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