AGREEMENT (the "Agreement"), executed on July __, 1997, effective as of
the closing date of the merger between RoTech Medical Corporation, a Florida
corporation, (the "Company") and Integrated Health Service, Inc. ("IHS") (the
"Effective Date") among Xxxxxxx X. Xxxxxxx ("Xxxxxxx"), the Company and IHS.
WHEREAS, the Company simultaneously with the execution of this
Agreement has entered into a merger agreement with IHS whereby the Company will
become a wholly owned subsidiary of IHS (the "Merger Agreement");
WHEREAS, Xxxxxxx is Chairman of the Board of Directors of the Company
(the "Board"), a member of the Board, Chief Executive Officer, an employee and a
stockholder of the Company;
WHEREAS, Xxxxxxx, the Company and IHS mutually desire to terminate
Xxxxxxx'x employment with the Company on the Effective Date and to enter into
certain other arrangements between Xxxxxxx and the Company.
NOW, THEREFORE, in consideration of the mutual agreements of the
parties hereto contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and in reliance upon
the representations of the other parties hereto contained herein, each of the
parties hereto agrees as follows:
1. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) In the event it shall be determined that any payment, investment or
distribution by the Company to or for the benefit of Xxxxxxx or any entity
controlled by Xxxxxxx
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement, the Consulting Agreement, any other agreement executed in
connection with the Merger Agreement, or otherwise, but determined without
regard to any additional payments required under this Section 1) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code or any
corresponding provisions of state or local tax laws, or any interest or
penalties are incurred by Xxxxxxx 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 Xxxxxxx shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Xxxxxxx 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, Xxxxxxx retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 1(c), all determinations
required to be made under this Section 1, 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, shall be made by Ernst & Young
LLP or such other certified public accounting firm as may be designated by
Xxxxxxx (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and Xxxxxxx within 15 business days of the
receipt of notice from Xxxxxxx 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 merger of
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the Company at IHS, Xxxxxxx 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 reasonable
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 1, shall be paid by
the Company to Xxxxxxx within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and Xxxxxxx. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 1(c) and Xxxxxxx 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 any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Xxxxxxx.
(c) Xxxxxxx shall 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 ten business days after Xxxxxxx is informed in
writing of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. Xxxxxxx shall not pay
such claim prior to the expiration of the 30-day period following the date on
which Xxxxxxx gives such notice to the Company (or such shorter
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period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies Xxxxxxx in writing prior to the expiration of
such period that it desires to contest such claim, Xxxxxxx shall:
(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 shall reasonably request 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 shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Xxxxxxx 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 on the foregoing provisions of this Section
1(c), the Company shall 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 Xxxxxxx to pay
the tax claimed and xxx for a
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refund or contest the claim in any permissible manner, and Xxxxxxx 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 shall determine; provided, however, that if the Company directs Xxxxxxx
to pay such claim and xxx for a refund, the Company shall advance the amount of
such payment to Xxxxxxx, on an interest-free basis and shall indemnify and hold
Xxxxxxx harmless, in 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;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of Xxxxxxx 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 shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
Xxxxxxx shall 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 Xxxxxxx of an amount advanced by the
Company pursuant to Section 1(c), Xxxxxxx becomes entitled to receive any refund
with respect to such claim, Xxxxxxx shall (subject to the Company's complying
with the requirements of Section 1(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 Xxxxxxx of an amount advanced by
the Company pursuant to Section 1(c), a determination is made that Xxxxxxx shall
not be entitled to any refund with respect to such claim and the Company does
not notify Xxxxxxx in writing of its intent to contest such denial of refund
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prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
2. CONFIDENTIALITY. (a) Except as otherwise required by law, each of
the parties hereto shall keep the terms of this Agreement confidential.
3. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
Xxxxxxx or others. In no event shall Xxxxxxx be obligated to seek other
employment or take any other action by way of mitigation of the amounts playable
to Xxxxxxx under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not Xxxxxxx obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law, all legal fees
and expenses which Xxxxxxx may reasonably incur as a result of any contest
(regardless of the outcome thereof) of the validity or enforceability of, or
liability or entitlement under any provision of this Agreement or any guarantee
of performance thereof, unless such contest is against IHS, the Company or any
of their respective subsidiaries or affiliates, in which case, each party shall
pay their respective costs incurred in connection with such contest, provided,
however, that to the extent any arbitrator or court shall determine that Xxxxxxx
has prevailed as to the material issues raised in determination of the dispute,
the Company shall as soon as practicable, but in no event later than 30 days
from the date of determination of such arbitrator or court, reimburse Xxxxxxx
for his costs incurred in connection with such contest.
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4. CERTAIN EFFECTS. The invalidity or unenforceability of any
paragraph, term or provision of this Agreement shall in no way affect the
validity or enforceability of the remaining paragraphs, terms and provisions of
this Agreement. In the event of any such invalidity or unenforceability, it is
the parties' hereto intention and agreement that any such paragraph, term or
provision which is held or determined to be invalid or unenforceable, as
written, shall nonetheless be in force and binding to the fullest extent
permitted by law as though such paragraph, term or provision had been written in
such a manner and to such an extent as to be enforceable under the
circumstances.
5. EXPENSES. The Company shall pay all legal expenses incurred by
Xxxxxxx with respect to this Agreement up to a maximum amount of $2,500.
6. NOTICES. All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telecopier or mailed, certified or
registered, return receipt requested, or (c) when received by addressee, if sent
by Express Mail, Federal Express or other express delivery service (receipt
requested), in each case to the appropriate addresses or telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
designate as to himself or itself or by notice to the other parties):
If to Xxxxxxx:
Xxxxxxx X. Xxxxxxx
000 Xxxxxxx Xxxxxxx
Xxxxxx Xxxx, Xxxxxxx 00000
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If to any other party hereto:
Integrated Health Services, Inc.
00000 Xxx Xxx Xxxxxxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Executive Vice President
Xxxxxxxx Xxxxxx
General Counsel
with a copy to:
Blass & Xxxxxx
000 0xx Xxxxxx
Xxx Xxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxx
7. ENTIRE AGREEMENT. This Agreement is intended to express the complete
agreement and understanding among the parties hereto on the matters set forth
herein and to supersede any and all other agreements and understandings, whether
oral or written, between or among the parties hereto on the matters set forth
herein.
8. BINDING EFFECT. The rights and obligations of the parties under this
Agreement shall inure to the benefit of and shall be binding upon their
respective heirs, successors and legal representatives.
9. AMENDMENTS. This Agreement shall be amended or modified only by a
written instrument signed by the parties hereto. Nothing in this Agreement,
expressed or implied, is intended to confer upon any third person any rights or
remedies under or by reason of this Agreement.
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10. SUCCESSORS.
(a) This Agreement is personal to Xxxxxxx and without the prior written
consent of the Company shall not be assignable by Xxxxxxx otherwise than by will
or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by Xxxxxxx'x legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and IHS and its successors and assigns.
(c) The Company and IHS will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company and IHS to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company and IHS would be required to perform it if no such
succession had taken place.
11. GOVERNING LAW. This Agreement shall be construed under the laws of
the State of Florida applicable to agreements made and to be performed fully
therein, without regard to its conflicts of laws rules.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
13. TERMINATION OF THE MERGER AGREEMENT. This Agreement shall
automatically terminate if and when the Merger Agreement is terminated.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
--------------------------------
Xxxxxxx X. Xxxxxxx
WITNESS:
------------------------
Name:
RoTech Medical Corporation
By:
-------------------------
Title:
WITNESS:
------------------------
Name:
Integrated Health Services, Inc.
By:
-------------------------
Title:
WITNESS:
--------------------------
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