EXHIBIT 10.4
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment (this "Amendment") to Employment Agreement is made
effective as of March 2, 1998 by and between Total Renal Care Holdings, Inc.
(the "Company"), a Delaware corporation, and Victor M.G. Chaltiel (the
"Executive").
W I T N E S E T H:
WHEREAS, the Company and the Executive are parties to that certain Employment
Agreement dated as of August 11, 1994, as amended on that same date (the
"Agreement"); and
WHEREAS, the Company and the Executive desire by this Amendment to clarify
and amend certain provisions of the Agreement all as more fully hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the
receipt of which the parties hereby acknowledge, the parties hereto, intending
to be legally bound hereby, agree as follows:
1. Amendment.
(a) The Company and the Executive agree that the definition of "Change of
Control" in Section 1 of the Agreement is hereby amended and restated as
follows:
"Change of Control" shall mean (1) 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 under 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 50% 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 the
Company (including any transaction in which the Company becomes a wholly
owned or majority owned subsidiary of another corporation), (ii) any merger
or consolidation or reorganization in which the Company does not survive,
(iii) any merger or consolidation in which the Company survives, but the
shares of the Company's Common Stock outstanding immediately prior to such
merger or consolidation represent 50% or less of the voting power of the
Company after such merger or consolidation, and (iv) any transaction in
which more than 50% of the Company's assets are sold.
(b) The Company and the Executive agree that Section 5 of the Agreement is
hereby amended and restated as follows:
5. Excess Parachute Payment. In the event that any payment or benefit
received or to be received by Executive in connection with a Change of
Control, whether payable pursuant to the terms of this Agreement or any
other plan, arrangement or agreement by the Company, any predecessor or
successor to the Company or any corporation affiliated with the Company or
which becomes so affiliated pursuant to the transactions resulting in a
Change of Control, both within the meaning of Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code") (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 Executive as a
result of Section 280G and/or 4999 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 Executive by the Company hereunder, the Company shall, within
thirty (30) days of the date on which any Excess Parachute Payment is made,
pay to Executive, 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 Executive
(determined without regard to any payments made to Executive 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
Executive 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 the Company's intention that Executive'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
Executive 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 the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
2. Ratification and Confirmation. All other terms and conditions of the
Agreement are hereby ratified and confirmed and shall continue in full force
and effect.
3. Miscellaneous. This Amendment may be executed in two or more counterparts,
and by different parties on different counterparts, each of which shall be
deemed an original and in making proof of this Amendment it shall be necessary
only to produce sufficient counterparts. This Amendment and the rights and
obligations of the parties hereunder shall be construed in accordance with and
shall be governed by the laws of the State of California, conflict of laws
provisions notwithstanding.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above written.
TOTAL RENAL CARE HOLDINGS, INC. EXECUTIVE
By:_____________________________________ _____________________________________
Signature
Its:____________________________________ _____________________________________
Victor M.G. Chaltiel
2