10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

(X)	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003 or
(  )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______to________

Commission file number 0-27640

RENAL CARE GROUP, INC.
(Exact Name of Company as Specified in its Charter)

Delaware	62-1622383
(State or other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

2525 West End Avenue, Suite 600
Nashville, Tennessee 37203
(Address, Including Zip Code, of Principal Executive Offices)

Registrant’s Telephone Number, Including Area Code: (615) 345-5500

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Exchange on Which Registered
Common Stock, $0.01 par value	New York Stock Exchange
Series A Junior Participating Preferred Stock Purchase Rights	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Company’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No o

     The aggregate market value of the voting stock held by non-affiliates of the Company was $1,703,072,314 as of June 30, 2003, based upon the closing price of such stock as reported on the New York Stock Exchange (“New York Stock Exchange”) on that day (assuming for purposes of this calculation, without conceding, that all executive officers and directors are affiliates).

     There 45,433,033 shares of common stock, $0.01 par value, issued and outstanding at February 27, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant’s Proxy Statement for its 2004 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report.

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TABLE OF CONTENTS

PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for Company’s Common Equity and Related Stockholder Matters.
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7a. Quantitative and Qualitative Disclosures About Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
	Item 9a. Controls and Procedures
PART III
	Item 10. Directors and Executive Officers of the Company
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
	Item 14. Principal Accountant Fees and Services
PART IV
	Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
EX-10.1 EMPLOYMENT AGREEMENT R. HAKIM 12/15/03
EX-10.12.3 SECOND AMENDMENT TO LOAN AGREEMENT
EX-10.12.4 THIRD AMENDMENT TO LOAN AGREEMENT
EX-10.2.1 AMENDMENT NO.1 TO MEDICAL AGREEMENT
EX-10.2.2 AMENDMENT NO.2 TO MEDICAL AGREEMENT
EX-10.3 MEDICAL DIRECTOR SERVICES AGREEMENT
EX-10.44 EMPLOYMENT AGREEMENT DAVID M DILL
EX-10.45 EMPLOYMENT AGREEMENT TIMOTHY P MARTIN
EX-10.46 EMPLOYMENT AGREEMENT DOUGLAS B. CHAPPELL
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

PART I

FORWARD LOOKING STATEMENTS

     This report contains “forward-looking statements.” Forward-looking statements relate to expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or that necessarily depend upon future events. In some cases, you can identify forward-looking statements by words like “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions. Specifically, this report contains, among others, forward-looking statements about:

• our expectations regarding financial condition or results of operations for periods after December 31, 2003;

• our critical accounting policies;

• our business strategies and our ability to grow our business;

• the reimbursement levels of third-party payors;

• our future sources of and needs for liquidity and capital resources.

     The forward-looking statements included in this report reflect our current views about future events. They are based on assumptions and are subject to known and unknown risks and uncertainties. Many factors could cause actual results or achievements to differ materially from future results or achievements that may be expressed in or implied by our forward-looking statements. Many of the factors that will determine future events or achievements are beyond our ability to control or predict. Important factors that could cause actual results or achievements to differ materially from the results or achievements reflected in our forward-looking statements include, among other things, the factors discussed on pages 20 to 26 of this report under the heading “Risk Factors.”

     You should read this report, the information incorporated by reference into this report and the documents filed as exhibits to this report completely and with the understanding that our actual future results or achievements may be materially different from what we expect or anticipate.

     The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is filed with the Securities and Exchange Commission. Except as required by law, we assume no responsibility to update any forward-looking statements.

     Before you invest in our common stock, you should understand that the occurrence of any of the events described in the risk factors, elsewhere in this annual report on Form 10-K or incorporated by reference into this annual report on Form 10-K and other events that we have not predicted or assessed could have a material adverse effect on our earnings, financial condition and business. If the events described in the risk factors or other unpredicted events occur, then the trading price of our common stock could decline, and you may lose all or part of your investment.

     We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Item 1. Business

GENERAL

     Renal Care Group, Inc. provides dialysis services to patients with chronic kidney failure, also known as end-stage renal disease (ESRD). As of December 31, 2003, we provided dialysis and ancillary services to over 21,400 patients through 284

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outpatient dialysis centers in 27 states, in addition to providing acute dialysis services to more than 130 hospitals. Renal Care Group was formed in 1996 by leading nephrologists with the objective of creating a company with the clinical and financial capability to manage the full range of care for ESRD patients on a cost-effective basis. As of December 31, 2003, there were 640 nephrologists with privileges to practice at one or more of our outpatient dialysis centers.

     In our dialysis facilities, ESRD patients receive dialysis treatments, generally three times a week, in a technologically advanced outpatient setting. According to the Centers for Medicare & Medicaid Services (CMS), there were more than 4,000 facilities providing outpatient dialysis services in the United States at the end of 2001. In the 1980’s and 1990’s, many outpatient dialysis facilities were owned by practicing nephrologists and comprised an integral component of their practice, because of the critical role that dialysis plays in the treatment of ESRD patients. The dialysis services industry has been consolidating since before we were formed. As a result, we believe that as of December 31, 2003, approximately 66% of outpatient dialysis centers are now owned by multi-center dialysis companies, approximately 16% are owned by independent physicians, small chains and other small operators, and approximately 18% are hospital-based centers.

     Renal Care Group is a Delaware corporation; our principal executive offices are located at 2525 West End Avenue, Suite 600, Nashville, Tennessee 37203; and our telephone number is (615) 345-5500.

INDUSTRY OVERVIEW

End-Stage Renal Disease

     ESRD is a state of advanced kidney failure. ESRD is irreversible and, without a kidney transplant, ultimately lethal. It is most commonly a result of complications associated with diabetes, hypertension, certain renal and hereditary diseases, aging and other factors. In order to sustain life, ESRD patients must receive either dialysis for the remainder of their lives or a successful kidney transplant. By the end of 2001, dialysis was the primary treatment for approximately 72% of all ESRD patients in the United States, and the remaining 28% of ESRD patients had a functioning kidney transplant.

     According to United States Renal Data System estimates, direct medical payments for ESRD totaled $22.8 billion during 2001. Of the total direct medical payments for ESRD, approximately $15.4 billion was paid by the federal government through the Medicare program. As a result of legislation enacted in 1972, the federal government provides Medicare benefits to patients who are diagnosed with ESRD, if they are eligible for Social Security, regardless of their age or financial circumstances.

     According to CMS data, the number of ESRD patients in the United States who need dialysis grew from approximately 66,000 in 1982 to approximately 292,000 as of December 31, 2001. Based on data from the United States Renal Data System, the rate of ESRD incidence among Medicare-eligible patients was approximately 334 patients per million in 2001 as compared to 111 patients per million in 1984.

     Based on these trends, United States Renal Data System forecasts indicate that the total number of ESRD patients, including those with functioning transplants, will grow from approximately 406,000 in 2001 to 661,000 in 2010. The growth in the number of ESRD patients is expected to result principally from the aging of the population along with better treatment of, and better survival rates for, diabetes and other illnesses that lead to chronic kidney disease, reduced somewhat by declines in incidence of ESRD among patients with high blood pressure as a result of better treatments for high blood pressure. In addition, as a result of improved technology, older patients and patients who could not previously tolerate dialysis due to other illnesses can now receive life-sustaining dialysis treatment.

Treatment Options for End-Stage Renal Disease

     Currently, there are three treatment options for patients with ESRD:

• hemodialysis performed in a hospital setting, an outpatient facility or a patient’s home,

• peritoneal dialysis, which is generally performed in the patient’s home, and

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• kidney transplant surgery.

     According to CMS data, in 2001 approximately 91% of patients on dialysis in the United States received hemodialysis in an outpatient setting, and approximately 9% received hemodialysis or peritoneal dialysis in their homes.

     Hemodialysis is the most common form of ESRD treatment. It is generally performed either in a freestanding center or in a hospital. The process of hemodialysis uses a dialyzer, essentially an artificial kidney, to remove certain toxins, fluid and chemicals from the patient’s blood and another device that controls external blood flow and monitors the patient’s vital signs. The dialysis process occurs across a semi-permeable membrane that divides the dialyzer into two chambers. While the blood is circulated through one chamber, a pre-mixed dialysis fluid is circulated through the adjacent chamber. The toxins and excess fluid contained in the patient’s blood cross the membrane into the dialysis fluid. Hemodialysis usually takes about four hours and is usually administered three times per week for the life of the patient or until the patient receives a transplant.

     Peritoneal dialysis is typically performed by the patient at home and uses the patient’s abdominal cavity to eliminate fluids and toxins in the patient’s blood. There are several forms of peritoneal dialysis. Continuous ambulatory peritoneal dialysis and continuous cycling peritoneal dialysis are the most common. Under each method, the patient’s blood is circulated across the peritoneal membrane into a dialysis solution that removes toxins and excess fluid from the patient’s blood. Patients treated at home are monitored monthly either by a visit from a staff person from a designated outpatient dialysis center or by a visit by the patient to a dialysis center or home dialysis support facility.

     Kidney transplants, when successful, are the most desirable form of therapy for ESRD patients. However, there is a shortage of donors that severely limits the availability of this procedure as a treatment option. Only about 6% of ESRD patients receive kidney transplants each year.

Nephrology Practice

     Caring for ESRD patients is typically the primary clinical activity of a physician specializing in nephrology (a nephrologist). A nephrologist’s other clinical activities include the post-surgical care of kidney transplant patients, the diagnosis and treatment of kidney diseases in patients who are at risk for developing ESRD, and the diagnosis, treatment and management of clinical disorders including hypertension, kidney stones and autoimmune diseases. Because of the complexity involved in treating patients with chronic kidney disease, the nephrologist usually assumes the role of primary care physician for the ESRD patient. While some nephrologists practice independently or are members of multi-specialty groups, most nephrologists practice in small single-specialty groups. A nephrology group’s practice often covers a relatively large geographic service area. Outside metropolitan areas, a large geographic area may be served by only one nephrology group. Most nephrologists also have a significant office practice, consult on numerous hospitalized patients who are not on dialysis and follow the clinical outcomes of kidney transplant patients.

OPERATIONS

Location, Capacity and Use of Facilities

     As of December 31, 2003, Renal Care Group operated 284 outpatient dialysis centers in 27 states with 5,177 certified dialysis stations and provided inpatient dialysis services to more than 130 acute care hospitals. During 2003, we provided 3,254,447 hemodialysis treatments. We estimate that on average our centers were operating at approximately 57% of capacity as of December 31, 2003, based on the assumption that a dialysis center is able to provide up to three treatments a day per station, six days a week.

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Operation of Facilities

     Our dialysis centers provide outpatient hemodialysis and related services to ESRD patients. Renal Care Group’s centers use technologically advanced dialysis equipment to provide effective and efficient dialysis. Our centers generally contain between 10 and 30 dialysis stations, one or more nurses’ stations, a patient waiting area, examination rooms, a supply room, a water treatment space to purify water used in hemodialysis treatments, a dialyzer reprocessing room, staff work areas, offices and a staff lounge. Many of our centers are adjacent to areas used for training patients in home dialysis.

     In order for our dialysis centers to be eligible to participate in the Medicare ESRD program, a qualified physician or group of physicians must act as medical director for each center and must supervise medical aspects of the center’s operations. An administrator or manager manages each center. The administrator or manager is typically a registered nurse who is responsible for the day-to-day operations of the center and oversight of the staff. The staff of each center typically includes registered nurses, licensed practical or vocational nurses, patient care technicians, social workers, registered dietitians, a unit clerk and biomedical equipment technicians. We work to staff each center in a manner that allows us to adjust to the scheduling of personnel according to the number of patients receiving treatments.

Home Dialysis

     All of our markets offer home dialysis, either home hemodialysis, peritoneal dialysis or both. As of December 31, 2003, about 11% of the patients we were treating received home dialysis. In our home dialysis services we provide equipment and supplies, training, patient monitoring and follow-up assistance to patients who receive dialysis treatments in their homes. Management believes that home dialysis is important to providing a full range of dialysis care, and we continue to work to expand our home dialysis program.

Inpatient Care

     We also provide inpatient dialysis services to hospitals in most of our markets. These services are also referred to as acute dialysis services. As of December 31, 2003, we provided inpatient services to more than 130 hospitals. Under these arrangements, we typically provide equipment, supplies and personnel to perform hemodialysis and peritoneal dialysis in connection with a hospital’s inpatient services. Patients with acute renal failure resulting from accidents, medical and surgical complications, patients in the early stage of renal failure and ESRD patients who need to be in the hospital for other reasons often require inpatient dialysis services. Most of our hospital contracts specify predetermined fees per dialysis treatment. Management believes that these fees will be subject to re-negotiation in the future as competition increases among dialysis providers and as the health care industry becomes more influenced by managed care and subject to capitated arrangements.

University Programs

     We currently manage the dialysis programs at Vanderbilt University Medical Center and are the owner or managing partner of programs at the Cleveland Clinic Foundation, MetroHealth (a hospital affiliated with Case Western Reserve University), St. Louis University Hospital, Oregon Health Sciences University, the University of Louisville, Froedtert Hospital (a hospital affiliated with the Medical College of Wisconsin), Northwestern Memorial Hospital of Chicago, Elmhurst Memorial Hospital, the University of Colorado and the University of Kentucky. Management expects these affiliations will expand our patient base and provide opportunities for the development of new centers. Management also expects these affiliations to provide access to outcomes research and trained nephrologists who may become medical directors at our centers or who may join the practices of current medical directors and attending physicians.

Nephrologists

     A key factor in the success of a dialysis center is the local nephrologist. An ESRD patient generally seeks treatment at a center where his or her nephrologist has privileges to admit patients. Consequently, we rely on our ability to satisfy the needs of patients of local nephrologists in order to gain new patients and to retain existing patients. As of December 31, 2003, there were 640 nephrologists with privileges to practice at one or more of our outpatient dialysis centers.

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Medical Directors

     To satisfy the requirements of the Medicare ESRD program, we must engage a medical director for each of our facilities. We generally engage practicing, board-certified or board-eligible nephrologists to serve as medical directors for our centers. The medical director is an independent contractor and provides services under an agreement with Renal Care Group. Medical directors are responsible for administering and monitoring our patient care policies, including patient education, administration of dialysis treatment, development and training programs, and assessment of all patients. Medical directors play an important role in quality assurance activities and in coordinating the delivery of care to maintain dialysis patients’ general level of health and to avoid medical complications that might require hospitalization.

     Renal Care Group’s typical medical director agreement has a term of between five and ten years with renewal options. We pay medical directors fees that are consistent with the fair market value of the required services. These medical director fees are the result of arms-length negotiations. Most of our medical director agreements also include non-competition clauses with specific limitations on the medical director’s ability to compete with us by owning or providing medical director services for another dialysis facility for certain specified periods of time and in specified geographic areas.

Ancillary Services

     Renal Care Group provides a variety of ancillary services to treat ESRD patients in its dialysis operations. The most significant ancillary service is the administration of erythropoietin (also known as Epogen® or EPO). EPO is a bio-engineered protein that stimulates the production of red blood cells. EPO is used in connection with all forms of dialysis to treat anemia, a complication experienced by almost all ESRD patients. EPO is manufactured by a single supplier, Amgen Inc., and there are no substitute products available to dialysis providers in the United States. Through our RenaLab subsidiary, we provide clinical laboratory services for our dialysis operations. We offer other ancillary services, depending on medical appropriateness, including the administration of other drugs, tests for bone deterioration, electrocardiograms, nerve conduction studies to test for deterioration of a patient’s nerves, Doppler flow testing for the effectiveness of the patient’s vascular access for dialysis, and blood transfusions.

QUALITY ASSURANCE

     Integral to our operating philosophy is the belief that providing quality care is in the best interest not only of patients but also of our shareholders. Better patient care results in improved mortality and morbidity and a greater number of treatments, as patients’ life spans increase and the number of days patients spend in hospitals declines. In order to optimize therapy and improve outcomes, we maintain a vigorous quality assurance program. We establish, maintain and monitor quality criteria for clinical operations and monitor patient outcomes in all of our centers.

Medical Advisory Board

     Our Medical Advisory Board oversees the review of patient outcomes and the development and communication of clinical protocols. The Medical Advisory Board is chaired by Raymond Hakim, M.D., Ph.D., our Chief Medical Officer, and is composed of 12 nephrologists who are medical directors of one or more of our centers. The Medical Advisory Board is responsible for establishing, implementing and monitoring our quality assurance policies and procedures and for reviewing and recommending protocols, policies and procedures for clinical treatment. The Medical Advisory Board also works to identify deficiencies in treatment practices and to evaluate technological changes. The Medical Advisory Board’s ultimate objective is to assist Renal Care Group in developing and communicating a protocol-driven clinical management model that will assist us in continuously improving the care we provide to patients, with the goal of providing optimal care to all patients.

Quality Criteria

     Continuous quality improvement is our primary clinical objective. We work to achieve this objective by regularly evaluating dialysis treatments and patients’ key physiological parameters. Our Quality Assurance Coordinator is a registered nurse who oversees our quality assurance program. In addition, each of our dialysis centers has a quality assurance committee that

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monitors the quality of care in the center and oversees compliance with applicable regulations. These committees typically include the medical director, the center administrator, nurses and other technical personnel..

Outcomes Data

     We believe that an important factor in managing ESRD successfully is the development and implementation of clinical pathways and treatment protocols. To develop, review and maintain these pathways and protocols, we maintain a broad database of treatment-specific patient outcomes information. The Quality Assurance Coordinator oversees the collection of patient outcomes and cost data in our centers. We make these data available to the Medical Advisory Board and affiliated physicians to assist in developing, implementing and evaluating clinical pathways to enhance patient outcomes while working to control the cost of care. Management believes that the implementation of clinical pathways will assist in improving the overall quality, while resulting in operating efficiencies at our dialysis centers.

CORPORATE COMPLIANCE PROGRAM

     We have developed and maintain a company-wide compliance program as part of our commitment to comply fully with all laws and regulations applicable to our business and to maintain high standards of conduct by our associates. The primary purposes of the program are to heighten associates’ and affiliated professionals’ awareness of the importance of complying with all laws and regulations that apply to our business in an increasingly complicated regulatory environment and to take steps promptly to identify and resolve instances of non-compliance.

     The compliance program has been approved by our Board of Directors. The program addresses general compliance issues and areas of particular sensitivity. Among the areas of particular sensitivity covered by the compliance program are health care fraud and abuse issues, financial reporting, conflicts of interest and antitrust. As part of the program we have published a code of conduct setting forth standards of conduct and principles of business ethics that we will follow and that we expect each employee and affiliated professional to follow. The code of conduct is regularly reviewed and updated. A Compliance Committee comprised of some of our officers and senior managers and our full-time Compliance Officer administer the corporate compliance program. The Compliance Committee and Compliance Officer are authorized to report compliance issues directly to the Audit and Compliance Committee of our Board of Directors.

     We also maintain a compliance program specific to RenaLab, our laboratory subsidiary. This program mandates laboratory-specific compliance standards, policies and procedures. The laboratory compliance program is administered by a laboratory compliance committee, composed of officers and senior managers of Renal Care Group and RenaLab. This committee includes the Renal Care Group Compliance Officer and a part-time RenaLab Compliance Officer. This committee and the RenaLab Compliance Officer are authorized to report compliance issues directly to the RenaLab Board of Directors and to the Audit and Compliance Committee of Renal Care Group’s Board of Directors.

REIMBURSEMENT

Sources of Net Patient Revenue

     The following table sets forth information regarding the sources of our net patient revenue:

		Year Ended December 31,
		2001			2002			2003
Medicare			49	%		50	%		49	%
Medicaid			6			7			6
Commercial and other payors			40			38			40
Acute dialysis services			5			5			5
	Total		100	%		100	%		100	%

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Medicare

     The Social Security Act provides that most U.S. citizens and resident aliens with ESRD are entitled to Medicare coverage. If a physician finds that an eligible person has ESRD, then he or she will be entitled to Medicare coverage (1) beginning the third month after the month in which a regular course of dialysis is initiated; or (2) as early as the month in which a kidney transplant candidate is hospitalized for the transplant if certain conditions are met.

     For Medicare purposes, ESRD is defined as kidney impairment that appears irreversible and permanent and that requires a regular course of dialysis or a kidney transplant to maintain life. For a period of 30 months, Medicare coverage is secondary for patients who have qualifying health insurance. After this 30-month period, Medicare becomes the primary coverage for patients, and the patient’s other health insurance generally pays applicable Medicare coinsurance payments and deductibles.

     Under the Medicare ESRD program, Medicare reimbursement rates per outpatient dialysis treatment are fixed under a composite rate structure. The Medicare ESRD composite rate may be changed by legislation or rulemaking. Congress increased the Medicare composite rate in 2001 by 2.4%. Congress also increased the Medicare composite rate in 2000 by 1.2%. Neither Congress nor CMS approved an increase in the composite rate for 2002, 2003 or 2004. Congress has approved an increase of 1.6% in the Medicare ESRD composite rate for 2005. Although Medicare reimbursement limits the allowable charge per treatment, it provides Renal Care Group with predictable and recurring treatment revenue for its outpatient dialysis services that are covered by the composite rate.

     The Medicare ESRD composite rate for outpatient dialysis services averaged $131 per treatment in freestanding facilities during 2003. The Medicare ESRD composite rate is subject to regional differences based on certain factors, including labor costs. CMS or Congress may periodically adjust Medicare reimbursement rates, including the ESRD composite rate, based on certain factors, including legislation, executive and congressional budget reduction and control processes, inflation and costs incurred in rendering the services. Historically, adjustments in the Medicare ESRD composite rate have had little relationship to the cost of conducting business.

     The Medicare ESRD composite rate applies to a designated group of outpatient dialysis services, including the dialysis treatment, supplies used for such treatment, certain laboratory tests and certain medications, and most of the home dialysis services we provide. Some other services, laboratory tests and drugs are eligible for separate reimbursement under Medicare and are not part of the composite rate. These separately reimbursed items include specific drugs such as EPO, some physician-ordered tests provided to dialysis patients and some home dialysis services. We generally submit Medicare claims monthly and are usually paid within 30 days of the submission.

Changes in the Medicare ESRD Composite Rate

     Congress has approved 1.6% increase in the Medicare ESRD composite rate for 2005, following increases of 1.2% in 2000 and 2.4% in 2001. The 2003 Medicare Reform bill provides that beginning in 2005 Medicare will reimburse dialysis providers for all ancillary drugs (including EPO) at an amount equal to the drugs’ acquisition cost (as determined by the Inspector General of the Department of Health and Human Services) and that the Medicare ESRD composite rate will be increased by an amount estimated by HHS to be dialysis providers’ average profit on these drugs. The increase in the composite rate is intended to compensate dialysis providers for the cost of administering these drugs. Overall, Medicare spending for ESRD services in 2005 is required to result in the same aggregate spending as would have occurred if the current system had continued until 2005.

     Before 2000, the Medicare ESRD composite rate was unchanged from commencement of the program in 1972 until 1983. From 1983 through December 1990, a series of congressional actions resulted in net reductions of the average Medicare ESRD composite rate from approximately $138 per treatment in 1983 to approximately $125 per treatment in 1986. As a result of the 2000 and 2001 increases in the Medicare ESRD composite rate, our average Medicare rate per dialysis treatment was $131 during 2003.

     The Medicare ESRD composite rate has been the subject of a number of reports and studies. During 2000, Congress directed a study of the ESRD composite rate structure, which was due in June 2002. This study was delivered in 2003. It reviewed items included in the composite rate and items that are currently separately billable (such as EPO and certain laboratory

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services), and analyzed whether the composite rate should be subject to an annual inflationary update. The study made preliminary recommendations to expand the services covered by the Medicare ESRD composite rate. The study made no final recommendations, and Congress has not acted on it. Pending this study, the Medicare Payment Advisory Commission, also known as MedPAC, recommended that the ESRD composite rate for 2003 be increased by 2.6%. Congress did not approve an increase for 2003 or 2004. MedPAC is a body that makes recommendations to Congress concerning Medicare reimbursement rates. Congress is not required to implement any of these recommendations and could either raise or lower the reimbursement rate or change the items covered by the composite rate.

     The 2003 Medicare Reform bill requires additional reports and studies relating to the Medicare ESRD composite rate. The Secretary of the Department of Health and Human Services is required to submit a report to Congress by October 1, 2005 detailing the elements and features for the design and implementation of a bundled prospective payment system for services furnished by ESRD facilities including, to the extent feasible, bundling of drugs, clinical laboratory tests, and other items that are now separately billed by ESRD facilities. Also, the Secretary is required to conduct a three-year demonstration project beginning on January 1, 2006 relating to the use of a payment system for ESRD services that bundles amounts for drugs and biologicals furnished to ESRD patients, including EPO, and clinical laboratory tests relating to such drugs and biologicals.

     During recent congressional sessions, there have been proposals to change numerous aspects of Medicare, not all of which were included in the 2003 Medicare Reform Bill. We are unable to predict what, if any, future changes may occur in the Medicare ESRD composite rate. Any reductions in the Medicare ESRD composite rate or change in the items covered by the composite rate (such as EPO or certain laboratory services) could have a material adverse effect on our earnings, financial condition and business.

Medicare Reimbursement for EPO

     We also derive a significant portion of our revenue and earnings from the administration of EPO. Medicare reimbursement for EPO has been fixed at $10 per 1,000 units since 1994. The Secretary of the Department of Health and Human Services has the authority to determine the Medicare reimbursement rate for EPO. In the past there have been proposals to reduce Medicare reimbursement for EPO, but none of these proposals has been adopted. We are unable to predict whether any changes in EPO reimbursement will occur. Approximately 24% of our revenue in 2003 was generated from the administration of EPO; therefore, any reduction in Medicare reimbursement for EPO could have a material adverse effect on our earnings, financial condition and business.

     CMS also places limits on EPO reimbursement based on patients’ hematocrit levels. Hematocrit is a measure of a patient’s anemia. Currently, if a patient’s hematocrit is below 36%, CMS approves Medicare reimbursement for EPO without specific documentation of medical necessity. If a patient’s average hematocrit over a three-month period is higher than 36%, Medicare reimbursement is contingent on medical necessity. Medicare’s contractors often review claims in these instances. We are unable to predict whether any changes in EPO reimbursement based on hematocrit levels will occur. Any reduction in Medicare reimbursement for EPO could have a material adverse effect on our earnings, financial condition and business.

Medicaid Reimbursement

     Medicaid programs are health care programs partially funded by the federal government that are administered by the states. These programs generally provide coverage for uninsured patients whose income and assets are below levels determined by the states. The programs also serve as supplemental insurance programs for the Medicare co-insurance portion and provide coverage for some items (for example, oral medications) that are not covered by Medicare. State regulations generally follow Medicare reimbursement levels and coverage without any coinsurance amounts. Some states, however, require beneficiaries to pay a share of the cost based upon their income or assets. We are a licensed ESRD Medicaid provider in all of the states in which we do business.

     Some of the states in which we do business have dialysis reimbursement rates for Medicaid patients that are higher than Medicare rates. Representatives of CMS and some of these states have indicated that the states should consider reducing these higher reimbursement levels, and at least two of these states, Washington and Wisconsin, have implemented reductions in

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Medicaid reimbursement. Reductions in Medicaid reimbursement in other states could have a material adverse effect on our earnings, financial condition and business.

Private Reimbursement/Acute Care Contracts

     Before Medicare becomes a patient’s primary payor, the patient’s own insurance plan or other health care coverage, if any, pays for his or her ESRD treatments. Reimbursement rates from these private payors are generally significantly higher than the rates paid by Medicare. We have negotiated contracts with most managed care payors in our markets at rates that are higher than the Medicare ESRD composite rate. Rates under these managed care contracts are, however, generally lower than those we charge other private payors. After Medicare becomes a patient’s primary payor, private secondary payors generally reimburse us for the patient’s copayment of 20% of the applicable Medicare rate. We also receive payments from hospitals under acute care contracts. The rates under these contracts are generally higher than the Medicare ESRD composite rate. Rates under these acute care contracts are the result of arms-length negotiations between the hospital and us and approximate fair market value of the services we provide.

SUBSEQUENT EVENTS

Midwest Kidney Centers

     Effective January 1, 2004, we acquired the assets of Midwest Kidney Centers and several affiliated companies for $49.5 million in consideration. Through this acquisition, we added approximately 825 patients and 13 dialysis facilities in central Illinois.

National Nephrology Associates, Inc.

     On February 2, 2004, we announced the signing of a definitive agreement to acquire National Nephrology Associates, Inc. (NNA), a Nashville, Tennessee-based dialysis services provider. NNA owns and operates 87 outpatient dialysis facilities in 15 states and provides services to approximately 5,600 patients, as well as acute dialysis services to approximately 55 hospitals.

     Under the terms of the agreement, the total consideration of $345.0 million will consist of a cash payment of approximately $167.0 million payable to NNA’s equity holders and the assumption of NNA’s outstanding debt, including its $160.0 million of 9% senior subordinated notes due 2011, and other indebtedness, including capital leases. We plan to finance the acquisition through our new credit agreement, as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Liquidity and Capital Resources. Completion of the transaction, which is expected to close on or before March 31, 2004, is subject to customary conditions, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

     Following completion of the Midwest Kidney Centers acquisition and assuming completion of the NNA transaction, we will serve almost 28,000 patients at over 370 facilities in 30 states, in addition to providing acute dialysis services at more than 175 hospitals.

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GOVERNMENT REGULATION

General

     Federal, state, and local governments regulate Renal Care Group’s operations extensively, including the operation of the dialysis centers and laboratory we own. Applicable federal and state statutes and regulations require us to meet various standards relating, among other things, to licensure, billing and reimbursement, management of dialysis centers, patient care personnel, maintenance of proper records, confidentiality of medical records, equipment and quality assurance programs, and the treatment and disposal of biomedical waste. In addition, our laboratory operations are subject, among other laws, to the federal Clinical Laboratory Improvement Amendments of 1988, also known as CLIA. Our dialysis centers and laboratory are subject to periodic inspection by state and federal agencies to determine if they satisfy applicable requirements. In addition, through certificate of need, or CON, programs, some states regulate the development or expansion of health care facilities and services, including dialysis centers. Our operations also are subject to regulations of the Occupational Safety and Health Administration, also known as OSHA, concerning workplace safety and employee exposure to blood and other potentially infectious materials.

     Renal Care Group is subject to federal and state laws governing, among other things, our relationships with physicians and other health care providers, patient referrals, and false claims. See “Government Regulation–Anti-Kickback Statute,” “Government Regulation–Stark Law” and “Government Regulation–Civil Monetary Penalties.” The federal government, many states and some private third-party payors have made combating fraud and abuse in the health care industry a high priority. As a result, scrutiny and investigation of health care providers and their relationships with physicians and other referral sources has increased significantly.

     We believe our operations substantially comply with applicable federal and state laws. However, if a state or the federal government finds that we have not complied with these laws, then we could be required to change our operations. Any changes could have a negative impact on us. To date, our dialysis centers have maintained their licenses and Medicare and Medicaid certifications. Any loss of certification to participate in the Medicare and Medicaid programs or loss of any required state or federal licenses or certifications would have a negative effect on us. Management believes that the health care services industry will continue to be subject to extensive regulation at the federal, state, and local levels. We cannot predict the scope and effect of future regulation of our business and cannot predict whether health care reform will require us to change our operations or whether such reform will have a negative impact on us.

     Renal Care Group cannot predict whether it will be held responsible for actions previously taken by acquired companies or facilities before it purchased them. We also cannot predict whether our operations, or the previous operations of acquired companies or facilities, will be reviewed or challenged by the government. Any review or challenge of our operations could have a negative impact on us.

Medicare and Medicaid Certification and Reimbursement

     To receive reimbursement from federal health care programs for dialysis and laboratory services, our dialysis centers and laboratory must be certified as meeting certain requirements. For example, to receive Medicare reimbursement, our dialysis centers and laboratory must be certified by the Centers for Medicare and Medicaid Services. All of our dialysis centers and our laboratory operations are certified under the Medicare program and applicable state Medicaid programs. In connection with our participation in Medicare, we must comply with conditions for coverage, including requirements concerning personnel, management, patient care, patient rights, medical records and physical environment. We must also comply with extensive billing rules governing, among other things, medical necessity and documentation. See “Government Regulation–False Claims Act” and “Government Regulation–Civil Monetary Penalties.”

     CMS has announced that it is in the process of revising the current Medicare conditions for coverage for ESRD services. Proposed revisions have not been published, but CMS has announced that they will be published soon. We cannot predict when proposed rules will be published or finalized or what, if any, changes CMS might make to the current conditions for coverage. Renal Care Group also cannot predict whether it will be able to meet any new or revised conditions for coverage. Any changes to the Medicare conditions for coverage for ESRD facilities could require us to change our operations and could have a negative

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effect on our business and profitability. Any reduction in governmental payments for dialysis services or any reduction or elimination of coverage of dialysis services by a governmental party would have a negative impact on our business.

     The HHS Office of Inspector General, also known as the OIG, issued reports in the summer of 2000 recommending greater oversight of the quality of care in dialysis facilities. In January of 2003, the United States General Accounting Office, known as the GAO, issued a report finding that efforts by CMS to ensure quality care at certain facilities including kidney dialysis facilities continue to be jeopardized by problems in the performance of state inspections, complaint investigations, and enforcement of federal standards. Any increased oversight could lead to increased requirements and greater scrutiny of dialysis facilities, including those owned by Renal Care Group.

The Anti-Kickback Statute

     Under Medicare, Medicaid, and other government-funded health care programs such as the CHAMPUS/Tri-Care program, federal and state governments enforce a federal law called the Anti-Kickback Statute. The Anti-Kickback Statute prohibits any person from offering, paying, soliciting or receiving any type of benefit (1) in exchange for the referral of a patient covered by Medicare, Medicaid or other federally-subsidized program or (2) for the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or service covered by the programs. Remuneration prohibited by the Anti-Kickback Statute includes the payment or transfer of anything of value. Many states have similar anti-kickback statutes that are not necessarily limited to items or services for which payment is made by a federal or state health care program.

     Any person or entity that violates the Anti-Kickback Statute may be penalized. These penalties include criminal fines of up to $25,000 per violation and imprisonment. In addition, the government may impose civil penalties of up to $50,000 per violation, plus three times total remuneration offered, paid, solicited or received. Further, the Secretary of the Department of Health and Human Services, HHS, has the authority to exclude or bar individuals or entities who violate the Anti-Kickback Statute from participating in Medicare and Medicaid.

     The Anti-Kickback Statute is a broad law. Courts have stated that, under certain circumstances, the Anti-Kickback Statute is violated when just one purpose, as opposed to the primary purpose, of a payment is to induce referrals. To clarify what acts or arrangements will not be subject to prosecution by the Office of Inspector General of HHS or the United States Attorney, HHS adopted a set of safe harbor regulations and continues to publish clarifications to these safe harbors. If an arrangement meets all of the requirements of a safe harbor, it will not be considered to violate the Anti-Kickback Statute.

     The types of arrangements covered by safe harbors include certain investments in companies whose stock is traded on a national exchange, certain small company investments in which physician ownership is limited, rental of space, rental of equipment, personal services and management contracts, sales of physician practices, physician referral services, warranties, discounts, payments to employees, group purchasing organizations, and waivers of beneficiary deductibles and co-payments. Each type of arrangement must meet a number of specific requirements in order to enjoy the benefits of the applicable safe harbor. Meeting the requirements of a safe harbor will protect an arrangement from enforcement action by the government. However, the fact that an arrangement does not meet the requirements of a safe harbor does not mean that the arrangement is necessarily illegal or will be prosecuted under the Anti-Kickback Statute.

     The OIG has issued a Special Fraud Alert concerning the pricing of laboratory testing at ESRD centers. Medicare pays for laboratory tests provided to ESRD patients in two different ways. Some laboratory tests are considered routine, and Medicare includes payment for those tests in the Medicare ESRD composite rate paid to the dialysis center. Some laboratory testing is not included in the composite rate, and these tests are billed by the laboratory directly to Medicare. In the Special Fraud Alert, the OIG stated it is aware of cases where a laboratory offers to perform tests included in the composite rate at a price below fair market value. In exchange, the dialysis facility agrees to refer all or most of its non-composite rate tests to the laboratory. The OIG identified such an arrangement as raising issues under the Anti-Kickback Statute. Management believes that our arrangements with laboratories reflect fair market value and comply with the Anti-Kickback Statute.

     Renal Care Group seeks to satisfy as many safe harbor requirements as possible when we are structuring business arrangements. However, not all of our arrangements satisfy all elements of a safe harbor. Management believes that we have a

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reasonable basis for concluding that we substantially comply with the Anti-Kickback Statute and other applicable related federal and state laws and regulations. Management believes that Renal Care Group’s current arrangements with physicians including nephrologists owning our common stock, medical directors, laboratories, suppliers, hospitals, and other sources of referrals to its dialysis centers and its acute dialysis services agreements with hospitals materially comply with the Anti-Kickback Statute. However, a government agency might take a position contrary to our interpretations or may require us to change our practices. If an agency were to take such a position, it could adversely affect Renal Care Group.

The Stark Law

     Congress has also passed significant prohibitions against certain physician referrals of patients for health care services. These prohibitions are commonly known as the Stark Law. The Stark Law prohibits a physician from making referrals for particular health care services (called designated health services) to entities with which the physician, or an immediate family member of the physician, has a financial relationship. If an arrangement is covered by the Stark Law, the requirements of a Stark Law exception must be met for the physician to be able to make referrals to the entity for designated health services.

     The term “financial relationship” is defined very broadly to include most types of ownership or compensation relationships. The Stark Law also prohibits the entity receiving the referral from seeking payment under the Medicare and Medicaid programs for services rendered pursuant to a prohibited referral. If an entity is paid for services rendered pursuant to a prohibited referral, it may incur civil penalties and could be excluded from participating in Medicare or Medicaid.

     As originally enacted, the Stark Law restricted referrals for clinical laboratory services. This version of the Stark Law is also called Stark I. Effective January 1, 1995, the Stark Law was expanded to include physical therapy services; occupational therapy services; radiology services, including magnetic resonance imaging (MRI), computerized axial tomography (CAT) scans, and ultrasound services; radiation therapy services and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment, and supplies; prosthetics, orthotics, and prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services. This version of the Stark Law is also known as Stark II.

     The Stark Law defines a financial relationship to include (1) a physician’s ownership or investment interest in an entity and (2) a compensation relationship between a physician and an entity. Under the Stark Law, financial relationships include both direct and indirect relationships. We have compensation arrangements with medical directors or the professional practices of the medical directors. The medical directors or their practices may also own shares, and options to purchase shares, of our common stock. In addition, other physicians who refer patients to our centers may own our stock. If so, the medical directors and other physicians would have a financial relationship with us. Accordingly, these physicians would not be able to refer patients to our dialysis centers for designated health services unless a Stark Law exception applies.

     Dialysis is not listed as a designated health service under the Stark Law. However, the definition of “designated health services” includes some items and services that are components of dialysis or that we may provide to patients in connection with their dialysis services. On January 4, 2001, HHS issued final regulations to the Stark II provisions of the Stark Law for some provisions of the Stark Law. These regulations became effective on January 4, 2002. The final regulations exclude from the definition of covered designated health services those services that are reimbursed by Medicare as part of a composite rate. The final regulations also contain an exception under the Stark Law for clinical laboratory services that are included in the Medicare ESRD composite rate. Therefore, services that are included in the Medicare ESRD composite rate are not covered by the Stark Law.

     Further, the Stark II final regulations exclude from the referral prohibition EPO and certain other drugs required as part of dialysis if certain requirements are met. If the requirements are met, this exception applies whether or not these drugs are included in the Medicare ESRD composite rate.

     The final regulations also exclude from the definition of “inpatient hospital services” any dialysis services provided by a hospital that is not certified by CMS to provide outpatient dialysis services. This rule would have the effect of excluding from the Stark Law prohibition, any dialysis services we provide under an acute dialysis contract with a hospital, if that hospital is not certified to provide outpatient dialysis. The final Stark II regulations exclude from the definition of “durable medical equipment”

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all equipment and supplies used in connection with home dialysis. These Stark II regulations exclude most of the items and services connected with dialysis from the Stark Law prohibitions.

     HHS has accepted comments to the Stark II final rules and has stated that it will issue further regulations to the Stark Law in the future. HHS has stated that it will issue additional Stark II final regulations in the future, but proposed regulations have not been published. We cannot predict whether HHS will revise the final regulations or will adopt additional regulations that affect our business.

     If the Stark Law applies to our relationships with referring physicians, there are exceptions to the Stark Law, which, if certain requirements are met, would permit such physicians to refer patients to us for designated health services. The Stark Law contains exceptions for certain physician ownership or investment interests in entities and certain physician compensation arrangements with entities. The exceptions for compensation arrangements include employment relationships, personal services contracts, and space and equipment leases. If a compensation arrangement between a physician, or immediate family member, and an entity satisfies all requirements for a Stark Law exception, then the Stark Law will not prohibit the physician from referring patients to the entity for designated health services. Management believes our compensation arrangements with referring physicians meet the requirements for an exception under the Stark Law. For example, management believes that our agreements with medical directors or their professional practices materially satisfy the Stark Law exception for personal services agreements.

     The Stark Law also includes an exception for a physician’s ownership or investment interest in certain entities through the ownership of stock. If a physician owns stock in an entity, and the stock is listed on a national exchange or is quoted on the Nasdaq Stock Market and the ownership meets certain other requirements, then the Stark Law will not apply to prohibit the physician from referring to the entity for designated health services. The requirements for this Stark Law exception include a requirement that the entity issuing the stock have at least $75.0 million in stockholders’ equity at the end of its most recent fiscal year or on average during the previous three fiscal years. As of December 31, 2003, Renal Care Group had stockholders’ equity of more than $570.0 million. Management believes that physician ownership of our stock satisfies this Stark Law exception.

     If an entity violates the Stark Law, it could be subject to civil penalties of up to $15,000 per prohibited claim and may be excluded from Medicare and Medicaid. If the Stark Law applies to our relationships with referring physicians and no exceptions under the Stark Law are available, then we will be required to restructure these relationships or refuse to accept referrals for designated health services from these physicians. If we were found to have submitted claims to Medicare for services provided pursuant to a referral prohibited by the Stark Law, then we would be required to repay amounts we received from Medicare for those services and could be subject to civil monetary penalties. If we are required to repay amounts to Medicare or is subject to fines, we could be harmed.

     Many states have physician relationship and referral statutes that are similar to the Stark Law. Management believes we are in substantial compliance with applicable state laws with respect to physician relationships and referrals. However, any finding that we are not in compliance with these state laws could require us to change our operations and could have a negative impact on us.

The Health Insurance Portability and Accountability Act of 1996

     In an effort to combat health care fraud, Congress included several anti-fraud measures in the Health Insurance Portability and Accountability Act of 1996, also called HIPAA. Among other things, HIPAA broadened the scope of certain fraud and abuse laws, extended criminal penalties for Medicare and Medicaid fraud to other federal health care programs, and expanded the authority of the OIG to exclude persons and entities from participating in the Medicare and Medicaid programs. HIPAA also extended the Medicare and Medicaid civil monetary penalty provisions to other federal health care programs, increased the amounts of civil monetary penalties, and established a criminal health care fraud statute.

     Federal health care offenses under HIPAA include health care fraud and making false statements relating to health care matters. Under HIPAA, among other things, any person or entity that knowingly and willfully defrauds or attempts to defraud a health care benefit program is subject to a fine, imprisonment or both. Also under HIPAA, any person or entity that knowingly and willfully falsifies or conceals or covers up a material fact or makes any materially false or fraudulent statements in connection with the delivery of or payment of health care services by a health care benefit plan is subject to a fine, imprisonment or both.

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     HIPAA also required the OIG to issue advisory opinions to outside parties regarding the interpretation and applicability of the Anti-Kickback Statute and other OIG health care fraud and abuse sanctions. An OIG advisory opinion only applies to the people or entities that requested it. However, advisory opinions are published and made available to the public, and they provide guidance on those practices the OIG believes may violate federal law. We have not requested any advisory opinions from the OIG. However, the OIG has issued several advisory opinions addressing practices of companies owning ESRD centers.

     In advisory opinions addressing practices of companies owning ESRD centers, the OIG has advised ESRD companies that they may not pay policy premiums for Medicare supplemental insurance for patients, even patients with proven financial hardship. Prior to the adoption of HIPAA and the issuance of these OIG opinions, we had paid premiums for Medicare supplemental insurance for some patients with demonstrated financial need. We stopped making such payments following the adoption of HIPAA. Consistent with the advisory opinions, we have made donations to charitable foundations that may, but are not required to, make premium payments on behalf of ESRD patients. We believe, but cannot promise, that our current practices regarding supplemental insurance substantially comply with the general principles expressed by the OIG in these advisory opinions.

     On August 17, 2000, HHS published final regulations governing electronic transactions involving health information. These regulations are part of the administrative simplification provisions of HIPAA. These regulations are commonly referred to as the Transaction Standards rule. The rule establishes standards for eight of the most common health care transactions by reference to technical standards promulgated by recognized standards publishing organizations. Under the new standards, any party transmitting or receiving health transactions electronically must send and receive data in a single format, rather than the large number of different data formats currently used. Health care providers, health care clearinghouses and large health plans who submitted a compliance extension plan to HHS by October 15, 2002 had until October 16, 2003 to comply with the Transaction Standards rule. However, the Transaction Standards rule’s implementation has been delayed indefinitely. This rule will apply to Renal Care Group in connection with submitting and processing health claims. The Transaction Standards rule also applies to many of our payors and to our relationships with those payors. Since many of our payors might not have been able to accept transactions in the format required by the Transaction Standards rule by the original compliance date, we filed a timely compliance extension plan with HHS. We believe that our operations comply with the Transaction Standards rule.

     On December 28, 2000, HHS published final regulations implementing HIPAA that adopted standards for privacy of individually identifiable health information. The regulations cover health care providers, health care clearinghouses and health plans. The privacy regulations, among other things, require companies covered by the regulations:

• to obtain patient authorization prior to certain uses or disclosures of protected health information,

• to provide notice of privacy practices to patients and obtain an acknowledgement that the patient has received the notice,

• to respond to requests from patients for access to or to obtain a copy of their information,

• to respond to patient requests for amendments of their information,

• to designate a privacy officer,

• to use and disclose only the minimum necessary information to accomplish a particular purpose, and

• to establish policies and procedures with respect to uses and disclosures of protected health information.

     These regulatory requirements impose significant administrative and financial obligations on companies that use or disclose individually identifiable information relating to the health of a patient. During 2003, we implemented new policies and procedures to maintain patient privacy and comply with HIPAA’s privacy requirements. The privacy regulations

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are extensive, and we may need to change some of our practices to comply with them as they are interpreted and as we deal with issues that arise.

     On August 12, 1998, HHS published proposed regulations implementing HIPAA that governs the security of health information. HHS recently published the final security regulations. Most covered entities will be required to comply with these regulations by April 21, 2005. We are studying the new regulations and may be required to change some of our practices to comply with them.

The False Claims Act

     The federal False Claims Act gives the federal government an additional way to police false bills or requests for payment for health care services. Under the False Claims Act, the government may fine any person who knowingly submits, or participates in submitting, claims for payment to the federal government that are false or fraudulent, or that contain false or misleading information. Any person who knowingly makes or uses a false record or statement to avoid paying the federal government may also be subject to fines under the False Claims Act. Under the False Claims Act, the term “person” means an individual, company, or corporation. The federal government has used the False Claims Act widely to prosecute fraud against Medicare and other governmental programs in areas such as coding errors, billing for services not provided and submitting false cost reports. The False Claims Act has also been used to prosecute people or entities that bill services at a higher reimbursement rate than is allowed and billing for care that is not medically necessary.

     The penalty for violation of the False Claims Act ranges from $5,500 to $11,000 for each fraudulent claim plus up to three times the amount of damages caused to the government as a result of each fraudulent claim. In addition to the False Claims Act, the federal government may use several criminal statutes to prosecute the submission of false or fraudulent claims for payment to the federal government. Many states have similar false claims statutes that impose liability for the types of acts prohibited by the False Claims Act.

Civil Monetary Penalties

     The Secretary of HHS may impose civil monetary penalties on any person or entity that presents or causes to be presented certain ineligible claims for medical items or services. The amount of penalties varies, depending on the offense, from $2,000 to $50,000 per violation. HHS can impose penalties for false or fraudulent claims and those that include services not provided as claimed. In addition, HHS may impose penalties on claims:

• for physician services the person or entity knew or should have known were rendered by a person who was unlicensed, or misrepresented either (1) his or her qualifications in obtaining his or her license or (2) his or her certification in a medical specialty;

• that were furnished by a person who was, at the time the claim was made, excluded from the program to which the claim was made; or

• that show a pattern of medically unnecessary items or services.

     Penalties also may be imposed on a person or entity that violates rules regarding the assignment of payments, that knowingly gives false or misleading information that could reasonably influence the discharge of patients from a hospital, or that offers inducements to beneficiaries for program services. Persons who have been excluded from the program and who retain ownership in a participating entity, or who contract with excluded persons, may be penalized. Penalties also are applicable in certain other cases, including violations of the federal Anti-Kickback Statute, payments to limit certain patient services and improper execution of statements of medical necessity.

Government Investigations

     Last year, the federal government continued to investigate practices of health care providers, including providers of dialysis. We expect that the number of government investigations of dialysis providers will continue to increase in 2004. The

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OIG has indicated in its 2004 Work Plan that it will be focusing this year on a number of areas of ESRD services, including billing for home dialysis.

     The federal government also continues to investigate practices of laboratories. Each of the laboratories owned and operated by the major dialysis providers, including our laboratory, has been the subject of a government investigation. These laboratories, including our laboratory, could be the subject of future investigations.

     Renal Care Group has developed and implemented a compliance program that is designed to prevent violations of the law. The existence of an effective compliance program may reduce the severity of civil and criminal penalties for certain offenses. We believe our compliance program is effective.

Health Care Legislation

     Congress may enact legislation in the future which may significantly change the Medicare ESRD program or reduce the amount that Medicare and Medicaid will pay for our services. Federal and state statutes or regulations may be enacted to impose additional requirements on us to continue to provide services to ESRD patients, to provide new services, or to maintain eligibility to participate in federal and state payment programs. Any new legislation or regulations, or new interpretations of existing statutes and regulations, governing reimbursement of dialysis providers or the manner in which dialysis companies provide services to patients could have a material impact on us and could adversely affect our profitability.

Joint Ventures

     A number of the dialysis centers we operate are owned by joint ventures in which we own a controlling interest and one or more physicians or physician practice groups own a minority interest. The physician owners also may provide medical director services to those centers and/or to other centers we own and operate. Because our relationships with physicians are governed by the Anti-Kickback Statute, we have sought to satisfy as many safe harbor requirements as possible in structuring these joint venture arrangements. However, our joint venture arrangements do not satisfy all elements of a safe harbor. Management believes that we have a reasonable basis for concluding that we substantially comply with the Anti-Kickback Statute. Also, we believe we have structured the physician relationships in these joint ventures in a way that meets applicable exceptions under the Stark Law or that otherwise complies with the Stark Law. If the joint ventures were found to be in violation of the Anti-Kickback Statute or the Stark Law, we could be required to restructure them or refuse to accept referrals for designated health services from the physicians with whom the joint venture centers have a relationship. We also could be required to repay to Medicare amounts received by the joint ventures pursuant to prohibited referrals, and we could be subject to monetary penalties. If the joint venture centers are subject to any of these penalties, our business could be damaged.

Recent Regulatory Developments

     In addition to the other matters discussed in this section, during 2003, the following regulatory studies, actions and decisions took place:

• In May of 2003, the OIG issued a report, “Home Dialysis Payment Vulnerabilities,” concerning home dialysis billing processes. The OIG recommended, among other things, changing regulations to limit payments for some home dialysis supplies and collecting any incorrect payments made to providers.

• On September 22, 2003, CMS issued a letter inviting submission of scientific evidence on EPO dosing and hematocrit/hemoglobin levels to assist CMS in developing of a permanent policy to ensure appropriate administration of EPO to ESRD patients. The comment period ended on January 15, 2004. A draft policy is expected on May 1, 2004, and CMS is scheduled to issue a final policy or memorandum on this matter on July 2, 2004.

• On November 20, 2003, the OIG Office of Audit Services issued a report, “End Stage Renal Disease Pricing Errors at Independent Facilities,” concerning its audit of Medicare overpayments to independent ESRD providers by a fiscal

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	intermediary, AdminaStar Federal. The overpayments involved injectable drugs that are billed outside of the Medicare composite rate for ESRD services. The OIG recommended, among other things, recovery of identified overpayments.
•	On December 22, 2003, CMS finalized a proposed rule removing the cap on ESRD bad debt reimbursement, which limits payment of allowable bad debt to the facility’s unrecovered costs.

COMPETITION

     The dialysis industry is highly competitive. Competition for qualified physicians to act as medical directors is also intense. According to CMS, there were more than 4,000 outpatient facilities providing dialysis in the United States at the end of 2001. We believe that as of December 31, 2003, approximately 66% of these facilities were owned by multi-center dialysis companies, approximately 16% were owned by independent physicians, small chains and other small operators, and approximately 18% were hospital-affiliated centers. The largest multi-center dialysis company is Fresenius Medical Care, Inc. Other large competitors include DaVita, Inc. and Gambro Healthcare, Inc.

     Fresenius and Gambro are both vertically integrated providers that manufacture and sell dialysis equipment and supplies, which may give them certain competitive advantages. There are also a number of other health care providers that have entered or may decide to enter the dialysis business. Some of our competitors have substantially greater financial resources than ours, and they may compete with us for acquisitions, development and/or management of dialysis centers and nephrology practices. We believe that competition for acquisitions has, over time, increased the cost of acquiring dialysis centers. We may also experience competition from centers established by former medical directors or other referring physicians. There can be no assurance that we will compete effectively with any of our competitors.

INSURANCE

     We maintain professional liability insurance and general liability insurance policies for all of its operations. We also maintain insurance in amounts management deems adequate to cover property and casualty risks, workers’ compensation, and directors and officers liability. During 2003, our cost for most types of insurance, particularly professional liability insurance, general liability insurance, and directors and officers liability insurance increased substantially, both in terms of premiums and deductibles. In addition, the availability of insurance diminished in 2002 and 2003. Management expects that these trends will continue in 2004 and that we may be required to take more risk in our insurance program. There can be no assurance that the aggregate amount and types of our insurance are adequate to cover all risks we may incur or that insurance will be available in the future.

EMPLOYEES

     At December 31, 2003, we employed 5,818 full-time employees and 931 part-time employees. Of the total employees, 56 were employed at our headquarters and 6,693 were employed at our dialysis facilities, laboratory or regional business offices. In management’s opinion, employee relations are good.

INTERNET WEBSITE

     Our internet website can be found at www.renalcaregroup.com. We make available free of charge on or through our internet website, access to our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is filed, or furnished, to the Securities and Exchange Commission.

CODE OF ETHICS

     We have adopted a code of ethics that applies to all of our directors, officers and employees. This code is publicly available in the investor relations area of our website at www.renalcaregroup.com. Copies of our code of ethics may also be requested in print by writing to Investor Relations at 2525 West End Avenue, Suite 600, Nashville, Tennessee 37203.

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RISK FACTORS

     You should carefully consider the risks described below before investing in our securities. The risks and uncertainties described below are not the only ones we face. Other risks and uncertainties that we have not predicted or assessed may also adversely affect us.

     If any of the following risks occurs, our earnings, financial condition or business could be materially harmed, and the trading price of our common stock could decline, resulting in the loss of all or part of your investment.

If Congress or CMS Changes the Medicare or Medicaid Programs for Dialysis, Then Our Revenue and Earnings Could Decrease

     If the government changes the Medicare, Medicaid or similar government programs or the rates those programs pay for our services, then our revenue and earnings may decline. We estimate that approximately 49% of our net revenue for 2001, 50% of our net revenue for 2002 and 49% of our net revenue for 2003 consisted of reimbursements from Medicare, including reimbursement for the administration of EPO to treat anemia. We also estimate that approximately 6% of our net revenue for 2001, 7% of our net revenue for 2002 and 6% of our net revenue for 2003 consisted of reimbursements from Medicaid or comparable state programs. Any of the following actions in connection with government programs could cause our revenue and earnings to decline:

• a reduction of the amount paid to us under government programs;

• an increase in the costs associated with performing our services that are subject to inflation, such as labor and supply costs, without a corresponding increase in reimbursement rates;

• the inclusion of some or all ancillary services, for which we are now reimbursed separately, in the flat composite rate for a dialysis treatment; or

• changes in laws, or the interpretations of laws, which could cause us to modify our operations.

     Specifically, Congress and CMS have proposed expanding the drugs and services that are included in the flat composite rate. CMS has indicated that it believes such a mechanism would be fairer and easier to administer. In addition, Congress mandated a change in the way we will be paid beginning in 2005 for some of the drugs (including EPO) that we bill for outside of the flat composite rate. This change will result in lower reimbursement for these drugs and a higher composite rate. Congress stated that these changes are not intended to reduce overall reimbursement to dialysis providers, but until actual rates are set, we do not know how the changes will affect us.

If States Lower Medicaid Reimbursement, Then We Would be Less Profitable

     The Medicaid programs in some of the states in which we operate have formerly reimbursed us, or currently reimburse us, at rates higher than those paid by Medicare. Some of these programs, like Washington’s and Wisconsin’s, have approved and implemented reductions in reimbursement. Other programs have proposed reductions or have announced that they are considering reductions. In addition, a number of the states where we operate are experiencing budget shortfalls, and some of these states may consider reducing Medicaid reimbursement or changing their Medicaid programs to cut costs. We are unable to predict whether and, if so, when any reductions in Medicaid reimbursement, other than those approved and implemented in Washington and Wisconsin, might occur and what their precise effect will be.

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If Reimbursement for EPO Decreases, Then We Could be Less Profitable

     If government or private payors decrease reimbursement rates for EPO, for which we are currently reimbursed separately outside of the flat composite rate, then our revenue and earnings will decline. EPO is a bio-engineered hormone that is used to treat anemia. Revenues from the administration of EPO were approximately 25% of our net revenue for 2001, 23% of our net revenue for 2002, and 24% of our net revenue for 2003. Most of our payments for EPO come from government programs. For the year ended December 31, 2003, Medicare and Medicaid reimbursement represented approximately 55% of the total revenue we derived from EPO. A reduction in the reimbursement rate for EPO could materially and adversely affect our revenue and earnings.

If Amgen Raises the Price for EPO or if EPO Becomes in Short Supply, Then We Could be Less Profitable

     EPO is produced by a single manufacturer, Amgen Inc., and there are no substitute products currently marketed to dialysis providers in the United States. In April 2002, Amgen announced a 3.9% increase in the price of EPO. This price increase did not affect our earnings in 2002 because our contract with Amgen had pricing protection through 2002, but did adversely affect our earnings in 2003. If Amgen imposes additional EPO price increases or if Amgen or other factors interrupt the supply of EPO, then our revenue and earnings will decline.

If Amgen Markets Aranesp^® for ESRD Patients, Then We Could be Less Profitable

     Amgen has developed and obtained FDA approval for a new drug to treat anemia that is marketed as Aranesp^® (darbepoetin alfa). Aranesp^® is a longer acting form of bio-engineered protein that, like EPO, can be used to treat anemia. EPO is usually administered in conjunction with each dialysis treatment. Aranesp^® can remain effective for between two and three weeks. If Amgen markets Aranesp^® for the treatment of dialysis patients, then our earnings could be materially and adversely affected by either of the following factors:

• Our margins realized from the administration of Aranesp^® could be lower than the margins realized on the administration of EPO; or

• Physicians could decide to administer Aranesp^® in their offices, and we would not recognize revenue or profit from the administration of EPO or Aranesp^®.

If Payments by Private Insurers, Hospitals or Managed Care Organizations Decrease, Then Our Revenue and Earnings Could Decrease

     If private insurers, managed care organizations or hospitals reduce their rates or if we experience a significant shift in our revenue mix toward additional Medicare or Medicaid reimbursement, then our revenue and earnings will decline. We estimate that approximately 45% of our net revenue for 2001, 43% of our net revenue for 2002 and 45% of our net revenue for 2003 were derived from sources other than Medicare and Medicaid. In general, payments we receive from private insurers and hospitals for our services are at rates significantly higher than the Medicare or Medicaid rates. Payments we receive from managed care organizations are also at rates higher than Medicare and Medicaid rates but lower than those paid by private insurers. In addition, we have been able to implement annual price increases for these private payors that we have not been able to implement for federal programs. Management believes that health insurance pricing is cyclical and that we may be at or near the top of the cycle. As a result, management believes that our ability to maintain or raise rates to private insurers and managed care companies will likely be more limited over the next several years than it has been in the recent past. We have recently experienced reductions in reimbursement from two commercial insurers, and management believes that the reductions in reimbursement by these two commercial insurers along with pricing pressure from other commercial insurers and managed care organizations will likely adversely impact our revenue per treatment and earnings per share in 2004. Any of the following events could have a material adverse effect on our revenue and earnings:

• any number of economic or demographic factors could cause private insurers, hospitals or managed care companies to reduce the rates they pay us or to refuse to pay price increases or work to reduce the rate of our price increases;

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• a portion of our business that is currently reimbursed by private insurers or hospitals may become reimbursed by managed care organizations, which generally have lower rates for our services;

• a portion of our business that is currently reimbursed by private insurers at rates based on our billed charges may become reimbursed under a contract at lower rates; or

• the scope of coverage by Medicare or Medicaid under the flat composite rate could expand and, as a result, reduce the extent of our services being reimbursed at the higher private-insurance rates.

If Local Physicians Stop Sending Patients to Our Centers or Were Prohibited From Doing so for Regulatory Reasons, Then Our Revenue and Earnings Would Decline

     Our dialysis centers depend on local nephrologists sending patients to the centers. Typically, one or a few physicians’ patients make up all or a significant portion of the patient base at each of our dialysis centers, and the loss of the patient base of one or more of these physicians could have a material adverse effect on the operations of that center. The loss of the patient base of a significant number of local physicians could cause our revenue and earnings to decline. In many instances, the primary referral sources for our centers are physicians who also serve as medical directors of our centers and may be shareholders. If the medical director relationship or stock ownership were found to violate applicable federal or state law, including fraud and abuse laws and laws prohibiting self-referrals, then the physicians acting as medical directors or owning our stock could be forced to stop referring patients to our centers.

     A number of our medical director agreements will expire over the next three years, unless they are renewed or renegotiated. We were not able to renew or renegotiate a small number of our medical director agreements that expired in 2003, and we may not be able to renew or renegotiate expiring medical director agreements successfully, or we may not be able to enforce the non-competition provisions of some of our medical director or other agreements. Any of these factors could result in a loss of patients, since dialysis patients are typically treated at a center where their physician or a member of his or her practice group serves as medical director. We believe that our future success will depend in part on our ability to attract and retain qualified physicians to serve as medical directors of our dialysis centers.

If Our Business Is Alleged or Found To Violate Heath Care or Other Applicable Laws, Our Revenue and Earnings Could Decrease

     We are subject to extensive federal, state and local regulation. The laws that apply to our operations include, but are not limited to, the following:

• fraud and abuse prohibitions under state and federal health care laws;

• prohibitions and limitations on patient referrals;

• billing and reimbursement rules, including false claims prohibitions under health care reimbursement laws;

• rules regarding the collection, use, storage and disclosure of patient health information, including the federal Health Insurance Portability and Accountability Act of 1996, referred to as HIPAA, and state law equivalents of HIPAA;

• facility licensure;

• health and safety requirements;

• environmental compliance; and

• medical and toxic waste disposal.

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     Much of the regulation of our business, particularly in the areas of fraud and abuse and patient referral, is complex and open to differing interpretations. Due to the broad application of the statutory provisions and the absence in many instances of regulations or court decisions addressing the specific arrangements by which we conduct our business, including our arrangements with medical directors, physician stockholders and physician joint venture partners, governmental agencies could challenge some of our practices under these laws.

     New regulations governing electronic transactions and the collection, use, storage, and disclosure of health information impose significant administrative and financial obligations on our business. If, after the required compliance date, we are found to have violated these regulations, we could be subject to:

• criminal or civil penalties, including significant fines;

• claims by people who believe their health information has been improperly used or disclosed; and

• administrative penalties by payors.

     Government investigations of health care providers, including dialysis providers, have continued to increase. We have been the subject of investigations in the past, and the government may investigate our business in the future. One of our competitors, DaVita, Inc., has announced that it is the subject of an investigation by the U.S. Attorney for the Eastern District of Pennsylvania, and another competitor, Gambro Healthcare, Inc., has announced that it is the subject of an investigation by the U.S. Attorney’s Office in St. Louis, Missouri. If any of our operations are found to violate applicable laws, then we may be subject to severe sanctions, or we could be required to alter or discontinue the challenged conduct or both. If we are required to alter our practices, we may not be able to do so successfully. If any of these events occurs, our revenue and earnings could decline.

If Our Joint Ventures are Found to Violate the Law, Our Business Could Be Damaged

     A number of the dialysis centers we operate are owned by joint ventures in which we own a controlling interest and one or more physicians or physician practice groups maintain a minority interest. The physician owners also may provide medical director services to those centers and/or other centers we own and operate. Because our relationships with physicians are governed by the Anti-Kickback Statute, we have sought to satisfy as many safe harbor requirements as possible in structuring these joint venture arrangements. However, our joint venture arrangements do not satisfy all elements of a safe harbor. Also, we believe we have structured the physician relationships in these joint ventures in a way that meets applicable exceptions under the Stark Law or that otherwise complies with the Stark Law. If the joint ventures were found to be in violation of the Anti-Kickback Statute or the Stark Law, we could be required to restructure them or refuse to accept referrals for designated health services from the physicians with whom the joint venture centers have a relationship. We also could be required to repay to Medicare amounts received by the joint ventures pursuant to prohibited referrals, and we could be subject to monetary penalties. If the joint venture centers are subject to any of these penalties, our business could be damaged.

Changes in the Health Care Delivery, Financing or Reimbursement Systems Could Adversely Affect Our Business

     The health care industry in the United States may be entering a period of change and uncertainty. Health care organizations, public or private, may dramatically change the way they operate and pay for services. Our business is designed to function within the current health care financing and reimbursement system. During the past several years, the health care industry has been subject to increasing levels of government regulation of, among other things, reimbursement rates and relationships with referring physicians. In addition, proposals to reform the health care system have been considered by Congress. In light of the continued increases in the cost of health care and the current economic weakness, there may be new proposals to change the health care system and control costs. These proposals, if enacted, could further increase the government’s oversight role and involvement in health care, lower reimbursement rates and otherwise change the operating environment for health care companies. We cannot predict the likelihood of those events or what impact they may have on our business.

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The Dialysis Business Is Highly Competitive. If We Do Not Compete Effectively in Our Markets, Then We Could Lose Market Share and Our Rate of Growth Could Slow

     The dialysis industry is largely consolidated, and the consolidation trend continues as large providers acquire smaller providers. There is a small number of large dialysis companies that compete for the acquisition of outpatient dialysis centers and the development of relationships with referring physicians. Two of our major competitors are part of larger companies that also manufacture dialysis equipment, which allows them to benefit from lower equipment costs. Several of our competitors, including these equipment manufacturers, are larger than we are and have greater financial resources and more established operations. We may also face competition from new entrants into the market, including centers established by former medical directors or other referring physicians. We cannot assure you that we will be able to compete effectively with any of our competitors.

If We Lose Any of Our Executive Officers, Then Our Ability To Run Our Business Could be Adversely Affected, and Our Revenue and Earnings Could Decline

     We depend on the services of our executive officers William P. Johnston, our chairman of the board, Gary A. Brukardt, our president and chief executive officer, Raymond M. Hakim, M.D., Ph.D., David M. Dill and Timothy P. Martin, each an executive vice president, and Douglas B. Chappell, our general counsel. Mr. Brukardt and Dr. Hakim have each been with Renal Care Group since 1996. The services of our executive officers would be difficult to replace. We selected Mr. Johnston as our chairman, Mr. Brukardt as our president and chief executive officer, Mr. Dill as our chief financial officer and Mr. Martin as executive vice president, operations in 2003.

If We are Unable to Make Acquisitions in the Future, Then Our Rate of Growth Will Slow

     Much of our historical growth has come from acquisitions. Although we intend to continue to pursue growth through the acquisition of dialysis centers, we may be unable to identify and complete suitable acquisitions at prices we are willing to pay, or we may be unable to obtain the necessary financing. Further, due to the increased size of our business, the amount that acquired businesses contribute to our revenue and profits will continue to be smaller on a percentage basis. Also, as a result of consolidation in the dialysis industry, as of December 31, 2003, the four largest providers of outpatient dialysis services owned approximately 66% of the outpatient dialysis facilities in the United States. We compete with these other companies to identify and complete suitable acquisitions. We expect this competition to intensify in light of the smaller pool of available acquisition candidates and other market forces. As a result, we believe it will be more difficult for us to acquire suitable companies on favorable terms. Further, the businesses we acquire may not perform well enough to justify our investment. If we are unable to make additional acquisitions on suitable terms, then we may not meet our growth expectations.

If We Complete Future Acquisitions, We May Dilute Existing Stockholders by Issuing More of Our Common Stock or We May Incur Expenses Related to Debt and Goodwill, Which Could Reduce Our Earnings

     We may issue equity securities in future acquisitions that could be dilutive to our shareholders. We also may incur additional debt in future acquisitions. Interest expense on debt incurred to fund our acquisitions may significantly reduce our profitability. While goodwill and other intangible assets with indefinite lives are not amortized to expense under generally accepted accounting principles, we are required to review all of these assets at regular intervals for impairment and to charge an appropriate amount to expense when we identify impairment. If we identify impairment and are required to write off a significant portion of our intangible assets at one time, then there could be a material adverse impact on our stock price.

If We Complete our Acquisition of National Nephrology Associates and Planned Share Repurchases, Then We Will Have Substantial Leverage

     We have announced a definitive agreement to acquire National Nephrology Associates and our intention to repurchase $250.0 million of our common stock between November 1, 2003 and March 31, 2004. If we complete both of these initiatives as planned, then we will have indebtedness of more than $475.0 million and will incur substantial interest expense in 2004 and beyond. For the last several years, we have had very little indebtedness coupled with strong cash flow, which have given us substantial financial flexibility. Our new level of indebtedness could restrict our ability to make

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investments in our business or to expand it through the development of new facilities, to make other acquisitions or to acquire additional common stock. In addition, we are or will be subject to a number of covenants in the agreements governing this indebtedness that could restrict the way we do business, acquire new businesses and repurchase common stock.

If We Fail to Integrate Acquired Companies, Then We Will be Less Profitable

     We have grown significantly by acquisitions of other dialysis providers since our formation. We recently acquired Midwest Kidney Centers and announced a definitive agreement to acquire National Nephrology Associates, Inc. and we intend to pursue acquisitions of more dialysis businesses in the future. We are unable to predict the number and size of any future acquisitions. We face significant challenges in integrating an acquired company’s management and other personnel, clinical operations, and financial and operating systems with ours, often without the benefit of continued services from key personnel of the acquired company. We face these challenges particularly in larger acquisitions like the acquisition of National Nephrology Associates. We may be unable to integrate the businesses we acquire successfully or to achieve anticipated benefits from an acquisition in a timely manner, which could lead to substantial costs and delays or other operational, technical or financial problems, including diverting management’s attention from our existing business. Any of these results could damage our profitability and our prospects for future growth.

If Acquired Businesses Have Unknown Liabilities, Then We Could be Exposed to Liabilities That Could Harm Our Business and Profitability

     Businesses we acquire may have unknown or contingent liabilities, including liabilities for failure to comply with health care laws. Although we generally attempt to identify practices that may give rise to unknown or contingent liabilities and conform them to our standards after the acquisition, private plaintiffs or governmental agencies may still assert claims. Even though we generally seek to obtain indemnification from the sellers of businesses we buy, unknown and contingent liabilities may not be covered by indemnification or may exceed contractual limits or the financial capacity of the indemnifying party.

If Our Costs of Insurance and Claims Increase, Then Our Earnings Could Decrease

     We currently maintain programs of general and professional liability insurance and directors’ and officers’ insurance with significant deductible or self-insured retention amounts on each claim. In addition, we generally self-insure our employee health plan and workers’ compensation program, while maintaining excess insurance for some very large claims. We have accepted higher deductibles and self-insurance exposure in each of the last several years to offset part of the increases in premiums for the programs. These deductibles and premiums increased substantially in 2002 and 2003. Our earnings could be materially and adversely affected by any of the following:

• further increases in premiums, deductibles and self-insurance retentions;

• increases in the number of liability claims against us or the cost of settling or trying cases related to those claims; and

• an inability to obtain one or more types of insurance on acceptable terms.

If Our Board of Directors Does Not Approve an Acquisition or Change in Control, Then Our Shareholders May Not Realize the Full Value of Their Stock

     Our certificate of incorporation and bylaws contain a number of provisions that may delay, deter or inhibit a future acquisition or change in control that is not first approved by our board of directors. This could occur even if our shareholders receive an attractive offer for their shares or if a substantial number or even a majority of our shareholders believe the takeover is in their best interest. These provisions are intended to encourage any person interested in acquiring Renal Care Group to negotiate with and obtain approval from our board of directors before pursuing a transaction. Provisions that could delay, deter or inhibit a future acquisition or change in control include the following:

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• a staggered board of directors that would require two annual meetings to replace a majority of the board of directors;

• restrictions on calling special meetings at which an acquisition or change in control might be brought to a vote of the shareholders;

• blank check preferred stock that may be issued by our board of directors without shareholder approval and that may be substantially dilutive or contain preferences or rights objectionable to an acquiror; and

• a poison pill that would substantially dilute the interest sought by an acquiror.

     These provisions could also discourage bids for our common stock at a premium and cause the market price of our common stock to decline.

Our Stock Price Is Volatile and as a Result, the Value of Your Investment May Go Down for Reasons Unrelated To the Performance of Our Business

     Our common stock is traded on the New York Stock Exchange. The market price of our common stock has been volatile, ranging from a low closing price of $28.05 per share to a high closing price of $41.62 per share during the year ended December 31, 2003. The market price for our common stock could fluctuate substantially based on a variety of factors, including the following:

• future announcements concerning us, our competitors or the health care market;

• the threat of litigation or government investigation;

• changes in government regulations; and

• changes in earnings estimates by analysts.

     Furthermore, stock prices for many companies fluctuate widely for reasons that may be unrelated to their operating results. These fluctuations, coupled with changes in demand or reimbursement levels for our services and general economic, political and market conditions, could cause the market price of our common stock to decline.

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Item 2. Properties

PROPERTIES

     As of December 31, 2003, we operated 284 dialysis centers in 27 states, of which 251 are located in leased facilities and 33 are owned. The following is a summary of our outpatient dialysis centers by state.

OUTPATIENT FACILITIES BY STATE

Alabama	4
Alaska	2
Arizona	31
Arkansas	10
Colorado	2
Florida	7
Idaho	1
Illinois	18
Indiana	27
Kansas	12
Kentucky	3
Louisiana	1
Michigan	6
Mississippi	33
Missouri	10
Nebraska	2
New Jersey	3
New Mexico	3
Ohio	22
Oklahoma	4
Oregon	10
Pennsylvania	11
South Carolina	3
Tennessee	6
Texas	41
Washington	10
Wisconsin	2
TOTAL	284

     Some of our centers are leased from physicians who practice at the center and who are stockholders. Our leases generally have terms ranging from one to 15 years and typically contain renewal options. The size of our centers ranges from approximately 1,000 to 25,000 square feet. We lease office space in Nashville, Tennessee for our corporate headquarters under a lease that expires in 2009. We lease other office space in and around Nashville, Tennessee for certain billing and computer operations. We consider our physical properties to be in good operating condition and suitable for the purposes for which they are being used.

     Expansion or relocation of our dialysis centers is subject to compliance with conditions relating to participation in the Medicare ESRD program. In states that require a certificate of need, approval of a certificate of need application is usually necessary for expansion of an existing dialysis center or development of a new center.

     We generally own the equipment used in our outpatient centers. We consider our equipment generally to be in good operating condition and suitable for the purposes for which it is being used.

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Item 3. Legal Proceedings

     On August 30, 2000, 19 patients were hospitalized and one patient died shortly after becoming ill while receiving treatment at one of our dialysis centers in Youngstown, Ohio. One of the 19 hospitalized patients also died some time later.

     In March 2001, we were sued in Mahoning County, Ohio by one of the affected patients for injuries related to the August 30, 2000 illnesses. Ten additional suits were filed, and as of December 31, 2003, a total of five of these suits were pending. The suits allege negligence, medical malpractice and product liability. Additional defendants are named in each of the suits. Additional defendants in some of the suits include the water system vendors who installed and maintained the water system in the dialysis center. We have denied the allegations and have filed cross-claims against the water system vendors. We intend to pursue these cross-claims vigorously.

     Management believes that our insurance should be adequate to cover these illnesses and does not anticipate a material adverse effect on our consolidated financial position or results of operation.

     In addition, we are subject to claims and suits in the ordinary course of business, including those arising from patient treatment, and we believe these claims and suits will be covered by our liability insurance and reserves we have established to satisfy these claims.

Item 4. Submission of Matters to a Vote of Security Holders

     We did not submit any matter to a vote of our shareholders during the fourth quarter of 2003.

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PART II

     Item 5. Market for Company’s Common Equity and Related Stockholder Matters.

PRICE RANGE OF COMMON STOCK

     The Company’s common stock is traded on the New York Stock Exchange under the symbol “RCI”. The following table sets forth the quarterly high and low closing sales prices as reported on the New York Stock Exchange for the last two fiscal years.

2002	High		Low
First quarter	$	33.65	$	28.30
Second quarter	$	35.80	$	31.15
Third quarter	$	33.65	$	27.72
Fourth quarter	$	34.01	$	30.35

2003	High		Low
First quarter	$	31.60	$	28.05
Second quarter	$	35.21	$	30.00
Third quarter	$	37.60	$	34.05
Fourth quarter	$	41.62	$	33.04

HOLDERS

     As of February 26, 2004, the approximate number of registered stockholders was 166, and the Company had approximately 11,000 beneficial owners.

DIVIDEND POLICY

     Renal Care Group has never paid any cash dividend on its capital stock. Renal Care Group currently anticipates that all of its earnings will be retained to finance the growth and development of its business or to repurchase common stock. Renal Care Group does currently not anticipate that any cash dividend will be declared or paid on the common stock in the foreseeable future. Any future declaration of dividends will be subject to the discretion of Renal Care Group’s Board of Directors and its review of Renal Care Group’s earnings, financial condition, capital requirements and surplus, contractual restrictions to pay such dividends and other factors the Board of Directors deems relevant.

SALES OF UNREGISTERED SECURITIES

     There were no sales of unregistered securities during the year ended December 31, 2003.

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Securities Authorized for Issuance Under Equity Compensation Plans (number of shares in thousands)

     The following table summarizes our equity compensation plans as of December 31, 2003:

							Number of Shares
							Remaining Available
	Number of Shares to		Weighted-Average			For Future Issuance
	Be Issued Upon		Exercise Price of				Under Equity
	Exercise of		Outstanding				Compensation Plans
	Outstanding		Options,				(Excluding
	Options, Warrants		Warrants and			Securities Reflected
	And Rights		Rights				In Column (a))
Plan Category (1)	(a)		(b)				(c)
Equity compensation plans approved by Stockholders		5,646		$	26.50			1,242
Equity compensation plans not approved by Stockholders (2)		353		$	12.86			—
Total		5,999		$	25.70			1,242

(1)     Renal Care Group currently has three option plans that were assumed in connection with a merger, acquisition or other transaction. The first such plan was adopted by Renal Disease Management by Physicians, Inc. (RDM) in 1997 under which there are nine options issued and outstanding to purchase shares at a weighted average exercise price of $19.65. The second plan was adopted by Dialysis Centers of America, Inc. (DCA) in 1995 under which there are 16 options issued and outstanding to purchase shares at a weighted average exercise price of $25.58. The third plan was adopted in 1994 and there are eight options issued and outstanding under such plan to purchase shares at a weighted average exercise price of $3.33.

(2)     These options were issued outside of our existing stock options plans to certain employees, officers, directors, and other key persons. These options vest over various periods up to five years and have a term of ten years from the date of issuance.

Further information concerning these plans is incorporated by reference to Footnote 8 in the Consolidated Financial Statements included in this annual report.

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Item 6. Selected Financial Data

     The selected financial data for the years ended December 31, 1999, 2000, 2001, 2002 and 2003 are derived from the audited consolidated financial statements of the Company and its subsidiaries. The consolidated financial statements and related notes for the years ended December 31, 2001, 2002 and 2003, together with the related Report of Independent Auditors are included elsewhere in this annual report on Form 10-K. Please read the following data in conjunction with the financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that appear elsewhere in this annual report on Form 10-K.

Selected Financial Data
(in thousands, except per share data)

	Year Ended December 31,
	1999		2000		2001		2002		2003
INCOME STATEMENT DATA:
Net revenue	$	541,895	$	622,575	$	755,082	$	903,387	$	1,005,319
Patient care costs		351,367		402,009		489,271		589,696		653,307
General and administrative expenses		51,315		57,104		64,530		78,079		90,249
Provision for doubtful accounts		14,632		16,949		20,290		23,501		26,200
Depreciation and amortization		27,835		32,321		38,945		40,432		44,905
Restructuring charge		—		9,235		—		—		—
Merger expenses		4,300		3,766		—		—		—
Total operating costs and expenses		449,449		521,384		613,036		731,708		814,661
Income from operations		92,446		101,191		142,046		171,679		190,658
Interest expense, net		6,224		5,015		2,636		1,140		629
Income before minority interest and income taxes		86,222		96,176		139,410		170,539		190,029
Minority interest		7,768		10,011		15,478		21,410		25,431
Income before income taxes		78,454		86,165		123,932		149,129		164,598
Provision for income taxes		31,367		34,706		47,331		56,669		62,542
Net income	$	47,087	$	51,459	$	76,601	$	92,460	$	102,056
Basic net income per share	$	1.05	$	1.12	$	1.59	$	1.89	$	2.11
Basic weighted average shares outstanding		45,015		46,048		48,113		48,978		48,479
Diluted net income per share	$	1.00	$	1.07	$	1.52	$	1.82	$	2.05
Diluted weighted average shares outstanding		47,052		47,948		50,433		50,767		49,835

	December 31,
	1999		2000		2001		2002		2003
BALANCE SHEET DATA:
Working capital	$	73,651	$	108,915	$	104,047	$	110,481	$	122,667
Total assets		500,906		582,672		651,049		740,123		819,873
Long-term debt		79,690		58,316		3,776		10,161		2,652
Stockholders’ equity		311,839		394,122		510,251		543,888		570,845

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed on pages 20 to 26 under the heading “Risk Factors.” Also, please read the cautionary notice regarding forward-looking statements set forth at the beginning of this annual report.

     Please read the following discussion in conjunction with our consolidated financial statements and the related notes contained elsewhere in this annual report on Form 10-K.

Overview

     Renal Care Group provides dialysis services to patients with chronic kidney failure. As of December 31, 2003, we provided dialysis and ancillary services to over 21,400 patients through 284 outpatient dialysis centers in 27 states, in addition to providing acute dialysis services to more than 130 hospitals.

     Our net revenue has been derived primarily from the following sources:

• outpatient hemodialysis services;

• ancillary services associated with outpatient dialysis, primarily the administration of EPO and other drugs;

• home dialysis services;

• inpatient hemodialysis services provided to acute care hospitals and skilled nursing facilities;

• laboratory services; and

• management contracts with hospital-based medical university dialysis programs.

     Most patients with end-stage renal disease receive three dialysis treatments each week in an outpatient setting. Reimbursement for these services is provided primarily by the Medicare ESRD program based on rates established by the Centers for Medicare and Medicaid Services. For the year ended December 31, 2003, approximately 55% of our net revenue was derived from reimbursement under the Medicare and Medicaid programs. Medicare reimbursement is subject to rate and other legislative changes by Congress and periodic changes in regulations, including changes that may reduce payments under the ESRD program. Neither Congress nor CMS approved an increase in the composite rate for 2002, 2003 or 2004.

     The Medicaid programs in some of the states in which we operate have formerly reimbursed us, or currently reimburse us, at rates higher than those paid by Medicare. Some of these programs, like Washington’s and Wisconsin’s, have approved and implemented reductions in reimbursement. Other programs have proposed reductions or have announced that they are considering reductions. If all the states in which we operate that have Medicaid rates that are higher than Medicare rates were to reduce their rates to Medicare rates, and giving effect to the reductions already implemented in Washington and Wisconsin, our earnings per share will likely be adversely affected by between $0.10 and $0.15 per share in 2004. We assumed that these reductions would occur when we set and communicated our corporate goals for 2004.

     The Medicare composite rate applies to a designated group of outpatient dialysis services, including the dialysis treatment, supplies used for the treatment, certain laboratory tests and medications, and most of the home dialysis services we provide. We receive separate reimbursement outside the composite rate for some other services, drugs (including specific drugs such as EPO) and some physician-ordered tests, including laboratory tests, provided to dialysis patients.

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     If a patient has private health insurance, then that patient’s treatment is typically reimbursed at rates significantly higher than those paid by Medicare during the first 30 months of care. After that period Medicare becomes the primary payor. Reimbursement for dialysis services provided pursuant to a hospital contract is negotiated with the individual hospital and is usually higher than Medicare rates. Because dialysis is a life-sustaining therapy to treat a chronic disease, utilization is predictable and is not subject to seasonal fluctuations.

     We derive a significant portion of our net revenue and net income from the administration of EPO. EPO is manufactured by a single company, Amgen Inc. In April 2002, Amgen implemented its third EPO price increase of 3.9% in as many years. Because we were already under contract with Amgen through 2002, this price increase did not affect our results of operations during 2002. Key components of the 2002 pricing formula were maintained in our 2003 contract with Amgen. Therefore, while the 2002 price increase had an adverse affect on our 2003 results of operations, we were able to mitigate approximately 80% of the increase. Amgen did not implement a price increase in 2003, but changes in our contract with Amgen for 2004 may result in an increase in our cost of EPO. We estimated the impact of these changes and assumed they would take place when we set and communicated our corporate goals for 2004.

Critical Accounting Policies

     The Securities and Exchange Commission issued a financial reporting release, FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies. In accordance with that release, we have identified accounting policies that we consider critical to our business. Management identified these policies based on their importance to the Consolidated Financial Statements and on the degrees of subjectivity and complexity involved in these policies. In addition to these critical policies, a summary of significant accounting policies is included in our consolidated financial statements and related notes, contained elsewhere in this annual report on Form 10-K.

     Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We continuously evaluate our critical accounting policies and estimates, including those related to net revenue and contractual provisions and provision for doubtful accounts. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     We believe the following critical accounting policies require significant judgments and estimates in the preparation of our consolidated financial statements.

Net Revenue and Contractual Provisions

     We recognize revenue net of contractual provisions as services are provided. Contractual provisions represent the difference between our gross billed charges and the amount we expect to receive. Under the Medicare ESRD program, Medicare reimbursement rates for outpatient dialysis treatments are fixed under a composite rate structure. The composite rate applies to a designated group of outpatient dialysis services, including the dialysis treatment, supplies for the treatment, some laboratory tests and some medications. There are other drugs, laboratory tests and services that are eligible for separate reimbursement outside the composite rate. Most state Medicaid plans follow reimbursement methodologies that are similar to the Medicare program, but other payors, particularly private insurance plans and managed care payors, reimburse us under contractual arrangements or based on our charges. Each of these payor sources provides unique challenges to the process of recording contractual provisions.

     We have made significant investments in human resources and information systems to enable us to estimate the appropriate amount of contractual provisions as services are provided. Actual levels of reimbursement, however, are sometimes difficult to determine due to the complexity of the applicable regulations or contracts. As a result, we may in fact collect more or less than the amount expected when the services are provided. In addition, regulations and contracts may be changed, making system updates and maintenance necessary for estimating net revenue accurately. As a result, management

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may make adjustments to the contractual provisions estimated by the system based on actual collection experience and other factors.

Provision for Doubtful Accounts

     Collecting outstanding accounts receivable is critical to our success. Our primary source of collection risk is related to the portion of our charges for which the patient is responsible. The patients’ responsibility is typically between 10% and 15% of gross charges. We record an estimate of the provision for doubtful accounts in the period in which the revenue is recognized based on management’s estimate of the net collectibility of the accounts receivable. Management estimates and monitors the net collectibility of accounts receivable based upon a variety of factors, including the analysis of payor mix, subsequent collection analysis and review of detailed agings of accounts receivable. Significant changes in our payor mix or business office operations could have a significant impact on our results of operations and cash flows.

Self- Insurance Accruals

     From time to time, we are subject to professional liability, general liability and workers compensation claims or lawsuits in the ordinary course of business. To mitigate a portion of this risk, we maintain insurance for professional liability and general liability claims exceeding certain individual amounts and workers compensation claims exceeding certain individual and aggregate amounts. We estimate the self-insured retention portion of professional liability, general liability and workers compensation risks using third-party actuarial calculations that include historical claims data, demographic factors and other assumptions. The estimated accrual for professional liability, general liability and workers compensation claims could be significantly affected, if current and future occurrences differ from historical claims trends. While management monitors current claims closely and considers outcomes when estimating its insurance accruals, the complexity of the claims, the wide range of potential outcomes and changes in the legal climate often complicate our ability to make precise estimates.

Impairment of Goodwill and Long-Lived Assets

     We review goodwill, long-lived assets and identifiable intangibles for impairment at least once a year and at any other time management identifies events or changes in circumstances that indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the discounted present value of future net cash flows management expects the asset to generate. The computation of future net cash flows is often complex and includes subjective assumptions. If management determines that assets are impaired, then the impairment is equal to the amount by which the carrying amount of the assets exceeds the fair value of the assets, as determined by independent appraisals or estimates of discounted future cash flows.

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Results of Operations

     The following table sets forth results of operations (in thousands) for the periods indicated and the percentage of net revenue represented by the respective financial line items:

	Year Ended December 31,
	2001				2002				2003
Net revenue	$	755,082	100.0	%	$	903,387	100.0	%	$	1,005,319	100.0	%
Patient care costs		489,271	64.8			589,696	65.3			653,307	65.0
General and administrative expenses		64,530	8.5			78,079	8.6			90,249	9.0
Provision for doubtful accounts		20,290	2.7			23,501	2.6			26,200	2.6
Depreciation and amortization		38,945	5.2			40,432	4.5			44,905	4.4
Total operating costs and expenses		613,036	81.2			731,708	81.0			814,661	81.0
Income from operations		142,046	18.8			171,679	19.0			190,658	19.0
Interest expense, net		2,636	0.3			1,140	0.1			629	0.1
Minority interest		15,478	2.0			21,410	2.4			25,431	2.5
Income before income taxes		123,932	16.4			149,129	16.5			164,598	16.4
Provision for income taxes		47,331	6.3			56,669	6.3			62,542	6.2
Net income	$	76,601	10.1	%	$	92,460	10.2	%	$	102,056	10.2	%

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Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

     Net Revenue Net revenue increased from $903.4 million for the year ended December 31, 2002 to $1,005.3 million for the year ended December 31, 2003, an increase of $101.9 million, or 11.3%. This increase resulted primarily from a 7.8% increase in the number of treatments we performed from 3,019,675 in 2002 to 3,254,447 in 2003 and a 3.7% increase in the average patient revenue per dialysis treatment from $297 in 2002 to $308 in 2003. The growth in treatments was the result of the acquisition and development of various dialysis facilities and a 4.7% increase in same-market treatments for 2003 over 2002. We anticipate reductions in same-market treatment rate of growth during 2004. We estimate that approximately $10 of the $11 increase in revenue per treatment in 2003 was largely attributable to the rate increase to private payors that we implemented during the fourth quarter of 2002. The remaining $1 per treatment increase was the net result of both favorable and unfavorable payor contract resolutions. During 2003 we experienced favorable payor contract resolutions of $5 per treatment, which was offset by $4 per treatments of unfavorable payor resolutions a portion of which relate to reduced reimbursement experienced with certain managed care contracts and reduced reimbursement in certain state Medicaid programs. Assuming a full year impact in these reductions, we expect our 2004 patient revenue per dialysis treatment to be negatively impacted by approximately $5. Consistent with previous years we implemented a rate increase to private payors during the fourth quarter of 2003, and we believe this increase will offset most of the decrease noted above. Accordingly, we expect patient revenue per dialysis treatment to remain flat or increase slightly in 2004 as compared to 2003.

     Patient Care Costs. Patient care costs consist of costs directly related to the care of patients, including direct labor, drugs and other medical supplies, and operational costs of facilities. Patient care costs increased from $589.7 million for the year ended December 31, 2002 to $653.3 million for the year ended December 31, 2003, an increase of 10.8%. This increase was due principally to the increase in the number of treatments performed during the period, which was reflected in corresponding increases in the use of labor, drugs and supplies. Patient care costs as a percentage of net revenue decreased from 65.3% in 2002 to 65.0% in 2003. Patient care costs per treatment increased 3.1% from $195 in 2002 to $201 in 2003. The increase in patient care costs per treatment was due to increases in the price of EPO, labor costs, the cost of insurance, increases in self-insurance accruals, and the utilization of certain ancillary drugs. Management believes that the Company will continue to face increases in the cost of labor and insurance in 2004.

     General and Administrative Expenses. General and administrative expenses include corporate office costs and other costs not directly related to the care of patients, including facility administration, accounting, billing and information systems. General and administrative expenses increased from $78.1 million for the year ended December 31, 2002 to $90.2 million for the year ended December 31, 2003, an increase of 15.6%. This increase was due primarily to a $5.4 million charge recorded in the first quarter of 2003 for a retirement benefit plan for our former chairman, chief executive officer and president that was adopted in January 2003. General and administrative expenses as percentage of revenue increased from 8.6% in 2002 to 9.0% in 2003. The charge for the retirement package accounted for substantially all of the increase in general and administrative expenses as a percentage of net revenue.

     Provision for Doubtful Accounts. Management determines the provision for doubtful accounts as a function of payor mix, billing practices and other factors. We reserve for doubtful accounts in the period when the revenue is recognized based on management’s estimate of the net collectibility of the accounts receivable. Management estimates the net collectibility of accounts receivable based upon a variety of factors. These factors include, but are not limited to, analyzing revenues generated from payor sources, performing subsequent collection testing and regularly reviewing detailed accounts receivable agings. Management makes adjustments to the allowance for doubtful accounts as necessary based on the results of management’s reviews of the net collectibility of accounts receivable. The provision for doubtful accounts increased from $23.5 million in 2002 to $26.2 million in 2003, an increase of $2.7 million, or 11.5%. The provision for doubtful accounts as a percentage of net revenue remained consistent in 2002 and 2003 at 2.6%.

     Depreciation and Amortization. Depreciation and amortization increased from $40.4 million for the year ended December 31, 2002 to $44.9 million for the year ended December 31, 2003, an increase of 11.1%. This increase was due to the start-up of dialysis facilities, the normal replacement costs of dialysis facilities and equipment, the purchase of information systems and the amortization of separately identifiable intangible assets associated with acquisitions. Depreciation and amortization as a percentage of net revenue decreased slightly from 4.5% in 2002 to 4.4% in 2003.

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     Income from Operations. Income from operations increased from $171.7 million for the year ended December 31, 2002 to $190.7 million for the year ended December 31, 2003, an increase of 11.1%. Income from operations as a percentage of net revenue remained consistent in 2002 and 2003 at 19.0%.

     Interest Expense, Net. Interest expense decreased from $1.1 million for the year-ended December 31, 2002 to $629,000 for the year ended December 31, 2003. This decrease was the result of lower average borrowings in 2003. We expect substantially higher interest expense in 2004 as the result of borrowings associated with the planned acquisition of National Nephrology Associates and our previously announced plan to repurchase $250.0 million of our common stock by March 31, 2004.

     Minority Interest. Minority interest represents the proportionate equity interest of other owners of entities that are not wholly owned whose financial results are included in our consolidated results. Minority interest as a percentage of net revenue increased to 2.5% in 2003 from 2.4% in 2002. This increase was the result of continued financial improvements of our larger joint ventures, primarily those in Ohio, Oregon and Washington, as well as an increase in the number of facilities operated as joint ventures. As of December 31, 2003, we were the majority and controlling owner in 50 joint ventures compared to 36 as of December 31, 2002.

     Provision for Income Taxes. Income tax expense increased from $56.7 million in 2002 to $62.5 million in 2003, an increase of $5.9 million or 10.4%. The increase is a result of pre-tax earnings increasing by 10.4%. Our effective tax rate was 38.0% in both 2002 and 2003.

     Net Income. Net income increased from $92.5 million in 2002 to $102.1 million in 2003, an increase of $9.6 million or 10.4%. This increase was a result of the items discussed above.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     Net Revenue Net revenue increased from $755.1 million for the year ended December 31, 2001 to $903.4 million for the year ended December 31, 2002, an increase of $148.3 million, or 19.6%. This increase resulted primarily from a 12.4% increase in the number of treatments we performed from 2,686,181 in 2001 to 3,019,675 in 2002 and a 6.8% increase in the average patient revenue per dialysis treatment from $278 in 2001 to $297 in 2002. The growth in treatments was the result of the acquisition and development of various dialysis facilities and a 5.8% increase in same-market treatments for 2002 over 2001. We estimate that approximately $10 of the $19 per treatment increase was attributable to the rate increase to private payors that we implemented during the fourth quarter of 2001. The remaining $9 per treatment increase was the result of favorable resolutions of various payor contract issues of $4, and $5 relating to the increase in the utilization of certain ancillary drugs.

     Patient Care Costs. Patient care costs consist of costs directly related to the care of patients, including direct labor, drugs and other medical supplies, and operational costs of facilities. Patient care costs increased from $489.3 million for the year ended December 31, 2001 to $589.7 million for the year ended December 31, 2002, an increase of 20.5%. This increase was due principally to the increase in the number of treatments performed during the period, which was reflected in corresponding increases in the use of labor, drugs and supplies. Patient care costs as a percentage of net revenue increased from 64.8% in 2001 to 65.3% in 2002. Patient care costs per treatment increased 7.1% from $182 in 2001 to $195 in 2002. The increases in patient care costs as a percentage of net revenue and patient care costs per treatment were due to increases in the price of EPO, increased labor costs to address wage pressures in many of our markets, increases in the cost of insurance, increases in self-insurance accruals, the increase in utilization of certain ancillary drugs and the increased cost of the drug Heparin following a recall by its manufacturer.

     General and Administrative Expenses. General and administrative expenses include corporate office costs and other costs not directly related to the care of patients, including facility administration, accounting, billing and information systems. General and administrative expenses increased from $64.5 million for the year ended December 31, 2001 to $78.1 million for the year ended December 31, 2002, an increase of 21.0%. General and administrative expenses as a percentage of net revenue increased from 8.5% in 2001 to 8.6% in 2002 primarily as a result of expenses incurred in connection with closing two dialysis facilities (one in Texas and one in Alabama) in 2002.

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     Provision for Doubtful Accounts. Management determines the provision for doubtful accounts as a function of payor mix, billing practices and other factors. We reserve for doubtful accounts in the period when the revenue is recognized based on management’s estimate of the net collectibility of the accounts receivable. Management estimates the net collectibility of accounts receivable based upon a variety of factors. These factors include, but are not limited to, analyzing revenues generated from payor sources, performing subsequent collection testing and regularly reviewing detailed accounts receivable agings. Management makes adjustments to the allowance for doubtful accounts as necessary based on the results of management’s reviews of the net collectibility of accounts receivable. The provision for doubtful accounts increased from $20.3 million in 2001 to $23.5 million in 2002, an increase of $3.2 million, or 15.8%. The provision for doubtful accounts as a percentage of net revenue decreased slightly from 2.7% in 2001 to 2.6% in 2002 as a result of improved collection efforts.

     Depreciation and Amortization. Depreciation and amortization increased from $38.9 million for the year ended December 31, 2001 to $40.4 million for the year ended December 31, 2002, an increase of 3.8%. This increase was due to the start-up of dialysis facilities, the normal replacement costs of dialysis facilities and equipment, the purchase of information systems and the amortization of separately identifiable intangible assets associated with acquisitions. Depreciation and amortization as a percentage of net revenue decreased from 5.2% in 2001 to 4.5% in 2002, primarily as a result of the implementation of SFAS No. 142, under which we stopped amortizing goodwill effective January 1, 2002. For 2001, we recorded goodwill amortization of $6.4 million.

     Income from Operations. Income from operations increased from $142.0 million for the year ended December 31, 2001 to $171.7 million for the year ended December 31, 2002, an increase of 20.9%. Income from operations as a percentage of net revenue increased from 18.8% in 2001 to 19.0% in 2002 principally as a result of the factors discussed above.

     Interest Expense, Net. Interest expense decreased from $2.6 million for the year-ended December 31, 2001 to $1.1 million for the year ended December 31, 2002. This decrease was principally the result of lower average borrowings in 2002, partially offset by costs incurred when we restructured our lines of credit in 2002.

     Minority Interest. Minority interest represents the proportionate equity interest of other owners of entities that are not wholly owned whose financial results are included in our consolidated results. Minority interest as a percentage of net revenue increased to 2.4% in 2002 from 2.0% in 2001. This increase was the result of continued financial improvements of our larger joint ventures, primarily those in Ohio, Oregon and Washington, as well as an increase in the number of facilities operated as joint ventures.

     Provision for Income Taxes. Income tax expense increased from $47.3 million in 2001 to $56.7 million in 2002, an increase of $9.3 million or 19.7%. The increase is a result of pre-tax earnings increasing by 20.3%. Our effective tax rate decreased from 38.2% in 2001 to 38.0% in 2002. This decrease was primarily the result of eliminating goodwill amortization for financial reporting purposes as required by SFAS No. 142 while some goodwill continues to be amortized for income tax purposes.

     Net Income. Net income increased from $76.6 million in 2001 to $92.5 million in 2002, an increase of $15.9 million or 20.7%. This increase was a result of the items discussed above.

Liquidity and Capital Resources

     Renal Care Group requires capital primarily to acquire and develop dialysis centers, to purchase property and equipment for existing centers, to repurchase shares of our common stock and to finance working capital needs. At December 31, 2003, our working capital was $122.7 million; cash and cash equivalents were $50.3 million; and our current ratio was 1.7 to 1.0. Our working capital increased during the year primarily as a result of the increase in operating cash flows.

     Net cash provided by operating activities was $186.5 million for the year ended December 31, 2003. Cash provided by operating activities consists of net income before depreciation and amortization expense, adjusted for changes in components of working capital, primarily accounts receivable. Net cash used in investing activities was $78.5 million for the year ended December 31, 2003. Cash used in investing activities consisted primarily of $63.8 million of purchases of property and equipment and $14.2 million of cash paid for acquisitions, net of cash acquired. Net cash used in financing activities was $96.1 million for

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the year ended December 31, 2003. Cash used in financing activities primarily reflects $140.5 million in repurchases of our common stock, partially offset by $51.8 million in net proceeds from the issuance of common stock as stock options were exercised.

     In July 2002, we entered into two credit agreements with a group of banks totaling $150.0 million consisting of a $100.0 million Second Amended and Restated Loan Agreement (the Multi-Year Facility) and a $50.0 million Loan Agreement (the 364-day Facility). The Multi-Year Facility had a final maturity of July 1, 2005, and the 364-day facility had a final maturity of June 30, 2004, based on an amendment made in June 2003. As of December 31, 2003 there were no amounts outstanding under the Multi-Year Facility or the 364-day Facility, and the Company had $150.0 million available under these agreements.

     On February 10, 2004, we entered into a new credit agreement (the 2004 Agreement) with a group of banks totaling up to $700.0 million. The 2004 Agreement replaced the Multi-Year Facility and the 364-day Facility discussed above. This credit agreement has a $150.0 million revolving credit facility, a committed $325.0 million dollar term loan facility and a $225.0 million incremental term loan facility. Our ability to borrow under the committed term loan facility expires in May 2004. All of these committed facilities have a final maturity of February 10, 2009. The credit agreement provides that $175.0 million of the committed term loan facility may only be used to finance our acquisition of National Nephrology Associates. To the extent we do not use that amount to fund the acquisition, unborrowed amounts will increase the size of the incremental term loan facility. Borrowings under the incremental term loan facility are subject to obtaining commitments from the banks finalizing specific terms.

     Borrowings under the revolving credit facility and $150.0 million of the committed term loan facility may be used for acquisitions, repurchases of our stock, capital expenditures, working capital and general corporate purposes. Borrowings under the 2004 Agreement bear interest at variable rates determined by our leverage ratio. This variable rate debt instrument carries a degree of interest rate risk. Specifically, we will face higher interest costs on this debt if interest rates rise. Each of our wholly-owned subsidiaries has guaranteed all of our obligations under the 2004 Agreement. Further, our obligations under the 2004 Agreement, and our subsidiaries’ obligations under their guarantees, are secured by a pledge of the equity interests we hold in each of our subsidiaries. The 2004 Agreement includes financial covenants that are customary based on the amount and duration of the agreement.

     We intend to use this facility to complete our previously announced $250.0 million share repurchase and our acquisition of National Nephrology Associates. Assuming we complete both of these initiatives we will have more than $475.0 million in outstanding indebtedness. This indebtedness will include $160.0 million in senior subordinated notes of National Nephrology Associates that we will assume in the acquisition. These notes bear interest at the rate of 9% per annum. As a result of this indebtedness, we will incur substantial interest expense in 2004.

     A significant component of our growth strategy is the acquisition and development of dialysis facilities. There can be no assurance that we will be able to identify suitable acquisition candidates or to close acquisition transactions with them on acceptable terms. Management believes that existing cash and funds from operations, together with funds available under our new credit facility, will be sufficient to meet our acquisition, expansion, capital expenditure and working capital needs for the foreseeable future. However, in order to finance certain large strategic acquisition opportunities, we may need to incur additional short and long-term bank indebtedness or to issue equity or debt securities. The availability and terms of any future financing will depend on market and other conditions. There can be no assurance that we will be able to secure additional financing, if required, on acceptable terms.

     We plan to make capital expenditures of between $70.0 million and $80.0 million, primarily for equipment replacement, expansion of existing dialysis facilities and construction of de novo facilities. We expect that these capital expenditures will be funded with cash provided by operating activities and our existing credit facilities. Management believes that capital resources available to us will be sufficient to meet the needs of our business, both on a short- and long-term basis.

     Management, from time to time, determines the appropriateness of repurchasing its common stock in accordance with a repurchase plan initially authorized by the Board of Directors in October 2000. In 2001, we began repurchasing shares of our common stock by purchasing 100,000 shares of common stock for approximately $3.1 million. In 2002, we repurchased 2.9

39

million shares of our common stock for approximately $90.9 million. In October 2003, we announced that the Board of Directors had approved an increase in the repurchase plan to allow the purchase of up to a total of $450.0 million in common stock, and we announced that we intended to repurchase $250.0 million in common stock between November 1, 2003 and March 31, 2004. During 2003, we repurchased 3.7 million shares of common stock for $140.5 million. Through December 31, 2003, we had repurchased an aggregate of 6.6 million shares under the plan, for a total of approximately $234.4 million. As of February 23, 2004, we had repurchased approximately $181.9 million of our common stock between November 1, 2003 and that date, leaving $68.1 million remaining of the $250.0 million we intend to repurchase in early 2004.

     The Securities and Exchange Commission has issued a financial reporting release, FR-61, Commission Statement about Management’s Discussion and Analysis of Financial Condition and Results of Operations. This release encourages public companies to give investors additional information about funds that will be required to operate its business in the future under agreements that are in place today. In accordance with FR-61, the following table gives information about our existing contractual obligations. At December 31, 2003, we had no significant contingent commitments.

	Payments Due by Period (in thousands)
			Less than 1
Contractual Obligations	Total		year		1 - 3 years		3 - 5 years		After 5 years
Long-Term Obligations:
Capital leases and long term debt	$	2,834	$	182	$	321	$	265	$	2,066
Operating leases		195,891		30,413		53,219		43,890		68,369
Medical director fee obligations		75,172		13,902		25,571		19,313		16,386
Total contractual cash obligations	$	273,897	$	44,497	$	79,111	$	63,468	$	86,821

Newly Issued Accounting Standards

     In December 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure (SFAS No. 148), which amends SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123). SFAS No. 148 provides alternative methods for Companies electing to implement the fair-value based method of accounting for stock-based employee compensation. The Statement also requires that certain disclosures be made in both annual and interim financial statements about the method of accounting and the related effect of the method used on reported results. The Company has adopted the disclosure requirements of SFAS No. 148 and SFAS No. 123, and accounts for its stock option plans in accordance with the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and does not utilize the fair-value method.

     In December 2003, the FASB issued revised Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). Until this interpretation, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns. Application of FIN 46 is required during the fourth quarter of 2003 for interests in structures that are commonly referred to as special-purpose entities; immediately for all new entities created after February 1, 2003; and for all other types of variable interest entities in the first quarter of 2004. The effect of applying the initial consolidation provisions of FIN 46 on Renal Care Group’s results of operations or financial position as of December 31, 2003 was not significant. We do not expect the application of the remaining consolidation provisions of FIN 46, as required in the first quarter of 2004, will have a material effect on Renal Care Group’s results of operations or financial position.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS No. 150). This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and the first interim period beginning after June 15, 2003. We

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currently have no financial instruments that fall within the guidelines of the new requirements and, as such, there was no effect of adopting SFAS No. 150 on our results of operations or financial position.

Impact of Inflation

     A substantial portion of our net revenue is subject to reimbursement rates that are regulated by the federal government and do not automatically adjust for inflation. We are unable to increase the amount we receive for the services provided by our dialysis business that are reimbursed under or by reference to the Medicare composite rate. Increased operating costs due to inflation, such as labor and supply costs (including the cost of EPO), without a corresponding increase in reimbursement rates, may adversely affect our results of operations, financial condition and business.

Off-Balance Sheet Arrangements

     We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

     Renal Care Group maintains all cash in United States dollars in highly liquid, interest-bearing, investment grade instruments with maturities of less than three months, which the Company considers cash equivalents; therefore, the Company has no “market risk sensitive instruments.”

Interest Rate Risk

     On February 10, 2004, we entered a new credit agreement with a group of banks, which agreement has a total of $475.0 million in committed facilities. Under the 2004 Agreement, outstanding balances have interest at rates that are adjusted on specific consolidated leverage ratios defined in the agreement. These variable rate debt instruments carry a degree of interest rate risk. Specifically, variable rate debt may result in higher costs to us if interest rates rise.

Item 8. Financial Statements and Supplementary Data

     The consolidated financial statements and financial statement schedule in Part IV, Item 15(a) (1) and (2) of the report are incorporated by reference into this Item 8.

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

     None.

Item 9a. Controls and Procedures

     Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, we maintain disclosure controls and procedures that provide reasonable assurance that information that we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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     There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2003 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART III

Item 10. Directors and Executive Officers of the Company

     The information required by this item will appear in, and is incorporated by reference from, the sections entitled “Proposals for Stockholder Action - Proposal 1. Election of Directors” and “Management - Directors and Executive Officers” included in the Company’s definitive Proxy Statement relating to the 2004 Annual Meeting of Stockholders.

Item 11. Executive Compensation

     The information required by this item will appear in the section entitled “Executive Compensation” included in the Company’s definitive Proxy Statement relating to the 2004 Annual Meeting of Stockholders, which information, other than the Compensation Committee Report and Performance Graph required by Items 402(k) and (l) of Regulation S-K, is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The information required by this item will appear in, and is incorporated by reference from, the section entitled “Security Ownership of Directors, Officers and Principal Stockholders” included in the Company’s definitive Proxy Statement relating to the 2004 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions

     The information required by this item will appear in, and is incorporated by reference from, the sections entitled “Compensation Committee Interlocks and Insider Participation” and “Certain Relationships and Related Transactions” included in the Company’s definitive Proxy Statement relating to the 2004 Annual Meeting of Stockholders.

Item 14. Principal Accountant Fees and Services

     The information required by this item will appear in, and is incorporated by reference from, the section entitled “Auditors” included in the Company’s definitive Proxy Statement relating to the 2004 Annual Meeting of Stockholders.

43

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

		Page
(a)	Documents filed as part of this Report:
(1)	Consolidated Financial Statements
	Report of Independent Auditors	F-1
	Consolidated Balance Sheets at December 31, 2002 and 2003	F-2
	Consolidated Income Statements for the years ended December 31, 2001, 2002, and 2003	F-4
	Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2001, 2002, and 2003	F-5
	Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2002, and 2003	F-6
	Notes to Consolidated Financial Statements	F-8
(2)	Consolidated Financial Statement Schedules
	Schedule II - Consolidated Schedule-Valuation and Qualifying Accounts	F-25
(3)	The Exhibits are listed in the Index of Exhibits Required by Item 601 of Regulation S-K included herewith, which is incorporated herein by reference.
(b)	None.

44

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Renal Care Group, Inc.

We have audited the accompanying consolidated balance sheets of Renal Care Group, Inc. as of December 31, 2002 and 2003, and the related consolidated income statements, statements of stockholders’ equity, and statements of cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Renal Care Group, Inc. at December 31, 2002 and 2003 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

	/s/ ERNST & YOUNG LLP
Nashville, Tennessee
February 13, 2004

F-1

Renal Care Group, Inc.

Consolidated Balance Sheets
(in thousands)

			December 31
			2002		2003
ASSETS
Current assets:
	Cash and cash equivalents		$	38,359	$	50,295
	Accounts receivable, less allowance for doubtful accounts of $43,677 in 2002 and $32,161 in 2003			152,440		173,679
	Inventories			23,336		26,345
	Prepaid expenses and other current assets			19,486		28,050
	Income taxes receivable			—		1,910
	Deferred income taxes			12,240		11,825
		Total current assets		245,861		292,104
Property, plant and equipment, net				202,972		224,397
Intangible assets, net				12,110		14,046
Goodwill				275,666		286,578
Other assets				3,514		2,748
		Total assets	$	740,123	$	819,873

See accompanying notes to consolidated financial statements.

F-2

Renal Care Group, Inc.

Consolidated Balance Sheets
(in thousands, except per share data)

				December 31
				2002			2003
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable			$	33,655		$	36,795
	Accrued compensation				32,066			40,619
	Due to third-party payors				32,611			46,049
	Income taxes payable				1,423			—
	Accrued expenses and other current liabilities				35,492			45,792
	Current portion of long-term debt				133			182
			Total current liabilities		135,380			169,437
Long-term debt, net of current portion					10,161			2,652
Deferred income taxes					19,288			38,390
Other long-term liabilities					—			5,898
Minority interest					31,406			32,651
			Total liabilities		196,235			249,028
Commitments and contingencies
Stockholders’ equity:
	Preferred stock, $0.01 par value, 10,000 shares authorized, none issued				—			—
	Common stock, $0.01 par value, 90,000 shares authorized, 51,176 and 53,643 shares issued at December 31, 2002 and 2003, respectively				512			536
	Treasury stock, 2,983 and 6,641 shares of common stock at December 31, 2002 and 2003, respectively				(93,953	)		(234,404	)
	Additional paid-in capital				309,355			374,683
	Retained earnings				327,974			430,030
		Total stockholders’ equity			543,888			570,845
		Total liabilities and stockholders’ equity		$	740,123		$	819,873

See accompanying notes to consolidated financial statements.

F-3

Renal Care Group, Inc.

Consolidated Income Statements
(in thousands, except per share data)

			Year Ended December 31
			2001		2002		2003
Net revenue			$	755,082	$	903,387	$	1,005,319
Operating costs and expenses:
	Patient care costs			489,271		589,696		653,307
	General and administrative expenses			64,530		78,079		90,249
	Provision for doubtful accounts			20,290		23,501		26,200
	Depreciation and amortization			38,945		40,432		44,905
	Total operating costs and expenses			613,036		731,708		814,661
Income from operations				142,046		171,679		190,658
Interest expense, net				2,636		1,140		629
	Income before minority interest and income taxes			139,410		170,539		190,029
Minority interest				15,478		21,410		25,431
	Income before income taxes			123,932		149,129		164,598
Provision for income taxes				47,331		56,669		62,542
		Net income	$	76,601	$	92,460	$	102,056
Net income per share:
		Basic	$	1.59	$	1.89	$	2.11
		Diluted	$	1.52	$	1.82	$	2.05
Weighted average shares outstanding:
		Basic		48,113		48,978		48,479
		Diluted		50,433		50,767		49,835

See accompanying notes to consolidated financial statements.

F-4

Renal Care Group, Inc.

Consolidated Statements of Stockholders’ Equity
(in thousands)

											Additional				Total
		Common Stock				Treasury Stock					Paid-In		Retained		Stockholders’
		Shares		Amount		Shares		Amount			Capital		Earnings		Equity
Balance at December 31, 2000			47,087	$	471		—	$	—		$	234,738	$	158,913	$	394,122
	Net income		—		—		—		—			—		76,601		76,601
	Common stock issued and related income tax benefit		2,510		25		—		—			42,562		—		42,587
	Repurchase of common stock held in treasury		—		—		100		(3,059	)		—		—		(3,059	)
Balance at December 31, 2001			49,597		496		100		(3,059	)		277,300		235,514		510,251
	Net income		—		—		—		—			—		92,460		92,460
	Common stock issued and related income tax benefit		1,579		16		—		—			32,055		—		32,071
	Repurchase of common stock held in treasury		—		—		2,883		(90,894	)		—		—		(90,894	)
Balance at December 31, 2002			51,176		512		2,983		(93,953	)		309,355		327,974		543,888
	Net income		—		—		—		—			—		102,056		102,056
	Common stock issued and related income tax benefit		2,467		24		—		—			65,328		—		65,352
	Repurchase of common stock held in treasury		—		—		3,658		(140,451	)		—		—		(140,451	)
Balance at December 31, 2003			53,643	$	536		6,641	$	(234,404	)	$	374,683	$	430,030	$	570,845

See accompanying notes to consolidated financial statements.

F-5

Renal Care Group, Inc.

Consolidated Statements of Cash Flows
(in thousands)

				Year Ended December 31
				2001			2002			2003
OPERATING ACTIVITIES
Net income				$	76,601		$	92,460		$	102,056
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization				38,945			40,432			44,905
	Loss on sale of property and equipment				1,266			1,167			886
	Income applicable to minority interest				15,478			21,410			25,431
	Distributions to minority shareholders				(16,446	)		(7,934	)		(24,634	)
	Deferred income taxes				1,488			11,214			19,517
	Changes in operating assets and liabilities, net of effects from acquisitions:
		Accounts receivable			(4,240	)		(23,814	)		(20,253	)
		Inventories			(2,832	)		(6,587	)		(2,754	)
		Prepaid expenses and other current assets			604			(902	)		(8,564	)
		Accounts payable			2,247			5,369			3,140
		Accrued compensation			2,625			18			8,553
		Due to third-party payors			649			4,712			13,313
		Accrued expenses and other current liabilities			5,168			12,747			8,838
		Income taxes			11,648			18,331			10,217
		Other long-term liabilities			—			—			5,898
			Net cash provided by operating activities		133,201			168,623			186,549
INVESTING ACTIVITIES
Proceeds from sale of property and equipment					1,078			218			2,270
Purchases of property and equipment					(65,672	)		(61,551	)		(63,762	)
Cash paid for acquisitions, net of cash acquired					(38,403	)		(40,495	)		(14,154	)
(Increase) decrease in other assets					(4,415	)		4,408			(2,858	)
			Net cash used in investing activities		(107,412	)		(97,420	)		(78,504	)
FINANCING ACTIVITIES
Net (payments) borrowings under line of credit					(54,000	)		7,394			(7,080	)
Payments on long-term debt					(516	)		(1,884	)		(380	)
Net proceeds from issuance of common stock					29,307			22,221			51,802
Repurchase of treasury shares					(3,059	)		(90,894	)		(140,451	)
Proceeds from sale of minority interest investment					—			2,896			—
			Net cash used in financing activities		(28,268	)		(60,267	)		(96,109	)
(Decrease) increase in cash and cash equivalents					(2,479	)		10,936			11,936
Cash and cash equivalents, at beginning of year					29,902			27,423			38,359
Cash and cash equivalents, at end of year				$	27,423		$	38,359		$	50,295

See accompanying notes to consolidated financial statements.

F-6

Renal Care Group, Inc.

Consolidated Statements of Cash Flows
(in thousands)

			Year Ended December 31
			2001		2002		2003
DISCLOSURES OF CASH FLOW INFORMATION:
	Cash paid during the year for:
		Interest	$	2,520	$	782	$	922
		Income taxes	$	48,963	$	27,126	$	32,808
DISCLOSURES OF BUSINESS ACQUISITIONS:
	Fair value of assets acquired		$	39,108	$	41,478	$	14,388
	Liabilities assumed			705		983		234
		Cash paid for acquisitions, net of cash acquired	$	38,403	$	40,495	$	14,154

See accompanying notes to consolidated financial statements.

F-7

Renal Care Group, Inc.

Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
December 31, 2003

1. ORGANIZATION

Renal Care Group, Inc. (the “Company”) provides dialysis services to patients with chronic kidney failure, also known as end-stage renal disease (“ESRD”). As of December 31, 2003, the Company provided dialysis and ancillary services to over 21,400 patients through 284 outpatient dialysis centers in 27 states. In addition to its outpatient dialysis center operations, as of December 31, 2003, the Company provided acute dialysis services through contractual relationships with more than 130 hospitals.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority-owned subsidiaries and joint venture entities over which the Company exercises majority-voting control and for which control is other than temporary. All significant intercompany transactions and accounts are eliminated in consolidation.

Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with accounting principles generally accepted in the United States. Actual results could differ from those estimates.

Cash Equivalents

The Company considers all highly-liquid investments with original maturities of three months or less to be cash equivalents. The Company places its cash in financial institutions that are federally insured and limits the amount of credit exposure with any one financial institution.

Inventories

Inventories consist of drugs, supplies and parts used in dialysis treatments and are stated at the lower of cost or market. Cost is determined using either the first-in, first-out method or the average cost method.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is calculated on the straight-line method over the useful lives of the related assets, ranging from 3 to 40 years. Leasehold improvements are amortized using the straight-line method over the shorter of the related lease terms or the useful lives.

Goodwill and Other Intangibles

The Company adopted Statements of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), on January 1, 2002. In accordance with the transitional requirements of this statement, during 2001, the Company did not amortize goodwill or intangible assets with indefinite lives acquired after June 30, 2001. However, during 2001, the Company amortized goodwill and intangibles acquired prior to July 1, 2001 in accordance with Accounting Principles Board (“APB”) Opinion No. 16, Business Combinations. For periods subsequent to December 31,

F-8

2001, the Company did not amortize goodwill or intangible assets with indefinite lives in accordance with SFAS No. 142. As of December 31, 2002 and 2003, the carrying amount of goodwill was $275,666 and $286,578, respectively.

During 2001, separately identifiable intangible assets with definite lives, such as non-competition agreements, acquired after June 30, 2001 were amortized over the estimated useful life of such assets. For periods subsequent to December 31, 2001, all separately identifiable intangible assets, whether acquired before or after June 30, 2001, with definite lives were amortized over their respective useful lives.

Due to Third-Party Payors

Amounts reflected as due to third-party payors include amounts received in excess of revenue recognized for specific billed charges. These amounts are commonly referred to as overpayments. Overpayments received from federally funded programs are reported to the federal program in accordance with the program’s established procedures. The amounts remain in due to third-party payors until either a refund is made or until the amount is recouped by the federal payor. For overpayments received from non-federally funded payors, the Company uses various procedures to communicate and refund such amounts to the respective payor. Similar to the federally funded overpayments, these amounts remain in due to third-party payors until either a refund is made or the amount is recouped by the payor.

Minority Interest

Minority interest represents the proportionate equity interest of other owners in the Company’s consolidated entities that are not wholly owned. As of December 31, 2003 the Company was the majority and controlling owner in 50 joint ventures.

Stock Based Compensation

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure (“SFAS No. 148”), which amended SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”). SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. SFAS No. 148 is effective for financial statements issued for fiscal years ending after December 15, 2002, and interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. These consolidated financial statements and related notes include the disclosure requirements of SFAS No. 148. However, the Company has elected to account for its stock-based compensation plans under the intrinsic value-based method of accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB Opinion No. 25”), and does not utilize the fair value method.

Net Revenue

Net revenue is recognized as services are provided at the estimated net realizable amount from Medicare, Medicaid, commercial insurers and other third-party payors. The Company’s net revenue is largely derived from the following sources:

• Outpatient hemodialysis;

• Ancillary services associated with outpatient dialysis, primarily the administration of erythropoietin (EPO) and other drugs;

• Home dialysis services;

• Inpatient hemodialysis services provided to acute care hospitals and skilled nursing facilities;

• Laboratory services; and

• Management contracts with hospital-based medical university dialysis programs.

The Medicare and Medicaid programs, along with certain third-party payors, reimburse the Company at amounts that are different from the Company’s established rates. Contractual adjustments represent the difference between the amounts billed for these

F-9

services and the amounts that are reimbursable by third-party payors. A summary of the basis for reimbursement with these payors follows:

Medicare

The Company is reimbursed by the Medicare program predominantly on a prospective payment system for dialysis services. Under the prospective payment system, each facility receives a composite rate per treatment. The composite rate is subject to regional differences based on certain factors, including labor costs. Some drugs and other ancillary services are reimbursed on a fee for service basis.

Medicaid

Medicaid is a state-administered program with reimbursements varying by state. The Medicaid programs are separately administered in each state in which the Company operates, and they reimburse the Company predominantly on a prospective payment system for dialysis services rendered.

Other

Payments from commercial insurers, other third-party payors and patients are received pursuant to a variety of reimbursement arrangements. Generally payments from commercial insurers and other third-party payors are greater than those received from the Medicare and Medicaid programs.

Reimbursements from Medicare and Medicaid approximated 55%, 57% and 55% of net revenue for the years ended December 31, 2001, 2002 and 2003, respectively.

Provision for Doubtful Accounts

The provision for doubtful accounts is determined as a function of payor mix, billing practices, and other factors. The Company reserves for doubtful accounts in the period in which the revenue is recognized based on management’s estimate of the net collectibility of the accounts receivable. Management estimates and monitors the net collectibility of accounts receivable based upon a variety of factors. These factors include, but are not limited to, analyzing revenues generated from payor sources, performing subsequent collection testing and regularly reviewing detailed accounts receivable agings.

Income Taxes

The Company accounts for income taxes under the asset and liability method. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date for the change.

F-10

Self Insurance

The Company is subject to professional liability, general liability and workers compensation claims or lawsuits in the ordinary course of business. Accordingly, the Company maintains insurance for professional liability and general liability claims exceeding certain individual amounts. Similarly, the Company maintains workers compensation insurance for claims exceeding certain individual and aggregate amounts. The Company estimates its self-insured retention portion of professional liability, general liability and workers compensation risks using third party actuarial calculations that include historical claims data, demographic factors and other assumptions.

Fair Value of Financial Instruments

Cash and Cash Equivalents

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents approximate fair value.

Accounts Receivable, Accounts Payable and Accrued Liabilities

The carrying amounts reported in the consolidated balance sheets for accounts receivable, accounts payable and accrued liabilities approximate fair value. Accounts receivable are generally unsecured.

Long-Term Debt

Based upon the borrowing rates currently available to the Company, the carrying amounts reported in the consolidated balance sheets for long-term debt approximate fair value.

Concentration of Credit Risks

The Company’s primary concentration of credit risk exists within accounts receivable, which consist of amounts owed by various governmental agencies, insurance companies and private patients. Receivables from Medicare and Medicaid represented 45% and 46% of gross accounts receivable at December 31, 2002 and 2003, respectively. Concentration of credit risk relating to accounts receivable is limited to some extent by the diversity of the number of patients and payors and the geographic dispersion of the Company’s operations.

The Company administers EPO to most of its patients to treat anemia, a medical complication frequently experienced by dialysis patients. Revenue from the administration of EPO was 25% of the net revenue of the Company for the year ended December 31, 2001, 23% of the net revenue of the Company for the year ended December 31, 2002 and 24% of the net revenue of the Company for the year ended December 31, 2003. EPO is produced by a single manufacturer.

Impairment of Goodwill and Long-Lived Assets to be Disposed Of

The Company reviews goodwill, long-lived assets and separately identifiable intangible assets for impairment at least annually and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the present value of future net cash flows expected to be generated by the assets. If assets are identified as impaired, the impairment is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets as determined by independent appraisals or estimates of discounted future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the fourth quarter of 2003, the Company completed its annual impairment testing, and, as of December 31, 2003, in the opinion of management, there has been no impairment of goodwill, long-lived assets or separately identifiable intangible assets.

F-11

3. BUSINESS ACQUISITIONS

2003 Acquisitions

During 2003, the Company completed three acquisitions, which were accounted for under the purchase method of accounting. The combined purchase price paid in these acquisitions was $14,154 and consisted exclusively of cash. Each of the transactions involved the acquisition of assets of entities that provide care to ESRD patients through owned dialysis facilities. The acquired businesses either strengthened the Company’s existing market share within a specific geographic area or provided the Company with an entrance into a new market.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for the acquisitions completed in 2003:

Accounts receivable			$	986
Inventory				255
Property, plant and equipment, net				1,579
Intangible assets				656
Goodwill				10,912
		Total assets acquired		14,388
		Total liabilities assumed		234
	Net assets acquired		$	14,154

The Company began recording the results of operations for each of these acquired businesses at the effective date of the transaction. Goodwill resulting from these transactions amounted to $10,912 and was not amortized during 2003 in accordance with the requirements of SFAS No. 142. All goodwill is expected to be deductible for tax purposes. Intangible assets typically represent the value assigned to certain contracts such as non-competition agreements and acute dialysis service agreements entered into in the transactions. These amounts are amortized over the lives of the contracts, which generally range from five to ten years.

2002 Acquisitions

During 2002, the Company completed eight acquisitions, which were accounted for under the purchase method of accounting. The combined purchase price paid in these acquisitions was $40,495 and consisted exclusively of cash. Each of the transactions involved the acquisition of assets of entities that provide care to ESRD patients through owned dialysis facilities. The acquired businesses either strengthened the Company’s existing market share within a specific geographic area or provided the Company with an entrance into a new market.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for the acquisitions completed in 2002:

Accounts receivable			$	1,570
Inventory				457
Property, plant and equipment, net				3,329
Intangible assets				3,986
Goodwill				32,136
		Total assets acquired		41,478
		Total liabilities assumed		983
	Net assets acquired		$	40,495

The Company began recording the results of operations for each of these acquired businesses at the effective date of the transaction. Goodwill resulting from these transactions amounted to $32,136 and was not amortized during 2002 in

F-12

accordance with the requirements of SFAS No. 142. All goodwill is expected to be deductible for tax purposes. Intangible assets typically represent the value assigned to certain contracts such as non-competition agreements and acute dialysis service agreements entered into in the transactions. These amounts are amortized over the lives of the contracts, which generally range from five to ten years.

2001 Acquisitions

During 2001, the Company completed five acquisitions, which were accounted for under the purchase method of accounting. The combined purchase price paid in these acquisitions was $38,403 and consisted exclusively of cash. Each of the transactions involved the acquisition of assets of entities that provide care to ESRD patients through owned dialysis facilities. The acquired businesses either strengthened the Company’s existing market share within a specific geographic area or provided the Company with an entrance into a new market.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for all five of the acquisitions completed in 2001:

Inventory			$	579
Property, plant and equipment, net				5,629
Intangible assets				1,675
Goodwill				30,325
Other assets				900
		Total assets acquired		39,108
		Total liabilities assumed		705
	Net assets acquired		$	38,403

The Company began recording the results of operations for each of these acquired businesses at the effective date of the transaction. Three of the five transactions were completed prior to July 1, 2001 and resulted in goodwill and other intangibles of $6,428. This goodwill was amortized during 2001 using a 35-year blended useful life. The other two transactions were completed after June 30, 2001. Goodwill and other intangible assets resulting from these transactions was $24,077 and was not amortized during 2001 in accordance with the requirements of SFAS No. 142. None of the goodwill from 2001 transactions was amortized during 2002. All goodwill is expected to be deductible for tax purposes. Intangible assets typically represent the value assigned to certain contracts such as non-competition agreements entered into in the transactions. These amounts are amortized over the lives of the contracts, which generally range from five to ten years.

Pro Forma Data (unaudited)

The following summary, prepared on a pro forma basis, combines the results of operations of the Company and the acquired businesses, as if each of the acquisitions had been consummated as of the beginning of each year below, giving effect to adjustments such as amortization of intangibles, interest expense and related income taxes.

		2001		2002		2003
Pro forma net revenue		$	794,409	$	919,244	$	1,013,965
Pro forma net income		$	77,492	$	93,060	$	102,383
Pro forma net income per share
	Basic	$	1.61	$	1.90	$	2.11
	Diluted	$	1.54	$	1.83	$	2.05

The unaudited pro forma results of operations are not necessarily indicative of what actually would have occurred if the acquisitions had been completed prior to the beginning of the periods presented.

F-13

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	December 31,
	2002			2003
Medical equipment	$	124,347		$	143,758
Computer software and equipment		58,285			57,718
Furniture and fixtures		24,532			27,027
Leasehold improvements		84,807			101,113
Buildings		24,862			23,511
Construction-in-progress		10,437			15,058
		327,270			368,185
Less accumulated depreciation		(124,298	)		(143,788	)
	$	202,972		$	224,397

Depreciation expense was $30,836, $38,191 and $42,561 for the years ended December 31, 2001, 2002 and 2003, respectively.

5. GOODWILL AND INTANGIBLE ASSETS

In accordance with the requirements of SFAS No. 142, the Company discontinued amortizing goodwill effective January 1, 2002, and is required to disclose goodwill separately from other intangible assets in the balance sheet. Additionally, goodwill must be tested for impairment on a periodic basis. The Company completed its annual impairment testing and identified no impairments.

A reconciliation of previously reported net income and earnings per share to the pro forma amounts adjusted for the exclusion of goodwill amortization net of the related income tax effect follows:

			Year Ended
			December 31,
	2001		2002		2003
Reported net income	$	76,601	$	92,460	$	102,056
Add: goodwill amortization, net of tax		3,956		—		—
Pro forma adjusted net income	$	80,557	$	92,460	$	102,056
Reported basic earnings per share	$	1.59	$	1.89	$	2.11
Add: goodwill amortization, net of tax		0.08		—		—
Pro forma adjusted basic earnings per share	$	1.67	$	1.89	$	2.11
Reported diluted earnings per share	$	1.52	$	1.82	$	2.05
Add: goodwill amortization, net of tax		0.08		—		—
Pro forma adjusted diluted earnings per share	$	1.60	$	1.82	$	2.05

Changes in the carrying amount of goodwill for the year ended December 31, 2003, are as follows:

Balance as of December 31, 2001	$	243,530
Goodwill acquired during the period		32,136
Balance as of December 31, 2002		275,666
Goodwill acquired during the period		10,912
Balance as of December 31, 2003	$	286,578

F-14

The Company’s separately identifiable intangible assets, which consist of non-competition agreements and acute dialysis services agreements, are as follows:

	December 31,
	2002			2003
Carrying amount	$	20,076		$	24,113
Accumulated amortization		(7,966	)		(10,067	)
Net	$	12,110		$	14,046

Separately identifiable intangible assets are being amortized over their useful lives, ranging from five to ten years. Amortization expense was $2,241 and $2,344 for the years ended December 31, 2002 and 2003, respectively. Estimated amortization expense for each of the next five fiscal years is as follows:

Year ending December 31,	Amount
2004	$	2,856
2005		2,856
2006		2,712
2007		2,308
2008		2,141

6. LONG-TERM DEBT

Long-term debt consists of the following:

	December 31,
	2002		2003
Line of credit, bearing interest at LIBO rate (3.96% at December 31, 2002)	$	7,394	$	—
Other		2,900		2,834
		10,294		2,834
Less current portion		133		182
	$	10,161	$	2,652

Lines of Credit

Effective July 1, 2002, the Company entered into two credit agreements with a group of banks totaling $150,000 consisting of a $100,000 Second Amended and Restated Loan Agreement (the “Multi-Year Facility”) and a $50,000 Loan Agreement (the “364-day Facility”). The Multi-Year Facility had a final maturity of July 1, 2005 and the 364-day Facility had a final maturity of June 30, 2004, based on an amendment made in June 2003. As of December 31, 2003 there were no amounts outstanding under the Multi-Year Facility or the 364-day Facility, and the Company had $150,000 available under these agreements.

Each of the Company’s wholly-owned subsidiaries has guaranteed all of the obligations outstanding under the Multi-Year Facility and the 364-day Facility. Further, the Company’s obligations under the credit facility, and the obligations of each of its subsidiaries under its guaranty, are secured by a pledge of the equity interests held by the Company in each of the subsidiaries. Financial covenants are customary based on the amount and duration of these commitments. The Company was in compliance with all such covenants at December 31, 2003.

On February 10, 2004, the Company entered into a new credit agreement (the “2004 Agreement”) with a group of banks totaling up to $700,000. The 2004 Agreement replaced the Multi-Year Facility and the 364-day Facility discussed

F-15

above. The 2004 Agreement has a $150,000 revolving credit facility, a committed $325,000 term loan facility and a $225,000 incremental term loan facility. Our ability to borrow under the committed term loan facility expires in May 2004. All of the committed facilities have a final maturity of February 10, 2009. The 2004 Agreement provides that $175,000 of the committed term loan facility may only be used to finance the Company’s acquisition of National Nephrology Associates. To the extent the Company does not use that amount to fund the acquisition, unborrowed amounts will increase the size of the incremental term loan facility. Borrowings under the incremental term loan facility are subject to obtaining final commitments from the banks finalizing specific terms.

Borrowings under the revolving credit facility and $150,000 of the committed term loan facility under the 2004 Agreement may be used for acquisitions, repurchases of Company common stock, capital expenditures, working capital and general corporate purposes. Borrowings under the 2004 Agreement bear interest at variable rates determined by the Company’s leverage ratio. This variable rate debt instrument carries a degree of interest rate risk. Specifically, the Company will face higher interest costs on this debt if interest rates rise. Each of the Company’s wholly-owned subsidiaries has guaranteed all of the Company’s obligations under the 2004 Agreement. Further, the Company’s obligations under the 2004 Agreement, and the Company’s subsidiaries’ obligations under their guarantees, are secured by a pledge of the equity interests the Company holds in each of its subsidiaries. The 2004 Agreement includes financial covenants that are customary based on the amount and duration of the agreement.

Other

The other long-term debt consists of notes maturing at various times through April 2015.

The aggregate maturities of long-term debt at December 31, 2003 are as follows:

2004	$	182
2005		227
2006		94
2007		119
2008		146
Thereafter		2,066
	$	2,834

7. INCOME TAXES

The provision for income taxes consists of the following:

		Year Ended December 31,
		2001		2002		2003
Current:
	Federal	$	42,002	$	40,205	$	38,716
	State and local		3,841		5,250		4,309
			45,843		45,455		43,025
Deferred:
	Federal		1,364		10,079		17,152
	State and local		124		1,135		2,365
			1,488		11,214		19,517
	Provision for income taxes	$	47,331	$	56,669	$	62,542

At December 31, 2003, the Company has net operating loss carryforwards of approximately $231,000 for state income tax purposes that expire in years 2002 through 2022, and a capital loss carryforward of approximately $2,200 that expires in 2006. The utilization of the state net operating loss carryforwards in future years is dependent upon the profitability of certain subsidiary corporations. The utilization of the capital loss carryforward requires capital gain income in the future. Therefore, the Company

F-16

has recorded a valuation allowance of $7,756 against the deferred tax asset attributable to the state net operating loss carryforwards and the capital loss carryforward, which represents an increase in the valuation allowance of $1,715 in 2003.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Components of the Company’s deferred tax liabilities and assets are as follows:

		December 31,
		2002			2003
Deferred tax assets:
	Net operating loss carryforwards	$	5,282		$	6,928
	Capital loss carryforward		759			828
	Allowance for doubtful accounts		7,258			2,840
	Accrued vacation and other accrued liabilities		9,367			11,770
	Other		106			53
	Less: valuation allowance		(6,041	)		(7,756	)
			16,731			14,663
Deferred tax liabilities:
	Depreciation		8,572			17,851
	Amortization		12,788			22,629
	Investments in partnerships		2,419			748
			23,779			41,228
Net deferred tax liability		$	(7,048	)	$	(26,565	)

The following is a reconciliation of the statutory federal and state income tax rates to the effective rates as a percentage of income before provision for income taxes as reported in the consolidated financial statements:

	Year Ended December 31,
	2001			2002			2003
U.S. federal income tax rate		35.0	%		35.0	%		35.0	%
State income tax, net of federal income tax benefit		2.5			1.2			1.7
Increase in valuation allowances		0.1			1.8			1.0
Other		0.6			—			0.3
Effective income tax rate		38.2	%		38.0	%		38.0	%

F-17

8.     STOCKHOLDERS’ EQUITY (in thousands, except per share amounts)

Stock Option Plans

As of December 31, 2003, the Company had six stock option plans. The Company has also issued options, referred to in these financial statements as Free Standing Options outside of these plans. Options issued as Free Standing are for employees, officers, directors, and other key persons. Free Standing Options vest over various periods up to five years and have a term of ten years from the date of issuance.

Options issued under the 1999 and 1996 Employee Plans have similar terms and purposes. Specifically, options under each of these plans are available for grant to eligible employees and other key persons, the options generally vest over four to five years and have a term of ten years from the date of issuance. These plans were adopted in 1999 and 1996, and have 7,500 and 6,000 shares of common stock reserved for issuance, respectively.

Options issued under the Equity Compensation Plan (“Equity Plan”) are for eligible employees and other key persons. The options vest over periods up to three years and have a term of ten years from the date of issuance. This plan was adopted by Dialysis Centers of America, Inc. (“DCA”) in 1995, and there are 350 shares of common stock reserved for issuance. The Company merged with DCA in a pooling-of-interests transaction in February 1999.

Options issued under the 1994 Stock Option Plan (“1994 Plan”) are for directors, officers and other key persons. These options vest over four years and the options have a term of ten years from the date of issuance. This plan was adopted in 1994 and there are 720 shares of common stock reserved for issuance.

Options issued under the Directors Plan are for non-management directors. These options vest immediately and have a term of ten years from the date of issuance. The plan was adopted in 1996 and there are 225 shares of common stock reserved for issuance.

Options issued under the RDM Plan are for directors, officers, and other key persons. These options vest immediately upon grant and have a term of 5 to 10 years from the date of issuance. The plan was adopted by Renal Disease Management by Physicians, Inc. (“RDM”) in 1997, and there are 109 shares of common stock reserved for issuance. The Company merged with RDM in a pooling-of-interests transaction in April 2000.

The Company has adopted the disclosure-only provisions of SFAS No. 123 and SFAS No. 148, but applies APB Opinion No. 25 and related interpretations in accounting for its plans. Therefore, compensation expense would generally be recorded only if on the date of grant the then-current market price of the underlying stock exceeded the exercise price.

F-18

The following is a summary of option transactions during the period from January 1, 2001 through December 31, 2003:

																									Weighted
					1999			1996															Exercise		Average
		Free			Employee Plan			Employee Plan			Equity			1994			Directors			RDM			Price		Exercise
		Standing			Plan			Plan			Plan			Plan			Plan			Plan			Range		Price
Balance at December 31, 2000			1,466			2,375			3,857			18			17			56			26		$	3.33–$29.50	$	15.65
	Granted		120			899			—			—			—			17			—			28.02 – 29.63		28.05
	Exercised		(686	)		(198	)		(1,113	)		(1	)		(9	)		(6	)		(6	)		3.33 – 25.58		13.39
	Forfeited		(9	)		(46	)		(54	)		—			—			—			—			8.00 – 28.02		18.07
Balance at December 31, 2001			891			3,030			2,690			17			8			67			20			3.33 – 29.63		18.27
	Granted		—			1,920			—			—			—			11			—			28.30 – 32.70		28.41
	Exercised		(273	)		(486	)		(704	)		—			—			(5	)		(6	)		3.33 – 29.63		15.23
	Forfeited		(1	)		(64	)		(55	)		—			—			—			—			14.06 – 28.39		19.12
Balance at December 31, 2002			617			4,400			1,931			17			8			73			14			3.33 – 32.70		21.66
	Granted		—			1,912			—			—			—			28			—			30.00 – 37.81		34.46
	Exercised		(229	)		(1,324	)		(800	)		(1	)		—			—			(5	)		3.33 – 29.03		20.80
	Forfeited		(35	)		(545	)		(62	)		—			—			—			—			15.94 – 34.65		27.53
Balance at December 31, 2003			353			4,443			1,069			16			8			101			9		$	3.33–$37.81	$	25.70
Available for grant at December 31, 2003			—			946			189			—			—			107			—
Exercisable at December 31, 2001			571			800			1,935			17			8			67			17
Exercisable at December 31, 2002			428			1,216			1,720			16			8			73			13
Exercisable at December 31, 2003			294			1,040			999			15			8			101			9

The weighted-average fair value of options granted during 2001, 2002 and 2003 is $12.40, $11.55 and $13.48, respectively.

F-19

The following table summarizes information about stock options outstanding at December 31, 2003:

	Number		Weighted				Number
	Outstanding as		Average		Weighted		Exercisable as		Weighted
	of		Remaining		Average		of		Average
Range of	December 31,		Contractual		Exercise		December 31,		Exercise
Exercise Prices	2003		Life		Price		2003		Price
$3.33 - $18.25		1,703		4.76	$	14.39		1,390	$	14.01
$19.36 - $28.39		2,426		7.44		27.02		974		25.14
$28.50 - $34.65		1,653		9.43		33.86		85		30.30
$34.89 - $37.81		217		9.82		37.58		17		34.89
$3.33 - $37.81		5,999		7.31	$	25.70		2,466	$	19.11

Pro forma information regarding net income and net income per share is required by SFAS No. 123 and SFAS No. 148, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	Year Ended December 31,
	2001			2002			2003
Expected volatility		45.0	%		40.0	%		39.0	%
Expected dividend yield	None			None			None
Risk-free interest rate		3.75	%		3.75	%		3.25	%
Expected life of options	5years			5years			5years

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

F-20

For purposes of pro forma disclosure, the estimated fair value of the options is amortized to expense over the option’s vesting period. The Company’s pro forma information follows:

		Year Ended December 31
		2001			2002			2003
Net income, as reported		$	76,601		$	92,460		$	102,056
Add: stock-based compensation expense, net of related tax effects, included in the determination of net income as reported			338			380			424
Less: stock-based compensation expense, net of related tax effects, determined by the fair value-based method			(8,036	)		(8,028	)		(8,663	)
Pro forma net income		$	68,903		$	84,812		$	93,817
Net income per share:
	Basic, as reported	$	1.59		$	1.89		$	2.11
	Basic, pro forma	$	1.43		$	1.73		$	1.94
	Diluted, as reported	$	1.52		$	1.82		$	2.05
	Diluted, pro forma	$	1.37		$	1.67		$	1.88

The effect of applying SFAS No. 123 and SFAS No. 148 for providing pro forma disclosure is not likely to be representative of the effect on reported net income for future years.

9. OPERATING LEASES

The Company rents office and space for its dialysis facilities under lease agreements that are classified as operating leases for financial statement purposes. At December 31, 2003, future minimum rental payments under non-cancelable operating leases with terms of one year or more consist of the following:

2004	$	30,413
2005		27,766
2006		25,453
2007		23,242
2008		20,648
Thereafter		68,369
	$	195,891

Rent expense was $22,624, $27,074 and $30,729 for the years ending December 31, 2001, 2002 and 2003, respectively.

10. EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

The Company has qualified defined contribution plans covering substantially all employees that permit participants to make voluntary contributions. The Company pays all general and administrative expenses of the plans and makes matching contributions on behalf of the employees. The Company made contributions relating to these plans totaling $1,960, $2,518 and $2,978 for the years ended December 31, 2001, 2002 and 2003, respectively.

Defined Benefit Plan

Effective January 29, 2003, the Company implemented a retirement benefit plan for Sam A. Brooks, the Company’s former Chairman, Chief Executive Officer and President. Mr. Brooks died March 20, 2003. The plan provides that the Company will make 120 monthly payments of $54 each to Mr. Brook’s beneficiary, beginning in April 2003. As a result, the Company recorded a $5,350 charge representing the pre-tax net present value of such payments during the first quarter of 2003. As of December 31, 2003 the Company has accrued liabilities totaling $5,019 related to this defined benefit plan.

F-21

Employee Stock Purchase Plan

Effective April 1996, the Company adopted an Employee Stock Purchase Plan (“Stock Purchase Plan”) to provide substantially all employees an opportunity to purchase shares of its common stock in amounts not to exceed 10% of eligible compensation or $25 of common stock each calendar year. Annually, the participant’s December 31 account balance is used to purchase shares of stock at the lesser of 85% of the fair market value of shares at the beginning of the year or December 31. A total of 85 shares are available for purchase under the plan. At December 31, 2002 and 2003, $2,347 and $3,055, respectively, were included in accrued wages and benefits relating to the Stock Purchase Plan.

11. EARNINGS PER SHARE

Basic net income per share is based on the weighted average number of common shares outstanding during the periods. Diluted net income per share is based on the weighted average number of common shares outstanding during the periods plus the effect of dilutive stock options and warrants calculated using the treasury stock method.

The following table sets forth the computation of basic and diluted net income per share.

			2001		2002		2003
Numerator:
	Numerator for basic and diluted net income per share		$	76,601	$	92,460	$	102,056
Denominator:
	Denominator for basic net income per share weighted-average shares			48,113		48,978		48,479
	Effect of dilutive securities:
		Stock options		2,087		1,712		1,356
		Warrants		233		77		—
	Denominator for diluted net income per share-adjusted weighted-average shares and assumed conversions			50,433		50,767		49,835
Basic net income per share			$	1.59	$	1.89	$	2.11
Diluted net income per share			$	1.52	$	1.82	$	2.05

12. COMMITMENTS AND CONTINGENCIES

On August 30, 2000, 19 patients were hospitalized and one patient died shortly after becoming ill while receiving treatment at one of the Company’s dialysis centers in Youngstown, Ohio. One of the 19 hospitalized patients also died some time later. In March 2001, one of the affected patients sued the Company in Mahoning County, Ohio for injuries related to the August 30, 2000 illnesses. Additional suits have been filed, and as of December 31, 2003, a total of five suits were pending. The suits allege negligence, medical malpractice and product liability. Additional defendants are named in each of the suits. Additional defendants in some of the suits include the water system vendors who installed and maintained the water system in the dialysis center. Renal Care Group has denied the allegations and has filed cross-claims against the water system vendors. Renal Care Group intends to pursue these cross-claims vigorously. Management believes that Renal Care Group’s insurance should be adequate to cover claims for these illnesses and does not anticipate a material adverse effect on the Company’s consolidated financial position or results of operations.

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. The Company believes that it is in compliance with all applicable laws and regulations governing the Medicare and Medicaid programs. The Company is not aware of any pending or threatened investigations involving allegations of potential noncompliance with applicable laws or regulations. While no regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusion from the Medicare and Medicaid programs.

F-22

The Company is involved in other litigation and regulatory investigations arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, these matters will be resolved without material adverse effect on the Company’s consolidated financial position or results of operations.

The Company generally engages practicing board-certified or board-eligible nephrologists to serve as medical directors for its centers. Medical directors are responsible for the administration and monitoring of the Company’s patient care policies, including patient education, administration of dialysis treatment, development programs and assessment of all patients. The Company pays medical director fees that are consistent with the fair market value of the required supervisory services. Such medical director agreements typically have a term of seven years with a three-year renewal option. As of December 31, 2003, estimated commitments for medical director fees for the year 2004 are $13,902 and are $61,270 over the remaining lives of the agreements.

13. SUBSEQUENT EVENTS

Midwest Kidney Centers

Effective January 1, 2004, the Company acquired certain operating assets and liabilities of Midwest Kidney Centers and several affiliated companies (“MKC”) for $49,500 in consideration. Through this acquisition, the Company added approximately 825 patients and 13 dialysis facilities in central Illinois.

National Nephrology Associates, Inc.

On February 2, 2004, the Company announced the signing of a definitive agreement to acquire National Nephrology Associates, Inc. (“NNA”), a Nashville, Tennessee-based dialysis services provider. NNA owns and operates 87 outpatient dialysis facilities in 15 states and provides services to approximately 5,600 patients, as well as acute dialysis services to approximately 55 hospitals.

Under the terms of the agreement, the total consideration of $345,000 will consist of a cash payment of approximately $167,000 payable to NNA’s equity holders and the assumption of NNA’s outstanding debt, including its $160,000 of 9% senior subordinated notes due 2011, and other indebtedness, including capital leases. Renal Care Group plans to finance the acquisition through the new 2004 Agreement as discussed in Note 6. Completion of the transaction, which is expected to close on or before March 31, 2004, is subject to customary conditions, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

Following completion of the MKC acquisition and assuming completion of the NNA transaction, Renal Care Group will serve almost 28,000 patients at over 370 facilities in 30 states, in addition to providing acute dialysis services at more than 175 hospitals.

F-23

14. SELECTED QUARTERLY FINANCIAL DATA (unaudited)

The following tables include, for 2002 and 2003, certain selected quarterly financial data. In the opinion of the Company’s management this unaudited information has been prepared on the same basis as the audited information and includes all adjustments necessary to present fairly the information included therein. The operating results for any quarter are not necessarily indicative of results for any future period.

		2002
		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter
Net revenue		$	206,678	$	222,169	$	231,542	$	242,998
Operating expenses			157,756		170,273		177,416		185,831
Depreciation and amortization			9,362		9,933		10,402		10,735
Income from operations			39,560		41,963		43,724		46,432
Interest expense, net			173		138		569		260
Minority interest			4,710		5,307		5,364		6,029
Income before income taxes			34,677		36,518		37,791		40,143
Provision for income taxes			13,184		13,876		14,361		15,248
Net income		$	21,493	$	22,642	$	23,430	$	24,895
Net income per share:
	Basic	$	0.43	$	0.46	$	0.48	$	0.52
	Diluted	$	0.42	$	0.44	$	0.46	$	0.50

		2003
		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter
Net revenue		$	242,143	$	247,061	$	253,835	$	262,280
Operating expenses			190,177		187,653		192,743		199,183
Depreciation and amortization			10,298		11,579		11,365		11,663
Income from operations			41,668		47,829		49,727		51,434
Interest expense, net			285		165		76		103
Minority interest			6,308		6,029		6,837		6,257
Income before income taxes			35,075		41,635		42,814		45,074
Provision for income taxes			13,323		15,822		16,269		17,128
Net income		$	21,752	$	25,813	$	26,545	$	27,946
Net income per share:
	Basic	$	0.45	$	0.53	$	0.54	$	0.58
	Diluted	$	0.44	$	0.52	$	0.53	$	0.56

F-24

Schedule II

Renal Care Group, Inc.
Consolidated Schedule - Valuation and Qualifying Accounts
(in thousands)

		Balance		Amount					Balance
		Beginning		Charged to					At End of
		Of Period		Expense		Write-Offs			Period
Allowance for doubtful accounts:
	Year ended December 31, 2001	$	47,392	$	20,290	$	(22,422	)	$	45,260
	Year ended December 31, 2002	$	45,260	$	23,501	$	(25,084	)	$	43,677
	Year ended December 31, 2003	$	43,677	$	26,200	$	(37,716	)	$	32,161

F-25

SIGNATURES

     Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Nashville, State of Tennessee, on the 4th day of March, 2004.

RENAL CARE GROUP, INC.
By:	Gary A. Brukardt      Gary A. Brukardt      President and Chief Executive Officer

45

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Gary A. Brukardt and David M. Dill and either of them (with full power in each to act alone) as true and lawful attorneys-in-fact with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated.

/s/ Gary A. Brukardt	President, Chief Executive	March 4, 2004
	Officer and Director
Gary A. Brukardt	(Principal Executive Officer)
/s/ David M. Dill	Executive Vice President,	March 4, 2004
	Chief Financial Officer
David M. Dill	Treasurer (Principal Financial
	and Accounting Officer)
/s/ Peter J. Grua	Director	March 4, 2004
Peter J. Grua
/s/ Joseph C. Hutts	Director	March 4, 2004
Joseph C. Hutts
/s/ Harry R. Jacobson, M.D.	Director	March 4, 2004
Harry R. Jacobson, M.D.
/s/ William P. Johnston	Chairman of the Board	March 4, 2004
	Director
William P. Johnston
/s/ William V. Lapham	Director	March 4, 2004
William V. Lapham
/s/ Thomas A. Lowery, M.D.	Director	March 4, 2004
Thomas A. Lowery, M.D.
/s/ Stephen D. McMurray, M.D.	Director	March 4, 2004
Stephen D. McMurray, M.D.
/s/ C. Thomas Smith	Director	March 4, 2004
C. Thomas Smith

46

EXHIBIT INDEX

Exhibit
Number	Description of Exhibits
3.1	Amended and Restated Certificate of Incorporation of the Company (1)
3.1.2	Certificate of Amendment of Certificate of Incorporation of the Company (2)
3.1.3	Certificate of Designation, Preferences, and Rights of Series A Junior Participating Preferred Stock of the Company (2)
3.1.4	Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company (10)
3.2	Amended and Restated Bylaws of the Company (1)
4.1	See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated Certificate of Incorporation and Bylaws of the Company defining rights of holders of Common Stock of the Company (1)
4.2	Specimen stock certificate for the Common Stock of the Company (1)
4.3	Shareholder Rights Protection Agreement, dated May 2, 1997 between the Company and First Union National Bank of North Carolina, as Rights Agent (3)
10.1	Employment Agreement, effective as of December 15, 2003, between the Company and Raymond Hakim, M.D.*
10.2	Medical Director Services Agreement, dated February 12, 1996, between the Company and Indiana Dialysis Management, P.C. (4)
10.2.1	Amendment Number 1, to Medical Director Services Agreement, effective as of January 1, 1999, between the Company and Indiana Dialysis Management, P.C.
10.2.2	Amendment Number 2 to Medical Director Services Agreement, effective as of February 12, 2002, between the Company and Indiana Dialysis Management.
10.3	Medical Director Services Agreement, effective as of February 12, 2003, between the Company and Tyler Nephrology Associates, P.A.
10.4	Lease Agreement, dated February 12, 1996, among the Company and Thomas A. Lowery, M.D., James R. Cotton, M.D., Roy D. Gerard, M.D. and Kevin A. Curran, M.D., relating to property in Carthage, Texas (4)
10.5	Lease Agreement, dated February 12, 1996, among the Company and Thomas A. Lowery, M.D., James R. Cotton, M.D., Roy D. Gerard, M.D., and Kevin A. Curran, M.D., relating to property in Tyler, Texas (4)
10.6	Sublease Agreement, dated February 12, 1996, with Tyler Nephrology Associates, Inc. (4)
10.7	Dialysis Center Management Agreement, effective as of July 1, 2001, between Renal Care Group, Inc. and Vanderbilt University (23)
10.8	1996 Stock Option Plan for Outside Directors (1)*
10.9	Fourth Amended and Restated 1996 Stock Incentive Plan (5)*
10.10	Amended and Restated Employee Stock Purchase Plan (2)*
10.11	Employment Agreement, April 28, 2003, between the Company and Gary Brukardt (20)*

47

Exhibit
Number	Description of Exhibits
10.12	Loan Agreement dated as of July 1, 2002, among the Company, Bank of America, N.A., SunTrust Bank, AmSouth Bank, and Wells Fargo Bank, N.A. (16)
10.12.1	Second Amended and Restated Loan Agreement, dated as of July 1, 2002, among the Company, Bank of America, N.A., SunTrust Bank, AmSouth Bank, and Wells Fargo Bank. N.A.(16)
10.12.2	Second Amendment dated as of July 27, 2003 to the Loan Agreement, dated as of July 1, 2002, among the Company, Bank of America, N.A., SunTrust Bank, AmSouth Bank, and Wells Fargo Bank, N.A.(20)
10.12.3	Second Amendment to Second Amended and Restated Loan Agreement and Consent dated as of December 23, 2003
10.12.4	Third Amendment to Loan Agreement and Consent dated as of December 23, 2003
10.13	Stock Option Agreement, dated April 30, 1997, between the Company and Gary Brukardt (2)*
10.14	Asset Purchase Agreement with an effective date of February 1, 1997 among the Company, RCG Indiana, LLC, Eastern Indiana Kidney Center, Indiana Kidney Center, Indiana Kidney Center South, LLC, St. Vincent Dialysis Center, Saint Joseph Dialysis Center and Indiana Dialysis Services PC and Community Hospitals of Indiana, Inc., Seton Health Corporation of Central Indiana, Inc., Reid Hospital & Health Care Services, Inc., and Saint Joseph Hospital and Health Care Center of Kokomo, Indiana, Inc. and Indiana Dialysis Services, PC, Reid Hospital Physicians, Greenwood Dialysis Services, PC and certain individuals named on the signature pages thereto and Indiana Nephrology & Internal Medicine, P.C. (6)
10.15	Stock Option Agreement, dated May 22, 1998, between the Company and Gary A. Brukardt (7)*
10.16	Stock Option Agreement, dated May 22, 1998, between the Company and Raymond Hakim, M.D. (7)*
10.17	Stock Option Agreement, dated June 5, 1998, between the Company and Joseph C. Hutts (7)*
10.18	Stock Option Agreement, dated June 5, 1998, between the Company and Harry R. Jacobson, M.D. (7)*
10.19	Agreement No. 20010240, between Renal Care Group, Inc. and Amgen Inc. effective January 2, 2002 (The Company has requested confidential treatment of certain portions of this Exhibit.)(15)
10.19.1	Amendment #2 dated February 10, 2003 to Agreement No. 200010240 between Renal Care Group, Inc. and Amgen Inc. (The Company has requested confidential treatment of certain portions of this Exhibit.)(21)
10.20	Restricted Stock Award Agreement, dated January 25, 1999, between the Company and Harry R. Jacobson (8)*
10.21	Restricted Stock Award Agreement, dated January 25, 1999, between the Company and Stephen D. McMurray (8)*
10.22	Renal Care Group, Inc. 1999 Long-Term Incentive Plan (9)*
10.22.1	Amendment to the Renal Care Group, Inc. 1999 Long-Term Incentive Plan (12)*
10.22.2	Amended and Restated Renal Care Group, Inc. 1999 Long-Term Incentive Plan (19)*
10.23	Stock Option Agreement, dated August 30, 1999, between the Company and Gary A. Brukardt (11)*
10.24	Stock Option Agreement, dated August 30, 1999, between the Company and Raymond Hakim, M.D. (11)*

48

Exhibit
Number	Description of Exhibits
10.25	Stock Option Agreement, dated June 2, 1999, between the Company and Joseph C. Hutts (11)*
10.26	Stock Option Agreement, dated June 2, 1999, between the Company and Harry R. Jacobson, M.D. (11)*
10.27	Stock Option Agreement, dated July 22, 1999, between the Company and William V. Lapham (11)*
10.28	Stock Option Agreement, dated June 8, 2000, between the Company and Joseph C. Hutts (13)*
10.29	Stock Option Agreement, dated June 8, 2000, between the Company and Harry R. Jacobson, M.D.(13)*
10.30	Stock Option Agreement, dated June 8, 2000, between the Company and William V. Lapham(13)*
10.31	Stock Option Agreement, dated September 19, 2000, between the Company and Gary A. Brukardt(13)*
10.32	Stock Option Agreement, dated September 19, 2000, between the Company and Raymond Hakim, M.D.(13)*
10.33	Stock Option Agreement dated August 2, 2001 between the Company and Gary Brukardt(14)*
10.34	Stock Option Agreement dated August 2, 2001 between the Company and Raymond Hakim(14)*
10.35	Stock Option Agreement dated June 7, 2001 between the Company and Joseph C. Hutts(15)*
10.36	Stock Option Agreement dated June 7, 2001 between the Company and William V. Lapham(15)*
10.37	Form of Stock Option Agreement for stock option grants to executive employees under the Company’s 1999 Long-Term Incentive Plan(17)
10.38	Form of Stock Option Agreement for stock option grants to non-management directors under the Company’s 1996 Stock Option Plan for Outside Directors(17)
10.39	Medical Director Services Agreement, dated May 1, 2002, between the Company and Tyler Nephrology Associates, P.A.(18)
10.40	Medical Director Services Agreement, dated July 11, 2002 between the Company and Tyler Nephrology Associates, P.A.(18)
10.41	Renal Care Group Supplemental Benefit Plan(19)*
10.42	Plan Agreement dated February 25, 2003 between Renal Care Group, Inc. and Sam A. Brooks(19)*
10.42.1	Amendment #1 to Plan Agreement under the Renal Care Group, Inc. Supplemental Benefit Plan dated as of May 29, 2003(20)*
10.43	Form of Indemnity Agreement between the Company and directors and certain officers(19)
10.44	Employment Agreement, effective as of November 3, 2003, between the Company and David M. Dill*
10.45	Employment Agreement, effective as of November 30, 2003, between the Company and Timothy P. Martin*

49

Exhibit
Number	Description of Exhibits
10.46	Employment Agreement effective as of December 31, 2003 between the Company and Douglas B. Chappell*
21.1	List of subsidiaries of the Company
23.1	Consent of Ernst & Young LLP
24.1	Power of Attorney (contained on the signature page of this report)
31.1	Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* *	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2* *	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)	Incorporated by reference to the Company’s Registration Statement on Form S-1 (Reg. No. 333-80221) effective February 6, 1996.
(2)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended June 30, 1997 (Commission File No. 0-27640).
(3)	Incorporated by reference to the Company’s Current Report on Form 8-K filed May 5, 1997 (Commission File No. 0-27640).
(4)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended March 31, 1996 (Commission File No. 0-27640).
(5)	Incorporated by reference to Appendix A to the Company’s definitive Proxy Statement filed April 27, 1998 relating to the 1998 Annual Meeting of Stockholders (Commission File No. 0-27640).
(6)	Incorporated by reference to the Company’s Form 10-K for the year ended December 31, 1996 (Commission File No. 0-27640).
(7)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended June 30, 1998 (Commission File No. 0-27640).
(8)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended March 31, 1999 (Commission File No. 0-27640).
(9)	Incorporated by reference to Appendix A to the Company’s definitive Proxy Statement filed April 27, 1999 relating to the 1999 Annual Meeting of Stockholders (Commission File No. 0-27640).
(10)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended June 30, 1999 (Commission File No. 0-27640).
(11)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended September 30, 1999 (Commission File No. 0-27640).
(12)	Incorporated by reference to the Company’s definitive Proxy Statement filed April 28, 2000 relating to the 2001 Annual Meeting of Stockholders (Commission File No. 0-27640).
(13)	Incorporated by reference to the Company’s Form 10-K for the year ended December 31, 2000 (Commission File No. 0-27640).

50

(14)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended September 30, 2001 (Commission File No. 0-27640).
(15)	Incorporated by reference to the Company’s Form 10-K for the year ended December 31, 2001 (Commission File No. 0-27640).
(16)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended June 30, 2002 (Commission File No. 0-27640).
(17)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended September 30, 2002 (Commission File No. 0-27640).
(18)	Incorporated by reference to the Company’s Form 10-K for the year ended December 31, 2002 (Commission File No. 0-27640).
(19)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended March 31, 2003 (Commission File No. 0-27640).
(20)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended June 30, 2003 (Commission File No. 0-27640).
(21)	Incorporated by reference to the Company’s Form 10-Q for the quarter ended September 30, 2003 (Commission File No. 0-27640).
*	Management contract or executive compensation plan or arrangement.

*     In accordance with Release No. 34-47551, this exhibit is hereby furnished to the SEC as an accompanying document and is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, and it shall not be deemed incorporated by reference into any filing under the Securities Act of 1933.

51

EX-10.1 3 g87511exv10w1.txt EX-10.1 EMPLOYMENT AGREEMENT R. HAKIM 12/15/03 EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS AGREEMENT is made and entered into effective as of the 15th day of December 2003, by and between RENAL CARE GROUP, INC., a Delaware corporation (the "Company"), and RAYMOND M. HAKIM, M.D., Ph.D. (hereinafter "Employee"). WITNESSETH: WHEREAS, Employee is currently Executive Vice President and Chief Medical Officer of the Company under an Employment Agreement effective as of July 1, 2000 (the "Old Agreement"), and the Company desires to employ and retain Employee to continue to act as its Executive Vice President and Chief Medical Officer; and WHEREAS, Employee desires to remain an employee of the Company on the terms and conditions contained in this Agreement; and NOW, THEREFORE, in consideration of the compensation payable to Employee by the Company pursuant to this Agreement, and the mutual promises, covenants, representations and warranties contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do agree as follows: 1. Employment. The Company employs Employee and Employee accepts employment with the Company under the terms of this Agreement effective as of December 15, 2003 (the "Effective Date"). 2. Term. The term of this Agreement shall begin on the Effective Date and shall continue for an initial term of approximately three years, ending on December 31, 2006 (the "Initial Period"), subject to earlier termination by Employee or the Company as hereinafter provided. Unless one party gives the other notice of non-renewal not less than 60 days prior to the expiration of the Initial Period or an additional term, this Agreement shall renew for additional terms of 12 months each, subject to earlier termination as hereinafter provided, on the same terms and conditions (subject to mutually agreeable modifications, if any). 3. Compensation and Benefits. (a) Base Compensation. The Company shall pay Employee a base salary at an annual rate of $400,000 from the Effective Date through March 31, 2004 (the "Base Compensation"). Such Base Compensation may be adjusted as provided herein. The Base Compensation is payable according to the pay periods of the Company as may be in effect from time to time. Such payments will be prorated for periods less than a full pay period. The Base Compensation will be subject to withholding for federal, state and local payroll and all other taxes or withholdings applicable to Employee. Any increases of the Base Compensation will be at the discretion of the Company, provided that the Company may not decrease the then current Base Compensation without the consent of Employee. The Base Compensation and target percentage for the Annual Bonus (as defined below) will be reviewed annually by the Compensation Committee of the Company. (b) Benefits. During the term of this Agreement, Employee shall also be entitled to participate in the insurance and other fringe benefits made available generally to senior management employees of the Company, as such benefits may be determined from time to time by the Company, provided that Employee shall have at least four weeks of paid vacation time. In addition, during the term of this Agreement, the Company will reimburse Employee an amount equal to the cost of the policy of whole life insurance with a face value of $1,000,000 maintained by Employee as of the date of this Agreement, such insurance being payable to one or more beneficiaries designated by Employee from time to time. (c) Annual Bonuses. In addition to the Base Compensation, Employee will be entitled to an annual bonus (the "Annual Bonus"), with a target amount equal to 75% of the Base Compensation for such year. The actual amount of the Annual Bonus paid will be determined based on the Company's and Employee's achievement of performance goals reasonably established by the Compensation Committee of the Company and, in the case of performance goals established specifically for Employee, agreed to by Employee. The Company agrees that the Company-related performance goals for Employee shall be substantially similar to those established for other members of senior management. (d) Expenses. The Company shall reimburse Employee for any and all expenses reasonably incurred by employee incident to the performance of the duties imposed upon Employee hereunder. (e) Restricted Stock. In addition to the compensation and benefits described above, the Company will grant Employee 26,667 restricted shares of Common Stock of the Company. The restrictions on such shares shall lapse as to one-third of such shares on December 15, 2004, one-third of such shares on May 1, 2005 and the remaining one-third of such shares on May 1, 2006. These restrictions will lapse earlier upon a change in control of the Company (as defined below) or the death or permanent disability of Employee. (f) Signing Bonus. In addition to the compensation and benefits described above, the Company will pay Employee a bonus equal to $30,000 with the Company's regular payroll that includes December 15 of each of 2003, 2004 and 2005 if Employee remains employed by the Company as of such date. This bonus is in addition to the Annual Bonus described above and is conditioned only upon Employee being an employee of the Company as of such date. 4. Duties, Extent of Services. Employee is employed as Executive Vice President and Chief Medical Officer of the Company. As such, Employee will perform such duties and responsibilities as are typically incident thereto and will perform in a faithful and competent manner such additional duties as may be reasonably assigned from time to time by the Company. Throughout the term of this Agreement, Employee will report to the Chief Executive Officer and President of the Company. Employee's duties for the Company will be performed on a full-time basis at the Company's corporate offices in Nashville, Tennessee. Employee may be required, from time to time, to perform his duties temporarily hereunder at such other place or places as the Company shall reasonably require, provided that such period does not exceed 30 consecutive days without Employee's consent and that during any such period Employee is able to return to Nashville, Tennessee at the Company's expense for weekends. -2- Employee will devote all of Employee's business time, attention, knowledge, and skill solely to the business and interest of the Company, and the Company will be entitled to all the benefits, profits, and other issues arising from, or incident to, all work, services, and advice of Employee. 5. Termination. This Agreement may be terminated by the parties in the manners specified below: (a) Termination without Cause. Either the Company or Employee may terminate Employee's employment under this Agreement at any time for any reason or no reason upon 30 days' prior written notice to the other party. (b) Termination for Cause. The Company may terminate this Agreement on written notice at any time for "Cause". For purposes of this Agreement, "Cause" means: (i) Employee is convicted of, pleads guilty to, or confesses to a felony or any crime involving any act of dishonesty, fraud, misappropriation, embezzlement or moral turpitude, in which event the Company may terminate this Agreement immediately, (ii) the misconduct or gross negligence by Employee in connection with the performance of Employee's duties hereunder, (iii) the engaging by Employee in any fraudulent, disloyal or unprofessional conduct which results in an injury to the Company, its affiliates or any of its or their centers, monetarily or otherwise, (iv) Employee breaches any provision of Section 6 of this Agreement, or (v) the material failure by Employee otherwise substantially to perform his duties with the Company (other than any such failure resulting from the disability of Employee under Section 5(d)(i)) or the breach of any provision of this Agreement other than Section 6. If the Company terminates this Agreement for Cause pursuant to the provisions of (ii), (iii), (iv) or (v) of this subsection (b), then the Company will give Employee written notice prior to such termination detailing the specific acts, actions, failures, or events upon which the forecast termination is based. Employee will have 15 days after such written notice to cease such actions or otherwise correct any such failure or breach. If Employee does not cease such action or otherwise correct such failure or breach within such 15-day period, or having once received such written notice and ceased such actions or corrected such failure or breach, Employee at any time thereafter again so acts, fails or breaches, the Company may terminate this Agreement immediately. (c) Termination for Good Reason. Employee may terminate this Agreement on written notice at any time for "Good Reason". For purposes of this Agreement, "Good Reason" means: (i) without the express written consent of Employee, a material diminution of his position, duties, responsibilities and status with the Company as in effect as of the Effective Date, a change in Employee's reporting responsibilities, a material reduction of Employee's titles or offices as in effect on the date of this Agreement, or the removal of Employee from, or failure to re-elect Employee to, any position referred to in Section 4 of this Agreement, except in connection with the termination of this Agreement for Cause; (ii) any reduction of the Base Compensation; (iii) the requirement that Employee relocate outside of the Nashville, Tennessee metropolitan area; (iv) the material breach by the Company of any material provision of this Agreement, which breach continues uncorrected and uncured for 15 days after Employee gives notice of such breach to the Company; or (v) the termination of this Agreement by written notice from Employee to the Company during the 30-day period immediately following the first anniversary of a Change in Control (as defined below). (d) Involuntary Termination. The employment of Employee hereunder will be automatically terminated by the death or disability of Employee as outlined below. (i) Disability. The Company may terminate this Agreement at such time as Employee shall have been Disabled (as defined below) for a continuous period of six months during any -3- continuous 12-month period. For purposes of this Section 5(d)(i), the term "Disabled" means Employee's inability to perform the essential functions of his duties, with or without reasonable accommodation. During Employee's six-month period of Disability, the Company will continue to pay Employee's Base Compensation (less regular withholdings for payroll or other taxes and other required or proper items, and less proceeds from all disability insurance policies or plans provided or made available by the Company). In the event of a termination of Employee on account of Disability, the Company will pay Employee's Base Compensation for a period of six months following the effective date of termination (less regular withholdings for payroll or other taxes and other required or proper times, and less proceeds from all disability insurance policies or plans provided or made available by the Company). In addition, any provisions in the relevant stock option agreements notwithstanding, all outstanding stock options granted to Employee by the Company will vest immediately upon termination pursuant to this Section 5(d)(i). (ii) Death. If Employee dies during the term of this Agreement, this Agreement shall terminate and Employee's estate shall receive the remainder of the Base Compensation set forth in Section 3(a) hereof accrued to the last day of the month in which death occurs. In addition, any provisions in the relevant stock option agreements notwithstanding, all outstanding stock options granted to Employee by the Company will vest immediately upon termination pursuant to this Section 5(d)(i). (e) Post-Termination Compensation. Except as provided in Section 5(d) above, upon termination of this Agreement, the Company shall be relieved of all of its obligations hereunder notwithstanding any period of time remaining under the initial or any renewal term, subject to the following: (i) Termination without Cause or with Good Reason. If the Company terminates Employee's employment hereunder without Cause under Section 5(a) above or if Employee terminates Employee's employment hereunder with Good Reason under Section 5(c) above or if this Agreement expires as a result of the Company's giving notice of non-renewal as contemplated by Section 2 above, then the Company will pay to Employee, after the effective date of such termination, as Employee's sole and exclusive remedy, (A) an amount equal to the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect), and (B) any unpaid bonus payable for the most recently completed calendar year. If the Company terminates Employee's employment without Cause or if Employee terminates Employee's employment hereunder with good reason or if this Agreement expires as a result of the Company's giving notice of non-renewal, Employee shall be under no duty to seek or accept other employment; but if he shall do so, any compensation he shall receive from such other employment will not diminish the Company's obligation to make payments required to the Employee hereunder. (ii) Termination without Good Reason. If Employee terminates his employment under Section 5(a) above, then the Company's obligation to pay Employee's Base Compensation will terminate as of the date of termination. (iii) Termination for Cause. If the Company terminates Employee's employment with Cause under Section 5(b) above, then the Company will pay Employee, after the effective date of such termination, the Base Compensation (as then in effect) for a period of one month after the termination date. (iv) Termination following Change in Control. If, within twelve (12) months following a Change in Control, either (A) the Company terminates the employment of Employee -4- hereunder without Cause under Section 5(a) above or (B) Employee terminates his employment for Good Reason under Section 5(c) above (except for a termination under clause (v) of Section 5(c)), then, in lieu of any other compensation that may be specified in this Agreement, the Company will pay Employee (A) an amount equal to (i) the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect) multiplied by (ii) three (3), plus (B) any unpaid portion of the retention bonus described in Section 3(f) above as if Employee remained employed by the Company through May 1, 2006. If Employee terminates his employment for Good Reason under clause (v) of Section 5(c) above, then, in lieu of any other compensation that may be specified herein, the Company will pay Employee (X) an amount equal to (i) the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect) multiplied by (ii) two (2), plus (Y) any unpaid portion of the retention bonus described in Section 3(f) above as if Employee remained employed by the Company through May 1, 2006. The Company will make any payment due under this clause (iv) in a single lump-sum payment not later than 30 days after termination. If any payment obligation under this Section 5(e) arises, no compensation received from other employment (or otherwise) will reduce the Company's obligation to make the payment(s) described in this paragraph. (f) Change in Control. "Change in Control" means a change in control of the Company of a nature that would be required to be reported (assuming such event has not been "previously reported") in response to Item 1(a) of a Current Report on Form 8-K pursuant to Section 13 or 15(d) of the Exchange Act of 1934 (the "Exchange Act"); provided that, without limitation, a Change in Control shall also be deemed to have occurred at such time as: (i) Any "person" within the meaning of Section 14(d) of the Exchange Act, other than the Company; a subsidiary, or any employee benefit plan(s) sponsored by the Company or any Subsidiary, is or has become the "beneficial owner," as defined in rule l3d-3 under the Exchange Act, directly or indirectly, of 25% or more of the combined voting power of the outstanding securities of the Company ordinarily having the right to vote at the election of directors, or (ii) Individuals who constitute the Board immediately prior to any meeting of stockholders (the "Incumbent Board") have ceased for any reason to constitute at least a majority thereof, provided that any person becoming a director whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters (3/4) of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination) will be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) Upon approval by the Company's stockholders of a reorganization, merger, share exchange or consolidation, other than a reorganization, merger, share exchange or consolidation with respect to which those persons who were the beneficial owners, immediately prior to such reorganization, merger, share exchange or consolidation, of outstanding securities of the Company ordinarily having the right to vote in the election of directors own, immediately after such transaction, more than 75% of the outstanding securities of the resulting corporation ordinarily having the right to vote in the election of directors; or (iv) Upon approval by the Company's stockholders of a complete liquidation and dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company other than to a Subsidiary. -5- 6. Nondisclosure, Confidentiality; Competition. (a) Subject to Section 6(f) below, Employee agrees that, during the term of this Agreement and of Employee's employment by the Company, and for a period 12 months after the termination of Employee's employment with the Company, Employee will not in any manner, directly or indirectly, by himself or in conjunction with any other person, (i) conduct any of the activities or perform any of the responsibilities or duties that Employee provided the Company during his employment by the Company for any business entity that is competitive with the business of the Company or its affiliates or (ii) establish or own any financial, beneficial or other interest in (other than an interest consisting of less than one percent (1%) of a class of publicly traded security), make any loan to or for the benefit of, or render any managerial, marketing or other business advice, to any entity that is then conducting activities that are competitive with those of the business of the Company or its affiliates, in either case within a geographic territory defined as a 75-mile radius of any renal dialysis center, unit or facility owned or operated by the Company or an affiliate of the Company. For purposes of this Section, the "business of the Company or its affiliates" means owning or operating a renal dialysis center, unit or facility. Notwithstanding any provision of this Section 6(a) to the contrary, nothing in this Section 6(a) shall be deemed to prevent Employee from providing services to (1) any dialysis operation owned or operated by an academic medical center or an affiliate of an academic medical center, including, without limitation, Vanderbilt Medical Center or Vanderbilt University or any of their affiliates, (whether as an employee or independent contractor of any such party or otherwise); provided that such academic medical center or affiliate does not operate dialysis facilities outside of its principal service or catchment area; or (2) up to three outpatient dialysis facilities, if Employee is engaged in the private practice of medicine following the termination of Employee's employment with the Company. (b) Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee will keep confidential and not directly divulge, or allow through a lack of reasonable care to be divulged to anyone, or use or otherwise appropriate for Employee's own benefit or for the benefit of others, any knowledge or information of a confidential nature with respect to the Company's and its affiliates' current business, the Company itself, or any of its affiliates, including all trade secrets, pricing information, marketing information or technical information (hereinafter referred to as the "Confidential Data"), except for (i) a disclosure that is required by law; or (ii) information that has been made generally available to the public by the act of one who has the right to disclose such information; or (iii) information that has become part of the public domain through no fault of Employee. Employee acknowledges and agrees that the prohibitions against disclosure of Confidential Data recited herein are in addition to, and not in lieu of, any rights or remedies the Company may have available pursuant to the laws of any jurisdiction or at common law to prevent the disclosure of confidential information, and the enforcement by the Company of its rights and remedies pursuant hereto shall not be construed as a waiver of any other rights or available remedies which the Company may possess in law or equity. Employee acknowledges that the Company has taken reasonable and appropriate steps to ensure the confidentiality and non-disclosure of all such Confidential Data. For purposes of this Section the Company's and its affiliates' "current business" means owning or operating a renal dialysis center, unit or facility. (c) Subject to Section 6(f) below, Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee will not, for his own benefit or the benefit of others, solicit any person or entity that has or has had, or disrupt or attempt to disrupt, any relationship, contractual or otherwise, with the Company or an affiliate of the Company (including any patient, payor, physician, provider, managed care organization or supplier) at any time during Employee's employment with the Company, for the purpose of assisting, or creating such a relationship for, any business entity that is competitive with the Company or an affiliate of the Company. -6- For purposes of this Section, a business entity is competitive with the Company or an affiliate of the Company if it provides or offers any renal dialysis service that is provided by the Company or an affiliate of the Company. (d) Subject to Section 6(f) below, Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee shall not induce, nor attempt to induce, any employee of the Company, or any of its affiliates, to terminate such employee's association with the Company or any of its affiliates. (e) These post-employment covenants are considered by the parties hereto to be fair, reasonable and integral for the protection of the Company. The parties mutually agree that if a violation of any of these covenants occurs, such violation or any threatened violation will cause irreparable injury to the Company and the remedy at law for any such violation or threatened violation will be inadequate. The parties acknowledge that these covenants will survive, and remain in effect and enforceable after, termination of this Agreement. (f) The Company agrees that the forgoing covenants in subsections (a), (c) and (d) of this Section 6 shall be null and void as to any period following termination of Employee's employment if such termination occurs within 13 months following a Change in Control through either (A) a termination by the Company without Cause under Section 5(a) above or (B) a resignation by Employee for any reason. (g) Employee agrees to indemnify and hold harmless the Company from and against any and all claims, causes of action, damages and/or any other losses suffered or incurred by the Company as a result of any breach or purported breach by Employee of any agreement applicable to Employee which existed prior to the time of the entering into of this Agreement. The obligations of Employee to indemnify and hold the Company harmless include any and all costs of defense of any such claim or threatened claim, including reasonable attorneys' fees. 7. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, if any payment or distribution by the Company to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 7) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Company will make an additional payment (a "Gross-Up Payment") to Employee in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 7(c), all determinations required to be made under this Section 7, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, will be made by Ernst & Young LLP or such other certified public accounting firm as may be designated by Employee (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Employee within 15 business days of the receipt of notice from Employee that there has -7- been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by the Company to Employee within five business days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Employee. It is possible (due to the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder) that Gross-Up Payments will not have been made by the Company which it is ultimately determined should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. Consequently, if the Company exhausts its remedies pursuant to Section 7(c) and Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and the Company will promptly pay any such Underpayment to or for the benefit of Employee. (c) Employee will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after Employee is informed in writing of such claim, and such notification will apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee will not pay such claim prior to the expiration of the 30-day period following the date on which Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee will: (i) Give the Company any information reasonably requested by the Company relating to such claim, (ii) Take such action in connection with contesting such claim as the Company reasonably requests in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) Cooperate with the Company in good faith in order effectively to contest such claim, and (iv) Permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and will indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 7(c), the Company will control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company may determine; provided, however, that if the Company directs -8- Employee to pay such claim and sue for a refund, the Company will advance the amount of such payment to Employee, on an interest-free basis and will indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Employee will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 7(c), Employee becomes entitled to receive any refund with respect to such claim, Employee will (subject to the Company's complying with the requirements of Section 7(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 7(c), a determination is made that Employee is not entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance will be forgiven and Employee shall not be required to repay and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 8. Severability. The parties hereto hereby expressly agree and contract that it is not the intention of either party to violate any public policy, or any statutory or common law, and that if any paragraph, sentence, clause or combination of the same of this Agreement will be in violation of the laws of any state where applicable, such paragraph, sentence, clause or the combination of the same will be void in the jurisdictions where it is unlawful, and the remainder thereof shall remain binding on the parties hereto. It is the intention of the parties to make the covenants of this Agreement binding only to the extent that they may be lawfully done under existing applicable laws. In the event that any part of any term or covenant of this Agreement is determined by a court of law or equity to be overly broad or otherwise unenforceable, the parties hereto agree that such court shall be empowered to substitute, and it is the intent of the parties hereto that such court substitute, a reasonably judicially enforceable term or limitation in the place of such unenforceable term or covenant, and that as so modified this Agreement will be fully enforceable. 9. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and supersedes any and all prior understandings or agreements, specifically including the Old Agreement. Any changes or additions to this Agreement must be in writing and signed by both parties. If there is any conflict between the terms of this Agreement and any stock option agreement or other agreement between Employee and the Company (including any agreement entered into after the date of this Agreement), then this Agreement will control unless there is specific reference to superseding this Agreement in such other agreement or in this Agreement. -9- 10. Assignment. (a) The rights and benefits of Employee under this Agreement, other than accrued and unpaid amounts due under Section 3(a) hereof, are personal to Employee and are not assignable. (b) This Agreement may not be assigned by the Company except to an affiliate of the Company, provided that such affiliate assumes the Company's obligations under this Agreement; provided, further, that if the Company merges or effects a consolidation or share exchange with or into, or sells or otherwise transfers substantially all its assets to, another business entity, the Company may assign its rights hereunder to that business entity without the consent of the Employee provided that it causes such business entity to assume the Company's obligations under this Agreement and provided, further, that the provisions of Section 5 remain in full force and effect following such assignment. 11. Notice. Unless otherwise specifically provided, references to notice periods of a certain number of "days" contained in this Agreement are references to calendar days. Any notice provided for in this Agreement shall be delivered to Employee at the most recent address of Employee listed in the Company's then current employment records. Notice to the Company shall be delivered to the following address: c/o Renal Care Group, Inc., 2525 West End Avenue, Suite 600, Nashville, Tennessee 37203, Attention: General Counsel. 12. Waiver. The waiver by any party to this Agreement of a breach of any of the provisions contained herein will not operate or be construed as a waiver of any subsequent breach. 13. Disputes and Governing Law. The Company and Employee agree that any dispute arising in connection with, or relating to, this Agreement or the termination of this Agreement, to the maximum extent allowed by applicable law, will be subject to resolution through informal methods and, failing such efforts, through arbitration. Either party may notify the other party of the existence of a dispute by written notice to the address indicated above in Section 11. The parties will thereafter attempt in good faith to resolve their differences within 30 days after the receipt of such notice. If the dispute cannot be resolved within such 30-day period, either party may file a written demand for arbitration with the other party. The arbitration shall proceed in accordance with the terms of the Federal Arbitration Act and the Commercial Arbitration Rules of the American Arbitration Association. A single arbitrator shall be appointed through the American Arbitration Association's procedures to resolve the dispute. The parties agree that in the event arbitration is necessary, the laws of the State of Tennessee and any applicable federal law shall apply. The place of the arbitration shall be Nashville, Tennessee. The award of the arbitrator shall be binding and conclusive upon the parties. Either party shall have the right to have the award made the judgment of a court of competent jurisdiction in the State of Tennessee. In the event of a dispute arising under this Agreement, the prevailing party shall be entitled to all reasonable attorneys' fees incurred in connection with such dispute. The Company and -10- Employee are parties to an Indemnification Agreement effective as of August 13, 2002, which the parties specifically ratify and confirm by this reference. IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on the day and year first above written. COMPANY: RENAL CARE GROUP, INC. By: /s/ Gary A. Brukardt ------------------------------------ Title: President and CEO EMPLOYEE: /s/ Raymond M. Hakim ---------------------------------------- RAYMOND M. HAKIM, M.D., Ph.D. -11- EX-10.12.3 4 g87511exv10w12w3.txt EX-10.12.3 SECOND AMENDMENT TO LOAN AGREEMENT EXHIBIT 10.12.3 SECOND AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT AND CONSENT (MULTI-YEAR FACILITY) THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT AND CONSENT (this "Second Amendment"), dated as of December 23, 2003, is by and among RENAL CARE GROUP, INC., a Delaware corporation (the "Borrower"), the Guarantors, the Lenders party hereto and BANK OF AMERICA, N.A., as Agent for the Lenders (in such capacity, the "Agent"). W I T N E S S E T H: WHEREAS, pursuant to the Second Amended and Restated Loan Agreement (Multi-Year Facility) dated as of July 1, 2001 among the Borrower, the Lenders identified therein and the Agent, as amended by that certain First Amendment to Second Amended and Restated Loan Agreement (Multi-Year Facility) dated as of November 1, 2002 and as further amended or modified from time to time (the "Existing Agreement"), the Lenders have extended commitments to make certain credit facilities available to the Borrower; and WHEREAS, the parties hereto have agreed to amend the Existing Agreement as set forth herein; NOW, THEREFORE, in consideration of the agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: PART I DEFINITIONS SUBPART 1.1 Certain Definitions. Unless otherwise defined herein or the context otherwise requires, the following terms used in this Second Amendment, including its preamble and recitals, shall have the following meanings: "Amended Agreement" means the Existing Agreement as amended hereby. "Second Amendment Effective Date" shall have the meaning set forth in Subpart 3.1. SUBPART 1.2 Other Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Second Amendment, including its preamble and recitals, shall have the meanings provided in the Amended Agreement. PART II AMENDMENTS TO EXISTING AGREEMENT Effective on (and subject to the occurrence of) the Second Amendment Effective Date, the Existing Agreement is hereby amended in accordance with this Part II. Except as so amended, the Existing Agreement shall continue in full force and effect. SUBPART 2.1 Amendment to 6.15. Subclause (c) of Section 6.15 of the Existing Agreement is hereby amended and restated in its entirety to read as follows: (c) so long as no Default or Event of Default exists prior to and after giving effect to such transaction, the Borrower may, from and after November 1, 2002, repurchase shares of its Capital Stock in an amount not to exceed $450,000,000 in the aggregate, PART III CONSENT Pursuant to clause (c) of the definition of Permitted Acquisition in Section 1.1 of the Existing Agreement, the Required Lenders hereby consent to the purchase of substantially all of the assets of Midwest Kidney Centers, LLC, Acute Renal Services, LLC, MKC-Decatur, LLC, Quality Kidney Care, LLC, Kidney Care, LLC, and Midwest Renal Support, LLC for Cash Consideration and non-cash consideration in an aggregate amount not to exceed $55,830,000 provided that such acquisition satisfies all of the other criteria identified in the definition of Permitted Acquisition. PART IV CONDITIONS TO EFFECTIVENESS SUBPART 4.1 Second Amendment Effective Date. This Second Amendment shall become effective (the "Second Amendment Effective Date") when the Agent shall have received counterparts of this Second Amendment, which collectively shall have been duly executed on behalf of each of the Borrower, the Guarantors, the Agent and the Required Lenders. PART V MISCELLANEOUS SUBPART 5.1 Cross-References. References in this Second Amendment to any Part or Subpart are, unless otherwise specified, to such Part or Subpart of this Second Amendment. 2 SUBPART 5.2 References in Other Loan Documents. At such time as this Second Amendment shall become effective pursuant to the terms of Subpart 4.1, all references in the Existing Agreement to the "Agreement" and all references in the other Loan Documents to the "Agreement" shall be deemed to refer to the Amended Agreement. SUBPART 5.3 Acknowledgment. The Credit Parties acknowledge and confirm (a) that the Agent, on behalf of the Lenders, has a valid and enforceable first priority security interest in the Collateral, (b) that the Borrower's obligation to repay the outstanding principal amount of the Loans and reimburse the Issuing Lender for any drawing on a Letter of Credit is unconditional and not subject to any offsets, defenses or counterclaims and (c) that the Agent and the Lenders have performed fully all of their respective obligations under the Existing Agreement and the other Loan Documents. Furthermore, the Guarantors (a) acknowledge and consent to all of the terms and conditions of this Second Amendment, (b) affirm all of their obligations under the Loan Documents and (c) agree that this Second Amendment and all documents executed in connection herewith do not operate to reduce or discharge the Guarantors' obligations under the Guaranty Agreement or the other Loan Documents. SUBPART 5.4 Representations and Warranties. The Credit Parties hereby represent and warrant that (a) the representations and warranties contained in Article IV of the Amended Agreement are correct in all material respects on and as of the date hereof as though made on and as of such date and after giving effect to the amendments contained herein, (b) no Default or Event of Default exists under the Existing Agreement on and as of the date hereof and (c) each Credit Party has taken all necessary action to authorize the execution, delivery and performance of this Second Amendment. SUBPART 5.5 Counterparts. This Second Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Delivery by facsimile by any of the parties hereto of an executed counterpart of this Second Amendment shall be effective as an original executed counterpart hereof and shall be deemed a representation that an original executed counterpart will be delivered. SUBPART 5.6 Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA. SUBPART 5.7 Successors and Assigns. This Second Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. [The remainder of this page is intentionally left blank.] 3 Each of the parties hereto has caused a counterpart of this Second Amendment to be duly executed and delivered as of the date first above written. BORROWER: RENAL CARE GROUP, INC. a Delaware corporation By: _____________________________________ Name: ___________________________________ Title: __________________________________ GUARANTORS: RENAL CARE GROUP EAST, INC., a Pennsylvania corporation RENAL CARE GROUP MICHIGAN, INC., a Delaware corporation MICHIGAN HOME DIALYSIS CENTER, INC., a Michigan corporation RENAL CARE GROUP OF THE MIDWEST, INC., a Kansas corporation FOUR STATE REGIONAL DIALYSIS CENTER, INC., a Missouri corporation FORT SCOTT REGIONAL DIALYSIS CENTER, INC., a Missouri corporation MIAMI REGIONAL DIALYSIS CENTER, INC., a Missouri corporation RCG MISSISSIPPI, INC., a Delaware corporation RENAL CARE GROUP OF THE SOUTHEAST, INC., a Florida corporation NORTHEAST ALABAMA KIDNEY CLINIC, INC., an Alabama corporation RENAL CARE GROUP TEXAS, INC., a Texas corporation Second Amendment to Second Amended and Restated Loan Agreement Renal Care Group DIALYSIS MANAGEMENT CORPORATION, a Texas corporation RCG PA MERGER CORP., a Texas corporation STAT DIALYSIS CORPORATION, a Delaware corporation ANGLETON DIALYSIS, INC., a Texas corporation BRAZORIA KIDNEY CENTER, INC., a Texas corporation FONDREN DIALYSIS CLINIC, INC., a Texas corporation WHARTON DIALYSIS, INC., a Texas corporation JEFFERSON COUNTY DIALYSIS, INC., an Arkansas corporation KDCO, INC., an Arkansas corporation LAWTON DIALYSIS, INC., an Arkansas corporation LITTLE ROCK DIALYSIS, INC., an Arkansas corporation NORTHWEST DIALYSIS, INC., an Arkansas corporation RENALAB, INC., a Delaware corporation RENALPARTNERS, INC., a Delaware corporation RENALNET, INC., a Delaware corporation Second Amendment to Second Amended and Restated Loan Agreement Renal Care Group WOUND CARE GROUP, INC. a Delaware corporation DIABETES CARE GROUP, INC. a Delaware corporation RENAL CARE GROUP ARIZONA, INC. an Arizona corporation RENAL CARE GROUP NORTHWEST, INC., a Delaware corporation RENALNET, ARIZONA, INC., an Arizona corporation RCG UNIVERSITY DIVISION, INC. a Tennessee corporation RCG SUPPLY COMPANY, a Tennessee corporation RENAL CARE GROUP ALASKA, INC., an Alaska corporation RENAL CARE GROUP SOUTHWEST HOLDINGS, INC., a Texas corporation DIALYSIS CENTERS OF AMERICA - ILLINOIS, INC., an Illinois corporation SSKG, INC., an Illinois corporation RENAL CARE GROUP OHIO, INC., a Delaware corporation PHYSICIANS DIALYSIS COMPANY, INC., an Ohio corporation By: ______________________________________ Name: ______________________________________ Title: ______________________________________ Second Amendment to Second Amended and Restated Loan Agreement Renal Care Group RCG FINANCE, INC., a Delaware corporation By: ______________________________________ Name: ______________________________________ Title: ______________________________________ DIALYSIS LICENSING CORP., a Delaware corporation RCGIH, INC. a Delaware corporation By: ______________________________________ Name: ______________________________________ Title: ______________________________________ RCG INDIANA, LLC, a Delaware limited liability company By: Renal Care Group, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ By: Renal Care Group Arizona, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ Second Amendment to Second Amended and Restated Loan Agreement Renal Care Group KIDNEY DISEASE CENTERS OF THE OZARKS, LLC a Missouri limited liability company By: Renal Care Group, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ STUTTGART DIALYSIS, LLC, an Arkansas limited liability company By: Little Rock Dialysis, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ By: Jefferson County Dialysis, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ RCG WEST HEALTH SUPPLY, LLC, an Arizona limited liability company By: Renal Care Group, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ By: Renal Care Group Arizona, Inc.. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ Second Amendment to Second Amended and Restated Loan Agreement Renal Care Group KENTUCKY RENAL CARE GROUP, LLC, a Delaware limited liability company By: ______________________________________ Name: ______________________________________ Title: ______________________________________ RENAL CARE GROUP SOUTHWEST, L.P. a Delaware limited partnership By: Renal Care Group Arizona, Inc., an Arizona corporation Its: General Partner By: ______________________________________ Name: ______________________________________ Title: ______________________________________ Second Amendment to Second Amended and Restated Loan Agreement Renal Care Group AGENT: BANK OF AMERICA, N.A., as Agent By: ______________________________________ Name: ______________________________________ Title: ______________________________________ LENDERS: BANK OF AMERICA, N. A., as a Lender By: ______________________________________ Name: ______________________________________ Title: ______________________________________ WELLS FARGO BANK, NATIONAL ASSOCIATION By: ______________________________________ Name: ______________________________________ Title: ______________________________________ SUNTRUST BANK By: ______________________________________ Name: ______________________________________ Title: ______________________________________ AMSOUTH BANK By: ______________________________________ Name: ______________________________________ Title: ______________________________________ Second Amendment to Second Amended and Restated Loan Agreement Renal Care Group EX-10.12.4 5 g87511exv10w12w4.txt EX-10.12.4 THIRD AMENDMENT TO LOAN AGREEMENT EXHIBIT 10.12.4 THIRD AMENDMENT TO LOAN AGREEMENT AND CONSENT (364-DAY FACILITY) THIS THIRD AMENDMENT TO LOAN AGREEMENT AND CONSENT (this "Third Amendment"), dated as of December 23, 2003, is by and among RENAL CARE GROUP, INC., a Delaware corporation (the "Borrower"), the Guarantors, the Lenders party hereto and BANK OF AMERICA, N.A., as Agent for the Lenders (in such capacity, the "Agent"). W I T N E S S E T H: WHEREAS, pursuant to the Loan Agreement (364-Day Facility) dated as of July 1, 2001 among the Borrower, the Lenders identified therein and the Agent, as amended by that certain First Amendment to Loan Agreement (364-Day Facility) dated as of November 1, 2002, that certain Second Amendment dated as of June 27, 2003 and as further amended or modified from time to time (the "Existing Agreement"), the Lenders have extended commitments to make certain credit facilities available to the Borrower; and WHEREAS, the parties hereto have agreed to amend the Existing Agreement as set forth herein; NOW, THEREFORE, in consideration of the agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: PART I DEFINITIONS SUBPART 1.1 Certain Definitions. Unless otherwise defined herein or the context otherwise requires, the following terms used in this Third Amendment, including its preamble and recitals, shall have the following meanings: "Amended Agreement" means the Existing Agreement as amended hereby. "Third Amendment Effective Date" shall have the meaning set forth in Subpart 3.1. SUBPART 1.2 Other Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Third Amendment, including its preamble and recitals, shall have the meanings provided in the Amended Agreement. PART II AMENDMENTS TO EXISTING AGREEMENT Effective on (and subject to the occurrence of) the Third Amendment Effective Date, the Existing Agreement is hereby amended in accordance with this Part II. Except as so amended, the Existing Agreement shall continue in full force and effect. SUBPART 2.1 Amendment to 6.15. Subclause (c) of Section 6.15 of the Existing Agreement is hereby amended and restated in its entirety to read as follows: (c) so long as no Default or Event of Default exists prior to and after giving effect to such transaction, the Borrower may, from and after November 1, 2002, repurchase shares of its Capital Stock in an amount not to exceed $450,000,000 in the aggregate, PART III CONSENT Pursuant to clause (c) of the definition of Permitted Acquisition in Section 1.1 of the Existing Agreement, the Required Lenders hereby consent to the purchase of substantially all of the assets of Midwest Kidney Centers, LLC, Acute Renal Services, LLC, MKC-Decatur, LLC, Quality Kidney Care, LLC, Kidney Care, LLC, and Midwest Renal Support, LLC for Cash Consideration and non-cash consideration in an aggregate amount not to exceed $55,830,000 provided that such acquisition satisfies all of the other criteria identified in the definition of Permitted Acquisition. PART IV CONDITIONS TO EFFECTIVENESS SUBPART 4.1 Third Amendment Effective Date. This Third Amendment shall become effective (the "Third Amendment Effective Date") when the Agent shall have received counterparts of this Third Amendment, which collectively shall have been duly executed on behalf of each of the Borrower, the Guarantors, the Agent and the Required Lenders. PART V MISCELLANEOUS SUBPART 5.1 Cross-References. References in this Third Amendment to any Part or Subpart are, unless otherwise specified, to such Part or Subpart of this Third Amendment. SUBPART 5.2 References in Other Loan Documents. At such time as this Third Amendment shall become effective pursuant to the terms of Subpart 4.1, all 2 references in the Existing Agreement to the "Agreement" and all references in the other Loan Documents to the "Agreement" shall be deemed to refer to the Amended Agreement. SUBPART 5.3 Acknowledgment. The Credit Parties acknowledge and confirm (a) that the Agent, on behalf of the Lenders, has a valid and enforceable first priority security interest in the Collateral, (b) that the Borrower's obligation to repay the outstanding principal amount of the Loans is unconditional and not subject to any offsets, defenses or counterclaims and (c) that the Agent and the Lenders have performed fully all of their respective obligations under the Existing Agreement and the other Loan Documents. Furthermore, the Guarantors (a) acknowledge and consent to all of the terms and conditions of this Third Amendment, (b) affirm all of their obligations under the Loan Documents and (c) agree that this Third Amendment and all documents executed in connection herewith do not operate to reduce or discharge the Guarantors' obligations under the Guaranty Agreement or the other Loan Documents. SUBPART 5.4 Representations and Warranties. The Credit Parties hereby represent and warrant that (a) the representations and warranties contained in Article IV of the Amended Agreement are correct in all material respects on and as of the date hereof as though made on and as of such date and after giving effect to the amendments contained herein, (b) no Default or Event of Default exists under the Existing Agreement on and as of the date hereof and (c) each Credit Party has taken all necessary action to authorize the execution, delivery and performance of this Third Amendment. SUBPART 5.5 Counterparts. This Third Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Delivery by facsimile by any of the parties hereto of an executed counterpart of this Third Amendment shall be effective as an original executed counterpart hereof and shall be deemed a representation that an original executed counterpart will be delivered. SUBPART 5.6 Governing Law. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA. SUBPART 5.7 Successors and Assigns. This Third Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. [The remainder of this page is intentionally left blank.] 3 Each of the parties hereto has caused a counterpart of this Third Amendment to be duly executed and delivered as of the date first above written. BORROWER: RENAL CARE GROUP, INC. a Delaware corporation By: ________________________________ Name: ________________________________ Title: _______________________________ GUARANTORS: RENAL CARE GROUP EAST, INC., a Pennsylvania corporation RENAL CARE GROUP MICHIGAN, INC., a Delaware corporation MICHIGAN HOME DIALYSIS CENTER, INC., a Michigan corporation RENAL CARE GROUP OF THE MIDWEST, INC., a Kansas corporation FOUR STATE REGIONAL DIALYSIS CENTER, INC., a Missouri corporation FORT SCOTT REGIONAL DIALYSIS CENTER, INC., a Missouri corporation MIAMI REGIONAL DIALYSIS CENTER, INC., a Missouri corporation RCG MISSISSIPPI, INC., a Delaware corporation RENAL CARE GROUP OF THE SOUTHEAST, INC., a Florida corporation NORTHEAST ALABAMA KIDNEY CLINIC, INC., an Alabama corporation RENAL CARE GROUP TEXAS, INC., a Texas corporation Third Amendment to Loan Agreement (364-Day Facility) Renal Care Group DIALYSIS MANAGEMENT CORPORATION, a Texas corporation RCG PA MERGER CORP., a Texas corporation STAT DIALYSIS CORPORATION, a Delaware corporation ANGLETON DIALYSIS, INC., a Texas corporation BRAZORIA KIDNEY CENTER, INC., a Texas corporation FONDREN DIALYSIS CLINIC, INC., a Texas corporation WHARTON DIALYSIS, INC., a Texas corporation JEFFERSON COUNTY DIALYSIS, INC., an Arkansas corporation KDCO, INC., an Arkansas corporation LAWTON DIALYSIS, INC., an Arkansas corporation LITTLE ROCK DIALYSIS, INC., an Arkansas corporation NORTHWEST DIALYSIS, INC., an Arkansas corporation RENALAB, INC., a Delaware corporation RENALPARTNERS, INC., a Delaware corporation RENALNET, INC., a Delaware corporation Third Amendment to Loan Agreement (364-Day Facility) Renal Care Group WOUND CARE GROUP, INC. a Delaware corporation DIABETES CARE GROUP, INC. a Delaware corporation RENAL CARE GROUP ARIZONA, INC. an Arizona corporation RENAL CARE GROUP NORTHWEST, INC., a Delaware corporation RENALNET, ARIZONA, INC., an Arizona corporation RCG UNIVERSITY DIVISION, INC. a Tennessee corporation RCG SUPPLY COMPANY, a Tennessee corporation RENAL CARE GROUP ALASKA, INC., an Alaska corporation RENAL CARE GROUP SOUTHWEST HOLDINGS, INC., a Texas corporation DIALYSIS CENTERS OF AMERICA - ILLINOIS, INC., an Illinois corporation SSKG, INC., an Illinois corporation RENAL CARE GROUP OHIO, INC., a Delaware corporation PHYSICIANS DIALYSIS COMPANY, INC., an Ohio corporation By: ______________________________________ Name: ______________________________________ Title: ______________________________________ Third Amendment to Loan Agreement (364-Day Facility) Renal Care Group RCG FINANCE, INC., a Delaware corporation By: ______________________________________ Name: ______________________________________ Title: ______________________________________ DIALYSIS LICENSING CORP., a Delaware corporation RCGIH, INC. a Delaware corporation By: ______________________________________ Name: ______________________________________ Title: ______________________________________ RCG INDIANA, LLC, a Delaware limited liability company By: Renal Care Group, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ By: Renal Care Group Arizona, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ Third Amendment to Loan Agreement (364-Day Facility) Renal Care Group KIDNEY DISEASE CENTERS OF THE OZARKS, LLC a Missouri limited liability company By: Renal Care Group, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ STUTTGART DIALYSIS, LLC, an Arkansas limited liability company By: Little Rock Dialysis, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ By: Jefferson County Dialysis, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ RCG WEST HEALTH SUPPLY, LLC, an Arizona limited liability company By: Renal Care Group, Inc. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ By: Renal Care Group Arizona, Inc.. Its: Member By: _________________________________ Name: _________________________________ Title: _________________________________ Third Amendment to Loan Agreement (364-Day Facility) Renal Care Group KENTUCKY RENAL CARE GROUP, LLC, a Delaware limited liability company By: ______________________________________ Name: ______________________________________ Title: ______________________________________ RENAL CARE GROUP SOUTHWEST, L.P. a Delaware limited partnership By: Renal Care Group Arizona, Inc., an Arizona corporation Its: General Partner By: ______________________________________ Name: ______________________________________ Title: ______________________________________ Third Amendment to Loan Agreement (364-Day Facility) Renal Care Group AGENT: BANK OF AMERICA, N.A., as Agent By: ______________________________________ Name: ______________________________________ Title: ______________________________________ LENDERS: BANK OF AMERICA, N. A., as a Lender By: ______________________________________ Name: ______________________________________ Title: ______________________________________ WELLS FARGO BANK, NATIONAL ASSOCIATION By: ______________________________________ Name: ______________________________________ Title: ______________________________________ SUNTRUST BANK By: ______________________________________ Name: ______________________________________ Title: ______________________________________ AMSOUTH BANK By: ______________________________________ Name: ______________________________________ Title: ______________________________________ Third Amendment to Loan Agreement (364-Day Facility) Renal Care Group EX-10.2.1 6 g87511exv10w2w1.txt EX-10.2.1 AMENDMENT NO.1 TO MEDICAL AGREEMENT EXHIBIT 10.2.1 AMENDMENT NUMBER 1 TO MEDICAL DIRECTOR SERVICES AGREEMENT THIS AMENDMENT NUMBER 1 TO MEDICAL DIRECTOR SERVICES AGREEMENT (this "Amendment") is made and entered into as of the 1st day of January, 1999, by and between RCG INDIANA, LLC, a Delaware limited liability company as assignee of Renal Care Group, Inc. (the "Company"), and INDIANA DIALYSIS MANAGEMENT, P.C., an Indiana corporation (the "Group "). WITNESSETH: WHEREAS, Renal Care Group, Inc. and the Group are parties to a Medical Director Services Agreement (Group Practice/Freestanding Facility), effective as of February 12, 1996 (the "Agreement"), under which the Group agrees to provide medical director services for the Company's dialysis facilities located in and near Ft. Wayne, Indiana, which Agreement was assigned by Renal Care Group, Inc. to the Company; and WHEREAS, the parties to this Amendment now desire to make certain modifications and amendments to the Agreement as provided herein; and WHEREAS, capitalized terms that are used but not defined in this Amendment that are defined in the Agreement shall have the meanings set forth in the Agreement; NOW, THEREFORE, in consideration of the mutual promises, covenants and undertakings set forth in this Amendment and in the Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Amendment hereby agree as follows: 1. Compensation. The parties agree that Section 3.1 of the Agreement is hereby amended by deleting such section in its entirety and inserting in lieu thereof, the following: 3.1 Compensation. (a) In consideration of the services, covenants, and agreements agreed to be performed by the Group during the Initial Term and any Renewal Term, effective as of February 12, 1999, the Company shall pay the Group $500,000 per year, payable in substantially equal monthly installments. The parties agree that this medical director fee will be fixed for the years ending February 11, 2000, 2001 and 2002. The Group agrees to accept the payment under this subsection (a) (as it may be adjusted as provided below) as the total compensation for all services, covenants and agreements pursuant to this Agreement. (b) (i) Beginning 90 days prior to February 12, 2002 and each year thereafter, if either party believes that the fair market value of the services provided by the Group under this Agreement has changed in any material way since the most recent anniversary of the effective date of a change in compensation payable under this Agreement (a "Compensation Adjustment Date") (or since February 12, 1999 with respect to the Compensation Adjustment Date occurring on February 12, 2002), then such party may notify the other that it believes such a change has occurred and the Group and the Company shall negotiate in good faith an adjustment to the compensation described in Section 3.1(a) above so that it represents fair market value for the duties and responsibilities of the Group to be provided during the next year under this Agreement. Notwithstanding the foregoing, no adjustment pursuant to this subsection (b)(i) to the compensation payable under this Agreement shall be effective unless set forth in writing signed by each of the Group and the Company, which writing shall be deemed an amendment to this Agreement. (ii) If the Group and the Company are unable to agree on an adjustment, then either may require that an adjustment of the compensation hereunder be submitted to a qualified independent third party mutually selected by both the Group and the Company to determine the fair market value of the services required hereunder, the costs and fees of which shall be borne equally by the Group and the Company. If the Group and the Company are unable to agree on the third party, then each of the Company and the Group shall at its own cost and expense select its own qualified independent third party and the average of such two determinations of fair market value shall be the revised compensation unless such determinations are more than 10% apart, in which case such third parties shall mutually select an additional qualified independent third party, the fees and expenses of which shall be shared equally, who shall determine the fair market value of the services hereunder from between the range of the amounts determined by the first two appraisals. The fair market value of the services as determined in accordance with the provisions of this subsection (b)(ii) shall be the compensation payable under this Agreement effective as of the applicable anniversary of the Compensation Adjustment Date, and such final determination shall be deemed an amendment to this Agreement. (c) Any change to the compensation payable hereunder in accordance with subsection (b) of this Section 3.1 shall be effective as of the applicable anniversary of the Compensation Adjustment Date and shall remain effective, and not subject to adjustment under Section 3.1(b) or otherwise, for at least 12 months from the effective date of such change. 2. No Further Amendment. Except as expressly modified and amended by this Amendment, the parties agree that the Agreement shall continue in full force and effect as provided therein, and the parties reaffirm all of its provisions. 3. Miscellaneous. The section and other headings used in this Amendment are for convenience of reference only and shall not affect the interpretation of this Agreement in any way. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original for all purposes and all of which shall be deemed, collectively, one agreement. [the remainder of this page intentionally left blank, signatures follow] 2 IN WITNESS WHEREOF, this Amendment is executed effective as of the date first set forth above. The Company: RCG INDIANA, LLC By: /s/ R. Dirk Allison --------------------------------------- Title: Vice President of Manager ------------------------------------ The Group INDIANA DIALYSIS MANAGEMENT, P.C. By: /s/ Stephen D. McMurray --------------------------------------- Title: President ------------------------------------ 3 Each physician executing below acknowledges that he or she has read and understood the terms of this Amendment and the Agreement amended hereby and hereby confirms and ratifies the acknowledgement set forth in Section 6.1(i) of the Agreement and the agreements set forth in Article VII of the Agreement, as provided therein. /s/ Stephen D. McMurray -------------------------------------- STEPHEN D. McMURRAY, M.D. /s/ Robert L. Dettmer -------------------------------------- ROBERT L. DETTMER, M.D. /s/ Richard Nelson -------------------------------------- RICHARD NELSON, M.D. /s/ John Dyer -------------------------------------- JOHN DYER, M.D. -------------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- 4 EX-10.2.2 7 g87511exv10w2w2.txt EX-10.2.2 AMENDMENT NO.2 TO MEDICAL AGREEMENT EXHIBIT 10.2.2 AMENDMENT NUMBER 2 TO MEDICAL DIRECTOR SERVICES AGREEMENT THIS AMENDMENT NUMBER 2 TO MEDICAL DIRECTOR SERVICES AGREEMENT (this "Amendment") is made and entered into as of the 12th day of February, 2002, by and between RCG INDIANA, LLC, a Delaware limited liability company as assignee of Renal Care Group, Inc. (the "Company"), and INDIANA DIALYSIS MANAGEMENT, a division of INDIANA MEDICAL ASSOCIATES, an Indiana corporation (the "Group "). WITNESSETH: WHEREAS, Renal Care Group, Inc. and the predecessor of the Group, Indiana Dialysis Management, P.C., are parties to a Medical Director Services Agreement (Group Practice/Freestanding Facility), effective as of February 12, 1996, which was amended by Amendment Number 1 to Medical Director Services Agreement, effective as of January 1, 1999 (as so amended, the "Agreement"), under which the Group agrees to provide medical director services for the Company's dialysis facilities located in and near Ft. Wayne, Indiana, which Agreement was assigned by Renal Care Group, Inc. to the Company; and WHEREAS, by mutual agreement, the Agreement has been amended to add additional facilities developed in and near Ft. Wayne, Indiana, including facilities owned by the Company in joint ventures with the Group; and WHEREAS, the parties to this Amendment now desire to make certain modifications and amendments to the Agreement as provided herein; and WHEREAS, capitalized terms that are used but not defined in this Amendment that are defined in the Agreement shall have the meanings set forth in the Agreement; NOW, THEREFORE, in consideration of the mutual promises, covenants and undertakings set forth in this Amendment and in the Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Amendment hereby agree as follows: 1. Facilities. The parties agree that the definition of "Facilities" is hereby amended by deleting the current definition thereof in the Agreement. In lieu of such definition, for purposes of the Agreement the term "Facilities" means those dialysis facilities owned in whole or in part by the Company that are located within the Territory (as defined in the Agreement), including the facilities listed on EXHIBIT A attached to this Amendment and any new facilities developed by the Company or an affiliate of the Company within the Territory; provided, however, that "Facilities" shall not include any dialysis facilities that are acquired by the Company or an affiliate of the Company from an unrelated third party. 2. Compensation. The parties agree that Section 3.1 of the Agreement is hereby amended by deleting such section in its entirety and inserting in lieu thereof, the following: 3.1 Compensation. (a) In consideration of the services, covenants, and agreements agreed to be performed by the Group during the Initial Term and any Renewal Term, effective as of February 12, 2002, the Company shall pay the Group $620,000 per year, payable in substantially equal monthly installments. The installment for the month of February 2002 will be $47,381.22, and the installment for the 12-day period ending February 12, 2006 will be $22,142.86. The parties agree that this $620,000 per year medical director fee will be fixed for the years ending February 11, 2003, 2004, 2005 and 2006. In addition to the monthly medical director fee prescribed above, the Group shall be eligible for an annual bonus of up to 15% of the base medical director compensation paid during the year based upon the success of the Facility in meeting annual clinical outcomes targets and in achieving performance objectives for the Facilities and the Group generally prescribed by Renal Care Group, Inc. ("RCG") for its dialysis facilities in the region in which the Facilities are located. This bonus shall be payable on a calendar year basis, and it will be prorated for years in which this Agreement (and this bonus provision) is in force for less than the entire year. The criteria for reviewing and determining the bonus amount will be substantially similar to those attached hereto as EXHIBIT C. RCG may change such criteria annually, and the Company will provide the revised criteria to the Group when adopted. The amount of the bonus payable to the Group shall be determined by reviewing such criteria for all Facilities. If the Facilities (as a group) are in the top quartile (the top 25%) of RCG facilities, then the bonus will be 15%; if the Facilities are in the second quartile, then the bonus will be 10%; if the Facilities are in the third quartile, then the bonus will be 5%; if the Facilities are in the bottom quartile, no bonus will be paid. The Group agrees to accept the payment under this subsection (a) (as it may be adjusted as provided below) as the total compensation for all services, covenants and agreements pursuant to this Agreement. (b) (i) Beginning 90 days prior to February 12, 2006 and each year thereafter, if either party believes that the fair market value of the services provided by the Group under this Agreement has changed in any material way since the most recent anniversary of the effective date of a change in compensation payable under this Agreement (a "Compensation Adjustment Date") (or since February 12, 2002 with respect to the Compensation Adjustment Date occurring on February 12, 2006), then such party may notify the other that it believes such a change has occurred and the Group and the Company shall negotiate in good faith an adjustment to the compensation described in Section 3.1(a) above so that it represents fair market value for the duties and responsibilities of the Group to be provided during the next year under this Agreement. Notwithstanding the foregoing, no adjustment pursuant to this subsection (b)(i) to the compensation payable under this Agreement shall be effective unless set forth in writing signed by each of the Group and the Company, which writing shall be deemed an amendment to this Agreement. (ii) If the Group and the Company are unable to agree on an adjustment, then either may require that an adjustment of the compensation hereunder be submitted to a qualified independent third party mutually selected by both the Group and the Company to determine the fair market value of the services required hereunder, the costs and fees of which shall be borne equally by the Group and the Company. If the Group and the Company are unable to agree on the third party, then each of the Company and the Group shall at its own cost and expense select its own qualified independent third party and the average of such two determinations of fair market value shall be the revised compensation unless such determinations are more than 10% apart, in which case such third parties shall mutually select an additional qualified independent third party, the fees and expenses of which shall be shared equally, who shall determine the fair market value of the services hereunder from between the range of the amounts determined by the first 2 two appraisals. The fair market value of the services as determined in accordance with the provisions of this subsection (b)(ii) shall be the compensation payable under this Agreement effective as of the applicable anniversary of the Compensation Adjustment Date, and such final determination shall be deemed an amendment to this Agreement. (c) Any change to the compensation payable hereunder in accordance with subsection (b) of this Section 3.1 shall be effective as of the applicable anniversary of the Compensation Adjustment Date and shall remain effective, and not subject to adjustment under Section 3.1(b) or otherwise, for at least 12 months from the effective date of such change. 2. No Further Amendment. Except as expressly modified and amended by this Amendment, the parties agree that the Agreement shall continue in full force and effect as provided therein, and the parties reaffirm all of its provisions. 3. Miscellaneous. The section and other headings used in this Amendment are for convenience of reference only and shall not affect the interpretation of this Agreement in any way. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original for all purposes and all of which shall be deemed, collectively, one agreement. [the remainder of this page intentionally left blank, signatures follow] 3 IN WITNESS WHEREOF, this Amendment is executed effective as of the date first set forth above. The Company: RCG INDIANA, LLC By: /s/ R. Dirk Allison ----------------------------------------- Title: Vice President of Manager The Group INDIANA DIALYSIS MANAGEMENT a division of INDIANA MEDICAL ASSOCIATES By: /s/ Stephen D. McMurray ----------------------------------------- Title: President -------------------------------------- 4 Each physician executing below acknowledges that he or she has read and understood the terms of this Amendment and the Agreement amended hereby and hereby confirms and ratifies the acknowledgement set forth in Section 6.1(i) of the Agreement and the agreements set forth in Article VII of the Agreement, as provided therein. /s/ Stephen D. McMurray --------------------------------------- STEPHEN D. McMURRAY, M.D. /s/ John Ducker --------------------------------------- JOHN DUCKER, M.D. /s/ Samuel Eby --------------------------------------- SAMUEL EBY, M.D. /s/ John Dyer --------------------------------------- JOHN DYER, M.D. /s/ Greg Johnson --------------------------------------- GREG JOHNSON, D.O. /s/ Andrew O'Shaughnessy --------------------------------------- ANDREW O'SHAUGHNESSY, M.D. --------------------------------------- --------------------------------------- --------------------------------------- --------------------------------------- 5 EXHIBIT A LIST OF FACILITIES RCG Van Wert RCG DuPont Road 140 Fox Road, Suite 405 10204 Dupont Circle Drive Van Wert, Ohio 45891 Fort Wayne, Indiana 46825 Northeast Indiana Kidney Center - Auburn Regional Dialysis Center of Williams County 1147 W. 15th Street 537 W. High Street Auburn, Indiana 46706 Bryan, Ohio 43506 Northeast Indiana Kidney Center - Decatur Northeast Indiana Kidney Center - Ft. Wayne 1029 S. 13th Street 7910 W. Jefferson Blvd., Suite L10 Decatur, Indiana 46733 Fort Wayne, Indiana 46804 Northeast Indiana Kidney Center - Marion Northeast Indiana Kidney Center - New Haven 1797 Kem Road 1308 Minnich Road Marion, Indiana 46952 New Haven, Indiana 46774 Northeast Indiana Kidney Center - Warsaw 3334 Lake City Highway Warsaw, Indiana 46580 6 EXHIBIT C MEDICAL DIRECTOR PERFORMANCE REVIEW There has been general agreement regarding the need for a clear set of guidelines and expectations of an RCG Medical Director. Objectivity in the annual performance evaluation has been prerequisite, leading to the development of this document. Our mission is "to improve the quality of life and to care for those patients with chronic and acute renal disease." This requires that the dialysis facility and its staff function collaboratively at the highest possible level, under the leadership of the Medical Director. The Interpretive Guidelines for ESRD Facilities states in V-420 "Treatment is under the general supervision of a Director who is a physician. The Medical Director is responsible for planning, organizing, conducting and directing the professional ESRD services and must devote sufficient time to carrying out these responsibilities." The Nephrologist has the medical skills and must develop leadership and collaborative management skills to fulfill this mandate as Medical Director. Teamwork and collegiality are highly valued as the leader of the ESRD team. The measure of performance will be based on a point system as authorized by the Medical Advisory Board (MAB). The specific criteria and weight may be changed in the future at the discretion of the MAB. The elements to be measured and their weight are as follows: - 50% based on Clinical Indicators of the Facility - 30% based on Medical Director administrative duties - 20% based on patient satisfaction with the Facility CLINICAL PERFORMANCE MEASURES (50%) HEMODIALYSIS MEDICAL DIRECTOR (evaluation based on annual rolling average of prior year) - - URR (% of patients with URRs >=70%) >75% = 10 points RCG average 65% 70-75% = 8 points Best Region 72.8% 65-69.9% = 6 points 60-64.9% = 4 points <60% = 0 points - - HEMATOCRIT (% of Hcts >=33%) >75% = 10 points RCG average 63.7% 70-75% = 8 points Best Region 70.2 65-69.9% = 6 points 60-64.9% = 4 points 55-59.9% = 2 points <55% = 0 points - - HOSPITALIZATION (91+ days, based on days per patient year at risk) RCG average 12.0 days < 10 days = 8 points Best Region 8.6 days 10-14.9 days = 6 points 15-20 days = 2 points >20 days = 0 points 7 - - MORTALITY (91+ days, based on deaths per 100 patient years at risk) RCG average 20.7 < 20 = 8 points Best Region 15.5 20-23.9 = 6 points 24-29.9 = 4 points 30-35 = 2 points >35 = 0 points - - VASCULAR ACCESS: - - % OF TEMPORARY CATHETERS < 10% = 8 points RCG average 19.8% 10-14.9% = 6 points Best Region 10.7% 15-19.9% = 4 points 20-25% = 2 points >25% = 0 points % NATIVE AV FISTULAS >35% = 15 points RCG average 22% 30-34.9% = 12 points Best Region 33.6% 25-29.9% = 9 points 20-24% = 6 points 15-19.9% = 3 points <15% = 0 points PTFE CLOTTING EVENTS/PATIENT YEAR < 0.3 = 10 points RCG average 0.9 0.3 - 0.59 = 8 points Best Region 0.6 0.6 - 0.99 = 9 points 1.0 - 1.2 = 4 points >1.2 = 0 points PERITONEAL DIALYSIS MEDICAL DIRECTOR (VALUATION BASED ON ANNUAL ROLLING AVERAGE OF PRIOR YEAR) - - KT/V (>=2.1) RCG average 63.5% CAPD > 65 = 15 points RCG average 70.6% CCPD 60-65% = 12 points 55-59.9% = 10 points 50-54.9% = 8 points 45-49.9% = 5 points - - CREATININE CLEARANCE (>=60L CAPD or >=60 L CCPD) RCG average 67.1% CAPD > 70% = 15 points RCG average 70.6% CCPD 65-70% = 12 points 60-64.9% = 10 points 55-59.9% = 8 points 50-54.9% = 5 points 8 - - HEMATOCRIT (% of Hcts 33-36%) >75% = 10 points RCG average 63.7% 70-75% = 8 points Best Region 70.2 65-69.9% = 6 points 60-64.9% = 4 points 55-59.9% = 2 points < 55% = 0 points - - HOSPITALIZATION (91 + days, based on days per patient year at risk) RCG average 12.0 days < 10 days = 8 points Best Region 8.6 days 10-14.9 days = 6 points 15-20 days = 2 points > 20 days = 0 points - - MORTALITY (91 + days, based on deaths per 100 patient years at risk) RCG average 20.7 < 20 = 8 points Best Region 15.5 20-24.9 = 6 points 24-29.9 = 4 points 30-35 = 2 points > 35 = 0 points - - PERITONITIS (new cases + relapse) RCG average 14.9 months between cases Best Region 16.9 months between cases >25 months between cases 15 points 20-25 months between cases 12 points 15-19.9 months between cases 9 points 10-14.9 months between cases 6 points >10 months between cases 0 points 9 COMBINATION HEMODIALYSIS & PERITONEAL MEDICAL DIRECTOR For those physicians who oversee both modalities, each is evaluated using the above criteria. The overall Clinical Quality is then a composite of these, weighted to reflect the numbers of patients in each modality. MEDICAL DIRECTOR TASKS (30%) - - PARTICIPATION IN MONTHLY REVIEW: (one point / month with 12 points possible) - Review staffing & training issues impacting patient outcomes with Manager - Review water quality - Review dialyzer reuse @ the Facility - Review monthly lab of patients below quality goals & develop plan - Review trend in hospitalizations, infections - Review temporary catheter usage & trend - Review patient incident reports & trends - Monitor staff physician patient rounding process - Adequacy of staff physician medical documentation - - PARTICIPATION IN CQI PROCESS: (one point / hourly meeting with 12 points possible) - - PARTICIPATION IN PROFESSIONAL STAFF PROCESS: - Quarterly Professional Staff meetings (one point / quarter - 4 points possible) - Quarterly Quality conference calls (one point / quarter - 4 points possible) - - ANNUAL CHECKLIST: (2 points for each item - 8 points possible) - Review and approve facility Policy and Procedures and make necessary modifications; review and approve clinical protocols. - Review patient satisfaction data annually and in concert with the Facility Manager make recommendations for improvement. - Participate with the Manager in the Budget process for the Facility. - Participate in Facility surveys by BOH, CMS, etc. PATIENT SATISFACTION SCORES (PSS) (20 %) CAREGIVER: RCG average 1.26 PSS>1.5 = 8 points PSS 1.25-1.5 = 6 points PSS 1.0-1.249 = 4 points PSS 0.5-0.99 = 2 points PSS <0.5 = 0 points PHYSICIAN: RCG average 1.11 PSS>1.5 = 10 points PSS 1.25-1.5 = 8 points PSS 1.0-1.249 = 6 points PSS 0.5-0.99 = 2 points PSS <0.5 = 0 points 10 DIETICIAN, SOCIAL WORKER, OTHER RCG average 1.47, 1.33, 1.08 PSS>1.5 = 4 points each PSS 1.25-1.5 = 3 points each PSS 1.0-1.249 = 2 points each PSS 0.5-0.99 = 1 point each PSS <0.5 = 0 points 11 EX-10.3 8 g87511exv10w3.txt EX-10.3 MEDICAL DIRECTOR SERVICES AGREEMENT EXHIBIT 10.3 MEDICAL DIRECTOR SERVICES AGREEMENT THIS MEDICAL DIRECTOR SERVICES AGREEMENT (the "Agreement") is made and entered into this 14th day of August 2003, effective as of the February 12, 2003, by and between RENAL CARE GROUP TEXAS, INC., a Texas corporation (the "Company"), and TYLER NEPHROLOGY ASSOCIATES, P.A., a Texas professional corporation (the "Practice"). In addition, each Practice Physician, as defined below, has executed the attached Physician Joinder and by which each such Practice Physician has agreed to be bound by certain terms of this Agreement as provided in the Physician Joinder. W I T N E S S E T H: WHEREAS, the Company owns and operates the renal dialysis facilities at the addresses shown on EXHIBIT A (collectively, the "Facilities" and, individually, the "Facility"), which provide outpatient and home dialysis services; WHEREAS, the Facilities are outpatient dialysis facilities certified by the Center for Medicare and Medicaid Services ("CMS") for payment under the Medicare program, which program requires each Facility to obtain the services of a physician or group of physicians to perform prescribed medical director services for such Facility; WHEREAS, the Company desires to engage one or more nephrologists skilled in dialysis center administration to provide medical director services at the Facilities in accordance with the requirements established by CMS and as provided in this Agreement; WHEREAS, the Practice desires and is qualified to provide the medical director services contemplated by this Agreement to the Facilities through one or more of its Practice Physicians, each of whom will be licensed to Practice medicine and prescribe drugs without restriction in the State of Texas, will specialize in nephrology and dialysis services and will be experienced in dialysis center administration. NOW, THEREFORE, in consideration of the premises set forth above and the mutual covenants and agreements of the parties set forth in this Agreement, the receipt and sufficiency of which are acknowledged, the parties agree as follows: ARTICLE I ENGAGEMENT AND SERVICES 1.1 Engagement. The Company engages the Practice to provide, and the Practice shall provide, services for the Company as medical director of the Facilities in accordance with the requirements of applicable CMS regulations (including, without limitation, 42 C.F.R. Section 405.2100 et seq. and any successor regulations) and all applicable state regulations, as the same may be amended or supplemented, together with such other services as are customarily performed by medical directors at high quality dialysis facilities and such other tasks related to the oversight of dialysis treatments administered at the Facilities as the Company may from time to time reasonably designate. 1.2 Responsibilities. Without limiting the generality of this Article I, the Practice shall provide the medical director services described in EXHIBIT B, which may be revised and updated from time to time by the Company, provided that any change that is not a CMS or other legal requirement must first be approved by the Practice if it increases the medical director duties hereunder. 1.3 Principal Contact. The Practice shall from time to time designate in writing to the Company a Practice Physician to serve as the principal contact at each Facility and who shall provide or arrange for the provision of the services required hereunder, and who shall serve as the principal contact for a period of no less than 12 months. The Practice may change the designation of the principal contact with the written consent of the Company (such written consent not to be unreasonably withheld or delayed); provided that the Practice will not change the principal contact more often than once per 12-month period, unless the principal contact dies, becomes disabled, leaves the Practice or experiences other exigent circumstances. The initial principal contact for each Facility is set forth on Exhibit A. 1.4 Patient Care Manual. The Practice shall advise the Company in developing, maintaining and implementing a patient care policy and procedures manual for each Facility describing: (a) The types of dialysis used in the Facility and the procedures to be followed in performing each type of dialysis; (b) Procedures for implementing universal precautions for the prevention of disease transmission; (c) Procedures for properly handling blood-borne and infectious pathogens; and (d) A disaster readiness plan. 1.5 Records. The Company and the Practice acknowledge that attending physicians have medical responsibility for the content of medical records of each Facility and that the head nurse of each Facility has operational responsibility for the day-to-day maintenance of such Facility's records. The Company, through a medical records supervisor designated for the Facility, with the assistance and support of the Practice, shall oversee the maintenance of current medical and business records relating to the care and treatment of patients in the Facilities in accordance with Company policies and applicable regulations of governmental agencies, including: (a) Patient long-term care plans, patient short-term care plans and medical histories; (b) Results of physical examinations and laboratory tests; and (c) Progress notes by all patient care staff, and complete and legibly signed orders and discharge summaries. 1.6 Documentation. The Practice and Practice Physicians who provide services hereunder shall maintain, and provide to the Company upon request, reasonably complete and detailed documentation of the time spent and services performed in providing medical director services under this Agreement. This documentation shall be maintained in a form reasonably satisfactory to or prescribed by the Company. 1.7 Medical Staff. The Practice shall review the applications of physicians requesting to attend to patients at each Facility and forward a recommendation concerning such applications to the body making credentialing decisions for the Facility under its Professional Staff Bylaws. Subject to each Facility's Professional Staff Bylaws, the Practice shall maintain oversight of all disciplinary actions with regard to any matter of such physicians or patient care personnel as needed to assure the quality of services and conformity to Company and Facility rules and policies. - 2 - 1.8 Coverage. The Practice shall make available one or more Practice Physicians, as appropriate, to provide medical director services at each Facility for its hours of operation. The Practice and the Company shall confer from time to time in good faith concerning the appropriate level of physician coverage to provide medical director services hereunder. 1.9 Practice Physicians. (a) The Practice represents and warrants that all physicians who as of the date of this Agreement meet the definition of a Practice Physician have executed the Physician Joinder attached hereto. As a condition to engaging any physician in a manner that causes such physician to become a Practice Physician, the Practice shall obtain the signature of such physician on the Physician Joinder in consideration for such engagement the fees payable to the Practice hereunder. (b) For purposes of this Agreement, the term "Practice Physician" means any physician who is a physician performing services on behalf of the Practice at any of the Facilities (whether as an employee, partner, member, shareholder or independent contractor of the Practice), any other physician performing services on behalf of the Practice hereunder (as may be approved by the Company), and any other physician in any way affiliated or associated with the Practice, or regularly seeing patients of the Practice (other than on a covering or locum tenens basis). 1.10 No Required Referrals. Notwithstanding any other provision of this Agreement, each of the Company, the Practice and the Practice Physicians acknowledges and agrees that neither the Practice nor any Practice Physician is required to make referrals of patients to the Company or any affiliate of the Company or to the Facilities. Each of the Practice Physicians is free to maintain professional staff privileges at any dialysis facility, to refer patients to any other facility for dialysis or other services, and, subject to Article VII, otherwise to perform professional medical services at or through any entity, whether or not it is competing with any Facility, the Company or with any affiliates of the Company. 1.11 Supervising Nurse. The Company shall provide a full-time nurse to manage the provision of patient care in each Facility. The Practice may delegate to the supervising nurse the responsibility for the execution of patient care policies on a day-to-day basis, and the principal contact will provide medical guidance to the supervising nurse in the execution of these duties; provided, however, that the Practice may only delegate to the supervising nurse duties covered by this Agreement. ARTICLE II TERM AND TERMINATION 2.1 Initial and Renewal Terms. This Agreement is effective as of February 12, 2003, (the "Effective Date") and shall remain in full force and effect until 12:00 p.m. midnight on the seventh anniversary of the Effective Date (the "Initial Term"), unless earlier terminated as provided in this Article II. This Agreement shall automatically renew for additional successive terms of three years each (the "Renewal Terms"), unless either party gives written notice of non-renewal to the other party not less than 90 days prior to the expiration of the Initial Term or then-current Renewal Term, as applicable. If such notice is given, this Agreement shall expire as of the last day of the Initial Term or the then-current Renewal Term, as applicable. 2.2 Termination By Agreement. The Company and the Practice may agree in writing signed by both parties to terminate this Agreement at a time and date stipulated in such writing. - 3 - 2.3 Termination by the Practice for Cause. (a) The Practice may during the Initial Term or any Renewal Term terminate this Agreement upon written notice to the Company in the event of the occurrence of any of the following: (i) material breach of any covenant, agreement, term, representation or warranty of the Company in this Agreement or the failure of any representation or warranty of the Company in this Agreement to be true and correct in all material respects when made or deemed made hereunder, which breach or failure, if susceptible of cure, continues uncured for 30 days after the Practice gives written notice of such breach or failure of the Company, any notice of breach or failure will describe such breach or failure with reasonable particularity; (ii) the revocation of the Medicare certification of the Facility or the exclusion of the Company from participation in the Medicare or Medicaid program which exclusion or revocation has not been cured, stayed or rescinded within 90 days; (iii) any felony conviction (including a plea of nolo contendere) of any officer of management-level employee of the Company relating to the provision of health care services at the Facility; (iv) dishonesty, misappropriation of property, or false or defamatory disparagement of the Practice or any of its medical staff, affiliates, representatives or employees; (v) the failure of the Company reasonably to consider or reasonably to act upon a written request by the Practice that the Company provide equipment, personnel or training for personnel necessary to operate the Facility in accordance with applicable law and the conditions of participation in the Medicare program, which failure continues for 30 days after the Practice gives the Company notice written notice that the Practice intends to terminate this Agreement under this Section 2.3(a)(v); or (vi) the existence of an immediate threat to the health or safety of any patient receiving treatment at the Facility, which threats results from any act or omission of the Company or any of its employees (and not from any act or omission of the Practice). (b) Upon the occurrence of any event described in Section 2.3(a)(iii), or 2.3(a)(iv), the Practice shall not terminate this Agreement, if, within 30 days after the Practice gives the Company written notice of the action or event giving the Practice the right to terminate this Agreement, the Company agrees that the individual who is the subject of such cause will not have any further involvement with the Facilities. 2.4 Termination by the Company. (a) The Company may during the Initial Term or any Renewal Term terminate this Agreement upon written notice to the Practice in the event of the occurrence of any of the following with respect to the Practice or any one of the Practice Physicians: (i) dishonesty, misappropriation of property, disparagement of the Company, any Facility or Renal Care Group, Inc., the parent company of the Company ("RCG"), or any of their affiliates, representatives or employees; (ii) negligence in the performance of any duty or responsibility as medical director under this Agreement, which negligence was not occasioned in whole or in part by any negligence by the - 4 - management or employees of the Company, the Facilities or RCG, and which negligence results in substantial harm to the reputation or ongoing ability to conduct the business of the Facility or the Company; (iii)suspension, revocation or limitation of the licenses or authorizations required to be maintained by the Practice or the Practice Physicians; (iv) exclusion of the Practice or any Practice Physician from participation under Medicare, Medicaid or any other federal health benefits program; (v) revocation, suspension, probation, removal or resignation under investigation of any Practice Physician from membership or privileges on the medical staff of any Facility or of any other health care facility at which such Practice Physician has medical staff privileges; (vi) the existence of an immediate threat to the health or safety of any patient receiving treatment at any Facility, which threat results from any act or omission of the Practice or any Practice Physician; (vii) the requirement, or threatened requirement, by any federal or state agency having jurisdiction over the Company or any Facility that the Practice or any Practice Physician cease to provide medical director services at a Facility; (viii) commission or conviction, including a plea of nolo contendere, of any felony or of any crime involving moral turpitude; or (ix) material breach of any covenant, agreement, term, representation or warranty of the Practice or any Practice Physician in this Agreement or the failure of any representation or warranty of the Practice in this Agreement to be true and correct in all material respects when made or deemed made hereunder, which breach or failure, if susceptible of cure, continues uncured for 30 days after the Company gives written notice of such breach or failure to the Practice; any notice of breach will describe such breach with reasonable particularity. (b) Upon the occurrence of any event described in paragraph (a) of this Section 2.4 that is the result of an act or omission of one or more specific Practice Physicians who do not constitute a majority of the Practice Physicians then providing services hereunder, the Company shall not terminate this Agreement if, within 30 days after the Company gives the Practice written notice of the act or omission giving the Company the right to terminate this Agreement, the Practice agrees that any Practice Physician who is the subject of such cause will not provide further services under this Agreement and, if requested by the Company, that the Practice will use its best efforts to cause such physician to resign the privileges of such Practice Physician to attend patients at the Facilities. (c) Upon the occurrence of any event described in paragraph (a) of this Section 2.4, the Company shall have, in addition to the right to terminate this Agreement, the right to suspend the Practice from providing services under this Agreement for a period of up to one year. In the event of any such suspension, this Agreement shall remain in force, except that (i) the Practice will not be required to perform services required under this Agreement, (ii) the Company will not be required to pay the compensation contemplated by this Agreement, and (iii) the term of this Agreement shall not be extended by the occurrence of such suspension. At any time during or at the end of any such period of suspension, the Company may elect to terminate this Agreement. - 5 - 2.5 Effect of Termination or Expiration. Upon and following the expiration of this Agreement or its termination for any reason, the Practice shall not interfere with any efforts by the Company to contract with any other individual or entity for the provision of medical director services. Expiration or termination of this Agreement shall not affect any rights or obligations of the parties accruing hereunder through the date of expiration or termination, including the Company's obligation to compensate Practice for medical director services pro-rated through such date, and such rights and obligations shall survive expiration or termination. ARTICLE III COMPENSATION 3.1 Compensation. (a) In consideration of the services, covenants, and agreements agreed to be performed by the Practice during the Initial Term and any Renewal Term, the Company shall pay the Practice at the rate of $532,000 per year, payable in substantially equal monthly installments on or before the 15th day of each month for services rendered during the preceding month. In addition to the monthly medical director fee prescribed above, the Practice shall be eligible for an annual bonus of up to 15% of the base medical director compensation paid during the year based upon the success of the Facilities in meeting annual clinical outcomes targets and in achieving performance objectives for the Facilities and the Practice generally prescribed by RCG for its dialysis facilities in the region in which the Facilities are located. Such annual bonus (if any) shall be payable on or before July 1 for the prior year's services. The current criteria for reviewing and determining the bonus amount are attached hereto as EXHIBIT C. RCG may change such criteria annually, and the Company will provide the revised criteria to the Practice when adopted. The Practice agrees to accept the payment under this subsection (a) (as it may be adjusted as provided below) as the total compensation for all services, covenants and agreements pursuant to this Agreement. (b) (i) Beginning effective as of the second anniversary of the Effective Date, if either party believes that the fair market value of the services provided by the Practice under this Agreement has changed in any material way since the most recent anniversary of the Effective Date, then such party may notify the other that it believes such a change has occurred and the Practice and the Company shall negotiate in good faith an adjustment to the compensation described in Section 3.1(a) above so that it represents fair market value for the duties and responsibilities of the Practice to be provided during the next year under this Agreement. Notwithstanding the foregoing, no adjustment pursuant to this subsection (b)(i) to the compensation payable under this Agreement shall be effective unless set forth in writing signed by each of the Practice and the Company, which writing shall be deemed an amendment to this Agreement. The parties hereto agree that any additional compensation paid to the Practice pursuant to this Agreement in connection with additional renal dialysis facilities developed or acquired by the Company after the Effective Date shall be no less than $30,000 per facility, per annum. (ii) If the Practice and the Company are unable to agree on an adjustment, then either may require that an adjustment of the compensation hereunder be submitted to a qualified independent third party mutually selected by both the Practice and the Company to determine the fair market value of the services required hereunder, the costs and fees of which shall be borne equally by the Practice and the Company. If the Practice and the Company are unable to agree on the third party, then each such party shall at its own cost and expense select its own qualified independent third party and the average of such two determinations of fair market value shall be the revised compensation unless such determinations are more than 10% apart, in which case such third parties shall mutually select an additional qualified independent third party, the fees and expenses of which shall be shared equally, who shall determine the fair market - 6 - value of the services hereunder from between the range of the amounts determined by the first two appraisals. The fair market value of the services as determined in accordance with the provisions of this subsection (b)(ii) shall be the compensation payable under this Agreement effective as of the applicable anniversary of the Effective Date, and such final determination shall be deemed an amendment to this Agreement. (c) Any change to the compensation payable hereunder in accordance with subsection (b) of this Section 3.1 shall be effective as of the applicable anniversary of the Effective Date and shall remain effective, and not subject to adjustment under Section 3.1(b) or otherwise, for at least 12 months from the effective date of such change. (d) In further consideration of the Practice's execution and delivery of this Agreement and the services, covenants and agreements of the Practice and the Practice Physicians pursuant to this Agreement, the Company shall pay the Practice a signing bonus of $600,000 (the "Signing Bonus"). The Signing Bonus will be payable $100,000 in cash by wire transfer to one or more accounts designated by the Practice, which wire transfer will be made and upon the Practice's execution and delivery of this Agreement, and $500,000, plus interest in the amount of 5% per annum, in substantially equal monthly installments of $7,066.96, in arrears on or before the 15th of each month during the Initial Term. 3.2 Expenses. The Company shall be responsible for all reasonable expenses incurred in the operation of the Facility and the support of the services provided by Practice hereunder, including appropriate office space and secretarial support, and shall reimburse the Practice for all reasonable out-of-pocket expenses incurred by the Practice in attending meetings outside the service area of the Facility as required or requested by the Company pursuant to Article I of this Agreement. The Company and the Practice acknowledge and agree that attendance by existing medical directors at RCG's annual medical meeting is not required under this Agreement. The Company will pay the Practice $1,000 each year to help defray the cost of one or more Practice Physicians attending RCG's annual medical meeting if one or more Practice Physicians attend such annual meeting. ARTICLE IV STATUS OF PARTIES 4.1 Tax Status. The Company and the Practice acknowledge and agree that the relationship created under this Agreement between them is that of independent contractors and that nothing in this Agreement shall be deemed to render either party the employer or employee of the other, agent or principal of the other, or joint venturer or partner of the other. The parties acknowledge and agree that the Practice Physicians will be engaged by the Practice and will under no circumstances be considered the employee(s) of the Company, RCG or the Facilities, or any of their affiliates. The Practice shall be responsible for all withholding, payroll and similar taxes related to its engagement of the Practice Physicians, and neither the Practice nor the Practice Physicians shall be entitled to any benefits afforded to the employees of the Company, RCG or the Facilities, or any of their affiliates. The Practice agrees that (i) neither it nor any Practice Physician be treated as an employee of the Company for federal tax purposes; (ii) the Company will not withhold on behalf of the Practice any sums for income tax, unemployment insurance, social security, or any other withholding pursuant to any law or requirement of any governmental body; (iii) all of such taxes, payments and withholdings, if any, are the sole responsibility of the Practice; and (iv) the Practice will indemnify and hold the Company and RCG harmless from any and all loss or liability arising with respect to such benefits, taxes, payments and withholdings, if any. If the United States Internal Revenue Service ("IRS") should question or challenge the worker status of the Practice or the Practice Physicians, then the parties agree that both the Practice and the Company shall have the right to participate in any discussion or negotiation - 7 - occurring with the IRS, irrespective of which party initiated such discussions or negotiations, and each party shall notify the other in advance of any planned meeting or discussion. 4.2 No Agency. The Practice shall not have the right or authority to, and expressly agrees that it will not, enter into any contract in the name of the Company or otherwise to bind the Company, in any way, without the express written consent of the Company. The Practice shall indemnify and hold the Company harmless from any and all loss or liability attributable to a violation of this covenant. 4.3 Access to Records. If it is ultimately determined that Section 952 of the Omnibus Reconciliation Act of 1980 (42 CFR 420.300 et seq.) applies to this Agreement, then until the expiration of four years after the furnishing of services provided under this Agreement, the Practice will make available to the Secretary of the United States Department of Health and Human Services, the United States Comptroller General, and their representatives, this Agreement and all books, documents and records necessary to certify the nature and extent of the costs of those services. If the Practice carries out the duties of this Agreement through a subcontract worth $10,000 or more over a twelve-month period with a related organization, the subcontract will also contain an access clause to permit access by the Secretary, Comptroller General, and their representatives to the related organization's books, documents and records. 4.4 The Company's Work Product. All operating procedures, protocols, information systems, operating data, databases, reports and other non-public proprietary business systems or information owned by the Company or RCG shall be and remain the exclusive property of the Company or RCG, as appropriate. If the Practice or any Practice Physician modifies, enhances or alters any of such property such modification, enhancement or alteration will be deemed a work-for-hire and shall be the property of the Company or RCG, as appropriate. The Practice or Practice Physician making such modification, enhancement or alteration will execute all documents reasonably requested by the Company to vest fully in the Company or RCG title to such modification, enhancement or alteration. ARTICLE V INSURANCE 5.1 Practice Insurance Coverage. The Practice shall purchase and maintain at its expense for itself and each of the Practice Physicians professional and general liability insurance, with an insurance company reasonably acceptable to the Company, with policy limits of at least $1,000,000 per occurrence and $3,000,000 in the aggregate for each of the Practice Physicians and policy limits of at least $200,000 per occurrence and $600,000 in the aggregate for the Practice, including coverage for acts and omissions in performing services under this Agreement and in rendering medical services to patients of the Facilities. 5.2 Company Insurance Coverage. The Company shall procure and maintain throughout the term of this Agreement professional and general customary liability insurance (through self-insurance or an insurance carrier) with policy limits of at least $1,000,000 per occurrence and $3,000,000 in the aggregate. 5.3 Evidence of Coverage. Upon the execution of this Agreement and annually thereafter or on reasonable request, the Company and the Practice shall each provide the other with certificates of insurance or other reasonably satisfactory evidence of the insurance required to be maintained under Sections 5.1 and 5.2. Each party shall notify the other at least 60 days prior to the voluntary cancellation or termination of any such coverage and immediately upon receipt of any notice of involuntary cancellation or termination of any such coverage. - 8 - ARTICLE VI PRACTICE REPRESENTATIONS AND COVENANTS 6.1 Representations and Covenants. The Practice represents, covenants and warrants as follows: (a) The Practice is, and shall at all times during the term of this Agreement be, licensed to conduct its business in the State of Texas, and shall engage as Practice Physicians only physicians who are licensed without restriction to Practice medicine in Texas and who never have had any such license in this or any other state limited, withdrawn, suspended, subject to reprimand, curtailed, placed on probation or revoked; (b) The Practice shall engage as Practice Physicians only physicians who are board eligible or board certified in the specialty of nephrology as recognized by the American Board of Medical Specialists; (c) The Practice shall engage as Practice Physicians only physicians who are members of the medical staff of a local hospital, who have at least one year experience or training in the care of patients at an end stage renal disease treatment facility, and who have been granted privileges to practice at the Facilities; (d) Except as may be approved in writing by the Company, which approval will not be unreasonably withheld or delayed, the Practice shall engage as Practice Physicians only physicians who have never been denied membership or reappointment to membership on the medical staff of any health care facility, and who have never had medical staff membership or clinical privileges limited, suspended, curtailed, revoked, placed on probation or withdrawn, and who have never been subject to reprimand whether voluntarily or as a result of action (either formal or informal) initiated by any health care facility or its medical staff; (e) The Practice shall require the Practice Physicians to use their commercially reasonable best efforts and professional skills and judgment in rendering services under this Agreement; (f) The Practice shall require the Practice Physicians to perform professional services and render care to patients in accordance with, and in a manner consistent with, appropriate standards and the ethics of the medical profession and as necessary for the Facilities to maintain compliance with applicable governmental laws and regulations; (g) The Practice shall require the Practice Physicians promptly to notify the Company of any actual or threatened denial, suspension, revocation or curtailment of licensure or certification status, medical staff membership or clinical privileges held by such physician(s) with any state, with any Facility of the Company, or with any payor or other health care facility; (h) The Practice has notified the Company of each action or claim alleging professional negligence filed or asserted against the Practice or any Practice Physician within the previous five years and a current status and/or ultimate resolution of such claim and will promptly notify the Company in writing of its receipt of any action, claim or lawsuit alleging professional negligence lodged against the Practice or any Practice Physician individually or any partnership, professional corporation or association with which any Practice Physician is affiliated; (i) The Practice shall, for itself, and for each Practice Physician, promptly notify the Company of any sanction, threatened sanction, investigation or proceeding by any governmental agency or - 9 - any entity regarding the participation by the Practice or any Practice Physician in the Medicare, Medicaid program or any third party payor program in which the Facilities participate; and (j) This Agreement covers all of the services being provided to the Company by the Practice and the Practice Physicians as medical directors of the Facilities, and the Practice acknowledges and agrees that the aggregate amount of services to be provided under this Agreement will not exceed an amount that is reasonable and necessary for the legitimate medical and business purposes of this arrangement. ARTICLE VII CONFIDENTIALITY, NONCOMPETITION AND NONSOLICITATION COVENANT 7.1 Additional Covenants. (a) During the term of this Agreement and for a period of two years after the termination or expiration of this Agreement, the Practice and each Practice Physician agrees that it, he or she will not in any manner, directly or indirectly, by itself, himself or herself or in conjunction with any other person, (i) conduct any of the activities or perform any of the responsibilities delineated in Article I and EXHIBIT B ("Services") of this Agreement for any business entity that is competitive with the business of the Company or (ii) establish or own any financial, beneficial or other interest in (other than an interest consisting of less than one percent (1%) of a class of a publicly traded security), make any loan to or for the benefit of, or render any managerial, marketing or other business advice, to any entity that is then conducting activities that are competitive with those of the business of the Company, in either case within a 25-mile radius around each Facility (the "Territory"). For purposes of this Article, the "business of the Company" means owning or operating a renal dialysis center, unit or facility or providing dialysis supplies or services to any other such center, unit or facility to any home dialysis program, including the provision of pharmaceuticals or laboratory services related to renal dialysis, but does not include participating, directly or indirectly, as a limited partner in RCG East Texas, LLP. By executing a counterpart of this Agreement and in consideration of the compensation paid to the Practice hereunder, each Practice Physician agrees to be bound by the terms of this Article VII. With respect to the Practice Physicians, the two year time periods applicable to this Article VII shall begin on the earlier of (i) the termination or expiration of this Agreement, or (ii) the termination of the employment, independent contractor or other relationship or affiliation of the Practice Physician with the Practice, such that such Practice Physician ceases to fall within the definition of a Practice Physician hereunder and generally ceases to treat patients of the Practice. (b) During the term of this Agreement and for a period of two years after the termination or expiration of this Agreement, the Practice and each Practice Physician will use all reasonable efforts to keep confidential and not to divulge, or allow to be divulged to anyone, or use or otherwise appropriate for its, his or her own benefit or for the benefit of others, any knowledge or information of a confidential nature with respect to the business of the Company, the Company itself, or any of its affiliates, including all trade secrets, pricing information, marketing information or technical information (hereinafter referred to as the "Confidential Data"), except for (i) information that is generally available to the public other than as a result of a breach of a confidentiality agreement, (ii) information available on a non-confidential basis from a source other than the Company or its affiliates or agents, which source itself is not bound by a confidentiality agreement, (iii) information required to be disclosed by law or pursuant to court order, but only to the extent such disclosure is necessary to respond to such law or court order, or (iv) disclosure necessary in order for the Practice to perform its obligations under this Agreement, but only to the extent - 10 - such disclosure is necessary for such performance. Each of the Practice and the Practice Physician acknowledges and agrees that the prohibitions against disclosure of Confidential Data recited herein are in addition to, and not in lieu of, any rights or remedies that the Company may have available pursuant to the laws of any jurisdiction or at common law to prevent the disclosure of confidential information or trade secrets, and the enforcement by the Company of its rights and remedies under to this Agreement shall not be construed as a waiver of any other rights or available remedies that the Company may possess in law or equity. (c) During the term of this Agreement and for a period of two years after the termination or expiration of this Agreement, neither the Practice nor any of the Practice Physicians will, for its, his or her own benefit or the benefit of others, solicit any person or entity that has or has had, or disrupt or attempt to disrupt, any relationship, contractual or otherwise, with the Company (including any payor, physician, provider, managed care organization or supplier) at any time during the term of this Agreement for the purpose of assisting or creating such a relationship for any business entity that is competitive with the business of the Company. (d) During the term of this Agreement and for a period of two years after the termination of this Agreement, no party hereto will hire or attempt to hire, or induce, or attempt to induce, any employee of another party or any of its affiliates to terminate his or her association with such other party or any of its affiliates. If any employee of a party hereto or any of its affiliates (the "Non-Hiring Party") responds to a general solicitation and seeks employment with another party or any of its affiliates (the "Hiring Party"), and the Hiring Party desires to hire such employee, then the Hiring Party shall give notice of its, his or her desire to hire such employee to the Non-Hiring Party and will not offer to hire such employee until the earlier of seven days after such notice is received by the Non-Hiring Party or the date on which the Non-Hiring Party approves such hiring. If the Hiring Party hires an employee of the Non-Hiring Party after following the procedures outlined above, the Non-Hiring Party may request that the employee continue to provide services to the Non-Hiring Party for up to 30 days to provide for an orderly transition. (e) These covenants are considered by the parties hereto to be fair, reasonable and integral for the protection of the Company. The parties agree that if a violation of any of these covenants occurs, then (i) such violation and any threatened violation will cause irreparable injury to the Company, (ii) the remedy at law for any such violation or threatened violation will be inadequate, and (iii) the Company will be entitled to injunctive relief to prevent such violation. The parties acknowledge that these covenants will survive, and remain in effect and enforceable after, termination of this Agreement. (f) Nothing in this Article VII shall be deemed to prohibit any Practice Physician from exercising his or her medical judgment concerning the medical treatment of a patient in any manner whatsoever in any location whatsoever, and shall not be deemed to require the referral of any such patient to any facility of the Company or any of its affiliates. The parties acknowledge and agree that this Agreement shall in no way be deemed to restrict the right or ability of the Practice and the Practice Physicians to admit and provide professional service to patients at facilities and institutions other than the Facilities or other facilities of the Company or RCG, including without limitation facilities operated by business entities that are competitive with the business of the Company. The Practice and the Practice Physicians acknowledge that enforcement of this covenant will not prevent any physician of the Practice from earning a living by practicing medicine or nephrology. ARTICLE VIII CONFIDENTIALITY OF PATIENT RECORDS - 11 - 8.1 Patient Records. (a) All patient medical records shall be and remain the sole property of the Company and shall be maintained at the Facilities. The Practice shall assist the Company in implementing procedures to preserve the confidentiality of patient medical records and shall cooperate in compiling data regarding patient treatment costs and outcomes. (b) Neither the Practice nor any Practice Physician shall disclose to any third party, except where permitted or required by law or where such disclosure is expressly approved by the Company in writing, any patient or medical record information regarding patients of the Company, and the Practice and the Practice Physicians shall comply with all federal and state laws and regulations and with the policies of the Company regarding the confidentiality of such information. Each party acknowledges that in receiving or otherwise dealing with any records or information from the other party about a Facility's patients receiving treatment for alcohol or drug abuse, each party are fully bound by the provisions of the federal regulations governing Confidentiality of Alcohol and Drug Abuse Patient Records (42 C.F.R. Part 2, as amended from time to time). (c) The Company, the Practice and the Practice Physicians agree to comply with the applicable provisions of the Administrative Simplification section of the Health Insurance Portability and Accountability Act of 1996, as codified at 42 U.S.C. Section 1320d through d-8 ("HIPAA"), and the requirements of any regulations promulgated thereunder including without limitation the federal privacy regulations as contained in 45 CFR Part 164 (the "Federal Privacy Regulations") and the federal security standards as contained in 45 CFR Part 142 (the "Federal Security Regulations"). The Company, the Practice and the Practice Physicians agree not to use or further disclose any protected health information, as defined in 45 CFR 164.504, or individually identifiable health information, as defined in 42 U.S.C. Section 1320d (collectively, the "Protected Health Information"), concerning a patient other than as permitted by this Agreement and the requirements of HIPAA or regulations promulgated under HIPAA including without limitation the Federal Privacy Regulations and the Federal Security Regulations. The Practice and the Practice Physicians will assist the Company in implementing appropriate safeguards to prevent the use or disclosure of a patient's Protected Health Information other than as provided for by this Agreement, and the Practice and the Practice Physicians will abide by the policies and procedures adopted by the Company with respect to the Protected Health Information of the Facility's patients. Each of the Practice Physicians and the Practice will promptly report to the other any use or disclosure of a Company patient's Protected Health Information not provided for by this Agreement or in violation of HIPAA, the Federal Privacy Regulations, or the Federal Security Regulations of which the Practice or the Practice Physician becomes aware. In the event the Practice or any Practice Physician, with the Company's approval, contracts with any agents to whom the Company provides a patient's Protected Health Information, the Practice or the Practice Physician shall include provisions in such agreements whereby the Practice or the Practice Physician and such agent agree to the same restrictions and conditions that apply to the Practice and the Practice Physicians with respect to such patient's Protected Health Information. The Practice and the Practice Physicians will make their internal practices, books, and records relating to the use and disclosure of a patient's Protected Health Information available to the Secretary of Health and Human Services to the extent required for determining compliance with the Federal Privacy Regulations and the Federal Security Regulations. Notwithstanding the foregoing, no attorney-client, accountant-client, or other legal privilege shall be deemed waived by the Company, RCG, the Practice or any Practice Physician by virtue of this subsection. (d) The provisions of this Section 8.1 shall survive expiration or other termination of this Agreement, regardless of the cause of such termination. - 12 - ARTICLE IX MISCELLANEOUS 9.1 Notices. Any notice sent in accordance with the provisions of this Section 9.1 shall be deemed to have been received (even if delivery is refused or unclaimed) on the date that is: (i) the date of proper posting, if sent by certified U.S. mail or by express U.S. mail or private overnight courier, or (ii) the date on which sent, if sent by facsimile transmission, with confirmation and with the original sent by certified U.S. mail, addressed as follows: Practice: Tyler Nephrology Associates, P.A. 1133 Medical Drive Tyler, Texas 75701 Telecopy Number: (903) 595-0206 Company: Renal Care Group Texas, Inc. c/o Renal Care Group, Inc. 2525 West End, Suite 6800 Nashville, Tennessee 37203 Telecopy Number: (615) 345-5503 Attn: Chief Financial Officer and General Counsel Any party hereto may change its address specified for notices herein by designating a new address by notice in accordance with this Section 9.1. 9.2 Amendments. Subject to Section 9.4, this Agreement may be amended at any time by mutual agreement of the Practice and the Company hereto, but any such amendment shall not be operative or valid unless the same is reduced to writing and approved by the parties hereto. 9.3 Assignability. This Agreement shall not be assignable by the Practice, and the Practice shall not assign any of its rights or obligations under this Agreement without the written consent of the Company. This Agreement shall not be assignable by the Company, and the Company shall not assign any of its rights or obligations under this Agreement without the written consent of the Practice; provided that, without the consent of Practice, the Company may assign or transfer this Agreement to an affiliate of the Company or RCG or in connection with a sale of the Facilities or all or substantially all of the assets or business of the Company. 9.4 Contract Modifications; Severability. (a) This Agreement shall be construed to the fullest extent possible to be in compliance with and permitted by all Federal (including Medicare and Medicaid) and state statutes, rules and regulations. If a Triggering Event (as defined below) occurs, either the Company or the Practice may by written notice to the other propose an amendment to this Agreement as necessary to comply with the item giving rise to the Triggering Event. To the fullest extent possible, any such amendment shall preserve the responsibilities and duties of the parties and the underlying economic and financial arrangements between the Company and the Practice with the least changes to the parties' expectations hereunder. If the Practice and the Company fail to agree to the form of an amendment within 60 days after the date of such notice, then either of such party may submit the matter to arbitration as provided in Section 9.9, and any arbitration award shall comply with - 13 - the second sentence of this Section; provided that if any resulting change to this Agreement includes a change to the compensation under Section 3.1(a), then the amount of compensation shall be determined under the procedures in Section 3.1(b). For purposes of this Section 9.4, "Triggering Event" means the effectiveness of any statute, rule, regulation, order, decree or regulatory interpretation (i) prohibiting the Practice or any of the Practice Physicians from referring patients (whether Medicare, Medicaid or otherwise) for renal dialysis either directly or indirectly to the Facilities; (ii) prohibiting the Company, the Practice or any Practice Physician from submitting claims or receiving payment under the Medicare, Medicaid or any other third party payment programs for services rendered to patients receiving care at the Facilities; (iii) determining that the amount or method for determining compensation paid to the Practice hereunder does not reflect fair market value for the services provided by the Practice under this Agreement without taking into account the volume or value of referrals made by the Practice Physicians; or (iv) otherwise rendering illegal the relationship hereunder between the Company, the Practice and the Practice Physicians. (b) Subject to the provisions of subsection (a) of this Section 9.4, if any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws in effect during the term of this Agreement, the legality, validity or enforceability of the remaining provisions of this Agreement shall not be affected thereby. 9.5 Headings. The headings of this Agreement are inserted for convenience only and are not to be considered in construction of its provisions. 9.6 Entire Agreement. This Agreement constitutes the full contract and agreement of the parties with respect to its subject matter, superseding all prior or contemporaneous agreements, either oral or written. 9.7 Construction of the Agreement and Binding Effect. Notwithstanding the place where this Agreement may be executed by any of the parties hereto, the parties expressly agree that all terms and conditions of this Agreement shall be construed under and governed by the laws of the State of Texas. Venue of any dispute regarding this Agreement (including any mediation or arbitration) shall be in Smith County, Texas. 9.8 Non-Waiver. The failure of either party to exercise any of its rights under this Agreement for a breach thereof shall not be deemed to be a waiver of such rights or a waiver of any subsequent breach. 9.9 Disputes. (a) The parties agree that any dispute arising in connection with, or relating to, this Agreement or the termination of this Agreement (other than a dispute related to Sections 3.1(b) or 9.4) shall be subject to resolution through informal methods. If the parties are unable to resolve such dispute after thirty days of efforts, then such dispute shall be submitted to mediation with a singe mediator selected by the parties or, failing the parties' agreement on a mediator, selected by the American Health Lawyers Association Alternative Dispute Resolution Service (the "AHLA-ADRS"). The mediation shall be conducted in accordance with the AHLA-ADRS Rules of Procedure for Mediation. If the parties are unable to resolve the dispute through mediation, they shall retain all rights and remedied at applicable law, subject to paragraph (b) below. (b) Following the procedures outlined in paragraph (a) above, the parties agree that any dispute arising in connection with, or relating to, this Agreement or the termination of this Agreement (other than a dispute related to Section 3.1(b) and, unless the Company so agrees, a dispute under Article VII), to the maximum extent allowed by applicable law, shall be subject to arbitration in accordance with the terms of the AHLA-ADRS Rules of Procedure for Arbitration (the "ADR Procedures"). A single arbitrator shall be - 14 - chosen mutually by the parties pursuant to the ADR Procedures. Notwithstanding the foregoing, any party hereto may seek all available preliminary injunctive or other temporary relief pending the issuance of an arbitration award. The award of the arbitrator shall contain findings of fact and conclusions of law and shall be binding and conclusive upon the parties. 9.10 Third Party Beneficiaries. The Practice and the Practice Physicians agree that RCG and its affiliates are express and intended third party beneficiaries of this Agreement. 9.11 Right of First Refusal to Provide Medical Director Services. If the Company or any affiliate of the Company seeks to establish any de novo or satellite dialysis facility within the Territory (as defined in Section 7.1), then the Practice shall have a right of first refusal, but not the obligation, to provide medical director services to any such facility. The terms and provisions governing the provision of such services shall be substantially the same as the terms and provisions of this Agreement, provided that the compensation for such additional services shall not be less than $30,000 per facility. The Company will notify the Practice in writing at least 120 days prior to opening a de novo or satellite facility. Such notice will specify the medical director fee proposed for such facility. If the Practice declines such offer or fails to respond to such offer within the applicable 120-day period, then the Company will be free to engage another physician or practice to provide such medical director services on substantially the same terms and conditions as offered by the Company to the Practice. - 15 - IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written to be effective as provided hereinabove. Company: ------- RENAL CARE GROUP TEXAS, INC. By: /s/ Robert K. Stillwell ---------------------------------------- Title: Senior Vice President ---------------------------------------- Practice: -------- TYLER NEPHROLOGY ASSOCIATES, P.A. By: /s/ James R. Cotton, Jr., M.D. ---------------------------------------- Title: James R. Cotton, Jr., M.D., President ---------------------------------------- PHYSICIAN JOINDER Each Practice Physician executing below acknowledges that he or she has read and understood the terms of the Medical Director Services Agreement, effective February 12, 2003, to which this Physician Joinder is attached and as same may be amended or revised as provided therein (the "Agreement"). By signing this Physician Joinder, each Practice Physician agrees in his or her individual capacity, to (i) the nature and scope of medical director duties set forth in Article I of the Agreement, including as described in detail on Exhibit B, (ii) the restrictive covenants contained in Article VII of the Agreement, and (iii) the third party beneficiary designated in Section 8.10 of this Agreement, in each case as may be amended by agreement of the Practice. /s/ Nabeel K. Ahmed, M.D. (seal) ------------------------------------------------- Name: Nabeel K. Ahmed, M.D. -------------------------------------------- /s/ James R. Cotton, Jr.,, M.D. (seal) ------------------------------------------------- Name: James R. Cotton, Jr.,, M.D. -------------------------------------------- /s/ Stefanie M. Diaz, M.D. (seal) ------------------------------------------------- Name: Stefanie M. Diaz, M.D. -------------------------------------------- /s/ Robert C. Dobrowolski, M.D. (seal) ------------------------------------------------- Name: Robert C. Dobrowolski, M.D. -------------------------------------------- /s/ Roy G. Gerard, Jr., M.D. (seal) ------------------------------------------------- Name: Roy G. Gerard, Jr., M.D. -------------------------------------------- /s/ Alpesh R. Jethva, M.D. (seal) ------------------------------------------------- Name: Alpesh R. Jethva, M.D. -------------------------------------------- /s/ Thomas A. Lowery, M.D. (seal) ------------------------------------------------- Name: Thomas A. Lowery, M.D. -------------------------------------------- EXHIBIT A FACILITIES

Initial Principal Contact ------------------------- Athens Dialysis Center 425 S. Carroll, Suite 104 -------------------------- Athens, Texas 75751 Carthage Dialysis Center 1614 South Market Street -------------------------- Carthage, Texas 75633 Jacksonville Dialysis Center 908 East Loop 456, Suite 1 -------------------------- Jacksonville, Texas 75766 Mineola Dialysis Center 102 Maxine Drive -------------------------- Mineola, Texas 75773 Mt. Pleasant Dialysis Center 628 South Jefferson Avenue -------------------------- Mount Pleasant, Texas 75455 Palestine Dialysis Center 2041 Crockett Road -------------------------- Palestine, Texas 75801 Tyler Dialysis - Watson Wise (and Home Dialysis) 815 East 1st Street -------------------------- Tyler, Texas 75701 West Tyler Dialysis Center 3600 West Erwin Street -------------------------- Tyler, Texas 75702

EXHIBIT B MEDICAL DIRECTOR DUTIES AND RESPONSIBILITIES Qualifications: THE MEDICAL DIRECTOR SHALL BE A PHYSICIAN PRACTICING NEPHROLOGY LICENSED IN THE STATE WHERE THE FACILITY IS LOCATED, WHO MEETS THE ESRD "QUALIFIED PHYSICIAN DIRECTOR" CRITERIA AS WELL AS THE REQUIREMENTS FOR STAFF MEMBERSHIP AS DEFINED BY THE APPLICABLE PROFESSIONAL STAFF BYLAWS. DUTIES AND RESPONSIBILITIES: As required by Title 42 of the Federal Code of Federal Regulations (C.F.R.), the Medical Director has responsibility for the quality of professional care delivered to the patients at the Facility. He exercises that responsibility through directing the professional services of the Facility and conscientiously applying its policies and procedures. The Medical Director is an independent contractor, responsible to the Chief Medical Officer of Renal Care Group. Specific responsibilities of the Medical Director include administrative, medical and technical services as outlined below. The position is separate and distinct from that of the attending Nephrologist. EVALUATION: The Medical Director's duties and responsibilities are tracked monthly and reported annually for each Medical Director by the Chief Medical Officer. Section 4 of the Medical Director Handbook describes the evaluation process and scoring system. The components of the duties are listed below: Administrative A. The Medical Director will provide advice and assistance to the Facility in the implementation and maintenance of written policies and guidelines including: 1. Patient care delivery policy and procedures manual. 2. Communicable disease control within the unit. 3. The RCG Professional Staff Bylaws. 4. Maintenance of patient medical records. 5. Patient and staff education programs. 6. Physical environment, fire and safety, and emergency preparedness of the dialysis facility. 7. Responsibilities and functions of each category of personnel employed by the facility. Such policies and guidelines will be developed by Company personnel, including the Facility's head nurse or manager and the area administrator, and the policies and guidelines will be subject to the review and comment of the Medical Director. The Company will, with the advice and assistance of the Medical Director, oversee the implementation and maintenance of such policies and procedures and the training of personnel in the same, and the Medical Director will provide advice in such training as needed to the Company. Training for nurses and dialysis technicians will be provided by the Company through an instructor qualified under 25 TAC Section 117.62(g)(2). B. The Medical Director will actively participate in Facility Quality Improvement Programs (CQI), as well as participate in multidisciplinary quality assurance programs that monitor the performance of the Facilities' written policies. C. The Medical Director will participate and communicate as needed with the RCG Medical Office and the regional Executive Board (or its representative) in pursuit of the common goal of delivering the optimal patient care. Pursuit of this goal requires implementation of mandated directives by the Medical Advisory Board (MAB) and earnest consideration of its recommendations. D. The Medical Director will review on a timely basis the RCG Quality Indicator and patient satisfaction data for the facility with the manager of the facility and will consult with attending nephrologists regarding achievement of Quality Indicator targets. E. The Medical Director will assure that the Facility and all attending physicians comply with applicable ESRD Network, State, Federal and RCG mandates. F. The Medical Director will review incident reports, patient complaints and any disciplinary action of medical staff or patient care personnel in a timely fashion. G. The Medical Director will serve as Facility liaison with affiliated medical institutions for services such as renal transplantation, hospitalization, and emergency medical services. H. The Medical Director will participate in the Facility survey process by Federal, State, and private groups approved by RCG and will then communicate to the Facility's Governing Body and the Executive Board the results of such surveys. I. The Medical Director will collaborate with RCG's Chief Medical Officer (CMO) and the MAB in obtaining data from regulatory agencies and other sources as part of RCG's strategy to work continuously to improve patient care. J. The Medical Director will make best efforts to participate in national RCG Medical Director educational symposiums, as well as attend the quarterly Quality conference calls. K. The Medical Director will collaborate with the laboratory to implement ESRD Network, State, Federal and RCG mandates. L. The Medical Director will document the performance of all such duties with a written log detailing duties performed and provide documentation of these duties on a monthly basis to the RCG Medical Office or its designee (Administrative checklist). Medical A. The Medical Director will be a member of the renal health care team to ensure quality of care, including the establishment and implementation of policies regarding patient care. Among these quality of care criteria are: - The suitability of patients admitted to the outpatient dialysis Facility. - Implementation of existing RCG patient care policies and procedures. - The appropriateness of dialysis prescriptions in the Facility, particularly for all new patients. - Administration of dialysis related medications as listed on the Facility Drug Inventory. - Administration of recommended vaccines for ESRD patients and staff. B. The Medical Director will serve on the professional team in the development of both short and long-term patient care plansand will participate in the selection of the most appropriate ESRD modality for the patients of the Facility. C. The Medical Director will advise the Company regarding the implementation of written policies outlining the patient's options for various treatment modalities, including in-center hemodialysis, home hemodialysis, peritoneal dialysis, and transplantation. D. When self-dialysis training or home dialysis training is offered, the Medical Director will advise the Company in developing and implementing a program that assures that patient teaching materials are available for use of all trainees during training and at times other than during the dialysis procedure. E. The Medical Director will work to assure that the ESRD patient has appropriate consultation with a renal dietician, social worker, financial counselor and other individuals as needed. F. The Medical Director will oversee the appropriate performance of the dialysis orders and day-to-day patient care policy by the nursing and technical staff. G. The Medical Director will use reasonable efforts to encourage attending physicians to comply with the facility's policies on patient care. H. The Medical Director will review patient satisfaction surveys and clinical outcomes data and will consult with attending physicians and staff as appropriate to implement appropriate action to address issues identified and to improve patient care at the Facility. Technical A. The Medical Director will participate in the selection of cost-effective treatment modalities and dialysis supplies to be offered by the Facility and advise attending physicians regarding the compatibility of their dialysis prescriptions with the options available at the Facility. B. The Company will provide to the Medical Director, and the Medical Directo will review and approve, policies and procedures designed to ensure the adequate training of nurses and technicians in dialysis science and techniques. C. The Medical Director will provide continuous availability for medical and technical questions to the patient care staff, including coverage when unavailable. D. The Medical Director will advise the Company regarding the implementation of a dialysis water standards policy including monitoring and enforcement. E. The Medical Director will advise the Company regarding the implementation of a policy regarding dialyzer reuse including monitoring and quality improvement. F. The Medical Director will advise the Company regarding the implementation of a policy on the administration of intradialytic medications. EXHIBIT C MEDICAL DIRECTOR PERFORMANCE REVIEW The annual evaluation of the RCG Facility and Medical Director is essential to the mission, "to improve the quality of life and to care for those patients with chronic and acute renal disease." To achieve this mission, all associates of the Facility must function collaboratively at the highest possible level, under the leadership of the Medical Director. The Facility/Medical Director evaluation is conducted annually by the Chief Medical Officer, to whom the Medical Director is primarily responsible. This evaluation process must be understood by Medical Directors, since it is an important component of the RCG policy of continuous quality improvement. The Interpretive Guidelines for ESRD Facilities states "Treatment is under the general supervision of a Director who is a physician. The Medical Director is responsible for planning, organizing, conducting and directing the professional ESRD services and must devote sufficient time to carrying out these responsibilities." The Nephrologist has the medical skills and must develop leadership and collaborative management skills to fulfill this mandate as Medical Director. Teamwork and collegiality are highly valued as the leader of the ESRD team. The Practice shall be eligible for an annual bonus of up to 15% of the base medical director compensation paid during the year based upon the success of the Facilities in meeting annual clinical outcomes targets and in achieving performance objectives for the Facilities and the Practice generally prescribed by RCG for its dialysis facilities in the region in which the Facilities are located. Each year the base compensation paid to the practice is allocated between the Facilities as agreed upon by RCG and the Practice. Then, each Facility is placed in a quartile based on its evaluation. If a Facility is in the top quartile, then 100% of 15% of the base compensation allocated to that Facility is paid to the Practice. If a Facility is in the second quartile, then 66.67% of 15% of the base compensation allocated to that Facility is paid to the Practice. If a Facility is in the third quartile, then 33.33% of 15% of the base compensation allocated to that Facility is paid to the Practice. If a Facility is in the fourth quartile, then nothing is paid to the Practice for that Facility. The evaluation is based on an annually updated point system, authorized and reviewed by the RCG Medical Advisory Board (MAB). The elements measured and their weight are as follows: - 50 % based on Clinical Indicators of the Facility. The Clinical Indicators are measured monthly and reported quarterly. Measurement is based on the RCG one year rolling average. Tracking the Clinical Indicators and observing trends provides opportunities for quality improvement using the CQI process. The market or regional Quality Management Committee is charged with reviewing the outcomes and performance of each Facility and is available as a resource to the Medical Director. The point system has been weighted to encourage reduction of temporary catheters and placement of AV fistulas. Vascular access is the indicator most influenced by the concerted effort of the Medical Director. The literature shows both mortality and morbidity are reduced with early permanent access placement. Reduction of mortality is the most important outcome, but can only occur with improvement in all care processes that impact patient outcomes (such as URR, nutrition, anemia, etc.). - 30 % based on Medical Director administrative duties. Section 5 and 6 of this Handbook describe the administrative duties in greater detail. Guidelines have been prepared for the Medical Directors of both Hemodialysis and Home Therapy Facilities. At the back of each section is a grid, which is designed to assist the Medical Director and the Manager of each Facility in the documentation of the performance of these duties. On a monthly basis, the required tasks should be completed and both the Medical Director and the Manager of each Facility should initial the completion at the bottom of the grid. At a minimum, this will document the compliance of the Medical Director with regulatory requirements by Medicare. The CQI process is a vital part of the quality improvement process of the Facility and the Medical Director is expected to participate in this process. Three levels of participation are provided for but a High level of participation is expected as Medical Directors become knowledgeable and proficient with the CQI process. The Chief Medical Officer (CMO) and his staff are available as resources. - 20 % based on patient satisfaction with the Facility. The Patient Satisfaction Survey will be conducted in the spring of each year and the results made available to the Facility and Medical Directors. The Medical Director, as the clinical leader, and the Manager of each Facility, are held responsible for the performance of the staff of the Facility. Although not directly under the control of the Medical Director, he/she is expected to be a positive influence on the staff and their performance in the Facility. Completion of the duties should be documented in some manner, in addition to a check mark on the grid sheet, further described in Section 5. Common tools of documentation include minutes from meetings, a personal Medical Director notebook, or dictated notes kept in the Facility. The Manager of each Facility (or an RCG designee) must concur that the line item on the check list was completed and initial the monthly grid sheet with the Medical Director. This indicates that the line item was completed to the satisfaction of both parties. The grid sheet and related documentation is the property of the Medical Director. A copy of the grid sheet should be forwarded monthly to the office of the Associate Medical Officer for monitoring purposes and for use in the annual Medical Director evaluation. The Medical Director will be held accountable for meeting facility outcome criteria. Failure to improve outcomes, as measured by the annual Medical Director evaluation, especially when in the 4th Quartile of performance, will result in a request for a written explanation to the Chief Medical Officer. Clinical Performance Measures (50 %) - ----------------------------- Hemodialysis Medical Director (evaluation based on annual rolling average of prior year) - URR (% of patients with URRs >=70%) >80% = 10 points RCG average 72.9 % 75-80% = 8 points Best Region 80.7 % 70-74.9% = 6 points 65-69.9% = 4 points <65% = 0 points - Hematocrit (% of Hcts >=33%) >85% =10 points RCG average 74.6 % 80-85% = 8 points Best Region 78.4% 75-79.9% = 6 points 70-74.9% = 4 points 65-69.9% = 2 points <65%= 0 points - Hospitalization (91+ days, based on days per patient year at risk) RCG average 12.1 days <10 days = 8 points Best Region 9.4 days 10-14.9 days = 6 points 15-20 days = 2 points >20 days = 0 points - Mortality (91+ days, based on deaths per 100 patient years at risk) RCG average 22.1 <20 = 8 points Best Region 17.5 20-23.9 = 6 points 24-29.9 = 4 points 30-35 = 2 points >35 = 0 points - No Shows (per patient/year) RCG average 1.8 <1.0 = 10 points Best Region 0.8 1.1-1.5 = 8 points 1.6-2.0 = 6 points 2.1-2.5 = 4 points >2.5 = 0 points - Vascular Access: - % of temporary catheters <10% = 8 points RCG average 25.5 % 10-14.9% = 6 points Best Region 17.4% 15-19.9% = 4 points 20-25% = 2 points >25% = 0 points - % native AV fistulas >43 = 8 points RCG average 29.8 % 38-42.9% = 6 points Best Region 42.9% 33-37.9% = 4 points 28-32.9% = 2 points <28% = 0 points - PTFE clotting events/patient year <0.3= 10 points RCG average 0.8 0.3 - 0.59= 8 points Best region 0.4 0.6 - 0.99= 6 points 1.0 - 1.2= 4 points >1.2= 0 points Peritoneal Dialysis Medical Director (valuation based on annual rolling average of prior year) - KT/V (>=2.1) RCG average 76.8 % CAPD RCG average 88.1 % CCPD >78 = 15 points 63-78% = 12 points 68-62.9% = 10 points 63-67.9% = 8 points 58-62.9% = 5 points - Creatinine Clearance (>=60L CAPD or >=60 L CCPD) RCG average 81.2 % CAPD >75 = 15 points RCG average 75.2 % CCPD 70-75% = 12 points Weighted average 78.2% 65-69.9% = 10 points 60-64.9% = 8 points 55-59.9% = 5 points - Hematocrit (% of Hcts >=33%) >85% =10 points RCG average 74.6 % 80-85% = 8 points Best Region 78.4% 75-79.9% = 6 points 70-74.9% = 4 points 65-69.9% = 2 points <65%= 0 points - Hospitalization (91+ days, based on days per patient year at risk) RCG average 12.1 days <10 days = 8 points Best Region 9.4 days 10-14.9 days = 6 points 15-20 days = 2 points >20 days = 0 points - Mortality (91+ days, based on deaths per 100 patient years at risk) RCG average 20.7 <20 = 8 points Best Region 15.5 20-24.9 = 6 points 24-29.9 = 4 points 30-35 = 2 points >35 = 0 points - Peritonitis (new cases only) RCG average 22.6 months between cases Best Region 36.9 months between cases >32 months between cases 10 points 28-32 months between cases 8 points 22-27.9 months between cases 6 points 17-21.9 months between cases 4 points <17 months between cases 0 points - Peritonitis (relapse cases only) RCG average 11.2 % of peritonitis cases due to relapse Best Region 7.4% of peritonitis cases due to relapse <7 % of cases 10 points 7.0 to 9.9 % of cases 8 points 10 to 12 % of cases 6 points 12 to 15% of cases 4 points >15% of cases 0 points Combination Hemodialysis & Peritoneal Medical Director For those physicians who oversee both modalities, each is evaluated using the above criteria. The overall Clinical Quality is then a composite of these, weighted to reflect the numbers of patients in each modality. MEDICAL DIRECTOR ADMINISTRATIVE TASKS (30 %) The completion of administrative tasks must be documented by the Medical Director on a monthly basis. It is important that both the Manager of each Facility and the Medical Director document completion of the required tasks. Other Medical Director functions including such things as meeting with surgeons regarding access, goals, attendance at medical meetings and literature review regarding ESRD issues, etc, should also be noted in this record as well, since this contributes to a high quality Facility. Participation in monthly review: - Review staffing & training issues impacting patient outcomes with Manager - Review water quality - Review dialyzer reuse at the Facility - Review monthly lab of patients below quality goals & develop plan - Review trend in hospitalizations, infections - Review temporary catheter usage & trend - Review patient incident reports & trends - Monitor staff physician patient rounding process - Adequacy of staff physician medical documentation Participation in CQI process: - The CQI process should be a routine process in the Facility striving to improve its outcomes. As physicians learn this process, Medical Directors are expected to participate at higher levels. In the meantime, Low, Medium and High participation levels may be chosen on the Performance grid, depending on the physician's comfort with the process. Participation in Professional Staff process: - Participate in the Quarterly Quality conference calls, which have physician CME available. Annual checklist: - Review and approve Facility Policy and Procedures and make necessary modifications; review and approve clinical protocols. - Review patient satisfaction data annually and in concert with the Manager of the Facility make recommendations for improvement. - Participate with the Manager in the Budget process for the Facility - Participate in Facilities' surveys by regulatory agencies. Patient Satisfaction Surveys (PSS) (20 %) The Satisfaction Survey will be conducted in the spring of each year and results forwarded to each Facility for review and discussion regarding potential areas of improvement. Nurse: RCG average In-Center 3.43 PSS >3.5 = 4 points PSS >= 3.25 and < 3.5 = 3 points PSS >=3.0 and < 3.25 = 2 points PSS > 2.5 and < 3.0 = 1 points PSS < 2.5 = 0 points RCG average Home 3.77 PSS > 3.5 = 4 points PSS >= 3.25 and < 3.5 = 3 points PSS >=3.0 and < 3.25 = 2 points PSS > 2.5 and < 3.0 = 1 points PSS < 2.5 = 0 points PCT/Home Services: RCG average In-Center 3.42 PSS >3.5 = 4 points PSS >= 3.25 and < 3.5 = 3 points PSS >=3.0 and < 3.25 = 2 points PSS > 2.5 and < 3.0 = 1 points PSS < 2.5 = 0 points RCG average Home 3.67 PSS >3.5 = 4 points PSS >= 3.25 and < 3.5 = 3 points PSS >=3.0 and < 3.25 = 2 points PSS > 2.5 and < 3.0 = 1 points PSS < 2.5 = 0 points Physician: RCG average In-Center 3.27 PSS > 3.5 = 8 points PSS >= 3.25 and < 3.5 = 6 points PSS >=3.0 and < 3.25 = 4 points PSS > 2.5 and < 3.0 = 2 points PSS < 2.5 = 0 points RCG average Home 3.67 PSS > 3.5 = 8 points PSS >= 3.25 and < 3.5 = 6 points PSS >=3.0 and < 3.25 = 4 points PSS > 2.5 and < 3.0 = 2 points Dietitian: RCG average In-Center 3.27 PSS > 3.5 = 4 points PSS >= 3.25 and < 3.5 = 3 points PSS >=3.0 and < 3.25 = 2 points PSS > 2.5 and < 3.0 = 1 points RCG average Home 3.67 PSS > 3.5 = 4 points PSS >= 3.25 and < 3.5 = 3 points PSS >=3.0 and < 3.25 = 2 points PSS > 2.5 and < 3.0 = 1 points Social Worker: RCG average In-Center 3.40 PSS > 3.5 = 4 points PSS >= 3.25 and < 3.5 = 3 points PSS >=3.0 and < 3.25 = 2 points PSS > 2.5 and < 3.0 = 1 points RCG average Home 3.51 PSS > 3.5 = 4 points PSS >= 3.25 and < 3.5 = 3 points PSS >=3.0 and < 3.25 = 2 points PSS > 2.5 and < 3.0 = 1 points Facility: RCG average: In-Center 3.24 PSS > 3.5 = 4 points PSS >= 3.25 and < 3.5 = 3 points PSS >=3.0 and < 3.25 = 2 points PSS > 2.5 and < 3.0 = 1 points RCG average Home 3.58 PSS > 3.5 = 4 points PSS >= 3.25 and < 3.5 = 3 points PSS >=3.0 and < 3.25 = 2 points PSS > 2.5 and < 3.0 = 1 points EX-10.44 9 g87511exv10w44.txt EX-10.44 EMPLOYMENT AGREEMENT DAVID M DILL EXHIBIT 10.44 EMPLOYMENT AGREEMENT THIS AGREEMENT is made and entered into effective as of the 3rd day of November 2003, by and between RENAL CARE GROUP, INC., a Delaware corporation (the "Company"), and DAVID M. DILL (hereinafter "Employee"). WITNESSETH: WHEREAS, Employee is currently Senior Vice President, Finance, and the Company desires to employ and retain Employee to act as its Executive Vice President and Chief Financial Officer; and WHEREAS, Employee desires to remain an employee of the Company on the terms and conditions contained in this Agreement; and NOW, THEREFORE, in consideration of the compensation payable to Employee by the Company pursuant to this Agreement, and the mutual promises, covenants, representations and warranties contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do agree as follows: 1. Employment. The Company employs Employee and Employee accepts employment with the Company under the terms of this Agreement effective as of November 3, 2003 (the "Effective Date"). 2. Term. The term of this Agreement shall begin on the Effective Date and shall continue for an initial term of approximately three years and two months, ending on December 31, 2006 (the "Initial Period"), subject to earlier termination by Employee or the Company as hereinafter provided. Unless one party gives the other notice of non-renewal not less than 60 days prior to the expiration of the Initial Period or an additional term, this Agreement shall renew for additional terms of 12 months each, subject to earlier termination as hereinafter provided, on the same terms and conditions (subject to mutually agreeable modifications, if any). 3. Compensation and Benefits. (a) Base Compensation. The Company shall pay Employee a base salary at an annual rate of $275,000 from the Effective Date through March 31, 2004 (the "Base Compensation"). Such Base Compensation may be adjusted as provided herein. The Base Compensation is payable according to the pay periods of the Company as may be in effect from time to time. Such payments will be prorated for periods less than a full pay period. The Base Compensation will be subject to withholding for federal, state and local payroll and all other taxes or withholdings applicable to Employee. Any increases of the Base Compensation will be at the discretion of the Company, provided that the Company may not decrease the then current Base Compensation without the consent of Employee. The Base Compensation and target percentage for the Annual Bonus (as defined below) will be reviewed annually by the Compensation Committee of the Company. (b) Benefits. During the term of this Agreement, Employee shall also be entitled to participate in the insurance and other fringe benefits made available generally to senior management employees of the Company, as such benefits may be determined from time to time by the Company. Employee may take vacations at times and for periods that are approved from time to time by the Company's President and Chief Executive Officer in his reasonable discretion, Employee not accruing any vacation time for purposes of compensation upon termination of employment. The Company and Employee acknowledge and agree that vacation time of at least four weeks per calendar year is expected, but that such amount may be more or less in any specific. In addition, during the term of this Agreement, the Company will provide to Employee term life insurance coverage of $1,000,000 on Employee's life payable to one or more beneficiaries designated by Employee from time to time. (c) Annual Bonuses. In addition to the Base Compensation, Employee will be entitled to an annual bonus (the "Annual Bonus"), with a target amount equal to 75% of the Base Compensation for such year. The actual amount of the Annual Bonus paid will be determined based on the Company's and Employee's achievement of performance goals reasonably established by the Compensation Committee of the Company and, in the case of performance goals established specifically for Employee, agreed to by Employee. The Company agrees that the Company-related performance goals for Employee shall be substantially similar to those established for other members of senior management. (d) Expenses. The Company shall reimburse Employee for any and all expenses reasonably incurred by Employee incident to the performance of the duties imposed upon Employee hereunder. 4. Duties, Extent of Services. Employee is employed as Executive Vice President and Chief Financial Officer of the Company. As such, Employee will perform such duties and responsibilities as are typically incident thereto and will perform in a faithful and competent manner such additional duties as may be reasonably assigned from time to time by the Company. Throughout the term of this Agreement, Employee will report to the Chief Executive Officer and President of the Company. Employee's duties for the Company will be performed on a full-time basis at the Company's corporate offices in Nashville, Tennessee. Employee may be required, from time to time, to perform his duties temporarily hereunder at such other place or places as the Company shall reasonably require, provided that such period does not exceed 30 consecutive days without Employee's consent and that during any such period Employee is able to return to Nashville, Tennessee at the Company's expense for weekends. Employee will devote all of Employee's business time, attention, knowledge, and skill solely to the business and interest of the Company, and the Company will be entitled to all the benefits, profits, and other issues arising from, or incident to, all work, services, and advice of Employee. 5. Termination. This Agreement may be terminated by the parties in the manners specified below: (a) Termination without Cause. Either the Company or Employee may terminate Employee's employment under this Agreement at any time for any reason or no reason upon 30 days' prior written notice to the other party. (b) Termination for Cause. The Company may terminate this Agreement on written notice at any time for "Cause". For purposes of this Agreement, "Cause" means: (i) Employee is convicted of, pleads guilty to, or confesses to a felony or any crime involving any act of dishonesty, -2- fraud, misappropriation, embezzlement or moral turpitude, in which event the Company may terminate this Agreement immediately, (ii) the misconduct or gross negligence by Employee in connection with the performance of Employee's duties hereunder, (iii) the engaging by Employee in any fraudulent, disloyal or unprofessional conduct which results in an injury to the Company, its affiliates or any of its or their centers, monetarily or otherwise, (iv) Employee breaches any provision of Section 6 of this Agreement, or (v) the material failure by Employee otherwise substantially to perform his duties with the Company (other than any such failure resulting from the disability of Employee under Section 5(d)(i)) or the breach of any provision of this Agreement other than Section 6. If the Company terminates this Agreement for Cause pursuant to the provisions of (ii), (iii), (iv) or (v) of this subsection (b), then the Company will give Employee written notice prior to such termination detailing the specific acts, actions, failures, or events upon which the forecast termination is based. Employee will have 15 days after such written notice to cease such actions or otherwise correct any such failure or breach. If Employee does not cease such action or otherwise correct such failure or breach within such 15-day period, or having once received such written notice and ceased such actions or corrected such failure or breach, Employee at any time thereafter again so acts, fails or breaches, the Company may terminate this Agreement immediately. (c) Termination for Good Reason. Employee may terminate this Agreement on written notice at any time for "Good Reason". For purposes of this Agreement, "Good Reason" means: (i) without the express written consent of Employee, a material diminution of his position, duties, responsibilities and status with the Company as in effect as of the Effective Date, a change in Employee's reporting responsibilities, a material reduction of Employee's titles or offices as in effect on the date of this Agreement, or the removal of Employee from, or failure to re-elect Employee to, any position referred to in Section 4 of this Agreement, except in connection with the termination of this Agreement for Cause; (ii) any reduction of the Base Compensation; (iii) the requirement that Employee relocate outside of the Nashville, Tennessee metropolitan area; (iv) the material breach by the Company of any material provision of this Agreement, which breach continues uncorrected and uncured for 15 days after Employee gives notice of such breach to the Company; or (v) the termination of this Agreement by written notice from Employee to the Company during the 30-day period immediately following the first anniversary of a Change in Control (as defined below). (d) Involuntary Termination. The employment of Employee hereunder will be automatically terminated by the death or disability of Employee as outlined below. (i) Disability. The Company may terminate this Agreement at such time as Employee shall have been Disabled (as defined below) for a continuous period of six months during any continuous 12-month period. For purposes of this Section 5(d)(i), the term "Disabled" means Employee's inability to perform the essential functions of his duties, with or without reasonable accommodation. During Employee's six-month period of Disability, the Company will continue to pay Employee's Base Compensation (less regular withholdings for payroll or other taxes and other required or proper items, and less proceeds from all disability insurance policies or plans provided or made available by the Company). In the event of a termination of Employee on account of Disability, the Company will pay Employee's Base Compensation for a period of six months following the effective date of termination (less regular withholdings for payroll or other taxes and other required or proper times, and less proceeds from all disability insurance policies or plans provided or made available by the Company). In addition, any provisions in the relevant stock option agreements notwithstanding, all outstanding stock options granted to Employee by the Company will vest immediately upon termination pursuant to this Section 5(d)(i). (ii) Death. If Employee dies during the term of this Agreement, this Agreement shall terminate and Employee's estate shall receive the remainder of the Base Compensation -3- set forth in Section 3(a) hereof accrued to the last day of the month in which death occurs. In addition, any provisions in the relevant stock option agreements notwithstanding, all outstanding stock options granted to Employee by the Company will vest immediately upon termination pursuant to this Section 5(d)(i). (e) Post-Termination Compensation. Except as provided in Section 5(d) above, upon termination of this Agreement, the Company shall be relieved of all of its obligations hereunder notwithstanding any period of time remaining under the initial or any renewal term, subject to the following: (i) Termination without Cause or with Good Reason. If the Company terminates Employee's employment hereunder without Cause under Section 5(a) above or if Employee terminates Employee's employment hereunder with Good Reason under Section 5(c) above or if this Agreement expires as a result of the Company's giving notice of non-renewal as contemplated by Section 2 above, then the Company will pay to Employee, after the effective date of such termination, as Employee's sole and exclusive remedy, (A) an amount equal to the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect), and (B) any unpaid bonus payable for the most recently completed calendar year. If the Company terminates Employee's employment without Cause or if Employee terminates Employee's employment hereunder with good reason or if this Agreement expires as a result of the Company's giving notice of non-renewal, Employee shall be under no duty to seek or accept other employment; but if he shall do so, any compensation he shall receive from such other employment will not diminish the Company's obligation to make payments required to the Employee hereunder. (ii) Termination without Good Reason. If Employee terminates his employment under Section 5(a) above, then the Company's obligation to pay Employee's Base Compensation will terminate as of the date of termination. (iii) Termination for Cause. If the Company terminates Employee's employment with Cause under Section 5(b) above, then the Company will pay Employee, after the effective date of such termination, the Base Compensation (as then in effect) for a period of one month after the termination date. (iv) Termination following Change in Control. If, within twelve (12) months following a Change in Control, either (A) the Company terminates the employment of Employee hereunder without Cause under Section 5(a) above or (B) Employee terminates his employment for Good Reason under Section 5(c) above (except for a termination under clause (v) of Section 5(c)), then, in lieu of any other compensation that may be specified in this Agreement, the Company will pay Employee an amount equal to (i) the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect) multiplied by (ii) three. If Employee terminates his employment for Good Reason under clause (v) of Section 5(c) above, then, in lieu of any other compensation that may be specified herein, the Company will pay Employee an amount equal to (i) the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect) multiplied by (ii) two. The Company will make any payment due under this clause (iv) in a single lump-sum payment not later than 30 days after termination. If any payment obligation under this Section 5(e) arises, no compensation received from other employment (or otherwise) will reduce the Company's obligation to make the payment(s) described in this paragraph. -4- (f) Change in Control. "Change in Control" means a change in control of the Company of a nature that would be required to be reported (assuming such event has not been "previously reported") in response to Item 1(a) of a Current Report on Form 8-K pursuant to Section 13 or 15(d) of the Exchange Act of 1934 (the "Exchange Act"); provided that, without limitation, a Change in Control shall also be deemed to have occurred at such time as: (i) Any "person" within the meaning of Section 14(d) of the Exchange Act, other than the Company; a subsidiary, or any employee benefit plan(s) sponsored by the Company or any Subsidiary, is or has become the "beneficial owner," as defined in rule l3d-3 under the Exchange Act, directly or indirectly, of 25% or more of the combined voting power of the outstanding securities of the Company ordinarily having the right to vote at the election of directors, or (ii) Individuals who constitute the Board immediately prior to any meeting of stockholders (the "Incumbent Board") have ceased for any reason to constitute at least a majority thereof, provided that any person becoming a director whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters (3/4) of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination) will be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) Upon approval by the Company's stockholders of a reorganization, merger, share exchange or consolidation, other than a reorganization, merger, share exchange or consolidation with respect to which those persons who were the beneficial owners, immediately prior to such reorganization, merger, share exchange or consolidation, of outstanding securities of the Company ordinarily having the right to vote in the election of directors own, immediately after such transaction, more than 75% of the outstanding securities of the resulting corporation ordinarily having the right to vote in the election of directors; or (iv) Upon approval by the Company's stockholders of a complete liquidation and dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company other than to a Subsidiary. 6. Nondisclosure, Confidentiality; Competition. (a) Subject to Section 6(f) below, Employee agrees that, during the term of this Agreement and of Employee's employment by the Company, and for a period 12 months after the termination of Employee's employment with the Company, Employee will not in any manner, directly or indirectly, by himself or in conjunction with any other person, (i) conduct any of the activities or perform any of the responsibilities or duties that Employee provided the Company during his employment by the Company for any business entity that is competitive with the business of the Company or its affiliates or (ii) establish or own any financial, beneficial or other interest in (other than an interest consisting of less than one percent (1%) of a class of publicly traded security), make any loan to or for the benefit of, or render any managerial, marketing or other business advice, to any entity that is then conducting activities that are competitive with those of the business of the Company or its affiliates, in either case within a geographic territory defined as a 75-mile radius of any renal dialysis center, unit or facility owned or operated by the Company or an affiliate of the Company. For purposes of this Section, the "business of the Company or its affiliates" means owning or operating a renal dialysis center, unit or facility. The parties acknowledge and agree that nothing in this Section 6(a) shall be deemed to restrict any firm of accountants of or with which Employee becomes an employee, partner, shareholder or otherwise -5- associated or affiliated from rendering accounting services to any business entity or entities that are competitive with the business of the Company or its affiliates, so long as Employee does not perform services for any such business entity and that such entity or entities do not represent more than fifty percent (50%) of the revenue of such firm in any twelve (12)-month period. (b) Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee will keep confidential and not directly divulge, or allow through a lack of reasonable care to be divulged to anyone, or use or otherwise appropriate for Employee's own benefit or for the benefit of others, any knowledge or information of a confidential nature with respect to the Company's and its affiliates' current business, the Company itself, or any of its affiliates, including all trade secrets, pricing information, marketing information or technical information (hereinafter referred to as the "Confidential Data"), except for (i) a disclosure that is required by law; or (ii) information that has been made generally available to the public by the act of one who has the right to disclose such information; or (iii) information that has become part of the public domain through no fault of Employee. Employee acknowledges and agrees that the prohibitions against disclosure of Confidential Data recited herein are in addition to, and not in lieu of, any rights or remedies the Company may have available pursuant to the laws of any jurisdiction or at common law to prevent the disclosure of confidential information, and the enforcement by the Company of its rights and remedies pursuant hereto shall not be construed as a waiver of any other rights or available remedies which the Company may possess in law or equity. Employee acknowledges that the Company has taken reasonable and appropriate steps to ensure the confidentiality and non-disclosure of all such Confidential Data. For purposes of this Section the Company's and its affiliates' "current business" means owning or operating a renal dialysis center, unit or facility. (c) Subject to Section 6(f) below, Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee will not, for his own benefit or the benefit of others, solicit any person or entity that has or has had, or disrupt or attempt to disrupt, any relationship, contractual or otherwise, with the Company or an affiliate of the Company (including any patient, payor, physician, provider, managed care organization or supplier) at any time during Employee's employment with the Company, for the purpose of assisting, or creating such a relationship for, any business entity that is competitive with the Company or an affiliate of the Company. For purposes of this Section, a business entity is competitive with the Company or an affiliate of the Company if it provides or offers any renal dialysis service that is provided by the Company or an affiliate of the Company. (d) Subject to Section 6(f) below, Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee shall not induce, nor attempt to induce, any employee of the Company, or any of its affiliates, to terminate such employee's association with the Company or any of its affiliates. (e) These post-employment covenants are considered by the parties hereto to be fair, reasonable and integral for the protection of the Company. The parties mutually agree that if a violation of any of these covenants occurs, such violation or any threatened violation will cause irreparable injury to the Company and the remedy at law for any such violation or threatened violation will be inadequate. The parties acknowledge that these covenants will survive, and remain in effect and enforceable after, termination of this Agreement. (f) The Company agrees that the forgoing covenants in subsections (a), (c) and (d) of this Section 6 shall be null and void as to any period following termination of Employee's employment if such termination occurs within 13 months following a Change in Control through either (A) a -6- termination by the Company without Cause under Section 5(a) above or (B) a resignation by Employee for any reason. (g) Employee agrees to indemnify and hold harmless the Company from and against any and all claims, causes of action, damages and/or any other losses suffered or incurred by the Company as a result of any breach or purported breach by Employee of any agreement applicable to Employee which existed prior to the time of the entering into of this Agreement. The obligations of Employee to indemnify and hold the Company harmless include any and all costs of defense of any such claim or threatened claim, including reasonable attorneys' fees. 7. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, if any payment or distribution by the Company to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 7) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Company will make an additional payment (a "Gross-Up Payment") to Employee in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 7(c), all determinations required to be made under this Section 7, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, will be made by Ernst & Young LLP or such other certified public accounting firm as may be designated by Employee (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Employee within 15 business days of the receipt of notice from Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by the Company to Employee within five business days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Employee. It is possible (due to the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder) that Gross-Up Payments will not have been made by the Company which it is ultimately determined should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. Consequently, if the Company exhausts its remedies pursuant to Section 7(c) and Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and the Company will promptly pay any such Underpayment to or for the benefit of Employee. (c) Employee will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after -7- Employee is informed in writing of such claim, and such notification will apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee will not pay such claim prior to the expiration of the 30-day period following the date on which Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee will: (i) Give the Company any information reasonably requested by the Company relating to such claim, (ii) Take such action in connection with contesting such claim as the Company reasonably requests in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) Cooperate with the Company in good faith in order effectively to contest such claim, and (iv) Permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and will indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 7(c), the Company will control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company may determine; provided, however, that if the Company directs Employee to pay such claim and sue for a refund, the Company will advance the amount of such payment to Employee, on an interest-free basis and will indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Employee will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 7(c), Employee becomes entitled to receive any refund with respect to such claim, Employee will (subject to the Company's complying with the requirements of Section 7(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 7(c), a determination is made that Employee is not entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance will be forgiven -8- and Employee shall not be required to repay and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 8. Severability. The parties hereto hereby expressly agree and contract that it is not the intention of either party to violate any public policy, or any statutory or common law, and that if any paragraph, sentence, clause or combination of the same of this Agreement will be in violation of the laws of any state where applicable, such paragraph, sentence, clause or the combination of the same will be void in the jurisdictions where it is unlawful, and the remainder thereof shall remain binding on the parties hereto. It is the intention of the parties to make the covenants of this Agreement binding only to the extent that they may be lawfully done under existing applicable laws. In the event that any part of any term or covenant of this Agreement is determined by a court of law or equity to be overly broad or otherwise unenforceable, the parties hereto agree that such court shall be empowered to substitute, and it is the intent of the parties hereto that such court substitute, a reasonably judicially enforceable term or limitation in the place of such unenforceable term or covenant, and that as so modified this Agreement will be fully enforceable. 9. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and supersedes any and all prior understandings or agreements. Any changes or additions to this Agreement must be in writing and signed by both parties. If there is any conflict between the terms of this Agreement and any stock option agreement or other agreement between Employee and the Company (including any agreement entered into after the date of this Agreement), then this Agreement will control unless there is specific reference to superseding this Agreement in such other agreement or in this Agreement. 10. Assignment. (a) The rights and benefits of Employee under this Agreement, other than accrued and unpaid amounts due under Section 3(a) hereof, are personal to Employee and are not assignable. (b) This Agreement may not be assigned by the Company except to an affiliate of the Company, provided that such affiliate assumes the Company's obligations under this Agreement; provided, further, that if the Company merges or effects a consolidation or share exchange with or into, or sells or otherwise transfers substantially all its assets to, another business entity, the Company may assign its rights hereunder to that business entity without the consent of the Employee provided that it causes such business entity to assume the Company's obligations under this Agreement and provided, further, that the provisions of Section 5 remain in full force and effect following such assignment. 11. Notice. Unless otherwise specifically provided, references to notice periods of a certain number of "days" contained in this Agreement are references to calendar days. Any notice provided for in this Agreement shall be delivered to Employee at the most recent address of Employee listed in the Company's then current employment records. Notice to the Company shall be delivered to the following address: c/o Renal Care Group, Inc., 2525 West End Avenue, Suite 600, Nashville, Tennessee 37203, Attention: General Counsel. -9- 12. Waiver. The waiver by any party to this Agreement of a breach of any of the provisions contained herein will not operate or be construed as a waiver of any subsequent breach. 13. Disputes and Governing Law. The Company and Employee agree that any dispute arising in connection with, or relating to, this Agreement or the termination of this Agreement, to the maximum extent allowed by applicable law, will be subject to resolution through informal methods and, failing such efforts, through arbitration. Either party may notify the other party of the existence of a dispute by written notice to the address indicated above in Section 11. The parties will thereafter attempt in good faith to resolve their differences within 30 days after the receipt of such notice. If the dispute cannot be resolved within such 30-day period, either party may file a written demand for arbitration with the other party. The arbitration shall proceed in accordance with the terms of the Federal Arbitration Act and the Commercial Arbitration Rules of the American Arbitration Association. A single arbitrator shall be appointed through the American Arbitration Association's procedures to resolve the dispute. The parties agree that in the event arbitration is necessary, the laws of the State of Tennessee and any applicable federal law shall apply. The place of the arbitration shall be Nashville, Tennessee. The award of the arbitrator shall be binding and conclusive upon the parties. Either party shall have the right to have the award made the judgment of a court of competent jurisdiction in the State of Tennessee. In the event of a dispute arising under this Agreement, the prevailing party shall be entitled to all reasonable attorneys' fees incurred in connection with such dispute. The Company and Employee are parties to an Indemnification Agreement effective as of August 13, 2002, which the parties specifically ratify and confirm by this reference. [the remainder of this page is intentionally left blank] -10- IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on the day and year first above written. COMPANY: RENAL CARE GROUP, INC. By: /s/ Gary A. Brukardt --------------------------------------- Title: President and CEO EMPLOYEE: /s/ David M. Dill --------------------------------------- DAVID M. DILL -11- EX-10.45 10 g87511exv10w45.txt EX-10.45 EMPLOYMENT AGREEMENT TIMOTHY P MARTIN EXHIBIT 10.45 EMPLOYMENT AGREEMENT THIS AGREEMENT is made and entered into effective as of the 30th day of November 2003, by and between RENAL CARE GROUP, INC., a Delaware corporation (the "Company"), and TIMOTHY P. MARTIN (hereinafter "Employee"). WITNESSETH: WHEREAS, Employee is currently Group Senior Vice President, East Group, and the Company desires to employ and retain Employee to act as its Executive Vice President of Operations; and WHEREAS, Employee desires to remain an employee of the Company on the terms and conditions contained in this Agreement; and NOW, THEREFORE, in consideration of the compensation payable to Employee by the Company pursuant to this Agreement, and the mutual promises, covenants, representations and warranties contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do agree as follows: 1. Employment. The Company employs Employee and Employee accepts employment with the Company under the terms of this Agreement effective as of November ___, 2003 (the "Effective Date"). 2. Term. The term of this Agreement shall begin on the Effective Date and shall continue for an initial term beginning on the Effective Date and ending on December 31, 2006 (the "Initial Period"), subject to earlier termination by Employee or the Company as hereinafter provided. Unless one party gives the other notice of non-renewal not less than 60 days prior to the expiration of the Initial Period or an additional term, this Agreement shall renew for additional terms of 12 months each, subject to earlier termination as hereinafter provided, on the same terms and conditions (subject to mutually agreeable modifications, if any). 3. Compensation and Benefits. (a) Base Compensation. The Company shall pay Employee a base salary at an annual rate of $300,000 from the Effective Date through March 31, 2004 (the "Base Compensation"). Such Base Compensation may be adjusted as provided herein. The Base Compensation is payable according to the pay periods of the Company as may be in effect from time to time. Such payments will be prorated for periods less than a full pay period. The Base Compensation will be subject to withholding for federal, state and local payroll and all other taxes or withholdings applicable to Employee. Any increases of the Base Compensation will be at the discretion of the Company, provided that the Company may not decrease the then current Base Compensation without the consent of Employee. The Base Compensation and target percentage for the Annual Bonus (as defined below) will be reviewed annually by the Compensation Committee of the Company. (b) Benefits. During the term of this Agreement, Employee shall also be entitled to participate in the insurance and other fringe benefits made available generally to senior management employees of the Company, as such benefits may be determined from time to time by the Company. Employee may take vacations at times and for periods that are approved from time to time by the Company's President and Chief Executive Officer in his reasonable discretion, Employee not accruing any vacation time for purposes of compensation upon termination of employment. The Company and Employee acknowledge and agree that vacation time of at least four weeks per calendar year is expected, but that such amount may be more or less in any specific. In addition, during the term of this Agreement, the Company will provide to Employee term life insurance coverage of $1,000,000 on Employee's life payable to one or more beneficiaries designated by Employee from time to time. (c) Annual Bonuses. In addition to the Base Compensation, Employee will be entitled to an annual bonus (the "Annual Bonus"), with a target amount equal to 75% of the Base Compensation for such year. The actual amount of the Annual Bonus paid will be determined based on the Company's and Employee's achievement of performance goals reasonably established by the Compensation Committee of the Company and, in the case of performance goals established specifically for Employee, agreed to by Employee. The Company agrees that the Company-related performance goals for Employee shall be substantially similar to those established for other members of senior management. (d) Expenses. The Company shall reimburse Employee for any and all expenses reasonably incurred by Employee incident to the performance of the duties imposed upon Employee hereunder. In addition, the Company shall, in accordance with the Company's relocation policy for senior executives, reimburse Employee for expenses reasonably incurred by Employee in connection with his relocation from Cleveland, Ohio to Nashville, Tennessee. 4. Duties, Extent of Services. Employee is employed as Executive Vice President, Operations of the Company and shall be generally responsible for overseeing the regional dialysis operations of the Company. As such, Employee will perform such duties and responsibilities as are typically incident thereto and will perform in a faithful and competent manner such additional duties as may be reasonably assigned to Employee from time to time by Chief Executive Officer and President of the Company. Throughout the term of this Agreement, Employee will report to the Chief Executive Officer and President of the Company. Employee's duties for the Company will be performed on a full-time basis at the Company's corporate offices in Nashville, Tennessee. Employee may be required, from time to time, to perform his duties temporarily hereunder at such other place or places as the Company shall reasonably require, provided that such period does not exceed 30 consecutive days without Employee's consent and that during any such period Employee is able to return to Nashville, Tennessee at the Company's expense for weekends. Employee will devote all of Employee's business time, attention, knowledge, and skill solely to the business and interest of the Company, and the Company will be entitled to all the benefits, profits, and other issues arising from, or incident to, all work, services, and advice of Employee. 5. Termination. This Agreement may be terminated by the parties in the manners specified below: (a) Termination without Cause. Either the Company or Employee may terminate Employee's employment under this Agreement at any time for any reason or no reason upon 30 days' prior written notice to the other party. -2- (b) Termination for Cause. The Company may terminate this Agreement on written notice at any time for "Cause". For purposes of this Agreement, "Cause" means: (i) Employee is convicted of, pleads guilty to, or confesses to a felony or any crime involving any act of dishonesty, fraud, misappropriation, embezzlement or moral turpitude, in which event the Company may terminate this Agreement immediately, (ii) the misconduct or gross negligence by Employee in connection with the performance of Employee's duties hereunder, (iii) the engaging by Employee in any fraudulent, disloyal or unprofessional conduct which results in an injury to the Company, its affiliates or any of its or their centers, monetarily or otherwise, (iv) Employee breaches any provision of Section 6 of this Agreement, or (v) the material failure by Employee otherwise substantially to perform his duties with the Company (other than any such failure resulting from the disability of Employee under Section 5(d)(i)) or the breach of any provision of this Agreement other than Section 6. If the Company terminates this Agreement for Cause pursuant to the provisions of (ii), (iii), (iv) or (v) of this subsection (b), then the Company will give Employee written notice prior to such termination detailing the specific acts, actions, failures, or events upon which the forecast termination is based. Employee will have 15 days after such written notice to cease such actions or otherwise correct any such failure or breach. If Employee does not cease such action or otherwise correct such failure or breach within such 15-day period, or having once received such written notice and ceased such actions or corrected such failure or breach, Employee at any time thereafter again so acts, fails or breaches, the Company may terminate this Agreement immediately. (c) Termination for Good Reason. Employee may terminate this Agreement on written notice at any time for "Good Reason". For purposes of this Agreement, "Good Reason" means: (i) without the express written consent of Employee, a material diminution of his position, duties, responsibilities and status with the Company as in effect as of the Effective Date, a change in Employee's reporting responsibilities, a material reduction of Employee's titles or offices as in effect on the date of this Agreement, or the removal of Employee from, or failure to re-elect Employee to, any position referred to in Section 4 of this Agreement, except in connection with the termination of this Agreement for Cause; (ii) any reduction of the Base Compensation; (iii) the requirement that Employee relocate outside of the Nashville, Tennessee metropolitan area; (iv) the material breach by the Company of any material provision of this Agreement, which breach continues uncorrected and uncured for 15 days after Employee gives notice of such breach to the Company; or (v) the termination of this Agreement by written notice from Employee to the Company during the 30-day period immediately following the first anniversary of a Change in Control (as defined below). (d) Involuntary Termination. The employment of Employee hereunder will be automatically terminated by the death or disability of Employee as outlined below. (i) Disability. The Company may terminate this Agreement at such time as Employee shall have been Disabled (as defined below) for a continuous period of six months during any continuous 12-month period. For purposes of this Section 5(d)(i), the term "Disabled" means Employee's inability to perform the essential functions of his duties, with or without reasonable accommodation. During Employee's six-month period of Disability, the Company will continue to pay Employee's Base Compensation (less regular withholdings for payroll or other taxes and other required or proper items, and less proceeds from all disability insurance policies or plans provided or made available by the Company). In the event of a termination of Employee on account of Disability, the Company will pay Employee's Base Compensation for a period of six months following the effective date of termination (less regular withholdings for payroll or other taxes and other required or proper times, and less proceeds from all disability insurance policies or plans provided or made available by the Company). In addition, any provisions in the relevant stock option agreements notwithstanding, all outstanding stock options -3- granted to Employee by the Company will vest immediately upon termination pursuant to this Section 5(d)(i). (ii) Death. If Employee dies during the term of this Agreement, this Agreement shall terminate and Employee's estate shall receive the remainder of the Base Compensation set forth in Section 3(a) hereof accrued to the last day of the month in which death occurs. In addition, any provisions in the relevant stock option agreements notwithstanding, all outstanding stock options granted to Employee by the Company will vest immediately upon termination pursuant to this Section 5(d)(i). (e) Post-Termination Compensation. Except as provided in Section 5(d) above, upon termination of this Agreement, the Company shall be relieved of all of its obligations hereunder notwithstanding any period of time remaining under the initial or any renewal term, subject to the following: (i) Termination without Cause or with Good Reason. If the Company terminates Employee's employment hereunder without Cause under Section 5(a) above or if Employee terminates Employee's employment hereunder with Good Reason under Section 5(c) above or if this Agreement expires as a result of the Company's giving notice of non-renewal as contemplated by Section 2 above, then the Company will pay to Employee, after the effective date of such termination, as Employee's sole and exclusive remedy, (A) an amount equal to the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect), and (B) any unpaid bonus payable for the most recently completed calendar year. If the Company terminates Employee's employment without Cause or if Employee terminates Employee's employment hereunder with good reason or if this Agreement expires as a result of the Company's giving notice of non-renewal, Employee shall be under no duty to seek or accept other employment; but if he shall do so, any compensation he shall receive from such other employment will not diminish the Company's obligation to make payments required to the Employee hereunder. (ii) Termination without Good Reason. If Employee terminates his employment under Section 5(a) above, then the Company's obligation to pay Employee's Base Compensation will terminate as of the date of termination. (iii) Termination for Cause. If the Company terminates Employee's employment with Cause under Section 5(b) above, then the Company will pay Employee, after the effective date of such termination, the Base Compensation (as then in effect) for a period of one month after the termination date. (iv) Termination following Change in Control. If, within twelve (12) months following a Change in Control, either (A) the Company terminates the employment of Employee hereunder without Cause under Section 5(a) above or (B) Employee terminates his employment for Good Reason under Section 5(c) above (except for a termination under clause (v) of Section 5(c)), then, in lieu of any other compensation that may be specified in this Agreement, the Company will pay Employee an amount equal to (i) the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect) multiplied by (ii) three. If Employee terminates his employment for Good Reason under clause (v) of Section 5(c) above, then, in lieu of any other compensation that may be specified herein, the Company will pay Employee an amount equal to (i) the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect) multiplied by (ii) two. The Company will make any payment due under this clause (iv) in a single lump-sum payment not later than 30 days after termination. -4- If any payment obligation under this Section 5(e) arises, no compensation received from other employment (or otherwise) will reduce the Company's obligation to make the payment(s) described in this paragraph. (f) Change in Control. "Change in Control" means a change in control of the Company of a nature that would be required to be reported (assuming such event has not been "previously reported") in response to Item 1(a) of a Current Report on Form 8-K pursuant to Section 13 or 15(d) of the Exchange Act of 1934 (the "Exchange Act"); provided that, without limitation, a Change in Control shall also be deemed to have occurred at such time as: (i) Any "person" within the meaning of Section 14(d) of the Exchange Act, other than the Company; a subsidiary, or any employee benefit plan(s) sponsored by the Company or any Subsidiary, is or has become the "beneficial owner," as defined in rule l3d-3 under the Exchange Act, directly or indirectly, of 25% or more of the combined voting power of the outstanding securities of the Company ordinarily having the right to vote at the election of directors, or (ii) Individuals who constitute the Board immediately prior to any meeting of stockholders (the "Incumbent Board") have ceased for any reason to constitute at least a majority thereof, provided that any person becoming a director whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters (3/4) of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination) will be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) Upon approval by the Company's stockholders of a reorganization, merger, share exchange or consolidation, other than a reorganization, merger, share exchange or consolidation with respect to which those persons who were the beneficial owners, immediately prior to such reorganization, merger, share exchange or consolidation, of outstanding securities of the Company ordinarily having the right to vote in the election of directors own, immediately after such transaction, more than 75% of the outstanding securities of the resulting corporation ordinarily having the right to vote in the election of directors; or (iv) Upon approval by the Company's stockholders of a complete liquidation and dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company other than to a Subsidiary. 6. Nondisclosure, Confidentiality; Competition. (a) Subject to Section 6(f) below, Employee agrees that, during the term of this Agreement and of Employee's employment by the Company, and for a period 12 months after the termination of Employee's employment with the Company, Employee will not in any manner, directly or indirectly, by himself or in conjunction with any other person, (i) conduct any of the activities or perform any of the responsibilities or duties that Employee provided the Company during his employment by the Company for any business entity that is competitive with the business of the Company or its affiliates or (ii) establish or own any financial, beneficial or other interest in (other than an interest consisting of less than one percent (1%) of a class of publicly traded security), make any loan to or for the benefit of, or render any managerial, marketing or other business advice, to any entity that is then conducting activities that are competitive with those of the business of the Company or its affiliates, in either case within a geographic territory defined as a 75-mile radius of any renal dialysis center, unit or facility owned or -5- operated by the Company or an affiliate of the Company. For purposes of this Section, the "business of the Company or its affiliates" means owning or operating a renal dialysis center, unit or facility. (b) Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee will keep confidential and not directly divulge, or allow through a lack of reasonable care to be divulged to anyone, or use or otherwise appropriate for Employee's own benefit or for the benefit of others, any knowledge or information of a confidential nature with respect to the Company's and its affiliates' current business, the Company itself, or any of its affiliates, including all trade secrets, pricing information, marketing information or technical information (hereinafter referred to as the "Confidential Data"), except for (i) a disclosure that is required by law; or (ii) information that has been made generally available to the public by the act of one who has the right to disclose such information; or (iii) information that has become part of the public domain through no fault of Employee. Employee acknowledges and agrees that the prohibitions against disclosure of Confidential Data recited herein are in addition to, and not in lieu of, any rights or remedies the Company may have available pursuant to the laws of any jurisdiction or at common law to prevent the disclosure of confidential information, and the enforcement by the Company of its rights and remedies pursuant hereto shall not be construed as a waiver of any other rights or available remedies which the Company may possess in law or equity. Employee acknowledges that the Company has taken reasonable and appropriate steps to ensure the confidentiality and non-disclosure of all such Confidential Data. For purposes of this Section the Company's and its affiliates' "current business" means owning or operating a renal dialysis center, unit or facility. (c) Subject to Section 6(f) below, Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee will not, for his own benefit or the benefit of others, solicit any person or entity that has or has had, or disrupt or attempt to disrupt, any relationship, contractual or otherwise, with the Company or an affiliate of the Company (including any patient, payor, physician, provider, managed care organization or supplier) at any time during Employee's employment with the Company, for the purpose of assisting, or creating such a relationship for, any business entity that is competitive with the Company or an affiliate of the Company. For purposes of this Section, a business entity is competitive with the Company or an affiliate of the Company if it provides or offers any renal dialysis service that is provided by the Company or an affiliate of the Company. (d) Subject to Section 6(f) below, Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee shall not induce, nor attempt to induce, any employee of the Company, or any of its affiliates, to terminate such employee's association with the Company or any of its affiliates. (e) These post-employment covenants are considered by the parties hereto to be fair, reasonable and integral for the protection of the Company. The parties mutually agree that if a violation of any of these covenants occurs, such violation or any threatened violation will cause irreparable injury to the Company and the remedy at law for any such violation or threatened violation will be inadequate. The parties acknowledge that these covenants will survive, and remain in effect and enforceable after, termination of this Agreement. (f) The Company agrees that the forgoing covenants in subsections (a), (c) and (d) of this Section 6 shall be null and void as to any period following termination of Employee's employment if such termination occurs within 13 months following a Change in Control through either (A) a termination by the Company without Cause under Section 5(a) above or (B) a resignation by Employee for any reason. -6- (g) Employee agrees to indemnify and hold harmless the Company from and against any and all claims, causes of action, damages and/or any other losses suffered or incurred by the Company as a result of any breach or purported breach by Employee of any agreement applicable to Employee which existed prior to the time of the entering into of this Agreement. The obligations of Employee to indemnify and hold the Company harmless include any and all costs of defense of any such claim or threatened claim, including reasonable attorneys' fees. 7. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, if any payment or distribution by the Company to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 7) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Company will make an additional payment (a "Gross-Up Payment") to Employee in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 7(c), all determinations required to be made under this Section 7, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, will be made by Ernst & Young LLP or such other certified public accounting firm as may be designated by Employee (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Employee within 15 business days of the receipt of notice from Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by the Company to Employee within five business days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Employee. It is possible (due to the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder) that Gross-Up Payments will not have been made by the Company which it is ultimately determined should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. Consequently, if the Company exhausts its remedies pursuant to Section 7(c) and Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and the Company will promptly pay any such Underpayment to or for the benefit of Employee. (c) Employee will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after Employee is informed in writing of such claim, and such notification will apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee will not pay -7- such claim prior to the expiration of the 30-day period following the date on which Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee will: (i) Give the Company any information reasonably requested by the Company relating to such claim, (ii) Take such action in connection with contesting such claim as the Company reasonably requests in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) Cooperate with the Company in good faith in order effectively to contest such claim, and (iv) Permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and will indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 7(c), the Company will control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company may determine; provided, however, that if the Company directs Employee to pay such claim and sue for a refund, the Company will advance the amount of such payment to Employee, on an interest-free basis and will indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Employee will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 7(c), Employee becomes entitled to receive any refund with respect to such claim, Employee will (subject to the Company's complying with the requirements of Section 7(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 7(c), a determination is made that Employee is not entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance will be forgiven and Employee shall not be required to repay and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. -8- 8. Severability. The parties hereto hereby expressly agree and contract that it is not the intention of either party to violate any public policy, or any statutory or common law, and that if any paragraph, sentence, clause or combination of the same of this Agreement will be in violation of the laws of any state where applicable, such paragraph, sentence, clause or the combination of the same will be void in the jurisdictions where it is unlawful, and the remainder thereof shall remain binding on the parties hereto. It is the intention of the parties to make the covenants of this Agreement binding only to the extent that they may be lawfully done under existing applicable laws. In the event that any part of any term or covenant of this Agreement is determined by a court of law or equity to be overly broad or otherwise unenforceable, the parties hereto agree that such court shall be empowered to substitute, and it is the intent of the parties hereto that such court substitute, a reasonably judicially enforceable term or limitation in the place of such unenforceable term or covenant, and that as so modified this Agreement will be fully enforceable. 9. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and supersedes any and all prior understandings or agreements. Any changes or additions to this Agreement must be in writing and signed by both parties. If there is any conflict between the terms of this Agreement and any stock option agreement or other agreement between Employee and the Company (including any agreement entered into after the date of this Agreement), then this Agreement will control unless there is specific reference to superseding this Agreement in such other agreement or in this Agreement. 10. Assignment. (a) The rights and benefits of Employee under this Agreement, other than accrued and unpaid amounts due under Section 3(a) hereof, are personal to Employee and are not assignable. (b) This Agreement may not be assigned by the Company except to an affiliate of the Company, provided that such affiliate assumes the Company's obligations under this Agreement; provided, further, that if the Company merges or effects a consolidation or share exchange with or into, or sells or otherwise transfers substantially all its assets to, another business entity, the Company may assign its rights hereunder to that business entity without the consent of the Employee provided that it causes such business entity to assume the Company's obligations under this Agreement and provided, further, that the provisions of Section 5 remain in full force and effect following such assignment. 11. Notice. Unless otherwise specifically provided, references to notice periods of a certain number of "days" contained in this Agreement are references to calendar days. Any notice provided for in this Agreement shall be delivered to Employee at the most recent address of Employee listed in the Company's then current employment records. Notice to the Company shall be delivered to the following address: c/o Renal Care Group, Inc., 2525 West End Avenue, Suite 600, Nashville, Tennessee 37203, Attention: General Counsel. -9- 12. Waiver. The waiver by any party to this Agreement of a breach of any of the provisions contained herein will not operate or be construed as a waiver of any subsequent breach. 13. Disputes and Governing Law. The Company and Employee agree that any dispute arising in connection with, or relating to, this Agreement or the termination of this Agreement, to the maximum extent allowed by applicable law, will be subject to resolution through informal methods and, failing such efforts, through arbitration. Either party may notify the other party of the existence of a dispute by written notice to the address indicated above in Section 11. The parties will thereafter attempt in good faith to resolve their differences within 30 days after the receipt of such notice. If the dispute cannot be resolved within such 30-day period, either party may file a written demand for arbitration with the other party. The arbitration shall proceed in accordance with the terms of the Federal Arbitration Act and the Commercial Arbitration Rules of the American Arbitration Association. A single arbitrator shall be appointed through the American Arbitration Association's procedures to resolve the dispute. The parties agree that in the event arbitration is necessary, the laws of the State of Tennessee and any applicable federal law shall apply. The place of the arbitration shall be Nashville, Tennessee. The award of the arbitrator shall be binding and conclusive upon the parties. Either party shall have the right to have the award made the judgment of a court of competent jurisdiction in the State of Tennessee. In the event of a dispute arising under this Agreement, the prevailing party shall be entitled to all reasonable attorneys' fees incurred in connection with such dispute. The Company and Employee are parties to an Indemnification Agreement effective as of August 13, 2002, which the parties specifically ratify and confirm by this reference. [the remainder of this page is intentionally left blank] -10- IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on the day and year first above written. COMPANY: RENAL CARE GROUP, INC. By: /s/ Gary A. Brukardt --------------------------------------- Title: President and CEO EMPLOYEE: /s/ Timothy P. Martin --------------------------------------- TIMOTHY P. MARTIN -11- EX-10.46 11 g87511exv10w46.txt EX-10.46 EMPLOYMENT AGREEMENT DOUGLAS B. CHAPPELL EXHIBIT 10.46 EMPLOYMENT AGREEMENT THIS AGREEMENT is made and entered into effective as of the 31st day of December 2003, by and between RENAL CARE GROUP, INC., a Delaware corporation (the "Company"), and DOUGLAS B. CHAPPELL (hereinafter "Employee"). WITNESSETH: WHEREAS, Employee is currently Senior Vice President, General Counsel and Secretary of the Company under an Employment Agreement effective as of December 7, 1998 (the "Old Agreement"), and the Company desires to employ and retain Employee to continue to act as its Senior Vice President, General Counsel and Secretary; and WHEREAS, Employee desires to remain an employee of the Company on the terms and conditions contained in this Agreement; and NOW, THEREFORE, in consideration of the compensation payable to Employee by the Company pursuant to this Agreement, and the mutual promises, covenants, representations and warranties contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do agree as follows: 1. Employment. The Company employs Employee and Employee accepts employment with the Company under the terms of this Agreement effective as of December 31, 2003 (the "Effective Date"). 2. Term. The term of this Agreement shall begin on the Effective Date and shall continue for an initial term of three years, ending on December 31, 2006 (the "Initial Period"), subject to earlier termination by Employee or the Company as hereinafter provided. Unless one party gives the other notice of non-renewal not less than 60 days prior to the expiration of the Initial Period or an additional term, this Agreement shall renew for additional terms of 12 months each, subject to earlier termination as hereinafter provided, on the same terms and conditions (subject to mutually agreeable modifications, if any). 3. Compensation and Benefits. (a) Base Compensation. The Company shall pay Employee a base salary at an annual rate of $270,000 from the Effective Date through March 31, 2004 (the "Base Compensation"). Such Base Compensation may be adjusted as provided herein. The Base Compensation is payable according to the pay periods of the Company as may be in effect from time to time. Such payments will be prorated for periods less than a full pay period. The Base Compensation will be subject to withholding for federal, state and local payroll and all other taxes or withholdings applicable to Employee. Any increases of the Base Compensation will be at the discretion of the Company, provided that the Company may not decrease the then current Base Compensation without the consent of Employee. The Base Compensation and target percentage for the Annual Bonus (as defined below) will be reviewed annually by the Compensation Committee of the Company. (b) Benefits. During the term of this Agreement, Employee shall also be entitled to participate in the insurance and other fringe benefits made available generally to senior management employees of the Company, as such benefits may be determined from time to time by the Company, provided that Employee shall have at least four weeks of paid vacation time. In addition, during the term of this Agreement, the Company will provide to Employee term life insurance coverage of $500,000 on Employee's life payable to one or more beneficiaries designated by Employee from time to time. (c) Annual Bonuses. In addition to the Base Compensation, Employee will be entitled to an annual bonus (the "Annual Bonus"), with a target amount equal to 40% of the Base Compensation for such year. The actual amount of the Annual Bonus paid will be determined based on the Company's and Employee's achievement of performance goals reasonably established by the Compensation Committee of the Company and, in the case of performance goals established specifically for Employee, agreed to by Employee. The Company agrees that the Company-related performance goals for Employee shall be substantially similar to those established for other members of senior management. (d) Expenses. The Company shall reimburse Employee for any and all expenses reasonably incurred by employee incident to the performance of the duties imposed upon Employee hereunder. 4. Duties, Extent of Services. Employee is employed as Senior Vice President, General Counsel and Secretary of the Company. As such, Employee will perform such duties and responsibilities as are typically incident thereto and will perform in a faithful and competent manner such additional duties as may be reasonably assigned from time to time by the Company. Throughout the term of this Agreement, Employee will report to the Chief Executive Officer and President or the Chairman of the Board of Directors of the Company. Employee's duties for the Company will be performed on a full-time basis at the Company's corporate offices in Nashville, Tennessee. Employee may be required, from time to time, to perform his duties temporarily hereunder at such other place or places as the Company shall reasonably require, provided that such period does not exceed 30 consecutive days without Employee's consent and that during any such period Employee is able to return to Nashville, Tennessee at the Company's expense for weekends. Employee will devote all of Employee's business time, attention, knowledge, and skill solely to the business and interest of the Company, and the Company will be entitled to all the benefits, profits, and other issues arising from, or incident to, all work, services, and advice of Employee. 5. Termination. This Agreement may be terminated by the parties in the manners specified below: (a) Termination without Cause. Either the Company or Employee may terminate Employee's employment under this Agreement at any time for any reason or no reason upon 30 days' prior written notice to the other party. (b) Termination for Cause. The Company may terminate this Agreement on written notice at any time for "Cause". For purposes of this Agreement, "Cause" means: (i) Employee is convicted of, pleads guilty to, or confesses to a felony or any crime involving any act of dishonesty, -2- fraud, misappropriation, embezzlement or moral turpitude, in which event the Company may terminate this Agreement immediately, (ii) the misconduct or gross negligence by Employee in connection with the performance of Employee's duties hereunder, (iii) the engaging by Employee in any fraudulent, disloyal or unprofessional conduct which results in an injury to the Company, its affiliates or any of its or their centers, monetarily or otherwise, (iv) Employee breaches any provision of Section 6 of this Agreement, or (v) the material failure by Employee otherwise substantially to perform his duties with the Company (other than any such failure resulting from the disability of Employee under Section 5(d)(i)) or the breach of any provision of this Agreement other than Section 6. If the Company terminates this Agreement for Cause pursuant to the provisions of (ii), (iii), (iv) or (v) of this subsection (b), then the Company will give Employee written notice prior to such termination detailing the specific acts, actions, failures, or events upon which the forecast termination is based. Employee will have 15 days after such written notice to cease such actions or otherwise correct any such failure or breach. If Employee does not cease such action or otherwise correct such failure or breach within such 15-day period, or having once received such written notice and ceased such actions or corrected such failure or breach, Employee at any time thereafter again so acts, fails or breaches, the Company may terminate this Agreement immediately. (c) Termination for Good Reason. Employee may terminate this Agreement on written notice at any time for "Good Reason". For purposes of this Agreement, "Good Reason" means: (i) without the express written consent of Employee, a material diminution of his position, duties, responsibilities and status with the Company as in effect as of the Effective Date, a change in Employee's reporting responsibilities, a material reduction of Employee's titles or offices as in effect on the date of this Agreement, or the removal of Employee from, or failure to re-elect Employee to, any position referred to in Section 4 of this Agreement, except in connection with the termination of this Agreement for Cause; (ii) any reduction of the Base Compensation; (iii) the requirement that Employee relocate outside of the Nashville, Tennessee metropolitan area; (iv) the material breach by the Company of any material provision of this Agreement, which breach continues uncorrected and uncured for 15 days after Employee gives notice of such breach to the Company; or (v) the termination of this Agreement by written notice from Employee to the Company during the 30-day period immediately following the first anniversary of a Change in Control (as defined below). (d) Involuntary Termination. The employment of Employee hereunder will be automatically terminated by the death or disability of Employee as outlined below. (i) Disability. The Company may terminate this Agreement at such time as Employee shall have been Disabled (as defined below) for a continuous period of six months during any continuous 12-month period. For purposes of this Section 5(d)(i), the term "Disabled" means Employee's inability to perform the essential functions of his duties, with or without reasonable accommodation. During Employee's six-month period of Disability, the Company will continue to pay Employee's Base Compensation (less regular withholdings for payroll or other taxes and other required or proper items, and less proceeds from all disability insurance policies or plans provided or made available by the Company). In the event of a termination of Employee on account of Disability, the Company will pay Employee's Base Compensation for a period of six months following the effective date of termination (less regular withholdings for payroll or other taxes and other required or proper times, and less proceeds from all disability insurance policies or plans provided or made available by the Company). In addition, any provisions in the relevant stock option agreements notwithstanding, all outstanding stock options granted to Employee by the Company will vest immediately upon termination pursuant to this Section 5(d)(i). (ii) Death. If Employee dies during the term of this Agreement, this Agreement shall terminate and Employee's estate shall receive the remainder of the Base Compensation -3- set forth in Section 3(a) hereof accrued to the last day of the month in which death occurs. In addition, any provisions in the relevant stock option agreements notwithstanding, all outstanding stock options granted to Employee by the Company will vest immediately upon termination pursuant to this Section 5(d)(i). (e) Post-Termination Compensation. Except as provided in Section 5(d) above, upon termination of this Agreement, the Company shall be relieved of all of its obligations hereunder notwithstanding any period of time remaining under the initial or any renewal term, subject to the following: (i) Termination without Cause or with Good Reason. If the Company terminates Employee's employment hereunder without Cause under Section 5(a) above or if Employee terminates Employee's employment hereunder with Good Reason under Section 5(c) above or if this Agreement expires as a result of the Company's giving notice of non-renewal as contemplated by Section 2 above, then the Company will pay to Employee, after the effective date of such termination, as Employee's sole and exclusive remedy, (A) an amount equal to the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect), and (B) any unpaid bonus payable for the most recently completed calendar year. If the Company terminates Employee's employment without Cause or if Employee terminates Employee's employment hereunder with good reason or if this Agreement expires as a result of the Company's giving notice of non-renewal, Employee shall be under no duty to seek or accept other employment; but if he shall do so, any compensation he shall receive from such other employment will not diminish the Company's obligation to make payments required to the Employee hereunder. (ii) Termination without Good Reason. If Employee terminates his employment under Section 5(a) above, then the Company's obligation to pay Employee's Base Compensation will terminate as of the date of termination. (iii) Termination for Cause. If the Company terminates Employee's employment with Cause under Section 5(b) above, then the Company will pay Employee, after the effective date of such termination, the Base Compensation (as then in effect) for a period of one month after the termination date. (iv) Termination following Change in Control. If, within twelve (12) months following a Change in Control, either (A) the Company terminates the employment of Employee hereunder without Cause under Section 5(a) above or (B) Employee terminates his employment for Good Reason under Section 5(c) above (except for a termination under clause (v) of Section 5(c)), then, in lieu of any other compensation that may be specified in this Agreement, the Company will pay Employee an amount equal to (i) the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect) multiplied by (ii) two. If Employee terminates his employment for Good Reason under clause (v) of Section 5(c) above, then, in lieu of any other compensation that may be specified herein, the Company will pay Employee an amount equal to the Base Compensation (as then in effect) plus an amount of Annual Bonus equal to the target percentage of Base Compensation (as then in effect). The Company will make any payment due under this clause (iv) in a single lump-sum payment not later than 30 days after termination. If any payment obligation under this Section 5(e) arises, no compensation received from other employment (or otherwise) will reduce the Company's obligation to make the payment(s) described in this paragraph. (f) Change in Control. "Change in Control" means a change in control of the Company of a nature that would be required to be reported (assuming such event has not been -4- "previously reported") in response to Item 1(a) of a Current Report on Form 8-K pursuant to Section 13 or 15(d) of the Exchange Act of 1934 (the "Exchange Act"); provided that, without limitation, a Change in Control shall also be deemed to have occurred at such time as: (i) Any "person" within the meaning of Section 14(d) of the Exchange Act, other than the Company; a subsidiary, or any employee benefit plan(s) sponsored by the Company or any Subsidiary, is or has become the "beneficial owner," as defined in rule l3d-3 under the Exchange Act, directly or indirectly, of 25% or more of the combined voting power of the outstanding securities of the Company ordinarily having the right to vote at the election of directors, or (ii) Individuals who constitute the Board immediately prior to any meeting of stockholders (the "Incumbent Board") have ceased for any reason to constitute at least a majority thereof, provided that any person becoming a director whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters (3/4) of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination) will be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (iii) Upon approval by the Company's stockholders of a reorganization, merger, share exchange or consolidation, other than a reorganization, merger, share exchange or consolidation with respect to which those persons who were the beneficial owners, immediately prior to such reorganization, merger, share exchange or consolidation, of outstanding securities of the Company ordinarily having the right to vote in the election of directors own, immediately after such transaction, more than 75% of the outstanding securities of the resulting corporation ordinarily having the right to vote in the election of directors; or (iv) Upon approval by the Company's stockholders of a complete liquidation and dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company other than to a Subsidiary. 6. Nondisclosure, Confidentiality; Competition. (a) Subject to Section 6(f) below, Employee agrees that, during the term of this Agreement and of Employee's employment by the Company, and for a period 12 months after the termination of Employee's employment with the Company, Employee will not in any manner, directly or indirectly, by himself or in conjunction with any other person, (i) conduct any of the activities or perform any of the responsibilities or duties that Employee provided the Company during his employment by the Company for any business entity that is competitive with the business of the Company or its affiliates or (ii) establish or own any financial, beneficial or other interest in (other than an interest consisting of less than one percent (1%) of a class of publicly traded security), make any loan to or for the benefit of, or render any managerial, marketing or other business advice, to any entity that is then conducting activities that are competitive with those of the business of the Company or its affiliates, in either case within a geographic territory defined as a 75-mile radius of any renal dialysis center, unit or facility owned or operated by the Company or an affiliate of the Company. For purposes of this Section, the "business of the Company or its affiliates" means owning or operating a renal dialysis center, unit or facility. The parties acknowledge and agree that nothing in this Section 6(a) shall be deemed to restrict any firm of attorneys of or with which Employee becomes an employee, partner, shareholder, counsel or otherwise associated or affiliated from rendering legal services to any business entity or entities that are competitive with the business of the Company or its affiliates, so long as Employee does not perform -5- services for any such business entity and that such entity or entities do not represent more than fifty percent (50%) of the revenue of such firm in any twelve (12)-month period. (b) Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee will keep confidential and not directly divulge, or allow through a lack of reasonable care to be divulged to anyone, or use or otherwise appropriate for Employee's own benefit or for the benefit of others, any knowledge or information of a confidential nature with respect to the Company's and its affiliates' current business, the Company itself, or any of its affiliates, including all trade secrets, pricing information, marketing information or technical information (hereinafter referred to as the "Confidential Data"), except for (i) a disclosure that is required by law; or (ii) information that has been made generally available to the public by the act of one who has the right to disclose such information; or (iii) information that has become part of the public domain through no fault of Employee. Employee acknowledges and agrees that the prohibitions against disclosure of Confidential Data recited herein are in addition to, and not in lieu of, any rights or remedies the Company may have available pursuant to the laws of any jurisdiction or at common law to prevent the disclosure of confidential information, and the enforcement by the Company of its rights and remedies pursuant hereto shall not be construed as a waiver of any other rights or available remedies which the Company may possess in law or equity. Employee acknowledges that the Company has taken reasonable and appropriate steps to ensure the confidentiality and non-disclosure of all such Confidential Data. For purposes of this Section the Company's and its affiliates' "current business" means owning or operating a renal dialysis center, unit or facility. (c) Subject to Section 6(f) below, Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee will not, for his own benefit or the benefit of others, solicit any person or entity that has or has had, or disrupt or attempt to disrupt, any relationship, contractual or otherwise, with the Company or an affiliate of the Company (including any patient, payor, physician, provider, managed care organization or supplier) at any time during Employee's employment with the Company, for the purpose of assisting, or creating such a relationship for, any business entity that is competitive with the Company or an affiliate of the Company. For purposes of this Section, a business entity is competitive with the Company or an affiliate of the Company if it provides or offers any renal dialysis service that is provided by the Company or an affiliate of the Company. (d) Subject to Section 6(f) below, Employee further agrees that, for a period of three years after the termination of Employee's employment with the Company, Employee shall not induce, nor attempt to induce, any employee of the Company, or any of its affiliates, to terminate such employee's association with the Company or any of its affiliates. (e) These post-employment covenants are considered by the parties hereto to be fair, reasonable and integral for the protection of the Company. The parties mutually agree that if a violation of any of these covenants occurs, such violation or any threatened violation will cause irreparable injury to the Company and the remedy at law for any such violation or threatened violation will be inadequate. The parties acknowledge that these covenants will survive, and remain in effect and enforceable after, termination of this Agreement. (f) The Company agrees that the forgoing covenants in subsections (a), (c) and (d) of this Section 6 shall be null and void as to any period following termination of Employee's employment if such termination occurs within 13 months following a Change in Control through either (A) a termination by the Company without Cause under Section 5(a) above or (B) a resignation by Employee for any reason. -6- (g) Employee agrees to indemnify and hold harmless the Company from and against any and all claims, causes of action, damages and/or any other losses suffered or incurred by the Company as a result of any breach or purported breach by Employee of any agreement applicable to Employee which existed prior to the time of the entering into of this Agreement. The obligations of Employee to indemnify and hold the Company harmless include any and all costs of defense of any such claim or threatened claim, including reasonable attorneys' fees. 7. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, if any payment or distribution by the Company to or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 7) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Company will make an additional payment (a "Gross-Up Payment") to Employee in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 7(c), all determinations required to be made under this Section 7, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, will be made by Ernst & Young LLP or such other certified public accounting firm as may be designated by Employee (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Employee within 15 business days of the receipt of notice from Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by the Company to Employee within five business days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and Employee. It is possible (due to the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder) that Gross-Up Payments will not have been made by the Company which it is ultimately determined should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. Consequently, if the Company exhausts its remedies pursuant to Section 7(c) and Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and the Company will promptly pay any such Underpayment to or for the benefit of Employee. (c) Employee will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 10 business days after Employee is informed in writing of such claim, and such notification will apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Employee will not pay -7- such claim prior to the expiration of the 30-day period following the date on which Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee will: (i) Give the Company any information reasonably requested by the Company relating to such claim, (ii) Take such action in connection with contesting such claim as the Company reasonably requests in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) Cooperate with the Company in good faith in order effectively to contest such claim, and (iv) Permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and will indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 7(c), the Company will control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company may determine; provided, however, that if the Company directs Employee to pay such claim and sue for a refund, the Company will advance the amount of such payment to Employee, on an interest-free basis and will indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Employee will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 7(c), Employee becomes entitled to receive any refund with respect to such claim, Employee will (subject to the Company's complying with the requirements of Section 7(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Employee of an amount advanced by the Company pursuant to Section 7(c), a determination is made that Employee is not entitled to any refund with respect to such claim and the Company does not notify Employee in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance will be forgiven and Employee shall not be required to repay and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. -8- 8. Severability. The parties hereto hereby expressly agree and contract that it is not the intention of either party to violate any public policy, or any statutory or common law, and that if any paragraph, sentence, clause or combination of the same of this Agreement will be in violation of the laws of any state where applicable, such paragraph, sentence, clause or the combination of the same will be void in the jurisdictions where it is unlawful, and the remainder thereof shall remain binding on the parties hereto. It is the intention of the parties to make the covenants of this Agreement binding only to the extent that they may be lawfully done under existing applicable laws. In the event that any part of any term or covenant of this Agreement is determined by a court of law or equity to be overly broad or otherwise unenforceable, the parties hereto agree that such court shall be empowered to substitute, and it is the intent of the parties hereto that such court substitute, a reasonably judicially enforceable term or limitation in the place of such unenforceable term or covenant, and that as so modified this Agreement will be fully enforceable. 9. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and supersedes any and all prior understandings or agreements, specifically including the Old Agreement. Any changes or additions to this Agreement must be in writing and signed by both parties. If there is any conflict between the terms of this Agreement and any stock option agreement or other agreement between Employee and the Company (including any agreement entered into after the date of this Agreement), then this Agreement will control unless there is specific reference to superseding this Agreement in such other agreement or in this Agreement. 10. Assignment. (a) The rights and benefits of Employee under this Agreement, other than accrued and unpaid amounts due under Section 3(a) hereof, are personal to Employee and are not assignable. (b) This Agreement may not be assigned by the Company except to an affiliate of the Company, provided that such affiliate assumes the Company's obligations under this Agreement; provided, further, that if the Company merges or effects a consolidation or share exchange with or into, or sells or otherwise transfers substantially all its assets to, another business entity, the Company may assign its rights hereunder to that business entity without the consent of the Employee provided that it causes such business entity to assume the Company's obligations under this Agreement and provided, further, that the provisions of Section 5 remain in full force and effect following such assignment. 11. Notice. Unless otherwise specifically provided, references to notice periods of a certain number of "days" contained in this Agreement are references to calendar days. Any notice provided for in this Agreement shall be delivered to Employee at the most recent address of Employee listed in the Company's then current employment records. Notice to the Company shall be delivered to the following address: c/o Renal Care Group, Inc., 2525 West End Avenue, Suite 600, Nashville, Tennessee 37203, Attention: General Counsel. -9- 12. Waiver. The waiver by any party to this Agreement of a breach of any of the provisions contained herein will not operate or be construed as a waiver of any subsequent breach. 13. Disputes and Governing Law. The Company and Employee agree that any dispute arising in connection with, or relating to, this Agreement or the termination of this Agreement, to the maximum extent allowed by applicable law, will be subject to resolution through informal methods and, failing such efforts, through arbitration. Either party may notify the other party of the existence of a dispute by written notice to the address indicated above in Section 11. The parties will thereafter attempt in good faith to resolve their differences within 30 days after the receipt of such notice. If the dispute cannot be resolved within such 30-day period, either party may file a written demand for arbitration with the other party. The arbitration shall proceed in accordance with the terms of the Federal Arbitration Act and the Commercial Arbitration Rules of the American Arbitration Association. A single arbitrator shall be appointed through the American Arbitration Association's procedures to resolve the dispute. The parties agree that in the event arbitration is necessary, the laws of the State of Tennessee and any applicable federal law shall apply. The place of the arbitration shall be Nashville, Tennessee. The award of the arbitrator shall be binding and conclusive upon the parties. Either party shall have the right to have the award made the judgment of a court of competent jurisdiction in the State of Tennessee. In the event of a dispute arising under this Agreement, the prevailing party shall be entitled to all reasonable attorneys' fees incurred in connection with such dispute. The Company and Employee are parties to an Indemnification Agreement effective as of August 13, 2002, which the parties specifically ratify and confirm by this reference. [the remainder of this page is intentionally left blank] -10- IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on the day and year first above written. COMPANY: RENAL CARE GROUP, INC. By: /s/ Gary A. Brukardt ---------------------------------------- Title: /s/ President and CEO EMPLOYEE: /s/ Douglas B. Chappell ---------------------------------------- DOUGLAS B. CHAPPELL -11- EX-31.1 12 g87511exv31w1.txt EX-31.1 SECTION 302 CERTIFICATION OF THE CEO Exhibit 31.1 CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Gary A. Brukardt, certify that: 1. I have reviewed this annual report on Form 10-K of Renal Care Group, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 4, 2004 /s/ Gary A. Brukardt ---------------------------------- Gary A. Brukardt Chief Executive Officer EX-31.2 13 g87511exv31w2.txt EX-31.2 SECTION 302 CERTIFICATION OF THE CFO Exhibit 31.2 CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, David M. Dill, certify that: 1. I have reviewed this annual report on Form 10-K of Renal Care Group, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 4, 2004 /s/ David M. Dill --------------------------------- David M. Dill Executive Vice President and Chief Financial Officer EX-32.1 14 g87511exv32w1.txt EX-32.1 SECTION 906 CERTIFICATION OF THE CEO Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Renal Care Group, Inc. (the "Company") on Form 10-K for the year ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gary A. Brukardt Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Gary A. Brukardt - ------------------------------------- Gary A. Brukardt Chief Executive Officer March 4, 2004 EX-32.2 15 g87511exv32w2.txt EX-32.2 SECTION 906 CERTIFICATION OF THE CFO Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Renal Care Group, Inc. (the "Company") on Form 10-K for the year ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David M. Dill, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ David M. Dill - ------------------------------------- David M. Dill Executive Vice President and Chief Financial Officer March 4, 2004 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made and entered into effective as of the 15th day of
December 2003, by and between RENAL CARE GROUP, INC., a Delaware corporation
(the "Company"), and RAYMOND M. HAKIM, M.D., Ph.D. (hereinafter "Employee").

                                   WITNESSETH:

         WHEREAS, Employee is currently Executive Vice President and Chief
Medical Officer of the Company under an Employment Agreement effective as of
July 1, 2000 (the "Old Agreement"), and the Company desires to employ and retain
Employee to continue to act as its Executive Vice President and Chief Medical
Officer; and

         WHEREAS, Employee desires to remain an employee of the Company on the
terms and conditions contained in this Agreement; and

         NOW, THEREFORE, in consideration of the compensation payable to
Employee by the Company pursuant to this Agreement, and the mutual promises,
covenants, representations and warranties contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do agree as
follows:

         1.       Employment.

                  The Company employs Employee and Employee accepts employment
with the Company under the terms of this Agreement effective as of December 15,
2003 (the "Effective Date").

         2.       Term.

                  The term of this Agreement shall begin on the Effective Date
and shall continue for an initial term of approximately three years, ending on
December 31, 2006 (the "Initial Period"), subject to earlier termination by
Employee or the Company as hereinafter provided. Unless one party gives the
other notice of non-renewal not less than 60 days prior to the expiration of the
Initial Period or an additional term, this Agreement shall renew for additional
terms of 12 months each, subject to earlier termination as hereinafter provided,
on the same terms and conditions (subject to mutually agreeable modifications,
if any).

         3.       Compensation and Benefits.

                  (a)      Base Compensation. The Company shall pay Employee a
base salary at an annual rate of $400,000 from the Effective Date through March
31, 2004 (the "Base Compensation"). Such Base Compensation may be adjusted as
provided herein. The Base Compensation is payable according to the pay periods
of the Company as may be in effect from time to time. Such payments will be
prorated for periods less than a full pay period. The Base Compensation will be
subject to withholding for federal, state and local payroll and all other taxes
or withholdings applicable to Employee. Any increases of the Base Compensation
will be at the discretion of the Company, provided that the Company may not
decrease the then current Base Compensation without the consent of Employee. The
Base Compensation and target percentage for the Annual Bonus (as defined below)
will be reviewed annually by the Compensation Committee of the Company.



                  (b)      Benefits. During the term of this Agreement, Employee
shall also be entitled to participate in the insurance and other fringe benefits
made available generally to senior management employees of the Company, as such
benefits may be determined from time to time by the Company, provided that
Employee shall have at least four weeks of paid vacation time. In addition,
during the term of this Agreement, the Company will reimburse Employee an amount
equal to the cost of the policy of whole life insurance with a face value of
$1,000,000 maintained by Employee as of the date of this Agreement, such
insurance being payable to one or more beneficiaries designated by Employee from
time to time.

                  (c)      Annual Bonuses. In addition to the Base Compensation,
Employee will be entitled to an annual bonus (the "Annual Bonus"), with a target
amount equal to 75% of the Base Compensation for such year. The actual amount of
the Annual Bonus paid will be determined based on the Company's and Employee's
achievement of performance goals reasonably established by the Compensation
Committee of the Company and, in the case of performance goals established
specifically for Employee, agreed to by Employee. The Company agrees that the
Company-related performance goals for Employee shall be substantially similar to
those established for other members of senior management.

                  (d)      Expenses. The Company shall reimburse Employee for
any and all expenses reasonably incurred by employee incident to the performance
of the duties imposed upon Employee hereunder.

                  (e)      Restricted Stock. In addition to the compensation and
benefits described above, the Company will grant Employee 26,667 restricted
shares of Common Stock of the Company. The restrictions on such shares shall
lapse as to one-third of such shares on December 15, 2004, one-third of such
shares on May 1, 2005 and the remaining one-third of such shares on May 1, 2006.
These restrictions will lapse earlier upon a change in control of the Company
(as defined below) or the death or permanent disability of Employee.

                  (f)      Signing Bonus. In addition to the compensation and
benefits described above, the Company will pay Employee a bonus equal to $30,000
with the Company's regular payroll that includes December 15 of each of 2003,
2004 and 2005 if Employee remains employed by the Company as of such date. This
bonus is in addition to the Annual Bonus described above and is conditioned only
upon Employee being an employee of the Company as of such date.

         4.       Duties, Extent of Services.

                  Employee is employed as Executive Vice President and Chief
Medical Officer of the Company. As such, Employee will perform such duties and
responsibilities as are typically incident thereto and will perform in a
faithful and competent manner such additional duties as may be reasonably
assigned from time to time by the Company. Throughout the term of this
Agreement, Employee will report to the Chief Executive Officer and President of
the Company. Employee's duties for the Company will be performed on a full-time
basis at the Company's corporate offices in Nashville, Tennessee. Employee may
be required, from time to time, to perform his duties temporarily hereunder at
such other place or places as the Company shall reasonably require, provided
that such period does not exceed 30 consecutive days without Employee's consent
and that during any such period Employee is able to return to Nashville,
Tennessee at the Company's expense for weekends.

                                       -2-



                  Employee will devote all of Employee's business time,
attention, knowledge, and skill solely to the business and interest of the
Company, and the Company will be entitled to all the benefits, profits, and
other issues arising from, or incident to, all work, services, and advice of
Employee.

         5.       Termination.

                  This Agreement may be terminated by the parties in the manners
specified below:

                  (a)      Termination without Cause. Either the Company or
Employee may terminate Employee's employment under this Agreement at any time
for any reason or no reason upon 30 days' prior written notice to the other
party.

                  (b)      Termination for Cause. The Company may terminate this
Agreement on written notice at any time for "Cause". For purposes of this
Agreement, "Cause" means: (i) Employee is convicted of, pleads guilty to, or
confesses to a felony or any crime involving any act of dishonesty, fraud,
misappropriation, embezzlement or moral turpitude, in which event the Company
may terminate this Agreement immediately, (ii) the misconduct or gross
negligence by Employee in connection with the performance of Employee's duties
hereunder, (iii) the engaging by Employee in any fraudulent, disloyal or
unprofessional conduct which results in an injury to the Company, its affiliates
or any of its or their centers, monetarily or otherwise, (iv) Employee breaches
any provision of Section 6 of this Agreement, or (v) the material failure by
Employee otherwise substantially to perform his duties with the Company (other
than any such failure resulting from the disability of Employee under Section
5(d)(i)) or the breach of any provision of this Agreement other than Section 6.
If the Company terminates this Agreement for Cause pursuant to the provisions of
(ii), (iii), (iv) or (v) of this subsection (b), then the Company will give
Employee written notice prior to such termination detailing the specific acts,
actions, failures, or events upon which the forecast termination is based.
Employee will have 15 days after such written notice to cease such actions or
otherwise correct any such failure or breach. If Employee does not cease such
action or otherwise correct such failure or breach within such 15-day period, or
having once received such written notice and ceased such actions or corrected
such failure or breach, Employee at any time thereafter again so acts, fails or
breaches, the Company may terminate this Agreement immediately.

                  (c)      Termination for Good Reason. Employee may terminate
this Agreement on written notice at any time for "Good Reason". For purposes of
this Agreement, "Good Reason" means: (i) without the express written consent of
Employee, a material diminution of his position, duties, responsibilities and
status with the Company as in effect as of the Effective Date, a change in
Employee's reporting responsibilities, a material reduction of Employee's titles
or offices as in effect on the date of this Agreement, or the removal of
Employee from, or failure to re-elect Employee to, any position referred to in
Section 4 of this Agreement, except in connection with the termination of this
Agreement for Cause; (ii) any reduction of the Base Compensation; (iii) the
requirement that Employee relocate outside of the Nashville, Tennessee
metropolitan area; (iv) the material breach by the Company of any material
provision of this Agreement, which breach continues uncorrected and uncured for
15 days after Employee gives notice of such breach to the Company; or (v) the
termination of this Agreement by written notice from Employee to the Company
during the 30-day period immediately following the first anniversary of a Change
in Control (as defined below).

                  (d)      Involuntary Termination. The employment of Employee
hereunder will be automatically terminated by the death or disability of
Employee as outlined below.

                           (i)      Disability. The Company may terminate this
Agreement at such time as Employee shall have been Disabled (as defined below)
for a continuous period of six months during any

                                       -3-



continuous 12-month period. For purposes of this Section 5(d)(i), the term
"Disabled" means Employee's inability to perform the essential functions of his
duties, with or without reasonable accommodation. During Employee's six-month
period of Disability, the Company will continue to pay Employee's Base
Compensation (less regular withholdings for payroll or other taxes and other
required or proper items, and less proceeds from all disability insurance
policies or plans provided or made available by the Company). In the event of a
termination of Employee on account of Disability, the Company will pay
Employee's Base Compensation for a period of six months following the effective
date of termination (less regular withholdings for payroll or other taxes and
other required or proper times, and less proceeds from all disability insurance
policies or plans provided or made available by the Company). In addition, any
provisions in the relevant stock option agreements notwithstanding, all
outstanding stock options granted to Employee by the Company will vest
immediately upon termination pursuant to this Section 5(d)(i).

                           (ii)     Death. If Employee dies during the term of
this Agreement, this Agreement shall terminate and Employee's estate shall
receive the remainder of the Base Compensation set forth in Section 3(a) hereof
accrued to the last day of the month in which death occurs. In addition, any
provisions in the relevant stock option agreements notwithstanding, all
outstanding stock options granted to Employee by the Company will vest
immediately upon termination pursuant to this Section 5(d)(i).

                  (e)      Post-Termination Compensation. Except as provided in
Section 5(d) above, upon termination of this Agreement, the Company shall be
relieved of all of its obligations hereunder notwithstanding any period of time
remaining under the initial or any renewal term, subject to the following:

                           (i)      Termination without Cause or with Good
Reason. If the Company terminates Employee's employment hereunder without Cause
under Section 5(a) above or if Employee terminates Employee's employment
hereunder with Good Reason under Section 5(c) above or if this Agreement expires
as a result of the Company's giving notice of non-renewal as contemplated by
Section 2 above, then the Company will pay to Employee, after the effective date
of such termination, as Employee's sole and exclusive remedy, (A) an amount
equal to the Base Compensation (as then in effect) plus an amount of Annual
Bonus equal to the target percentage of Base Compensation (as then in effect),
and (B) any unpaid bonus payable for the most recently completed calendar year.
If the Company terminates Employee's employment without Cause or if Employee
terminates Employee's employment hereunder with good reason or if this Agreement
expires as a result of the Company's giving notice of non-renewal, Employee
shall be under no duty to seek or accept other employment; but if he shall do
so, any compensation he shall receive from such other employment will not
diminish the Company's obligation to make payments required to the Employee
hereunder.

                           (ii)     Termination without Good Reason. If Employee
terminates his employment under Section 5(a) above, then the Company's
obligation to pay Employee's Base Compensation will terminate as of the date of
termination.

                           (iii)    Termination for Cause. If the Company
terminates Employee's employment with Cause under Section 5(b) above, then the
Company will pay Employee, after the effective date of such termination, the
Base Compensation (as then in effect) for a period of one month after the
termination date.

                           (iv)     Termination following Change in Control. If,
within twelve (12) months following a Change in Control, either (A) the Company
terminates the employment of Employee

                                       -4-



hereunder without Cause under Section 5(a) above or (B) Employee terminates his
employment for Good Reason under Section 5(c) above (except for a termination
under clause (v) of Section 5(c)), then, in lieu of any other compensation that
may be specified in this Agreement, the Company will pay Employee (A) an amount
equal to (i) the Base Compensation (as then in effect) plus an amount of Annual
Bonus equal to the target percentage of Base Compensation (as then in effect)
multiplied by (ii) three (3), plus (B) any unpaid portion of the retention bonus
described in Section 3(f) above as if Employee remained employed by the Company
through May 1, 2006. If Employee terminates his employment for Good Reason under
clause (v) of Section 5(c) above, then, in lieu of any other compensation that
may be specified herein, the Company will pay Employee (X) an amount equal to
(i) the Base Compensation (as then in effect) plus an amount of Annual Bonus
equal to the target percentage of Base Compensation (as then in effect)
multiplied by (ii) two (2), plus (Y) any unpaid portion of the retention bonus
described in Section 3(f) above as if Employee remained employed by the Company
through May 1, 2006. The Company will make any payment due under this clause
(iv) in a single lump-sum payment not later than 30 days after termination. If
any payment obligation under this Section 5(e) arises, no compensation received
from other employment (or otherwise) will reduce the Company's obligation to
make the payment(s) described in this paragraph.

                  (f)      Change in Control. "Change in Control" means a change
in control of the Company of a nature that would be required to be reported
(assuming such event has not been "previously reported") in response to Item
1(a) of a Current Report on Form 8-K pursuant to Section 13 or 15(d) of the
Exchange Act of 1934 (the "Exchange Act"); provided that, without limitation, a
Change in Control shall also be deemed to have occurred at such time as:

                           (i)      Any "person" within the meaning of Section
14(d) of the Exchange Act, other than the Company; a subsidiary, or any employee
benefit plan(s) sponsored by the Company or any Subsidiary, is or has become the
"beneficial owner," as defined in rule l3d-3 under the Exchange Act, directly or
indirectly, of 25% or more of the combined voting power of the outstanding
securities of the Company ordinarily having the right to vote at the election of
directors, or

                           (ii)     Individuals who constitute the Board
immediately prior to any meeting of stockholders (the "Incumbent Board") have
ceased for any reason to constitute at least a majority thereof, provided that
any person becoming a director whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least three-quarters (3/4)
of the directors comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as
a nominee for director without objection to such nomination) will be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; or

                           (iii)    Upon approval by the Company's stockholders
of a reorganization, merger, share exchange or consolidation, other than a
reorganization, merger, share exchange or consolidation with respect to which
those persons who were the beneficial owners, immediately prior to such
reorganization, merger, share exchange or consolidation, of outstanding
securities of the Company ordinarily having the right to vote in the election of
directors own, immediately after such transaction, more than 75% of the
outstanding securities of the resulting corporation ordinarily having the right
to vote in the election of directors; or

                           (iv)     Upon approval by the Company's stockholders
of a complete liquidation and dissolution of the Company or the sale or other
disposition of all or substantially all of the assets of the Company other than
to a Subsidiary.

                                       -5-



         6.       Nondisclosure, Confidentiality; Competition.

                  (a)      Subject to Section 6(f) below, Employee agrees that,
during the term of this Agreement and of Employee's employment by the Company,
and for a period 12 months after the termination of Employee's employment with
the Company, Employee will not in any manner, directly or indirectly, by himself
or in conjunction with any other person, (i) conduct any of the activities or
perform any of the responsibilities or duties that Employee provided the Company
during his employment by the Company for any business entity that is competitive
with the business of the Company or its affiliates or (ii) establish or own any
financial, beneficial or other interest in (other than an interest consisting of
less than one percent (1%) of a class of publicly traded security), make any
loan to or for the benefit of, or render any managerial, marketing or other
business advice, to any entity that is then conducting activities that are
competitive with those of the business of the Company or its affiliates, in
either case within a geographic territory defined as a 75-mile radius of any
renal dialysis center, unit or facility owned or operated by the Company or an
affiliate of the Company. For purposes of this Section, the "business of the
Company or its affiliates" means owning or operating a renal dialysis center,
unit or facility. Notwithstanding any provision of this Section 6(a) to the
contrary, nothing in this Section 6(a) shall be deemed to prevent Employee from
providing services to (1) any dialysis operation owned or operated by an
academic medical center or an affiliate of an academic medical center,
including, without limitation, Vanderbilt Medical Center or Vanderbilt
University or any of their affiliates, (whether as an employee or independent
contractor of any such party or otherwise); provided that such academic medical
center or affiliate does not operate dialysis facilities outside of its
principal service or catchment area; or (2) up to three outpatient dialysis
facilities, if Employee is engaged in the private practice of medicine following
the termination of Employee's employment with the Company.

                  (b)      Employee further agrees that, for a period of three
years after the termination of Employee's employment with the Company, Employee
will keep confidential and not directly divulge, or allow through a lack of
reasonable care to be divulged to anyone, or use or otherwise appropriate for
Employee's own benefit or for the benefit of others, any knowledge or
information of a confidential nature with respect to the Company's and its
affiliates' current business, the Company itself, or any of its affiliates,
including all trade secrets, pricing information, marketing information or
technical information (hereinafter referred to as the "Confidential Data"),
except for (i) a disclosure that is required by law; or (ii) information that
has been made generally available to the public by the act of one who has the
right to disclose such information; or (iii) information that has become part of
the public domain through no fault of Employee. Employee acknowledges and agrees
that the prohibitions against disclosure of Confidential Data recited herein are
in addition to, and not in lieu of, any rights or remedies the Company may have
available pursuant to the laws of any jurisdiction or at common law to prevent
the disclosure of confidential information, and the enforcement by the Company
of its rights and remedies pursuant hereto shall not be construed as a waiver of
any other rights or available remedies which the Company may possess in law or
equity. Employee acknowledges that the Company has taken reasonable and
appropriate steps to ensure the confidentiality and non-disclosure of all such
Confidential Data. For purposes of this Section the Company's and its
affiliates' "current business" means owning or operating a renal dialysis
center, unit or facility.

                  (c)      Subject to Section 6(f) below, Employee further
agrees that, for a period of three years after the termination of Employee's
employment with the Company, Employee will not, for his own benefit or the
benefit of others, solicit any person or entity that has or has had, or disrupt
or attempt to disrupt, any relationship, contractual or otherwise, with the
Company or an affiliate of the Company (including any patient, payor, physician,
provider, managed care organization or supplier) at any time during Employee's
employment with the Company, for the purpose of assisting, or creating such a
relationship for, any business entity that is competitive with the Company or an
affiliate of the Company.

                                       -6-



For purposes of this Section, a business entity is competitive with the Company
or an affiliate of the Company if it provides or offers any renal dialysis
service that is provided by the Company or an affiliate of the Company.

                  (d)      Subject to Section 6(f) below, Employee further
agrees that, for a period of three years after the termination of Employee's
employment with the Company, Employee shall not induce, nor attempt to induce,
any employee of the Company, or any of its affiliates, to terminate such
employee's association with the Company or any of its affiliates.

                  (e)      These post-employment covenants are considered by the
parties hereto to be fair, reasonable and integral for the protection of the
Company. The parties mutually agree that if a violation of any of these
covenants occurs, such violation or any threatened violation will cause
irreparable injury to the Company and the remedy at law for any such violation
or threatened violation will be inadequate. The parties acknowledge that these
covenants will survive, and remain in effect and enforceable after, termination
of this Agreement.

                  (f)      The Company agrees that the forgoing covenants in
subsections (a), (c) and (d) of this Section 6 shall be null and void as to any
period following termination of Employee's employment if such termination occurs
within 13 months following a Change in Control through either (A) a termination
by the Company without Cause under Section 5(a) above or (B) a resignation by
Employee for any reason.

                  (g)      Employee agrees to indemnify and hold harmless the
Company from and against any and all claims, causes of action, damages and/or
any other losses suffered or incurred by the Company as a result of any breach
or purported breach by Employee of any agreement applicable to Employee which
existed prior to the time of the entering into of this Agreement. The
obligations of Employee to indemnify and hold the Company harmless include any
and all costs of defense of any such claim or threatened claim, including
reasonable attorneys' fees.

         7.       Certain Additional Payments by the Company.

                  (a)      Anything in this Agreement to the contrary
notwithstanding and except as set forth below, if any payment or distribution by
the Company to or for the benefit of Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 7) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company will make an additional payment (a "Gross-Up
Payment") to Employee in an amount such that after payment by Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

                  (b)      Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, will be made
by Ernst & Young LLP or such other certified public accounting firm as may be
designated by Employee (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Employee within 15 business days
of the receipt of notice from Employee that there has

                                       -7-



been a Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, Employee shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 7, shall be paid by the Company to Employee within five business
days of the receipt of the Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and Employee. It is
possible (due to the uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting Firm hereunder) that
Gross-Up Payments will not have been made by the Company which it is ultimately
determined should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. Consequently, if the Company
exhausts its remedies pursuant to Section 7(c) and Employee thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and the Company will
promptly pay any such Underpayment to or for the benefit of Employee.

                  (c)      Employee will notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after Employee is
informed in writing of such claim, and such notification will apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. Employee will not pay such claim prior to the expiration
of the 30-day period following the date on which Employee gives such notice to
the Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies Employee in writing
prior to the expiration of such period that it desires to contest such claim,
Employee will:

                           (i)      Give the Company any information reasonably
requested by the Company relating to such claim,

                           (ii)     Take such action in connection with
contesting such claim as the Company reasonably requests in writing from time to
time, including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,

                           (iii)    Cooperate with the Company in good faith in
order effectively to contest such claim, and

                           (iv)     Permit the Company to participate in any
proceedings relating to such claim;

provided, however, that the Company will bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and will indemnify and hold Employee harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation of the foregoing provisions of this Section
7(c), the Company will control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct Employee to pay
the tax claimed and sue for a refund or contest the claim in any permissible
manner, and Employee agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company may determine; provided, however, that if
the Company directs

                                       -8-



Employee to pay such claim and sue for a refund, the Company will advance the
amount of such payment to Employee, on an interest-free basis and will indemnify
and hold Employee harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; provided, further, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Employee with respect to
which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest will be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Employee will be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.

                           (d)      If, after the receipt by Employee of an
amount advanced by the Company pursuant to Section 7(c), Employee becomes
entitled to receive any refund with respect to such claim, Employee will
(subject to the Company's complying with the requirements of Section 7(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by Employee of an amount advanced by the Company pursuant to Section
7(c), a determination is made that Employee is not entitled to any refund with
respect to such claim and the Company does not notify Employee in writing of its
intent to contest such denial of refund prior to the expiration of thirty (30)
days after such determination, then such advance will be forgiven and Employee
shall not be required to repay and the amount of such advance will offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.

         8.       Severability.

                  The parties hereto hereby expressly agree and contract that it
is not the intention of either party to violate any public policy, or any
statutory or common law, and that if any paragraph, sentence, clause or
combination of the same of this Agreement will be in violation of the laws of
any state where applicable, such paragraph, sentence, clause or the combination
of the same will be void in the jurisdictions where it is unlawful, and the
remainder thereof shall remain binding on the parties hereto. It is the
intention of the parties to make the covenants of this Agreement binding only to
the extent that they may be lawfully done under existing applicable laws. In the
event that any part of any term or covenant of this Agreement is determined by a
court of law or equity to be overly broad or otherwise unenforceable, the
parties hereto agree that such court shall be empowered to substitute, and it is
the intent of the parties hereto that such court substitute, a reasonably
judicially enforceable term or limitation in the place of such unenforceable
term or covenant, and that as so modified this Agreement will be fully
enforceable.

         9.       Entire Agreement; Modification.

                  This Agreement constitutes the entire agreement between the
parties and supersedes any and all prior understandings or agreements,
specifically including the Old Agreement. Any changes or additions to this
Agreement must be in writing and signed by both parties. If there is any
conflict between the terms of this Agreement and any stock option agreement or
other agreement between Employee and the Company (including any agreement
entered into after the date of this Agreement), then this Agreement will control
unless there is specific reference to superseding this Agreement in such other
agreement or in this Agreement.

                                       -9-



         10.      Assignment.

                  (a)      The rights and benefits of Employee under this
Agreement, other than accrued and unpaid amounts due under Section 3(a) hereof,
are personal to Employee and are not assignable.

                  (b)      This Agreement may not be assigned by the Company
except to an affiliate of the Company, provided that such affiliate assumes the
Company's obligations under this Agreement; provided, further, that if the
Company merges or effects a consolidation or share exchange with or into, or
sells or otherwise transfers substantially all its assets to, another business
entity, the Company may assign its rights hereunder to that business entity
without the consent of the Employee provided that it causes such business entity
to assume the Company's obligations under this Agreement and provided, further,
that the provisions of Section 5 remain in full force and effect following such
assignment.

         11.      Notice.

                  Unless otherwise specifically provided, references to notice
periods of a certain number of "days" contained in this Agreement are references
to calendar days. Any notice provided for in this Agreement shall be delivered
to Employee at the most recent address of Employee listed in the Company's then
current employment records. Notice to the Company shall be delivered to the
following address: c/o Renal Care Group, Inc., 2525 West End Avenue, Suite 600,
Nashville, Tennessee 37203, Attention: General Counsel.

         12.      Waiver.

                  The waiver by any party to this Agreement of a breach of any
of the provisions contained herein will not operate or be construed as a waiver
of any subsequent breach.

         13.      Disputes and Governing Law.

                  The Company and Employee agree that any dispute arising in
connection with, or relating to, this Agreement or the termination of this
Agreement, to the maximum extent allowed by applicable law, will be subject to
resolution through informal methods and, failing such efforts, through
arbitration. Either party may notify the other party of the existence of a
dispute by written notice to the address indicated above in Section 11. The
parties will thereafter attempt in good faith to resolve their differences
within 30 days after the receipt of such notice. If the dispute cannot be
resolved within such 30-day period, either party may file a written demand for
arbitration with the other party. The arbitration shall proceed in accordance
with the terms of the Federal Arbitration Act and the Commercial Arbitration
Rules of the American Arbitration Association. A single arbitrator shall be
appointed through the American Arbitration Association's procedures to resolve
the dispute.

                  The parties agree that in the event arbitration is necessary,
the laws of the State of Tennessee and any applicable federal law shall apply.
The place of the arbitration shall be Nashville, Tennessee.

                  The award of the arbitrator shall be binding and conclusive
upon the parties. Either party shall have the right to have the award made the
judgment of a court of competent jurisdiction in the State of Tennessee.

                  In the event of a dispute arising under this Agreement, the
prevailing party shall be entitled to all reasonable attorneys' fees incurred in
connection with such dispute. The Company and

                                      -10-



Employee are parties to an Indemnification Agreement effective as of August 13,
2002, which the parties specifically ratify and confirm by this reference.

                  IN WITNESS WHEREOF, the Company and Employee have executed
this Agreement on the day and year first above written.

                                        COMPANY:
                                        RENAL CARE GROUP, INC.

                                        By: /s/ Gary A. Brukardt
                                            ------------------------------------
                                        Title: President and CEO

                                        EMPLOYEE:

                                        /s/ Raymond M. Hakim
                                        ----------------------------------------
                                        RAYMOND M. HAKIM, M.D., Ph.D.

                                      -11-

EX-10.12.3

                                                                 EXHIBIT 10.12.3

                           SECOND AMENDMENT TO SECOND
                 AMENDED AND RESTATED LOAN AGREEMENT AND CONSENT
                              (MULTI-YEAR FACILITY)

         THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT AND
CONSENT (this "Second Amendment"), dated as of December 23, 2003, is by and
among RENAL CARE GROUP, INC., a Delaware corporation (the "Borrower"), the
Guarantors, the Lenders party hereto and BANK OF AMERICA, N.A., as Agent for the
Lenders (in such capacity, the "Agent").

                              W I T N E S S E T H:

         WHEREAS, pursuant to the Second Amended and Restated Loan Agreement
(Multi-Year Facility) dated as of July 1, 2001 among the Borrower, the Lenders
identified therein and the Agent, as amended by that certain First Amendment to
Second Amended and Restated Loan Agreement (Multi-Year Facility) dated as of
November 1, 2002 and as further amended or modified from time to time (the
"Existing Agreement"), the Lenders have extended commitments to make certain
credit facilities available to the Borrower; and

         WHEREAS, the parties hereto have agreed to amend the Existing Agreement
as set forth herein;

         NOW, THEREFORE, in consideration of the agreements herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:

                                     PART I
                                   DEFINITIONS

                  SUBPART 1.1 Certain Definitions. Unless otherwise defined
         herein or the context otherwise requires, the following terms used in
         this Second Amendment, including its preamble and recitals, shall have
         the following meanings:

                           "Amended Agreement" means the Existing Agreement as
                  amended hereby.

                           "Second Amendment Effective Date" shall have the
                  meaning set forth in Subpart 3.1.

                  SUBPART 1.2 Other Definitions. Unless otherwise defined herein
         or the context otherwise requires, terms used in this Second Amendment,
         including its preamble and recitals, shall have the meanings provided
         in the Amended Agreement.



                                     PART II
                        AMENDMENTS TO EXISTING AGREEMENT

         Effective on (and subject to the occurrence of) the Second Amendment
Effective Date, the Existing Agreement is hereby amended in accordance with this
Part II. Except as so amended, the Existing Agreement shall continue in full
force and effect.

                  SUBPART 2.1 Amendment to 6.15. Subclause (c) of Section 6.15
         of the Existing Agreement is hereby amended and restated in its
         entirety to read as follows:

                           (c) so long as no Default or Event of Default exists
                  prior to and after giving effect to such transaction, the
                  Borrower may, from and after November 1, 2002, repurchase
                  shares of its Capital Stock in an amount not to exceed
                  $450,000,000 in the aggregate,

                                    PART III
                                     CONSENT

         Pursuant to clause (c) of the definition of Permitted Acquisition in
Section 1.1 of the Existing Agreement, the Required Lenders hereby consent to
the purchase of substantially all of the assets of Midwest Kidney Centers, LLC,
Acute Renal Services, LLC, MKC-Decatur, LLC, Quality Kidney Care, LLC, Kidney
Care, LLC, and Midwest Renal Support, LLC for Cash Consideration and non-cash
consideration in an aggregate amount not to exceed $55,830,000 provided that
such acquisition satisfies all of the other criteria identified in the
definition of Permitted Acquisition.

                                     PART IV
                           CONDITIONS TO EFFECTIVENESS

                  SUBPART 4.1 Second Amendment Effective Date. This Second
         Amendment shall become effective (the "Second Amendment Effective
         Date") when the Agent shall have received counterparts of this Second
         Amendment, which collectively shall have been duly executed on behalf
         of each of the Borrower, the Guarantors, the Agent and the Required
         Lenders.

                                     PART V
                                  MISCELLANEOUS

                  SUBPART 5.1 Cross-References. References in this Second
         Amendment to any Part or Subpart are, unless otherwise specified, to
         such Part or Subpart of this Second Amendment.

                                       2



                  SUBPART 5.2 References in Other Loan Documents. At such time
         as this Second Amendment shall become effective pursuant to the terms
         of Subpart 4.1, all references in the Existing Agreement to the
         "Agreement" and all references in the other Loan Documents to the
         "Agreement" shall be deemed to refer to the Amended Agreement.

                  SUBPART 5.3 Acknowledgment. The Credit Parties acknowledge and
         confirm (a) that the Agent, on behalf of the Lenders, has a valid and
         enforceable first priority security interest in the Collateral, (b)
         that the Borrower's obligation to repay the outstanding principal
         amount of the Loans and reimburse the Issuing Lender for any drawing on
         a Letter of Credit is unconditional and not subject to any offsets,
         defenses or counterclaims and (c) that the Agent and the Lenders have
         performed fully all of their respective obligations under the Existing
         Agreement and the other Loan Documents. Furthermore, the Guarantors (a)
         acknowledge and consent to all of the terms and conditions of this
         Second Amendment, (b) affirm all of their obligations under the Loan
         Documents and (c) agree that this Second Amendment and all documents
         executed in connection herewith do not operate to reduce or discharge
         the Guarantors' obligations under the Guaranty Agreement or the other
         Loan Documents.

                  SUBPART 5.4 Representations and Warranties. The Credit Parties
         hereby represent and warrant that (a) the representations and
         warranties contained in Article IV of the Amended Agreement are correct
         in all material respects on and as of the date hereof as though made on
         and as of such date and after giving effect to the amendments contained
         herein, (b) no Default or Event of Default exists under the Existing
         Agreement on and as of the date hereof and (c) each Credit Party has
         taken all necessary action to authorize the execution, delivery and
         performance of this Second Amendment.

                  SUBPART 5.5 Counterparts. This Second Amendment may be
         executed by the parties hereto in several counterparts, each of which
         shall be deemed to be an original and all of which shall constitute
         together but one and the same agreement. Delivery by facsimile by any
         of the parties hereto of an executed counterpart of this Second
         Amendment shall be effective as an original executed counterpart hereof
         and shall be deemed a representation that an original executed
         counterpart will be delivered.

                  SUBPART 5.6 Governing Law. THIS SECOND AMENDMENT SHALL BE
         GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
         GEORGIA.

                  SUBPART 5.7 Successors and Assigns. This Second Amendment
         shall be binding upon and inure to the benefit of the parties hereto
         and their respective successors and assigns.

            [The remainder of this page is intentionally left blank.]

                                       3



         Each of the parties hereto has caused a counterpart of this Second
Amendment to be duly executed and delivered as of the date first above written.

BORROWER:                          RENAL CARE GROUP, INC. a
                                   Delaware corporation

                                   By: _____________________________________
                                   Name: ___________________________________
                                   Title: __________________________________

GUARANTORS:                        RENAL CARE GROUP EAST, INC.,
                                   a Pennsylvania corporation

                                   RENAL CARE GROUP MICHIGAN, INC.,
                                   a Delaware corporation

                                   MICHIGAN HOME DIALYSIS CENTER, INC.,
                                   a Michigan corporation

                                   RENAL CARE GROUP OF THE MIDWEST, INC.,
                                   a Kansas corporation

                                   FOUR STATE REGIONAL DIALYSIS CENTER, INC.,
                                   a Missouri corporation

                                   FORT SCOTT REGIONAL DIALYSIS CENTER, INC.,
                                   a Missouri corporation

                                   MIAMI REGIONAL DIALYSIS CENTER, INC.,
                                   a Missouri corporation

                                   RCG MISSISSIPPI, INC.,
                                   a Delaware corporation

                                   RENAL CARE GROUP OF THE SOUTHEAST, INC.,
                                   a Florida corporation

                                   NORTHEAST ALABAMA KIDNEY CLINIC, INC.,
                                   an Alabama corporation

                                   RENAL CARE GROUP TEXAS, INC.,
                                   a Texas corporation

                                              Second Amendment to Second Amended
                                                     and Restated Loan Agreement
                                                                Renal Care Group


                                   DIALYSIS MANAGEMENT CORPORATION,
                                   a Texas corporation

                                   RCG PA MERGER CORP.,
                                   a Texas corporation

                                   STAT DIALYSIS CORPORATION,
                                   a Delaware corporation

                                   ANGLETON DIALYSIS, INC.,
                                   a Texas corporation

                                   BRAZORIA KIDNEY CENTER, INC.,
                                   a Texas corporation

                                   FONDREN DIALYSIS CLINIC, INC.,
                                   a Texas corporation

                                   WHARTON DIALYSIS, INC.,
                                   a Texas corporation

                                   JEFFERSON COUNTY DIALYSIS, INC.,
                                   an Arkansas corporation

                                   KDCO, INC.,
                                   an Arkansas corporation

                                   LAWTON DIALYSIS, INC.,
                                   an Arkansas corporation

                                   LITTLE ROCK DIALYSIS, INC.,
                                   an Arkansas corporation

                                   NORTHWEST DIALYSIS, INC.,
                                   an Arkansas corporation

                                   RENALAB, INC.,
                                   a Delaware corporation

                                   RENALPARTNERS, INC.,
                                   a Delaware corporation

                                   RENALNET, INC.,
                                   a Delaware corporation

                                              Second Amendment to Second Amended
                                                     and Restated Loan Agreement
                                                                Renal Care Group



                                   WOUND CARE GROUP, INC.
                                   a Delaware corporation

                                   DIABETES CARE GROUP, INC.
                                   a Delaware corporation

                                   RENAL CARE GROUP ARIZONA, INC.
                                   an Arizona corporation

                                   RENAL CARE GROUP NORTHWEST, INC.,
                                   a Delaware corporation

                                   RENALNET, ARIZONA, INC.,
                                   an Arizona corporation

                                   RCG UNIVERSITY DIVISION, INC.
                                   a Tennessee corporation

                                   RCG SUPPLY COMPANY,
                                   a Tennessee corporation

                                   RENAL CARE GROUP ALASKA, INC.,
                                   an Alaska corporation

                                   RENAL CARE GROUP SOUTHWEST HOLDINGS, INC.,
                                   a Texas corporation

                                   DIALYSIS CENTERS OF AMERICA - ILLINOIS, INC.,
                                   an Illinois corporation

                                   SSKG, INC.,
                                   an Illinois corporation

                                   RENAL CARE GROUP OHIO, INC.,
                                   a Delaware corporation

                                   PHYSICIANS DIALYSIS COMPANY, INC.,
                                   an Ohio corporation

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                              Second Amendment to Second Amended
                                                     and Restated Loan Agreement
                                                                Renal Care Group



                                   RCG FINANCE, INC.,
                                   a Delaware corporation

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   DIALYSIS LICENSING CORP.,
                                   a Delaware corporation

                                   RCGIH, INC.
                                   a Delaware corporation

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   RCG INDIANA, LLC,
                                   a Delaware limited liability company

                                   By:  Renal Care Group, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                   By:  Renal Care Group Arizona, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                              Second Amendment to Second Amended
                                                     and Restated Loan Agreement
                                                                Renal Care Group



                                   KIDNEY DISEASE CENTERS OF THE OZARKS, LLC
                                   a Missouri limited liability company

                                   By:  Renal Care Group, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                   STUTTGART DIALYSIS, LLC,
                                   an Arkansas limited liability company

                                   By:  Little Rock Dialysis, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                   By:  Jefferson County Dialysis, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                   RCG WEST HEALTH SUPPLY, LLC,
                                   an Arizona limited liability company

                                   By:  Renal Care Group, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                   By:  Renal Care Group Arizona, Inc..
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                              Second Amendment to Second Amended
                                                     and Restated Loan Agreement
                                                                Renal Care Group



                                   KENTUCKY RENAL CARE GROUP, LLC,
                                   a Delaware limited liability company

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   RENAL CARE GROUP SOUTHWEST, L.P.
                                   a Delaware limited partnership

                                   By:  Renal Care Group Arizona, Inc.,
                                        an Arizona corporation
                                   Its: General Partner

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                              Second Amendment to Second Amended
                                                     and Restated Loan Agreement
                                                                Renal Care Group



AGENT:                             BANK OF AMERICA, N.A., as
                                   Agent

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

LENDERS:                           BANK OF AMERICA, N. A., as a Lender

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   WELLS FARGO BANK, NATIONAL
                                   ASSOCIATION

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   SUNTRUST BANK

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   AMSOUTH BANK

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                              Second Amendment to Second Amended
                                                     and Restated Loan Agreement
                                                                Renal Care Group

EX-10.12.4

                                                                 EXHIBIT 10.12.4

                               THIRD AMENDMENT TO
                           LOAN AGREEMENT AND CONSENT
                               (364-DAY FACILITY)

         THIS THIRD AMENDMENT TO LOAN AGREEMENT AND CONSENT (this "Third
Amendment"), dated as of December 23, 2003, is by and among RENAL CARE GROUP,
INC., a Delaware corporation (the "Borrower"), the Guarantors, the Lenders party
hereto and BANK OF AMERICA, N.A., as Agent for the Lenders (in such capacity,
the "Agent").

                              W I T N E S S E T H:

         WHEREAS, pursuant to the Loan Agreement (364-Day Facility) dated as of
July 1, 2001 among the Borrower, the Lenders identified therein and the Agent,
as amended by that certain First Amendment to Loan Agreement (364-Day Facility)
dated as of November 1, 2002, that certain Second Amendment dated as of June 27,
2003 and as further amended or modified from time to time (the "Existing
Agreement"), the Lenders have extended commitments to make certain credit
facilities available to the Borrower; and

         WHEREAS, the parties hereto have agreed to amend the Existing Agreement
as set forth herein;

         NOW, THEREFORE, in consideration of the agreements herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:

                                     PART I
                                   DEFINITIONS

                  SUBPART 1.1 Certain Definitions. Unless otherwise defined
         herein or the context otherwise requires, the following terms used in
         this Third Amendment, including its preamble and recitals, shall have
         the following meanings:

                           "Amended Agreement" means the Existing Agreement as
                  amended hereby.

                           "Third Amendment Effective Date" shall have the
                  meaning set forth in Subpart 3.1.

                  SUBPART 1.2 Other Definitions. Unless otherwise defined herein
         or the context otherwise requires, terms used in this Third Amendment,
         including its preamble and recitals, shall have the meanings provided
         in the Amended Agreement.



                                     PART II
                        AMENDMENTS TO EXISTING AGREEMENT

         Effective on (and subject to the occurrence of) the Third Amendment
Effective Date, the Existing Agreement is hereby amended in accordance with this
Part II. Except as so amended, the Existing Agreement shall continue in full
force and effect.

                  SUBPART 2.1 Amendment to 6.15. Subclause (c) of Section 6.15
         of the Existing Agreement is hereby amended and restated in its
         entirety to read as follows:

                           (c) so long as no Default or Event of Default exists
                  prior to and after giving effect to such transaction, the
                  Borrower may, from and after November 1, 2002, repurchase
                  shares of its Capital Stock in an amount not to exceed
                  $450,000,000 in the aggregate,

                                    PART III
                                     CONSENT

         Pursuant to clause (c) of the definition of Permitted Acquisition in
Section 1.1 of the Existing Agreement, the Required Lenders hereby consent to
the purchase of substantially all of the assets of Midwest Kidney Centers, LLC,
Acute Renal Services, LLC, MKC-Decatur, LLC, Quality Kidney Care, LLC, Kidney
Care, LLC, and Midwest Renal Support, LLC for Cash Consideration and non-cash
consideration in an aggregate amount not to exceed $55,830,000 provided that
such acquisition satisfies all of the other criteria identified in the
definition of Permitted Acquisition.

                                     PART IV
                           CONDITIONS TO EFFECTIVENESS

                  SUBPART 4.1 Third Amendment Effective Date. This Third
         Amendment shall become effective (the "Third Amendment Effective Date")
         when the Agent shall have received counterparts of this Third
         Amendment, which collectively shall have been duly executed on behalf
         of each of the Borrower, the Guarantors, the Agent and the Required
         Lenders.

                                     PART V
                                  MISCELLANEOUS

                  SUBPART 5.1 Cross-References. References in this Third
         Amendment to any Part or Subpart are, unless otherwise specified, to
         such Part or Subpart of this Third Amendment.

                  SUBPART 5.2 References in Other Loan Documents. At such time
         as this Third Amendment shall become effective pursuant to the terms of
         Subpart 4.1, all

                                       2



         references in the Existing Agreement to the "Agreement" and all
         references in the other Loan Documents to the "Agreement" shall be
         deemed to refer to the Amended Agreement.

                  SUBPART 5.3 Acknowledgment. The Credit Parties acknowledge and
         confirm (a) that the Agent, on behalf of the Lenders, has a valid and
         enforceable first priority security interest in the Collateral, (b)
         that the Borrower's obligation to repay the outstanding principal
         amount of the Loans is unconditional and not subject to any offsets,
         defenses or counterclaims and (c) that the Agent and the Lenders have
         performed fully all of their respective obligations under the Existing
         Agreement and the other Loan Documents. Furthermore, the Guarantors (a)
         acknowledge and consent to all of the terms and conditions of this
         Third Amendment, (b) affirm all of their obligations under the Loan
         Documents and (c) agree that this Third Amendment and all documents
         executed in connection herewith do not operate to reduce or discharge
         the Guarantors' obligations under the Guaranty Agreement or the other
         Loan Documents.

                  SUBPART 5.4 Representations and Warranties. The Credit Parties
         hereby represent and warrant that (a) the representations and
         warranties contained in Article IV of the Amended Agreement are correct
         in all material respects on and as of the date hereof as though made on
         and as of such date and after giving effect to the amendments contained
         herein, (b) no Default or Event of Default exists under the Existing
         Agreement on and as of the date hereof and (c) each Credit Party has
         taken all necessary action to authorize the execution, delivery and
         performance of this Third Amendment.

                  SUBPART 5.5 Counterparts. This Third Amendment may be executed
         by the parties hereto in several counterparts, each of which shall be
         deemed to be an original and all of which shall constitute together but
         one and the same agreement. Delivery by facsimile by any of the parties
         hereto of an executed counterpart of this Third Amendment shall be
         effective as an original executed counterpart hereof and shall be
         deemed a representation that an original executed counterpart will be
         delivered.

                  SUBPART 5.6 Governing Law. THIS THIRD AMENDMENT SHALL BE
         GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
         GEORGIA.

                  SUBPART 5.7 Successors and Assigns. This Third Amendment shall
         be binding upon and inure to the benefit of the parties hereto and
         their respective successors and assigns.

            [The remainder of this page is intentionally left blank.]

                                       3



         Each of the parties hereto has caused a counterpart of this Third
Amendment to be duly executed and delivered as of the date first above written.

BORROWER:                          RENAL CARE GROUP, INC. a
                                   Delaware corporation

                                   By:   ________________________________
                                   Name: ________________________________
                                   Title: _______________________________

GUARANTORS:                        RENAL CARE GROUP EAST, INC.,
                                   a Pennsylvania corporation

                                   RENAL CARE GROUP MICHIGAN, INC.,
                                   a Delaware corporation

                                   MICHIGAN HOME DIALYSIS CENTER, INC.,
                                   a Michigan corporation

                                   RENAL CARE GROUP OF THE MIDWEST, INC.,
                                   a Kansas corporation

                                   FOUR STATE REGIONAL DIALYSIS CENTER, INC.,
                                   a Missouri corporation

                                   FORT SCOTT REGIONAL DIALYSIS CENTER, INC.,
                                   a Missouri corporation

                                   MIAMI REGIONAL DIALYSIS CENTER, INC.,
                                   a Missouri corporation

                                   RCG MISSISSIPPI, INC.,
                                   a Delaware corporation

                                   RENAL CARE GROUP OF THE SOUTHEAST, INC.,
                                   a Florida corporation

                                   NORTHEAST ALABAMA KIDNEY CLINIC, INC.,
                                   an Alabama corporation

                                   RENAL CARE GROUP TEXAS, INC.,
                                   a Texas corporation

                                                              Third Amendment to
                                               Loan Agreement (364-Day Facility)
                                                                Renal Care Group



                                   DIALYSIS MANAGEMENT CORPORATION,
                                   a Texas corporation

                                   RCG PA MERGER CORP.,
                                   a Texas corporation

                                   STAT DIALYSIS CORPORATION,
                                   a Delaware corporation

                                   ANGLETON DIALYSIS, INC.,
                                   a Texas corporation

                                   BRAZORIA KIDNEY CENTER, INC.,
                                   a Texas corporation

                                   FONDREN DIALYSIS CLINIC, INC.,
                                   a Texas corporation

                                   WHARTON DIALYSIS, INC.,
                                   a Texas corporation

                                   JEFFERSON COUNTY DIALYSIS, INC.,
                                   an Arkansas corporation

                                   KDCO, INC.,
                                   an Arkansas corporation

                                   LAWTON DIALYSIS, INC.,
                                   an Arkansas corporation

                                   LITTLE ROCK DIALYSIS, INC.,
                                   an Arkansas corporation

                                   NORTHWEST DIALYSIS, INC.,
                                   an Arkansas corporation

                                   RENALAB, INC.,
                                   a Delaware corporation

                                   RENALPARTNERS, INC.,
                                   a Delaware corporation

                                   RENALNET, INC.,
                                   a Delaware corporation

                                                              Third Amendment to
                                               Loan Agreement (364-Day Facility)
                                                                Renal Care Group



                                   WOUND CARE GROUP, INC.
                                   a Delaware corporation

                                   DIABETES CARE GROUP, INC.
                                   a Delaware corporation

                                   RENAL CARE GROUP ARIZONA, INC.
                                   an Arizona corporation

                                   RENAL CARE GROUP NORTHWEST, INC.,
                                   a Delaware corporation

                                   RENALNET, ARIZONA, INC.,
                                   an Arizona corporation

                                   RCG UNIVERSITY DIVISION, INC.
                                   a Tennessee corporation

                                   RCG SUPPLY COMPANY,
                                   a Tennessee corporation

                                   RENAL CARE GROUP ALASKA, INC.,
                                   an Alaska corporation

                                   RENAL CARE GROUP SOUTHWEST HOLDINGS, INC.,
                                   a Texas corporation

                                   DIALYSIS CENTERS OF AMERICA - ILLINOIS, INC.,
                                   an Illinois corporation

                                   SSKG, INC.,
                                   an Illinois corporation

                                   RENAL CARE GROUP OHIO, INC.,
                                   a Delaware corporation

                                   PHYSICIANS DIALYSIS COMPANY, INC.,
                                   an Ohio corporation

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                                              Third Amendment to
                                               Loan Agreement (364-Day Facility)
                                                                Renal Care Group



                                   RCG FINANCE, INC.,
                                   a Delaware corporation

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   DIALYSIS LICENSING CORP.,
                                   a Delaware corporation

                                   RCGIH, INC.
                                   a Delaware corporation

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   RCG INDIANA, LLC,
                                   a Delaware limited liability company

                                   By:  Renal Care Group, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                   By:  Renal Care Group Arizona, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                                              Third Amendment to
                                               Loan Agreement (364-Day Facility)
                                                                Renal Care Group



                                   KIDNEY DISEASE CENTERS OF THE OZARKS, LLC
                                   a Missouri limited liability company

                                   By:  Renal Care Group, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                   STUTTGART DIALYSIS, LLC,
                                   an Arkansas limited liability company

                                   By:  Little Rock Dialysis, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                   By:  Jefferson County Dialysis, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                   RCG WEST HEALTH SUPPLY, LLC,
                                   an Arizona limited liability company

                                   By:  Renal Care Group, Inc.
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                   By:  Renal Care Group Arizona, Inc..
                                   Its: Member

                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                                              Third Amendment to
                                               Loan Agreement (364-Day Facility)
                                                                Renal Care Group



                                   KENTUCKY RENAL CARE GROUP, LLC,
                                   a Delaware limited liability company

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   RENAL CARE GROUP SOUTHWEST, L.P.
                                   a Delaware limited partnership

                                   By:  Renal Care Group Arizona, Inc.,
                                        an Arizona corporation
                                   Its: General Partner

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                                              Third Amendment to
                                               Loan Agreement (364-Day Facility)
                                                                Renal Care Group



AGENT:                             BANK OF AMERICA, N.A., as
                                   Agent

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

LENDERS:                           BANK OF AMERICA, N. A., as a Lender

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   WELLS FARGO BANK, NATIONAL
                                   ASSOCIATION

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   SUNTRUST BANK

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                   AMSOUTH BANK

                                   By:    ______________________________________
                                   Name:  ______________________________________
                                   Title: ______________________________________

                                                              Third Amendment to
                                               Loan Agreement (364-Day Facility)
                                                                Renal Care Group

EX-10.2.1

                                                                  EXHIBIT 10.2.1

                              AMENDMENT NUMBER 1 TO
                       MEDICAL DIRECTOR SERVICES AGREEMENT

      THIS AMENDMENT NUMBER 1 TO MEDICAL DIRECTOR SERVICES AGREEMENT (this
"Amendment") is made and entered into as of the 1st day of January, 1999, by and
between RCG INDIANA, LLC, a Delaware limited liability company as assignee of
Renal Care Group, Inc. (the "Company"), and INDIANA DIALYSIS MANAGEMENT, P.C.,
an Indiana corporation (the "Group ").

                                   WITNESSETH:

      WHEREAS, Renal Care Group, Inc. and the Group are parties to a Medical
Director Services Agreement (Group Practice/Freestanding Facility), effective as
of February 12, 1996 (the "Agreement"), under which the Group agrees to provide
medical director services for the Company's dialysis facilities located in and
near Ft. Wayne, Indiana, which Agreement was assigned by Renal Care Group, Inc.
to the Company; and

      WHEREAS, the parties to this Amendment now desire to make certain
modifications and amendments to the Agreement as provided herein; and

      WHEREAS, capitalized terms that are used but not defined in this Amendment
that are defined in the Agreement shall have the meanings set forth in the
Agreement;

      NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings set forth in this Amendment and in the Agreement, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Amendment hereby agree as follows:

      1. Compensation. The parties agree that Section 3.1 of the Agreement is
hereby amended by deleting such section in its entirety and inserting in lieu
thereof, the following:

            3.1 Compensation.

                  (a) In consideration of the services, covenants, and
      agreements agreed to be performed by the Group during the Initial Term and
      any Renewal Term, effective as of February 12, 1999, the Company shall pay
      the Group $500,000 per year, payable in substantially equal monthly
      installments. The parties agree that this medical director fee will be
      fixed for the years ending February 11, 2000, 2001 and 2002. The Group
      agrees to accept the payment under this subsection (a) (as it may be
      adjusted as provided below) as the total compensation for all services,
      covenants and agreements pursuant to this Agreement.

                  (b) (i) Beginning 90 days prior to February 12, 2002 and each
      year thereafter, if either party believes that the fair market value of
      the services provided by the Group under this Agreement has changed in any
      material way since the most recent anniversary of the effective date of a
      change in compensation payable under this Agreement (a "Compensation
      Adjustment Date") (or since February 12, 1999 with respect to the
      Compensation Adjustment Date occurring on February 12, 2002), then such

      party may notify the other that it believes such a change has occurred and
      the Group and the Company shall negotiate in good faith an adjustment to
      the compensation described in Section 3.1(a) above so that it represents
      fair market value for the duties and responsibilities of the Group to be
      provided during the next year under this Agreement. Notwithstanding the
      foregoing, no adjustment pursuant to this subsection (b)(i) to the
      compensation payable under this Agreement shall be effective unless set
      forth in writing signed by each of the Group and the Company, which
      writing shall be deemed an amendment to this Agreement.

                        (ii) If the Group and the Company are unable to agree on
      an adjustment, then either may require that an adjustment of the
      compensation hereunder be submitted to a qualified independent third party
      mutually selected by both the Group and the Company to determine the fair
      market value of the services required hereunder, the costs and fees of
      which shall be borne equally by the Group and the Company. If the Group
      and the Company are unable to agree on the third party, then each of the
      Company and the Group shall at its own cost and expense select its own
      qualified independent third party and the average of such two
      determinations of fair market value shall be the revised compensation
      unless such determinations are more than 10% apart, in which case such
      third parties shall mutually select an additional qualified independent
      third party, the fees and expenses of which shall be shared equally, who
      shall determine the fair market value of the services hereunder from
      between the range of the amounts determined by the first two appraisals.
      The fair market value of the services as determined in accordance with the
      provisions of this subsection (b)(ii) shall be the compensation payable
      under this Agreement effective as of the applicable anniversary of the
      Compensation Adjustment Date, and such final determination shall be deemed
      an amendment to this Agreement.

                  (c) Any change to the compensation payable hereunder in
      accordance with subsection (b) of this Section 3.1 shall be effective as
      of the applicable anniversary of the Compensation Adjustment Date and
      shall remain effective, and not subject to adjustment under Section 3.1(b)
      or otherwise, for at least 12 months from the effective date of such
      change.

      2. No Further Amendment. Except as expressly modified and amended by this
Amendment, the parties agree that the Agreement shall continue in full force and
effect as provided therein, and the parties reaffirm all of its provisions.

      3. Miscellaneous. The section and other headings used in this Amendment
are for convenience of reference only and shall not affect the interpretation of
this Agreement in any way. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original for all purposes and all
of which shall be deemed, collectively, one agreement.


    [the remainder of this page intentionally left blank, signatures follow]

                                       2

      IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above.

                               The Company:

                               RCG INDIANA, LLC



                               By:       /s/ R. Dirk Allison
                                  ---------------------------------------
                               Title: Vice President of Manager
                                     ------------------------------------

                               The Group

                               INDIANA DIALYSIS MANAGEMENT, P.C.



                               By:       /s/ Stephen D. McMurray
                                  ---------------------------------------
                               Title:    President
                                     ------------------------------------

                                       3

      Each physician executing below acknowledges that he or she has read and
understood the terms of this Amendment and the Agreement amended hereby and
hereby confirms and ratifies the acknowledgement set forth in Section 6.1(i) of
the Agreement and the agreements set forth in Article VII of the Agreement, as
provided therein.

                               /s/ Stephen D. McMurray
                               --------------------------------------
                               STEPHEN D. McMURRAY, M.D.


                               /s/ Robert L. Dettmer
                               --------------------------------------
                               ROBERT L. DETTMER, M.D.


                               /s/ Richard Nelson
                               --------------------------------------
                               RICHARD NELSON, M.D.


                               /s/ John Dyer
                               --------------------------------------
                               JOHN DYER, M.D.

                               --------------------------------------
                               --------------------------------------

                               --------------------------------------
                               --------------------------------------

                               --------------------------------------
                               --------------------------------------

                               --------------------------------------
                               --------------------------------------

                                       4

EX-10.2.2

                                                                  EXHIBIT 10.2.2

                              AMENDMENT NUMBER 2 TO
                       MEDICAL DIRECTOR SERVICES AGREEMENT

      THIS AMENDMENT NUMBER 2 TO MEDICAL DIRECTOR SERVICES AGREEMENT (this
"Amendment") is made and entered into as of the 12th day of February, 2002, by
and between RCG INDIANA, LLC, a Delaware limited liability company as assignee
of Renal Care Group, Inc. (the "Company"), and INDIANA DIALYSIS MANAGEMENT, a
division of INDIANA MEDICAL ASSOCIATES, an Indiana corporation (the "Group ").

                                   WITNESSETH:

      WHEREAS, Renal Care Group, Inc. and the predecessor of the Group, Indiana
Dialysis Management, P.C., are parties to a Medical Director Services Agreement
(Group Practice/Freestanding Facility), effective as of February 12, 1996, which
was amended by Amendment Number 1 to Medical Director Services Agreement,
effective as of January 1, 1999 (as so amended, the "Agreement"), under which
the Group agrees to provide medical director services for the Company's dialysis
facilities located in and near Ft. Wayne, Indiana, which Agreement was assigned
by Renal Care Group, Inc. to the Company; and

      WHEREAS, by mutual agreement, the Agreement has been amended to add
additional facilities developed in and near Ft. Wayne, Indiana, including
facilities owned by the Company in joint ventures with the Group; and

      WHEREAS, the parties to this Amendment now desire to make certain
modifications and amendments to the Agreement as provided herein; and

      WHEREAS, capitalized terms that are used but not defined in this Amendment
that are defined in the Agreement shall have the meanings set forth in the
Agreement;

      NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings set forth in this Amendment and in the Agreement, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Amendment hereby agree as follows:

      1. Facilities. The parties agree that the definition of "Facilities" is
hereby amended by deleting the current definition thereof in the Agreement. In
lieu of such definition, for purposes of the Agreement the term "Facilities"
means those dialysis facilities owned in whole or in part by the Company that
are located within the Territory (as defined in the Agreement), including the
facilities listed on EXHIBIT A attached to this Amendment and any new facilities
developed by the Company or an affiliate of the Company within the Territory;
provided, however, that "Facilities" shall not include any dialysis facilities
that are acquired by the Company or an affiliate of the Company from an
unrelated third party.

      2. Compensation. The parties agree that Section 3.1 of the Agreement is
hereby amended by deleting such section in its entirety and inserting in lieu
thereof, the following:

            3.1 Compensation.

                  (a) In consideration of the services, covenants, and
      agreements agreed to be performed by the Group during the Initial Term and
      any Renewal Term, effective as of

      February 12, 2002, the Company shall pay the Group $620,000 per year,
      payable in substantially equal monthly installments. The installment for
      the month of February 2002 will be $47,381.22, and the installment for the
      12-day period ending February 12, 2006 will be $22,142.86. The parties
      agree that this $620,000 per year medical director fee will be fixed for
      the years ending February 11, 2003, 2004, 2005 and 2006. In addition to
      the monthly medical director fee prescribed above, the Group shall be
      eligible for an annual bonus of up to 15% of the base medical director
      compensation paid during the year based upon the success of the Facility
      in meeting annual clinical outcomes targets and in achieving performance
      objectives for the Facilities and the Group generally prescribed by Renal
      Care Group, Inc. ("RCG") for its dialysis facilities in the region in
      which the Facilities are located. This bonus shall be payable on a
      calendar year basis, and it will be prorated for years in which this
      Agreement (and this bonus provision) is in force for less than the entire
      year. The criteria for reviewing and determining the bonus amount will be
      substantially similar to those attached hereto as EXHIBIT C. RCG may
      change such criteria annually, and the Company will provide the revised
      criteria to the Group when adopted. The amount of the bonus payable to the
      Group shall be determined by reviewing such criteria for all Facilities.
      If the Facilities (as a group) are in the top quartile (the top 25%) of
      RCG facilities, then the bonus will be 15%; if the Facilities are in the
      second quartile, then the bonus will be 10%; if the Facilities are in the
      third quartile, then the bonus will be 5%; if the Facilities are in the
      bottom quartile, no bonus will be paid. The Group agrees to accept the
      payment under this subsection (a) (as it may be adjusted as provided
      below) as the total compensation for all services, covenants and
      agreements pursuant to this Agreement.

                  (b) (i) Beginning 90 days prior to February 12, 2006 and each
      year thereafter, if either party believes that the fair market value of
      the services provided by the Group under this Agreement has changed in any
      material way since the most recent anniversary of the effective date of a
      change in compensation payable under this Agreement (a "Compensation
      Adjustment Date") (or since February 12, 2002 with respect to the
      Compensation Adjustment Date occurring on February 12, 2006), then such
      party may notify the other that it believes such a change has occurred and
      the Group and the Company shall negotiate in good faith an adjustment to
      the compensation described in Section 3.1(a) above so that it represents
      fair market value for the duties and responsibilities of the Group to be
      provided during the next year under this Agreement. Notwithstanding the
      foregoing, no adjustment pursuant to this subsection (b)(i) to the
      compensation payable under this Agreement shall be effective unless set
      forth in writing signed by each of the Group and the Company, which
      writing shall be deemed an amendment to this Agreement.

                       (ii) If the Group and the Company are unable to agree on
      an adjustment, then either may require that an adjustment of the
      compensation hereunder be submitted to a qualified independent third party
      mutually selected by both the Group and the Company to determine the fair
      market value of the services required hereunder, the costs and fees of
      which shall be borne equally by the Group and the Company. If the Group
      and the Company are unable to agree on the third party, then each of the
      Company and the Group shall at its own cost and expense select its own
      qualified independent third party and the average of such two
      determinations of fair market value shall be the revised compensation
      unless such determinations are more than 10% apart, in which case such
      third parties shall mutually select an additional qualified independent
      third party, the fees and expenses of which shall be shared equally, who
      shall determine the fair market value of the services hereunder from
      between the range of the amounts determined by the first

                                       2

      two appraisals. The fair market value of the services as determined in
      accordance with the provisions of this subsection (b)(ii) shall be the
      compensation payable under this Agreement effective as of the applicable
      anniversary of the Compensation Adjustment Date, and such final
      determination shall be deemed an amendment to this Agreement.

                  (c) Any change to the compensation payable hereunder in
      accordance with subsection (b) of this Section 3.1 shall be effective as
      of the applicable anniversary of the Compensation Adjustment Date and
      shall remain effective, and not subject to adjustment under Section 3.1(b)
      or otherwise, for at least 12 months from the effective date of such
      change.

      2. No Further Amendment. Except as expressly modified and amended by this
Amendment, the parties agree that the Agreement shall continue in full force and
effect as provided therein, and the parties reaffirm all of its provisions.

      3. Miscellaneous. The section and other headings used in this Amendment
are for convenience of reference only and shall not affect the interpretation of
this Agreement in any way. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original for all purposes and all
of which shall be deemed, collectively, one agreement.

    [the remainder of this page intentionally left blank, signatures follow]

                                       3

      IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first set forth above.

                            The Company:

                            RCG INDIANA, LLC


                            By:       /s/ R. Dirk Allison
                               -----------------------------------------
                            Title: Vice President of Manager

                            The Group

                            INDIANA DIALYSIS MANAGEMENT
                            a division of INDIANA MEDICAL ASSOCIATES


                            By:       /s/ Stephen D. McMurray
                               -----------------------------------------
                            Title:    President
                                  --------------------------------------

                                       4

      Each physician executing below acknowledges that he or she has read and
understood the terms of this Amendment and the Agreement amended hereby and
hereby confirms and ratifies the acknowledgement set forth in Section 6.1(i) of
the Agreement and the agreements set forth in Article VII of the Agreement, as
provided therein.

                              /s/ Stephen D. McMurray
                              ---------------------------------------
                              STEPHEN D. McMURRAY, M.D.


                              /s/ John Ducker
                              ---------------------------------------
                              JOHN DUCKER, M.D.


                              /s/ Samuel Eby
                              ---------------------------------------
                              SAMUEL EBY, M.D.


                              /s/ John Dyer
                              ---------------------------------------
                              JOHN DYER, M.D.


                              /s/ Greg Johnson
                              ---------------------------------------
                              GREG JOHNSON, D.O.

                              /s/ Andrew O'Shaughnessy
                              ---------------------------------------
                              ANDREW O'SHAUGHNESSY, M.D.

                              ---------------------------------------
                              ---------------------------------------

                              ---------------------------------------
                              ---------------------------------------

                                       5

                                    EXHIBIT A

                               LIST OF FACILITIES

                                             
RCG Van Wert                                    RCG DuPont Road
140 Fox Road, Suite 405                         10204 Dupont Circle Drive
Van Wert, Ohio 45891                            Fort Wayne, Indiana 46825

Northeast Indiana Kidney Center - Auburn        Regional Dialysis Center of Williams County
1147 W. 15th Street                             537 W. High Street
Auburn, Indiana 46706                           Bryan, Ohio 43506

Northeast Indiana Kidney Center - Decatur       Northeast Indiana Kidney Center - Ft. Wayne
1029 S. 13th Street                             7910 W. Jefferson Blvd., Suite L10
Decatur, Indiana 46733                          Fort Wayne, Indiana 46804

Northeast Indiana Kidney Center - Marion        Northeast Indiana Kidney Center - New Haven
1797 Kem Road                                   1308 Minnich Road
Marion, Indiana 46952                           New Haven, Indiana 46774

Northeast Indiana Kidney Center - Warsaw
3334 Lake City Highway
Warsaw, Indiana 46580



                                       6

                                    EXHIBIT C

                       MEDICAL DIRECTOR PERFORMANCE REVIEW

      There has been general agreement regarding the need for a clear set of
guidelines and expectations of an RCG Medical Director. Objectivity in the
annual performance evaluation has been prerequisite, leading to the development
of this document. Our mission is "to improve the quality of life and to care for
those patients with chronic and acute renal disease." This requires that the
dialysis facility and its staff function collaboratively at the highest possible
level, under the leadership of the Medical Director.

      The Interpretive Guidelines for ESRD Facilities states in V-420 "Treatment
is under the general supervision of a Director who is a physician. The Medical
Director is responsible for planning, organizing, conducting and directing the
professional ESRD services and must devote sufficient time to carrying out these
responsibilities." The Nephrologist has the medical skills and must develop
leadership and collaborative management skills to fulfill this mandate as
Medical Director. Teamwork and collegiality are highly valued as the leader of
the ESRD team.

      The measure of performance will be based on a point system as authorized
by the Medical Advisory Board (MAB). The specific criteria and weight may be
changed in the future at the discretion of the MAB. The elements to be measured
and their weight are as follows:

      -     50% based on Clinical Indicators of the Facility

      -     30% based on Medical Director administrative duties

      -     20% based on patient satisfaction with the Facility

CLINICAL PERFORMANCE MEASURES  (50%)

                          HEMODIALYSIS MEDICAL DIRECTOR
           (evaluation based on annual rolling average of prior year)

- -   URR (% of patients with URRs >=70%)                  >75%    =   10 points
      RCG average 65%                                  70-75%    =    8 points
      Best Region 72.8%                              65-69.9%    =    6 points
                                                     60-64.9%    =    4 points
                                                         <60%    =    0 points

- -   HEMATOCRIT  (% of Hcts >=33%)                        >75%    =   10 points
      RCG average 63.7%                                70-75%    =    8 points
      Best Region 70.2                               65-69.9%    =    6 points
                                                     60-64.9%    =    4 points
                                                     55-59.9%    =    2 points
                                                         <55%    =    0 points

- -   HOSPITALIZATION (91+ days, based on days per patient year at risk)

    RCG average 12.0 days                          < 10 days     =    8 points
    Best Region 8.6 days                        10-14.9 days     =    6 points
                                                  15-20 days     =    2 points
                                                    >20 days     =    0 points

                                        7

- -   MORTALITY  (91+ days, based on deaths per 100 patient years at risk)
      RCG average 20.7                                < 20      =    8 points
      Best Region 15.5                                20-23.9   =    6 points
                                                      24-29.9   =    4 points
                                                      30-35     =    2 points
                                                      >35       =    0 points

- -   VASCULAR ACCESS:
- -
    % OF TEMPORARY CATHETERS                           < 10%    =    8 points
      RCG average 19.8%                               10-14.9%  =    6 points
      Best Region 10.7%                               15-19.9%  =    4 points
                                                        20-25%  =    2 points
                                                          >25%  =    0 points

      % NATIVE AV FISTULAS                                >35%  =   15 points
        RCG average 22%                               30-34.9%  =   12 points
        Best Region 33.6%                             25-29.9%  =    9 points
                                                        20-24%  =    6 points
                                                      15-19.9%  =    3 points
                                                          <15%  =    0 points

      PTFE CLOTTING EVENTS/PATIENT YEAR                 < 0.3   =   10 points
        RCG average 0.9                            0.3 - 0.59   =    8 points
        Best Region 0.6                            0.6 - 0.99   =    9 points
                                                    1.0 - 1.2   =    4 points
                                                         >1.2   =    0 points

                      PERITONEAL DIALYSIS MEDICAL DIRECTOR
            (VALUATION BASED ON ANNUAL ROLLING AVERAGE OF PRIOR YEAR)

- -   KT/V  (>=2.1)
      RCG average 63.5% CAPD                             > 65   =   15 points
      RCG average 70.6% CCPD                            60-65%  =   12 points
                                                      55-59.9%  =   10 points
                                                      50-54.9%  =    8 points
                                                      45-49.9%  =    5 points

- -   CREATININE CLEARANCE  (>=60L CAPD or >=60 L CCPD)
      RCG average 67.1% CAPD                             > 70%  =   15 points
      RCG average 70.6% CCPD                            65-70%  =   12 points
                                                      60-64.9%  =   10 points
                                                      55-59.9%  =    8 points
                                                      50-54.9%  =    5 points

                                       8

- -   HEMATOCRIT  (% of Hcts 33-36%)                        >75%  =   10 points
      RCG average 63.7%                                 70-75%  =    8 points
      Best Region 70.2                                65-69.9%  =    6 points
                                                      60-64.9%  =    4 points
                                                      55-59.9%  =    2 points
                                                         < 55%  =    0 points

- -   HOSPITALIZATION  (91 + days, based on days per patient year at risk)
      RCG average 12.0 days                          < 10 days  =    8 points
      Best Region  8.6 days                       10-14.9 days  =    6 points
                                                    15-20 days  =    2 points
                                                     > 20 days  =    0 points


- -   MORTALITY  (91 + days, based on deaths per 100 patient years at risk)
      RCG average 20.7                                    < 20  =    8 points
      Best Region 15.5                                 20-24.9  =    6 points
                                                       24-29.9  =    4 points
                                                         30-35  =    2 points
                                                          > 35  =    0 points

- -   PERITONITIS (new cases + relapse)
      RCG average 14.9 months between cases
      Best Region 16.9 months between cases

      >25 months between cases                 15 points
      20-25 months between cases               12 points
      15-19.9 months between cases              9 points
      10-14.9 months between cases              6 points
      >10 months between cases                  0 points

                                        9

             COMBINATION HEMODIALYSIS & PERITONEAL MEDICAL DIRECTOR

For those physicians who oversee both modalities, each is evaluated using the
above criteria. The overall Clinical Quality is then a composite of these,
weighted to reflect the numbers of patients in each modality.

MEDICAL DIRECTOR TASKS  (30%)

- -     PARTICIPATION IN MONTHLY REVIEW: (one point / month with 12 points
      possible)

      -     Review staffing & training issues impacting patient outcomes with
            Manager

      -     Review water quality

      -     Review dialyzer reuse @ the Facility

      -     Review monthly lab of patients below quality goals & develop plan

      -     Review trend in hospitalizations, infections

      -     Review temporary catheter usage & trend

      -     Review patient incident reports & trends

      -     Monitor staff physician patient rounding process

      -     Adequacy of staff physician medical documentation

- -     PARTICIPATION IN CQI PROCESS: (one point / hourly meeting with 12 points
      possible)

- -     PARTICIPATION IN PROFESSIONAL STAFF PROCESS:

      -     Quarterly Professional Staff meetings (one point / quarter - 4
            points possible)

      -     Quarterly Quality conference calls (one point / quarter - 4 points
            possible)

- -     ANNUAL CHECKLIST: (2 points for each item - 8 points possible)

      -     Review and approve facility Policy and Procedures and make necessary
            modifications; review and approve clinical protocols.

      -     Review patient satisfaction data annually and in concert with the
            Facility Manager make recommendations for improvement.

      -     Participate with the Manager in the Budget process for the Facility.

      -     Participate in Facility surveys by BOH, CMS, etc.

PATIENT SATISFACTION SCORES (PSS) (20 %)

            CAREGIVER:
            RCG average 1.26
                                    PSS>1.5       =  8 points
                                    PSS 1.25-1.5  =  6 points
                                    PSS 1.0-1.249 =  4 points
                                    PSS 0.5-0.99  =  2 points
                                    PSS <0.5      =  0 points

            PHYSICIAN:
            RCG average 1.11
                                    PSS>1.5       = 10 points
                                    PSS 1.25-1.5  =  8 points
                                    PSS 1.0-1.249 =  6 points
                                    PSS 0.5-0.99  =  2 points
                                    PSS <0.5      =  0 points

                                       10

            DIETICIAN, SOCIAL WORKER, OTHER
            RCG average 1.47, 1.33, 1.08

                                    PSS>1.5       =   4 points each
                                    PSS 1.25-1.5  =   3 points each
                                    PSS 1.0-1.249 =   2 points each
                                    PSS 0.5-0.99  =   1 point each
                                    PSS <0.5      =   0 points

                                       11

EX-10.3

                                                                    EXHIBIT 10.3




                       MEDICAL DIRECTOR SERVICES AGREEMENT

      THIS MEDICAL DIRECTOR SERVICES AGREEMENT (the "Agreement") is made and
entered into this 14th day of August 2003, effective as of the February 12,
2003, by and between RENAL CARE GROUP TEXAS, INC., a Texas corporation (the
"Company"), and TYLER NEPHROLOGY ASSOCIATES, P.A., a Texas professional
corporation (the "Practice"). In addition, each Practice Physician, as defined
below, has executed the attached Physician Joinder and by which each such
Practice Physician has agreed to be bound by certain terms of this Agreement as
provided in the Physician Joinder.

                              W I T N E S S E T H:

      WHEREAS, the Company owns and operates the renal dialysis facilities at
the addresses shown on EXHIBIT A (collectively, the "Facilities" and,
individually, the "Facility"), which provide outpatient and home dialysis
services;

      WHEREAS, the Facilities are outpatient dialysis facilities certified by
the Center for Medicare and Medicaid Services ("CMS") for payment under the
Medicare program, which program requires each Facility to obtain the services of
a physician or group of physicians to perform prescribed medical director
services for such Facility;

      WHEREAS, the Company desires to engage one or more nephrologists skilled
in dialysis center administration to provide medical director services at the
Facilities in accordance with the requirements established by CMS and as
provided in this Agreement;

      WHEREAS, the Practice desires and is qualified to provide the medical
director services contemplated by this Agreement to the Facilities through one
or more of its Practice Physicians, each of whom will be licensed to Practice
medicine and prescribe drugs without restriction in the State of Texas, will
specialize in nephrology and dialysis services and will be experienced in
dialysis center administration.

      NOW, THEREFORE, in consideration of the premises set forth above and the
mutual covenants and agreements of the parties set forth in this Agreement, the
receipt and sufficiency of which are acknowledged, the parties agree as follows:

                                    ARTICLE I
                             ENGAGEMENT AND SERVICES

      1.1 Engagement. The Company engages the Practice to provide, and the
Practice shall provide, services for the Company as medical director of the
Facilities in accordance with the requirements of applicable CMS regulations
(including, without limitation, 42 C.F.R. Section 405.2100 et seq. and any
successor regulations) and all applicable state regulations, as the same may be
amended or supplemented, together with such other services as are customarily
performed by medical directors at high quality dialysis facilities and such
other tasks related to the oversight of dialysis treatments administered at the
Facilities as the Company may from time to time reasonably designate.

      1.2 Responsibilities. Without limiting the generality of this Article I,
the Practice shall provide the medical director services described in EXHIBIT B,
which may be revised and updated from time to time by the Company, provided that
any change that is not a CMS or other legal requirement must first be approved
by the Practice if it increases the medical director duties hereunder.

      1.3 Principal Contact. The Practice shall from time to time designate in
writing to the Company a Practice Physician to serve as the principal contact at
each Facility and who shall provide or arrange for the provision of the services
required hereunder, and who shall serve as the principal contact for a period of
no less than 12 months. The Practice may change the designation of the principal
contact with the written consent of the Company (such written consent not to be
unreasonably withheld or delayed); provided that the Practice will not change
the principal contact more often than once per 12-month period, unless the
principal contact dies, becomes disabled, leaves the Practice or experiences
other exigent circumstances. The initial principal contact for each Facility is
set forth on Exhibit A.

      1.4 Patient Care Manual.  The Practice shall advise the Company in
developing, maintaining and implementing a patient care policy and procedures
manual for each Facility describing:

          (a) The types of dialysis used in the Facility and the procedures to
be followed in performing each type of dialysis;

          (b) Procedures for implementing universal precautions for the
prevention of disease transmission;

          (c) Procedures for properly handling blood-borne and infectious
pathogens; and

          (d) A disaster readiness plan.

      1.5 Records. The Company and the Practice acknowledge that attending
physicians have medical responsibility for the content of medical records of
each Facility and that the head nurse of each Facility has operational
responsibility for the day-to-day maintenance of such Facility's records. The
Company, through a medical records supervisor designated for the Facility, with
the assistance and support of the Practice, shall oversee the maintenance of
current medical and business records relating to the care and treatment of
patients in the Facilities in accordance with Company policies and applicable
regulations of governmental agencies, including:

          (a) Patient long-term care plans, patient short-term care plans and
medical histories;

          (b) Results of physical examinations and laboratory tests; and

          (c) Progress notes by all patient care staff, and complete and legibly
signed orders and discharge summaries.

      1.6 Documentation. The Practice and Practice Physicians who provide
services hereunder shall maintain, and provide to the Company upon request,
reasonably complete and detailed documentation of the time spent and services
performed in providing medical director services under this Agreement. This
documentation shall be maintained in a form reasonably satisfactory to or
prescribed by the Company.

      1.7 Medical Staff. The Practice shall review the applications of
physicians requesting to attend to patients at each Facility and forward a
recommendation concerning such applications to the body making credentialing
decisions for the Facility under its Professional Staff Bylaws. Subject to each
Facility's Professional Staff Bylaws, the Practice shall maintain oversight of
all disciplinary actions with regard to any matter of such physicians or patient
care personnel as needed to assure the quality of services and conformity to
Company and Facility rules and policies.


                                     - 2 -

      1.8 Coverage. The Practice shall make available one or more Practice
Physicians, as appropriate, to provide medical director services at each
Facility for its hours of operation. The Practice and the Company shall confer
from time to time in good faith concerning the appropriate level of physician
coverage to provide medical director services hereunder.

      1.9 Practice Physicians. (a) The Practice represents and warrants that all
physicians who as of the date of this Agreement meet the definition of a
Practice Physician have executed the Physician Joinder attached hereto. As a
condition to engaging any physician in a manner that causes such physician to
become a Practice Physician, the Practice shall obtain the signature of such
physician on the Physician Joinder in consideration for such engagement the fees
payable to the Practice hereunder.

          (b) For purposes of this Agreement, the term "Practice Physician"
means any physician who is a physician performing services on behalf of the
Practice at any of the Facilities (whether as an employee, partner, member,
shareholder or independent contractor of the Practice), any other physician
performing services on behalf of the Practice hereunder (as may be approved by
the Company), and any other physician in any way affiliated or associated with
the Practice, or regularly seeing patients of the Practice (other than on a
covering or locum tenens basis).

      1.10 No Required Referrals. Notwithstanding any other provision of this
Agreement, each of the Company, the Practice and the Practice Physicians
acknowledges and agrees that neither the Practice nor any Practice Physician is
required to make referrals of patients to the Company or any affiliate of the
Company or to the Facilities. Each of the Practice Physicians is free to
maintain professional staff privileges at any dialysis facility, to refer
patients to any other facility for dialysis or other services, and, subject to
Article VII, otherwise to perform professional medical services at or through
any entity, whether or not it is competing with any Facility, the Company or
with any affiliates of the Company.

      1.11 Supervising Nurse. The Company shall provide a full-time nurse to
manage the provision of patient care in each Facility. The Practice may delegate
to the supervising nurse the responsibility for the execution of patient care
policies on a day-to-day basis, and the principal contact will provide medical
guidance to the supervising nurse in the execution of these duties; provided,
however, that the Practice may only delegate to the supervising nurse duties
covered by this Agreement.

                                   ARTICLE II
                              TERM AND TERMINATION

      2.1 Initial and Renewal Terms. This Agreement is effective as of February
12, 2003, (the "Effective Date") and shall remain in full force and effect until
12:00 p.m. midnight on the seventh anniversary of the Effective Date (the
"Initial Term"), unless earlier terminated as provided in this Article II. This
Agreement shall automatically renew for additional successive terms of three
years each (the "Renewal Terms"), unless either party gives written notice of
non-renewal to the other party not less than 90 days prior to the expiration of
the Initial Term or then-current Renewal Term, as applicable. If such notice is
given, this Agreement shall expire as of the last day of the Initial Term or the
then-current Renewal Term, as applicable.

      2.2 Termination By Agreement.  The Company and the Practice may agree in
writing signed by both parties to terminate this Agreement at a time and date
stipulated in such writing.

                                     - 3 -

      2.3 Termination by the Practice for Cause. (a) The Practice may during the
Initial Term or any Renewal Term terminate this Agreement upon written notice to
the Company in the event of the occurrence of any of the following:

              (i) material breach of any covenant, agreement, term,
representation or warranty of the Company in this Agreement or the failure of
any representation or warranty of the Company in this Agreement to be true and
correct in all material respects when made or deemed made hereunder, which
breach or failure, if susceptible of cure, continues uncured for 30 days after
the Practice gives written notice of such breach or failure of the Company, any
notice of breach or failure will describe such breach or failure with reasonable
particularity;

              (ii) the revocation of the Medicare certification of the Facility
or the exclusion of the Company from participation in the Medicare or Medicaid
program which exclusion or revocation has not been cured, stayed or rescinded
within 90 days;

              (iii) any felony conviction (including a plea of nolo contendere)
of any officer of management-level employee of the Company relating to the
provision of health care services at the Facility;

              (iv)   dishonesty, misappropriation of property, or false or
defamatory disparagement of the Practice or any of its medical staff,
affiliates, representatives or employees;

              (v) the failure of the Company reasonably to consider or
reasonably to act upon a written request by the Practice that the Company
provide equipment, personnel or training for personnel necessary to operate the
Facility in accordance with applicable law and the conditions of participation
in the Medicare program, which failure continues for 30 days after the Practice
gives the Company notice written notice that the Practice intends to terminate
this Agreement under this Section 2.3(a)(v); or

              (vi) the existence of an immediate threat to the health or safety
of any patient receiving treatment at the Facility, which threats results from
any act or omission of the Company or any of its employees (and not from any act
or omission of the Practice).

          (b) Upon the occurrence of any event described in Section 2.3(a)(iii),
or 2.3(a)(iv), the Practice shall not terminate this Agreement, if, within 30
days after the Practice gives the Company written notice of the action or event
giving the Practice the right to terminate this Agreement, the Company agrees
that the individual who is the subject of such cause will not have any further
involvement with the Facilities.

      2.4 Termination by the Company.

          (a) The Company may during the Initial Term or any Renewal Term
terminate this Agreement upon written notice to the Practice in the event of the
occurrence of any of the following with respect to the Practice or any one of
the Practice Physicians:

              (i)  dishonesty, misappropriation of property, disparagement of
the Company, any Facility or Renal Care Group, Inc., the parent company of the
Company ("RCG"), or any of their affiliates, representatives or employees;

              (ii) negligence in the performance of any duty or responsibility
as medical director under this Agreement, which negligence was not occasioned in
whole or in part by any negligence by the

                                     - 4 -

management or employees of the Company, the Facilities or RCG, and which
negligence results in substantial harm to the reputation or ongoing ability to
conduct the business of the Facility or the Company;

              (iii)suspension, revocation or limitation of the licenses or
authorizations required to be maintained by the Practice or the Practice
Physicians;

              (iv) exclusion of the Practice or any Practice Physician from
participation under Medicare, Medicaid or any other federal health benefits
program;

              (v) revocation, suspension, probation, removal or resignation
under investigation of any Practice Physician from membership or privileges on
the medical staff of any Facility or of any other health care facility at which
such Practice Physician has medical staff privileges;

              (vi) the existence of an immediate threat to the health or safety
of any patient receiving treatment at any Facility, which threat results from
any act or omission of the Practice or any Practice Physician;

              (vii) the requirement, or threatened requirement, by any federal
or state agency having jurisdiction over the Company or any Facility that the
Practice or any Practice Physician cease to provide medical director services at
a Facility;

              (viii) commission or conviction, including a plea of nolo
contendere, of any felony or of any crime involving moral turpitude; or

              (ix) material breach of any covenant, agreement, term,
representation or warranty of the Practice or any Practice Physician in this
Agreement or the failure of any representation or warranty of the Practice in
this Agreement to be true and correct in all material respects when made or
deemed made hereunder, which breach or failure, if susceptible of cure,
continues uncured for 30 days after the Company gives written notice of such
breach or failure to the Practice; any notice of breach will describe such
breach with reasonable particularity.

          (b) Upon the occurrence of any event described in paragraph (a) of
this Section 2.4 that is the result of an act or omission of one or more
specific Practice Physicians who do not constitute a majority of the Practice
Physicians then providing services hereunder, the Company shall not terminate
this Agreement if, within 30 days after the Company gives the Practice written
notice of the act or omission giving the Company the right to terminate this
Agreement, the Practice agrees that any Practice Physician who is the subject of
such cause will not provide further services under this Agreement and, if
requested by the Company, that the Practice will use its best efforts to cause
such physician to resign the privileges of such Practice Physician to attend
patients at the Facilities.

          (c) Upon the occurrence of any event described in paragraph (a) of
this Section 2.4, the Company shall have, in addition to the right to terminate
this Agreement, the right to suspend the Practice from providing services under
this Agreement for a period of up to one year. In the event of any such
suspension, this Agreement shall remain in force, except that (i) the Practice
will not be required to perform services required under this Agreement, (ii) the
Company will not be required to pay the compensation contemplated by this
Agreement, and (iii) the term of this Agreement shall not be extended by the
occurrence of such suspension. At any time during or at the end of any such
period of suspension, the Company may elect to terminate this Agreement.


                                     - 5 -

      2.5 Effect of Termination or Expiration. Upon and following the expiration
of this Agreement or its termination for any reason, the Practice shall not
interfere with any efforts by the Company to contract with any other individual
or entity for the provision of medical director services. Expiration or
termination of this Agreement shall not affect any rights or obligations of the
parties accruing hereunder through the date of expiration or termination,
including the Company's obligation to compensate Practice for medical director
services pro-rated through such date, and such rights and obligations shall
survive expiration or termination.

                                   ARTICLE III
                                  COMPENSATION

      3.1 Compensation.

          (a) In consideration of the services, covenants, and agreements agreed
to be performed by the Practice during the Initial Term and any Renewal Term,
the Company shall pay the Practice at the rate of $532,000 per year, payable in
substantially equal monthly installments on or before the 15th day of each month
for services rendered during the preceding month. In addition to the monthly
medical director fee prescribed above, the Practice shall be eligible for an
annual bonus of up to 15% of the base medical director compensation paid during
the year based upon the success of the Facilities in meeting annual clinical
outcomes targets and in achieving performance objectives for the Facilities and
the Practice generally prescribed by RCG for its dialysis facilities in the
region in which the Facilities are located. Such annual bonus (if any) shall be
payable on or before July 1 for the prior year's services. The current criteria
for reviewing and determining the bonus amount are attached hereto as EXHIBIT C.
RCG may change such criteria annually, and the Company will provide the revised
criteria to the Practice when adopted. The Practice agrees to accept the payment
under this subsection (a) (as it may be adjusted as provided below) as the total
compensation for all services, covenants and agreements pursuant to this
Agreement.

          (b) (i) Beginning effective as of the second anniversary of the
Effective Date, if either party believes that the fair market value of the
services provided by the Practice under this Agreement has changed in any
material way since the most recent anniversary of the Effective Date, then such
party may notify the other that it believes such a change has occurred and the
Practice and the Company shall negotiate in good faith an adjustment to the
compensation described in Section 3.1(a) above so that it represents fair market
value for the duties and responsibilities of the Practice to be provided during
the next year under this Agreement. Notwithstanding the foregoing, no adjustment
pursuant to this subsection (b)(i) to the compensation payable under this
Agreement shall be effective unless set forth in writing signed by each of the
Practice and the Company, which writing shall be deemed an amendment to this
Agreement. The parties hereto agree that any additional compensation paid to the
Practice pursuant to this Agreement in connection with additional renal dialysis
facilities developed or acquired by the Company after the Effective Date shall
be no less than $30,000 per facility, per annum.

              (ii) If the Practice and the Company are unable to agree on an
adjustment, then either may require that an adjustment of the compensation
hereunder be submitted to a qualified independent third party mutually selected
by both the Practice and the Company to determine the fair market value of the
services required hereunder, the costs and fees of which shall be borne equally
by the Practice and the Company. If the Practice and the Company are unable to
agree on the third party, then each such party shall at its own cost and expense
select its own qualified independent third party and the average of such two
determinations of fair market value shall be the revised compensation unless
such determinations are more than 10% apart, in which case such third parties
shall mutually select an additional qualified independent third party, the fees
and expenses of which shall be shared equally, who shall determine the fair
market

                                     - 6 -

value of the services hereunder from between the range of the amounts determined
by the first two appraisals. The fair market value of the services as determined
in accordance with the provisions of this subsection (b)(ii) shall be the
compensation payable under this Agreement effective as of the applicable
anniversary of the Effective Date, and such final determination shall be deemed
an amendment to this Agreement.

          (c) Any change to the compensation payable hereunder in accordance
with subsection (b) of this Section 3.1 shall be effective as of the applicable
anniversary of the Effective Date and shall remain effective, and not subject to
adjustment under Section 3.1(b) or otherwise, for at least 12 months from the
effective date of such change.

          (d) In further consideration of the Practice's execution and delivery
of this Agreement and the services, covenants and agreements of the Practice and
the Practice Physicians pursuant to this Agreement, the Company shall pay the
Practice a signing bonus of $600,000 (the "Signing Bonus"). The Signing Bonus
will be payable $100,000 in cash by wire transfer to one or more accounts
designated by the Practice, which wire transfer will be made and upon the
Practice's execution and delivery of this Agreement, and $500,000, plus interest
in the amount of 5% per annum, in substantially equal monthly installments of
$7,066.96, in arrears on or before the 15th of each month during the Initial
Term.

      3.2 Expenses. The Company shall be responsible for all reasonable expenses
incurred in the operation of the Facility and the support of the services
provided by Practice hereunder, including appropriate office space and
secretarial support, and shall reimburse the Practice for all reasonable
out-of-pocket expenses incurred by the Practice in attending meetings outside
the service area of the Facility as required or requested by the Company
pursuant to Article I of this Agreement. The Company and the Practice
acknowledge and agree that attendance by existing medical directors at RCG's
annual medical meeting is not required under this Agreement. The Company will
pay the Practice $1,000 each year to help defray the cost of one or more
Practice Physicians attending RCG's annual medical meeting if one or more
Practice Physicians attend such annual meeting.

                                   ARTICLE IV
                                STATUS OF PARTIES

      4.1 Tax Status. The Company and the Practice acknowledge and agree that
the relationship created under this Agreement between them is that of
independent contractors and that nothing in this Agreement shall be deemed to
render either party the employer or employee of the other, agent or principal of
the other, or joint venturer or partner of the other. The parties acknowledge
and agree that the Practice Physicians will be engaged by the Practice and will
under no circumstances be considered the employee(s) of the Company, RCG or the
Facilities, or any of their affiliates. The Practice shall be responsible for
all withholding, payroll and similar taxes related to its engagement of the
Practice Physicians, and neither the Practice nor the Practice Physicians shall
be entitled to any benefits afforded to the employees of the Company, RCG or the
Facilities, or any of their affiliates. The Practice agrees that (i) neither it
nor any Practice Physician be treated as an employee of the Company for federal
tax purposes; (ii) the Company will not withhold on behalf of the Practice any
sums for income tax, unemployment insurance, social security, or any other
withholding pursuant to any law or requirement of any governmental body; (iii)
all of such taxes, payments and withholdings, if any, are the sole
responsibility of the Practice; and (iv) the Practice will indemnify and hold
the Company and RCG harmless from any and all loss or liability arising with
respect to such benefits, taxes, payments and withholdings, if any. If the
United States Internal Revenue Service ("IRS") should question or challenge the
worker status of the Practice or the Practice Physicians, then the parties agree
that both the Practice and the Company shall have the right to participate in
any discussion or negotiation

                                     - 7 -

occurring with the IRS, irrespective of which party initiated such discussions
or negotiations, and each party shall notify the other in advance of any planned
meeting or discussion.

      4.2 No Agency. The Practice shall not have the right or authority to, and
expressly agrees that it will not, enter into any contract in the name of the
Company or otherwise to bind the Company, in any way, without the express
written consent of the Company. The Practice shall indemnify and hold the
Company harmless from any and all loss or liability attributable to a violation
of this covenant.

      4.3 Access to Records. If it is ultimately determined that Section 952 of
the Omnibus Reconciliation Act of 1980 (42 CFR 420.300 et seq.) applies to this
Agreement, then until the expiration of four years after the furnishing of
services provided under this Agreement, the Practice will make available to the
Secretary of the United States Department of Health and Human Services, the
United States Comptroller General, and their representatives, this Agreement and
all books, documents and records necessary to certify the nature and extent of
the costs of those services. If the Practice carries out the duties of this
Agreement through a subcontract worth $10,000 or more over a twelve-month period
with a related organization, the subcontract will also contain an access clause
to permit access by the Secretary, Comptroller General, and their
representatives to the related organization's books, documents and records.

      4.4 The Company's Work Product. All operating procedures, protocols,
information systems, operating data, databases, reports and other non-public
proprietary business systems or information owned by the Company or RCG shall be
and remain the exclusive property of the Company or RCG, as appropriate. If the
Practice or any Practice Physician modifies, enhances or alters any of such
property such modification, enhancement or alteration will be deemed a
work-for-hire and shall be the property of the Company or RCG, as appropriate.
The Practice or Practice Physician making such modification, enhancement or
alteration will execute all documents reasonably requested by the Company to
vest fully in the Company or RCG title to such modification, enhancement or
alteration.

                                    ARTICLE V
                                    INSURANCE

      5.1 Practice Insurance Coverage. The Practice shall purchase and maintain
at its expense for itself and each of the Practice Physicians professional and
general liability insurance, with an insurance company reasonably acceptable to
the Company, with policy limits of at least $1,000,000 per occurrence and
$3,000,000 in the aggregate for each of the Practice Physicians and policy
limits of at least $200,000 per occurrence and $600,000 in the aggregate for the
Practice, including coverage for acts and omissions in performing services under
this Agreement and in rendering medical services to patients of the Facilities.

      5.2 Company Insurance Coverage. The Company shall procure and maintain
throughout the term of this Agreement professional and general customary
liability insurance (through self-insurance or an insurance carrier) with policy
limits of at least $1,000,000 per occurrence and $3,000,000 in the aggregate.

      5.3 Evidence of Coverage. Upon the execution of this Agreement and
annually thereafter or on reasonable request, the Company and the Practice shall
each provide the other with certificates of insurance or other reasonably
satisfactory evidence of the insurance required to be maintained under Sections
5.1 and 5.2. Each party shall notify the other at least 60 days prior to the
voluntary cancellation or termination of any such coverage and immediately upon
receipt of any notice of involuntary cancellation or termination of any such
coverage.


                                     - 8 -

                                   ARTICLE VI
                     PRACTICE REPRESENTATIONS AND COVENANTS

      6.1 Representations and Covenants. The Practice represents, covenants and
warrants as follows:

          (a) The Practice is, and shall at all times during the term of this
Agreement be, licensed to conduct its business in the State of Texas, and shall
engage as Practice Physicians only physicians who are licensed without
restriction to Practice medicine in Texas and who never have had any such
license in this or any other state limited, withdrawn, suspended, subject to
reprimand, curtailed, placed on probation or revoked;

          (b) The Practice shall engage as Practice Physicians only physicians
who are board eligible or board certified in the specialty of nephrology as
recognized by the American Board of Medical Specialists;

          (c) The Practice shall engage as Practice Physicians only physicians
who are members of the medical staff of a local hospital, who have at least one
year experience or training in the care of patients at an end stage renal
disease treatment facility, and who have been granted privileges to practice at
the Facilities;

          (d) Except as may be approved in writing by the Company, which
approval will not be unreasonably withheld or delayed, the Practice shall engage
as Practice Physicians only physicians who have never been denied membership or
reappointment to membership on the medical staff of any health care facility,
and who have never had medical staff membership or clinical privileges limited,
suspended, curtailed, revoked, placed on probation or withdrawn, and who have
never been subject to reprimand whether voluntarily or as a result of action
(either formal or informal) initiated by any health care facility or its medical
staff;

          (e) The Practice shall require the Practice Physicians to use their
commercially reasonable best efforts and professional skills and judgment in
rendering services under this Agreement;

          (f) The Practice shall require the Practice Physicians to perform
professional services and render care to patients in accordance with, and in a
manner consistent with, appropriate standards and the ethics of the medical
profession and as necessary for the Facilities to maintain compliance with
applicable governmental laws and regulations;

          (g) The Practice shall require the Practice Physicians promptly to
notify the Company of any actual or threatened denial, suspension, revocation or
curtailment of licensure or certification status, medical staff membership or
clinical privileges held by such physician(s) with any state, with any Facility
of the Company, or with any payor or other health care facility;

          (h) The Practice has notified the Company of each action or claim
alleging professional negligence filed or asserted against the Practice or any
Practice Physician within the previous five years and a current status and/or
ultimate resolution of such claim and will promptly notify the Company in
writing of its receipt of any action, claim or lawsuit alleging professional
negligence lodged against the Practice or any Practice Physician individually or
any partnership, professional corporation or association with which any Practice
Physician is affiliated;

          (i) The Practice shall, for itself, and for each Practice Physician,
promptly notify the Company of any sanction, threatened sanction, investigation
or proceeding by any governmental agency or

                                     - 9 -

any entity regarding the participation by the Practice or any Practice Physician
in the Medicare, Medicaid program or any third party payor program in which the
Facilities participate; and

          (j) This Agreement covers all of the services being provided to the
Company by the Practice and the Practice Physicians as medical directors of the
Facilities, and the Practice acknowledges and agrees that the aggregate amount
of services to be provided under this Agreement will not exceed an amount that
is reasonable and necessary for the legitimate medical and business purposes of
this arrangement.

                                   ARTICLE VII
                         CONFIDENTIALITY, NONCOMPETITION
                          AND NONSOLICITATION COVENANT

      7.1 Additional Covenants.

          (a) During the term of this Agreement and for a period of two years
after the termination or expiration of this Agreement, the Practice and each
Practice Physician agrees that it, he or she will not in any manner, directly or
indirectly, by itself, himself or herself or in conjunction with any other
person, (i) conduct any of the activities or perform any of the responsibilities
delineated in Article I and EXHIBIT B ("Services") of this Agreement for any
business entity that is competitive with the business of the Company or (ii)
establish or own any financial, beneficial or other interest in (other than an
interest consisting of less than one percent (1%) of a class of a publicly
traded security), make any loan to or for the benefit of, or render any
managerial, marketing or other business advice, to any entity that is then
conducting activities that are competitive with those of the business of the
Company, in either case within a 25-mile radius around each Facility (the
"Territory"). For purposes of this Article, the "business of the Company" means
owning or operating a renal dialysis center, unit or facility or providing
dialysis supplies or services to any other such center, unit or facility to any
home dialysis program, including the provision of pharmaceuticals or laboratory
services related to renal dialysis, but does not include participating, directly
or indirectly, as a limited partner in RCG East Texas, LLP.

          By executing a counterpart of this Agreement and in consideration of
the compensation paid to the Practice hereunder, each Practice Physician agrees
to be bound by the terms of this Article VII. With respect to the Practice
Physicians, the two year time periods applicable to this Article VII shall begin
on the earlier of (i) the termination or expiration of this Agreement, or (ii)
the termination of the employment, independent contractor or other relationship
or affiliation of the Practice Physician with the Practice, such that such
Practice Physician ceases to fall within the definition of a Practice Physician
hereunder and generally ceases to treat patients of the Practice.

          (b) During the term of this Agreement and for a period of two years
after the termination or expiration of this Agreement, the Practice and each
Practice Physician will use all reasonable efforts to keep confidential and not
to divulge, or allow to be divulged to anyone, or use or otherwise appropriate
for its, his or her own benefit or for the benefit of others, any knowledge or
information of a confidential nature with respect to the business of the
Company, the Company itself, or any of its affiliates, including all trade
secrets, pricing information, marketing information or technical information
(hereinafter referred to as the "Confidential Data"), except for (i) information
that is generally available to the public other than as a result of a breach of
a confidentiality agreement, (ii) information available on a non-confidential
basis from a source other than the Company or its affiliates or agents, which
source itself is not bound by a confidentiality agreement, (iii) information
required to be disclosed by law or pursuant to court order, but only to the
extent such disclosure is necessary to respond to such law or court order, or
(iv) disclosure necessary in order for the Practice to perform its obligations
under this Agreement, but only to the extent

                                     - 10 -

such disclosure is necessary for such performance. Each of the Practice and the
Practice Physician acknowledges and agrees that the prohibitions against
disclosure of Confidential Data recited herein are in addition to, and not in
lieu of, any rights or remedies that the Company may have available pursuant to
the laws of any jurisdiction or at common law to prevent the disclosure of
confidential information or trade secrets, and the enforcement by the Company of
its rights and remedies under to this Agreement shall not be construed as a
waiver of any other rights or available remedies that the Company may possess in
law or equity.

          (c) During the term of this Agreement and for a period of two years
after the termination or expiration of this Agreement, neither the Practice nor
any of the Practice Physicians will, for its, his or her own benefit or the
benefit of others, solicit any person or entity that has or has had, or disrupt
or attempt to disrupt, any relationship, contractual or otherwise, with the
Company (including any payor, physician, provider, managed care organization or
supplier) at any time during the term of this Agreement for the purpose of
assisting or creating such a relationship for any business entity that is
competitive with the business of the Company.

          (d) During the term of this Agreement and for a period of two years
after the termination of this Agreement, no party hereto will hire or attempt to
hire, or induce, or attempt to induce, any employee of another party or any of
its affiliates to terminate his or her association with such other party or any
of its affiliates. If any employee of a party hereto or any of its affiliates
(the "Non-Hiring Party") responds to a general solicitation and seeks employment
with another party or any of its affiliates (the "Hiring Party"), and the Hiring
Party desires to hire such employee, then the Hiring Party shall give notice of
its, his or her desire to hire such employee to the Non-Hiring Party and will
not offer to hire such employee until the earlier of seven days after such
notice is received by the Non-Hiring Party or the date on which the Non-Hiring
Party approves such hiring. If the Hiring Party hires an employee of the
Non-Hiring Party after following the procedures outlined above, the Non-Hiring
Party may request that the employee continue to provide services to the
Non-Hiring Party for up to 30 days to provide for an orderly transition.

          (e) These covenants are considered by the parties hereto to be fair,
reasonable and integral for the protection of the Company. The parties agree
that if a violation of any of these covenants occurs, then (i) such violation
and any threatened violation will cause irreparable injury to the Company, (ii)
the remedy at law for any such violation or threatened violation will be
inadequate, and (iii) the Company will be entitled to injunctive relief to
prevent such violation. The parties acknowledge that these covenants will
survive, and remain in effect and enforceable after, termination of this
Agreement.

          (f) Nothing in this Article VII shall be deemed to prohibit any
Practice Physician from exercising his or her medical judgment concerning the
medical treatment of a patient in any manner whatsoever in any location
whatsoever, and shall not be deemed to require the referral of any such patient
to any facility of the Company or any of its affiliates. The parties acknowledge
and agree that this Agreement shall in no way be deemed to restrict the right or
ability of the Practice and the Practice Physicians to admit and provide
professional service to patients at facilities and institutions other than the
Facilities or other facilities of the Company or RCG, including without
limitation facilities operated by business entities that are competitive with
the business of the Company. The Practice and the Practice Physicians
acknowledge that enforcement of this covenant will not prevent any physician of
the Practice from earning a living by practicing medicine or nephrology.

                                  ARTICLE VIII
                       CONFIDENTIALITY OF PATIENT RECORDS


                                     - 11 -

      8.1 Patient Records. (a) All patient medical records shall be and remain
the sole property of the Company and shall be maintained at the Facilities. The
Practice shall assist the Company in implementing procedures to preserve the
confidentiality of patient medical records and shall cooperate in compiling data
regarding patient treatment costs and outcomes.

          (b) Neither the Practice nor any Practice Physician shall disclose to
any third party, except where permitted or required by law or where such
disclosure is expressly approved by the Company in writing, any patient or
medical record information regarding patients of the Company, and the Practice
and the Practice Physicians shall comply with all federal and state laws and
regulations and with the policies of the Company regarding the confidentiality
of such information. Each party acknowledges that in receiving or otherwise
dealing with any records or information from the other party about a Facility's
patients receiving treatment for alcohol or drug abuse, each party are fully
bound by the provisions of the federal regulations governing Confidentiality of
Alcohol and Drug Abuse Patient Records (42 C.F.R. Part 2, as amended from time
to time).

          (c) The Company, the Practice and the Practice Physicians agree to
comply with the applicable provisions of the Administrative Simplification
section of the Health Insurance Portability and Accountability Act of 1996, as
codified at 42 U.S.C. Section 1320d through d-8 ("HIPAA"), and the requirements
of any regulations promulgated thereunder including without limitation the
federal privacy regulations as contained in 45 CFR Part 164 (the "Federal
Privacy Regulations") and the federal security standards as contained in 45 CFR
Part 142 (the "Federal Security Regulations"). The Company, the Practice and the
Practice Physicians agree not to use or further disclose any protected health
information, as defined in 45 CFR 164.504, or individually identifiable health
information, as defined in 42 U.S.C. Section 1320d (collectively, the "Protected
Health Information"), concerning a patient other than as permitted by this
Agreement and the requirements of HIPAA or regulations promulgated under HIPAA
including without limitation the Federal Privacy Regulations and the Federal
Security Regulations. The Practice and the Practice Physicians will assist the
Company in implementing appropriate safeguards to prevent the use or disclosure
of a patient's Protected Health Information other than as provided for by this
Agreement, and the Practice and the Practice Physicians will abide by the
policies and procedures adopted by the Company with respect to the Protected
Health Information of the Facility's patients. Each of the Practice Physicians
and the Practice will promptly report to the other any use or disclosure of a
Company patient's Protected Health Information not provided for by this
Agreement or in violation of HIPAA, the Federal Privacy Regulations, or the
Federal Security Regulations of which the Practice or the Practice Physician
becomes aware. In the event the Practice or any Practice Physician, with the
Company's approval, contracts with any agents to whom the Company provides a
patient's Protected Health Information, the Practice or the Practice Physician
shall include provisions in such agreements whereby the Practice or the Practice
Physician and such agent agree to the same restrictions and conditions that
apply to the Practice and the Practice Physicians with respect to such patient's
Protected Health Information. The Practice and the Practice Physicians will make
their internal practices, books, and records relating to the use and disclosure
of a patient's Protected Health Information available to the Secretary of Health
and Human Services to the extent required for determining compliance with the
Federal Privacy Regulations and the Federal Security Regulations.
Notwithstanding the foregoing, no attorney-client, accountant-client, or other
legal privilege shall be deemed waived by the Company, RCG, the Practice or any
Practice Physician by virtue of this subsection.

          (d) The provisions of this Section 8.1 shall survive expiration or
other termination of this Agreement, regardless of the cause of such
termination.


                                     - 12 -

                                   ARTICLE IX
                                  MISCELLANEOUS

      9.1 Notices.  Any notice sent in accordance with the provisions of this
Section 9.1 shall be deemed to have been received (even if delivery is refused
or unclaimed) on the date that is:  (i) the date of proper posting, if sent by
certified U.S. mail or by express U.S. mail or private overnight courier, or
(ii) the date on which sent, if sent by facsimile transmission, with
confirmation and with the original sent by certified U.S. mail, addressed as
follows:

      Practice:               Tyler Nephrology Associates, P.A.
                              1133 Medical Drive
                              Tyler, Texas 75701
                              Telecopy Number:  (903) 595-0206


      Company:                Renal Care Group Texas, Inc.
                              c/o Renal Care Group, Inc.
                              2525 West End, Suite 6800
                              Nashville, Tennessee 37203
                              Telecopy Number: (615) 345-5503
                              Attn:  Chief Financial Officer
                                and General Counsel

      Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 9.1.

      9.2 Amendments. Subject to Section 9.4, this Agreement may be amended at
any time by mutual agreement of the Practice and the Company hereto, but any
such amendment shall not be operative or valid unless the same is reduced to
writing and approved by the parties hereto.

      9.3 Assignability. This Agreement shall not be assignable by the Practice,
and the Practice shall not assign any of its rights or obligations under this
Agreement without the written consent of the Company. This Agreement shall not
be assignable by the Company, and the Company shall not assign any of its rights
or obligations under this Agreement without the written consent of the Practice;
provided that, without the consent of Practice, the Company may assign or
transfer this Agreement to an affiliate of the Company or RCG or in connection
with a sale of the Facilities or all or substantially all of the assets or
business of the Company.

      9.4 Contract Modifications; Severability.

          (a) This Agreement shall be construed to the fullest extent possible
to be in compliance with and permitted by all Federal (including Medicare and
Medicaid) and state statutes, rules and regulations. If a Triggering Event (as
defined below) occurs, either the Company or the Practice may by written notice
to the other propose an amendment to this Agreement as necessary to comply with
the item giving rise to the Triggering Event. To the fullest extent possible,
any such amendment shall preserve the responsibilities and duties of the parties
and the underlying economic and financial arrangements between the Company and
the Practice with the least changes to the parties' expectations hereunder. If
the Practice and the Company fail to agree to the form of an amendment within 60
days after the date of such notice, then either of such party may submit the
matter to arbitration as provided in Section 9.9, and any arbitration award
shall comply with

                                     - 13 -

the second sentence of this Section; provided that if any resulting change to
this Agreement includes a change to the compensation under Section 3.1(a), then
the amount of compensation shall be determined under the procedures in Section
3.1(b). For purposes of this Section 9.4, "Triggering Event" means the
effectiveness of any statute, rule, regulation, order, decree or regulatory
interpretation (i) prohibiting the Practice or any of the Practice Physicians
from referring patients (whether Medicare, Medicaid or otherwise) for renal
dialysis either directly or indirectly to the Facilities; (ii) prohibiting the
Company, the Practice or any Practice Physician from submitting claims or
receiving payment under the Medicare, Medicaid or any other third party payment
programs for services rendered to patients receiving care at the Facilities;
(iii) determining that the amount or method for determining compensation paid to
the Practice hereunder does not reflect fair market value for the services
provided by the Practice under this Agreement without taking into account the
volume or value of referrals made by the Practice Physicians; or (iv) otherwise
rendering illegal the relationship hereunder between the Company, the Practice
and the Practice Physicians.

          (b) Subject to the provisions of subsection (a) of this Section 9.4,
if any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws in effect during the term of this
Agreement, the legality, validity or enforceability of the remaining provisions
of this Agreement shall not be affected thereby.

      9.5 Headings. The headings of this Agreement are inserted for convenience
only and are not to be considered in construction of its provisions.

      9.6 Entire Agreement. This Agreement constitutes the full contract and
agreement of the parties with respect to its subject matter, superseding all
prior or contemporaneous agreements, either oral or written.

      9.7 Construction of the Agreement and Binding Effect. Notwithstanding the
place where this Agreement may be executed by any of the parties hereto, the
parties expressly agree that all terms and conditions of this Agreement shall be
construed under and governed by the laws of the State of Texas. Venue of any
dispute regarding this Agreement (including any mediation or arbitration) shall
be in Smith County, Texas.

      9.8 Non-Waiver. The failure of either party to exercise any of its rights
under this Agreement for a breach thereof shall not be deemed to be a waiver of
such rights or a waiver of any subsequent breach.

      9.9 Disputes. (a) The parties agree that any dispute arising in connection
with, or relating to, this Agreement or the termination of this Agreement (other
than a dispute related to Sections 3.1(b) or 9.4) shall be subject to resolution
through informal methods. If the parties are unable to resolve such dispute
after thirty days of efforts, then such dispute shall be submitted to mediation
with a singe mediator selected by the parties or, failing the parties' agreement
on a mediator, selected by the American Health Lawyers Association Alternative
Dispute Resolution Service (the "AHLA-ADRS"). The mediation shall be conducted
in accordance with the AHLA-ADRS Rules of Procedure for Mediation. If the
parties are unable to resolve the dispute through mediation, they shall retain
all rights and remedied at applicable law, subject to paragraph (b) below.

          (b) Following the procedures outlined in paragraph (a) above, the
parties agree that any dispute arising in connection with, or relating to, this
Agreement or the termination of this Agreement (other than a dispute related to
Section 3.1(b) and, unless the Company so agrees, a dispute under Article VII),
to the maximum extent allowed by applicable law, shall be subject to arbitration
in accordance with the terms of the AHLA-ADRS Rules of Procedure for Arbitration
(the "ADR Procedures"). A single arbitrator shall be

                                     - 14 -

chosen mutually by the parties pursuant to the ADR Procedures. Notwithstanding
the foregoing, any party hereto may seek all available preliminary injunctive or
other temporary relief pending the issuance of an arbitration award. The award
of the arbitrator shall contain findings of fact and conclusions of law and
shall be binding and conclusive upon the parties.

      9.10 Third Party Beneficiaries. The Practice and the Practice Physicians
agree that RCG and its affiliates are express and intended third party
beneficiaries of this Agreement.

      9.11 Right of First Refusal to Provide Medical Director Services. If the
Company or any affiliate of the Company seeks to establish any de novo or
satellite dialysis facility within the Territory (as defined in Section 7.1),
then the Practice shall have a right of first refusal, but not the obligation,
to provide medical director services to any such facility. The terms and
provisions governing the provision of such services shall be substantially the
same as the terms and provisions of this Agreement, provided that the
compensation for such additional services shall not be less than $30,000 per
facility. The Company will notify the Practice in writing at least 120 days
prior to opening a de novo or satellite facility. Such notice will specify the
medical director fee proposed for such facility. If the Practice declines such
offer or fails to respond to such offer within the applicable 120-day period,
then the Company will be free to engage another physician or practice to provide
such medical director services on substantially the same terms and conditions as
offered by the Company to the Practice.




                                     - 15 -


         IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written to be effective as provided hereinabove.

                             Company:
                             -------

                             RENAL CARE GROUP TEXAS, INC.


                             By:      /s/ Robert K. Stillwell
                                ----------------------------------------
                             Title:   Senior Vice President
                                ----------------------------------------


                             Practice:
                             --------

                             TYLER NEPHROLOGY ASSOCIATES, P.A.


                             By:  /s/ James R. Cotton, Jr., M.D.
                                ----------------------------------------
                             Title: James R. Cotton, Jr., M.D., President
                                ----------------------------------------

                                PHYSICIAN JOINDER

         Each Practice Physician executing below acknowledges that he or she has
read and understood the terms of the Medical Director Services Agreement,
effective February 12, 2003, to which this Physician Joinder is attached and as
same may be amended or revised as provided therein (the "Agreement"). By signing
this Physician Joinder, each Practice Physician agrees in his or her individual
capacity, to (i) the nature and scope of medical director duties set forth in
Article I of the Agreement, including as described in detail on Exhibit B, (ii)
the restrictive covenants contained in Article VII of the Agreement, and (iii)
the third party beneficiary designated in Section 8.10 of this Agreement, in
each case as may be amended by agreement of the Practice.

                               /s/ Nabeel K. Ahmed, M.D.                  (seal)
                               -------------------------------------------------
                               Name:    Nabeel K. Ahmed, M.D.
                                    --------------------------------------------


                               /s/ James R. Cotton, Jr.,, M.D.            (seal)
                               -------------------------------------------------
                               Name:    James R. Cotton, Jr.,, M.D.
                                    --------------------------------------------


                               /s/ Stefanie M. Diaz, M.D.                 (seal)
                               -------------------------------------------------
                               Name:    Stefanie M. Diaz, M.D.
                                    --------------------------------------------


                               /s/ Robert C. Dobrowolski, M.D.            (seal)
                               -------------------------------------------------
                               Name:    Robert C. Dobrowolski, M.D.
                                    --------------------------------------------


                               /s/ Roy G. Gerard, Jr., M.D.               (seal)
                               -------------------------------------------------
                               Name:    Roy G. Gerard, Jr., M.D.
                                    --------------------------------------------


                               /s/ Alpesh R. Jethva, M.D.                 (seal)
                               -------------------------------------------------
                               Name:    Alpesh R. Jethva, M.D.
                                    --------------------------------------------


                               /s/ Thomas A. Lowery, M.D.                 (seal)
                               -------------------------------------------------
                               Name:    Thomas A. Lowery, M.D.
                                    --------------------------------------------

                                    EXHIBIT A

                                   FACILITIES



                                                            Initial Principal Contact
                                                            -------------------------
                                                         
Athens Dialysis Center
425 S. Carroll, Suite 104                                   --------------------------
Athens, Texas 75751

Carthage Dialysis Center
1614 South Market Street                                    --------------------------
Carthage, Texas 75633

Jacksonville Dialysis Center
908 East Loop 456, Suite 1                                  --------------------------
Jacksonville, Texas 75766

Mineola Dialysis Center
102 Maxine Drive                                            --------------------------
Mineola, Texas 75773

Mt. Pleasant Dialysis Center
628 South Jefferson Avenue                                  --------------------------
Mount Pleasant, Texas 75455

Palestine Dialysis Center
2041 Crockett Road                                          --------------------------
Palestine, Texas 75801

Tyler Dialysis - Watson Wise (and Home Dialysis)
815 East 1st Street                                         --------------------------
Tyler, Texas 75701

West Tyler Dialysis Center
3600 West Erwin Street                                      --------------------------
Tyler, Texas 75702


                                    EXHIBIT B

                                MEDICAL DIRECTOR
                           DUTIES AND RESPONSIBILITIES

Qualifications: THE MEDICAL DIRECTOR SHALL BE A PHYSICIAN PRACTICING NEPHROLOGY
LICENSED IN THE STATE WHERE THE FACILITY IS LOCATED, WHO MEETS THE ESRD
"QUALIFIED PHYSICIAN DIRECTOR" CRITERIA AS WELL AS THE REQUIREMENTS FOR STAFF
MEMBERSHIP AS DEFINED BY THE APPLICABLE PROFESSIONAL STAFF BYLAWS.

DUTIES AND RESPONSIBILITIES: As required by Title 42 of the Federal Code of
Federal Regulations (C.F.R.), the Medical Director has responsibility for the
quality of professional care delivered to the patients at the Facility. He
exercises that responsibility through directing the professional services of the
Facility and conscientiously applying its policies and procedures.

The Medical Director is an independent contractor, responsible to the Chief
Medical Officer of Renal Care Group. Specific responsibilities of the Medical
Director include administrative, medical and technical services as outlined
below. The position is separate and distinct from that of the attending
Nephrologist.

EVALUATION: The Medical Director's duties and responsibilities are tracked
monthly and reported annually for each Medical Director by the Chief Medical
Officer. Section 4 of the Medical Director Handbook describes the evaluation
process and scoring system. The components of the duties are listed below:

Administrative

A.       The Medical Director will provide advice and assistance to the Facility
         in the implementation and maintenance of written policies and
         guidelines including:

         1.       Patient care delivery policy and procedures manual.

         2.       Communicable disease control within the unit.

         3.       The RCG Professional Staff Bylaws.

         4.       Maintenance of patient medical records.

         5.       Patient and staff education programs.

         6.       Physical environment, fire and safety, and emergency
                  preparedness of the dialysis facility.

         7.       Responsibilities and functions of each category of personnel
                  employed by the facility.

         Such policies and guidelines will be developed by Company personnel,
         including the Facility's head nurse or manager and the area
         administrator, and the policies and guidelines will be subject to the
         review and comment of the Medical Director. The Company will, with the
         advice and assistance of the Medical Director, oversee the
         implementation and maintenance of such policies and procedures and the
         training of personnel in the same, and the Medical Director will
         provide advice in such training as needed to the Company. Training for
         nurses and dialysis technicians will be provided by the Company through
         an instructor qualified under 25 TAC Section 117.62(g)(2).

B.       The Medical Director will actively participate in Facility Quality
         Improvement Programs (CQI), as well as participate in multidisciplinary
         quality assurance programs that monitor the performance of the
         Facilities' written policies.

C.       The Medical Director will participate and communicate as needed with
         the RCG Medical Office and the regional Executive Board (or its
         representative) in pursuit of the common goal of delivering the

         optimal patient care. Pursuit of this goal requires implementation of
         mandated directives by the Medical Advisory Board (MAB) and earnest
         consideration of its recommendations.

D.       The Medical Director will review on a timely basis the RCG Quality
         Indicator and patient satisfaction data for the facility with the
         manager of the facility and will consult with attending nephrologists
         regarding achievement of Quality Indicator targets.

E.       The Medical Director will assure that the Facility and all attending
         physicians comply with applicable ESRD Network, State, Federal and RCG
         mandates.

F.       The Medical Director will review incident reports, patient complaints
         and any disciplinary action of medical staff or patient care personnel
         in a timely fashion.

G.       The Medical Director will serve as Facility liaison with affiliated
         medical institutions for services such as renal transplantation,
         hospitalization, and emergency medical services.

H.       The Medical Director will participate in the Facility survey process by
         Federal, State, and private groups approved by RCG and will then
         communicate to the Facility's Governing Body and the Executive Board
         the results of such surveys.

I.       The Medical Director will collaborate with RCG's Chief Medical Officer
         (CMO) and the MAB in obtaining data from regulatory agencies and other
         sources as part of RCG's strategy to work continuously to improve
         patient care.

J.       The Medical Director will make best efforts to participate in national
         RCG Medical Director educational symposiums, as well as attend the
         quarterly Quality conference calls.

K.       The Medical Director will collaborate with the laboratory to implement
         ESRD Network, State, Federal and RCG mandates.

L.       The Medical Director will document the performance of all such duties
         with a written log detailing duties performed and provide documentation
         of these duties on a monthly basis to the RCG Medical Office or its
         designee (Administrative checklist).

Medical

A.       The Medical Director will be a member of the renal health care team to
         ensure quality of care, including the establishment and implementation
         of policies regarding patient care. Among these quality of care
         criteria are:

         -        The suitability of patients admitted to the outpatient
                  dialysis Facility.

         -        Implementation of existing RCG patient care policies and
                  procedures.

         -        The appropriateness of dialysis prescriptions in the Facility,
                  particularly for all new patients.

         -        Administration of dialysis related medications as listed on
                  the Facility Drug Inventory. - Administration of recommended
                  vaccines for ESRD patients and staff.

B.       The Medical Director will serve on the professional team in the
         development of both short and long-term patient care plansand will
         participate in the selection of the most appropriate ESRD modality for
         the patients of the Facility.

C.       The Medical Director will advise the Company regarding the
         implementation of written policies outlining the patient's options for
         various treatment modalities, including in-center hemodialysis, home
         hemodialysis, peritoneal dialysis, and transplantation.

D.       When self-dialysis training or home dialysis training is offered, the
         Medical Director will advise the Company in developing and implementing
         a program that assures that patient teaching materials are available
         for use of all trainees during training and at times other than during
         the dialysis procedure.

E.       The Medical Director will work to assure that the ESRD patient has
         appropriate consultation with a renal dietician, social worker,
         financial counselor and other individuals as needed.

F.       The Medical Director will oversee the appropriate performance of the
         dialysis orders and day-to-day patient care policy by the nursing and
         technical staff.

G.       The Medical Director will use reasonable efforts to encourage attending
         physicians to comply with the facility's policies on patient care.

H.       The Medical Director will review patient satisfaction surveys and
         clinical outcomes data and will consult with attending physicians and
         staff as appropriate to implement appropriate action to address issues
         identified and to improve patient care at the Facility.

Technical

A.       The Medical Director will participate in the selection of
         cost-effective treatment modalities and dialysis supplies to be offered
         by the Facility and advise attending physicians regarding the
         compatibility of their dialysis prescriptions with the options
         available at the Facility.

B.       The Company will provide to the Medical Director, and the Medical
         Directo will review and approve, policies and procedures designed to
         ensure the adequate training of nurses and technicians in dialysis
         science and techniques.

C.       The Medical Director will provide continuous availability for medical
         and technical questions to the patient care staff, including coverage
         when unavailable.

D.       The Medical Director will advise the Company regarding the
         implementation of a dialysis water standards policy including
         monitoring and enforcement.

E.       The Medical Director will advise the Company regarding the
         implementation of a policy regarding dialyzer reuse including
         monitoring and quality improvement.

F.       The Medical Director will advise the Company regarding the
         implementation of a policy on the administration of intradialytic
         medications.

                                    EXHIBIT C

                       MEDICAL DIRECTOR PERFORMANCE REVIEW

         The annual evaluation of the RCG Facility and Medical Director is
essential to the mission, "to improve the quality of life and to care for those
patients with chronic and acute renal disease." To achieve this mission, all
associates of the Facility must function collaboratively at the highest possible
level, under the leadership of the Medical Director. The Facility/Medical
Director evaluation is conducted annually by the Chief Medical Officer, to whom
the Medical Director is primarily responsible. This evaluation process must be
understood by Medical Directors, since it is an important component of the RCG
policy of continuous quality improvement.

         The Interpretive Guidelines for ESRD Facilities states "Treatment is
under the general supervision of a Director who is a physician. The Medical
Director is responsible for planning, organizing, conducting and directing the
professional ESRD services and must devote sufficient time to carrying out these
responsibilities." The Nephrologist has the medical skills and must develop
leadership and collaborative management skills to fulfill this mandate as
Medical Director. Teamwork and collegiality are highly valued as the leader of
the ESRD team.

         The Practice shall be eligible for an annual bonus of up to 15% of the
base medical director compensation paid during the year based upon the success
of the Facilities in meeting annual clinical outcomes targets and in achieving
performance objectives for the Facilities and the Practice generally prescribed
by RCG for its dialysis facilities in the region in which the Facilities are
located. Each year the base compensation paid to the practice is allocated
between the Facilities as agreed upon by RCG and the Practice. Then, each
Facility is placed in a quartile based on its evaluation. If a Facility is in
the top quartile, then 100% of 15% of the base compensation allocated to that
Facility is paid to the Practice. If a Facility is in the second quartile, then
66.67% of 15% of the base compensation allocated to that Facility is paid to the
Practice. If a Facility is in the third quartile, then 33.33% of 15% of the base
compensation allocated to that Facility is paid to the Practice. If a Facility
is in the fourth quartile, then nothing is paid to the Practice for that
Facility.

         The evaluation is based on an annually updated point system, authorized
and reviewed by the RCG Medical Advisory Board (MAB). The elements measured and
their weight are as follows:

         -        50 % based on Clinical Indicators of the Facility. The
                  Clinical Indicators are measured monthly and reported
                  quarterly. Measurement is based on the RCG one year rolling
                  average. Tracking the Clinical Indicators and observing trends
                  provides opportunities for quality improvement using the CQI
                  process. The market or regional Quality Management Committee
                  is charged with reviewing the outcomes and performance of each
                  Facility and is available as a resource to the Medical
                  Director.

                  The point system has been weighted to encourage reduction of
                  temporary catheters and placement of AV fistulas. Vascular
                  access is the indicator most influenced by the concerted
                  effort of the Medical Director. The literature shows both
                  mortality and morbidity are reduced with early permanent
                  access placement. Reduction of mortality is the most important
                  outcome, but can only occur with improvement in all care
                  processes that impact patient outcomes (such as URR,
                  nutrition, anemia, etc.).

         -        30 % based on Medical Director administrative duties. Section
                  5 and 6 of this Handbook describe the administrative duties in
                  greater detail. Guidelines have been prepared for the Medical
                  Directors of both Hemodialysis and Home Therapy Facilities. At
                  the back of each section is a grid, which is designed to
                  assist the Medical Director and the Manager of each Facility
                  in the documentation of the performance of these duties. On a
                  monthly basis, the required tasks should be completed and both
                  the Medical Director and the Manager of each Facility should
                  initial the completion at the bottom of the grid. At a
                  minimum, this will document the compliance of the Medical
                  Director with regulatory requirements by Medicare.

                  The CQI process is a vital part of the quality improvement
                  process of the Facility and the Medical Director is expected
                  to participate in this process. Three levels of participation
                  are provided for but a High level of participation is expected
                  as Medical Directors become knowledgeable and proficient with
                  the CQI process. The Chief Medical Officer (CMO) and his staff
                  are available as resources.

         -        20 % based on patient satisfaction with the Facility. The
                  Patient Satisfaction Survey will be conducted in the spring of
                  each year and the results made available to the Facility and
                  Medical Directors. The Medical Director, as the clinical
                  leader, and the Manager of each Facility, are held responsible
                  for the performance of the staff of the Facility. Although not
                  directly under the control of the Medical Director, he/she is
                  expected to be a positive influence on the staff and their
                  performance in the Facility.

         Completion of the duties should be documented in some manner, in
addition to a check mark on the grid sheet, further described in Section 5.
Common tools of documentation include minutes from meetings, a personal Medical
Director notebook, or dictated notes kept in the Facility. The Manager of each
Facility (or an RCG designee) must concur that the line item on the check list
was completed and initial the monthly grid sheet with the Medical Director. This
indicates that the line item was completed to the satisfaction of both parties.
The grid sheet and related documentation is the property of the Medical
Director. A copy of the grid sheet should be forwarded monthly to the office of
the Associate Medical Officer for monitoring purposes and for use in the annual
Medical Director evaluation. The Medical Director will be held accountable for
meeting facility outcome criteria. Failure to improve outcomes, as measured by
the annual Medical Director evaluation, especially when in the 4th Quartile of
performance, will result in a request for a written explanation to the Chief
Medical Officer.

Clinical Performance Measures (50 %)
- -----------------------------

Hemodialysis Medical Director

(evaluation based on annual rolling average of prior year)

                                                       
         -  URR (% of patients with URRs >=70%)            >80% = 10 points
            RCG average 72.9 %                              75-80% = 8 points
            Best Region   80.7 %                            70-74.9% = 6 points
                                                            65-69.9% = 4 points
                                                           <65% = 0 points

         -  Hematocrit   (% of Hcts >=33%)                >85% =10 points
            RCG average 74.6 %                             80-85% = 8 points
            Best Region   78.4%                            75-79.9% = 6 points
                                                           70-74.9% = 4 points
                                                           65-69.9% = 2 points
                                                          <65%= 0 points



         -  Hospitalization (91+ days, based on days per patient year at risk)

                                                       
            RCG average 12.1 days                         <10 days = 8 points
            Best Region 9.4 days                           10-14.9 days = 6 points
                                                           15-20 days = 2 points
                                                          >20 days    = 0 points



         -  Mortality (91+ days, based on deaths per 100 patient years at risk)

                                                       
            RCG average 22.1                              <20 = 8 points
            Best Region 17.5                               20-23.9 = 6 points
                                                           24-29.9 = 4 points
                                                           30-35 = 2 points
                                                          >35    = 0 points



                                                       
         -  No Shows (per patient/year)
            RCG average 1.8                               <1.0 = 10 points
            Best Region   0.8                              1.1-1.5 = 8 points
                                                           1.6-2.0 = 6 points
                                                           2.1-2.5 = 4 points
                                                          >2.5   = 0 points



                                                       
         -  Vascular Access:
            -  % of  temporary catheters                  <10% = 8 points
               RCG average 25.5 %                          10-14.9% = 6 points
               Best Region   17.4%                         15-19.9% = 4 points
                                                           20-25% = 2 points
                                                          >25%    = 0 points



                                                       
         -  % native AV fistulas                          >43   = 8 points
            RCG average 29.8 %                             38-42.9% = 6 points
            Best Region   42.9%                            33-37.9% = 4 points
                                                           28-32.9% = 2 points
                                                          <28%      = 0 points

         -  PTFE clotting events/patient year             <0.3= 10 points
            RCG average 0.8                                0.3 - 0.59= 8 points
            Best region 0.4                                0.6 - 0.99= 6 points
                                                           1.0 - 1.2= 4 points
                                                          >1.2= 0 points



Peritoneal Dialysis Medical Director
(valuation based on annual rolling average of prior year)

                                                       
         -  KT/V  (>=2.1)
            RCG average 76.8 % CAPD
            RCG average 88.1 % CCPD                       >78 = 15 points
                                                           63-78% = 12 points
                                                           68-62.9% = 10 points
                                                           63-67.9% =  8 points
                                                           58-62.9% =  5 points



         -  Creatinine Clearance (>=60L CAPD or >=60 L CCPD)
                                                       
            RCG average 81.2 % CAPD                       >75 = 15 points
            RCG average 75.2 % CCPD                        70-75% = 12 points
            Weighted average 78.2%                         65-69.9% = 10 points
                                                           60-64.9% =   8 points
                                                           55-59.9% =   5 points

         -  Hematocrit   (% of Hcts >=33%)                >85% =10 points
            RCG average 74.6 %                             80-85% = 8 points
            Best Region 78.4%                              75-79.9% = 6 points
                                                           70-74.9% = 4 points
                                                           65-69.9% = 2 points
                                                          <65%= 0 points



         -  Hospitalization (91+ days, based on days per patient year at risk)
                                                       
            RCG average 12.1 days                         <10 days = 8 points
            Best Region 9.4 days                           10-14.9 days = 6 points
                                                           15-20 days = 2 points
                                                          >20 days    = 0 points



         -  Mortality (91+ days, based on deaths per 100 patient years at risk)
                                                       
            RCG average 20.7                              <20 = 8 points
            Best Region 15.5                               20-24.9 = 6 points
                                                           24-29.9 = 4 points
                                                           30-35   = 2 points

                                                          >35      = 0 points



         -  Peritonitis (new cases only)
            RCG average 22.6 months between cases
            Best Region 36.9 months between cases

                                                       
           >32 months between cases                        10 points
            28-32 months between cases                     8 points
            22-27.9 months between cases                   6 points
            17-21.9 months between cases                   4 points
           <17 months between cases                        0 points



         -  Peritonitis (relapse cases only)
            RCG average 11.2 % of peritonitis cases due to relapse
            Best Region 7.4% of peritonitis cases due to relapse

                                                       
           <7 % of cases                                   10 points
            7.0 to 9.9 % of cases                           8 points
            10 to 12 % of cases                             6 points
            12 to 15% of cases                              4 points
           >15% of cases                                    0 points



Combination Hemodialysis & Peritoneal Medical Director

For those physicians who oversee both modalities, each is evaluated using the
above criteria. The overall Clinical Quality is then a composite of these,
weighted to reflect the numbers of patients in each modality.

MEDICAL DIRECTOR ADMINISTRATIVE TASKS (30 %)

The completion of administrative tasks must be documented by the Medical
Director on a monthly basis. It is important that both the Manager of each
Facility and the Medical Director document completion of the required tasks.
Other Medical Director functions including such things as meeting with surgeons
regarding access, goals, attendance at medical meetings and literature review
regarding ESRD issues, etc, should also be noted in this record as well, since
this contributes to a high quality Facility.

Participation in monthly review:

         -        Review staffing & training issues impacting patient outcomes
                  with Manager

         -        Review water quality

         -        Review dialyzer reuse at the Facility

         -        Review monthly lab of patients below quality goals & develop
                  plan

         -        Review trend in hospitalizations, infections

         -        Review temporary catheter usage & trend

         -        Review patient incident reports & trends

         -        Monitor staff physician patient rounding process

         -        Adequacy of staff physician medical documentation

Participation in CQI process:

         -        The CQI process should be a routine process in the Facility
                  striving to improve its outcomes. As physicians learn this
                  process, Medical Directors are expected to participate at
                  higher levels. In the meantime, Low, Medium and High
                  participation levels may be chosen on the Performance grid,
                  depending on the physician's comfort with the process.

Participation in Professional Staff process:

         -        Participate in the Quarterly Quality conference calls, which
                  have physician CME available.

Annual checklist:

         -        Review and approve Facility Policy and Procedures and make
                  necessary modifications; review and approve clinical
                  protocols. - Review patient satisfaction data annually and in
                  concert with the Manager of the Facility make recommendations
                  for improvement.

         -        Participate with the Manager in the Budget process for the
                  Facility - Participate in Facilities' surveys by regulatory
                  agencies.

Patient Satisfaction Surveys (PSS) (20 %)

The Satisfaction Survey will be conducted in the spring of each year and results
forwarded to each Facility for review and discussion regarding potential areas
of improvement.

                                                                
         Nurse:

                                RCG average In-Center 3.43

                                         PSS >3.5                     = 4 points
                                         PSS >= 3.25 and < 3.5        = 3 points
                                         PSS >=3.0 and < 3.25         = 2 points
                                         PSS >  2.5 and < 3.0         = 1 points
                                         PSS <  2.5                   = 0 points

                                RCG average Home 3.77
                                         PSS > 3.5                    = 4 points
                                         PSS >= 3.25 and < 3.5        = 3 points
                                         PSS >=3.0 and < 3.25         = 2 points
                                         PSS >  2.5 and < 3.0         = 1 points
                                         PSS <  2.5                   = 0 points

         PCT/Home Services:

                                RCG average In-Center 3.42

                                         PSS >3.5                     = 4 points
                                         PSS >= 3.25 and < 3.5        = 3 points
                                         PSS >=3.0 and < 3.25         = 2 points
                                         PSS >  2.5 and < 3.0         = 1 points
                                         PSS <  2.5                   = 0 points



                                                                
                                RCG average Home 3.67
                                         PSS >3.5                     = 4 points
                                         PSS >= 3.25 and < 3.5        = 3 points
                                         PSS >=3.0 and < 3.25         = 2 points
                                         PSS >  2.5 and < 3.0         = 1 points
                                         PSS <  2.5                   = 0 points

         Physician:

                                RCG average In-Center 3.27

                                         PSS > 3.5                    = 8 points
                                         PSS >= 3.25 and < 3.5        = 6 points
                                         PSS >=3.0 and < 3.25         = 4 points
                                         PSS >  2.5 and < 3.0         = 2 points
                                         PSS <  2.5                   = 0 points

                                RCG average Home 3.67
                                         PSS > 3.5                    = 8 points
                                         PSS >= 3.25 and < 3.5        = 6 points
                                         PSS >=3.0 and < 3.25         = 4 points
                                         PSS >  2.5 and < 3.0         = 2 points

         Dietitian:

                                RCG average In-Center 3.27

                                         PSS > 3.5                    = 4 points
                                         PSS >= 3.25 and < 3.5        = 3 points
                                         PSS >=3.0 and < 3.25         = 2 points
                                         PSS >  2.5 and < 3.0         = 1 points

                                RCG average Home 3.67
                                         PSS > 3.5                    = 4 points
                                         PSS >= 3.25 and < 3.5        = 3 points
                                         PSS >=3.0 and < 3.25         = 2 points
                                         PSS >  2.5 and < 3.0         = 1 points

         Social Worker:

                                RCG average In-Center 3.40

                                         PSS > 3.5                    = 4 points
                                         PSS >= 3.25 and < 3.5        = 3 points
                                         PSS >=3.0 and < 3.25         = 2 points
                                         PSS >  2.5 and < 3.0         = 1 points

                                RCG average Home 3.51
                                         PSS > 3.5                    = 4 points
                                         PSS >= 3.25 and < 3.5        = 3 points
                                         PSS >=3.0 and < 3.25         = 2 points
                                         PSS >  2.5 and < 3.0         = 1 points



                                                                
         Facility:

                                RCG average: In-Center 3.24
                                         PSS > 3.5                    = 4 points
                                         PSS >= 3.25 and < 3.5        = 3 points
                                         PSS >=3.0 and < 3.25         = 2 points
                                         PSS >  2.5 and < 3.0         = 1 points

                                RCG average Home 3.58
                                         PSS > 3.5                    = 4 points
                                         PSS >= 3.25 and < 3.5        = 3 points
                                         PSS >=3.0 and < 3.25         = 2 points
                                         PSS >  2.5 and < 3.0         = 1 points

EX-10.44

                                                                   EXHIBIT 10.44

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made and entered into effective as of the 3rd day of
November 2003, by and between RENAL CARE GROUP, INC., a Delaware corporation
(the "Company"), and DAVID M. DILL (hereinafter "Employee").

                                   WITNESSETH:

         WHEREAS, Employee is currently Senior Vice President, Finance, and the
Company desires to employ and retain Employee to act as its Executive Vice
President and Chief Financial Officer; and

         WHEREAS, Employee desires to remain an employee of the Company on the
terms and conditions contained in this Agreement; and

         NOW, THEREFORE, in consideration of the compensation payable to
Employee by the Company pursuant to this Agreement, and the mutual promises,
covenants, representations and warranties contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do agree as
follows:

         1.       Employment.

                  The Company employs Employee and Employee accepts employment
with the Company under the terms of this Agreement effective as of November 3,
2003 (the "Effective Date").

         2.       Term.

                  The term of this Agreement shall begin on the Effective Date
and shall continue for an initial term of approximately three years and two
months, ending on December 31, 2006 (the "Initial Period"), subject to earlier
termination by Employee or the Company as hereinafter provided. Unless one party
gives the other notice of non-renewal not less than 60 days prior to the
expiration of the Initial Period or an additional term, this Agreement shall
renew for additional terms of 12 months each, subject to earlier termination as
hereinafter provided, on the same terms and conditions (subject to mutually
agreeable modifications, if any).

         3.       Compensation and Benefits.

                  (a)      Base Compensation. The Company shall pay Employee a
base salary at an annual rate of $275,000 from the Effective Date through March
31, 2004 (the "Base Compensation"). Such Base Compensation may be adjusted as
provided herein. The Base Compensation is payable according to the pay periods
of the Company as may be in effect from time to time. Such payments will be
prorated for periods less than a full pay period. The Base Compensation will be
subject to withholding for federal, state and local payroll and all other taxes
or withholdings applicable to Employee. Any increases of the Base Compensation
will be at the discretion of the Company, provided that the Company may not
decrease the then current Base Compensation without the consent of Employee. The
Base Compensation and target percentage for the Annual Bonus (as defined below)
will be reviewed annually by the Compensation Committee of the Company.

                  (b)      Benefits. During the term of this Agreement, Employee
shall also be entitled to participate in the insurance and other fringe benefits
made available generally to senior management



employees of the Company, as such benefits may be determined from time to time
by the Company. Employee may take vacations at times and for periods that are
approved from time to time by the Company's President and Chief Executive
Officer in his reasonable discretion, Employee not accruing any vacation time
for purposes of compensation upon termination of employment. The Company and
Employee acknowledge and agree that vacation time of at least four weeks per
calendar year is expected, but that such amount may be more or less in any
specific. In addition, during the term of this Agreement, the Company will
provide to Employee term life insurance coverage of $1,000,000 on Employee's
life payable to one or more beneficiaries designated by Employee from time to
time.

                  (c)      Annual Bonuses. In addition to the Base Compensation,
Employee will be entitled to an annual bonus (the "Annual Bonus"), with a target
amount equal to 75% of the Base Compensation for such year. The actual amount of
the Annual Bonus paid will be determined based on the Company's and Employee's
achievement of performance goals reasonably established by the Compensation
Committee of the Company and, in the case of performance goals established
specifically for Employee, agreed to by Employee. The Company agrees that the
Company-related performance goals for Employee shall be substantially similar to
those established for other members of senior management.

                  (d)      Expenses. The Company shall reimburse Employee for
any and all expenses reasonably incurred by Employee incident to the performance
of the duties imposed upon Employee hereunder.

         4.       Duties, Extent of Services.

                  Employee is employed as Executive Vice President and Chief
Financial Officer of the Company. As such, Employee will perform such duties and
responsibilities as are typically incident thereto and will perform in a
faithful and competent manner such additional duties as may be reasonably
assigned from time to time by the Company. Throughout the term of this
Agreement, Employee will report to the Chief Executive Officer and President of
the Company. Employee's duties for the Company will be performed on a full-time
basis at the Company's corporate offices in Nashville, Tennessee. Employee may
be required, from time to time, to perform his duties temporarily hereunder at
such other place or places as the Company shall reasonably require, provided
that such period does not exceed 30 consecutive days without Employee's consent
and that during any such period Employee is able to return to Nashville,
Tennessee at the Company's expense for weekends.

                  Employee will devote all of Employee's business time,
attention, knowledge, and skill solely to the business and interest of the
Company, and the Company will be entitled to all the benefits, profits, and
other issues arising from, or incident to, all work, services, and advice of
Employee.

         5.       Termination.

                  This Agreement may be terminated by the parties in the manners
specified below:

                  (a)      Termination without Cause. Either the Company or
Employee may terminate Employee's employment under this Agreement at any time
for any reason or no reason upon 30 days' prior written notice to the other
party.

                  (b)      Termination for Cause. The Company may terminate this
Agreement on written notice at any time for "Cause". For purposes of this
Agreement, "Cause" means: (i) Employee is convicted of, pleads guilty to, or
confesses to a felony or any crime involving any act of dishonesty,

                                       -2-



fraud, misappropriation, embezzlement or moral turpitude, in which event the
Company may terminate this Agreement immediately, (ii) the misconduct or gross
negligence by Employee in connection with the performance of Employee's duties
hereunder, (iii) the engaging by Employee in any fraudulent, disloyal or
unprofessional conduct which results in an injury to the Company, its affiliates
or any of its or their centers, monetarily or otherwise, (iv) Employee breaches
any provision of Section 6 of this Agreement, or (v) the material failure by
Employee otherwise substantially to perform his duties with the Company (other
than any such failure resulting from the disability of Employee under Section
5(d)(i)) or the breach of any provision of this Agreement other than Section 6.
If the Company terminates this Agreement for Cause pursuant to the provisions of
(ii), (iii), (iv) or (v) of this subsection (b), then the Company will give
Employee written notice prior to such termination detailing the specific acts,
actions, failures, or events upon which the forecast termination is based.
Employee will have 15 days after such written notice to cease such actions or
otherwise correct any such failure or breach. If Employee does not cease such
action or otherwise correct such failure or breach within such 15-day period, or
having once received such written notice and ceased such actions or corrected
such failure or breach, Employee at any time thereafter again so acts, fails or
breaches, the Company may terminate this Agreement immediately.

                  (c)      Termination for Good Reason. Employee may terminate
this Agreement on written notice at any time for "Good Reason". For purposes of
this Agreement, "Good Reason" means: (i) without the express written consent of
Employee, a material diminution of his position, duties, responsibilities and
status with the Company as in effect as of the Effective Date, a change in
Employee's reporting responsibilities, a material reduction of Employee's titles
or offices as in effect on the date of this Agreement, or the removal of
Employee from, or failure to re-elect Employee to, any position referred to in
Section 4 of this Agreement, except in connection with the termination of this
Agreement for Cause; (ii) any reduction of the Base Compensation; (iii) the
requirement that Employee relocate outside of the Nashville, Tennessee
metropolitan area; (iv) the material breach by the Company of any material
provision of this Agreement, which breach continues uncorrected and uncured for
15 days after Employee gives notice of such breach to the Company; or (v) the
termination of this Agreement by written notice from Employee to the Company
during the 30-day period immediately following the first anniversary of a Change
in Control (as defined below).

                  (d)      Involuntary Termination. The employment of Employee
hereunder will be automatically terminated by the death or disability of
Employee as outlined below.

                           (i)      Disability. The Company may terminate this
Agreement at such time as Employee shall have been Disabled (as defined below)
for a continuous period of six months during any continuous 12-month period. For
purposes of this Section 5(d)(i), the term "Disabled" means Employee's inability
to perform the essential functions of his duties, with or without reasonable
accommodation. During Employee's six-month period of Disability, the Company
will continue to pay Employee's Base Compensation (less regular withholdings for
payroll or other taxes and other required or proper items, and less proceeds
from all disability insurance policies or plans provided or made available by
the Company). In the event of a termination of Employee on account of
Disability, the Company will pay Employee's Base Compensation for a period of
six months following the effective date of termination (less regular
withholdings for payroll or other taxes and other required or proper times, and
less proceeds from all disability insurance policies or plans provided or made
available by the Company). In addition, any provisions in the relevant stock
option agreements notwithstanding, all outstanding stock options granted to
Employee by the Company will vest immediately upon termination pursuant to this
Section 5(d)(i).

                           (ii)     Death. If Employee dies during the term of
this Agreement, this Agreement shall terminate and Employee's estate shall
receive the remainder of the Base Compensation

                                       -3-



set forth in Section 3(a) hereof accrued to the last day of the month in which
death occurs. In addition, any provisions in the relevant stock option
agreements notwithstanding, all outstanding stock options granted to Employee by
the Company will vest immediately upon termination pursuant to this Section
5(d)(i).

                  (e)      Post-Termination Compensation. Except as provided in
Section 5(d) above, upon termination of this Agreement, the Company shall be
relieved of all of its obligations hereunder notwithstanding any period of time
remaining under the initial or any renewal term, subject to the following:

                           (i)      Termination without Cause or with Good
Reason. If the Company terminates Employee's employment hereunder without Cause
under Section 5(a) above or if Employee terminates Employee's employment
hereunder with Good Reason under Section 5(c) above or if this Agreement expires
as a result of the Company's giving notice of non-renewal as contemplated by
Section 2 above, then the Company will pay to Employee, after the effective date
of such termination, as Employee's sole and exclusive remedy, (A) an amount
equal to the Base Compensation (as then in effect) plus an amount of Annual
Bonus equal to the target percentage of Base Compensation (as then in effect),
and (B) any unpaid bonus payable for the most recently completed calendar year.
If the Company terminates Employee's employment without Cause or if Employee
terminates Employee's employment hereunder with good reason or if this Agreement
expires as a result of the Company's giving notice of non-renewal, Employee
shall be under no duty to seek or accept other employment; but if he shall do
so, any compensation he shall receive from such other employment will not
diminish the Company's obligation to make payments required to the Employee
hereunder.

                           (ii)     Termination without Good Reason. If Employee
terminates his employment under Section 5(a) above, then the Company's
obligation to pay Employee's Base Compensation will terminate as of the date of
termination.

                           (iii)    Termination for Cause. If the Company
terminates Employee's employment with Cause under Section 5(b) above, then the
Company will pay Employee, after the effective date of such termination, the
Base Compensation (as then in effect) for a period of one month after the
termination date.

                           (iv)     Termination following Change in Control. If,
within twelve (12) months following a Change in Control, either (A) the Company
terminates the employment of Employee hereunder without Cause under Section 5(a)
above or (B) Employee terminates his employment for Good Reason under Section
5(c) above (except for a termination under clause (v) of Section 5(c)), then, in
lieu of any other compensation that may be specified in this Agreement, the
Company will pay Employee an amount equal to (i) the Base Compensation (as then
in effect) plus an amount of Annual Bonus equal to the target percentage of Base
Compensation (as then in effect) multiplied by (ii) three. If Employee
terminates his employment for Good Reason under clause (v) of Section 5(c)
above, then, in lieu of any other compensation that may be specified herein, the
Company will pay Employee an amount equal to (i) the Base Compensation (as then
in effect) plus an amount of Annual Bonus equal to the target percentage of Base
Compensation (as then in effect) multiplied by (ii) two. The Company will make
any payment due under this clause (iv) in a single lump-sum payment not later
than 30 days after termination. If any payment obligation under this Section
5(e) arises, no compensation received from other employment (or otherwise) will
reduce the Company's obligation to make the payment(s) described in this
paragraph.

                                       -4-



                  (f)      Change in Control. "Change in Control" means a change
in control of the Company of a nature that would be required to be reported
(assuming such event has not been "previously reported") in response to Item
1(a) of a Current Report on Form 8-K pursuant to Section 13 or 15(d) of the
Exchange Act of 1934 (the "Exchange Act"); provided that, without limitation, a
Change in Control shall also be deemed to have occurred at such time as:

                           (i)      Any "person" within the meaning of Section
14(d) of the Exchange Act, other than the Company; a subsidiary, or any employee
benefit plan(s) sponsored by the Company or any Subsidiary, is or has become the
"beneficial owner," as defined in rule l3d-3 under the Exchange Act, directly or
indirectly, of 25% or more of the combined voting power of the outstanding
securities of the Company ordinarily having the right to vote at the election of
directors, or

                           (ii)     Individuals who constitute the Board
immediately prior to any meeting of stockholders (the "Incumbent Board") have
ceased for any reason to constitute at least a majority thereof, provided that
any person becoming a director whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least three-quarters (3/4)
of the directors comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as
a nominee for director without objection to such nomination) will be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; or

                           (iii)    Upon approval by the Company's stockholders
of a reorganization, merger, share exchange or consolidation, other than a
reorganization, merger, share exchange or consolidation with respect to which
those persons who were the beneficial owners, immediately prior to such
reorganization, merger, share exchange or consolidation, of outstanding
securities of the Company ordinarily having the right to vote in the election of
directors own, immediately after such transaction, more than 75% of the
outstanding securities of the resulting corporation ordinarily having the right
to vote in the election of directors; or

                           (iv)     Upon approval by the Company's stockholders
of a complete liquidation and dissolution of the Company or the sale or other
disposition of all or substantially all of the assets of the Company other than
to a Subsidiary.

         6.       Nondisclosure, Confidentiality; Competition.

                  (a)      Subject to Section 6(f) below, Employee agrees that,
during the term of this Agreement and of Employee's employment by the Company,
and for a period 12 months after the termination of Employee's employment with
the Company, Employee will not in any manner, directly or indirectly, by himself
or in conjunction with any other person, (i) conduct any of the activities or
perform any of the responsibilities or duties that Employee provided the Company
during his employment by the Company for any business entity that is competitive
with the business of the Company or its affiliates or (ii) establish or own any
financial, beneficial or other interest in (other than an interest consisting of
less than one percent (1%) of a class of publicly traded security), make any
loan to or for the benefit of, or render any managerial, marketing or other
business advice, to any entity that is then conducting activities that are
competitive with those of the business of the Company or its affiliates, in
either case within a geographic territory defined as a 75-mile radius of any
renal dialysis center, unit or facility owned or operated by the Company or an
affiliate of the Company. For purposes of this Section, the "business of the
Company or its affiliates" means owning or operating a renal dialysis center,
unit or facility. The parties acknowledge and agree that nothing in this Section
6(a) shall be deemed to restrict any firm of accountants of or with which
Employee becomes an employee, partner, shareholder or otherwise

                                       -5-



associated or affiliated from rendering accounting services to any business
entity or entities that are competitive with the business of the Company or its
affiliates, so long as Employee does not perform services for any such business
entity and that such entity or entities do not represent more than fifty percent
(50%) of the revenue of such firm in any twelve (12)-month period.

                  (b)      Employee further agrees that, for a period of three
years after the termination of Employee's employment with the Company, Employee
will keep confidential and not directly divulge, or allow through a lack of
reasonable care to be divulged to anyone, or use or otherwise appropriate for
Employee's own benefit or for the benefit of others, any knowledge or
information of a confidential nature with respect to the Company's and its
affiliates' current business, the Company itself, or any of its affiliates,
including all trade secrets, pricing information, marketing information or
technical information (hereinafter referred to as the "Confidential Data"),
except for (i) a disclosure that is required by law; or (ii) information that
has been made generally available to the public by the act of one who has the
right to disclose such information; or (iii) information that has become part of
the public domain through no fault of Employee. Employee acknowledges and agrees
that the prohibitions against disclosure of Confidential Data recited herein are
in addition to, and not in lieu of, any rights or remedies the Company may have
available pursuant to the laws of any jurisdiction or at common law to prevent
the disclosure of confidential information, and the enforcement by the Company
of its rights and remedies pursuant hereto shall not be construed as a waiver of
any other rights or available remedies which the Company may possess in law or
equity. Employee acknowledges that the Company has taken reasonable and
appropriate steps to ensure the confidentiality and non-disclosure of all such
Confidential Data. For purposes of this Section the Company's and its
affiliates' "current business" means owning or operating a renal dialysis
center, unit or facility.

                  (c)      Subject to Section 6(f) below, Employee further
agrees that, for a period of three years after the termination of Employee's
employment with the Company, Employee will not, for his own benefit or the
benefit of others, solicit any person or entity that has or has had, or disrupt
or attempt to disrupt, any relationship, contractual or otherwise, with the
Company or an affiliate of the Company (including any patient, payor, physician,
provider, managed care organization or supplier) at any time during Employee's
employment with the Company, for the purpose of assisting, or creating such a
relationship for, any business entity that is competitive with the Company or an
affiliate of the Company. For purposes of this Section, a business entity is
competitive with the Company or an affiliate of the Company if it provides or
offers any renal dialysis service that is provided by the Company or an
affiliate of the Company.

                  (d)      Subject to Section 6(f) below, Employee further
agrees that, for a period of three years after the termination of Employee's
employment with the Company, Employee shall not induce, nor attempt to induce,
any employee of the Company, or any of its affiliates, to terminate such
employee's association with the Company or any of its affiliates.

                  (e)      These post-employment covenants are considered by the
parties hereto to be fair, reasonable and integral for the protection of the
Company. The parties mutually agree that if a violation of any of these
covenants occurs, such violation or any threatened violation will cause
irreparable injury to the Company and the remedy at law for any such violation
or threatened violation will be inadequate. The parties acknowledge that these
covenants will survive, and remain in effect and enforceable after, termination
of this Agreement.

                  (f)      The Company agrees that the forgoing covenants in
subsections (a), (c) and (d) of this Section 6 shall be null and void as to any
period following termination of Employee's employment if such termination occurs
within 13 months following a Change in Control through either (A) a

                                       -6-



termination by the Company without Cause under Section 5(a) above or (B) a
resignation by Employee for any reason.

                  (g)      Employee agrees to indemnify and hold harmless the
Company from and against any and all claims, causes of action, damages and/or
any other losses suffered or incurred by the Company as a result of any breach
or purported breach by Employee of any agreement applicable to Employee which
existed prior to the time of the entering into of this Agreement. The
obligations of Employee to indemnify and hold the Company harmless include any
and all costs of defense of any such claim or threatened claim, including
reasonable attorneys' fees.

         7.       Certain Additional Payments by the Company.

                  (a)      Anything in this Agreement to the contrary
notwithstanding and except as set forth below, if any payment or distribution by
the Company to or for the benefit of Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 7) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company will make an additional payment (a "Gross-Up
Payment") to Employee in an amount such that after payment by Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

                  (b)      Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, will be made
by Ernst & Young LLP or such other certified public accounting firm as may be
designated by Employee (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Employee within 15 business days
of the receipt of notice from Employee that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, Employee shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by
the Company to Employee within five business days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and Employee. It is possible (due to the uncertainty
in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder) that Gross-Up Payments will not
have been made by the Company which it is ultimately determined should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. Consequently, if the Company exhausts its remedies pursuant to
Section 7(c) and Employee thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and the Company will promptly pay any such Underpayment to or for the
benefit of Employee.

                  (c)      Employee will notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after

                                       -7-



Employee is informed in writing of such claim, and such notification will
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. Employee will not pay such claim prior to the
expiration of the 30-day period following the date on which Employee gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies
Employee in writing prior to the expiration of such period that it desires to
contest such claim, Employee will:

                           (i)      Give the Company any information reasonably
requested by the Company relating to such claim,

                           (ii)     Take such action in connection with
contesting such claim as the Company reasonably requests in writing from time to
time, including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,

                           (iii)    Cooperate with the Company in good faith in
order effectively to contest such claim, and

                           (iv)     Permit the Company to participate in any
proceedings relating to such claim;

provided, however, that the Company will bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and will indemnify and hold Employee harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation of the foregoing provisions of this Section
7(c), the Company will control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct Employee to pay
the tax claimed and sue for a refund or contest the claim in any permissible
manner, and Employee agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company may determine; provided, however, that if
the Company directs Employee to pay such claim and sue for a refund, the Company
will advance the amount of such payment to Employee, on an interest-free basis
and will indemnify and hold Employee harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; provided, further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Employee with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest will be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Employee will be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.

                  (d)      If, after the receipt by Employee of an amount
advanced by the Company pursuant to Section 7(c), Employee becomes entitled to
receive any refund with respect to such claim, Employee will (subject to the
Company's complying with the requirements of Section 7(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Employee of an
amount advanced by the Company pursuant to Section 7(c), a determination is made
that Employee is not entitled to any refund with respect to such claim and the
Company does not notify Employee in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such determination,
then such advance will be forgiven

                                       -8-



and Employee shall not be required to repay and the amount of such advance will
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid.

         8.       Severability.

                  The parties hereto hereby expressly agree and contract that it
is not the intention of either party to violate any public policy, or any
statutory or common law, and that if any paragraph, sentence, clause or
combination of the same of this Agreement will be in violation of the laws of
any state where applicable, such paragraph, sentence, clause or the combination
of the same will be void in the jurisdictions where it is unlawful, and the
remainder thereof shall remain binding on the parties hereto. It is the
intention of the parties to make the covenants of this Agreement binding only to
the extent that they may be lawfully done under existing applicable laws. In the
event that any part of any term or covenant of this Agreement is determined by a
court of law or equity to be overly broad or otherwise unenforceable, the
parties hereto agree that such court shall be empowered to substitute, and it is
the intent of the parties hereto that such court substitute, a reasonably
judicially enforceable term or limitation in the place of such unenforceable
term or covenant, and that as so modified this Agreement will be fully
enforceable.

         9.       Entire Agreement; Modification.

                  This Agreement constitutes the entire agreement between the
parties and supersedes any and all prior understandings or agreements. Any
changes or additions to this Agreement must be in writing and signed by both
parties. If there is any conflict between the terms of this Agreement and any
stock option agreement or other agreement between Employee and the Company
(including any agreement entered into after the date of this Agreement), then
this Agreement will control unless there is specific reference to superseding
this Agreement in such other agreement or in this Agreement.

         10.      Assignment.

                  (a)      The rights and benefits of Employee under this
Agreement, other than accrued and unpaid amounts due under Section 3(a) hereof,
are personal to Employee and are not assignable.

                  (b)      This Agreement may not be assigned by the Company
except to an affiliate of the Company, provided that such affiliate assumes the
Company's obligations under this Agreement; provided, further, that if the
Company merges or effects a consolidation or share exchange with or into, or
sells or otherwise transfers substantially all its assets to, another business
entity, the Company may assign its rights hereunder to that business entity
without the consent of the Employee provided that it causes such business entity
to assume the Company's obligations under this Agreement and provided, further,
that the provisions of Section 5 remain in full force and effect following such
assignment.

         11.      Notice.

                  Unless otherwise specifically provided, references to notice
periods of a certain number of "days" contained in this Agreement are references
to calendar days. Any notice provided for in this Agreement shall be delivered
to Employee at the most recent address of Employee listed in the Company's then
current employment records. Notice to the Company shall be delivered to the
following address: c/o Renal Care Group, Inc., 2525 West End Avenue, Suite 600,
Nashville, Tennessee 37203, Attention: General Counsel.

                                       -9-



         12.      Waiver.

                  The waiver by any party to this Agreement of a breach of any
of the provisions contained herein will not operate or be construed as a waiver
of any subsequent breach.

         13.      Disputes and Governing Law.

                  The Company and Employee agree that any dispute arising in
connection with, or relating to, this Agreement or the termination of this
Agreement, to the maximum extent allowed by applicable law, will be subject to
resolution through informal methods and, failing such efforts, through
arbitration. Either party may notify the other party of the existence of a
dispute by written notice to the address indicated above in Section 11. The
parties will thereafter attempt in good faith to resolve their differences
within 30 days after the receipt of such notice. If the dispute cannot be
resolved within such 30-day period, either party may file a written demand for
arbitration with the other party. The arbitration shall proceed in accordance
with the terms of the Federal Arbitration Act and the Commercial Arbitration
Rules of the American Arbitration Association. A single arbitrator shall be
appointed through the American Arbitration Association's procedures to resolve
the dispute.

                  The parties agree that in the event arbitration is necessary,
the laws of the State of Tennessee and any applicable federal law shall apply.
The place of the arbitration shall be Nashville, Tennessee.

                  The award of the arbitrator shall be binding and conclusive
upon the parties. Either party shall have the right to have the award made the
judgment of a court of competent jurisdiction in the State of Tennessee.

                  In the event of a dispute arising under this Agreement, the
prevailing party shall be entitled to all reasonable attorneys' fees incurred in
connection with such dispute. The Company and Employee are parties to an
Indemnification Agreement effective as of August 13, 2002, which the parties
specifically ratify and confirm by this reference.

            [the remainder of this page is intentionally left blank]

                                      -10-



                  IN WITNESS WHEREOF, the Company and Employee have executed
this Agreement on the day and year first above written.

                                        COMPANY:
                                        RENAL CARE GROUP, INC.

                                        By: /s/ Gary A. Brukardt
                                        ---------------------------------------
                                        Title: President and CEO

                                        EMPLOYEE:

                                        /s/ David M. Dill
                                        ---------------------------------------
                                        DAVID M. DILL

                                      -11-

EX-10.45

                                                                   EXHIBIT 10.45

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made and entered into effective as of the 30th day of
November 2003, by and between RENAL CARE GROUP, INC., a Delaware corporation
(the "Company"), and TIMOTHY P. MARTIN (hereinafter "Employee").

                                   WITNESSETH:

         WHEREAS, Employee is currently Group Senior Vice President, East Group,
and the Company desires to employ and retain Employee to act as its Executive
Vice President of Operations; and

         WHEREAS, Employee desires to remain an employee of the Company on the
terms and conditions contained in this Agreement; and

         NOW, THEREFORE, in consideration of the compensation payable to
Employee by the Company pursuant to this Agreement, and the mutual promises,
covenants, representations and warranties contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do agree as
follows:

         1.       Employment.

                  The Company employs Employee and Employee accepts employment
with the Company under the terms of this Agreement effective as of November ___,
2003 (the "Effective Date").

         2.       Term.

                  The term of this Agreement shall begin on the Effective Date
and shall continue for an initial term beginning on the Effective Date and
ending on December 31, 2006 (the "Initial Period"), subject to earlier
termination by Employee or the Company as hereinafter provided. Unless one party
gives the other notice of non-renewal not less than 60 days prior to the
expiration of the Initial Period or an additional term, this Agreement shall
renew for additional terms of 12 months each, subject to earlier termination as
hereinafter provided, on the same terms and conditions (subject to mutually
agreeable modifications, if any).

         3.       Compensation and Benefits.

                  (a)      Base Compensation. The Company shall pay Employee a
base salary at an annual rate of $300,000 from the Effective Date through March
31, 2004 (the "Base Compensation"). Such Base Compensation may be adjusted as
provided herein. The Base Compensation is payable according to the pay periods
of the Company as may be in effect from time to time. Such payments will be
prorated for periods less than a full pay period. The Base Compensation will be
subject to withholding for federal, state and local payroll and all other taxes
or withholdings applicable to Employee. Any increases of the Base Compensation
will be at the discretion of the Company, provided that the Company may not
decrease the then current Base Compensation without the consent of Employee. The
Base Compensation and target percentage for the Annual Bonus (as defined below)
will be reviewed annually by the Compensation Committee of the Company.

                  (b)      Benefits. During the term of this Agreement, Employee
shall also be entitled to participate in the insurance and other fringe benefits
made available generally to senior management





employees of the Company, as such benefits may be determined from time to time
by the Company. Employee may take vacations at times and for periods that are
approved from time to time by the Company's President and Chief Executive
Officer in his reasonable discretion, Employee not accruing any vacation time
for purposes of compensation upon termination of employment. The Company and
Employee acknowledge and agree that vacation time of at least four weeks per
calendar year is expected, but that such amount may be more or less in any
specific. In addition, during the term of this Agreement, the Company will
provide to Employee term life insurance coverage of $1,000,000 on Employee's
life payable to one or more beneficiaries designated by Employee from time to
time.

                  (c)      Annual Bonuses. In addition to the Base Compensation,
Employee will be entitled to an annual bonus (the "Annual Bonus"), with a target
amount equal to 75% of the Base Compensation for such year. The actual amount of
the Annual Bonus paid will be determined based on the Company's and Employee's
achievement of performance goals reasonably established by the Compensation
Committee of the Company and, in the case of performance goals established
specifically for Employee, agreed to by Employee. The Company agrees that the
Company-related performance goals for Employee shall be substantially similar to
those established for other members of senior management.

                  (d)      Expenses. The Company shall reimburse Employee for
any and all expenses reasonably incurred by Employee incident to the performance
of the duties imposed upon Employee hereunder. In addition, the Company shall,
in accordance with the Company's relocation policy for senior executives,
reimburse Employee for expenses reasonably incurred by Employee in connection
with his relocation from Cleveland, Ohio to Nashville, Tennessee.

         4.       Duties, Extent of Services.

                  Employee is employed as Executive Vice President, Operations
of the Company and shall be generally responsible for overseeing the regional
dialysis operations of the Company. As such, Employee will perform such duties
and responsibilities as are typically incident thereto and will perform in a
faithful and competent manner such additional duties as may be reasonably
assigned to Employee from time to time by Chief Executive Officer and President
of the Company. Throughout the term of this Agreement, Employee will report to
the Chief Executive Officer and President of the Company. Employee's duties for
the Company will be performed on a full-time basis at the Company's corporate
offices in Nashville, Tennessee. Employee may be required, from time to time, to
perform his duties temporarily hereunder at such other place or places as the
Company shall reasonably require, provided that such period does not exceed 30
consecutive days without Employee's consent and that during any such period
Employee is able to return to Nashville, Tennessee at the Company's expense for
weekends.

                  Employee will devote all of Employee's business time,
attention, knowledge, and skill solely to the business and interest of the
Company, and the Company will be entitled to all the benefits, profits, and
other issues arising from, or incident to, all work, services, and advice of
Employee.

         5.       Termination.

                  This Agreement may be terminated by the parties in the manners
specified below:

                  (a)      Termination without Cause. Either the Company or
Employee may terminate Employee's employment under this Agreement at any time
for any reason or no reason upon 30 days' prior written notice to the other
party.

                                       -2-



                  (b)      Termination for Cause. The Company may terminate this
Agreement on written notice at any time for "Cause". For purposes of this
Agreement, "Cause" means: (i) Employee is convicted of, pleads guilty to, or
confesses to a felony or any crime involving any act of dishonesty, fraud,
misappropriation, embezzlement or moral turpitude, in which event the Company
may terminate this Agreement immediately, (ii) the misconduct or gross
negligence by Employee in connection with the performance of Employee's duties
hereunder, (iii) the engaging by Employee in any fraudulent, disloyal or
unprofessional conduct which results in an injury to the Company, its affiliates
or any of its or their centers, monetarily or otherwise, (iv) Employee breaches
any provision of Section 6 of this Agreement, or (v) the material failure by
Employee otherwise substantially to perform his duties with the Company (other
than any such failure resulting from the disability of Employee under Section
5(d)(i)) or the breach of any provision of this Agreement other than Section 6.
If the Company terminates this Agreement for Cause pursuant to the provisions of
(ii), (iii), (iv) or (v) of this subsection (b), then the Company will give
Employee written notice prior to such termination detailing the specific acts,
actions, failures, or events upon which the forecast termination is based.
Employee will have 15 days after such written notice to cease such actions or
otherwise correct any such failure or breach. If Employee does not cease such
action or otherwise correct such failure or breach within such 15-day period, or
having once received such written notice and ceased such actions or corrected
such failure or breach, Employee at any time thereafter again so acts, fails or
breaches, the Company may terminate this Agreement immediately.

                  (c)      Termination for Good Reason. Employee may terminate
this Agreement on written notice at any time for "Good Reason". For purposes of
this Agreement, "Good Reason" means: (i) without the express written consent of
Employee, a material diminution of his position, duties, responsibilities and
status with the Company as in effect as of the Effective Date, a change in
Employee's reporting responsibilities, a material reduction of Employee's titles
or offices as in effect on the date of this Agreement, or the removal of
Employee from, or failure to re-elect Employee to, any position referred to in
Section 4 of this Agreement, except in connection with the termination of this
Agreement for Cause; (ii) any reduction of the Base Compensation; (iii) the
requirement that Employee relocate outside of the Nashville, Tennessee
metropolitan area; (iv) the material breach by the Company of any material
provision of this Agreement, which breach continues uncorrected and uncured for
15 days after Employee gives notice of such breach to the Company; or (v) the
termination of this Agreement by written notice from Employee to the Company
during the 30-day period immediately following the first anniversary of a Change
in Control (as defined below).

                  (d)      Involuntary Termination. The employment of Employee
hereunder will be automatically terminated by the death or disability of
Employee as outlined below.

                           (i)      Disability. The Company may terminate this
Agreement at such time as Employee shall have been Disabled (as defined below)
for a continuous period of six months during any continuous 12-month period. For
purposes of this Section 5(d)(i), the term "Disabled" means Employee's inability
to perform the essential functions of his duties, with or without reasonable
accommodation. During Employee's six-month period of Disability, the Company
will continue to pay Employee's Base Compensation (less regular withholdings for
payroll or other taxes and other required or proper items, and less proceeds
from all disability insurance policies or plans provided or made available by
the Company). In the event of a termination of Employee on account of
Disability, the Company will pay Employee's Base Compensation for a period of
six months following the effective date of termination (less regular
withholdings for payroll or other taxes and other required or proper times, and
less proceeds from all disability insurance policies or plans provided or made
available by the Company). In addition, any provisions in the relevant stock
option agreements notwithstanding, all outstanding stock options

                                       -3-



granted to Employee by the Company will vest immediately upon termination
pursuant to this Section 5(d)(i).

                           (ii)     Death. If Employee dies during the term of
this Agreement, this Agreement shall terminate and Employee's estate shall
receive the remainder of the Base Compensation set forth in Section 3(a) hereof
accrued to the last day of the month in which death occurs. In addition, any
provisions in the relevant stock option agreements notwithstanding, all
outstanding stock options granted to Employee by the Company will vest
immediately upon termination pursuant to this Section 5(d)(i).

                  (e)      Post-Termination Compensation. Except as provided in
Section 5(d) above, upon termination of this Agreement, the Company shall be
relieved of all of its obligations hereunder notwithstanding any period of time
remaining under the initial or any renewal term, subject to the following:

                           (i)      Termination without Cause or with Good
Reason. If the Company terminates Employee's employment hereunder without Cause
under Section 5(a) above or if Employee terminates Employee's employment
hereunder with Good Reason under Section 5(c) above or if this Agreement expires
as a result of the Company's giving notice of non-renewal as contemplated by
Section 2 above, then the Company will pay to Employee, after the effective date
of such termination, as Employee's sole and exclusive remedy, (A) an amount
equal to the Base Compensation (as then in effect) plus an amount of Annual
Bonus equal to the target percentage of Base Compensation (as then in effect),
and (B) any unpaid bonus payable for the most recently completed calendar year.
If the Company terminates Employee's employment without Cause or if Employee
terminates Employee's employment hereunder with good reason or if this Agreement
expires as a result of the Company's giving notice of non-renewal, Employee
shall be under no duty to seek or accept other employment; but if he shall do
so, any compensation he shall receive from such other employment will not
diminish the Company's obligation to make payments required to the Employee
hereunder.

                           (ii)     Termination without Good Reason. If Employee
terminates his employment under Section 5(a) above, then the Company's
obligation to pay Employee's Base Compensation will terminate as of the date of
termination.

                           (iii)    Termination for Cause. If the Company
terminates Employee's employment with Cause under Section 5(b) above, then the
Company will pay Employee, after the effective date of such termination, the
Base Compensation (as then in effect) for a period of one month after the
termination date.

                           (iv)     Termination following Change in Control. If,
within twelve (12) months following a Change in Control, either (A) the Company
terminates the employment of Employee hereunder without Cause under Section 5(a)
above or (B) Employee terminates his employment for Good Reason under Section
5(c) above (except for a termination under clause (v) of Section 5(c)), then, in
lieu of any other compensation that may be specified in this Agreement, the
Company will pay Employee an amount equal to (i) the Base Compensation (as then
in effect) plus an amount of Annual Bonus equal to the target percentage of Base
Compensation (as then in effect) multiplied by (ii) three. If Employee
terminates his employment for Good Reason under clause (v) of Section 5(c)
above, then, in lieu of any other compensation that may be specified herein, the
Company will pay Employee an amount equal to (i) the Base Compensation (as then
in effect) plus an amount of Annual Bonus equal to the target percentage of Base
Compensation (as then in effect) multiplied by (ii) two. The Company will make
any payment due under this clause (iv) in a single lump-sum payment not later
than 30 days after termination.

                                       -4-



If any payment obligation under this Section 5(e) arises, no compensation
received from other employment (or otherwise) will reduce the Company's
obligation to make the payment(s) described in this paragraph.

                  (f)      Change in Control. "Change in Control" means a change
in control of the Company of a nature that would be required to be reported
(assuming such event has not been "previously reported") in response to Item
1(a) of a Current Report on Form 8-K pursuant to Section 13 or 15(d) of the
Exchange Act of 1934 (the "Exchange Act"); provided that, without limitation, a
Change in Control shall also be deemed to have occurred at such time as:

                           (i)      Any "person" within the meaning of Section
14(d) of the Exchange Act, other than the Company; a subsidiary, or any employee
benefit plan(s) sponsored by the Company or any Subsidiary, is or has become the
"beneficial owner," as defined in rule l3d-3 under the Exchange Act, directly or
indirectly, of 25% or more of the combined voting power of the outstanding
securities of the Company ordinarily having the right to vote at the election of
directors, or

                           (ii)     Individuals who constitute the Board
immediately prior to any meeting of stockholders (the "Incumbent Board") have
ceased for any reason to constitute at least a majority thereof, provided that
any person becoming a director whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least three-quarters (3/4)
of the directors comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as
a nominee for director without objection to such nomination) will be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; or

                           (iii)    Upon approval by the Company's stockholders
of a reorganization, merger, share exchange or consolidation, other than a
reorganization, merger, share exchange or consolidation with respect to which
those persons who were the beneficial owners, immediately prior to such
reorganization, merger, share exchange or consolidation, of outstanding
securities of the Company ordinarily having the right to vote in the election of
directors own, immediately after such transaction, more than 75% of the
outstanding securities of the resulting corporation ordinarily having the right
to vote in the election of directors; or

                           (iv)     Upon approval by the Company's stockholders
of a complete liquidation and dissolution of the Company or the sale or other
disposition of all or substantially all of the assets of the Company other than
to a Subsidiary.

         6.       Nondisclosure, Confidentiality; Competition.

                  (a)      Subject to Section 6(f) below, Employee agrees that,
during the term of this Agreement and of Employee's employment by the Company,
and for a period 12 months after the termination of Employee's employment with
the Company, Employee will not in any manner, directly or indirectly, by himself
or in conjunction with any other person, (i) conduct any of the activities or
perform any of the responsibilities or duties that Employee provided the Company
during his employment by the Company for any business entity that is competitive
with the business of the Company or its affiliates or (ii) establish or own any
financial, beneficial or other interest in (other than an interest consisting of
less than one percent (1%) of a class of publicly traded security), make any
loan to or for the benefit of, or render any managerial, marketing or other
business advice, to any entity that is then conducting activities that are
competitive with those of the business of the Company or its affiliates, in
either case within a geographic territory defined as a 75-mile radius of any
renal dialysis center, unit or facility owned or

                                       -5-



operated by the Company or an affiliate of the Company. For purposes of this
Section, the "business of the Company or its affiliates" means owning or
operating a renal dialysis center, unit or facility.

                  (b)      Employee further agrees that, for a period of three
years after the termination of Employee's employment with the Company, Employee
will keep confidential and not directly divulge, or allow through a lack of
reasonable care to be divulged to anyone, or use or otherwise appropriate for
Employee's own benefit or for the benefit of others, any knowledge or
information of a confidential nature with respect to the Company's and its
affiliates' current business, the Company itself, or any of its affiliates,
including all trade secrets, pricing information, marketing information or
technical information (hereinafter referred to as the "Confidential Data"),
except for (i) a disclosure that is required by law; or (ii) information that
has been made generally available to the public by the act of one who has the
right to disclose such information; or (iii) information that has become part of
the public domain through no fault of Employee. Employee acknowledges and agrees
that the prohibitions against disclosure of Confidential Data recited herein are
in addition to, and not in lieu of, any rights or remedies the Company may have
available pursuant to the laws of any jurisdiction or at common law to prevent
the disclosure of confidential information, and the enforcement by the Company
of its rights and remedies pursuant hereto shall not be construed as a waiver of
any other rights or available remedies which the Company may possess in law or
equity. Employee acknowledges that the Company has taken reasonable and
appropriate steps to ensure the confidentiality and non-disclosure of all such
Confidential Data. For purposes of this Section the Company's and its
affiliates' "current business" means owning or operating a renal dialysis
center, unit or facility.

                  (c)      Subject to Section 6(f) below, Employee further
agrees that, for a period of three years after the termination of Employee's
employment with the Company, Employee will not, for his own benefit or the
benefit of others, solicit any person or entity that has or has had, or disrupt
or attempt to disrupt, any relationship, contractual or otherwise, with the
Company or an affiliate of the Company (including any patient, payor, physician,
provider, managed care organization or supplier) at any time during Employee's
employment with the Company, for the purpose of assisting, or creating such a
relationship for, any business entity that is competitive with the Company or an
affiliate of the Company. For purposes of this Section, a business entity is
competitive with the Company or an affiliate of the Company if it provides or
offers any renal dialysis service that is provided by the Company or an
affiliate of the Company.

                  (d)      Subject to Section 6(f) below, Employee further
agrees that, for a period of three years after the termination of Employee's
employment with the Company, Employee shall not induce, nor attempt to induce,
any employee of the Company, or any of its affiliates, to terminate such
employee's association with the Company or any of its affiliates.

                  (e)      These post-employment covenants are considered by the
parties hereto to be fair, reasonable and integral for the protection of the
Company. The parties mutually agree that if a violation of any of these
covenants occurs, such violation or any threatened violation will cause
irreparable injury to the Company and the remedy at law for any such violation
or threatened violation will be inadequate. The parties acknowledge that these
covenants will survive, and remain in effect and enforceable after, termination
of this Agreement.

                  (f)      The Company agrees that the forgoing covenants in
subsections (a), (c) and (d) of this Section 6 shall be null and void as to any
period following termination of Employee's employment if such termination occurs
within 13 months following a Change in Control through either (A) a termination
by the Company without Cause under Section 5(a) above or (B) a resignation by
Employee for any reason.

                                       -6-



                  (g)      Employee agrees to indemnify and hold harmless the
Company from and against any and all claims, causes of action, damages and/or
any other losses suffered or incurred by the Company as a result of any breach
or purported breach by Employee of any agreement applicable to Employee which
existed prior to the time of the entering into of this Agreement. The
obligations of Employee to indemnify and hold the Company harmless include any
and all costs of defense of any such claim or threatened claim, including
reasonable attorneys' fees.

         7.       Certain Additional Payments by the Company.

                  (a)      Anything in this Agreement to the contrary
notwithstanding and except as set forth below, if any payment or distribution by
the Company to or for the benefit of Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 7) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company will make an additional payment (a "Gross-Up
Payment") to Employee in an amount such that after payment by Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

                  (b)      Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, will be made
by Ernst & Young LLP or such other certified public accounting firm as may be
designated by Employee (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Employee within 15 business days
of the receipt of notice from Employee that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, Employee shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by
the Company to Employee within five business days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and Employee. It is possible (due to the uncertainty
in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder) that Gross-Up Payments will not
have been made by the Company which it is ultimately determined should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. Consequently, if the Company exhausts its remedies pursuant to
Section 7(c) and Employee thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and the Company will promptly pay any such Underpayment to or for the
benefit of Employee.

                  (c)      Employee will notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after Employee is
informed in writing of such claim, and such notification will apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. Employee will not pay

                                       -7-



such claim prior to the expiration of the 30-day period following the date on
which Employee gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies Employee in writing prior to the expiration of such period that
it desires to contest such claim, Employee will:

                           (i)      Give the Company any information reasonably
requested by the Company relating to such claim,

                           (ii)     Take such action in connection with
contesting such claim as the Company reasonably requests in writing from time to
time, including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,

                           (iii)    Cooperate with the Company in good faith in
order effectively to contest such claim, and

                           (iv)     Permit the Company to participate in any
proceedings relating to such claim;

provided, however, that the Company will bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and will indemnify and hold Employee harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation of the foregoing provisions of this Section
7(c), the Company will control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct Employee to pay
the tax claimed and sue for a refund or contest the claim in any permissible
manner, and Employee agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company may determine; provided, however, that if
the Company directs Employee to pay such claim and sue for a refund, the Company
will advance the amount of such payment to Employee, on an interest-free basis
and will indemnify and hold Employee harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; provided, further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Employee with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest will be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Employee will be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.

                  (d)      If, after the receipt by Employee of an amount
advanced by the Company pursuant to Section 7(c), Employee becomes entitled to
receive any refund with respect to such claim, Employee will (subject to the
Company's complying with the requirements of Section 7(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Employee of an
amount advanced by the Company pursuant to Section 7(c), a determination is made
that Employee is not entitled to any refund with respect to such claim and the
Company does not notify Employee in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such determination,
then such advance will be forgiven and Employee shall not be required to repay
and the amount of such advance will offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.

                                       -8-



         8.       Severability.

                  The parties hereto hereby expressly agree and contract that it
is not the intention of either party to violate any public policy, or any
statutory or common law, and that if any paragraph, sentence, clause or
combination of the same of this Agreement will be in violation of the laws of
any state where applicable, such paragraph, sentence, clause or the combination
of the same will be void in the jurisdictions where it is unlawful, and the
remainder thereof shall remain binding on the parties hereto. It is the
intention of the parties to make the covenants of this Agreement binding only to
the extent that they may be lawfully done under existing applicable laws. In the
event that any part of any term or covenant of this Agreement is determined by a
court of law or equity to be overly broad or otherwise unenforceable, the
parties hereto agree that such court shall be empowered to substitute, and it is
the intent of the parties hereto that such court substitute, a reasonably
judicially enforceable term or limitation in the place of such unenforceable
term or covenant, and that as so modified this Agreement will be fully
enforceable.

         9.       Entire Agreement; Modification.

                  This Agreement constitutes the entire agreement between the
parties and supersedes any and all prior understandings or agreements. Any
changes or additions to this Agreement must be in writing and signed by both
parties. If there is any conflict between the terms of this Agreement and any
stock option agreement or other agreement between Employee and the Company
(including any agreement entered into after the date of this Agreement), then
this Agreement will control unless there is specific reference to superseding
this Agreement in such other agreement or in this Agreement.

         10.      Assignment.

                  (a)      The rights and benefits of Employee under this
Agreement, other than accrued and unpaid amounts due under Section 3(a) hereof,
are personal to Employee and are not assignable.

                  (b)      This Agreement may not be assigned by the Company
except to an affiliate of the Company, provided that such affiliate assumes the
Company's obligations under this Agreement; provided, further, that if the
Company merges or effects a consolidation or share exchange with or into, or
sells or otherwise transfers substantially all its assets to, another business
entity, the Company may assign its rights hereunder to that business entity
without the consent of the Employee provided that it causes such business entity
to assume the Company's obligations under this Agreement and provided, further,
that the provisions of Section 5 remain in full force and effect following such
assignment.

         11.      Notice.

                  Unless otherwise specifically provided, references to notice
periods of a certain number of "days" contained in this Agreement are references
to calendar days. Any notice provided for in this Agreement shall be delivered
to Employee at the most recent address of Employee listed in the Company's then
current employment records. Notice to the Company shall be delivered to the
following address: c/o Renal Care Group, Inc., 2525 West End Avenue, Suite 600,
Nashville, Tennessee 37203, Attention: General Counsel.

                                       -9-



         12.      Waiver.

                  The waiver by any party to this Agreement of a breach of any
of the provisions contained herein will not operate or be construed as a waiver
of any subsequent breach.

         13.      Disputes and Governing Law.

                  The Company and Employee agree that any dispute arising in
connection with, or relating to, this Agreement or the termination of this
Agreement, to the maximum extent allowed by applicable law, will be subject to
resolution through informal methods and, failing such efforts, through
arbitration. Either party may notify the other party of the existence of a
dispute by written notice to the address indicated above in Section 11. The
parties will thereafter attempt in good faith to resolve their differences
within 30 days after the receipt of such notice. If the dispute cannot be
resolved within such 30-day period, either party may file a written demand for
arbitration with the other party. The arbitration shall proceed in accordance
with the terms of the Federal Arbitration Act and the Commercial Arbitration
Rules of the American Arbitration Association. A single arbitrator shall be
appointed through the American Arbitration Association's procedures to resolve
the dispute.

                  The parties agree that in the event arbitration is necessary,
the laws of the State of Tennessee and any applicable federal law shall apply.
The place of the arbitration shall be Nashville, Tennessee.

                  The award of the arbitrator shall be binding and conclusive
upon the parties. Either party shall have the right to have the award made the
judgment of a court of competent jurisdiction in the State of Tennessee.

                  In the event of a dispute arising under this Agreement, the
prevailing party shall be entitled to all reasonable attorneys' fees incurred in
connection with such dispute. The Company and Employee are parties to an
Indemnification Agreement effective as of August 13, 2002, which the parties
specifically ratify and confirm by this reference.

            [the remainder of this page is intentionally left blank]

                                      -10-



                  IN WITNESS WHEREOF, the Company and Employee have executed
this Agreement on the day and year first above written.

                                        COMPANY:
                                        RENAL CARE GROUP, INC.

                                        By: /s/ Gary A. Brukardt
                                        ---------------------------------------
                                        Title: President and CEO

                                        EMPLOYEE:

                                        /s/ Timothy P. Martin
                                        ---------------------------------------
                                        TIMOTHY P. MARTIN

                                      -11-

EX-10.46

                                                                   EXHIBIT 10.46

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made and entered into effective as of the 31st day of
December 2003, by and between RENAL CARE GROUP, INC., a Delaware corporation
(the "Company"), and DOUGLAS B. CHAPPELL (hereinafter "Employee").

                                   WITNESSETH:

         WHEREAS, Employee is currently Senior Vice President, General Counsel
and Secretary of the Company under an Employment Agreement effective as of
December 7, 1998 (the "Old Agreement"), and the Company desires to employ and
retain Employee to continue to act as its Senior Vice President, General Counsel
and Secretary; and

         WHEREAS, Employee desires to remain an employee of the Company on the
terms and conditions contained in this Agreement; and

         NOW, THEREFORE, in consideration of the compensation payable to
Employee by the Company pursuant to this Agreement, and the mutual promises,
covenants, representations and warranties contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do agree as
follows:

         1.       Employment.

                  The Company employs Employee and Employee accepts employment
with the Company under the terms of this Agreement effective as of December 31,
2003 (the "Effective Date").

         2.       Term.

                  The term of this Agreement shall begin on the Effective Date
and shall continue for an initial term of three years, ending on December 31,
2006 (the "Initial Period"), subject to earlier termination by Employee or the
Company as hereinafter provided. Unless one party gives the other notice of
non-renewal not less than 60 days prior to the expiration of the Initial Period
or an additional term, this Agreement shall renew for additional terms of 12
months each, subject to earlier termination as hereinafter provided, on the same
terms and conditions (subject to mutually agreeable modifications, if any).

         3.       Compensation and Benefits.

                  (a)      Base Compensation. The Company shall pay Employee a
base salary at an annual rate of $270,000 from the Effective Date through March
31, 2004 (the "Base Compensation"). Such Base Compensation may be adjusted as
provided herein. The Base Compensation is payable according to the pay periods
of the Company as may be in effect from time to time. Such payments will be
prorated for periods less than a full pay period. The Base Compensation will be
subject to withholding for federal, state and local payroll and all other taxes
or withholdings applicable to Employee. Any increases of the Base Compensation
will be at the discretion of the Company, provided that the Company may not
decrease the then current Base Compensation without the consent of Employee. The
Base Compensation and target percentage for the Annual Bonus (as defined below)
will be reviewed annually by the Compensation Committee of the Company.



                  (b)      Benefits. During the term of this Agreement, Employee
shall also be entitled to participate in the insurance and other fringe benefits
made available generally to senior management employees of the Company, as such
benefits may be determined from time to time by the Company, provided that
Employee shall have at least four weeks of paid vacation time. In addition,
during the term of this Agreement, the Company will provide to Employee term
life insurance coverage of $500,000 on Employee's life payable to one or more
beneficiaries designated by Employee from time to time.

                  (c)      Annual Bonuses. In addition to the Base Compensation,
Employee will be entitled to an annual bonus (the "Annual Bonus"), with a target
amount equal to 40% of the Base Compensation for such year. The actual amount of
the Annual Bonus paid will be determined based on the Company's and Employee's
achievement of performance goals reasonably established by the Compensation
Committee of the Company and, in the case of performance goals established
specifically for Employee, agreed to by Employee. The Company agrees that the
Company-related performance goals for Employee shall be substantially similar to
those established for other members of senior management.

                  (d)      Expenses. The Company shall reimburse Employee for
any and all expenses reasonably incurred by employee incident to the performance
of the duties imposed upon Employee hereunder.

         4.       Duties, Extent of Services.

                  Employee is employed as Senior Vice President, General Counsel
and Secretary of the Company. As such, Employee will perform such duties and
responsibilities as are typically incident thereto and will perform in a
faithful and competent manner such additional duties as may be reasonably
assigned from time to time by the Company. Throughout the term of this
Agreement, Employee will report to the Chief Executive Officer and President or
the Chairman of the Board of Directors of the Company. Employee's duties for the
Company will be performed on a full-time basis at the Company's corporate
offices in Nashville, Tennessee. Employee may be required, from time to time, to
perform his duties temporarily hereunder at such other place or places as the
Company shall reasonably require, provided that such period does not exceed 30
consecutive days without Employee's consent and that during any such period
Employee is able to return to Nashville, Tennessee at the Company's expense for
weekends.

                  Employee will devote all of Employee's business time,
attention, knowledge, and skill solely to the business and interest of the
Company, and the Company will be entitled to all the benefits, profits, and
other issues arising from, or incident to, all work, services, and advice of
Employee.

         5.       Termination.

                  This Agreement may be terminated by the parties in the manners
specified below:

                  (a)      Termination without Cause. Either the Company or
Employee may terminate Employee's employment under this Agreement at any time
for any reason or no reason upon 30 days' prior written notice to the other
party.

                  (b)      Termination for Cause. The Company may terminate this
Agreement on written notice at any time for "Cause". For purposes of this
Agreement, "Cause" means: (i) Employee is convicted of, pleads guilty to, or
confesses to a felony or any crime involving any act of dishonesty,

                                       -2-



fraud, misappropriation, embezzlement or moral turpitude, in which event the
Company may terminate this Agreement immediately, (ii) the misconduct or gross
negligence by Employee in connection with the performance of Employee's duties
hereunder, (iii) the engaging by Employee in any fraudulent, disloyal or
unprofessional conduct which results in an injury to the Company, its affiliates
or any of its or their centers, monetarily or otherwise, (iv) Employee breaches
any provision of Section 6 of this Agreement, or (v) the material failure by
Employee otherwise substantially to perform his duties with the Company (other
than any such failure resulting from the disability of Employee under Section
5(d)(i)) or the breach of any provision of this Agreement other than Section 6.
If the Company terminates this Agreement for Cause pursuant to the provisions of
(ii), (iii), (iv) or (v) of this subsection (b), then the Company will give
Employee written notice prior to such termination detailing the specific acts,
actions, failures, or events upon which the forecast termination is based.
Employee will have 15 days after such written notice to cease such actions or
otherwise correct any such failure or breach. If Employee does not cease such
action or otherwise correct such failure or breach within such 15-day period, or
having once received such written notice and ceased such actions or corrected
such failure or breach, Employee at any time thereafter again so acts, fails or
breaches, the Company may terminate this Agreement immediately.

                  (c)      Termination for Good Reason. Employee may terminate
this Agreement on written notice at any time for "Good Reason". For purposes of
this Agreement, "Good Reason" means: (i) without the express written consent of
Employee, a material diminution of his position, duties, responsibilities and
status with the Company as in effect as of the Effective Date, a change in
Employee's reporting responsibilities, a material reduction of Employee's titles
or offices as in effect on the date of this Agreement, or the removal of
Employee from, or failure to re-elect Employee to, any position referred to in
Section 4 of this Agreement, except in connection with the termination of this
Agreement for Cause; (ii) any reduction of the Base Compensation; (iii) the
requirement that Employee relocate outside of the Nashville, Tennessee
metropolitan area; (iv) the material breach by the Company of any material
provision of this Agreement, which breach continues uncorrected and uncured for
15 days after Employee gives notice of such breach to the Company; or (v) the
termination of this Agreement by written notice from Employee to the Company
during the 30-day period immediately following the first anniversary of a Change
in Control (as defined below).

                  (d)      Involuntary Termination. The employment of Employee
hereunder will be automatically terminated by the death or disability of
Employee as outlined below.

                           (i)      Disability. The Company may terminate this
Agreement at such time as Employee shall have been Disabled (as defined below)
for a continuous period of six months during any continuous 12-month period. For
purposes of this Section 5(d)(i), the term "Disabled" means Employee's inability
to perform the essential functions of his duties, with or without reasonable
accommodation. During Employee's six-month period of Disability, the Company
will continue to pay Employee's Base Compensation (less regular withholdings for
payroll or other taxes and other required or proper items, and less proceeds
from all disability insurance policies or plans provided or made available by
the Company). In the event of a termination of Employee on account of
Disability, the Company will pay Employee's Base Compensation for a period of
six months following the effective date of termination (less regular
withholdings for payroll or other taxes and other required or proper times, and
less proceeds from all disability insurance policies or plans provided or made
available by the Company). In addition, any provisions in the relevant stock
option agreements notwithstanding, all outstanding stock options granted to
Employee by the Company will vest immediately upon termination pursuant to this
Section 5(d)(i).

                           (ii)     Death. If Employee dies during the term of
this Agreement, this Agreement shall terminate and Employee's estate shall
receive the remainder of the Base Compensation

                                       -3-



set forth in Section 3(a) hereof accrued to the last day of the month in which
death occurs. In addition, any provisions in the relevant stock option
agreements notwithstanding, all outstanding stock options granted to Employee by
the Company will vest immediately upon termination pursuant to this Section
5(d)(i).

                  (e)      Post-Termination Compensation. Except as provided in
Section 5(d) above, upon termination of this Agreement, the Company shall be
relieved of all of its obligations hereunder notwithstanding any period of time
remaining under the initial or any renewal term, subject to the following:

                           (i)      Termination without Cause or with Good
Reason. If the Company terminates Employee's employment hereunder without Cause
under Section 5(a) above or if Employee terminates Employee's employment
hereunder with Good Reason under Section 5(c) above or if this Agreement expires
as a result of the Company's giving notice of non-renewal as contemplated by
Section 2 above, then the Company will pay to Employee, after the effective date
of such termination, as Employee's sole and exclusive remedy, (A) an amount
equal to the Base Compensation (as then in effect) plus an amount of Annual
Bonus equal to the target percentage of Base Compensation (as then in effect),
and (B) any unpaid bonus payable for the most recently completed calendar year.
If the Company terminates Employee's employment without Cause or if Employee
terminates Employee's employment hereunder with good reason or if this Agreement
expires as a result of the Company's giving notice of non-renewal, Employee
shall be under no duty to seek or accept other employment; but if he shall do
so, any compensation he shall receive from such other employment will not
diminish the Company's obligation to make payments required to the Employee
hereunder.

                           (ii)     Termination without Good Reason. If Employee
terminates his employment under Section 5(a) above, then the Company's
obligation to pay Employee's Base Compensation will terminate as of the date of
termination.

                           (iii)    Termination for Cause. If the Company
terminates Employee's employment with Cause under Section 5(b) above, then the
Company will pay Employee, after the effective date of such termination, the
Base Compensation (as then in effect) for a period of one month after the
termination date.

                           (iv)     Termination following Change in Control. If,
within twelve (12) months following a Change in Control, either (A) the Company
terminates the employment of Employee hereunder without Cause under Section 5(a)
above or (B) Employee terminates his employment for Good Reason under Section
5(c) above (except for a termination under clause (v) of Section 5(c)), then, in
lieu of any other compensation that may be specified in this Agreement, the
Company will pay Employee an amount equal to (i) the Base Compensation (as then
in effect) plus an amount of Annual Bonus equal to the target percentage of Base
Compensation (as then in effect) multiplied by (ii) two. If Employee terminates
his employment for Good Reason under clause (v) of Section 5(c) above, then, in
lieu of any other compensation that may be specified herein, the Company will
pay Employee an amount equal to the Base Compensation (as then in effect) plus
an amount of Annual Bonus equal to the target percentage of Base Compensation
(as then in effect). The Company will make any payment due under this clause
(iv) in a single lump-sum payment not later than 30 days after termination. If
any payment obligation under this Section 5(e) arises, no compensation received
from other employment (or otherwise) will reduce the Company's obligation to
make the payment(s) described in this paragraph.

                  (f)      Change in Control. "Change in Control" means a change
in control of the Company of a nature that would be required to be reported
(assuming such event has not been

                                       -4-



"previously reported") in response to Item 1(a) of a Current Report on Form 8-K
pursuant to Section 13 or 15(d) of the Exchange Act of 1934 (the "Exchange
Act"); provided that, without limitation, a Change in Control shall also be
deemed to have occurred at such time as:

                           (i)      Any "person" within the meaning of Section
14(d) of the Exchange Act, other than the Company; a subsidiary, or any employee
benefit plan(s) sponsored by the Company or any Subsidiary, is or has become the
"beneficial owner," as defined in rule l3d-3 under the Exchange Act, directly or
indirectly, of 25% or more of the combined voting power of the outstanding
securities of the Company ordinarily having the right to vote at the election of
directors, or

                           (ii)     Individuals who constitute the Board
immediately prior to any meeting of stockholders (the "Incumbent Board") have
ceased for any reason to constitute at least a majority thereof, provided that
any person becoming a director whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least three-quarters (3/4)
of the directors comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as
a nominee for director without objection to such nomination) will be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; or

                           (iii)    Upon approval by the Company's stockholders
of a reorganization, merger, share exchange or consolidation, other than a
reorganization, merger, share exchange or consolidation with respect to which
those persons who were the beneficial owners, immediately prior to such
reorganization, merger, share exchange or consolidation, of outstanding
securities of the Company ordinarily having the right to vote in the election of
directors own, immediately after such transaction, more than 75% of the
outstanding securities of the resulting corporation ordinarily having the right
to vote in the election of directors; or

                           (iv)     Upon approval by the Company's stockholders
of a complete liquidation and dissolution of the Company or the sale or other
disposition of all or substantially all of the assets of the Company other than
to a Subsidiary.

         6.       Nondisclosure, Confidentiality; Competition.

                  (a)      Subject to Section 6(f) below, Employee agrees that,
during the term of this Agreement and of Employee's employment by the Company,
and for a period 12 months after the termination of Employee's employment with
the Company, Employee will not in any manner, directly or indirectly, by himself
or in conjunction with any other person, (i) conduct any of the activities or
perform any of the responsibilities or duties that Employee provided the Company
during his employment by the Company for any business entity that is competitive
with the business of the Company or its affiliates or (ii) establish or own any
financial, beneficial or other interest in (other than an interest consisting of
less than one percent (1%) of a class of publicly traded security), make any
loan to or for the benefit of, or render any managerial, marketing or other
business advice, to any entity that is then conducting activities that are
competitive with those of the business of the Company or its affiliates, in
either case within a geographic territory defined as a 75-mile radius of any
renal dialysis center, unit or facility owned or operated by the Company or an
affiliate of the Company. For purposes of this Section, the "business of the
Company or its affiliates" means owning or operating a renal dialysis center,
unit or facility. The parties acknowledge and agree that nothing in this Section
6(a) shall be deemed to restrict any firm of attorneys of or with which Employee
becomes an employee, partner, shareholder, counsel or otherwise associated or
affiliated from rendering legal services to any business entity or entities that
are competitive with the business of the Company or its affiliates, so long as
Employee does not perform

                                       -5-



services for any such business entity and that such entity or entities do not
represent more than fifty percent (50%) of the revenue of such firm in any
twelve (12)-month period.

                  (b)      Employee further agrees that, for a period of three
years after the termination of Employee's employment with the Company, Employee
will keep confidential and not directly divulge, or allow through a lack of
reasonable care to be divulged to anyone, or use or otherwise appropriate for
Employee's own benefit or for the benefit of others, any knowledge or
information of a confidential nature with respect to the Company's and its
affiliates' current business, the Company itself, or any of its affiliates,
including all trade secrets, pricing information, marketing information or
technical information (hereinafter referred to as the "Confidential Data"),
except for (i) a disclosure that is required by law; or (ii) information that
has been made generally available to the public by the act of one who has the
right to disclose such information; or (iii) information that has become part of
the public domain through no fault of Employee. Employee acknowledges and agrees
that the prohibitions against disclosure of Confidential Data recited herein are
in addition to, and not in lieu of, any rights or remedies the Company may have
available pursuant to the laws of any jurisdiction or at common law to prevent
the disclosure of confidential information, and the enforcement by the Company
of its rights and remedies pursuant hereto shall not be construed as a waiver of
any other rights or available remedies which the Company may possess in law or
equity. Employee acknowledges that the Company has taken reasonable and
appropriate steps to ensure the confidentiality and non-disclosure of all such
Confidential Data. For purposes of this Section the Company's and its
affiliates' "current business" means owning or operating a renal dialysis
center, unit or facility.

                  (c)      Subject to Section 6(f) below, Employee further
agrees that, for a period of three years after the termination of Employee's
employment with the Company, Employee will not, for his own benefit or the
benefit of others, solicit any person or entity that has or has had, or disrupt
or attempt to disrupt, any relationship, contractual or otherwise, with the
Company or an affiliate of the Company (including any patient, payor, physician,
provider, managed care organization or supplier) at any time during Employee's
employment with the Company, for the purpose of assisting, or creating such a
relationship for, any business entity that is competitive with the Company or an
affiliate of the Company. For purposes of this Section, a business entity is
competitive with the Company or an affiliate of the Company if it provides or
offers any renal dialysis service that is provided by the Company or an
affiliate of the Company.

                  (d)      Subject to Section 6(f) below, Employee further
agrees that, for a period of three years after the termination of Employee's
employment with the Company, Employee shall not induce, nor attempt to induce,
any employee of the Company, or any of its affiliates, to terminate such
employee's association with the Company or any of its affiliates.

                  (e)      These post-employment covenants are considered by the
parties hereto to be fair, reasonable and integral for the protection of the
Company. The parties mutually agree that if a violation of any of these
covenants occurs, such violation or any threatened violation will cause
irreparable injury to the Company and the remedy at law for any such violation
or threatened violation will be inadequate. The parties acknowledge that these
covenants will survive, and remain in effect and enforceable after, termination
of this Agreement.

                  (f)      The Company agrees that the forgoing covenants in
subsections (a), (c) and (d) of this Section 6 shall be null and void as to any
period following termination of Employee's employment if such termination occurs
within 13 months following a Change in Control through either (A) a termination
by the Company without Cause under Section 5(a) above or (B) a resignation by
Employee for any reason.

                                       -6-



                  (g)      Employee agrees to indemnify and hold harmless the
Company from and against any and all claims, causes of action, damages and/or
any other losses suffered or incurred by the Company as a result of any breach
or purported breach by Employee of any agreement applicable to Employee which
existed prior to the time of the entering into of this Agreement. The
obligations of Employee to indemnify and hold the Company harmless include any
and all costs of defense of any such claim or threatened claim, including
reasonable attorneys' fees.

         7.       Certain Additional Payments by the Company.

                  (a)      Anything in this Agreement to the contrary
notwithstanding and except as set forth below, if any payment or distribution by
the Company to or for the benefit of Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 7) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Company will make an additional payment (a "Gross-Up
Payment") to Employee in an amount such that after payment by Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

                  (b)      Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, will be made
by Ernst & Young LLP or such other certified public accounting firm as may be
designated by Employee (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Employee within 15 business days
of the receipt of notice from Employee that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, Employee shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by
the Company to Employee within five business days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and Employee. It is possible (due to the uncertainty
in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder) that Gross-Up Payments will not
have been made by the Company which it is ultimately determined should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. Consequently, if the Company exhausts its remedies pursuant to
Section 7(c) and Employee thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and the Company will promptly pay any such Underpayment to or for the
benefit of Employee.

                  (c)      Employee will notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after Employee is
informed in writing of such claim, and such notification will apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. Employee will not pay

                                       -7-



such claim prior to the expiration of the 30-day period following the date on
which Employee gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies Employee in writing prior to the expiration of such period that
it desires to contest such claim, Employee will:

                           (i)      Give the Company any information reasonably
requested by the Company relating to such claim,

                           (ii)     Take such action in connection with
contesting such claim as the Company reasonably requests in writing from time to
time, including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,

                           (iii)    Cooperate with the Company in good faith in
order effectively to contest such claim, and

                           (iv)     Permit the Company to participate in any
proceedings relating to such claim;

provided, however, that the Company will bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and will indemnify and hold Employee harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation of the foregoing provisions of this Section
7(c), the Company will control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct Employee to pay
the tax claimed and sue for a refund or contest the claim in any permissible
manner, and Employee agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company may determine; provided, however, that if
the Company directs Employee to pay such claim and sue for a refund, the Company
will advance the amount of such payment to Employee, on an interest-free basis
and will indemnify and hold Employee harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; provided, further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Employee with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest will be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Employee will be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.

                  (d)      If, after the receipt by Employee of an amount
advanced by the Company pursuant to Section 7(c), Employee becomes entitled to
receive any refund with respect to such claim, Employee will (subject to the
Company's complying with the requirements of Section 7(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Employee of an
amount advanced by the Company pursuant to Section 7(c), a determination is made
that Employee is not entitled to any refund with respect to such claim and the
Company does not notify Employee in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after such determination,
then such advance will be forgiven and Employee shall not be required to repay
and the amount of such advance will offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.

                                       -8-



         8.       Severability.

                  The parties hereto hereby expressly agree and contract that it
is not the intention of either party to violate any public policy, or any
statutory or common law, and that if any paragraph, sentence, clause or
combination of the same of this Agreement will be in violation of the laws of
any state where applicable, such paragraph, sentence, clause or the combination
of the same will be void in the jurisdictions where it is unlawful, and the
remainder thereof shall remain binding on the parties hereto. It is the
intention of the parties to make the covenants of this Agreement binding only to
the extent that they may be lawfully done under existing applicable laws. In the
event that any part of any term or covenant of this Agreement is determined by a
court of law or equity to be overly broad or otherwise unenforceable, the
parties hereto agree that such court shall be empowered to substitute, and it is
the intent of the parties hereto that such court substitute, a reasonably
judicially enforceable term or limitation in the place of such unenforceable
term or covenant, and that as so modified this Agreement will be fully
enforceable.

         9.       Entire Agreement; Modification.

                  This Agreement constitutes the entire agreement between the
parties and supersedes any and all prior understandings or agreements,
specifically including the Old Agreement. Any changes or additions to this
Agreement must be in writing and signed by both parties. If there is any
conflict between the terms of this Agreement and any stock option agreement or
other agreement between Employee and the Company (including any agreement
entered into after the date of this Agreement), then this Agreement will control
unless there is specific reference to superseding this Agreement in such other
agreement or in this Agreement.

         10.      Assignment.

                  (a)      The rights and benefits of Employee under this
Agreement, other than accrued and unpaid amounts due under Section 3(a) hereof,
are personal to Employee and are not assignable.

                  (b)      This Agreement may not be assigned by the Company
except to an affiliate of the Company, provided that such affiliate assumes the
Company's obligations under this Agreement; provided, further, that if the
Company merges or effects a consolidation or share exchange with or into, or
sells or otherwise transfers substantially all its assets to, another business
entity, the Company may assign its rights hereunder to that business entity
without the consent of the Employee provided that it causes such business entity
to assume the Company's obligations under this Agreement and provided, further,
that the provisions of Section 5 remain in full force and effect following such
assignment.

         11.      Notice.

                  Unless otherwise specifically provided, references to notice
periods of a certain number of "days" contained in this Agreement are references
to calendar days. Any notice provided for in this Agreement shall be delivered
to Employee at the most recent address of Employee listed in the Company's then
current employment records. Notice to the Company shall be delivered to the
following address: c/o Renal Care Group, Inc., 2525 West End Avenue, Suite 600,
Nashville, Tennessee 37203, Attention: General Counsel.

                                       -9-



         12.      Waiver.

                  The waiver by any party to this Agreement of a breach of any
of the provisions contained herein will not operate or be construed as a waiver
of any subsequent breach.

         13.      Disputes and Governing Law.

                  The Company and Employee agree that any dispute arising in
connection with, or relating to, this Agreement or the termination of this
Agreement, to the maximum extent allowed by applicable law, will be subject to
resolution through informal methods and, failing such efforts, through
arbitration. Either party may notify the other party of the existence of a
dispute by written notice to the address indicated above in Section 11. The
parties will thereafter attempt in good faith to resolve their differences
within 30 days after the receipt of such notice. If the dispute cannot be
resolved within such 30-day period, either party may file a written demand for
arbitration with the other party. The arbitration shall proceed in accordance
with the terms of the Federal Arbitration Act and the Commercial Arbitration
Rules of the American Arbitration Association. A single arbitrator shall be
appointed through the American Arbitration Association's procedures to resolve
the dispute.

                  The parties agree that in the event arbitration is necessary,
the laws of the State of Tennessee and any applicable federal law shall apply.
The place of the arbitration shall be Nashville, Tennessee.

                  The award of the arbitrator shall be binding and conclusive
upon the parties. Either party shall have the right to have the award made the
judgment of a court of competent jurisdiction in the State of Tennessee.

                  In the event of a dispute arising under this Agreement, the
prevailing party shall be entitled to all reasonable attorneys' fees incurred in
connection with such dispute. The Company and Employee are parties to an
Indemnification Agreement effective as of August 13, 2002, which the parties
specifically ratify and confirm by this reference.

            [the remainder of this page is intentionally left blank]

                                      -10-



                  IN WITNESS WHEREOF, the Company and Employee have executed
this Agreement on the day and year first above written.

                                        COMPANY:
                                        RENAL CARE GROUP, INC.

                                        By: /s/ Gary A. Brukardt
                                        ----------------------------------------
                                        Title: /s/ President and CEO

                                        EMPLOYEE:

                                        /s/ Douglas B. Chappell
                                        ----------------------------------------
                                        DOUGLAS B. CHAPPELL

                                      -11-

EX-31.1

                                                                    Exhibit 31.1

               CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a),
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gary A. Brukardt, certify that:

1.   I have reviewed this annual report on Form 10-K of Renal Care Group, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

              (a) Designed such disclosure controls and procedures, or caused
       such disclosure controls and procedures to be designed under our
       supervision, to ensure that material information relating to the
       registrant, including its consolidated subsidiaries, is made known to us
       by others within those entities, particularly during the period in which
       this report is being prepared;

              (b) Evaluated the effectiveness of the registrant's disclosure
       controls and procedures and presented in this report our conclusions
       about the effectiveness of the disclosure controls and procedures, as of
       the end of the period covered by this report based on such evaluation;
       and

              (c) Disclosed in this report any change in the registrant's
       internal control over financial reporting that occurred during the
       registrant's most recent fiscal quarter (the registrant's fourth fiscal
       quarter in the case of an annual report) that has materially affected, or
       is reasonably likely to materially affect, the registrant's internal
       control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

              (a) All significant deficiencies and material weaknesses in the
       design or operation of internal control over financial reporting which
       are reasonably likely to adversely affect the registrant's ability to
       record, process, summarize and report financial information; and

              (b) Any fraud, whether or not material, that involves management
       or other employees who have a significant role in the registrant's
       internal control over financial reporting.

Date:  March 4, 2004                     /s/ Gary A. Brukardt
                                         ----------------------------------
                                         Gary A. Brukardt
                                         Chief Executive Officer

EX-31.2

                                                                    Exhibit 31.2

               CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a),
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David M. Dill, certify that:

1.   I have reviewed this annual report on Form 10-K of Renal Care Group, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

              (a) Designed such disclosure controls and procedures, or caused
       such disclosure controls and procedures to be designed under our
       supervision, to ensure that material information relating to the
       registrant, including its consolidated subsidiaries, is made known to us
       by others within those entities, particularly during the period in which
       this report is being prepared;

              (b) Evaluated the effectiveness of the registrant's disclosure
       controls and procedures and presented in this report our conclusions
       about the effectiveness of the disclosure controls and procedures, as of
       the end of the period covered by this report based on such evaluation;
       and

              (c) Disclosed in this report any change in the registrant's
       internal control over financial reporting that occurred during the
       registrant's most recent fiscal quarter (the registrant's fourth fiscal
       quarter in the case of an annual report) that has materially affected, or
       is reasonably likely to materially affect, the registrant's internal
       control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

              (a) All significant deficiencies and material weaknesses in the
       design or operation of internal control over financial reporting which
       are reasonably likely to adversely affect the registrant's ability to
       record, process, summarize and report financial information; and

              (b) Any fraud, whether or not material, that involves management
       or other employees who have a significant role in the registrant's
       internal control over financial reporting.

Date:  March 4, 2004                     /s/ David M. Dill
                                         ---------------------------------
                                         David M. Dill
                                         Executive Vice President and
                                         Chief Financial Officer

EX-32.1

                                                                    Exhibit 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Annual Report of Renal Care Group, Inc. (the
"Company") on Form 10-K for the year ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Gary A.
Brukardt Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that, to my knowledge:

   (1)        The Report fully complies with the requirements of section 13(a)
              or 15(d) of the Securities Exchange Act of 1934; and

   (2)        The information  contained in the Report fairly presents,  in all
              material  respects,  the financial  condition and results of
              operations of the Company.

/s/ Gary A. Brukardt
- -------------------------------------
Gary A. Brukardt
Chief Executive Officer
March 4, 2004

EX-32.2

                                                                    Exhibit 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Annual Report of Renal Care Group, Inc. (the
"Company") on Form 10-K for the year ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, David
M. Dill, Executive Vice President and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

   (1)        The Report fully complies with the requirements of section 13(a)
              or 15(d) of the Securities Exchange Act of 1934; and

   (2)        The information  contained in the Report fairly presents,  in all
              material respects,  the financial  condition and results of
              operations of the Company.

/s/ David M. Dill
- -------------------------------------
David M. Dill
Executive Vice President and
Chief Financial Officer
March 4, 2004