EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made and entered into as of the __________ day of April,
1994, by and between INTEGRATED HEALTH SERVICES, INC., a Delaware corporation,
(hereinafter collectively referred to as the "Employer" or the "Company"), and
XXXXXXX X. XXXXX (hereinafter referred to as the "Employee").
W I T N E S S E T H:
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WHEREAS, Employer is engaged in the business of owning and operating
nursing care facilities and other health care-related businesses through its
subsidiaries and tradenames; and
WHEREAS, Employer wishes to employ Employee, and Employee wishes to
accept such employment, on the terms and conditions set forth herein; and
WHEREAS, in the course of his employment, and as a necessary
consequence thereof, Employee will receive information and acquire knowledge of
special procedures, processes, business conduct, and knowledge that is private,
proprietary, and secret to the Company in its business; and
WHEREAS, the business, as well as the success and profits of the
Company, depend in large part upon the maintenance of secrecy as to such
information, processes, procedures and knowledge as to the conduct of the
Company's business generally.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained, as well as the agreement to employ the Employee or
to continue to employ the Employee under the terms and conditions contained
herein, and intending to be legally bound hereby, it is agreed between the
parties hereto as follows:
ARTICLE I
EMPLOYMENT RELATIONSHIP
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1.1 EMPLOYMENT. The Employer hereby employs the Employee in the
position of Senior Vice President-Managed Care, with such responsibilities as
may be assigned to Employee from time to time by the ________________________,
provided, that in the event the Company's Board of Directors provides for the
creation of an Executive Vice President position and any individual is appointed
to such position, then Employee shall be appointed Executive Senior Vice
President of Managed Care. Employee shall report to and be responsible to the
________________________________for the period hereinafter set forth, and the
Employee hereby accepts such employment.
1.2 EXCLUSIVE EMPLOYMENT. During the continuation of the Employee's
employment by the Employer hereunder, the Employee will, unless the Employee has
first received the prior written consent of the Employer, devote the Employee's
entire business time, energy, attention, and skill to the services of the
Employer and to the promotion of its interests, and covenants that during such
time the Employee will not engage in, be employed by, be a director of or be
otherwise directly or indirectly interested in (i) any business or activity
competing with or of a nature similar to the businesses of the Employer, or (ii)
any business or activity engaged in the owning, operation or management of
business or activity competing with or of a nature similar to the businesses of
the Employer.
ARTICLE II
PERIOD OF EMPLOYMENT
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2.1 TERM. Unless sooner terminated pursuant to the terms of this
Agreement, the term of Employee's employment under this Agreement shall be for a
period of three (3) years, commencing
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as of June 1, 1994, and ending on May 31, 1997, provided, however, that on June
1, 1997 and on each June 1st thereafter (an "Anniversary Date"), the term of
this Agreement shall be automatically extended by an additional period of twelve
(12) months. Notwithstanding the foregoing, either party hereto may elect not to
so extend this Agreement by giving written notice of his or its election to the
other party hereto at least one (1) year prior to any Anniversary Date. The
expiration of this Agreement following an election by either party not to renew
shall be deemed to be an expiration on the Agreement's natural expiration date
for all purposes of this Agreement.
2.2 TERMINATION FOR CAUSE. Employer may terminate this Agreement with
cause and without any obligation to pay Employee further compensation upon the
occurrence of any one or more of the following events:
(a) Employee fails to materially perform any of his duties of
employment or breaches any material term of this Agreement, which
failure, non-performance or event is not corrected within fifteen (15)
days after written notice is delivered by the Employer to the Employee
specifying said failure, non-performance or breach.
(b) Employee becomes disabled or is unable to perform his
normal duties, which condition persists for a period of sixty (60) days
or more, and Employer has provided Employee with disability insurance
which shall begin to pay after said sixty (60) day period expires;
(c) Employee is convicted of a misdemeanor or a felony;
(d) Employee commits theft, larceny or embezzlement of
Employer's tangible or intangible property.
2.3 TERMINATION WITHOUT CAUSE. Employer may terminate this Agreement
without cause at any time prior to this Agreement's natural expiration,
provided, however, that Employer shall pay to Employee Severance Pay in
accordance with Section 3.5.
2.4 TERMINATION BY EMPLOYEE WITH CAUSE. Employee may terminate this
Agreement with cause at any time prior to the Agreement's natural expiration
upon the occurrence of any one or more of the following events:
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(a) A material breach of the Agreement by Employer, which
breach is not corrected within sixty (60) days after written notice is
delivered by the Employee to the Employer specifying said breach.
(b) Removal or dismissal of Xxxxxx X. Xxxxxx as Chief
Executive Officer of the Company or Xxxxxxxx X. Xxxxx as Senior Vice
President and Chief Operating Officer of the Company at any time after
April 25, 1996.
(c) A substantial diminution in Employee's employment duties.
(d) A requirement that Employee relocate his current
residence.
(e) Employer fails to grant to Employee stock options in
accordance with Section 3.3.
ARTICLE III
COMPENSATION
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3.1 BASE SALARY. For all services rendered by Employee under this
Agreement, the Employee shall receive a base salary at an initial rate of
$250,000 per year, payable in accordance with the pay period policy established
by the Employer from time to time. Said base salary shall be reviewed for
increase annually, commencing one year after the date hereof. If at any time
Employer decides to effect a company-wide pay reduction, any reduction of
Employee's base salary, such reduction not to exceed twenty (20%) percent of
Employee's then current base salary, shall take effect immediately and shall
neither cause the termination of this Agreement nor constitute an event of
default by the Employer.
3.2 BONUSES. Within 90 days of the close of each calendar year
(beginning with calendar year 1994), the Company shall pay to the Employee a
cash bonus ("Cash Bonus") in such amount as may be determined at the Company's
discretion.
3.3 STOCK OPTIONS. As additional compensation for the performance by
the Employee of his services hereunder, the Company shall recommend to the Stock
Option Plan Committee that, as soon as is reasonably practicable following the
execution of this Agreement and upon the approval
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by the Company's stockholders of Employer's 1994 Stock Incentive Plan that the
Employee be granted options to purchase 100,000 shares of common stock pursuant
to the Company's 1994 Stock Incentive Plan, which options shall have the
following terms: options to purchase 10,000 shares shall vest immediately, and
options to purchase the remaining 90,000 shares shall vest on a straight line
basis over the five (5) year period commencing on February 1, 1994. From and
after any termination of this Agreement, none of such options which have not
already vested shall vest unless this Agreement was terminated by the Company
without cause, which termination without cause shall include Company's failure
to renew this Agreement pursuant to Section 2.1. If such options are granted at
Employee's request as non-statutory stock options, all of such options will be
granted at an exercise price equal to the lowest daily closing NYSE price of the
Company's common stock reached during the period of April 25, 1994, through June
1, 1994; provided, however, that Employee may, by notice to the Company prior to
the granting of such options, elect to have any or all of such options qualify
as Incentive Stock Options under the 1994 Stock Incentive Plan, in which event
the exercise price of the options so designated by the Employee will be equal to
the market value of the Company's common stock as of the date of grant. In the
event Employee is not granted stock options in accordance with this Section 3.3,
Employer shall be entitled, at his sole option, to either (i) terminate this
Agreement for cause pursuant to Section 2.4 hereof, or (ii) receive an annual
bonus for each calendar year during the term of this Agreement, commencing with
the calendar year ending December 31, 1994, of at least thirty (30%) percent of
his then current base salary.
3.4 ADDITIONAL BENEFITS. Separate and apart from the Employee's cash
compensation as set forth above, the Company shall provide and pay for the
following:
(a) Employee's coverage under the Company's standard life and
health package for executives and Exec-U-Care;
(b) Employee's coverage under the Company's long term
disability plan;
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(c) a monthly automobile allowance; and
(d) Employee's reasonable out of pocket expenses incurred as a
result of his relocation to the Owings Mills, MD area.
3.5 SEVERANCE PAY. (a) In the event (i) Employer chooses to terminate
this Agreement without cause, prior to the Agreement's natural expiration date
and so notifies the Employee, or (ii) Employee chooses to terminate this
Agreement with cause, then Employer shall pay to Employee severance pay of
one-twelfth (1/12) of Employee's annual salary on a monthly basis ("Severance
Pay") for (i) twenty-four (24) months or (ii) the amount of time remaining until
this Agreement's natural expiration, whichever is less. Employee shall be bound
by the non-competition restrictions of Paragraph 4.4 for as long as Employee is
receiving such Severance Pay, provided, however, that Employer shall be
obligated to pay the foregoing Severance Pay regardless of whether Employer
wishes to bind Employee to the non-competition restrictions of Paragraph 4.4 or
agrees to release Employee from such restrictions. However, the Employer may
extend the restriction period to such a date which is no later than thirty-six
(36) months from the date of Employee's termination, which time period shall be
at Employer's election, provided that Employer shall pay to Employee Severance
Pay for the extension of such restriction, and shall give Employee written
notice thereof within fifteen (15) days of such termination. The benefits
provided for under Paragraph 3.4(a), (b) and (c), above, shall continue to be
applicable during any period of salary continuation under this Paragraph 3.5.
(b) In the event this Agreement terminates at its natural expiration
date, including termination as a result of a notice of nonrenewal by Employer or
Employee, and Employer elects to enforce and bind Employee to the noncompetition
restrictions of Paragraph 4.4 below, then Employer shall pay to Employee
Severance Pay for each month of restriction for a period of time which is no
later than twelve (12) months from the Agreement's natural expiration, which
time period shall be at Employer's election.
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(c) In the event that this Agreement is terminated by the Employer for
cause and the Employer elects to enforce and bind Employee to the
non-competition restrictions of Paragraph 4.4, below, then Employer shall pay to
Employee one-half of the Severance Pay over the nine-month restriction period of
said Paragraph 4.4. Employer may extend the nine-month restriction period of
Paragraph 4.4 by paying to Employee the full Severance Pay for each month of
restriction after the initial nine-month restriction period, up to a maximum of
three (3) additional months, which time period shall be at Employer's election.
The benefits provided for under Paragraph 3.4, above, shall continue to be
applicable during the first 4.5 months of such restriction period.
ARTICLE IV
COVENANTS OF THE EMPLOYEE
-------------------------
4.1 OWNERSHIP AND RETURN OF DOCUMENTS. The Employee agrees that all
memoranda, notes, records, papers or other documents and all copies thereof
relating to the Employer's operations or businesses, some of which may be
prepared by the Employee, and all objects associated therewith in any way
obtained by the Employee shall be the Employer's property. The Employee shall
not, except for employer's use, copy or duplicate any of the aforementioned
documents or objects, nor remove them from the Employer's facilities nor use any
information concerning them except for the Employer's benefit, either during the
Employee's employment or thereafter. The Employee agrees that the Employee will
deliver all of the aforementioned documents and objects that may be in his
possession to the Employer on termination of the Employee's employment, or at
any other time on the Employer's request, together with the Employee's written
certification of compliance with the provision of this paragraph.
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4.2 CONFIDENTIAL INFORMATION. In connection with employment at the
Company, Employee will have access to confidential information consisting of
some or all of the following categories of information. Employer and Employee
consider their relation one of confidence with respect to such information:
(a) FINANCIAL INFORMATION, including but not limited to
information relating to the Company's earnings, assets, debts, prices,
pricing structure, volume of purchases or sales or other financial data
whether related to the Company or generally, or to particular products,
services, geographic areas, or time periods;
(b) SUPPLY AND SERVICE INFORMATION, including but not limited
to information relating to goods and services, suppliers' names or
addresses, terms of supply or service contracts or of particular
transactions, or related information about potential suppliers to the
extent that such information is not generally known to the public, and
to the extent that the combination of suppliers or use of a particular
supplier, though generally known or available, yields advantages to the
Company details of which are not generally known;
(c) MARKETING INFORMATION, including but not limited to
information relating to details about ongoing or proposed marketing
programs or agreements by or on behalf of the Company, sales
fore-casts, advertising formats and methods or results of marketing
efforts or information about impending transactions;
(d) PERSONNEL INFORMATION, including but not limited to
information relating to employees' personal or medical histories,
compensation or other terms of employment actual or proposed
promotions, hirings, resignation, disciplinary actions, terminations or
reasons therefor, training methods, performance, or other employee
information; and
(e) CUSTOMER INFORMATION, including but not limited to
information relating to past, existing or prospective customers' names,
addresses or backgrounds, records of agreements and prices, proposals
or agreements between customers and the Company, status of customers'
accounts or credit, or related information about actual or prospective
customers as well as customer lists.
All of the foregoing are hereinafter referred to as "Trade Secrets."
During and after the employment by the Company, regardless of the reasons that
such employment ends, Employee agrees:
(aa) To hold all Trade Secrets in confidence and not discuss,
communicate or transmit to others, or make any unauthorized copy of or
use the Trade Secrets in any capacity, position or business except as
it directly relates to Employee's employment by the Company;
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(bb) To use the Trade Secrets only in furtherance of proper
employment related reasons of the Company to further the interests of
the Company;
(cc) To take all reasonable actions that Company deems
necessary or appropriate, to prevent unauthorized use or disclosure of
or to protect the Company's interest in the Trade Secrets; and
(dd) That any of the Trade Secrets, whether prepared by
Employee or which may come into Employee's possession during Employee's
employment hereunder, are and remain the property of the Company and
its affiliates, and all such Trade Secrets, including copies thereof,
together with all other property belonging to the Company or its
affiliates, or used in their respective businesses, shall be delivered
to or left with the Company.
This Agreement does not apply to (i) information that by means other
than Employee's deliberate or inadvertent disclosure becomes well known to the
public; (ii) disclosure compelled by judicial or administrative proceedings
after Employee diligently tries to avoid each disclosure and affords the Company
the opportunity to obtain assurance that compelled disclosures will receive
confidential treatment.
4.3 NON-SOLICITATION AND NON-PIRATING. At all times following a
termination or the natural expiration of this Agreement, the Employee hereby
agrees that, without the express written consent of the Employer, the Employee
will not, directly or indirectly, for the Employee or on behalf of any other
person, firm, entity or other enterprise:
(a) call upon any client or customer of the Employer or in any
way solicit, divert or take away any client or customer of the Employer
who was a client or customer of the Employer while the Employee was an
employee of the Employer under this Agreement (such period being
hereinafter referred to as the "Employment Period"); and
(b) disturb, hire, entice away or in any other manner persuade
any employee, client, or customer of the Employer who was an employee,
client, or customer of the Employer during the Employment Period, to
alter, modify or terminate their relationship with the Employer as an
employee, client, or customer, as the case may be.
4.4 NON-COMPETITION. In consideration of the Employee's employment
hereunder, and subject to the provisions of 3.5, above, the Employee hereby
agrees that, without the express written consent of the Employer, the Employee
will not, directly or indirectly, for the Employee or on behalf
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of any other person, firm, entity or other enterprise, during any period in
which the Employee is receiving Severance Pay pursuant to Paragraph 3.5 or, in
the event Employer terminates this Agreement for cause prior to its natural
expiration, for a period of nine (9) calendar months following the date of
termination of the Employee's employment hereunder (subject to extension
pursuant to Paragraph 3.5 hereof), be employed by, be a director or manager of,
act as a consultant for, be a partner in, have a proprietary interest in, give
advice to, loan money to or otherwise associate with, any person, enterprise,
partnership, association, corporation, joint venture or other entity which is
directly or indirectly in the business of owning, operating or managing any
nursing home, hospital, health care facility or other entity of any type,
licensed or unlicensed, which is engaged in or provides nursing, residential or
domiciliary care services or which provides community meals, supervises the
personal care of individuals, or in any way competes with the Employer or its
subsidiaries. This provision shall not be construed to prohibit the Employee
from owning up to 2% of the issued shares of any company whose common stock is
listed for trading on any national securities exchange or on the NASDAQ National
Market System.
4.5 NECESSARY RESTRICTIONS. The Employee acknowledges that the
restrictions contained in Paragraphs 4.3 and 4.4 are reasonable and necessary to
protect the legitimate business interests of the Employer and that any violation
thereof by him would result in irreparable harm to the Employer. Accordingly,
the Employee agrees that upon the violation by him of any of the restrictions
contained in Paragraphs 4.3 or 4.4, the Employer shall be entitled to obtain
from any court of competent jurisdiction a preliminary and permanent injunction
as well as any other relief provided at law, equity, under this Agreement or
otherwise. In the event any of the foregoing restrictions are adjudged
unreasonable in any proceeding, then the parties agree that the period of time
or the scope of such
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restrictions (or both) shall be adjusted to such a manner or for such a time (or
both) as is adjudged to be reasonable.
4.6 PRIOR EMPLOYERS. The Employee agrees to indemnify and hold harmless
the Company, its officers, directors, and employees from and against any
liabilities and expenses, including attorney's fees and amounts paid in
settlement, incurred by any of them in connection with any claim by any of the
Employee's prior employers that the termination of his employment with such
employer, his employment with the Employer, or that the use of any skills or
knowledge by the Company is a violation of contract or law. Employee hereby
represents and warrants to the Company that (i) he is not bound by any agreement
with any prior employer or other party to refrain from using or disclosing any
confidential information or from competing with the business of such employer or
other party, (ii) his performance under this Agreement will not breach any other
agreement by which he is bound, and (iii) he has not brought with him to the
Company, nor will he bring or use in the performance of his responsibilities at
the Company, any materials or documents of a former employer which are not
generally available to the public.
4.7 REMEDIES FOR BREACH. The Employee acknowledges that the covenants
contained in Article IV of this Agreement are independent covenants and that any
failure by the Employer to perform its obligations under this Agreement (other
than the act of nonpayment which is not cured by the Employer within thirty (30)
days of the receipt of written notice of said condition from the Employee) shall
not be a defense to enforcement of the covenants contained in Article IV,
including but not limited to a temporary or permanent injunction. The Employee
acknowledges that damages in the event of Employee's breach of this Article IV
will be difficult, if not impossible, to ascertain and it is therefore agreed
that the Employer, in addition to, and without limiting any other remedy or
right it may have, shall have the right to an injunction enjoining the said
breach. Employee agrees to
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reimburse Employer for all costs and expenses, including reasonable attorney's
fees, incurred by Employer because of any breach of this Article.
ARTICLE V
ASSIGNMENT
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5.1 PROHIBITION OF EMPLOYMENT ASSIGNMENT. The Employee agrees on behalf
of the Employee and the Employee's heirs and executors, personal
representatives, and any other person or persons claiming any benefit under the
Employee by virtue of this Agreement, that this Agreement and the rights,
interests, and benefits hereunder shall not be assigned, transferred, pledged or
hypothecated in any way by the Employee or the Employee's heirs, executors and
personal representatives, and shall not be subject to execution, attachment or
similar process. Any attempt to assign, transfer, pledge, hypothecate or
otherwise dispose of this Agreement or any such rights, interests and benefits
thereunder contrary to the foregoing provision, or the levy of any attachment or
similar process thereupon shall be null and void and without effect and shall
relieve the Employer of any and all liability hereunder.
5.2 RIGHT OF EMPLOYER TO ASSIGN. This Agreement shall be assignable and
transferable by the Employer to Employer's transferee, assignee or any
successor-in-interest, parent, subsidiary or affiliate of Employer, and shall
inure to the benefit of and be binding upon the Employee, the Employee's heirs
and personal representatives, and the Employer and its successors and assigns.
Employee agrees to execute all documents necessary to ratify and effectuate such
assignment.
5.3 BINDING EFFECT IF TRANSFERRED. In the event this Agreement is
transferred by Employer, the term "Employer" and "Company" used herein shall
refer to and be binding upon the Employer's transferee or assignee.
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ARTICLE VI
GENERAL
6.1 GOVERNING LAW. This Agreement shall be subject to and governed by
the laws of the State of Maryland, irrespective of the fact that the Employee
may become a resident of a different state.
6.2 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Employer and the Employee and their respective heirs, legal
representatives, executors, administrators, successors and permitted assigns.
6.3 ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties and contains all of the agreements between the parties with
respect to the subject matter hereof; this Agreement supersedes any and all
other agreements, either oral or in writing, between the parties hereto with
respect to the subject hereof. No change or modification of this Agreement shall
be valid unless the same be in writing and signed by both parties hereto. No
waiver of any provisions of this Agreement shall be valid unless in writing and
signed by the person or party to be charged.
6.4 SEVERABILITY. If any portion of this Agreement shall be for any
reason, invalid or unenforceable, the remaining portion or portions shall
nevertheless be valid, enforceable and carried into effect, unless to do so
would clearly violate the present legal and valid intention of the parties
hereto.
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6.5 NOTICES. All notices, demands, requests, consents, approvals or
other communications required or permitted hereunder shall be in writing and
shall be delivered by hand, registered or certified mail with return receipt
requested or by a nationally recognized overnight delivery service, in each case
with all postage or other delivery charges prepaid, and to the address of the
party to whom it is directed as indicated below, or to such other address as
such party may specify by giving notice to the other in accordance with the
terms hereof. Any such notice shall be deemed to be received (i) when delivered,
if by hand, (ii) on the next business day following timely deposit with a
nationally recognized overnight delivery service, or (iii) on the date shown on
the return receipt as received or refused or on the date the postal authorities
state that delivery cannot be ac
IF TO THE COMPANY: Integrated Health Services, Inc.
00000 Xxx Xxx Xxxxxxxxx
Xxxxxx Xxxxx, XX 00000
Attn: General Counsel
IF TO THE EMPLOYEE: Xxxxxxx X. Xxxxx
00000 Xxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
6.6 INDEPENDENT LEGAL COUNSEL. Employee represents and warrants that he
has had the opportunity to seek the advice of independent legal counsel prior to
signing this Agreement, and that the Company has recommended to him that he
obtain such counsel.
6.7 ATTORNEY'S FEES. In the event of litigation concerning this
Agreement, the prevailing party shall be entitled to collect from the losing
party attorney's fees and costs, including those on appeal.
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IN WITNESS WHEREOF, the Employer has caused this Agreement to be signed
by its duly authorized officers and its corporate seal to be hereunto affixed,
and the Employee has hereunto set Employee's hand on the day and year first
above written.
EMPLOYER EMPLOYEE
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Integrated Health Services,
Inc., a Delaware Corporation
/s/ Xxxxxxx X. Xxxxx
By:-------------------------------- ------------------------------
Xxxxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx
Senior Vice President and
Chief Operating Officer
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