EXHIBIT 10.1
AGREEMENT
THIS AGREEMENT is dated as of the 26th day of July, 2000 and is by and
between XXXXXX X. XXXXXX ("Xxxxxx"), an individual with an address of 0000 Xxx
Xxxxxx Xxxx, Xxxxxx, Xxxxxxx 00000, and INTEGRATED HEALTH SERVICES, INC. ("IHS"
or the "Company"), a Delaware corporation with an address of 000 Xxxxxxxxxx
Xxxx, Xxxxxx, Xxxxxxxx 00000, on behalf of itself and its subsidiaries,
WHEREAS, IHS and affiliates are debtors and debtors in possession in
procedurally consolidated Chapter 11 cases (the "Case") pending in the United
States Bankruptcy Court for the District of Delaware (the "Court") (IHS and the
other entities who are debtors and debtors in possession in the Case are
sometimes collectively referred to as the "Debtors").
WHEREAS, Xxxxxx and IHS are parties to an Employment Agreement dated as
of January 1, 1994, which was amended by Amendment No. 1 dated as of January 1,
1995, which was amended by Amendment No. 2 dated as of November 18, 1997, and
which was supplemented by Supplemental Agreement dated as of November 18, 1997
and Amendment No. 1 to Supplemental Agreement dated as of September 30, 1998
(collectively the "Employment Agreement"); and
WHEREAS, Xxxxxx is Chairman of the Board, Chief Executive Officer, and
President of IHS and is entitled to indemnity from the Debtors pursuant to the
Company's ByLaws, Certificate of Incorporation, and applicable law; and
WHEREAS, in December 1997, IHS sold an aircraft to RNE Skyview LLC
("Skyview"), a limited liability company in which Xxxxxx is the sole member, and
simultaneously IHS and Skyview entered into an Aircraft Lease Agreement dated as
of December 12, 1997 (the "Aircraft Lease"), which remains in force and effect;
and
WHEREAS, IHS from time to time has advanced Xxxxxx money to purchase
stock in IHS, exercise stock options in IHS and pay taxes associated with option
exercise, which advances are memorialized by the documents referred to in
Exhibit A (sometimes collectively referred to as the "Notes"); and
WHEREAS, the Company maintains a primary policy of Directors, Officers
and Corporate Liability insurance with National Union Fire Ins. Co. of
Pittsburgh, PA ("National Union") (policy no. 858-35-56) (the "National Union
Primary Policy"), and excess policies with Zurich American Insurance Company
(policy no. DOC202729302), Gulf Insurance Company (policy no. GA0436277), the
Chubb Group of Insurance Companies (policy no. 7942-44-24-AKCO), and National
Union (policy no. 858-35-55) (said insurance policies, together with all
endorsements through the date hereof, collectively referred to as the "D&O
Policies"), providing a total of $90 million in insurance coverage on the terms
and subject to the conditions set forth in the D&O Policies; and
WHEREAS, as of February 1, 1998 IHS caused its wholly-owned subsidiary
Lyric Health Care LLC. ("Lyric") to sell a 50% membership interest to TFN
Healthcare Investors, Inc. ("TFN"), an entity controlled by Xxxxxxx X. Xxxxxxxxx
("Xxxxxxxxx"), and Xxxxxxxxx became Managing Director of Lyric; and
WHEREAS, as of December 31, 1998, one or more of the Debtors sold
twenty-seven (27) long term care facilities and five (5) specialty hospitals to
Monarch Properties, LP ("Monarch LP") for cash, plus contingent earn out
payments. As of March 25, 1999, the Company sold a nursing facility to Monarch
Properties at Jacksonville, LLC ("Monarch Jacksonville"). Monarch LP and Monarch
Jacksonville leased those facilities to affiliates of Lyric, and an affiliate of
IHS manages those facilities for Lyric pursuant to management agreements (the
"Management Agreements"); and
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WHEREAS, the Debtors after careful consideration, have concluded that
entry into and performance of this Agreement represents a sound exercise of the
Debtors' business judgment, and is in the best interests of the Debtors, their
estates and their Creditors; and
WHEREAS, the parties intend this Agreement to resolve, among other
things, all the Claims and causes of action which Xxxxxx and the other Xxxxxx
Released Parties have or may have against the Debtors and all Equity Interests
which the Xxxxxx Released Parties have in IHS, including rights to purchase or
otherwise acquire stock in IHS, and to effect a total termination of Xxxxxx'
interests in IHS and the other Debtors and their subsidiaries.
NOW, THEREFORE, in consideration of their mutual promises and
covenants, and intending to be legally bound, the parties hereto represent,
warrant, covenant and agree as follows:
1.0 DEFINITIONS. As used in this Agreement, the following capitalized
terms (not already defined in the Recitals above) shall have the meanings set
forth below:
1.1 "APPROVAL ORDER" means the Order of the Court authorizing the
Debtors to perform the transactions contemplated by this Agreement, in form and
substance reasonably satisfactory to the parties.
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1.2 "AVOIDANCE POWER CAUSE OF ACTION" means rights and remedies
accruing to or vested in the Debtors pursuant to Chapter 5 of the Bankruptcy
Code, including 11 U.S.C. xx.xx. 544, 547, 548, 549, 550 or 553.
1.3 "BANKRUPTCY CODE" means the Bankruptcy Reform Act of 1978, as
amended, and as codified in title 11 of the United States Code.
1.4 "BANKRUPTCY RULES" means the Federal Rules of Bankruptcy
Procedure.
1.5 "BOARD" means the Board of Directors of IHS.
1.6 "CLAIM" has the meaning set forth in 11 U.S.C.ss.101(5).
1.7 "CLOSING" means the consummation of the transactions contemplated
by this Agreement.
1.8 "CLOSING DATE" means the date on which the transactions
contemplated by this Agreement are consummated, and the Closing occurs.
1.9 "CLOSING PAYMENT" means the sum of $1,494,000 in immediately
available funds, plus transfer of good and clear title to the Tangible Personal
Property..
1.10 "COMMITTEE" means the Official Committee of Unsecured Creditors
duly appointed in the Case, as the same may be constituted from time to time.
1.11 "COBRA" means the Comprehensive Omnibus Budget Reconciliation
Act.
1.12 "CONSULTING AGREEMENT" means the Consulting Agreement, to be
entered into between IHS and Xxxxxx, substantially in the form of Exhibit B
annexed hereto.
1.13 "CREDITOR" means any entity with a claim against any of the
Debtors, including the holder of a Claim arising from ownership of an Equity
Security issued by any of the Debtors.
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1.14 "EFFECTIVE DATE" means the date on which the parties have
executed and delivered this Agreement and the Committee has executed and
delivered to Xxxxxx the letter agreement annexed hereto as Exhibit C.
1.15 "XXXXXX RELEASED PARTY" means Xxxxxx, his spouse, his children,
his parents, Skyview, and those Entities set forth on Schedule 1.15 which are
owned or controlled by Xxxxxx, and their respective, successors, heirs, or legal
representatives.
1.16 "ENTITY" has the meaning set forth in 11 U.S.C.ss.101(15).
1.17 "EQUITY SECURITY" has the meaning set forth in 11 U.S.C.
ss.101(16).
1.18 "FINAL ORDER" means an order or judgment of the Court, or other
court of competent jurisdiction, as entered on the docket of such court, that
has not been reversed or stayed, and as to which (a) the time to appeal or
petition for certiorari has expired and no timely filed appeal or petition for
certiorari is pending, or (b) any appeal taken or petition for certiorari filed
has been resolved by the highest court to which the order or judgment was
appealed from or from which certiorari was sought.
1.19 "INSURER" means the insurer under any of the D&O Policies.
1.20 "LOSS" has the meaning set forth in the National Union Primary
Policy.
1.21 "MONARCH/LYRIC RELEASED CLAIMS" means any Claim of the Debtors,
including any Avoidance Power Cause of Action, against any of the Monarch/Lyric
Released Parties seeking to unwind, modify, avoid or rescind the transactions
between any of the Debtors and the Monarch/Lyric Released Parties described in
the preamble to this Agreement, including any Claim to recover any property from
any Monarch/Lyric Released Party in connection with or related to any such Claim
to unwind, modify, avoid or rescind any such transaction; provided, however, to
the extent any such Claim is based upon any written contractual obligations of
any
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of the Monarch/Lyric Released Parties to any of the Debtors, such Claim shall
not constitute a Monarch/Lyric Released Claim. Additionally, the Debtors' rights
under the Management Agreements, and any other agreements between or among the
Debtors and the Monarch/Lyric Released Parties and the Debtors' rights to
receive any payments from any of the Monarch/Lyric Released Parties pursuant to
any written agreements between the Debtors and any of such parties, shall not
constitute a Monarch/Lyric Released Claim, and shall not be affected by this
Agreement.
1.22 "MONARCH/LYRIC RELEASED PARTIES" means, collectively, Monarch LP,
Monarch Jacksonville, the affiliates of Monarch LP and Monarch Jacksonville set
forth on Exhibit D hereto(the "Monarch Released Parties" or "Monarch Entities"),
Lyric, the affiliates of Lyric set forth on Exhibit E hereto, TFN and Xxxxxxxxx
(the "Lyric Released Parties" or "Lyric Entities").
1.23 "PLAN" means any plan of reorganization for any of the Debtors.
1.24 "RELEASED CLAIMS" means all Claims, rights, causes of action
(including Avoidance Power Causes of Action), notes, debts, accounts payable,
rights of reimbursement or contribution, demands, judgments, suits, matters and
issues, known or unknown, whether individual, class, derivative, representative,
legal, equitable, or any other type, or in any other capacity, of the Debtors,
in each case against an Xxxxxx Released Party. Released Claims (i) shall not
include Claims giving rise to a Loss arising from Wrongful Acts, it being the
express intent of the parties to this Agreement that the insurance available, if
any, pursuant to the D&O Policies shall be the sole source of recovery for any
Claims of the Debtors which do not constitute Released Claims; provided,
however, a Claim against Xxxxxx giving rise to a Loss arising from a Wrongful
Act shall constitute a Released Claim if the Loss incurred by Xxxxxx with
respect thereto exceeds the amount actually paid by the Insurer under any D&O
Policy (but shall
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constitute a Released Claim only for the amount of such excess); (ii) shall not
include conduct by Xxxxxx which constitutes criminal fraud, for which Xxxxxx has
been convicted by Final Order of a court of competent jurisdiction; and (iii)
shall not include Xxxxxx' obligations under this Agreement, including under
sections 8.2 and 8.3 hereof. Notwithstanding anything contained herein to the
contrary, Released Claims shall not include Claims, if any, held by Entities
other than the Debtors or their estates, including Claims, if any, held by
Creditors.
1.25 "RELEASEE" means any Entity receiving a Release hereunder.
1.26 "RELEASOR" means any Entity granting a Release of any other
Entity under this Agreement.
1.27 "TANGIBLE PERSONAL PROPERTY" means those items of personal
property set forth on Exhibit F hereto.
1.28 "WRONGFUL ACT" has the meaning set forth in the National Union
Primary Policy.
1.29 OTHER DEFINITIONS. A term used and not defined herein, but that
is defined in the Bankruptcy Code, shall have the meaning set forth therein. The
words "herein", "hereof", "hereto", "hereunder" and others of similar import
refer to this Agreement as a whole and not to any particular section,
subsection, or clause in this Agreement. The word "including" shall mean
"including, without limitation." The singular shall include the plural and vice
versa, unless the context otherwise requires.
2.0 REPRESENTATIONS AND WARRANTIES OF XXXXXX.
2.1 Xxxxxx has the legal capacity, power and authority to enter into
and perform (and to cause Skyview to perform) this Agreement. The execution,
delivery and performance of this Agreement will not violate any agreement to
which he or Skyview is a party, nor will it violate any provision of law,
ordinance or regulation to which he or Skyview is subject.
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2.2 All of his representations and warranties will be true and correct
as of the Closing Date.
2.3 Xxxxxx, Skyview and the other Xxxxxx Released Parties will not
transfer, sell, assign or convey any of their Claims against or Equity
Securities issued by any of the Debtors prior to the Closing Date, and they will
not acquire any other Claims against or Equity Securities issued by any of the
Debtors.
2.4 No attachment, execution, assignment for the benefit of creditors,
or voluntary or involuntary proceedings in bankruptcy, or actions pursuant to
any other debtor relief laws are pending against Xxxxxx or Skyview.
2.5 Xxxxxx has performed such investigation, and consulted his
professional advisors, as he deems necessary to allow him to make an informed
determination concerning the merits of this Agreement, and has determined it to
be in his best interests.
2.6 Xxxxxx represents and warrants that all agreements between or
among the Debtors and the Monarch/Lyric Released Parties, including the
Management Agreements, are in full force and effect (except to the extent
enforceability may be limited by application of the Bankruptcy Code) and that
the transactions contemplated by this Agreement (including the termination of
Xxxxxx employment and status as an officer or director of any of the Debtors)
will not adversely impact the Debtors' rights under such agreements, or give any
of the Monarch/Lyric Released Parties the right or ability to terminate, cancel
or materially amend or modify any such agreements.
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3.0 REPRESENTATIONS AND WARRANTIES OF DEBTORS.
3.1 Subject to entry of the Approval Order; (a) the Debtors have
the legal capacity, power and authority to perform the transactions contemplated
by this Agreement, and (b) the execution, delivery and performance of this
Agreement will not violate any agreement to which the Debtors are a party, nor
will it violate any provision of law, ordinance or regulation to which they are
subject.
3.2 All of their representations and warranties will be true and
correct as of the Closing Date.
3.3 The Debtors will not transfer, sell, assign or convey any of
their Claims against any Xxxxxx Released Party or any Monarch/Lyric Released
Party prior to the Closing Date, and they will not acquire any other Claims
against any Xxxxxx Released Party or Monarch/Lyric Released Party.
3.4 The Debtors believe that entry into and performance of this
Agreement represents a sound exercise of their business judgment, and is in the
best interests of the Debtors, their estates and their Creditors.
4.0 COVENANTS OF THE DEBTORS, AND XXXXXX.
4.1 Promptly after execution of this Agreement, the Debtors will file
a Motion (the "Motion"), in form and substance satisfactory to the Debtors and
Xxxxxx, for entry of the Approval Order. Notice of the Motion will be served on
Creditors and other parties in interest, in accordance with the Bankruptcy
Rules, or as otherwise ordered by the Court. Concurrently with filing of the
Motion, the Debtors will apply to the Court for an Order (the "Scheduling
Order") fixing the hearing date on the Motion and the parties to be served
therewith. The Debtors will seek to have the Scheduling Order provide that the
time for any Xxxxxx Released Party to file a proof of claim or interest against
any of the Debtors will be extended to and including September 30, 2000.
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4.2 The Debtors will diligently prosecute the Motion, the Debtors and
Xxxxxx will submit pleadings and such other evidence as are necessary or
appropriate to support the Motion, and the Debtors and Xxxxxx will use their
best efforts to obtain entry of the Approval Order.
4.3 If the Approval Order is entered, the Debtors and Xxxxxx will fully
and timely perform their obligations under this Agreement, and will promptly
close the transactions contemplated by this Agreement.
4.4 Without Xxxxxx written consent, which shall not be unreasonably
withheld, the Debtors will not take any action (whether by way of application to
any court, pursuant to a Plan, or otherwise) (a) to vacate, amend or modify this
Agreement or the Approval Order, or (b) to deprive any Xxxxxx Released Party of
the benefits of this Agreement.
4.5 The Debtors shall not take any action to redeem, terminate, reduce,
cancel or otherwise adversely affect the continuation or maintenance of the D&O
Policies, (including seeking a premium refund, reduction or recovery), in a
manner that would adversely affect the rights of any Xxxxxx Released Party under
this Agreement or under the D&O Policies. The Debtors shall take all actions
reasonably necessary to maintain and continue the D&O Policies in full force and
effect, including the timely payment of all premiums due or to become due.
Xxxxxx shall have no liability for any Retention amount (as defined under the
National Union Primary Policy). If and to the extent National Union contends
that Xxxxxx or the Company are liable for any Retention amount under the
National Union Primary Policy, the Company shall fully discharge and pay all of
such Retention amount. The Debtors shall pay any and all Defense Costs (as
defined in the National Union Primary Policy) reasonably incurred by Xxxxxx
within thirty (30) days of demand for payment, and will be entitled to claim
Xxxxxx' rights of reimbursement
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from the Insurer under any D&O Policy for all such Defense Costs actually paid.
In the event any Insurer refuses to reimburse Defense Costs, which refusal is
sustained as proper by a final judgment of a court of competent jurisdiction in
an action in which Xxxxxx had adequate notice and an opportunity to be heard on
the issue, then Xxxxxx shall promptly refund to IHS any Defense Costs paid to
him by the Debtors but not reimbursed to the Debtors by such Insurer.
4.6 As of the Closing, and for a period of 20 days thereafter, Xxxxxx'
personal assistant, Xxxxx Xxxxxxxx, shall be entitled to resign her position
with the Company. If she elects to do so, then within ten days after receipt of
notice of such election from Xx. Xxxxxxxx, (a) the Debtors will execute and
deliver to Xx. Xxxxxxxx a general release of all Claims against her, if any, and
will pay Xx. Xxxxxxxx the sum of $35,000 in full settlement and satisfaction of
all her Claims against the Company, and (b) Xx. Xxxxxxxx will execute and
deliver to the Company a general release of all Claims, if any, against the
Debtors held by her.
4.7 The Debtors will not take any action to affect the Tangible
Personal Property prior to Closing, without the prior written consent of Xxxxxx.
4.8 The Debtors and Xxxxxx agree that the Approval Order shall
authorize the Committee to execute and perform the letter agreement annexed as
Exhibit C and shall also contain decretal paragraphs effective upon the
occurrence of the Closing that will provide:
(a) The Debtors and all Entities are permanently barred, enjoined
and restrained from commencing, prosecuting or asserting any Released Claim
against any of the Xxxxxx Released Parties, in any court, arbitration,
administrative agency or forum, or in any other manner, and that all Released
Claims against any of the Xxxxxx Released Parties are extinguished, discharged,
satisfied and unenforceable. The Xxxxxx Released Parties are permanently barred,
enjoined and restrained from commencing, prosecuting or asserting any Claims
against the
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Debtors in any court, arbitration, administrative agency or forum, or in any
other manner, which have been released under this Agreement, and all such Claims
against the Debtors are extinguished, discharged, satisfied and unenforceable.
(b) The Debtors and all Entities are permanently barred, enjoined
and restrained from commencing, prosecuting or asserting any Monarch/Lyric
Released Claim against the Monarch/Lyric Released Parties, in any court,
arbitration, administrative agency or forum, or in any other manner, and that
all Monarch/Lyric Released Claims are extinguished, discharged, satisfied and
unenforceable.
(c) To the extent any Debtor sues an Entity and in connection with
such suit such Entity asserts a claim for contribution, indemnification,
recovery of loss or potential loss, or otherwise, however denominated, arising
under state or federal law, including claims based upon tort or contract, as
direct claims, crossclaims, counterclaims or third party claims in any court,
arbitration, administrative agency or forum or in any other manner (each a
"Contribution Claim" and collectively "Contribution Claims") against any Xxxxxx
Released Party or Monarch/Lyric Released Party which Contribution Claim is not
precluded by the Approval Order, then such Debtor, shall automatically, and
without any further act on the part of any party, credit against or reduce the
amount of any judgment it may obtain against such Entity by an amount equal to
the amount as is determined by trial or otherwise in a Final Order to be the
amount due to such Entity from such Xxxxxx Released Party in excess of any
amounts payable by any Insurer under any of the D&O Policies, or from such
Monarch/Lyric Released Party, by reason of such Entity's assertion of a
Contribution Claim against such Xxxxxx Released Party or Monarch/Lyric Released
Party.
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(d) For termination of the Aircraft Lease as of the Closing Date,
releasing and discharging all Claims held by Skyview arising from such
termination, and providing that IHS shall pay Skyview all normal lease payments
due pursuant to the Aircraft Lease through the Closing Date.
4.9 After the Closing Date, the Debtors will not seek, request or
demand, with or without formal legal process, any discovery, records or
information, pursuant to the Bankruptcy Rules or otherwise, from any Xxxxxx
Released Party directly relating to any Released Claim. After the Closing Date,
Xxxxxx will respond promptly to reasonable requests by the Debtors for
information with respect to other matters.
4.10 To the extent the Debtors seek to include in a Plan exoneration
of, indemnity for, or a release of Claims against any of the debtors' officers
or directors, then the Debtors shall use their reasonable efforts to cause
Xxxxxx to receive the benefits of such exoneration, indemnity or release;
provided, however, that any such release shall not include Claims giving rise to
a Loss arising from Wrongful Acts, unless the Loss incurred by Xxxxxx with
respect thereto exceeds the amount actually paid by the Insurer under any D&O
Policy, but such release shall apply only to the amount of such excess. To the
extent the Debtors apply to any court for an injunction against the commencement
or continuation of any action against any of their officers or directors, in
which Xxxxxx is threatened to be named or is a named party, the Debtors shall
use their reasonable efforts to cause Xxxxxx to receive the benefits of any
injunction which may be sought or issued.
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4.11 Xxxxxx and Xxxxx Xxxxxxxx (in the event she resigns her employment
with IHS after the Closing Date) shall be entitled to continuation of their
existing health insurance benefits for a period of eighteen (18) months after
the Closing Date, in accordance with COBRA, and the costs of such continued
benefits will be paid by the Company.
4.12 Xxxxxx shall vacate his office at the Company's Sparks, Maryland
headquarters no later than the Closing Date. The Debtors will provide Xxxxxx
with reasonable access to their business records and accounting personnel on
reasonable advance notice for purposes of facilitating his filing of tax returns
and compliance with this Agreement.
5.0 CLOSING CONDITIONS.
5.1 Conditions to Obligation of Each Party to Effect the Closing. The
respective obligations of each party to effect the Closing shall be subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions:
(a) The Approval Order has been entered.
(b) No restraining order, preliminary or permanent injunction,
or other order issued by any court of competent jurisdiction prohibiting the
consummation of the transactions contemplated hereby shall be in effect.
5.2 Additional Conditions to Obligations of Xxxxxx. The obligations of
Xxxxxx to effect the Closing are also subject to the following conditions (any
one or more of which may be waived by Xxxxxx in a writing signed by him).
(a) Each of the representations and warranties of the Debtors
set forth herein shall be true and correct, individually and in the aggregate,
in all material respects.
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(b) The Debtors shall have performed or complied in all
material respects with all of their agreements and covenants contained in this
Agreement, to be performed or complied with by any one or more of them at or
prior to the Closing Date.
(c) The Approval Order has become a Final Order.
(d) The Committee is not in default of its obligations under
Exhibit C.
5.3 Additional Conditions to Obligations of Debtors. The obligations
of the Debtors to effect the Closing are also subject to the following
conditions (any one or more of which may be waived by Debtors and Committee in
a writing signed by both of them).
(a) Each of the representations and warranties of Xxxxxx set
forth herein shall be true and correct, individually and in the aggregate, in
all material respects.
(b) Xxxxxx shall have performed or complied in all material
respects with all of his agreements and covenants contained in this Agreement,
to be performed or complied with by him at or prior to the Closing Date.
(c) The Approval Order has become a Final Order.
6.0 THE CLOSING.
6.1 The Closing will occur on a date and at a location mutually
agreeable to the parties, within three business days after satisfaction or
waiver of all conditions to Closing.
6.2 At the Closing, Xxxxxx and/or Skyview shall execute and deliver to
the Debtors the following:
(a) Written resignations by Xxxxxx of all of his positions as an
officer or director of any of the Debtors, effective as of the Closing Date.
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(b) An instrument effective to transfer and convey to IHS all of
Xxxxxx' common stock, and rights to acquire common stock or other equity
interests in IHS.
(c) The Consulting Agreement.
(d) Documents executed by the Xxxxxx Released Parties providing
for the releases granted by such parties under Section 7.1 of this Agreement.
6.3 At the Closing, the Debtors shall execute, deliver or transfer to
Xxxxxx all of the following, free and clear of any and all liens, claims and
encumbrances:
(a) The Closing Payment (which shall constitute prepayment in full
by the Debtors of all consideration due Xxxxxx under the Consulting
Agreement).
(b) The Notes.
(c) The Consulting Agreement.
6.4 At Closing, IHS shall pay directly to the federal, and appropriate
state and local taxing authorities for the account of Xxxxxx the following
amounts:
(i) to the Internal Revenue Service, an amount equal to: (a)
1.389 multiplied by (b) twenty eight percent (28%) of the sum of (x) the total
amount of outstanding principal plus interest accrued on the Notes as of the
Closing Date, (y) all principal and interest forgiven on the Notes since January
1, 2000 (the sum of clauses (x) and (y) in this subsection referred to herein as
the "Released Amount"), and (z) amounts payable pursuant to Sections 6.4 (ii)
and (iii) (to the extent applicable).
(ii) to the appropriate state and local taxing authority which
imposes a tax on all or any part of Xxxxxx' income: the amount which is required
under applicable state or local law to be withheld by IHS and remitted to such
taxing authority based upon the Released Amount, and any federal, state or local
tax payment, being treated as employee compensation to Xxxxxx as of the Closing,
grossed up for any additional state or local withholding taxes due on any
amounts payable pursuant to this Section 6.4.
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(iii) to the applicable taxing authorities: all employment,
excise and payroll taxes imposed on Xxxxxx or IHS by any federal, state or local
taxing authorities on account of Xxxxxx' constructive receipt of the Released
Amount or of any of the payments to be made by IHS pursuant to this Section 6.4.
Both IHS and Xxxxxx shall treat and report the Released Amount and all
amounts payable under Section 6.4 (i), (ii) and (iii) (to the extent applicable)
as employee compensation to Xxxxxx subject to withholding for all tax purposes.
7.0 RELEASES; COVENANTS NOT TO XXX; INDEMNITY.
7.1 As of the conclusion of the Closing, and without the need for any
further act by any party, and without a separate release being executed: (i)
Xxxxxx, Skyview and the other Xxxxxx Released Parties shall be deemed to have,
and shall have, fully, finally and forever released, relinquished and discharged
all Claims that they individually or collectively, whether directly,
representatively, derivatively or in any other capacity, ever had, now have, or
hereafter can, shall or may have against the Debtors; (ii) the Debtors shall
have, and shall be deemed to have fully, finally and forever released,
relinquished and discharged all Xxxxxx Released Parties from all Released Claims
that they individually or collectively, whether directly, representatively,
derivatively or in any other capacity, ever had, now have, or hereafter can,
shall or may have ; (iii) the Debtors shall have, and shall be deemed to have
fully, finally and forever released, relinquished and discharged all
Monarch/Lyric Released Parties from all Monarch/Lyric Released Claims; and (iv)
the Xxxxxx Released Parties shall have, and shall be
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deemed to have fully, finally and forever released, relinquished and discharged
all present or former members of the Board of Directors of the Debtors from any
Claims they may hold against such persons arising from the service by such
persons on the Debtors' Boards of Directors. Nothing contained herein shall be
deemed to constitute a release, waiver or discharge of any Entity's rights under
this Agreement.
7.2 Each Releasor hereby expressly agrees that it waives and releases,
with respect to the Claims to be released by it pursuant to this Agreement, any
and all provisions, rights and benefits conferred either (i) by ss. 1542 of the
California Civil Code, which reads: "A general release does not extend to claims
which the creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially affected his
settlement with the debtor," or (ii) by any law of any state or territory of the
United States, or principle of common law, which is similar, comparable or
equivalent to ss. 1542 of the California Civil Code.
7.3 Each Releasor hereby covenants and agrees not to bring, commence or
institute any action, proceeding or claim in any court, arbitration panel,
agency or other tribunal against any Releasee seeking to recover on the Claims
released pursuant to the provisions of this Agreement.
7.4 The Debtors shall indemnify the Xxxxxx Released Parties and hold
them harmless from all loss, cost or expense, including reasonable attorneys
fees, which any of them may incur or suffer arising from or related to the
prosecution by any Entity, including the Debtors, the Committee, any Creditor,
any trustee for any of the Debtors who may be appointed or elected in the Case
or in any superseding case under Chapter 7 of the Bankruptcy Code for any of the
Debtors, or any successor of the Debtors, against any one or more of the Xxxxxx
Released Parties of any of the Released Claims.
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8.0 EMPLOYMENT AGREEMENT, NON-COMPETITION, NON-SOLICITATION
8.1 Xxxxxx' Employment Agreement shall be deemed terminated with the
consent of the parties as of conclusion of the Closing. IHS shall pay Xxxxxx all
amounts earned by and due to him under his Employment Agreement for salary,
benefits, and reimbursement of his ordinary and necessary business expenses
through the Closing Date . The terms and conditions and all provisions of the
Employment Agreement shall be deemed terminated, canceled and of no further
force and effect as of the conclusion of the Closing, with the exception of
Article 4.1 thereof. No party to the Employment Agreement shall have any
continuing rights or obligations under the Employment Agreement after the
Closing, except with respect to Article 4.1 of such agreement.
8.2 Beginning on the first day after the Closing Date, and continuing
for a period of one year thereafter, and so long as no default on the part of
the Debtors, or of the Committee under Exhibit C, has occurred and is
continuing, Xxxxxx agrees that he will not, without the express written consent
of IHS and the Committee (if the Committee is still in existence), directly or
indirectly, for himself or on behalf of any other person, (i) solicit for
employment, or recommend that any subsequent employer of Xxxxxx seek to employ,
any person who, at the time of such solicitation or recommendation, is employed
by any of the Debtors; (ii) solicit, or endeavor to entice away, or direct any
other Entity to solicit or endeavor to entice away, any customer of the Debtors
who, at the time of such solicitation, diversion or enticement, is known by
Xxxxxx to be a customer of any of the Debtors ; or (iii) except for Monarch LP,
Monarch
19
Jacksonville, and the affiliates of Monarch LP and Monarch Jacksonville set
forth on Exhibit D hereto (the "Monarch Entities"), be employed by, be a
director, officer or manager of, act as a consultant for, be a partner in, have
a material proprietary interest in, or otherwise render material assistance to
any Entity that then derives 5% or more of its consolidated gross revenues from
(a) operating or managing subacute healthcare facilities, or (b) providing
oxygen or durable medical equipment in the home in a manner similar to the
current business operations of the Company's Rotech Medical subsidiaries (the
"Rotech Business") (any such Entity being hereinafter referred to as a
"Competitor"). This provision shall not be construed to prohibit Xxxxxx from (a)
acting as an employee, member, manager, officer, director, or consultant for, or
owning more than 10% of, the outstanding voting shares of the equity securities
of the Monarch Entities; or (b) owning up to 10% of the outstanding voting
shares of the equity securities of any company whose securities are listed for
trading on any national securities exchange, or (c) serving as a director of any
company which is not directly in the business of operating or managing any
subacute healthcare facility or in the Rotech Business, or (d) being employed
by, acting as an officer or director of, investing in or rendering services to,
any subsidiary or division of a Competitor so long as (A) such subsidiary or
division does not itself compete directly with the Debtors in the operation or
management of any subacute healthcare facilities, or in the Rotech Business, and
(B) Xxxxxx has no duties, responsibilities or investment in respect of any
portion of the business of the Competitor that does compete directly with the
Debtors in any subacute healthcare market or in the Rotech Business; or (e)
investing in, owning shares or interests in, or acting as an officer, director,
employee, member, manager or consultant for any Entity which acquires assets or
properties from any of the Debtors and which after such acquisition is not a
Competitor; or (f) acting as an investor, consultant, employee, director,
20
member, manager, or in any other capacity in a company which provides advice to
Entities (other than a Competitor) undergoing the restructuring of their assets
and liabilities; or (g) acting as in investor, consultant, employee, director,
member, manager or in any other capacity in respect of any Entity which is not a
Competitor of the Debtors and sells, leases, or otherwise provides goods,
services, personnel, equipment or products of any kind to any of the Debtors or
to any other Entity in the ordinary course of business on arms length terms and
conditions.
8.3 Xxxxxx agrees to hold all Trade Secrets (as defined in his
Employment Agreement) in confidence and to not discuss, communicate or transmit
to others, or make any unauthorized use of the Trade Secrets in any capacity,
position or business; provided, however, nothing contained herein or in Article
4.1 of the Employment Agreement shall preclude Xxxxxx from using Trade Secrets
in connection with the acquisition by Xxxxxx or his affiliate of any assets or
properties from any of the Debtors.
9.0 DEFAULT, REMEDIES
9.1 A default hereunder shall include any of the following:
(a) Any promise, covenant, representation or warranty by any party
hereto contained herein shall prove to be materially false, untrue or incorrect
when made, or shall contain a material omission, the absence of which renders
said representation, warranty, promise or covenant materially misleading.
(b) Any party shall fail to timely and fully perform any of its
obligations, promises, representations, warranties or covenants set forth
herein. If the Committee defaults on its obligations under Exhibit C, such
default shall constitute a default hereunder by the Debtors.
9.2 If a default shall occur and if such default shall continue
unremedied for a period of ten (10) days after notice thereof has been provided
to the defaulting party and to the Committee, the non-defaulting party shall
have and may exercise all rights available to it at law or equity.
21
9.3 Because of the difficulty in ascertaining the damages which may be
suffered by the Debtors if Xxxxxx breaches the provisions of sections 8.2 or
8.3, Xxxxxx agrees that equitable relief, including a temporary or permanent
injunction, is proper to redress his actual or threatened breach of sections 8.2
or 8.3 of this Agreement.
9.4 In any action to enforce the provisions of this Agreement, the
prevailing party shall be entitled to recover from the defaulting party the
prevailing party's actual costs of enforcement of this Agreement, including
attorneys fees and other costs of suit.
9.5 If the Approval Order has not been entered by August 25, 2000, or
if the Closing Date has not occurred by September 30, 2000 (or, in each case,
such later date or dates as may be agreed upon by the Debtors, Xxxxxx and the
Committee), then either the Debtors, Xxxxxx or the Committee shall have the
right to terminate this Agreement (and the letter agreement substantially in the
form of Exhibit C) which termination shall occur automatically upon the giving
of notice of such termination to the other parties in accordance with the notice
provisions hereof. A party that is in default shall not be entitled to elect to
terminate this Agreement or Exhibit C based upon the failure of the Approval
Order to be entered or the Closing Date to occur by the dates set forth above in
this Section 9.5 (or such later dates as may be agreed upon by the Debtors,
Xxxxxx and the Committee).
10. EFFECTIVE DATE. This Agreement shall take effect, and shall be
binding and enforceable, on and after the Effective Date.
11. FURTHER ASSURANCES. The obligations of the parties require that
they employ their good faith and best efforts in effectuating and fulfilling the
obligations contemplated hereunder. In furtherance thereof, the parties agree at
any time from time to time to execute any and all documents reasonably requested
by the other parties to carry out and further the intent of this Agreement.
22
12. ACTIONS AT CLOSING TO BE CONCURRENT All proceedings to be taken and
all documents to be executed and delivered in connection with the consummation
of the transactions contemplated hereby shall be deemed to have been taken and
executed simultaneously, and no proceeding shall be deemed taken or any
documents delivered until all have been taken and delivered.
13. GOVERNING LAW; CONSENT TO JURISDICTION This Agreement shall be
construed and enforced in accordance with the laws of the State of Delaware. The
parties consent to the jurisdiction of the Court in all actions to enforce this
Agreement until the Case is closed or dismissed; thereafter, the state and
federal courts of Delaware shall have jurisdiction to enforce this Agreement.
14. COUNTERPART EXECUTION This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
15. INTEGRATION This is the entire agreement of the parties with
respect to the subject matter hereof. There are no other oral or written
understandings, terms or conditions not contained in this Agreement, and no
party has relied upon any representation or warranty not contained in this
Agreement. Exhibits are an integral part of this Agreement.
16. CONSTRUCTION OF AGREEMENT AND DOCUMENTS The parties hereto agree
that the terms and language of this Agreement were the result of negotiations
between the parties and, as a result, there shall be no presumption that
ambiguities, if any, in this Agreement shall be resolved against either party;
further, any controversy over the construction of this Agreement shall be
decided without regard to events of authorship or negotiation.
23
17. AMENDMENT, WAIVER No consent or waiver, express or implied, by any
party to any breach hereof shall be deemed or construed to be a consent or
waiver to a breach hereof at any other time. No failure or delay of any party in
enforcing any remedy for default hereunder shall constitute a waiver of that
party's right to enforce such remedy. This Agreement may not be changed or
modified except by a writing signed by all parties and consented to by the
Committee.
18. SUCCESSORS BOUND This Agreement is binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, administrators,
legal representatives, successors and assigns.
19. CONSIDERATION This Agreement is entered into without force or
duress, in the free will of the parties, and on account of the receipt of
consideration. All parties acknowledge that they have not entered into this
Agreement in reliance upon any inducement or promise not otherwise contained
herein. The parties have consulted extensively with their respective counsel
regarding the terms of this Agreement and the Exhibits hereto. The decision of
the parties to execute this Agreement and the Exhibits is a fully informed
decision, and the parties are aware of all legal and other ramifications of such
decision.
20. HEADINGS Headings, titles and captions preceding the sections
hereof are provided for convenience of reference and shall not be used to
explain or to restrict the meaning, purpose or effect of any provision to which
they refer.
24
21. ADMISSIBILITY OF THE AGREEMENT After the Effective Date, the terms
of this Agreement shall be fully admissible in any court. The parties hereto
waive any objection that may be interposed under any state or federal rules of
evidence as to the admissibility of this document.
22. NO THIRD PARTY RIGHTS Except for rights accruing to the Xxxxxx
Released Parties and Monarch/Lyric Released Parties, it is not the intent of the
parties who are signatories to this Agreement to grant any rights whatsoever to
parties who are not signatories to this Agreement, and no provision of this
Agreement should be construed to grant any rights to any party who is not a
signatory hereto.
23. NO ADMISSION Nothing contained in this Agreement, or in any of the
negotiations leading up to the making of this Agreement, shall be construed as
an admission of any sort whatsoever by any party to this Agreement.
24. NOTICES Notice of any event as to which notice may be required
hereunder shall be given in writing by certified mail, by overnight courier
service, or by hand delivery, to each of the parties at the following addresses,
and shall be effective three days after mailing or one day after delivery to an
overnight courier service, or upon receipt if delivered by hand:
25.1 If to Xxxxxx X. Xxxxxx
0000 Xxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxx 00000
25.2 If to the Debtors:
Integrated Health Services, Inc.
000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Attention: General Counsel
With a copy (until the effective date of a Plan) to:
Xxxx Xxxxxxx Xxxxxxx Xxxx & Handler LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X.Xxxxxx
25
Any notice to be given to or by the Debtors shall also be given to
counsel to the Committee at the address set forth on Exhibit C hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and the year first above written.
WITNESS OR ATTEST:
/s/ Xxxxx Xxxxxxxx /s/ Xxxxxx X. Xxxxxx
----------------------------- ---------------------------------
XXXXXX X. XXXXXX
RNE SKYVIEW, LLC
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
INTEGRATED HEALTH SERVICES, INC.
/s/ Xxxxx Xxxxxxxx By: /s/ X. Xxxxxx Xxxxxxx
----------------------------- ------------------------------
26
EXHIBIT A
PROMISSORY NOTE
Dated: April 8, 1999 $11,500,000.00
FOR VALUE RECEIVED, the undersigned, XXXXXX X. XXXXXX (the "Maker"), promises to
pay to the order of INTEGRATED HEALTH SERVICES, INC., a Delaware corporation
("IHS"), in lawful money of the United States of America, the principal sum of
ELEVEN MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($11,500,000.00) (the
ADebt@), plus all accrued and unpaid interest thereon at the rate of seven
percent (7%) per annum, on the date (the "Maturity Date") which is five years
from the date hereof.
Notwithstanding the foregoing, on the second anniversary, and each anniversary
thereafter, of the date of this Note, provided that Maker is then a full-time
active employee of IHS, there shall be automatically forgiven hereunder (i) that
portion of the then unpaid principal balance of this Note as shall be equal to
twenty (20%) percent of the Debt, and (ii) all accrued and unpaid interest on
the principal amount. On the fifth anniversary of the date of this Note,
provided that Maker is then a full-time active employee of IHS, there shall be
automatically forgiven hereunder (i) that portion of the then unpaid principal
balance of this Note as shall be equal to forty (40%) percent of the Debt, and
(ii) all accrued and unpaid interest on the principal amount so forgiven.
Accordingly, if Maker shall have remained in the continuous employ of the
Company for a period of five (5) years following the date hereof, all principal
and accrued interest under this Note shall be automatically forgiven as of the
Maturity Date. In addition, the entire unpaid principal balance of this Note and
all accrued and unpaid interest thereon automatically shall be forgiven upon (i)
the occurrence of a "change of control" as defined in the then current
employment agreement between Maker and IHS ("Maker's Employment Agreement"),
(ii) the effective date of any termination by IHS of Maker's Employment
Agreement other than for cause as defined in Maker's Employment Agreement,
including, but not limited to, a rejection of Maker's Employment Agreement in a
reorganization proceeding, or (iii) the effective date of any termination by IHS
of Maker's employment other than for cause as defined in Maker's Employment
Agreement.
All payments on this Note shall be applied first to accrued and unpaid interest
and costs of collection and then to any unpaid principal. At his/her option,
Maker may at any time and from time to time pre-pay all or part of the principal
amount of this Note, without premium, penalty or notice.
Maker waives presentment for payment, demand, notice of non-payment, notice of
protest, and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note. Maker shall pay all costs of collection of this Note,
including reasonable attorneys' fees. All rights and remedies given by this
Note, are cumulative and not exclusive of any thereof or of any other rights or
remedies available to IHS, and no course of dealing between Maker and IHS, or
any delay or omission in exercising any right or remedy shall operate as a
waiver of any right or remedy, and every right and remedy may be exercised from
time to time and as often as shall be deemed appropriate by IHS.
This Note shall be governed, interpreted, and enforceable in accordance with the
laws of the State of Maryland.
THIS NOTE SUPERCEDES AND REPLACES IN ITS ENTIRETY THE NOTE DATED MARCH 24, 1999
IN THE PRINCIPAL AMOUNT OF ELEVEN MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS
($11,750,000.00), WHICH HAD SUPERCEDED AND REPLACED IN ITS ENTIRETY THE NOTE
DATED MARCH 4, 1999 IN THE PRINCIPAL AMOUNT OF SIX MILLION DOLLARS ($6,000,000).
IN WITNESS WHEREOF, the undersigned has executed this Note on the date first
above written.
/s/ Xxxxxx X. Xxxxxx [SEAL]
--------------------
Xxxxxx X. Xxxxxx
AMENDED PROMISSORY NOTE
Dated: July 8, 1999 $8,750,000.00
FOR VALUE RECEIVED, the undersigned, XXXXXX X. XXXXXX (the "Maker"), promises to
pay to the order of INTEGRATED HEALTH SERVICES, INC., a Delaware corporation
("IHS"), on July 8, 2004 in lawful money of the United States of America, the
principal sum of EIGHT MILLION SEVEN HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($8,750,000.00), plus all accrued and unpaid interest thereon.
This Note replaces in its entirety the Note dated November 13, 1998 in the
principal amount of FOUR MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS
($4,500,000) and the Note dated October 12, 1998 in the principal amount of FOUR
MILLION TWO HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($4,250,000).
The aggregate unpaid principal amount of this Note outstanding from time to time
shall bear interest from the date hereof to maturity at six and eight tenths
percent (6.8%) per annum.
Notwithstanding the foregoing, on the second anniversary, and each anniversary
thereafter, of the date of this Note, provided that Maker is then a full-time
active employee of IHS, there shall be automatically forgiven hereunder (i) that
portion of the then unpaid principal balance of this Note as shall be equal to
twenty (20%) percent of the Debt, and (ii) all accrued and unpaid interest on
the principal amount. On the fifth anniversary of the date of this Note,
provided that Maker is then a full-time active employee of IHS, there shall be
automatically forgiven hereunder (i) that portion of the then unpaid principal
balance of this Note as shall be equal to forty (40%) percent of the Debt, and
(ii) all accrued and unpaid interest on the principal amount so forgiven.
Accordingly, if Maker shall have remained in the continuous employ of the
Company for a period of five (5) years following the date hereof, all principal
and accrued interest under this Note shall be automatically forgiven as of the
Maturity Date. In addition, the entire unpaid principal balance of this Note and
all accrued and unpaid interest thereon automatically shall be forgiven upon (i)
the occurrence of a "change of control" as defined in the then current
employment agreement between Maker and IHS ("Maker's Employment Agreement"),
(ii) the effective date of any termination by IHS of Maker's Employment
Agreement other than for cause as defined in Maker's Employment Agreement,
including, but not limited to, a rejection of Maker's Employment Agreement in a
reorganization proceeding, or (iii) the effective date of any termination by IHS
of Maker's employment other than for cause as defined in Maker's Employment
Agreement.
At his option, Maker may at any time and from time to time pre-pay all or part
of the principal amount of this Note, without premium, penalty or notice.
Maker shall pay all costs of collection of this Note, including reasonable
attorneys' fees.
2
Maker waives presentment for payment, demand, notice of non-payment, notice of
protest, and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note. All rights and remedies given by this Note are cumulative
and not exclusive of any thereof or of any other rights or remedies available to
IHS, and no course of dealing between Maker and IHS, or any delay or omission in
exercising any right or remedy shall operate as a waiver of any right or remedy.
Every right and remedy may be exercised from time to time and as often as shall
be deemed appropriate by IHS.
This Note shall be governed, interpreted, and enforceable in accordance with the
Laws of Maryland.
IN WITNESS WHEREOF, the undersigned has executed this Note on the date first
above written.
/s/ Xxxxxx X. Xxxxxx
---------------------------------------
Xxxxxx X. Xxxxxx [SEAL]
3
PROMISSORY NOTE
Dated: July 8, 1999 4,409,095.00
FOR VALUE RECEIVED, the undersigned, XXXXXX X. XXXXXX (the "Maker"), promises to
pay to the order of INTEGRATED HEALTH SERVICES, INC., a Delaware corporation
("IHS"), in lawful money of the United States of America, the principal sum of
FOUR MILLION FOUR HUNDRED NINE THOUSAND NINETY-FIVE AND 00/100 DOLLARS
($4,409,095.00) (the "Debt"), plus all accrued and unpaid interest thereon at
the rate of the higher of (i) IHS' cost of borrowing under its bank credit
facility or (ii) seven and one-half percent (7.5%) per annum, on the date (the
"Maturity Date") which is five years from the date hereof.
Notwithstanding the foregoing, on the second anniversary, and each anniversary
thereafter, of the date of this Note, provided that Maker is then a full-time
active employee of IHS, there shall be automatically forgiven hereunder (i) that
portion of the then unpaid principal balance of this Note as shall be equal to
twenty (20%) percent of the Debt, and (ii) all accrued and unpaid interest on
the principal amount. On the fifth anniversary of the date of this Note,
provided that Maker is then a full-time active employee of IHS, there shall be
automatically forgiven hereunder (i) that portion of the then unpaid principal
balance of this Note as shall be equal to forty (40%) percent of the Debt, and
(ii) all accrued and unpaid interest on the principal amount so forgiven.
Accordingly, if Maker shall have remained in the continuous employ of the
Company for a period of five (5) years following the date hereof, all principal
and accrued interest under this Note shall be automatically forgiven as of the
Maturity Date. In addition, the entire unpaid principal balance of this Note and
all accrued and unpaid interest thereon automatically shall be forgiven upon (i)
the occurrence of a "charge of control" as defined in the then current
employment agreement between Maker and IHS ("Maker's Employment Agreement"),
(ii) the effective date of any termination by IHS Maker's Employment Agreement
other than for cause as defined in Maker's Employment Agreement, including, but
not limited to, a rejection of Maker's Employment Agreement in a reorganization
proceeding, or (iii) the effective date of any termination by IHS of Maker's
employment other than for cause as defined in Maker's Employment Agreement.
All payments on this Note shall be applied first to accrued and unpaid interest
and costs of collection and then to any unpaid principal. At his option, Maker
may at any time and from time to time pre-pay all or part of the principal
amount of this Note, without premium, penalty or notice.
Maker waives presentment for payment, demand, notice of non-payment, notice of
protest, and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note. Maker shall pay all costs of collection of this Note,
including reasonable attorney's fees. All rights and remedies given by this
Note, are cumulative and not exclusive of any thereof or of any other rights or
remedies available to IHS, and no course of dealing between Maker and IHS, or
any delay or omission in exercising any right or remedy shall operate as a
waiver of any right or remedy, and every right and remedy may be exercised from
time to time and as often as shall be deemed appropriate by IHS.
This Note shall be governed, interpreted, and enforceable in accordance with the
laws of the State of Maryland.
This Note replaces in its entirety the Note originally issued on December 19,
1996 in the principal amount of $4,690.527.
IN WITNESS WHEREOF, the undersigned has executed this Note on the date first
above written.
/s/ Xxxxxx X. Xxxxxx
-----------------------------[SEAL]
XXXXXX X. XXXXXX
4
PROMISSORY NOTE
Dated: July 8, 1999 $11,780,210.00
FOR VALUE RECEIVED, the undersigned, XXXXXX X. XXXXXX. ("Maker") promises to pay
to the order of INTEGRATED HEALTH SERVICES, INC. a Delaware corporation ("IHS"),
in lawful money of the United States of America, on July 8, 2003 (the "Maturity
Date"), the principal sum of ELEVEN MILLION SEVEN HUNDRED EIGHTY THOUSAND TWO
HUNDRED TEN AND 00/100 DOLLARS ($11,780,210.00) (the "Debt"), or such lesser
amount of the Debt as shall then be outstanding and unpaid, plus all accrued and
unpaid interest on the Debt. Maker also promises to pay interest on the unpaid
principal amount of the Debt from time to time outstanding, and on any interest
that has from time to time become due but has not yet been paid, at the rate of
Six and Eight-tenths Percent (6.8%) per annum, compounded annually and payable
annually in arrears on July 8 of each year, commencing on July 8, 2000, from the
date hereof until all such unpaid principal and unpaid interest shall have been
paid in full or forgiven.
Notwithstanding the foregoing, on the first anniversary, and each anniversary
thereafter, of the date of this Note, provided that Maker is then a full-time
active employee of IHS, there shall be automatically forgiven hereunder (i) that
portion of the then unpaid principal balance of this Note as shall be equal to
twenty-five (25%) percent of the Debt, and (ii) all accrued and unpaid interest
on the principal amount. On the fourth anniversary of the date of this Note,
provided that Maker is then a full-time active employee of IHS, there shall be
automatically forgiven hereunder (i) that portion of the then unpaid principal
balance of this Note as shall be equal to twenty-five (25%) percent of the Debt,
and (ii) all accrued and unpaid interest on the principal amount so forgiven.
Accordingly, if Maker shall have remained in the continuous employ of the
Company for a period of four (4) years following the date hereof, all principal
and accrued interest under this Note shall be automatically forgiven as of the
Maturity Date.
5
All payments on this Note shall be applied first to accrued and unpaid interest
and costs of collection and then to any unpaid principal. At his option, Maker
may at any time and from time to time pre-pay all or part of the principal
amount of this Note, without premium, penalty or notice.
By its acceptance of this Note, IHS acknowledges and agrees that: (i) Maker is
authorized at any time and from time to time to set off and apply any and all
indebtedness at any time owing by Maker under this Note against any and all
indebtedness or other obligations of IHS then due and owing to Maker and (ii)
any and all payments in respect of indebtedness or other obligations from time
to time due and owing from IHS to Maker shall be made without deduction or
set-off for any indebtedness at any time owing by Maker under this Note.
By accepting this Note, IHS agrees that, upon the occurrence of any Change of
Control or any termination of Maker's employment with IHS by death, for
Permanent Disability, by Maker for Good Reason, or by IHS without Cause, (a) the
Debt and all other amounts and obligations of Maker under this Note that are not
then due shall be automatically and immediately discharged and forgiven and (b)
this Note shall be marked "canceled" and promptly returned to Maker. For
purposes of this Note, (x) the term "Employment Agreement" shall mean the
Employment Agreement between IHS and Maker effective as of January 1, 1994, as
from time to time amended, (y) the terms "Change of Control", "Permanent
Disability", "Good Reason" and "Cause" shall have the meanings set forth in the
Employment Agreement and (z) whether Maker's employment has been terminated for
Permanent Disability, by Maker for Good Reason, or by IHS for Cause shall be
determined in accordance with the procedures set forth in the Employment
Agreement. In addition, the entire unpaid principal balance of this Note and all
accrued and unpaid interest thereon automatically shall be forgiven upon (i) the
effective date of any termination by IHS of Maker's Employment Agreement other
than for cause as defined in Maker's Employment Agreement, including, but not
limited to, a rejection of Maker's Employment Agreement in a reorganization
proceeding, or (ii) the effective date of any termination by IHS of Maker's
employment other than for cause as defined in Maker's Employment Agreement.
6
In the event that IHS purports to terminate Maker's employment for Cause
pursuant to the provisions of Section 3.4 of the Employment Agreement (or any
successor provisions), and Maker disputes that he was properly terminated for
Cause pursuant to such provisions, neither the Debt nor any other amount or
obligation of the Maker under this Note that is not then due shall be due or
payable until a final, unappealable judgment has been entered by a court of
competent jurisdiction affirming that Maker was properly terminated for Cause in
accordance with such provisions.
Maker waives presentment for payment, demand, notice of non-payment, notice of
protest, and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note. Maker shall pay all costs of collection of this Note,
including reasonable attorney's fees. All rights and remedies given by this Note
are cumulative and not exclusive of any thereof or of any other rights or
remedies available to IHS, and no course of dealing between Maker and IHS, or
any delay or omission in exercising any right or remedy shall operate as a
waiver of any right or remedy, and every right and remedy may be exercised from
time to time and as often as shall be deemed appropriate by IHS.
Neither this Note, nor the Debt or any amounts evidenced hereby, nor any other
rights or obligations of Maker of IHS under or in connection with this Note, may
be sold, assigned, pledged or otherwise transferred or encumbered, any attempt
to do so shall be null and void. This Note, and the rights and obligations of
Maker and IHS hereunder, shall inure to the benefit of and be binding upon
Maker, IHS and their respective successors, permitted assigns, heirs, executors
and personal representatives.
This Note shall be governed, interpreted, and enforced in accordance with the
laws of the State of Delaware, without regard to principles of conflict of laws.
This Note replaces in its entirety the Note originally issued on September 30,
1998 which was a replacement of the Note originally issued on September 29, 1997
and the Note originally issued on January 28, 1998.
IN WITNESS WHEREOF, the undersigned has executed this Note on the date first
above written.
/s/ Xxxxxx X. Xxxxxx
-----------------------------[SEAL]
XXXXXX X. XXXXXX
7
EXHIBIT B
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of _______________, 2000, by and between
INTEGRATED HEALTH SERVICES, INC., a Delaware corporation (the "Company"), and
XXXXXX X. XXXXXX (the "Consultant").
WHEREAS, the Company desires to utilize and avail itself of the
experience and expertise of the Consultant, as an independent contractor, in a
consulting capacity and the Consultant desires to provide its services to the
Company in accordance with the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained, and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties, intending to be legally
bound, hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
1.1 "Board" means the Board of Directors of the Company, as it may
be constituted from time to time.
1.2 "Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, or entity.
1.3 "Agreement" means the Agreement between the Company and Xxxxxx
dated as of ________, 2000.
Capitalized terms used herein which are not otherwise defined shall
have the meanings set forth in the Agreement, unless the context otherwise
requires.
2. TERM OF CONSULTING PERIOD. Subject to Section 6 hereof, the term
of this Agreement shall commence on the Closing Date and continue through the
close of business on the day prior to the first anniversary of the Closing
Closing Date (the "Term")
3. DUTIES. The Consultant hereby agrees during the Term to render
consulting services when and if reasonably requested by the Chief Executive
Officer of the Company, subject to the availability of the Consultant.
Consultant shall be entitled to not less than twenty-four (24) hours actual
advance notice of any request to perform services under this Agreement;
provided, however, that Consultant shall be entitled to not less than
forty-eight (48) hours actual advance notice of any request to perform services
under this Agreement which require travel in excess of a fifty (50) mile radius
of Consultant's residence in Naples, Florida. The Consultant shall not be
required to perform services in any consecutive thirty (30) day period which
consume more than ten (10) hours of the Consultant's time. The Consultant shall
not be required to spend more than one hundred (100) hours in the aggregate
performing services during the Term of this Agreement.
COMPENSATION AND REIMBURSABLE EXPENSES.
4.1 COMPENSATION. As full compensation for all obligations of
Consultant and services to be rendered by the Consultant during the Term, the
Company shall pay to the Consultant the Closing Payment on the Closing Date,
which shall be deemed fully earned and nonrefundable when paid (the "Consulting
Compensation"). The Company shall not withhold or cause to be withheld from the
Consulting Compensation any taxes or other amounts and Consultant shall pay
directly any taxes with respect thereto.
4.2 EXPENSES. The Company shall reimburse the Consultant during
the Term for all of his reasonable out-of-pocket expenses incurred pursuant to
this Agreement and in connection with the performance of his duties under this
Agreement, upon submission of satisfactory documentation evidencing such
expenditures, within thirty (30) days of request for such reimbursement. It is
understood and agreed that the foregoing expenses shall not include any expenses
related to any non-commercial air travel.
5. RELATIONSHIP BETWEEN PARTIES. The relationship of the Consultant
to the Company shall be that of an independent contractor. Consequently, neither
party shall have the authority to act for or on behalf of the other or to bind
the other without its express approval in writing. The Consultant shall not be
considered as having employee status for the purpose of any employee benefit
plan applicable to the Company's employees generally, payroll withholding taxes,
or for any other purpose.
6. TERMINATION.
6.1 Subject to the provisions of this Agreement, the Company may
terminate this Agreement without cause at any time on thirty (30) days written
notice to the other party.
6.2 Subject to the provisions of this Agreement, the Consultant
may terminate this Agreement on thirty (30) days notice upon occurrence of any
of the following: (i) default by the Company under this Agreement or under the
Agreement, or (ii) if Consultant permanently retires from active business
operations. In addition, this Agreement will automatically terminate on the
death or disability of the Consultant.
6.3 If the Company or the Consultant terminates this Agreement in
the manner permitted by this section, or upon expiration of the Term
("Termination of this Agreement"), the Company shall pay to the Consultant any
unreimbursed expenses required to be paid to the Consultant pursuant to section
4.2 hereof.
6.4 On Termination of this Agreement, the Consultant shall
promptly return to the Company all documents, materials, papers, data,
statements and any other written material (including but not limited to all
copies thereof) and other property of the Company in the possession of the
Consultant.
2
7. NON-ASSIGNMENT. This Agreement and all of the Consultant's rights
and obligations hereunder are personal to the Consultant and shall not be
assignable. No person, firm or corporation succeeding to the business of the
Company by a merger, purchase, consolidation or otherwise shall assume by
contract or operation of law the rights of the Company hereunder.
8. NON COMPETE; CONFIDENTIALITY The provisions of Section 8.2, 8.3
and 9.3 of the Agreement are incorporated herein by reference.
9. OTHER PROVISIONS.
9.1 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telex, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five (5) days after the date of deposit in the
United States mail, as follows:
(i) if to the Company, to:
Integrated Health Services, Inc.
000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
(ii) if to the Consultant, to:
Xxxxxx X. Xxxxxx
0000 Xxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxx 00000
Any party may change its address for notice hereunto by notice to other party
hereto.
9.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior representations, warranties and agreements, written or oral, with respect
thereto, between the Company and the Consultant.
9.3 WAIVERS AND AGREEMENTS. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
3
9.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its principles of conflicts of law.
9.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
9.6 HEADINGS. The headings of this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
10. ARBITRATION. In the event of a dispute between the Company and the
Consultant over the terms of this Agreement which is not settled by the parties,
the Company and the Consultant agree to settle any and all such disputed issues
by arbitration in accordance with the then-existing rules of the American
Arbitration Association. The Company and the Consultant shall jointly appoint
one person to act as the arbitrator. The decision of the arbitrator shall be
binding upon the parties and there shall be no appeal therefrom other than for
bias, fraud or misconduct. The costs of the arbitration, including the fees and
expenses of the arbitrator, shall be borne fifty per cent by the Company, on the
one hand, and fifty per cent by the Consultant, on the other, but each party
shall pay its own attorney's fees and other professional costs and expenses;
provided, however, that if the arbitrator shall rule for the Consultant, the
Company shall pay or reimburse the Consultant's reasonable attorneys' fees and
other professional costs and expenses and the Consultant's share of the
arbitration costs incurred in connection with such arbitration. Any decision
rendered by the arbitrator, except as provided above, shall be final and
binding.
11. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of the Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed,
4
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTEGRATED HEALTH SERVICES, INC.
By: /s/ X. Xxxxxx Xxxxxxx
---------------------------------------
Name: X. Xxxxxx Xxxxxxx
-------------------------------------
Title: EVP and CFO
------------------------------------
/s/ Xxxxxx X. Xxxxxx
-----------------------------------
Xxxxxx X. Xxxxxx
5
EXHIBIT C
Official Committee of Unsecured Creditors of
Integrated Health Services, Inc. and Subsidiaries, Debtors
Otterbourg, Steindler, Houston & Xxxxx, P.C.
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
July 26, 0000
Xxxxxx X. Xxxxxx
0000 Xxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxx 00000
Dear Xx. Xxxxxx:
This letter is delivered to you in connection with the Agreement dated
as of July 26, 2000 (the "Agreement") between you and Integrated Health
Services, Inc. and subsidiaries ("IHS" or the "Debtors"). All capitalized terms
not otherwise defined herein shall have the meanings set forth in the Agreement.
Paragraphs 1 and 2 of this letter will constitute the binding obligation of the
Committee, enforceable in accordance with its terms, immediately upon execution
and delivery of the Agreement. The balance of this letter will become the
binding obligation of the Committee, enforceable in accordance with its terms,
upon entry of the Approval Order. This letter applies in favor of any Xxxxxx
Released Party and Monarch/Lyric Released Party. The Committee's obligations
under this letter will terminate upon the occurrence of an Event of Default by
Xxxxxx under the Agreement, or in the event the Agreement is terminated pursuant
to Section 9.5 thereof.
1. The Committee has performed such analysis, and consulted its
professional advisors, as it deems necessary or appropriate with respect to the
Agreement. The Committee believes that consummation of the transactions provided
for in the Agreement is in the best interests of the Debtors, their estates and
their creditors.
2. The Committee will support the relief requested in the Motion and
entry of the Approval Order, and will submit pleadings in support of the Motion.
3. Without Xxxxxx' prior written consent, which will not be
unreasonably withheld, the Committee will not take any action (whether by way of
application to any court, pursuant to a Plan, or otherwise), (a) to vacate,
amend or modify, the Agreement or Approval Order, or (b) to deprive any party of
any of the benefits of the Agreement.
4. The Committee will take no action to cause the Debtors to redeem,
terminate, reduce, cancel or otherwise adversely affect the continuation or
maintenance of the D&O Policies in a manner that would adversely affect the
rights of any Xxxxxx Released Party under the Agreement or under the D&O
Policies.
5. The Committee will not unreasonably oppose the inclusion of Xxxxxx
as a beneficiary of any release of officers or directors of the Debtors which
may be included in any Plan to the extent provided in Section 4.10 of the
Agreement, and will not oppose reasonable efforts by the Debtors to include
Xxxxxx as a party covered by any injunction which the Debtors may seek against
the continuation of any third party action.
Very truly yours,
Otterbourg Xxxxxxxxx Houston & Xxxxx
Counsel for the Official Committee of Unsecured Creditors
By: /s/ Xxxxx Xxxx
----------------------------------------------------
Xxxxx Xxxx, Esq.
EXHIBIT D
MONARCH PROPERTIES
Monarch Properties, LLC Monarch Advisory Group, LLC
| | |
| | |
MP Operating, Inc. | |
| | Monarch Properties II, LLC
| | |
MP Operating, LLC | |
| | |
| | Monarch Properties at Jacksonville, LLC
Monarch Properties, LP
EXHIBIT E
LYRIC HEALTHCARE LLC
Integrated Health Services, Inc. TFN Healthcare Investors, LLC
(50%) (50%)
\ /
\ /
\ /
\ /
\ /
\ /
\ /
\ /
\ /
\ /
\ /
\ /
\ /
Lyric Health Care LLC
|
|
------------------------------------------------------------------------------------------------------------------------------
| | | |
| | | |
Lyric Health Care Lyric Health Care Lyric Health Care IHS of Florida at
Holdings Inc. Holdings II, Inc. Holdings III, Inc. Jacksonville, Inc.
| | | |
| | | |
5 Facilities leased from 5 Facilities leased from 32 Facilities leased from 1 Facility leased from
Omega Healthcare Omega Healthcare Monarch Properties Monarch Properties
Investors, Inc. Investors, Inc. by Subsidiaries at
by Subsidiaries by Subsidiaries (See Exhibit C) Jacksonville, LLC
(See Exhibit A) (See Exhibit B)
LYRIC HEALTH CARE HOLDINGS, INC.
Lyric Health Care Holdings, Inc.
|
|
--------------------------------------------------------------------------------------------------------------------------------
| | | | |
| | | | |
Claremont Integrated IHS Acquisition Gainesville Healthcare Rest Haven Integrated Management -
Health, Inc. No. 123, Inc. Center, Inc. Nursing Center Governor's Park, Inc.
(Chestnut Hill), Inc.
LYRIC HEALTH CARE HOLDINGS II, INC.
Lyric Health Care Holdings II, Inc.
|
|
--------------------------------------------------------------------------------------------------------------------------------
| | | | |
| | | | |
F.L.C. Sarasota Pinellas Park Central Park Lodges Integrated Health of Cambridge Group
Nursing Pavilion, Inc. Nursing Home, Inc. (Tarpon Springs), Inc. Waterford Commons, Inc. of Pennsylvania, Inc.
2
LYRIC HEALTH CARE HOLDINGS III, INC.
Lyric Health Care Holdings III, Inc.
|
|
----------------------------------------------------------------------------------------------------------------------------------
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
IHS at | IHS | Integrated | Briar Hill, | Integrated | IHS | Cedarcroft | Manchester
Colorado | Acquisition | Health | Inc. | Health | Acquisition | Health | Integrated
Springs, | No. 103, Inc. | Services at | | Services at | No. 114, Inc. | Services, | Health, Inc.
Inc. | | Central | | Briarcliff | | Inc. |
| | | | Haven, Inc. | | |
| | | | | | |
IHS IHS IHS IHS IHS IHS IHS
Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition
No. 129, Inc. No. 140, Inc. No. 134, Inc. No. 132, Inc. No. 138, Inc. No. 128, Inc. No. 133, Inc.
Lyric Health Care Holdings III, Inc.
|
|
-----------------------------------------------------------------------------------------------------------------------------------
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| IHS | IHS | IHS | IHS | IHS | Rest Haven | Integrated |
| Acquisition | Acquisition | Acquisition | Acquisition | Acquisition | Nursing | of |
| No. 121, Inc. | No. 125, Inc. | No. 124, Inc. | No. 168, Inc. | No. 127, Inc. | Center | Amarillo, |
| | | | | | (Whitemarsh) | Inc. |
| | | | | | Inc. | |
| | | | | | | |
| | | | | | | |
IHS IHS IHS | IHS IHS IHS IHS at
Acquisition Acquisition Acquisition | Acquisition Acquisition Acquisition Hanover
No. 131, Inc. No. 170, Inc. No. 171, Inc. | No. 136, Inc. No. 174, Inc. No. 139, Inc. House, Inc.
|
|
---------------------
| |
| |
Bethamy Living LPC Bethamy
Center Management Health
Company Corporation
| |
| |
Bethamy Living Center
Limited Partnership
3
EXHIBIT F
Tangible Personal Property
Xxxxxxx xx Xxxxxxxx Bigordi, called del Ghirlandaio "The Xxxxxxx and Child with
Adoring Angels", oil on tempura on panel-a tondo, 35" diameter
Xxxxxxxx Xxxxxxxxxxx "Portrait of Seigneur xx Xxxxxxxxxxx, Standing
Three-quarter Length by a Chair", oil on canvas, 54.1/4"x 41.3/4"
Xxxxxxxx de Clerk "The Gathering of Manna by the Israelites", oil on panel,
octagonal made up to a square, 34" x 34"
