SUPPLEMENTAL AGREEMENT
This AGREEMENT is made effective as of November 18, 1997, by and between
INTEGRATED HEALTH SERVICES, INC., a Delaware corporation (hereinafter referred
to as the "Company"), and XXXXXX X. XXXXXX (hereinafter referred to as the
"Executive").
W I T N E S S E T H:
WHEREAS, the Executive is employed as Chairman and Chief Executive Officer
of the Company;
WHEREAS, the Company and the Executive are parties to an Employment
Agreement, effective as of January 1, 1994 (such agreement, as from time to time
amended, being hereafter referred to as the "Employment Agreement");
WHEREAS, the Employment Agreement provides certain pension benefits to the
Executive;
WHEREAS, the Executive is a participant in a supplemental executive
retirement plan of the Company known as SERP A;
WHEREAS, the Company expects to establish a trust ("Trust B") in connection
with the Executive's pension benefits under the Employment Agreement and SERP A;
WHEREAS, the Executive has agreed to deliver to the Company a Note, dated
September 29, 1997 and executed by him, in the principal amount of $13,447,000
("Note A");
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WHEREAS, the Executive has delivered to the Company a Note, dated December
19, 1996 and executed by him, in the principal amount of $4,690,527 ("Note B");
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements herein contained, the parties, intending to be legally bound, hereby
agree as follows:
1. For purposes of this Agreement,
(a) the terms "Change of Control", "Permanent Disability", "Good Reason",
"Cause", "SERP A", "Trust B", "Trust B Agreement", "Board", "Salary" and
"Bonus" shall have the meanings ascribed to them in the Employment
Agreement;
(b) the term "Qualified Medical Termination" shall mean any termination by
the Executive of his employment with the Company pursuant to the
reasonable, good faith, medical advice of a qualified independent physician
selected by him (or, if he is unable to make such selection, by an adult
member of his immediate family) and reasonably acceptable to the Board,
provided that such advice is set forth in a written medical opinion that
(i) is delivered to the Board; (ii) states that, in the physician's
professional opinion, failure by the Executive to terminate his employment
with the Company would pose a significant risk of substantial adverse
effects on the Executive's long-term health and well-being and (iii) sets
forth the specific grounds for the physician's opinion;
(c) the term "Schedule A" shall mean the schedule attached to this
Agreement, which schedule forms a part of this Agreement for all purposes;
(d) the term "Loan Bonus" shall mean any of the five amounts specified in
Schedule A;
(e) the term "Compensation" shall have the meaning ascribed to it in SERP A
and the term "Average Annual Compensation" shall have the meaning ascribed
to it in SERP A and the Trust B Agreement; and
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(f) any determination that the Executive's employment has been terminated
for "Permanent Disability", by the Executive for "Good Reason", or by the
Company for "Cause" shall be made in accordance with the procedures set
forth in the Employment Agreement.
2. Upon any termination of the Executive's employment with the Company by
death, for Permanent Disability, by a Qualified Medical Termination, by the
Executive for Good Reason, or by the Company without Cause, the Executive shall
be deemed to have completed 15 "Years of Service", as that term is defined in
SERP A, for purposes of determining any pension or retirement benefit under the
Employment Agreement, SERP A or Trust B.
3. Upon any Change of Control or any termination of the Executive's
employment with the Company by death, for Permanent Disability, by the Executive
for Good Reason, or by the Company without Cause, all principal, interest and
other amounts and obligations of the Executive under Note B that are not then
due shall be automatically and immediately discharged and forgiven.
4. Subject to the provisions of this Section 4 and of Section 5, the
Executive shall be the beneficiary of Loan Bonuses as of the dates, and in the
amounts, set forth in Schedule A. Each Loan Bonus shall be applied first to
discharge any interest due and payable on Note A and thereafter to pay down any
principal amount that remains outstanding under Note A. No amount shall be due
as a Loan Bonus (a) except for the purpose of paying interest or outstanding
principal under Note A or (b) after the Executive's obligations to make payments
of interest and principal under Note A have been fully discharged.
5. No Loan Bonus shall be due to the Executive if his employment with the
Company terminates on or before the date such Loan Bonus is due unless the
following three requirements are satisfied as of such date:
(a) the termination of his employment was a Qualified Medical Termination;
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(b) he has made himself reasonably available to perform such consulting
services as the Company may have from time to time reasonably requested,
provided that such services were requested to be performed at times, at
places, and in amounts that were not inconsistent with the reasonable, good
faith medical advice of a physician selected in the manner described in
Section 1(b) and were reasonably consistent with the Executive's other
commitments; and
(c) he has not violated any of the restrictions set forth in Section 4.1 or
4.2 of the Employment Agreement (or any successor to such Sections relating
to confidentiality or non-competition covenants), provided that, for
purposes of this Section 5(c), the restrictions set forth in Section 4.2
(or in any successor to such Section) shall be deemed to continue so long
as Note A is not fully discharged.
6. No Loan Bonus, loan forgiveness, severance or termination of employment
benefit, change in control benefit, or income imputed to the Executive on any
purchase of any airplane or hanger referred to in Section 2.3(f) of the
Employment Agreement (or any successor to such Section) shall be treated as
Compensation for the purpose of determining the Executive's Average Annual
Compensation or retirement benefits under SERP A, the Trust B Agreement, or the
Employment Agreement.
7. No amendment, modification or waiver of any provision of this Agreement
shall be valid unless in writing and signed by the party to be charged. This
Agreement shall be governed, interpreted and enforced in accordance with the
laws of the State of Delaware, without regard to principles of conflict of laws.
Any dispute arising under or relating to this Agreement shall, at the election
of the Executive, be resolved in accordance with Section 6.9 of the Employment
Agreement (or any successor to such Section). This Agreement shall be binding
upon and inure to the benefit of the Company and the Executive and their
respective heirs, legal representatives, executors, administrators, successors
and permitted assigns. This Agreement may be executed in counterparts.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by
its duly authorized officers and its corporate seal to be hereunto affixed, and
the Executive has hereunto set the Executive's hand on the day and year first
above written.
COMPANY EXECUTIVE
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Integrated Health Services,
Inc., a Delaware corporation
By: /s/ /s/
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Xxxxxx X. Xxxxxx
Name: ___________________________
Title: ___________________________
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SCHEDULE A
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DATE OF LOAN BONUS AMOUNT OF LOAN BONUS
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October 1, 1998 (a) $3,618,000 minus (b) the excess of (i)
the sum of the Salary and Bonus to which the
Executive was entitled under the Employment
Agreement in respect of calendar year 1997
over (ii) $500,000.
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October 1, 1999 (a) $2,700,000 plus (b) the interest accrued
on the Note after September 30, 1998 minus
(c) the excess of (i) the sum of the Salary
and Bonus to which the Executive was entitled
under the Employment Agreement in respect of
calendar year 1998 over (ii) $500,000.
--------------------------------------------------------------------------------
October 1, 2000 (a) $2,700,000 plus (b) the interest accrued
on the Note after September 30, 1999 minus
(c) the excess of (i) the sum of the Salary
and Bonus to which the Executive was entitled
under the Employment Agreement in respect of
calendar year 1999 over (ii) $500,000.
--------------------------------------------------------------------------------
October 1, 2001 (a) $2,700,000 plus (b) the interest accrued
on the Note after September 30, 2000 minus
(c) the excess of (i) the sum of the Salary
and Bonus to which the Executive was entitled
under the Employment Agreement in respect of
calendar year 2000 over (ii) $500,000.
--------------------------------------------------------------------------------
October 1, 2002 (a) $2,700,000 plus (b) the interest accrued
on the Note after September 30, 2001 minus
(c) the excess of (i) the sum of the Salary
and Bonus to which the Executive was entitled
under the Employment Agreement in respect of
calendar year 2001 over (ii) $500,000.
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