expected to work
at least three hundred (300) hours per year.
5. Compensation. Upon confirmation of Consultant's performance of services
related to those acquisitions which are mutually agreed upon in advance and in
writing by Consultant and the Chief Executive Officer of TRC and where, in the
sole discretion of the Chief Executive Officer of TRC, Consultant introduces
potential targets and materially assists TRC with closing a transaction with
said potential target, Consultant shall be paid the following commission:
A. 1.5% of the purchase price of an acquisition with a purchase price of
$3,000,000 or less;
B. 1.2% of the purchase price of an acquisition with a purchase price of
between $3,000,001 and $7,500,000; and
C. 1.0% of the purchase price of an acquisition with a purchase price of
greater than 7,500,000 (the "Commission").
Consultant shall not receive a Commission in excess of $100,000 per
transaction nor shall Consultant receive any Commission on a transaction where
only limited services were performed, such as merely making an introduction and
only limited further involvement. Consultant acknowledges that for such limited
services on a particular transaction and where a particular transaction is not
pre-approved in writing by the Chief Executive Officer of TRC, the compensation
shall be limited to the Cash Fee and the Stock Options provided for below.
Consultant shall also be paid an annual aggregate compensation of One Hundred
and Twenty Thousand dollars ($120,000) payable in twelve monthly installments
of Ten Thousand dollars ($10,000) (the "Cash Fee'). However, Seventy Thousand
dollars ($70,000) of the Cash Fee shall be deemed an advance payable to against
the future payment of a Commission for closing deals which are not Targets,
(the "Advance") and no Commission shall be paid to Consultant until the entire
amount of the Advance is repaid to TRC. For example, if Consultant had been
paid $35,000 of the Advance before closing the first non-Target acquisition and
the purchase price for said non-Target acquisition was $3,000,000, thereby
entitling Consultant to a $45,000 Commission, he would only actually receive
$10,000 once the $35,000 Advance was repaid.
Furthermore, on the Effective Date and on each anniversary of the Effective
Date during the Term, Consultant shall receive Twenty-Two Thousand Five Hundred
(22,500) options to purchase Common Stock of Total Renal Care Holding, Inc.
(the "Options"). The strike price of the Options shall be the closing price on
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the Effective Date and each subsequent granting shall be priced as of the close
of market on each anniversary of the Effective Date. If the Effective Date or
any anniversary of the Effective Date falls on a day when the New York Stock
Exchange is closed, the strike price of the Options will be the closing price
on the next full day of trading. The initial grant of Options shall be pursuant
to the terms set forth in the Non-Qualified Stock Option Agreement Attached
hereto as Exhibit 1.
No additional compensation shall be paid without the express written
authorization by the CEO or any duly authorized officer of TRC.
6. Taxes. Consultant shall maintain responsibility for paying all Federal,
State and Local Income Taxes arising out of Consultant's earnings from TRC. TRC
shall provide the Consultant with a Federal Form 1099.
7. Non-Assignability. This Agreement is entered into in consideration of the
personal qualifications of Consultant and may not be, nor may any right or
interest hereunder be, assigned by her without the prior written consent of
TRC. TRC shall be permitted, without the consent of Consultant, to assign or
otherwise transfer this Agreement or any of its rights hereunder: (a) upon the
purchase or sale of all or substantially all of the assets or stock of TRC or
Total Renal Care Holdings, Inc. ("TRCH"), the parent of TRC, or the transfer
(by operation of law or otherwise) of the ownership or control of TRC or TRCH,
to the purchaser of such assets or stock, or the transferee of such interests;
or (b) to any affiliate (within the meaning of such term as set forth in Rule
501 of Regulation D under the federal Securities Act of 1933) of TRC.
8. Entire Agreement. Except as set forth in Section 4 above, this Agreement
supersedes any and all other agreements, either oral or in writing between the
parties in any manner whatsoever. Each party to this Agreement acknowledges
that no representation, inducements, promises, or agreements, orally or
otherwise, have been made by any party or anyone acting on behalf of any party,
which are not embodied herein, and that no other agreement, statement, or
promise not contained in this Agreement or attached as an exhibit shall be
valid or binding on either party.
9. Modification. Any modification of this Agreement will be effective only if
it is in writing and signed by the party to be charged.
10. Exclusivity and Confidential Information. Except for Consultant's current
position as Chief of the Division of Nephrology at County USC Medical Center,
Consultant understands that during the Term, he shall not provide the same or
similar services as are provided to TRC hereunder, directly or indirectly, as a
consultant or otherwise, to a competitor of TRC both domestically and abroad.
Furthermore, all information not disclosed to the public by TRC regarding the
business of TRC which is compiled by, obtained by or furnished to Consultant,
or any of it's agents or employees, while performing services hereunder, is
acknowledged to be confidential information, trade secrets and the exclusive
property of TRC. During and after the term hereof, Consultant agrees that he
will not, directly or indirectly, divulge in any manner contrary to the
interests of TRC or use or cause or suffer to be used in competition with TRC,
any such information or trade secrets. TRC acknowledges that the breach, or
threatened breach of the provisions of this Section would cause irreparable
injury to TRC that could not be adequately compensated by money damages.
Accordingly, TRC may obtain a restraining order and/or injunction prohibiting a
breach or threatened breach of the provisions of this Section, in addition to
any other legal or equitable remedies that may be available.
11. Termination of Agreements. The Agreements are hereby terminated as of the
Effective Date and shall have no further force or effect except that the Stock
Options granted to Consultant pursuant to the Agreement shall continue and vest
according to the terms of the agreement granting said options.
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IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
effective as of the day and year first above written.
TOTAL RENAL CARE, INC. CONSULTANT
/s/ Xxxxxx M.G. Chaltiel /s/ Xxxxx X. Xxxxxx, M.D.
By: ___________________________ By: _________________________________
Xxxxxx M.G. Chaltiel Xxxxx X. Xxxxxx, M.D.
Its: President, Chief
Executive Officer and
Chairman of the Board
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EXHIBIT I
TARGETS
1.Napoli
Dr. Del Pretta
Tora Del Xxxxx & Tora Annuziatta
Xx. Xx Xxxxx Group
Xx. Xxxxxxx Unit and laboratory
2.Sicily
Xx. Xxxxxx Laboratory and Nephrologico
Xxxx
Xxxxxxxxx
Unit of Xxxxxxx Xxxxx
Unit of Xx. Xxxxxxx
Unit of Xx. Xxxxx in Seracusa
Unit of Dr Jenarti in Caltinesta
Xx. Xxxxxx Giammaressi-Palermo
Xx. Xxxxxx-Xxxxxxx
3.Rome
Dr. Vinceguerra
4.Japan
Kurakawa & Kai
The above listed transactions are considered Targets for purpose of the
Agreement and therefore are not subject to the Advance adjustments. The deals
listed below which we to be updated quarterly are considered non-Targets and
are therefore subject to the Advance adjustments.
New as of 3/15/99
1.Sicily
Xx. Xxxxx-Xxxxxxx
Dr. Aliffe-Noto
Xx. Xxxxxxxx-Caltagione
2.Japan
Dr. Ohno-Osaka
Xx. Xxxxxxxx-Tokyo
Approval of March 15, 1999:
/s/ Xxxx Xxxxxxx /s/ Xxxxx Xxxxxx, M.D.
_______________________________ _________________________________
Xxxx Xxxxxxx Xxxxx Xxxxxx, M.D.
Vice President-- Consultant
International
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EXHIBIT I
TARGETS
1.Napoli
Dr. Del Pretta
Tora Del Xxxxx & Tora Annuziatta
Xx. Xx Xxxxx Group
Xx. Xxxxxxx Unit and laboratory
2.Sicily
Xx. Xxxxxx Laboratory and Nephrologico
Xxxx
Xxxxxxxxx
Unit of Xxxxxxx Xxxxx
Unit of Xx. Xxxxxxx
Unit of Xx. Xxxxx in Seracusa
Unit of Dr Jenarti in Caltinesta
3.Rome
Dr. Vinceguerra
The above listed transactions are considered Targets for purpose of the
Agreement and therefore are not subject to the Advance adjustments.
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