EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 11th day of March,
1996, by and between RENAL TREATMENT CENTERS, INC. ("Employer"), and Thomas J.
Karl ("Employee").
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:
Section 1. Employment and Duties. Employer shall employ the Employee and the
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Employee accepts such employment for the Term set forth in Section 3 hereof, on
the terms and conditions set forth in this Agreement. During the Term the
Employee shall serve as Vice President, Secretary and General Counsel of
Employer and shall perform such duties as are normally associated with such
position, as well as such other duties as shall reasonably be assigned to him
from time to time during the continuance of this Agreement by the President of
Employer commensurate with Employee's position as a senior corporate executive.
Employee shall devote Employee's best efforts and skills to the business and
interests of Employer.
Section 2. Compensation. In consideration of the services to be performed by
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Employee hereunder, Employee shall receive:
2.1 A salary ("Salary") at the rate of at least One Hundred Eighty
Thousand Dollars ($180,000) per year. Employee's salary shall be payable in
installments consistent with Employer's payroll schedule. Employee's salary
shall be reviewed each year on or about January 1st of each calendar year,
commencing January 1, 1997 but his salary may not be reduced from the then
current level.
2.2 Employee shall receive such medical, disability, life insurance
(containing provisions allowing the beneficiaries of Employee to use the
proceeds to, among other things, exercise stock options of Employee) and other
similar benefits as are provided by plans made available to other executive
officers, provided that at no time during the Term of this Agreement shall any
such benefits be terminated or reduced in any manner. All benefits shall begin
immediately upon Employee's commencement of employment with Employer and the
Employer hereby waives any and all waiting periods.
2.3 In the discretion of the Compensation Committee, Employee shall be
paid an annual incentive bonus (an "Incentive Bonus") with respect to each
calendar year of Employer ending during the term of this Agreement. Each
Incentive Bonus shall be paid as promptly as practicable after the end of the
year for
which it was earned but in no event more than 15 day after the completion of the
audit of Employer's financial statements for such year, and shall be of no less
percentage of Employee's salary than is applicable to any other officer of the
Employer other than the President and current Executive Vice President and Chief
Financial Officer. For purposes of the Incentive Bonus payable in 1997 for
Employee's contributions in calendar year 1996, such bonus shall be calculated
as if Employee had been employed by Employer for the entire 1996 calendar year
and received his full annual salary.
2.4 Employer shall pay Employee a sign on bonus equal to $36,000
payable within five days from the date that employment commences hereunder.
2.5 Employer shall provide group life insurance, group accident
insurance, group disability income insurance and group health insurance to
Employee in the amount and on the terms such insurance is made available to any
other executive officer of the Employer.
2.6 Employer shall reimburse Employee for all business related
telephone expenses, mobile or otherwise.
2.7 Employer deems it necessary to the duties of Employee that he
belong to standard and customary bar and legal associations and organizations.
Employer shall pay all dues for membership to such associations and
organizations and similar obligations required to be paid to remain a member in
good standing of the bar association and such associations, and for attendance
at legal continuing education courses and seminars.
2.8 Upon submission of adequate documentation, Employer shall pay to
or reimburse Employee all reasonable out-of-pocket expenses for entertainment,
travel, meals, hotel accommodations and the like incurred by him in the interest
of its business.
2.9 In the event Employer terminates this Agreement for any reason
other than under Sections 3.2, or if Employee's employment terminates by reason
of death or disability as described in Section 3.3. hereof or in the event of a
Constructive Discharge (as defined in Section 2.10 below) of Employee, then in
addition to amounts otherwise payable to Employee, Employer shall pay Employee,
within thirty (30) days of the effective date of termination, an amount equal to
the portion of Employer's contributions for the benefit of Employee under
Employer's Savings Plan, or any other qualified retirement plan of Employer then
in effect, that has not vested as of the date of Employee's termination, if any,
plus an additional amount sufficient to satisfy Employee's federal or state
income tax liability with respect to the foregoing payment and any additional
amount
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payable pursuant to this Section 2.9, it being the Employer's intention that
Employee's net after tax position be identical to that which would have been
obtained had the Employee had not been subject to any federal or state income
tax liabilities with respect to payments made under this Section 2.9. In
addition, Employee shall be entitled to participate in the Employer's Savings
Plan or any other qualified retirement plan of Employer immediately upon
consummation of Employee's employment hereunder and Employer hereby waives any
and all waiting periods.
2.10 In the event Employee is terminated for any reason other than under
Sections 3.2, or if Employee's employment terminates by reason of death or
disability as described in Section 3.3 hereof or in the event of a Constructive
Discharge of Employee, then all unexercisable options granted to Employee under
Employer's stock option plans which would otherwise have vested within twelve
(12) months from the date of Employee's termination or which would otherwise
have vested during the full Term of this Agreement, whichever is greater, shall
be deemed fully vested and exercisable immediately upon Employee's termination.
In determining which options shall become immediately exercisable hereunder, the
then unexercisable options under each grant of options to Employee shall become
exercisable. The foregoing benefit shall be in addition to, and not in lieu of,
any similar benefit contained in the Executive Severance Agreement between the
Employee and Employer, dated as of March 11, 1996 ( the "Executive Severance
Agreement"). For purposes of this Agreement, the term "Constructive Discharge"
means a termination of the Employee's employment by the Employee due to a
failure of the Employer or its successors without the prior written consent of
the Employee to fulfill the obligations under this Agreement in any material
respect, including any material change by the Employer in the functions, duties
or responsibilities of the Employee's position with the Employer which would
reduce the ranking or level, dignity, responsibility, importance or scope of
such position.
2.11 Employee shall have direct participation in stock option awards
commencing December 31, 1996 or at the same time as such 1996 awards are granted
to, and in amounts no less than, the higher amounts granted to the Vice
President and Chief Operating Officer or the Vice President - Finance of the
Employer, or such other title as such individuals may hold in the future.
2.12 Employer agrees to permit Employee to spend one week on site at a
dialysis facility to occur within the first two months from the date Employee
commences employment hereunder.
2.13 Employer agrees to grant to the benefit of Employee an
extraordinary one time bonus on May 31, 1998 consisting of additional stock
options of the Employer's common stock having an exercise price equal to eighty
percent of the
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closing price of the Employer's common stock on the trading day of such stock
immediately preceding May 31, 1998. The total number of shares of stock options
to be granted, if any, shall equal the following: twenty percent (20%) of the
cumulative savings inside non litigation legal expenses derived since the date
Employees employment commences hereunder determined by taking the sum of (i) non
litigation legal expenses incurred by the Employer for the twelve month period
prior to the Employees commencement date hereunder (the "Base") minus non
litigation legal expenses incurred during the first anniversary of Employee's
commencement date of employment and (ii) the Base minus non litigation legal
expenses incurred during the second anniversary of Employee's commencement date
of employment. Subsections 2.13(i) and 2.13(ii) shall be calculated on a pro
rata basis as a percentage of revenues compared with the Base.
2.14 Employer agrees to grant on the date hereof for the benefit of
Employee stock options to purchase 180,000 shares of the Employer's common stock
at an exercise price being the closing price of the Employer's common stock
March 11, 1996 with a grant date being March 11, 1996. Such options shall vest
beginning September 1, 1996; 33% will vest on September 1, 1996, 33% will vest
on December 31, 1997 and 33% will vest on December 31, 1998.
2.15 Such additional bonuses as shall be determined by the Compensation
Committee on an annual basis.
Section 3. Term.
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3.1 Commencement. The term ("Term") of this Agreement shall commence
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("Commencement Date") on the date between May 1, 1996 and May 31, 1996, as
specified by Employee and shall continue thereafter until April 30, 1999, and
shall continue thereafter on a year to year basis unless any party provides the
other party with at least ninety days prior written notice of termination.
3.2 Termination for Material Cause. Employer may terminate this
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Agreement for Material Cause, provided that, before Employer may terminate this
Agreement for Material Cause, Employer must give Employee at least 30 days'
advance written notice of its intention to terminate, specifying in detail the
cause for termination and the intended termination date. For purposes hereof,
the term for "Material Cause" shall mean: (a) conviction of a felony involving
moral turpitude relating to the business of Employer which does, in fact,
adversely and directly affect the business of Employer; (b) 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; (c) repeated failure or refusal by
Employee to follow policies or
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directives reasonably established by the President and Chief Executive Officer
of Employer that goes uncorrected for a period of thirty (30) consecutive days
after written notice has been provided to Employee; (d) persistent willful
failure by Employee to fulfill his duties hereunder that goes uncorrected for a
period of thirty (30) consecutive days after written notice has been provided to
Employee; or (e) intentional breach by Employee of Section 4.1(b) or Section
4.2 of this Agreement.
Notwithstanding anything set forth in Sections 3.2(c) or Section 3.2(d) shall
not constitute "Material Cause" if such termination arose as a result of or
constituted a Constructive Discharge.
3.3 Death and Disability. This Agreement shall automatically terminate
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upon death of Employee. Employer may terminate this Agreement upon written
notice in the event that Employee has for the preceding six month period been
subject to a physical or mental disability that, even with reasonable
accommodation, prevents Employee from adequately performing his regular duties,
provided that either: (a) Employee is immediately eligible to receive full
disability benefits under the disability insurance provided to him by Employer,
or (b) Employer continues to pay Employee's Salary until full disability
benefits are received up to a maximum period of one year.
3.4 Rights and Obligations upon Termination. Upon termination, this
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Agreement shall be of no further force and effect and neither party shall be of
no further force and effect and neither party shall have any further right or
obligation hereunder except those specified in this Agreement; provided,
however, no termination shall modify or affect the rights and obligations of the
parties which have accrued prior to termination; and further provided, however,
the rights and obligations of the parties under Section 4 shall survive
termination of this Agreement. Notwithstanding anything herein to the contrary,
in the event of any termination other than upon death or disability pursuant to
Section 3.3 above, termination following a Change of Control ( as defined in the
Executive Severance Agreement) or termination for material uses, Employer of
Section 2.1 for a period of one (1) year or the period consisting of the
remaining under this Agreement, whichever is greater.
Section 4. Information and Competition.
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4.1 (a) Information. Employee recognizes and acknowledges that:
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(i) in the course of Employee's employment or continued 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 which has not previously
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been released to the public either as a result of (1) Employer's authorization,
or (2) other dissemination that does not constitute a breach of this Agreement
including, but not limited to, confidential information, materials or
proprietary data belonging to Employer or relating to Employer's affairs
(collectively, the "Confidential Information") and (B) information and materials
that concern Employer's business that come into Employee's possession by reason
of employment with Employer (collectively, "Business Related Information"); (ii)
the Confidential Information and Business Related Information are the property
of Employer; (iii) the use, misappropriation or disclosure of the Confidential
Information or the 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 good will and to the maintenance of
Employer's competitive position that the Confidential Information and Business
Related Information be kept secret and that Employee not disclose the
Confidential Information or the Business Related Information to others or use
same to Employee's own advantage or the advantage of others.
(b) Non-Disclosure. In recognition of the acknowledgement
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contained in Section 4.1(a) above, Employee agrees during the Term and
thereafter: (i) not to 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 of the Confidential Information or Business Related Information,
whether or not developed by Employee, except as required in the performance of
Employee's duties to Employer; (ii) to keep in strictest confidence, both during
Employee's employment and subsequent to termination of employment, any as
Confidential Information or Business Related Information; and (iii) not to
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, Confidential
Information or Business Related Information.
4.2 Competition. Employee agrees that while an Employee of the
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Employer and for a period of one year after termination of employment Employee:
(a) will not solicit for employment or employ for his own or
for another's benefit any employee, former employee, officer, director or
consultant (including, without limitation, physician directors) of Employer; and
(b) shall not directly on his own behalf or as an officer,
director, consultant, partner, owner, stockholder, employee, creditor, agent,
trustee, or advisor of any individual, partnership or corporation or other
entity or in any other capacity own, manage, control, operate, invest or acquire
an
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interest in or otherwise engage in or act for or on behalf of any person other
than Employer engaged in any activity, in the counties of states within the
United States and those countries outside the United States in which Employer
or
any of its subsidiaries during his employment has conducted any material
business or in which Employer's customers were located where such activity is
similar to and competitive with the activities carried on by Employer or any of
its subsidiaries during his employment by Employer or is, directly or
indirectly, concerned with soliciting, serving or catering to any of the
customers of Employer or its subsidiaries during his employment by Employer for
the provision of products or services of a nature offered by Employer during the
Term, except the ownership of five percent or less of the issued and outstanding
stock of a public company. Notwithstanding the foregoing, Employee may be
employed by an entity that engages in businesses (the "Other Business") other
than prohibited business if Employer limits his activities to the Other
Business. 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.
4.3 Enforcement. In the event that any part of this Section 4 shall
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be held unenforceable or invalid, the remaining parts thereof 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 which a court of
competent jurisdiction deems enforceable, said area, period of restriction,
activities or subjects shall, for the purposes of this Section 4, be reduced to
the extent necessary to render them enforceable.
4.4 Equitable Relief. Employee agrees that any violation on his part
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of any covenant in Section 4 hereof may cause such damage to Employer as will
be serious and irreparable and the exact amount of which will be difficult to
ascertain, and for that reason, he 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 of Employee. Such injunctive
relief shall be in addition to and in no way in limitation of, any and all other
remedies Employer shall have in law and equity for the enforcement of such
covenants and provisions.
4.5 Indemnification and Payment. In the event of Employee's
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violation of any covenant in Section 4, Employee shall indemnify and hold
harmless Employer from any loss, liability, cost or expense (including
reasonable attorney's fees) arising
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out of such violation and shall pay over to Employer any tangible benefit
received by Employee in connection with such violation.
4.6 Documents. Upon the termination of Employee's employment with
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Employer for any reason, Employee shall promptly deliver to Employer all
materials and documents belonging to or concerning Employer or relating to its
affairs and, without limiting the foregoing, will promptly deliver to Employer
any and all other documents or materials containing or constituting Confidential
Information or Business Related Information.
Section 5. Entire Agreement. This Agreement supersedes any and all prior
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agreements between the parties and represents the entire understanding of the
parties hereto with respect to the employment of Employee and there are no other
agreements, warranties or representations except as may be herein provided and
set forth in the Stock Option Agreement between the Employer and the Employee,
dated as of March 11, 1996 and the Executive Severance Agreement. The parties
acknowledge that this Agreement shall not affect any prior, subsequent, or
contemporaneous agreements between the parties respecting Employer's
confidential information. This Agreement including this Section 5 may not be
altered or amended except in writing executed by both parties hereto.
Section 6. Assignment; Benefit. This Agreement is personal and may not be
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assigned except that it shall inure to the benefit of and be binding upon the
successors of Employer and personal representatives of Employee.
Section 7. Applicable Law. This Agreement shall be governed by the laws of the
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Commonwealth of Pennsylvania.
Section 8. Notice. Any notice required or permitted to be given hereunder
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shall be sufficient if in writing and if sent by certified or registered mail to
the last address as shall appear on the records of Employer in the case of
Employee or to Employer's principal office in the case of Employer.
Section 9. Waiver. The waiver by any party of a breach of any provision of
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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.
Section 10. Jurisdiction. Employee hereby submits to the jurisdiction of the
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courts of the Commonwealth of Pennsylvania or of the United States Court for the
Eastern District of Pennsylvania in any section or dispute arising out of this
Agreement, its interpretation or implementation. With respect to the
undersigned submitting to said courts of the Commonwealth of Pennsylvania or of
said United States court, Employer agrees that
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personal jurisdiction over Employee may be obtained by the mailing of a summons
or complaint (postage prepaid) to Employee at the last address of Employee as
shall appear on the records of Employer.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
as of the day and year set forth above.
EMPLOYER:
RENAL TREATMENT CENTERS, INC.
By: /s/ Robert T. Mayer, Jr.
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Title: CEO
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EMPLOYEE:
/s/ Thomas J. Karl
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Thomas J. Karl
Witness:
/s/ Frederick C. Jansen
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