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. Irish ("Irish"), 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, Irish is Chief Financial Officer of the Company, an employee
and a stockholder of the Company;
WHEREAS, Irish, the Company and IHS mutually desire to terminate
Irish's employment with the Company on the Effective Date and to enter into
certain other arrangements between Irish and the Company, and Irish, the Company
and IHS mutually desire to take certain other actions contemplated herein, upon
the terms and conditions contained herein;
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 Irish or any entity
controlled by Irish (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 Irish 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 Irish shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Irish 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, Irish 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 Irish
(the "Accounting Firm"), which shall provide detailed supporting calculations
both to the Company and Irish within 15 business days of the
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receipt of notice from Irish 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 the Company at IHS, Irish 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 Irish 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 Irish. 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 Irish 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
Irish.
(c) Irish 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 Irish 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. Irish
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shall not pay such claim prior to the expiration of the 30-day period following
the date on which Irish 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 Irish in writing prior to the expiration of such period
that it desires to contest such claim, Irish 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 Irish 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
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claim and may, at its sole option, either direct Irish to pay the tax claimed
and xxx for a refund or contest the claim in any permissible manner, and Irish
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 Irish to pay such claim and xxx for a refund, the Company shall advance
the amount of such payment to Irish, on an interest-free basis and shall
indemnify and hold Irish 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 Irish 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 Irish 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 Irish of an amount advanced by the Company
pursuant to Section 1(c), Irish becomes entitled to receive any refund with
respect to such claim, Irish 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 Irish of an amount advanced by the
Company pursuant to Section 1(c), a determination is made that Irish shall not
be entitled to any refund with respect to such claim and the Company does not
notify Irish in writing of
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its intent to contest such denial of refund 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 Irish
or others. In no event shall Irish be obligated to seek other employment or take
any other action by way of mitigation of the amounts playable to Irish under any
of the provisions of this Agreement and such amounts shall not be reduced
whether or not Irish obtains other employment. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal fees and expenses which
Irish 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 Irish has prevailed as to the
material issues raised in determination of the dispute, the Company shall as
soon as practicable, but in no
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event later than 30 days from the date of determination of such arbitrator or
court, reimburse Irish for his costs incurred in connection with such contest.
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. 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 Irish:
Xxxxxxx X. Irish
000 Xxxx Xxxxxxx Xxxxxxxxx
#0000
Xxxxxxx, 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
6. 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.
7. 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.
8. 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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9. SUCCESSORS.
(a) This Agreement is personal to Irish and without the prior written
consent of the Company shall not be assignable by Irish otherwise than by will
or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by Irish's 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.
10. 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.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
12. 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. Irish
WITNESS:
-----------------------------
Name:
RoTech Medical Corporation
By:
-----------------------------------
Title:
WITNESS:
-----------------------------
Name:
Integrated Health Services, Inc.
By:
-----------------------------------
Title:
WITNESS:
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