Document:

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                             AMENDED AND RESTATED
                         REGISTRATION RIGHTS AGREEMENT

          This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the
"Agreement") is entered into as of June 30, 2001 by and among LearningStar
----------
Corp., a Delaware corporation (the "Company"), and certain stockholders of the
                                    -------
Company identified from time to time on Schedule A hereto.

                                   RECITALS:
                                   --------

          A. Concurrent with the execution and delivery of that certain
Registration Rights Agreement, dated as of November 14, 2000 (the "Registration
                                                                   ------------
Rights Agreement"), the parties entered into a Contribution Agreement and Plan
----------------
of Reorganization and Merger, dated as of the date of the Registration Rights
Agreement (the "Merger Agreement"), by and among the Company, Earlychildhood.com
                ----------------
LLC, a California limited liability company ("Earlychildhood"), SmarterKids.com,
                                              --------------
Inc., a Delaware corporation ("SmarterKids"), and S-E Educational Merger Corp.,
                               -----------
a Delaware corporation and a wholly-owned subsidiary of the Company ("Merger
                                                                      ------
Sub").

          B. Pursuant to the Merger Agreement, and upon the terms and subject
to the conditions set forth therein, on April 30, 2001, the combination of
Earlychildhood and SmarterKids was effected through (i) the contribution to the
Company by the holders of LLC Interests (as defined in the Merger Agreement) of
all of the right, title and interest in and to their entire ownership interest
in Earlychildhood (the "Contribution") and (ii) the merger of Merger Sub with
                        ------------
and into SmarterKids such that SmarterKids became a wholly-owned subsidiary of
the Company (the "Merger" and, collectively with the Contribution, the
                  ------
"Transactions").
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          C. Concurrent with the execution and delivery of the Registration
Rights Agreement, and as a condition and inducement to the parties' willingness
to enter into the Merger Agreement, certain holders of LLC Interests in
Earlychildhood and certain stockholders of SmarterKids entered into a Lockup
Agreement, dated as of the date of the Registration Rights Agreement (the

"Lockup Agreement"), pursuant to which such persons agreed, among other things,
-----------------
not to sell the shares of Common Stock such persons received in the Transactions
until the earlier to occur of (i) 180 days from the Effective Time (as defined
in the Merger Agreement) and (ii) the date upon which a secondary offering of
the Company's Common Stock for the purposes of effecting the orderly sale of
such shares has been consummated.

          D. The Holders (as defined herein) entered into the Registration
Rights Agreement for the purpose of providing a single, comprehensive, agreement
governing the resale registration by the Company for the benefit of the Holders
of the Common Stock of the Company received by the Holders in the Transactions.

          E. On March 13, 2001, Earlychildhood, SmarterKids, the Company and
Merger Sub entered into Amendment No. 1 to the Merger Agreement to provide,
among other things, that, upon consummation of the Transactions, each
outstanding share of common stock of SmarterKids would be converted into the
right to receive 0.125 shares of the Common Stock of the Company, instead of the
1 share of Common Stock of the Company originally provided for in the Merger
Agreement.
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          F. The Holders (as defined herein) and the Company desire to enter
into this Agreement for the purpose of amending and restating the Registration
Rights Agreement to reflect Amendment No. 1 to the Merger Agreement.

                                   AGREEMENT:
                                   ---------

          NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements of the parties contained herein, the parties agree as
follows:

          1. Definitions. As used herein, the terms below shall have the
             -----------
following meanings. Any such term, unless the context otherwise requires, may be
used in the singular or plural, depending upon the reference.

          "Affiliate" shall have the meaning provided in the Exchange Act and
           ---------
the rules and regulations of the SEC promulgated thereunder.

          "Common Stock" shall mean the common stock, par value $0.01 per share,
           ------------
of the Company.

          "Exchange Act" shall mean the Securities Exchange Act of 1934, as
           ------------
amended.

          "Demand Holder" means any Holder or group of Holders controlling at
           -------------
least 20% of the Registrable Securities then outstanding.

          "Form S-3" shall mean such form under the Securities Act as in effect
           --------
on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
comparable information by reference to other documents filed by the Company with
the SEC.

          "Holder" shall mean any Person who is the record owner of (i)
           ------
Registrable Securities or (ii) other securities of the Company convertible into,
or exercisable for, Registrable Securities, or any assignee thereof in
accordance with Sections 13 and 26 hereof.  The identity of the Holders shall be
set forth on Schedule A which shall be revised from time to time as appropriate.

          "Initiating Holders" shall have the meaning provided in Section 2(b).
           ------------------

          "Other Stockholders" shall mean (i) any officers or directors of the
           ------------------
Company with respect to securities of the Company which are not Registrable
Securities, (ii) any Holders with respect to securities of the Company which are
not Registrable Securities and (iii) all other stockholders of the Company who
are entitled, by contract with the Company, to have securities included in a
registration; it being understood, in each case, that the only securities of the
Company to be registered hereunder shall be shares of Common Stock.

          "Person" shall mean an individual, partnership, limited liability
           ------
company, joint venture, corporation, trust or unincorporated organization or any
other similar entity.

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          "Register," "registered," and "registration" shall refer to a
           --------    ----------        ------------
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document by the SEC.

          "Registrable Securities" shall mean (a) shares of Common Stock
           ----------------------
beneficially owned by any Holder which were received in the Transactions, (b)
shares of Common Stock issuable upon conversion or exercise of any convertible
securities, warrants, options or rights beneficially owned by any Holder which
were received in the Transactions or (c) any Common Stock of the Company issued
to a Holder as (or issuable upon the conversion or exercise of any warrant,
option, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, any of
the securities described in (a) or (b) above; provided, however, that shares of
Common Stock or other securities shall only be treated as Registrable Securities
if and so long as (i) they have not, after the Closing Date (as defined in the
Merger Agreement), been sold to or through a broker or dealer or underwriter in
a public distribution or otherwise pursuant to an effective Registration
Statement under the Securities Act or (ii) they have not, after the Closing Date
(as defined in the Merger Agreement), been sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(l) thereof (including any sale pursuant to Rules 144 or 145 of the
Securities Act or any similar provision) so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale.  In no event shall any securities of the Company other than Common
Stock (or any successor security) constitute Registrable Securities.

          The number of shares of "Registrable Securities then outstanding"
                                   ---------------------------------------
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities.  The
number of shares of Registrable Securities owned by any Holder shall be deemed
to include the number of shares of Common Stock issuable pursuant to equity
securities convertible into, or exercisable for, convertible securities
(regardless of whether such securities are then convertible or exercisable,
except for compensatory stock options, which shall not be deemed outstanding
unless they have vested).

          "Securities Act" shall mean the Securities Act of 1933, as amended.
           --------------

          "SEC" shall mean the Securities and Exchange Commission, or any other
           ---
federal agency at the time administering the Securities Act.

          2. Request for Registration.
             ------------------------

          (a) Demand Rights; General.  If the Company shall receive at any time
              ----------------------
after the date 180 days after the Closing Date (as defined in the Merger
Agreement), a written request from a Demand Holder that the Company file a
registration statement under the Securities Act covering the registration of
such Registrable Securities as shall be identified in the notice, then the
Company shall, within ten (10) days of the receipt thereof, give written notice
of such request to all Holders and shall, subject to the limitations of Sections
2(c) and 2(d), use its best efforts to effect within ninety (90) days of the
receipt of such request, and in any event as soon as

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practicable, the registration on a Form S-1 registration statement under the
Securities Act for resale of all Registrable Securities which the Holders
request to be registered within fifteen (15) business days of receipt by each
Holder from the Company of notice of the pending registration. Such notice shall
be provided by the Company to all non-requesting Holders in accordance with
Section 22 promptly after receipt of notice by it from the Demand Holder
initiating the registration request.

          (b) Underwriter; Cut-back.  If the Demand Holder initiating the
              ---------------------
registration request under Section 2(a) or Section 12 (the "Initiating Holder")
                                                            -----------------
intends to distribute the Registrable Securities covered by its request by means
of an underwriting, it shall so advise the Company as a part of the request made
pursuant to this Agreement and the Company shall include such information in the
written notice to be delivered by the Company referred to in such Section.  The
selection of the managing underwriter by the Initiating Holder in any
registration under this Section 2 shall require the consent of a majority of the
Company's Board of Directors, such consent not to be unreasonably withheld.  In
the case of an underwritten offering, the right of any Holder to include
Registrable Securities in such registration and the right of any Other
Stockholder to include shares of Common Stock in such registration shall be
conditioned upon such Holder's or Other Stockholder's, as applicable,
participation in such underwriting on customary terms.  All Holders and Other
Stockholders proposing to distribute their securities through such underwriting
shall (together with the Company as provided in Section 4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting.  Notwithstanding any other provision of this
Agreement, if the underwriter advises the Initiating Holder in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holder shall so advise the Company which shall
so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto and all Other Stockholders having securities which
would otherwise be underwritten pursuant hereto, and (i) first, the number of
shares of the Company held by Other Stockholders (other than Registrable
Securities) shall be excluded from such underwriting on a pro rata basis
according to the total number of securities (other than Registrable Securities)
requested for registration by such Other Stockholder to the extent deemed
advisable by the managing underwriter, including down to zero and (ii)
thereafter, if a further limitation of the number of shares is required, the
number of shares of Registrable Securities that may be included in the
underwriting shall be allocated on pro rata basis among all Holders according to
the total amount of Registrable Securities requested for registration by each
selling Holder.  If any Holder of Registrable Securities or Other Stockholder
who has requested inclusion in such registration as provided above disapproves
of the terms of the underwriting, such Person may elect to withdraw therefrom by
written notice to the Company, and the securities so withdrawn shall also be
withdrawn from the registration.  If the managing underwriter has not limited
the number of Registrable Securities and other securities to be underwritten,
the Company may include securities for its own account in such registration, if
the managing underwriter so agrees and if the number of Registrable Securities
and other securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.

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          (c) Limit on Demand Registrations.  The Company is obligated to effect
              -----------------------------
only two (2) Demand Registrations pursuant to Section 2(a) and is obligated to
effect such Demand Registration only so long as the Registrable Securities
subject to such Demand Registration have a fair market value (based on the
closing market price on the trading day immediately prior to the date of the
written request referred to in Section 2(a) (as reported in the Wall Street
Journal), of not less than $10,000,000).  For purposes of this Section 2(c), no
such Demand Registration shall be deemed to have taken place unless (i) the
registration statement filed pursuant to such Demand Registration has been
declared effective by the SEC and sales of the securities have been permitted
consistent with the plan of distribution described in the registration statement
or (ii) a Demand Registration shall be forfeited by operation of Section 6.

          (d) Right to Defer; General.  Notwithstanding the foregoing, if the
              -----------------------
Company shall furnish to the Holders requesting a registration statement
pursuant to this Section 2 a certificate signed by the Secretary of the Company
stating that, in the good faith judgment of the Board of Directors of the
Company as set forth in a duly adopted written resolution, it would be
materially detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore necessary to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than ninety (90) days after receipt of the request of
the Initiating Holder, provided, however, that the Company may not utilize this
right more than once in any twelve month period.

          3. Company Registration. If (but without any obligation to do so) the
             --------------------
Company proposes to register (other than a registration effected by the Company
pursuant to Section 2 or Section 12 of this Agreement) any of its Common Stock
under the Securities Act in connection with the public offering of such
securities solely for cash (other than (i) a registration relating to the sale
of securities to participants in a Company stock plan, (ii) a registration on
any form which does not include or incorporate by reference substantially the
same information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or (iii) a SEC Rule 145
transaction), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within fifteen (15) business days after delivery of such notice by the Company
in accordance with Section 23 hereof, the Company shall cause to be registered
under the Securities Act all of the Registrable Securities that each such Holder
has requested to be registered subject to the underwriter cutback and other
provisions of Section 8 hereof.

          4. Obligations of the Company. Whenever required under this Agreement
             --------------------------
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:

          (a) SEC Filing.  Prepare and file with the SEC a registration
              ----------
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days or until all of the shares of Common Stock registered thereunder are sold,
whichever occurs sooner.

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          (b) Amendments.  Prepare and file with the SEC such amendments and
              ----------
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement, and furnish such copies
thereof to the Holders and any underwriters as they may reasonably request.

          (c) Prospectus.  Furnish to the Holders and any underwriters such
              ----------
numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them, and cause all related filings to be made
with the SEC as required by Rule 424.

          (d) Blue Sky Qualification.  Use all reasonable commercial efforts to
              ----------------------
register and qualify the securities covered by such registration statement under
such other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders and any underwriters, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.

          (e) Underwriting Agreement.  In the event of any underwritten public
              ----------------------
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering, provided that such managing underwriter has been selected, to the
extent applicable, consistent with the provisions of Section 2(b).  Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

          (f) Prospectus Delivery.  Promptly notify each Holder of Registrable
              -------------------
Securities covered by the registration statement at any time when the Company
becomes aware of the happening of any event as a result of which the
registration statement or the prospectus included in such registration statement
or any supplement to the prospectus (as then in effect) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein (in the case of the prospectus, in light of the
circumstances under which they were made) not misleading or, if for any other
reason it shall be necessary during such time period to amend or supplement the
registration statement or the prospectus in order to comply with the Securities
Act, whereupon, in either case, each Holder shall immediately cease to use such
registration statement or prospectus for any purpose and, as promptly as
practicable thereafter, the Company shall prepare and file with the SEC, and
furnish without charge to the appropriate Holders and managing underwriters, if
any, a supplement or amendment to such registration statement or prospectus
which will correct such statement or omission or effect such compliance and such
copies thereof as the Holders and any underwriters may reasonably request.

          5. Furnish Information. It shall be a condition precedent to the
             -------------------
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable

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<PAGE>

Securities. Such information shall be used specifically for inclusion in the
registration statement and the prospectus and any supplement thereto with
respect to the Registrable Securities. The selling Holders shall promptly notify
the Company at any time when any such Holder becomes aware that any information
furnished pursuant to this Section 5 becomes materially incorrect.

          6. Expenses of Demand Registration. All expenses other than
             -------------------------------
underwriting discounts and commissions and stock transfer taxes incurred in
connection with the registration and sale of Registrable Securities pursuant to
Section 2, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, reasonable fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company, which counsel the Company may request be the Company's counsel if such
counsel is reasonably acceptable to the Initiating Holders and, if not, shall be
selected by the Initiating Holders; provided, however, that in the event the
Holders retain separate counsel, the reasonable fees and expenses to be
reimbursed shall not exceed $50,000 in a subsequent registration without the
prior consent of the Company. Notwithstanding the foregoing, however, in the
event a registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (other than
as a result of information concerning the business or financial condition of the
Company which is made known to the Holders after the date on which such
registration was requested), then either (i) such expenses shall be borne solely
by the Initiating Holders and not by the Company (in which case all Holders
participating in such registration shall bear such expenses pro rata based on
the Registrable Securities to be registered), or (ii) one of the demand
registration rights provided for in Section 2(a) shall be deemed forfeited. The
election permitted by the previous sentence shall be made by the Initiating
Holders in proportion to the Registrable Securities to be registered by each.

          7. Expenses of Company Registration. The Company shall bear and pay
             --------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities pursuant to Section 3, including
(without limitation) all registration, filing, and qualification fees, printers
and accounting fees relating or apportionable thereto and fees and disbursements
of one counsel for the selling Holders selected by them (which the Company may
request be the Company's counsel if such counsel is reasonably acceptable to
such selling Holders), but excluding underwriting discounts and commissions and
stock transfer taxes relating to Registrable Securities; provided, however, that
in the event the Holders retain separate counsel, the reasonable fees and
expenses to be reimbursed shall not exceed $20,000 in a subsequent registration
without the prior consent of the Company.

          8. Underwriting Requirements. In connection with any offering
             -------------------------
contemplated by this Agreement which constitutes an underwriting, the Company
shall not be required to include any of the Holders' Registrable Securities or
any securities of any Other Stockholders in such underwriting unless such
Holders or Other Stockholders, as applicable, accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
the person(s) entitled to select the underwriters, and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company, such determination to be
confirmed in writing upon the request of any Holder. If the total amount of
Registrable Securities or other securities requested by Holders and Other

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Stockholders, as applicable, to be included in such offering exceeds the amount
of securities sold other than by the Company that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering only (i) that number of
Registrable Securities (up to 100% of the Registrable Securities requested to be
included in such registration) which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among all selling Holders according to the
total amount of Registrable Securities requested for registration by each
selling Holder or in such other proportions as shall mutually be agreed to by
such selling Holders) and (ii) if all Registrable Securities requested for
registration by the selling Holders are included in such offering, that number
of securities of the Company which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among all Other Stockholders according to
the total amount of securities (other than Registrable Securities) requested for
registration by such Other Stockholders). If any Holder of Registrable
Securities or Other Stockholder who has requested inclusion in such registration
as provided above disapproves of the terms of the underwriting, such Person may
elect to withdraw therefrom by written notice to the Company, and the securities
so withdrawn shall also be withdrawn from the registration.

          9. Delay of Registration. No Holder shall have any right to obtain or
             ---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.

          10. Indemnification. In the event any Registrable Securities are
              ---------------
included in a registration statement under this Agreement:

          (a) Indemnification by the Company.  To the fullest extent permitted
              ------------------------------
by law, the Company will indemnify and hold harmless each Holder and its
officers, directors, stockholders, partners, owners and agents, any underwriter
(as defined in the Securities Act) for such Holder, and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act, or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"):  (i) any untrue statement or alleged untrue statement of a
 ---------
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto,  (ii) the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, or any state securities
law or any rule or regulation promulgated under the Securities Act, the Exchange
Act, or any state securities law; and the Company will pay to each such Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by one law firm retained by them, plus appropriate local
counsel in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this Section 10(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which

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<PAGE>

consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to which
any Holder, underwriter or controlling person may become subject to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by such Holder, underwriter or controlling
person.

          (b) Indemnification by Selling Holder.  To the fullest extent
              ---------------------------------
permitted by law, each selling Holder severally, but not jointly, will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, any
underwriter, any other Holder selling securities in such registration statement
and any controlling person of any such underwriter or other Holder against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Securities Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Section 10(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 10(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, further, that, in no event shall any
indemnity under this Section 10(b) exceed the net after-tax proceeds from the
offering actually received by such Holder.

          (c) Procedures.  Promptly after receipt by an indemnified party under
              ----------
this Section 10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel
(plus appropriate local counsel), with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding.  The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall relieve such indemnifying party of any liability to the
indemnified party under this Section 10 to the extent (and only the extent) that
it is actually prejudiced thereby, but the omission so to deliver written notice
to the indemnifying party will

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<PAGE>

not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10.

          (d) Contribution.  If the indemnification provided for in this Section
              ------------
10 from the indemnifying party is unavailable to an indemnified party hereunder
in respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified parties on the other in connection
with the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations.  The relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or related to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action; provided, however, that in no event shall the liability of
any selling Holder hereunder be greater in amount than the difference between
the dollar amount of the net after-tax proceeds received by such Holder upon the
sale of the Registrable Securities giving rise to such contribution obligation
and all amounts previously contributed by such Holder with respect to such
losses, claims, damages, liabilities and expenses.  The amount paid or payable
to a party as a result of the losses, claims damages, liabilities and expenses
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.

          The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 10(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

          (e) Survival.  The obligations of the Company and Holders under this
              --------
Section 10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Agreement, and otherwise.

          11. Reports Under Exchange Act. With a view to making available to the
              --------------------------
Holders the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration generally or
pursuant to a registration on Form S-3, the Company agrees to:

          (a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after the effective date of
the first registration statement filed by the Company for the offering of its
securities to the general public;

                                       10
<PAGE>

          (b)  use all reasonable commercial efforts, including voluntarily
          registering its Common Stock under Section 12 of the Exchange Act, to
          qualify for registration on Form S-3 for the sale of their Registrable
          Securities as soon as it becomes eligible to file such resale
          registration statement;

          (c)  file with the SEC in a timely manner all reports and other
          documents required of the Company under the Securities Act and the
          Exchange Act; and

          (d)  furnish to any Holder, so long as the Holder owns any
          Registrable Securities, promptly upon request (i) a written statement
          by the Company that it has complied with the reporting requirements of
          SEC Rule 144, the Securities Act and the Exchange Act, (at any time
          after it has become subject to such reporting requirements), or that
          it qualifies as a registrant whose securities may be resold pursuant
          to Form S-3 (at any time after it so qualifies), (ii) a copy of the
          most recent annual and/or quarterly report of the Company and such
          other reports and documents so filed by the Company, and (iii) such
          other information as may be reasonably requested in availing any
          Holder of any rule or regulation of the SEC which permits the selling
          of any such securities without registration or pursuant to such form.

          12.  Form S-3 Registration.  In case the Company shall receive from
               ---------------------
any Holder or Holders of at least the lesser of (x) 625,000 shares of Common
Stock (adjusted for all stock splits or similar transactions) or (y) Registrable
Securities with a fair market value, based on the closing market price on the
trading day immediately prior to the date of notice (as reported in the Wall
Street Journal), of not less than $2,500,000, a written request or requests that
the Company effect a registration on Form S-3 and any related reasonable
qualification or compliance with respect to such Registrable Securities, the
Company will:

          (a)  promptly give written notice of the proposed registration, and
          any related qualification or compliance, to all other Holders; and

          (b)  as soon as practicable, effect such registration and all such
          qualifications and compliance as may be so requested and as would
          permit or facilitate the sale and distribution of all or a portion of
          each such Holder's Registrable Securities as are specified in such
          request, together with all or such portion of the Registrable
          Securities or other securities, as the case may be, of any other
          Holder or Other Stockholder, as applicable, joining in such request as
          are specified in a written request given within ten (10) business days
          after delivery of such notice by the Company in accordance with
          Section 23 hereof; provided, however, that the Company shall not be
          obligated to effect any such registration, qualification or
          compliance, pursuant to this Section 12:  (i) if Form S-3 is not
          available for such offering by the Holders; (ii) if the Company shall
          furnish to the Holders a certificate signed by the Secretary of the
          Company stating that in the good faith judgment of the Board of
          Directors of the Company as set forth in a duly adopted written
          resolution, it would be detrimental to the Company and its
          stockholders for such Form S-3 registration to be effected at such
          time, in which event the

                                       11
<PAGE>

          Company shall have the right to defer the filing of the Form S-3
          registration statement for a period of not more than sixty (60) days
          after receipt of the request of the Holders under this Section 12;
          provided, however, that the Company shall not utilize this right more
          than once in any twelve month period; (iii) if the Company has, within
          the twelve (12) month period preceding the date of such request,
          already effected two registrations for the Holders pursuant to Section
          2 and/or this Section 12; or (iv) in any particular jurisdiction in
          which the Company would be required to qualify to do business or to
          execute a general consent to service of process in effecting such
          registration, qualification or compliance.

          (c)  Subject to the foregoing, the Company shall file a registration
          statement covering the Registrable Securities and other securities so
          requested to be registered as soon as reasonably practicable after
          receipt of the request or requests of the Holders. All expenses
          incurred in connection with such registrations requested by the
          Holders, including (without limitation) all registration, filing,
          qualification, printer's and accounting fees, the reasonable fees and
          disbursements of counsel for the Company and the reasonable fees and
          expenses of one counsel for the selling Holders, which counsel the
          Company may request be the Company's counsel if such counsel is
          reasonably acceptable to such selling Holders and, if not, shall be
          selected by the Initiating Holders; provided, however, that (i) the
          underwriters' discounts or commissions and stock transfer taxes
          associated with Registrable Securities shall not be borne by the
          Company, but shall be borne by the applicable Holders of such
          Registrable Securities and (ii) in the event the Selling Holders
          retain separate counsel, the reasonable fees and expenses reimbursed
          shall not exceed $25,000 ($12,500 if the registration is not
          underwritten) without the prior consent of the Company. Registrations
          effected pursuant to this Section 12 shall not be counted as demands
          for registration effected pursuant to Section 2.

          (d)  For purposes of this Section 12, the provisions of Section 4
          applicable to Form S-3 offerings shall apply and, if any such
          registration is to be an underwritten offering, such registration
          shall be subject to underwriter, cut-back and other provisions as
          provided in Section 2(b).

          13.  Assignment of Registration Rights.  Except as otherwise provided
               ---------------------------------
herein, the rights to cause the Company to register Registrable Securities
pursuant to this Agreement may be assigned only to a purchaser, assignee or
transferee (each a "transferee") of in excess of 125,000 of the underlying
Registrable Securities (as adjusted for all stock splits or similar
transactions); provided, however, that such transferee must be (i) a member,
partner or stockholder of such Holder and be receiving such Registrable
Securities upon distribution by such Holder of all Registrable Securities held
by such Holder to its members, partners or stockholders in accordance with their
proportionate ownership of the Holder, or (ii) an Affiliate of the Holder; and,
provided, further, that such transferee must have executed a joinder agreement
substantially in the form of Exhibit 1 and become bound to this Agreement. The
Company may, at is election, require that this covenant be enforced by requiring
all Holders to legend their share certificates in a manner consistent with the
provisions of this Agreement.

                                       12
<PAGE>

        14.  Limitations on Subsequent Registration Rights.  From and after the
            ---------------------------------------------
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the then outstanding shares Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder to include such securities in any registration filed under Sections 2, 3
or 12 hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of its securities will not reduce the amount of
the Registrable Securities of the Holders which are included; provided, however,
that this Section 14 shall not apply to issuances to employees, directors or
consultants approved by the Board of Directors.

        15.  "Market Stand-Off" Agreement.  Each Holder hereby agrees that for
              ----------------------------
a period of ninety (90) days after any registration effected subsequent hereto
pursuant to Sections 2, 3 or 12 (provided the Holders are given written notice
of the offering and the right to participate therein as provided for in this
Agreement), such Holder shall not, unless otherwise agreed to by the managing
underwriters, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except Common Stock included in such registration; provided, however, that all
executive officers and directors of the Company and all other persons with
registration rights (whether or not pursuant to this Agreement) enter into
similar agreements. In addition, each Holder agrees to acknowledge the
undertaking provided for in this Section 15 by entering into customary written
"lock-up" agreements with the managing underwriters of the relevant
underwriting. This requirement shall not apply to a Holder that, at the time of
receipt of the referenced notice from the Company, (a) beneficially owned less
than 1% of the outstanding shares of each class of the capital stock of the
Company, (b) is not an Affiliate or an employee of the Company and (c) waives
any further benefits of this Agreement for it or any subsequent assignee or
transferee of its Registrable Securities.

     In order to enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to the Registrable Securities of each Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.

        16.  Amendment of Registration Rights.  Any provision of this Agreement
             --------------------------------
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the then
outstanding shares of Registrable Securities; provided, however, that if any
amendment proposed hereunder would reasonably be expected to adversely affect
any right granted to a specific Holder herein (including the rights granted in
Section 2(a)(i)), such amendment shall require the consent of such Holder. Any
amendment or waiver effected in accordance with this Section 16 shall be binding
upon each Holder of any Registrable Securities then outstanding, each future
holder of all such Registrable Securities and the Company.

        17.  Termination.  The rights provided in this Agreement shall
             -----------
terminate on the earlier of (i) five years from the Closing Date (as defined in
the Merger Agreement), or (ii) once

                                       13
<PAGE>

the Company has registered the resale of all of the shares of Registrable
Securities under the Exchange Act.

        18.  Governing Law.  This Agreement shall be construed in accordance
             -------------
with and governed by the laws of the State of Delaware (without giving effect to
its conflicts of law principles), except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or the subject of this Agreement, and as to those matters the law of
the jurisdiction under which the respective entity derives its powers shall
govern.

        19.  Counterparts.  This Agreement may be executed in two or more
             ------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

        20.  Titles and Subtitles.  The titles and subtitles used in this
             --------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

        21.  Negotiation of Agreement. Each party hereto represents and agrees
             ------------------------
with each other that it has been represented by or had the opportunity to be
represented by, independent counsel of its own choosing, and that it has had the
full right and opportunity to consult with its respective attorney(s), that to
the extent, if any, that it desired, it availed itself of this right and
opportunity, that it or its authorized officers (as the case may be) have
carefully read and fully understand this Agreement in its entirety and have had
it fully explained to them by such party's respective counsel, that each is
fully aware of the contents thereof and its meaning, intent and legal effect,
and that it or its authorized officer (as the case may be) is competent to
execute this Agreement and has executed this Agreement free from coercion,
duress or undue influence. This Agreement is the product of negotiations between
the parties hereto represented by counsel and any rules of construction relating
to interpretation against the drafter of an agreement, shall not apply to this
Agreement and are expressly waived.

        22.  Notices.  Any notice, request, instruction or other document to
             -------
be given hereunder by any party hereto to another party hereto shall be in
writing, shall be deemed to have been duly given or delivered when delivered
personally or telecopied (receipt confirmed, with a copy sent by reputable
overnight courier), or one business day after delivery to a reputable overnight
courier, postage prepaid, to the address of the party on file with the Secretary
of the Company.

        23.  Severability.  If one or more provisions of this Agreement are
             ------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms to the fullest extent permitted by law.

        24.  Further Assurances.  Each of the parties shall, without further
             ------------------
consideration, use reasonable efforts to execute and deliver such additional
documents and take such other action as the other parties, or any of them may
reasonably request to carry out the intent of this Agreement and the
transactions contemplated hereby.

                                       14
<PAGE>

        25.  Successors and Assigns.  This Agreement shall be binding upon and
             ----------------------
all rights hereto shall inure to the benefit of the Company, its successors and
permitted assigns, and shall be binding upon and all rights hereto shall inure
to the benefit of the other parties hereto and their respective heirs,
successors and permitted assigns.

        26.  Entire Agreement.  This Agreement embodies the entire agreement and
             ----------------
understanding of the parties hereto in respect of the actions and transactions
contemplated by this Agreement.  There are no restrictions, promises,
inducements, representations, warranties, covenants or undertakings with regard
to the registration of the Company's capital stock pursuant to the Securities
Act, other than those expressly set forth or referred to in this Agreement.

                            (Signature Page Follows)

                                       15
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Registration Rights Agreement to be duly executed as of the date first
above written.

                              LEARNINGSTAR CORP.

                              By:          /s/ Ronald Elliott
                                    ---------------------------------------
                                    Name:  Ronald Elliott
                                    Title: Chief Executive Officer

                              EDUCATIONAL SIMON, L.L.C., a Delaware limited
                              liability company

                              By:          /s/ Robert W. MacDonald
                                    ---------------------------------------
                                    Name:  Robert W. MacDonald
                                    Title: President

                              ACACIA CAPITAL PARTNERS, LLC, a California limited
                              liability company

                              By:          /s/ C.D.N. Thomas
                                    ---------------------------------------
                                    Name:  C.D.N. Thomas
                                    Title: Partner

                              NORTH BRIDGE VENTURE PARTNERS III, L.P.

                                By: NORTH BRIDGE VENTURE MANAGEMENT III, L.P.,
                                    its General Partner

                                    By:       /s/ Richard A. D'Amore
                                       ------------------------------------
                                       Name:  Richard A. D'Amore
                                       Title: General Partner

                                      S-1
<PAGE>

                              COMMONWEALTH CAPITAL VENTURES II, L.P.

                                By: COMMONWEALTH CAPITAL VENTURES II, L.P., its
                                    General Partner

                                    By:
                                       -----------------------------------
                                       Name:
                                       Title:

                              RONALD PHELAN, an Individual

                                       /s/ Ronald Phelan
                              -----------------------------------
                                       Ronald Phelan

                              RICHARD PHELAN, an Individual

                                      /s/ Richard Phelan
                              -----------------------------------
                                      Richard Phelan

                              RANDY DEAN, an Individual

                                        /s/ Randy Dean
                              -----------------------------------
                                        Randy Dean

                              DR. JUDITH HERR, an Individual

                              -----------------------------------
                                      Dr. Judith Herr

                              STEPHEN KAPLAN, an Individual

                                      /s/ Stephen Kaplan
                              -----------------------------------
                                      Stephen Kaplan

                                      S-2
<PAGE>

                              DAVID BLOHM, an Individual

                              -----------------------------------
                                       David Blohm

                              JEFF PUCCI, an Individual

                              -----------------------------------
                                        Jeff Pucci

                              RICHARD VIARD, an Individual

                              -----------------------------------
                                      Richard Viard

                              ALBERT NOYES, an Individual

                              -----------------------------------
                                        Albert Noyes

                              RICHARD SECOR, an Individual

                              -----------------------------------
                                       Richard Secor

                              RICHARD D'AMORE, an Individual

                                      /s/ Richard D'Amore
                              -----------------------------------
                                      Richard D'Amore

                              MICHAEL FITZGERALD, an Individual

                              -----------------------------------
                                     Michael Fitzgerald

                                     S-3
<PAGE>

                              MICHAEL KOLOWICH, an Individual

                              -----------------------------------
                                      Michael Kolowich

                              BRIAN HICKEY, an Individual

                                      /s/ Brian Hickey
                              -----------------------------------
                                      Brian Hickey

                              ROBERT CAHILL, an Individual

                                      /s/ Robert Cahill
                              -----------------------------------
                                      Robert Cahill

                              THE MAIR FAMILY 1984 LIVING TRUST

                                      /s/ Jeffrey R. Mair
                              -----------------------------------
                                      Jeffrey R. Mair, Trustee

                                      /s/ Gloria June Mair
                              -----------------------------------
                                      Gloria June Mair, Trustee

                              THE JENNIFER A. MAIR 1999 IRREVOCABLE TRUST

                                       /s/ Peter K. Mair
                              -----------------------------------
                                       Peter K. Mair, Trustee

                                      S-4
<PAGE>

                              THE JASON P. MAIR 1999 IRREVOCABLE TRUST

                                       /s/ Peter K. Mair
                              -----------------------------------
                                       Peter K. Mair, Trustee

                              RONALD ELLIOTT, an Individual

                                       /s/ Ronald Elliott
                              -----------------------------------
                                       Ronald Elliott

                                      S-5
<PAGE>

                                  SCHEDULE A

                                   HOLDERS:

Educational Simon, L.L.C.
Acacia Capital Partners, LLC
North Bridge Venture Partners III, L.P.
Commonwealth Capital Ventures II, L.P.
Ronald Phelan
Richard Phelan
Randy Dean
Dr. Judith Herr
Stephen Kaplan
David Blohm
Jeff Pucci
Richard Viard
Albert Noyes
Richard Secor
Richard D'Amore
Michael Fitzgerald
Michael Kolowich
Brian Hickey
Robert Cahill
The Mair Family 1984 Living Trust
The Jennifer A. Mair 1999 Irrevocable Trust
The Jason P. Mair 1999 Irrevocable Trust
Ronald Elliott

                                  Schedule A
                                  ----------<PAGE>

                                                                    EXHIBIT 10.5

                             EMPLOYMENT AGREEMENT
                             --------------------

     This Employment Agreement (this "Agreement") is entered into effective June
15, 2000 (the "Effective Date"),  by and between DaVita Inc. ("Employer") and
Joseph C. Mello ("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 Chief Operating Officer.  Employee accepts such employment on the terms
and conditions set forth in this Agreement.  Employee shall perform the duties
of Chief Operating Officer of the Employer and shall perform such other 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, provided, however, that from the
                                            --------  -------
date hereof until October 2, 2000, or such earlier date as Employee may
determine (the "Transition Period"), Employee shall be employed on a part-time
basis to enable Employee to complete the transition from his former employer
(the "Transition Activities").  Except for the Transition Activities during the
Transition Period, Employee shall not engage in any other business activities
during the term of this Agreement.  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 $325,000
               -----------
per annum, less standard withholdings and authorized deductions, provided,
                                                                 --------
however, that Employee will initially earn a salary of $2,700 per month during
-------
the Transition Period, which salary shall be increased proportionally to any
significant increase in Employee's workload during the Transition Period.
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, provided, however, during the Transition Period, Employee will
                --------  -------
not be entitled to any such benefits until Employee regularly works twenty-four
(24) or more hours per week.

                                       1
<PAGE>

          2.3  Bonus.
               -----

               (a)  Employee shall be eligible to receive a discretionary
performance bonus (the "Bonus"), 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.

               (b)  Employee must be employed by Employer (or an affiliate) on
the date any 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,
provided, however, that in the event Employee dies or is terminated by Employer
--------  -------
by reason of Disability (as defined below), Employee (or his estate) shall be
entitled to receive, at such time as bonuses for such year are otherwise paid by
Employer, a pro rated Bonus for that portion of any year prior to such
termination (or for the whole year and a portion of a year if such termination
occurs after December 31 of any year and prior to the date on which the Bonus
for such year is paid) regardless of whether Employee is employed on the date
such Bonus is paid; and provided further, that, in the event Employee is
                        -------- -------
terminated without Material Cause (as defined below) or resigns following
Constructive Discharge (as defined below) at any time, Employee shall be
entitled to receive a Bonus for the year in which such termination occurs equal
to the normal Bonus, if any, which he received for the immediately preceding
calendar year multiplied by two (2), which Bonus shall be payable within five
(5) business days after the effective date of such termination.

          2.4  Vacation.  Employee shall have vacation, subject to the approval
               --------
of the Chief Executive Officer.

          2.5  Stock Options.  Employee shall receive options to purchase
               -------------
450,000 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 for 225,000 shares shall be the closing price as
reported on the New York Stock Exchange on the start date of this Agreement,
June 15, 2000; the exercise price for the remaining 225,000 shares of Employee's
options shall be the closing price as reported on the New York Stock Exchange on
the second day of Employee's employment, June 16, 2000. The options will be
reflected in a separate Stock Option Agreement.

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

          2.7  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

                                       2
<PAGE>

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 at least thirty
(30) days' advance written notice specifying in detail the cause for the
termination and the intended termination date. 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 or other arrangement that
would, by its terms, apply.

          3.3  Other 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. If Employer terminates the employment of Employee
for reasons other than for Material Cause or Disability, or if Employee resigns
within sixty (60) days following Constructive Discharge (as defined below),
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 the Bonus provided for in
Section 2.3(b), (iii) be entitled to receive a lump-sum payment equal to the
--------------
Base Salary in effect as of the date of such termination; (iv) 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 subject to the
limitation set forth below and subject to the limitation set forth in Section
                                                                      -------
2.7); and (v) 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.

                                       3
<PAGE>

          3.4.  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.

          3.5  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.

          3.6  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.

          3.7  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 two (2) years after the Change

                                       4
<PAGE>

of Control or becomes the Chief Executive Officer of the surviving company with
which Employer merged or consolidated and remains in that position for at least
two (2) years 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 area of
operations, (B) in the same general level of seniority, or (C) 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 six
(6) 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
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 thirty
(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; (vii) exclusion of Employee from
participating in any federal health care program; or (viii) a failure to perform
his duties in a satisfactory manner, as determined by the Chief Executive
Officer of Employer, in his sole discretion, so long as Kent Thiry is the Chief
Executive Officer, which goes uncorrected for a period of thirty (30)
consecutive days after written notice has been provided to Employee.

          3.8  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 7 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.

                                       5
<PAGE>

          3.9  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, Section 5, Section 6 and Section 7 shall
              ---------  ---------  ---------  ---------     ---------
survive termination of this Agreement.

     Section 4.  Certain Covenants of Executive.
                 ------------------------------

          4.1  Confidential Information.
               ------------------------

               (a)  Employee acknowledges and agrees that: (i) in the course of
his employment by Employer, it will or may be necessary for Employee to create,
use, or have access to (A) technical, business, or customer information,
materials, or data relating to Employer's present or planned business that has
not been released to the public with Employer's authorization, including, but
not limited to, confidential information, materials, or proprietary data
belonging to Employer or relating to Employer's affairs (collectively,
"Confidential Information") and (B) information and materials that concern
Employer's business that come into Employer's possession by reason of employment
with Employer (collectively, "Business Related Information"); (ii) all
Confidential Information and Business Related Information are the property of
Employer; (iii) the use, misappropriation, or disclosure of any Confidential
Information or Business Related Information would constitute a breach of trust
and could cause serious and irreparable injury to Employer; and (iv) it is
essential to the protection of Employer's goodwill and maintenance of Employer's
competitive position that all Confidential Information and Business Related
Information be kept confidential and that Employee not disclose any Confidential
Information or Business Related Information to others or use Confidential
Information or Business Related Information to Employee's own advantage or the
advantage of others.

               (b)  In recognition of the acknowledgment contained in Section
                                                                      -------
4.1(a) above, Employee agrees that, during the term of this Agreement and
------
thereafter until the Confidential Information and/or Business Related
Information becomes publicly available (other than through a breach by
Employee), Employee shall: (i) hold and safeguard all Confidential Information
and Business Related Information in trust for Employer, its successors, and
assigns; (ii) not appropriate or disclose or make available to anyone for use
outside of Employer's organization at any time, either during employment with
Employer or subsequent to the termination of employment with Employer for any
reason, any Confidential Information and Business Related Information, whether
or not developed by Employee, except as required in the performance of
Employee's duties to Employer; (iii) keep in strictest confidence any
Confidential Information or Business Related Information; and (iv) not disclose
or divulge, or allow to be disclosed or divulged by any person within Employee's
control, to any person, firm, or corporation, or use directly or indirectly, for
Employee's own benefit or the benefit of others, any Confidential Information or
Business Related Information.

                                       6
<PAGE>

               (c)  Employee agrees that all lists, materials, records, books,
data, plans, files, reports, correspondence, and other documents ("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 agrees that during the term of this
               -----------
Agreement and for a period of one (1) year after the termination of his
employment with Employer 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 individual, partnership,
limited liability company, corporation, independent practice association,
management services organization, or any other entity (collectively, "Person")
that either is in the business of or, directly or indirectly, derives any
economic benefit from providing, arranging, offering, managing, or
subcontracting dialysis services or renal care services; 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 or in those countries outside 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 provided by Employer at any time during
the period of Employee's employment, including, but not limited to,
hemodialysis, acute dialysis, apheresis 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, 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.

                                       7
<PAGE>

          4.3  Solicitation of Employees.  Employee promises and agrees that he
               -------------------------
will not, for a period of one (1) year after the termination of his employment,
directly or indirectly, solicit any of Employer's employees to work for any
business, individual, partnership, firm, corporation, or other entity that is
then in competition with Employer's business or any subsidiary or affiliate of
Employer. Employee also agrees that during his employment and for a period of
one (1) year after the termination of his employment, directly or indirectly,
that he will not hire any of Employer's employees to work (as an employee or an
independent contractor) for any business, individual, partnership, firm,
corporation, or other entity that is then in competition with Employer's
business or any subsidiary or affiliate of Employer. In addition, Employee
agrees that during his employment and for a period of one (1) year after the
termination of his employment, directly or indirectly, that he will not take any
action that may reasonably result in any of Employer's employees going to work
(as an employee or an independent contractor) for any business, individual,
partnership, firm, corporation, or other entity that is then in competition with
Employer's business or any subsidiary or affiliate of Employer.

          4.4  Other solicitation.  Employee promises and agrees that during the
               ------------------
term of this Agreement and for a period of one (1) year after the termination of
his employment for any reason, he shall not, directly or indirectly: (i) induce
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 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, or encourage any physician (or former physician) affiliated with
Employer or induce or encourage any other person under contract with Employer to
curtail or terminated 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 physician) affiliated with
Employer; or (vi) disparage Employer or any of its agents, employees, or
affiliated physicians in any fashion.

          4.5  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 area, period of restriction, activity, or
subject established in accordance with this Section 4 shall be deemed to exceed
                                            ---------
the maximum area, period of restriction, activity, or subject that a court of
competent jurisdiction deems enforceable, such area, period of restriction,
activity, or subject shall, for the purpose of Section 4, be reduced to the
                                               ---------
extent necessary to render them enforceable.

          4.6  Equitable Relief.  Employee agrees that any violation by Employee
               ----------------
of any covenant in Section 4 will or would cause Employer to suffer irreparable
                   ---------
injury, the exact amount of which will be difficult to ascertain.  For that
reason, Employee agrees that Employer shall be entitled, as a matter of right,
to a temporary, preliminary, and/or permanent injunction and/or other injunctive
relief, ex parte or otherwise, from any court of competent jurisdiction,
restraining any further violations by Employee.  Such injunctive relief shall be
in addition to and in no way limit any

                                       8
<PAGE>

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 covenants and 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 hereunder, Employer shall, within
thirty (30) days of the date on which any Excess Parachute Payment is made, pay
to Employee, in addition to any other payment, coverage or benefit due and owing
hereunder, 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 5) and (ii) dividing the product so obtained by the
                 ---------
amount obtained by subtracting (A) the aggregate local, state and Federal income
tax rates (including the value of the loss of itemized deductions under Section
68 of the Internal Revenue Code) 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 5, (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(d)(3) and (4) 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 applicable Hospital Insurance
(Medicare) Tax Rate in effect for the calendar year in which the Tax Gross-Up
Payment is made.

                                       9
<PAGE>

     Section 6.  Representations, Warranties and Agreements of Employee.
                 ------------------------------------------------------
Employer represents and warrants to Employer that (i) upon the conclusion of the
Transition Period, he will have resigned as an officer and employee of Vivra
Asthma and Allergy, Inc. and all affiliated companies and, as of the date
hereof, is not an officer, director, or employee of any other corporation or
entity, (ii) the performance of this Agreement will not breach any other
agreement or obligation by which Employee is bound to keep in confidence
proprietary information acquired by Employee in confidence or in trust before
employment by Employer and or any agreement restricting or purporting to
restrict his right to perform services for Employer, and (iii) upon the
conclusion of the Transition Period, he will not have taken and will not have in
his possession or control any confidential information or property relating to
any former employer.  Employee agrees that he will not use confidential
information or property of any other employer while employed by Employer.
Employee shall indemnify and hold Employer harmless for any breach of the
representations, warranties, and agreements set forth in Section 6, including
reasonable attorneys' fees and costs of suit.

     Section 7.  Miscellaneous.
                 -------------

          7.1  Mediation of Disputes Concerning Employment. In the event of any
               -------------------------------------------
dispute concerning Employee's employment by Employer, whether or not relating to
this Agreement, Employee and Employer shall first attempt to resolve such
dispute through mediation as provided in this Section 7.1 before instituting any
                                              -----------
action or other proceedings with respect thereto; provided, however, that
                                                  --------  -------
neither party shall be required to utilize such mediation procedures to the
extent that equitable relief is being sought by a party in the good faith belief
that an immediate remedy is required to avoid irreparable injury to such party.
Except as otherwise provided in the proviso to the immediately preceding
sentence, in the event that either party desires to institute litigation or
other legal proceedings to resolve a dispute concerning Employee's employment by
Employer, such party shall first give written notice to the other party setting
forth in detail the nature of the dispute and the facts which such party
believes supports such party's position in such dispute.  The parties shall then
promptly (and, in any event, within ten (10) business days of the giving of
notice of a dispute) engage the services of an impartial, experienced employment
mediator (the "Mediator") under the auspices of JAMS/Endispute (or such other
mediation service as the parties may mutually select) in Los Angeles County,
California.  If the parties cannot mutually agree on the selection of a
Mediator, JAMS/Endispute shall select a Mediator within ten (10) business days
after being advised of the parties' inability to select a Mediator.  Once the
Mediator is selected, the parties shall promptly schedule a mediation session
with the Mediator for a date which is not later than forty-five (45) days after
the date of the selection of the Mediator.  The Mediator shall conduct a one-day
mediation session, attended by both parties and their counsel, in an attempt to
informally resolve the dispute. By oral or written agreement of both parties,
follow-up or additional mediation sessions may be scheduled, but neither party
shall be required to participate in more than one day of mediation.  Neither
party shall be required to submit briefs or position papers to the Mediator, but
both parties shall have the right to do so, subject to such rules and procedures
as the Mediator may establish in his or her sole discretion.  Except as
otherwise agreed by the parties, all written submissions to the Mediator shall
remain confidential as between the submitting party and the Mediator.  The
mediation

                                       10
<PAGE>

process shall be treated as a settlement negotiation and no evidence introduced
in the mediation process may be used in any way by either party or any other
person in connection with any subsequent litigation or other legal proceedings
(except to the extent independently obtained through discovery in such
litigation or proceedings) and the disclosure of any privileged information to
the Mediator shall not operate as a waiver of privilege with respect to such
information. Each party shall bear all of its own costs, attorneys' fees and
expenses related to preparing for and attending any mediation conducted under
this Agreement. The fees and expenses of the Mediator and the mediation service
used, if any, shall be borne equally by Employer and Employee.

          7.2  Arbitration.  Except as provided below and in Section 4, any
               -----------                                   ---------
controversy or claim arising out of, relating to, or in any way connected with
this Agreement, any alleged breach thereof, or Employee's employment, which was
not resolved through the use of the mediation procedure set forth in Section
                                                                     -------
7.1, shall be settled by arbitration in accordance with the rules of the
---
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association.  Without limiting the general nature of the foregoing,
such claims include, but are not limited to: wage and benefit claims; contract
claims; tort claims; defamation claims; claims for employment discrimination
(statutory or nonstatutory) based on age, race, sex, national origin, color,
religion, disability (perceived, actual, or record of), medical condition,
sexual orientation, and marital status; claims for harassment; and claims for a
violation of federal, state, local, or other government law, constitution,
statute, regulation, or ordinance.  The arbitrator shall apply the appropriate
federal or state law, shall have the authority to interpret this Agreement (but
does not have the power to amend, change, delete, or add any terms), and shall
have the power to determine the appropriate legal or equitable remedy, if any.
The arbitrator's decision, which must be in writing, will be final and binding,
and the arbitrator's award may be entered in any court having jurisdiction
thereof.  The arbitration will be held in a mutually agreeable location in
Southern California.  The arbitrator shall apply California law.

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

          7.4  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.

          7.5  Applicable Law.  This Agreement shall be governed by the laws of
               --------------
the State of California, without regard to the principles of conflicts of laws.

          7.6  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

                                       11
<PAGE>

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.

          7.7  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.

          7.8  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.

          7.9  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.

          7.10  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.

          7.11  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                      /s/ Joseph C. Mello
     __________________________________     ____________________________________
     Kent J. Thiry                                    Joseph C. Mello
     Chief Executive Officer and
     Chairman of the Board

                                       12

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