EXHIBIT 10.2

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is entered into effective August
16, 2004 (the “Effective Date”), by and between DaVita Inc. (“Employer”) and Tom
Usilton (“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:

 

Section 1. Employment and Duties. Employer hereby employs Employee to serve as
Group Vice President. Employee accepts such employment on the terms and
conditions set forth in this Agreement. Employee shall perform such duties as
may be assigned from time to time by the Chief Executive Officer. Employee
agrees to devote substantially all of his time, energy, and ability to the
business of Employer on a full-time basis and shall not engage in any other
business activities during the term of this Agreement, provided however,
Employee may retain his seat on the Board of Directors of Digital Insurance
Inc., SSI, and I-Health Technologies, may serve as a member of the Board of
Directors for any other company only with the express approval of the Chief
Executive Officer, and may pursue normal charitable activities so long as such
activities do not require a substantial amount of time and do not interfere with
his ability to perform his duties. Employee shall at all times observe and abide
by the Employer’s policies and procedures as in effect from time to time.

 

Section 2. Compensation. In consideration of the services to be performed by
Employee hereunder, Employee shall receive the following compensation and
benefits:

 

2.1 Base Salary. Employee shall be paid a Base Salary of $350,000 per annum,
less standard withholdings and authorized deductions. Employee shall be paid
consistent with Employer’s payroll schedule. The Base Salary will be reviewed
each year during Employer’s annual salary review. Employer, in its sole
discretion, may increase the Base Salary as a result of any such review.

 

2.2 Benefits. Employee and/or his family, as the case may be, shall be eligible
for participation in and shall receive all benefits under Employer’s health and
welfare benefit plans (including, without limitation, medical, prescription,
dental, disability, and life insurance) under the same terms and conditions
applicable to most executives at similar levels of compensation and
responsibility.

 

2.3 Bonus.

 

(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

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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.

 

2.5 Stock Options. Upon approval of the Board of Directors, Employee shall
receive options to purchase 50,000 shares of Employer stock. Such options shall
have a five-year term and vest over a four-year period, one-quarter vesting on
each anniversary date of the grant. The exercise price shall be the closing
price as reported on the New York Stock Exchange on the start date of this
Agreement. The options will be reflected in a separate Stock Option Agreement.

 

2.6 Restricted Stock Units. Upon approval of the Board of Directors, on the
Effective Date, Employee will receive 15,000 shares of Employer’s restricted
stock units, entitling Employee to the same number of full shares of DaVita
common stock, subject to the following vesting conditions: such restricted stock
units shall vest over a five-year period, one-third vesting on the third,
fourth, and fifth anniversary date of Employee’s date of hire. The terms of the
restricted stock units will be reflected in a separate Restricted Stock Units
Agreement.

 

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.

 

2.8 Employer Plane. Employee shall have the right to use the Employer’s
airplane, for business purposes, up to 25 hours per year. The Chief Executive
Officer must approve the use of the plane by Employee in advance.

 

2.9 Office Space. Employer shall provide Employee with a “DaVita-style” office
space, at a reasonable expense, including an office for Employee, conference
room, furniture, and cubicle for Employee’s assistant.

 

2.11 Rocket Group. Employee shall be a member of Employer’s Rocket Group so long
as it exists in its current state.

 

2.12 Indemnification. Employer agrees to indemnify Employee against and in
respect of any and all claims, actions, or demands, in accordance with all
applicable laws.

 

2.13 Reimbursement. Employer also agrees to reimburse Employee in accordance
with Employer’s reimbursement policies for travel and entertainment expenses, as
well as other business-related expenses, incurred in the performance of his
duties hereunder.

 

2.14 Changes to Benefit Plans. Employer reserves the right to modify, suspend,
or discontinue any and all of its health and welfare benefit plans, practices,
policies, and programs at any time without recourse by Employee so long as such
action is taken generally with respect to all other similarly-situated peer
executives and does not single out Employee.

 

Section 3. Provisions Relating to Termination of Employment.

 

3.1 Employment Is At-Will. Employee’s employment with Employer is “at will” and
is terminable by Employer or by Employee at any time and for any reason or no
reason, subject to the notice requirements set forth below.

 

3.2 Termination for Material Cause. Employer may terminate Employee’s employment
for Material Cause (as defined below). Upon termination for Material Cause,
Employee shall (i) be entitled to receive the Base Salary and benefits as set
forth in Section 2.1 and Section 2.2, respectively, through the effective date
of such termination and (ii) not be entitled to receive any other compensation,
benefits, or payments of any kind, except as otherwise required by law or by the
terms of any benefit or retirement plan (including any stock option agreement)
or other arrangement that would, by its terms, apply.

 

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3.3 Other Involuntary Termination. Employer may terminate the employment of
Employee for any reason or for no reason at any time upon at least thirty (30)
days’ advance written notice. Except following a Change of Control, as set forth
below, or a termination following a Change in Management, as set forth below, if
Employer terminates the employment of Employee for reasons other than for death,
Material Cause, or Disability, Employee shall (i) be entitled to receive the
Base Salary and benefits as set forth in Section 2.1 and Section 2.2,
respectively, through the effective date of such termination, (ii) be entitled
to receive a lump-sum payment equal to the Base Salary in effect as of the date
of the termination; (iii) be entitled to continue to receive during the one-year
period following the effective date of such termination (the “Severance Period”)
the employee health insurance benefits set forth in Section 2.2 (to the extent
Employee can continue to receive such benefits under Employer’s health insurance
policies and programs in effect at the effective time of such termination
through the exercise of his rights under COBRA, Employee shall elect to receive
COBRA benefits, and Employer shall pay Employee’s insurance premiums for COBRA
coverage during the Severance Period; provided, however, to the extent such
benefits cannot be provided under such policies and programs, Employer shall
purchase for Employee reasonably equivalent health insurance benefits during the
Severance Period; Employer’s obligation to provide this benefit is subject to
the limitation set forth below and subject to the limitation set forth in
Section 2.9); and (iv) not be entitled to receive any other compensation,
benefits, or payments of any kind, except as otherwise required by law or by the
terms of any benefit or retirement plan or other arrangement that would, by its
terms, apply. The foregoing notwithstanding, in the event Employee accepts
employment (as an employee or as an independent contractor) with another
employer during the Severance Period, (x) Employee shall immediately notify
Employer of such employment and (y) Employer’s obligation to continue to provide
certain health insurance benefits pursuant to clause (iv) of the immediately
preceding sentence shall terminate at such time as Employee is insured with
reasonably equivalent health benefits under such successor employer’s health
benefit plan, so long as Employee uses his best effort to obtain such insurance.

 

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.

 

3.4 Termination Following a Change of Control. If Employee resigns within sixty
(60) days following a Constructive Discharge (as defined below), or if Employer
terminates Employee for reasons other than for death, Material Cause, or
Disability following a Change of Control, Employee shall be entitled to all of
the rights and obligations (including, but not limited to, the duty to
cooperate) set forth in Section 3.3, provided, however, that, instead of being
entitled to a lump-sum payment equal to his Base Salary in effect as of the date
of the

 

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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.

 

3.5 Termination Following A Change in Management. If, during the first two years
of Employee’s employment, Kent Thiry is no longer the Chief Executive Officer,
Employee shall be entitled to all of the rights and obligations (including, but
not limited to, the duty to cooperate) set forth in Section 3.3, provided,
however, that, instead of being entitled to a lump-sum payment equal to his Base
Salary in effect as of the date of the 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. In addition, all of Employee’s Restricted Stock Units that were to vest
within 11 months of Employee’s termination will automatically vest as of the
date of the termination of his employment. Employee shall have not rights under
this Paragraph, however, if Kent Thiry is the Executive or Non-Executive
Chairman of the Employer.

 

3.6 Voluntary Resignation. Employee may resign from Employer at any time upon at
least ninety (90) days’ advance written notice. If Employee resigns from
Employer other than within sixty (60) days following Constructive Discharge,
Employee shall (i) be entitled to receive the Base Salary and benefits as set
forth in Section 2.1 and Section 2.2, respectively, through the effective date
of such termination and (ii) not be entitled to receive any other compensation,
benefits, or payments of any kind, except as otherwise required by law or by the
terms of any benefit or retirement plan or other arrangement that would, by its
terms, apply. In the event Employee resigns from Employer at any time, Employer
shall have the right to make such resignation effective as of any date before
the expiration of the required notice period.

 

3.7 Death. In the event of Employee’s death, Employee’s estate shall (i) be
entitled to receive the Base Salary and benefits as set forth in Section 2.1 and
Section 2.2, respectively, through the date of Employee’s death, (ii) be
entitled to receive the Bonus provided for in Section 2.3(b) pro rated through
the date of Employee’s death, and (iii) not be entitled to receive any other
compensation, benefits, or payments of any kind, except as otherwise required by
law or by the terms of any benefit or retirement plan or other arrangement that
would, by its terms, apply.

 

3.8 Disability. Upon thirty (30) days’ advance notice (which notice may be given
before the completion of the periods described herein), Employer may terminate
Employee’s employment for Disability (as defined below), provided that either
(i) immediately upon the effective date of such termination, Employee shall be
eligible to receive full disability benefits under the disability insurance, if
any, provided to Employee by Employer or (ii) Employer shall continue to pay the
Base Salary to Employee until the first to occur of (A) full disability benefits
are received or (B) one (1) year from the effective date of such termination.

 

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3.9 Definitions. For the purposes of this Section 3, the following terms shall
have the meanings indicated:

 

(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 Kent Thiry 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.

 

3.10 Notice of Termination. Any purported termination of Employee’s employment
by Employer or by Employee shall be communicated by a written Notice of
Termination to the other party hereto in accordance with Section 6 hereof. A
“Notice of Termination” shall mean a written notice that indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Employee’s employment.

 

3.11 Effect of Termination. Upon termination, this Agreement shall be of no
further force and effect and neither party shall have any further right or
obligation hereunder; provided, however, that no termination shall modify or
affect the rights and obligations of the parties that have accrued prior to
termination; and provided further, that the rights and obligations of the
parties under Section 3, Section 4, and Section 5 shall survive termination of
this Agreement.

 

Section 4. Certain Covenants of Executive.

 

4.1 Confidential Information.

 

(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.

 

4.2. Competition. Employee acknowledges that it would be inherent in the
performance of duties as an officer, director, partner, consultant, owner,
investor, shareholder, employee, creditor, agent, trustee, or advisor of any
individual, partnership, limited liability company, corporation, independent
practice association, management services organization, business, or any other
enterprise (individually and collectively, “Persons”) that competes with
Employer or that intends to compete with Employer, to use or disclose
Confidential Information, thereby causing Employer serious, immediate, and
irreparable harm. Employee agrees that during his employment and for a period of
two (2) years after the termination of his employment for any reason, he shall
not: (i) be an officer, director, consultant, partner, owner, stockholder,
employee, creditor, agent, trustee, independent contractor, or advisor of any
Person that either is in the business of or, directly or indirectly, derives any
material economic benefit from providing, arranging, offering, managing, or
subcontracting dialysis services or renal care services or products; or (ii)
directly or indirectly, own, manage, control, operate, invest in, acquire an
interest in, or otherwise engage in, act for, or act on behalf of any Person
(other than Employer and its subsidiaries and affiliates) engaged in any
activity in the United States in which Employer or any of its subsidiaries or
affiliates had conducted any business during Employee’s employment hereunder
where such activity is similar to or competitive with the activities carried on
by Employer or any of its subsidiaries or affiliates. As used herein, the term
“dialysis services” or “renal care services” includes, but shall not be limited
to, all dialysis services and nephrology-related services and products provided
by Employer at any time during the period of Employee’s employment, including,
but not limited to, hemodialysis, acute dialysis, apheresis

 

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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.

 

4.3 Solicitation of Employees. Employee promises and agrees that he will not,
for a period of two (2) years after the termination of his employment for any
reason whatsoever, directly or indirectly, (i) solicit or encourage any of
Employer’s employees to leave his or her employment, (ii) solicit, hire, or
otherwise engage the services of any employee of Employer, or any individual who
was employed by Employer within the last year of Employee’s employment, on
behalf of any Person other than Employer, or (iii) take any action, directly or
indirectly, that may reasonably result in, any of Employer’s employees or any
individual who was employed by Employer within the last year of Employee’s
employment, to work for any Person other than Employer.

 

4.4 Other solicitation. Employee promises and agrees that during the term of
this Agreement and for a period of two (2) years after the termination of his
employment for any reason whatsoever, he shall not, directly or indirectly: (i)
solicit, encourage, induce, or take any action that may reasonably result in,
any patient or customer of Employer, either individually or collectively, to
patronize any competing dialysis facility; (ii) request or advise any patient,
customer, or supplier of Employer to withdraw, curtail, or cancel such person’s
business with Employer; (iii) enter into any contract the purpose or reasonable
result of which would benefit Employee if any patient or customer of Employer
were to withdraw, curtail, or cancel such person’s business with Employer; (iv)
solicit, induce, encourage, or take any action that may result in any physician
(or former physician) affiliated with Employer to curtail or terminate such
person’s affiliation or contractual relationship with Employer; (v) disclose to
any Person the names or addresses of any patient or customer of Employer or of
any physician (or former

 

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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.

 

4.5 Acknowledgements. Employee acknowledges that the provisions of Section 4 of
this Agreement are reasonable and not excessively burdensome, and that he will
be reasonably able to earn a living without violating the terms of this
Agreement.

 

4.6 Enforcement. In the event that any part of this Section 4 shall be held
unenforceable or invalid, the remaining parts hereof shall nevertheless continue
to be valid and enforceable as though the invalid portions had not been a part
hereof. In the event that the scope of any part of Section 4 is held by a court
of competent jurisdiction to be too broad to permit enforcement to its maximum
extent, then such provision shall be deemed modified to the extent necessary to
allow enforceability to the maximum extent permitted by law.

 

4.7 Equitable Relief. Employee agrees that in the event he were to violate any
covenant in Section 4, Employer would immediately suffer irreparable injury and
such injury would not be readily susceptible to measurement in economic terms,
or economic compensation would be inadequate. For that reason, Employee agrees
that, in the event Employee violates, threatens to violate, or will inevitably
violate any provision of Section 4, Employer shall be entitled, as a matter of
right, to a temporary, preliminary, and/or permanent injunction, specific
performance, and any other equitable remedies, ex parte or otherwise, from any
court of competent jurisdiction, restraining any further violations by Employee,
without the necessity for posting a bond. Such relief shall be in addition to
and in no way limit any and all other remedies Employer shall have in law and
equity for the enforcement of such covenants and provisions. Employee consents
and stipulates to the entry of such injunctive relief in such a court
prohibiting him from any further violation of the provisions of Section 4.

 

Section 5. Excess Parachute Payment. In the event that any payment or benefit
received or to be received by Employee in connection with a Change of Control,
whether payable pursuant to the terms of this Agreement or any other plan,
arrangement or agreement by Employer, any predecessor or successor to Employer
or any corporation affiliated (within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended (the “Code”)) with Employer or which
becomes so affiliated pursuant to the transactions resulting in a Change of
Control (collectively all such payments are hereinafter referred to as the
“Total Payments”), is deemed to be an “Excess Parachute Payment” (in whole or in
part) to Employee within the meaning of Section 280G of the Code, as in effect
at such time, no change shall be made to the Total Payments to be made in
connection with the Change of Control, except that, in addition to all other
amounts to be paid to Employee by Employer, Employer shall, within thirty (30)
days of the date on which any Excess Parachute Payment is made, pay to Employee,
in addition to any

 

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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 sue 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 sue 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.

 

Section 6. Miscellaneous.

 

6.1 Entire Agreement; Amendment. This Agreement and the separate Stock Option
Agreement(s) represents the entire understanding of the parties hereto with
respect to the employment of Employee by Employer and supersedes all prior
agreements with respect thereto. This Agreement may not be altered or amended
except in writing executed by both parties hereto.

 

6.2 Assignment; Benefit. This Agreement is personal and may not be assigned by
Employee. This Agreement may be assigned by Employer and shall inure to the
benefit of and be binding upon the successors and assigns of Employer.

 

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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6.4 Notice. Notices and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or mailed by United States registered mail, return receipt requested, postage
prepaid, addressed to Employer at its principal office and to Employee at
Employee’s principal residence as shown in Employer’s personnel records,
provided that all notices to Employer shall be directed to the attention of the
Chief Executive Officer with a copy to the General Counsel of Employer, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.

 

6.5 Construction. Each party has cooperated in the drafting and preparation of
this Agreement. Hence, in any construction to be made of this Agreement, the
same shall not be construed against any party on the basis that the party was
the drafter. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.

 

6.6 Execution. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Photographic or facsimile copies of such signed
counterparts may be used in lieu of the originals for any purpose.

 

6.7 Legal Counsel. Employee and Employer recognize that this is a legally
binding contract and acknowledge and agree that they have had the opportunity to
consult with legal counsel of their choice.

 

6.8 Waiver. The waiver by any party of a breach of any provision of this
Agreement by the other shall not operate or be construed as a waiver of any
other or subsequent breach of such or any provision.

 

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6.9 Invalidity of Provision. In the event that any provision of this Agreement
is determined to be illegal, invalid, or void for any reason, the remaining
provisions hereof shall continue in full force and effect.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the date and year first written above.

 

DAVITA INC.

 

EMPLOYEE

By

  

/s/    KENT J. THIRY

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/s/    TOM USILTON

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Kent J. Thiry

 

Tom Usilton

    

Chief Executive Officer and

        

Chairman of the Board

   

 

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