Exhibit 10.1
EMPLOYMENT
AGREEMENT
This Employment Agreement (this
“Agreement”) is entered into on July 25, 2008,
effective as of July 25, 2008 (the Effective Date”),
between DaVita, Inc., a Delaware corporation (the
“Company”), and Kent J. Thiry (the
“Executive”).
WHEREAS, the Executive is currently
employed as Chairman of the Board and Chief Executive Officer of
the Company pursuant to an Employment Agreement dated as of
October 18, 1999, and as subsequently amended (the
“Prior Employment Agreement”); and
WHEREAS, the Company desires to
continue the employment of the Executive, and the Executive desires
to continue to be employed by the Company, upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of
the premises and the mutual agreements contained herein, the
Company and the Executive hereby agree as follows:
1. Employment .
The Company hereby agrees to employ
the Executive and the Executive hereby agrees to be employed by the
Company upon the terms and subject to the conditions contained in
this Agreement. The term of employment of the Executive by the
Company pursuant to this Agreement shall commence on the Effective
Date and, unless earlier terminated pursuant to Section 4
hereof, shall end on July 25, 2011 (the “Initial
Term”); provided that the term of this Agreement shall be
extended automatically for one additional year as of each
anniversary of the Effective Date, commencing with the second
anniversary of the Effective Date, unless no later than 90 days
prior to any such renewal date either the Board of Directors of the
Company (the “Board”), on behalf of the Company, or the
Executive gives written notice to the other that the term of this
Agreement shall not be so extended. The Initial Term and any
extension of the Initial Term pursuant to this Section 1 shall
be referred to herein as the “Employment
Period.”
2. Positions and Duties;
Responsibilities . (a) Positions and Duties . The
Company shall employ the Executive during the Employment Period as
its Chairman of the Board and as its Chief Executive Officer. The
Executive shall report to the Board. During the Employment Period,
the Executive shall perform faithfully and loyally and to the best
of the Executive’s abilities the duties assigned to the
Executive hereunder and shall devote the Executive’s full
business time, attention and effort to the affairs of the Company
and its subsidiaries and shall use the Executive’s reasonable
best efforts to promote the interests of the Company and its
subsidiaries.
(b) Responsibilities .
Subject to the powers, authority and responsibilities vested in the
Board and in duly constituted committees of the Board, the
Executive shall have the authority and responsibility for the
management, operation and overall conduct of the business of the
Company. The Executive shall also perform such other duties (not
inconsistent with the positions of Chairman of the Board and Chief
Executive Officer) on behalf of the Company and its subsidiaries as
may from time to time be authorized or directed by the
Board.
3. Compensation
. (a) Base
Salary . During the Employment Period, the Company shall pay to
the Executive a base salary at the rate of $1,050,000 per annum,
payable in accordance with the Company’s executive payroll
policy. Such base salary shall be reviewed annually, and shall be
subject to such increases (and not decreases), if any, as
determined by the Compensation Committee of the Board. The
Executive’s annual base salary in effect from time to time
under this Section 3(a) is hereinafter referred to as
“Base Salary.”
(b) Annual Incentive Bonus .
During the Employment Period, the Executive shall be entitled to
participate in the Company’s Executive Incentive Plan or
other annual bonus plan for senior executives (the “Incentive
Plan”) in accordance with the terms of such plan. The target
incentive bonus opportunity for the Executive for each fiscal year
under the Incentive Plan shall be equal to 100% of the
Executive’s Base Salary in effect at the beginning of such
fiscal year; provided that amount of the Executive’s bonus
for a fiscal year may exceed 100% of the Executive’s Base
Salary in effect at the beginning of such fiscal year if target
performance goals for the fiscal year are exceeded. The actual
incentive bonus payable for any year shall be based upon objective
criteria established and approved by the Compensation Committee of
the Board, which shall be similar to those applicable to other
senior executives of the Company.
(c) Other Benefits . During
the Employment Period, the Executive shall be entitled to
participate in the Company’s employee benefit plans generally
available to executives of the Company (such benefits being
hereinafter referred to as the “Employee Benefits”).
The Executive shall be entitled to take time off for vacation or
illness in accordance with the Company’s policies and to
receive all fringe benefits and perquisites as are from time to
time made generally available to senior executives of the
Company.
(d) Stock Options and Stock
Appreciation Rights . During the Employment Period, the
Executive shall be eligible to receive annual grants of stock
options and/or stock appreciation rights (“SARs”) under
the Company’s 2002 Equity Compensation Plan (or a successor
plan) with respect to such number of shares of Company common stock
and with such terms and conditions established and approved by the
Compensation Committee of the Board, which shall be similar to
those applicable to other senior executives of the
Company.
(e) Restricted Stock Units .
During the Employment Period, the Executive shall be eligible to
receive annual grants of restricted stock units under the
Company’s 2002 Equity Compensation Plan (or a successor plan)
with respect to such number of shares of Company common stock and
with such financial performance requirements and other terms and
conditions established and approved by the Compensation Committee
of the Board, which shall be similar to those applicable to other
senior executives of the Company.
(f) Other Long-Term
Incentives . During the Employment Period, the Executive shall
be eligible to participate in any other long-term incentives in
which other senior executives of the Company
participate.
(g) Expense Reimbursement .
The Company shall reimburse the Executive, in accordance with the
Company’s policies and procedures, for all proper expenses
incurred by the Executive during the Employment Period in the
performance of the Executive’s duties hereunder.
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4. Termination
. (a) Death
. Upon the death of the Executive, all rights of the Executive and
the Executive’s heirs, executors and administrators to
compensation and other benefits under this Agreement shall cease
immediately, except that the Executive’s heirs, executors or
administrators, as the case may be, shall be entitled
to:
(i) accrued Base Salary through and
including the Executive’s date of death;
(ii) the amount of any bonus earned
and payable but not yet paid for the fiscal year prior to the year
in which the Executive’s termination of employment
occurs;
(iii) other Employee Benefits to
which the Executive was entitled on the date of death in accordance
with the terms of the plans and programs of the Company;
and
(iv) the treatment of the options,
SARs, restricted stock units and any other long-term incentives
granted to the Executive in accordance with the terms
thereof.
(b) Disability . The Company
may, at its option, terminate the Executive’s employment upon
written notice to the Executive if the Executive, because of
physical or mental incapacity or disability, fails to perform the
essential functions of the Executive’s position, with or
without reasonable accommodation, required of the Executive
hereunder for a continuous period of 120 days or any 180 days
within any 12-month period. Upon such termination, the
Executive’s entitlement to compensation and benefits shall
cease immediately, except that the Executive shall be entitled
to:
(i) accrued Base Salary through and
including the effective date of the Executive’s termination
of employment;
(ii) the amount of any bonus earned
and payable but not yet paid for the fiscal year prior to the year
in which the Executive’s termination of employment
occurs;
(iii) other Employee Benefits to
which the Executive is entitled upon termination of employment in
accordance with the terms of the plans and programs of the Company;
and
(iv) the treatment of the options,
SARs, restricted stock units and any other long-term incentives
granted to the Executive in accordance with the terms
thereof.
In the event of any dispute
regarding the existence of the Executive’s incapacity or
disability hereunder, the matter shall be resolved by the
determination of a physician mutually agreed upon by the Board and
the Executive. The Executive shall submit to appropriate medical
examinations for purposes of such determination.
(c) Cause . (i) The
Company may, at its option, terminate the Executive’s
employment under this Agreement for Cause (as hereinafter defined)
upon written notice to the Executive. Any such termination shall be
authorized by the Board.
(ii) As used in this Agreement, the
term “Cause” shall mean any one or more of the
following:
(A) the Executive’s conviction
of a felony;
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(B) any act of fraud or dishonesty
by the Executive resulting or intended to result in personal
enrichment at the Company’s expense;
(C) repeated failure or refusal by
the Executive to follow policies established by the Board or
written directives of the Board, that is not corrected within 30
days after notice of such failure or refusal, and that is material
and willful and has a material adverse effect on the
Company’s business; or
(D) material breach by the Executive
of this Agreement, that is not corrected within 30 days after
notice of such breach.
(iii) The exercise of the right of
the Company to terminate the Executive’s employment under
this Agreement pursuant to this Section 4(c) shall not
abrogate the rights or remedies of the Company in respect of the
breach giving rise to such termination.
(iv) If the Company terminates the
Executive’s employment for Cause, the Executive’s
entitlement to compensation and benefits shall cease immediately,
except that the Executive shall be entitled to the payments and
benefits specified in Sections 4(b)(i) through 4(b)(iv)
hereof.
(d) Termination Without Cause
. (i) The Company may, at its option, terminate the
Executive’s employment under this Agreement upon written
notice to the Executive for a reason other than a reason set forth
in Section 4(a), 4(b) or 4(c). Any such termination shall be
authorized by the Board. If the Company terminates the
Executive’s employment for any such reason, the
Executive’s entitlement to compensation and benefits shall
cease immediately, except that the Executive shall be entitled
to:
(A) the payments and benefits
specified in Sections 4(b)(i) through 4(b)(iv) hereof,
inclusive;
(B) a prorated annual incentive
bonus (based on the actual bonus earned under the objective
standards set forth in the Incentive Plan for the fiscal year in
which the Executive’s termination of employment occurs)
through and including the Executive’s date of
termination;
(C) an amount equal to the product
of (x) three, and (y) the sum of the Base Salary and the
Prior Bonus (as defined below), which shall be payable in a lump
sum within the 90 days following the Executive’s termination
of employment, subject to satisfaction of Sections 6 and 7
hereof;
(D) if the Executive has been
employed by the Company for at least ten years on the date of the
Executive’s termination pursuant to this
Section 4(d)(i), 50% of any unvested stock options, stock
appreciation rights and restricted stock units held by the
Executive on the date of the Executive’s termination shall
become vested, and the remaining unvested stock options, stock
appreciation rights and restricted stock units may continue to
vest, contingent upon the Executive’s completion of any
consulting, board service, or other projects on behalf of the
Company as may be determined by the Board;
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(E) the use of an office and the
services of an administrative assistant for the lesser of 36 months
or until the Executive obtains other full-time employment;
and
(F) continued health insurance
coverage, at the rates charged by the Company to active senior
executives of the Company, for the lesser of 36 months or until
comparable coverage is available to the Executive from another
employer.
As used in this Agreement, the term
“Prior Bonus” shall mean the average of the annual
incentive bonus earned under the Incentive Plan (including any
bonus earned and payable but not yet paid) for the last two full
fiscal years before the fiscal year in which the Executive’s
employment was terminated.
(ii) In the event that, prior to the
date on which the Executive attains age 62, the Board gives the
Executive a notice pursuant to Section 1 hereof that the term
of this Agreement shall not be extended, upon the termination of
the Executive’s employment at the end of the Employment
Period the Executive shall be entitled to:
(A) the payments and benefits
specified in Sections 4(b)(i) through 4(b)(iv) hereof,
inclusive;
(B) a prorated annual incentive
bonus (based on the actual bonus earned under the objective
standards set forth in the Incentive Plan for the fiscal year in
which the Executive’s termination of employment occurs)
through and including the Executive’s date of
termination;
(C) an amount equal to the product
of (x) one and one-half, and (y) the sum of the Base
Salary and the Prior Bonus, which shall be payable in a lump sum
within the 90 days following the Executive’s termination of
employment, subject to satisfaction of Sections 6 and 7
hereof;
(D) if the Executive has been
employed by the Company for at least ten years on the date of the
Executive’s termination pursuant to this
Section 4(d)(ii), 50% of any unvested stock options, stock
appreciation rights and restricted stock units held by the
Executive on the date of the Executive’s termination shall
become vested, and the remaining unvested stock options, stock
appreciation rights and restricted stock units may continue to
vest, contingent upon the Executive’s completion of such
consulting, board service, or other projects on behalf of the
Company as may be determined by the Board;
(E) the use of an office and the
services of an administrative assistant for the lesser of 36 months
or until the Executive obtains other full-time employment;
and
(F) continued health insurance
coverage, at the rates charged by the Company to active senior
executives of the Company, for the lesser of 36 months or until
comparable coverage is available to the Executive from another
employer.
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(e) Voluntary Termination .
Upon 60 days prior written notice to the Company (or such shorter
period as may be permitted by the Board), the Executive may
voluntarily terminate the Executive’s employment with the
Company for any reason. If the Executive voluntarily terminates the
Executive’s employment pursuant to this Section 4(e),
the Executive’s entitlement to compensation and benefits
shall cease immediately, except that the Executive shall be
entitled to the payments and benefits specified in Sections 4(b)(i)
through 4(b)(iv) hereof. The Executive’s resignation, without
the consent of the Board, from either his position as Chairman of
the Board or his position as Chief Executive Officer shall
constitute a voluntary termination of employment by the Executive
under this Section 4(e).
(f) Termination for Good
Reason . (i) Upon 30 days prior written notice to the
Company (or such shorter period as may be permitted by the Board),
the Executive may voluntarily terminate the Executive’s
employment with Good Reason (as hereinafter defined). If the
Executive voluntarily terminates the Executive’s employment
pursuant to this Section 4(f), the Executive’s
entitlement to compensation and benefits shall cease immediately,
except that the Executive shall be entitled to:
(A) the payments and benefits
specified in Sections 4(b)(i) through 4(b)(iv) hereof,
inclusive;
(B) a prorated annual incentive
bonus (based on the actual bonus earned under the objective
standards set forth in the Incentive Plan for the fiscal year in
which the Executive’s termination of employment occurs)
through and including the Executive’s date of
termination;
(C) an amount equal to the product
of (x) three, and (y) the sum of the Base Salary and the
Prior Bonus, which shall be payable in a lump sum within the 90
days following the Executive’s termination of employment,
subject to satisfaction of Sections 6 and 7 hereof;
(D) if the Executive has been
employed by the Company for at least ten years on the date of the
Executive’s termination pursuant to this Section 4(f),
50% of any unvested stock options, stock appreciation rights and
restricted stock units held by the Executive on the date of the
Executive’s termination shall become vested, and the
remaining unvested stock options, stock appreciation rights and
restricted stock units may continue to vest, contingent upon the
Executive’s completion of any consulting, board service, or
other projects on behalf of the Company as may be determined by the
Board;
(E) the use of an office and the
services of an administrative assistant for the lesser of 36 months
or until the Executive obtains other full-time employment;
and
(F) continued health insurance
coverage, at the rates charged by the Company to active senior
executives of the Company, for the lesser of 36 months or until
comparable coverage is available to the Executive from another
employer.
(ii) As used in this Agreement, the
term “Good Reason” shall mean during the Employment
Period, without the written consent of the Executive, any one or
more of the following, provided that an isolated, insubstantial or
inadvertent action not
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taken in bad faith or failure not
occurring in bad faith which is remedied by the Company promptly
after receipt of notice thereof given by the Executive shall not
constitute Good Reason:
(A) the assignment to the Executive
of any duties inconsistent in any material and adverse respect with
the Executive’s then current duties and
responsibilities;
(B) the material and adverse change
in the Executive’s titles or positions;
(C) reduction in the
Executive’s Base Salary or target annual incentive
opportunity, unless such reductions are part of an across-the-board
reduction that applies to all senior executives of the Company and
takes effect prior to a Change in Control (as hereinafter defined);
or
(D) any material breach by the
Company of this Agreement, that is not corrected within 30 days
after notice of such breach.
(iii) As used in this Agreement, the
term “Change in Control” means:
(A) 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)
under 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
bas
