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Exhibit 10.32
EARNOUT AGREEMENT
THIS EARNOUT AGREEMENT is made and entered into this the 30th day of
June, 1997, by and among Renal Care Group, Inc., a Delaware corporation ("RCG"),
RCG Mississippi, Inc., a Delaware corporation and subsidiary of RCG ("RCG
Miss."), Kidney Care, Inc., a Mississippi nonprofit corporation ("KCI"), and
Xxxx X. Xxxxx, M.D., the Xxxx X. Xxxxx, M.D. Grantor Retained Annuity Trust,
Xxxxx XxXxxxxx and the XXX, Inc. Employee Stock Ownership Plan (collectively,
"XXX Shareholders").
WHEREAS, RCG and KCI entered into an Amended and Restated Transfer
Agreement dated November 14, 1995 ("Transfer Agreement");
WHEREAS, RCG and Medical Enterprises, Ltd. ("XXX") entered into an
Agreement and Plan of Merger dated November 15, 1995 ("Merger Agreement")
pursuant to which XXX merged into RCG Miss. (the "Merger");
WHEREAS, both the Transfer Agreement and the Merger Agreement provide,
in part, for the payment by RCG to KCI and the XXX Shareholders of an aggregate
amount up to $7,000,000 based upon the amount of 1996 and 1997 earnings of the
renal dialysis centers formerly owned by KCI ("Earnout");
WHEREAS, RCG, KCI, and the XXX Shareholders have agreed upon the amount
and terms of payment of the Earnout and desire to document their agreement
herein;
NOW THEREFORE, FOR AND IN CONSIDERATION, of the foregoing, the parties
agree as follows:
1. Amount of Earnout. RCG hereby agrees to pay to KCI and the XXX
Shareholders an aggregate amount equal to Five Million Seven Hundred Thousand
Dollars ($5,700,000) as adjusted in Section 2 hereof, in full satisfaction of
its obligation to pay the Earnout pursuant to Section 2.3 of the Transfer
Agreement and Section 2.3 of the Merger Agreement.
2. Adjustments to Earnout. Prior to the payment of the Earnout, the
parties hereto agree to adjust the Earnout as shown on Exhibit A. Pursuant to
Exhibit A, the amount of the Earnout allocable to KCI will be (i) reduced by
$164,726.14 as an agreed upon adjustment for certain accounts payable owed by
KCI, and (ii) increased by $14,454.36 as an adjustment for KCI Lab employees
paid time off. The portion of the Earnout payable to the XXX Shareholders will
be (i) reduced by $695,790 as the parties' estimate of an amount of certain
I.R.C. Section 4978 Excise Tax Liability due by reason of the impact of the
Merger on the ESOP; and (ii) increased by $75,000 pursuant to RCG's agreement to
bear the cost for a portion of those taxes. The XXX Shareholders agree that the
$100,000 "basket" for indemnity claims by RCG will be reduced by such $75,000.
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3. Payment of the Earnout. RCG Miss. agrees to pay the Earnout, as
adjusted in Section 2, in cash on or before June 30, 1997, to be divided between
KCI and the XXX Shareholders as shown on Exhibit B attached hereto and made a
part hereof.
4. Satisfaction of the Earnout Obligation. KCI and the XXX Shareholders
hereby agree that upon the payment of the Earnout, as adjusted in Section 2, on
June 30, 1997, the obligations of RCG to pay the Earnout as described in Section
2.3 of the Transfer Agreement and Section 2.3 of the Merger Agreement will be
fully satisfied and RCG will have no further liability to KCI or the XXX
Shareholders for the Earnout.
5. Excise Tax. RCG Miss. agrees to remit when due the $695,790 estimate
of that certain Section 4978 Excise Tax Liability described above with a tax
return for the ESOP prepared and furnished by the XXX Shareholders. In the event
that the amount of such Section 4978 Excise Tax Liability is less than $695,790,
RCG will refund the excess to the XXX Shareholders in the percentages shown on
Exhibit B. In the event that the amount of the Section 4978 Excise Tax Liability
is greater than $695,790, the XXX Shareholders will pay the excess to RCG in the
percentages shown on Exhibit B. Those XXX Shareholders obligated to indemnify
RCG acknowledge their continuing obligation to indemnify RCG from matters
relating to the ESOP and agree to assume responsibility for all future matters
concerning the ESOP, including resolving the amount and satisfaction of the
Excise Tax.
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed effective as of the date above written.
RENAL CARE GROUP, INC. KIDNEY CARE, INC.
By: By:
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Title: Xxxxx X. Xxxxxx
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RCG MISSISSIPPI, INC. XXX, INC. EMPLOYEE STOCK
OWNERSHIP PLAN
By: By:
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Title: Xxxx X. Xxxxxxxxxx
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By:
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Xxxx X. Xxxxx
THE XXXX X. XXXXX GRANTOR
RETAINED ANNUITY TRUST
XXXXX XXXXXXXX
By:
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Xxxx X. Xxxxx, M.D., Trustee XXXX X. XXXXX, M.D.
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EXHIBIT B
Amount
Kidney Care, Inc. $3,124,378.22
Xxxx X. Xxxxx, M.D. (50.82%) 916,916.82
Xxxxx X. XxXxxxxx, Xx. (2.43%) 43,850.00
Xxxx X. Xxxxx, M.D. Grantor Retained Annuity Trust (17.48%) 315,597.66
XXX, Inc. Employee Stock Ownership Plan (29.27%) 528,194.71
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Total Adjusted Earnout $4,928,938.22
