EMPLOYMENT AGREEMENT
This AGREEMENT is made effective as of January 1, 1994, (the
"Effective Date"), by and between INTEGRATED HEALTH SERVICES, INC., a Delaware
corporation (hereinafter referred to as the "Company"), and ROBERT N. ELKINS
(hereinafter referred to as the "Executive").
W I T N E S S E T H:
WHEREAS, the Company wishes to employ the Executive and to
ensure the continued services of the Executive for the Term (as hereinafter
defined), and the Executive desires to be employed by the Company for such Term,
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premise and
the mutual agreements herein contained, the parties, intending to be legally
bound, hereby agree as follows:
ARTICLE I
EMPLOYMENT RELATIONSHIP
1.1 Employment. During the Term, the Company and the Executive
agree that the Executive shall be employed as President and Chief Executive
Officer of the Company and shall have the customary powers, responsibilities and
authorities of presidents and chief executive officers of corporations of the
size, type and nature of the Company as they exist from time to time. During the
Term, the Company shall also recommend and propose the Executive as a Director
and as Chairman of the Board of Directors of the Company. The Executive shall
only report to and be responsible directly to the Board of Directors of the
Company (the "Board").
1.2 Exclusive Employment. During the Term, the Executive
agrees to devote all such working time as is reasonably required for the
discharge of his duties hereunder and to perform such services faithfully and to
the best of his ability. Notwithstanding the foregoing, nothing in this
Agreement shall preclude the Executive from (a) performing his duties and
responsibilities hereunder at a location other than the Company's executive
offices; (b) engaging in charitable and community affairs, so long as they are
consistent with his duties and responsibilities under this Agreement, (c)
managing his personal investments, and (d) serving on the Board of Directors of
Speciality Care PLC ("Speciality Care") and Community Care of America, Inc.
("Community Care") and on the boards of directors of other companies. From time
to time, the Executive may furnish services to other companies, provided that
furnishing such services does not materially interfere with his duties
hereunder.
1.3 Term. Unless sooner terminated pursuant to Article III
below, the term of this Agreement (the "Term") shall commence on the Effective
Date, and be in effect for three (3) years; provided, however, that on each
January 1st after the date of this Agreement (an "Anniversary Date"), the then
current term of this Agreement automatically shall be extended by an additional
period of twelve (12) months, so that, as of each Anniversary Date, this
Agreement shall have an unexpired Term of three (3) years. 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
ninety (90) days prior to any Anniversary Date. If the Company elects not to
renew the Agreement, the Executive shall be entitled to severance at the end of
the Term as set forth in Section 3.4.
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ARTICLE II
COMPENSATION
2.1 Salary. The Executive shall receive a base salary at an
initial rate of $500,000 per year (the "Salary"), payable in substantially equal
installments in accordance with the pay policy established by the Company from
time to time, but not less frequently than monthly. On each Anniversary Date,
the Salary shall be increased or decreased (but not below Five Hundred Thousand
Dollars ($500,000)), by a percentage which is equal to the percentage increase
or decrease, as applicable, in the "Consumer Price Index for All Urban
Consumers" published by the United States Department of Labor's Bureau of Labor
Statistics for the then most recently ended 12-month period as of the date of
such adjustment, and increased by such additional amounts as may be determined
at the discretion of the Board. Once adjusted, such adjusted amount shall
constitute Salary for purposes of this Agreement.
2.2 Bonuses. (a) If the Company's earnings per share equal or
exceed the earnings goals set by the Board (the "Target") then, no more than ten
(10) days following the date the Company publicly announces its earnings, the
Company shall pay the Executive a bonus ("Bonus") determined as follows:
(1) with respect to each calendar quarter, if the Company's
earnings equal or exceed the Target, the Company shall pay the
Executive a lump sum cash amount equal to 12-1/2% of Salary;
(2) with respect to each calendar year, if the Company's
earnings equal or exceed the Target, the Company shall pay the
Executive a lump sum cash amount equal to 50% of Salary plus an
additional 12 1/2% of Salary for each quarter within such year with
respect to which the Executive did not receive a payment under
paragraph (1).
(b) Notwithstanding anything in Section 2.2(a) to the
contrary, if in any calendar year the Company pays an amount with respect to the
Company's quarterly earnings
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pursuant to Section 2.2(a)(1) but (because the Company's earnings do not equal
or exceed the Target for the calendar year containing any of the quarters for
which a payment under Section 2.2(a)(1) is made) the Company does not pay the
Executive an amount pursuant to Section 2.2(a)(2), then the Company shall either
treat the quarterly amounts paid to the Executive pursuant to Section 2.2(a)(1)
in such year as a prepayment of its Salary, Severance, or Disability obligations
under Sections 2.1, 3.4 or 3.5, respectively, or, shall require the Executive to
repay such amounts to the Company with interest at the prime rate of Citibank,
N.A.
2.3 Employee Benefits and Perquisites. During the Term, the
Company shall provide and/or pay for employee benefits and perquisites that are,
in the aggregate, no less favorable than the employee benefits and perquisites
that the Executive enjoys as of the Effective Date, as increased from time to
time, including, without limitation:
(a) life insurance coverage in the amount of $2,000,000;
(b) medical and dental benefits;
(c) disability insurance coverage in a monthly benefit amount
equal to the sum of 100% of Executive's Salary plus "Bonus Amount" (as
defined in Section 3.4(a));
(d) one-half (1/2) of the cost of dues, assessments and other
charges for a full membership in a country club of the Executive's
choice;
(e) an automobile allowance (including an allowance for all
operating and maintenance expenses) and automobile insurance coverage
at least equal to the allowance and coverage the Executive receives as
of the Effective Date, and as increased from time to time; and
(f) use of the Company-provided airplane, that Executive has
use of as of the Effective Date.
Once increased, the level of benefits and perquisites shall
not be decreased without the Executive's consent.
2.4 Equity-based Compensation. During the Term, the
Compensation Committee, in its complete discretion, may select the Executive to
participate in programs or
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enter into agreements which provide for the grant of certain equity-based
compensation or rights to the Executive.
ARTICLE III
TERMINATION AND SEVERANCE
3.1 Termination; Nonrenewal. The Company shall have the right
to terminate the Executive's employment, and the Executive shall have the right
to resign his employment with the Company, at any time during the Term, for any
reason or for no stated reason, upon no less than ninety (90) days' prior
written notice (or such shorter notice to the extent provided for herein). Upon
the Executive's termination without "Cause" (as defined in Section 3.2) or
resignation for "Good Reason" (as defined in Section 3.3) or upon the expiration
of the Term following the Company's election not to renew this Agreement (in
accordance with Section 1.3), the Executive shall be entitled to severance as
set forth in Section 3.4. Upon the Executive's termination for Cause or
resignation without Good Reason, the Executive shall not be entitled to
severance. If the Executive's employment is terminated because of a Permanent
Disability (as defined in Section 3.5), the Executive shall receive the benefits
and payments described in Section 3.5.
3.2 Termination For Cause. (a) The Company may terminate this
Agreement for Cause following a determination by the Board that Cause exists.
For purposes of this Agreement, Cause shall mean any or all of the following:
(i) the Executive's willful and continuing neglect of his duties hereunder;
(ii) a material breach by the Executive of his covenants under
Sections 4.1 or 4.2;
(iii) the conviction of the Executive of a felony (including
the theft, larceny or embezzlement of the Company's tangible or
intangible property).
(b) Notwithstanding anything in Section 3.2(a) to the
contrary, a termination shall not be for Cause unless (i) the determination that
Cause exists is made by the Board at a special
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meeting called for the purpose of determining whether Cause exists, the
Executive is provided with at least thirty (30) days' prior written notice of
such Board meeting (which notice shall set forth the conduct alleged to
constitute Cause) (the "Cause Notice"), and the Executive is given the
opportunity to be represented by counsel at such meeting; and (ii) the Executive
does not cure his conduct (to the reasonable satisfaction of the Board) within
sixty (60) days after the receipt of the Cause Notice.
3.3 Termination for Good Reason. (a) The Executive may
terminate this Agreement for Good Reason, provided he gives the Company prior
written notice that Good Reason exists (the "Good Reason Notice"). For purposes
of this Agreement, Good Reason shall mean one or more of the following:
(1) a material breach of the Agreement by the Company
(including, without limitation, one or more of the following without
the Executive's prior written consent:
(i) a material diminution of the Executive's responsibilities,
title, authority or status,
(ii) the failure of the Company to pay the Executive amounts
when due under this Agreement,
(iii) the Executive's removal or dismissal from, or failure to
be reelected President or Chief Executive Officer; and
(iv) a reduction in salary or a material reduction in benefits
(other than a reduction in salary permitted by Section 2.1).
(2) the resignation by the Executive within one (1) year
following a "Change of Control", as defined in Section 3.3(b), provided
that the Executive gives the Company at least ninety (90) days prior
written notice of his intent to resign and the effective date of such
resignation is at least one hundred eighty (180) days after the Change
of Control.
(3) the Executive's removal or dismissal from, or failure to
be reelected Chairman of the Board of the Company.
Notwithstanding the foregoing, a termination on account of a reason described in
paragraph (1), shall be deemed not to be for Good Reason unless the Executive
(i) gives the Company the opportunity to cure the condition that purports to
constitute Good Reason, and (ii) the Company
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fails to cure that condition within sixty (60) days after the receipt of the
Good Reason Notice (or, with respect to the failure to make any payment when due
to the Executive within ten (10) days after the receipt of such notice).
(b) For purposes of this Agreement, a "Change of Control"
shall be deemed to occur if (i) there shall be consummated (x) any
consolidation, reorganization or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which shares of the
Company's common stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Company's common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (ii) the stockholders of the Company shall
approve any plan or proposal for liquidation or dissolution of the Company, or
(iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act, including any "group" (as defined in Section 13(d)(3) of the
Exchange Act), (other than the Executive or any group controlled by the
Executive)) shall become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of 20% or more of the Company's outstanding common stock
(other than pursuant to a plan or arrangement entered into by such person and
the Company) and such person discloses its intent to effect a change in the
control or ownership of the Company in any filing with the Securities and
Exchange Commission, or (iv) within any twenty-four (24) month period beginning
on or after the Effective Date, the persons who were directors of the Company
immediately before the beginning of such period (the "Incumbent Directors")
shall cease (for any reason other than death, disability or retirement) to
constitute at least a majority of the Board or the board of directors of any
successor to the Company, provided that, any director who was not a director as
of the Effective Date shall be deemed to be an Incumbent Director if such
director
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was elected to the Board by, or on the recommendation of or with the approval
of, at least two-thirds of the directors who then qualified as Incumbent
Directors either actually or by prior operation of this Section 3.3(b)(iv)
unless such election, recommendation or approval was the result of any actual or
threatened election contest of the type contemplated by Regulation 14a-11
promulgated under the Exchange Act or any successor provision.
3.4 Severance. (a) If the Executive resigns for Good Reason,
or is terminated without Cause, or if the Company gives the Executive notice of
its intention not to extend the Term, in accordance with Article II, the Company
shall cause the Executive's outstanding options which are not immediately
exercisable to vest and become immediately exercisable and the restrictions on
equity held by the Executive which are scheduled to lapse solely through the
passage of time to lapse (such events collectively referred to as "Acceleration
of Equity Rights"). In addition, the Company shall pay the Executive an amount
(the "Severance Amount") equal to three (3) times the sum of (1) his Salary; and
(2) the "Bonus Amount" which shall be the greater of i) 100% of the Executive's
Salary (the "Bonus Amount") in the year of termination; or ii) the Executive's
Bonus in the immediately preceding calendar year. Such Severance Amount shall be
payable in cash as follows:
(x) no later than 10 days after the effective date of
Executive's termination, the Company shall pay the Executive one-half
(1/2) of the Severance Amount in a lump sum;
(y) commencing on the first day of the month following the
effective date of Executive's termination and on the first day of the
month thereafter for a period of eighteen (18) months, the Company
shall pay the remaining one-half (1/2) of the Severance Amount to the
Executive in equal monthly installments;
provided, however, that if the Executive's employment terminates other than for
Cause, within one (1) year following a Change of Control, the Company shall, in
lieu of the making the
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payments described in (x) and (y), pay the Executive the Severance Amount, in
one lump sum cash payment within ten (10) days after the effective date of
Executive's termination.
In addition, for a period of thirty-six (36) months following
the effective date of the Executive's termination, the Company shall provide
continued employee benefits and coverage for the Executive and his dependents of
the type and at a level of coverage comparable to the coverage in effect at the
time of termination ("Continued Benefits") and shall provide the Executive with
the following additional benefits: (i) secretarial services provided by the
Executive's secretary at the time of his termination or a secretary with the
same skill and experience as such secretary, who is reasonably acceptable to the
Executive; (ii) office space with office equipment and furnishings, all of which
are comparable to that provided to the Executive at the time of his termination;
(iii) a continued automobile allowance (including an allowance for operating and
maintenance expenses) and continued automobile insurance coverage, in both
cases, at a level, which is not less than the allowance and coverage in effect
on the effective date of Executive's termination; and (iv) continued use of the
Company-provided airplane used by the Executive immediately prior to the
effective date of Executive's termination or a comparable airplane.
Notwithstanding the foregoing, if any of the Continued Benefits or other
benefits to be provided hereunder have been decreased or otherwise negatively
affected within twelve (12) months prior to the effective date of the
Executive's termination, the reference for measuring such benefit shall be the
date prior to such reduction rather than the date of such termination.
(b) If the Executive is required, pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code") to pay (through
withholding or otherwise) an excise tax on "excess parachute payments" as
defined in Section 280G of the Code, the Company shall pay the Executive
three-quarters (3/4) of the amount or amounts that are necessary to place the
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Executive in the same after-tax financial position that he would have been in if
he had not incurred any tax liability under Section 4999 of the Code.
3.5 Termination for Disability. (a) The Company may terminate
the Executive following a determination by the Board that the Executive has a
Permanent Disability; provided, however, that no such termination shall be
effective (i) prior to the expiration of the six (6) month period following the
date the Executive first incurred the condition which is the basis for the
Permanent Disability or (ii) if the Executive begins to substantially perform
the significant aspects of his regular duties prior to the proposed effective
date of such termination. For purposes of this Agreement, "Permanent Disability"
shall mean the Executive's inability, by reason of any physical or mental
impairment, to substantially perform the significant aspects of his regular
duties, as contemplated by this Agreement, which inability is reasonably
contemplated to continue for at least one (1) year from its incurrence and at
least ninety (90) days from the date of such vote. Any question as to the
existence, extent, or potentiality of the Executive's Permanent Disability shall
be determined by a qualified independent physician selected by the Executive
(or, if the Executive is unable to make such selection, by an adult member of
the Executive's immediate family) and reasonably acceptable to the Board.
(b) If the Executive is terminated because of his Permanent
Disability, the Company shall provide for the Acceleration of Equity Rights and,
the Company shall, (i) for a period of thirty (30) months following the
effective date of such termination (the "Disability Period") pay the Executive
one hundred (100%) percent of his Salary plus Bonus Amount, offset by the
amount, if any, paid to the Executive under the salary replacement portion of
disability benefits paid under a disability plan or policy paid for by the
Company; and (ii) provide him with Continued Benefits during the Disability
Period.
3.6 Death or Disability After Termination. Should the
Executive die or become disabled before receipt of any or all payments to which
the Executive is entitled to under Section
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3.4 (or in the case of the Executive's death following his termination on
account of Permanent Disability, before receipt of all payments under Section
3.5), then the balance of the payments to which the Executive is entitled shall
continue to paid to the Executive (in the case of his disability) or to the
executors or administrators of the Executive's estate (in the event of the
Executive's death); provided, however, that the Company may, at any time within
its discretion, accelerate any payments and pay the Executive or his estate the
present value of such payments in a lump sum cash payment. For purposes of
determining the present value under this Section 3.6, the interest rate shall be
the prime rate of Citibank, N.A.
ARTICLE IV
COVENANTS OF THE EXECUTIVE
--------------------------
4.1 Confidential Information. In connection with his employment at the
Company, the Executive will have access to confidential information consisting
of some or all of the following categories of 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
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 forecasts,
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' personnel 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
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(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." The Company and the Executive consider their relation one of
confidence with respect to Trade Secrets. Therefore, during and after the
employment by the Company, regardless of the reasons that such employment ends,
the Executive 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 the Executive's employment by the Company;
(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 the 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 the
Executive or which may come into the Executive's possession during the
Executive'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 the Executive's deliberate or inadvertent disclosure becomes known to
the public; (ii) disclosure compelled by judicial or administrative proceedings
provided the Executive affords the Company the opportunity to obtain assurance
that compelled disclosures will receive confidential treatment; and (iii)
information independently developed by the Executive, the development of which
was not a breach of this Agreement.
4.2 Non-Competition. During the Term and for a period of two
(2) years thereafter (or in the event of the Executive's termination of
employment other than for Cause
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within one (1) year after a Change of Control, for a period of one (1) year
thereafter), the Executive agrees that he will not, without the express written
consent of the Company, directly or indirectly, for the Executive or on behalf
of any other person, firm, entity or other enterprise (i) directly or indirectly
solicit for employment or recommend to any subsequent employer of the Executive
the solicitation for employment of any person who, at the time of such
solicitation is employed by Company or any affiliate thereof, (ii) directly or
indirectly solicit, divert, or endeavor to entice away any customer of the
Company or any affiliate thereof, or otherwise engage in any activity intended
to terminate, disrupt, or interfere with the Company's or any affiliate's
relationship with a customer, supplier, lessor or other person, or (iii) be
employed by, be a director, officer 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 in the business of
owning, operating or managing any subacute healthcare facility which competes
with any such type of facility then operated by the Company or any of its
subsidiaries. This provision shall not be construed to prohibit the Executive
from (i) acting as an employee, director, or consultant for, or owning more than
10% of, the outstanding voting shares of the equity securities of, Speciality
Care or Community Care, or (ii) owning up to 10% of the outstanding voting
shares of the equity securities of any company whose common stock is listed for
trading on any national securities exchange or on the NASDAQ System or (iii)
serving as a director of any company which is not directly in the business of
owning, operating or managing any subacute healthcare facility (other than
Speciality Care or Community Care). The provisions of this Section 4.2 shall
only apply to businesses and operations located in, or otherwise conducted in,
the United States.
4.3 Remedies For Breach of Article IV. The Executive
acknowledges and agrees that the amount of damages in the event of the
Executive's breach of this Article IV will be
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difficult, if not impossible, to ascertain. The Executive therefore agrees that
the Company, in addition to, and without limiting any other remedy or right it
may have, shall have the right to an injunction enjoining any breach of the
covenants made by the Executive in this Article IV.
ARTICLE V
AMENDMENT AND ASSIGNMENT
------------------------
5.1 Right of the Executive to Assign. The Executive may not
assign, transfer, pledge or hypothecate or otherwise transfer his rights,
obligations, interests and benefits under this Agreement and any attempt to do
so shall be null and void.
5.2 Right of Company to Assign. This Agreement shall be
assignable and transferable by the Company and any such assignment or transfer
shall inure to the benefit of and be binding upon the Executive, the Executive's
heirs and personal representatives, and the Company and its successors and
assigns. The Executive agrees to execute all documents necessary to ratify and
effectuate such assignment. An assignment of this Agreement by the Company shall
not release the Company from its monetary obligations under this Agreement.
5.3 Amendment/Waiver. No change or modification of this
Agreement shall be valid unless it is 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.
ARTICLE VI
GENERAL
6.1 Governing Law. This Agreement shall be subject to and
governed by the laws of the State of Delaware, irrespective of the fact that the
Executive may become a resident of a different state.
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6.2 Binding Effect. 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.
6.3 Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes the Prior Agreement and all other
prior agreements, either oral or written, between the parties hereto; provided,
however, that this Agreement does not supersede any agreements pertaining to
stock options which have been granted as of the Effective Date, except to the
extent that any such option agreement contains provisions which are contrary to
the provisions of this Agreement (including provisions regarding the
Acceleration of Equity Rights).
6.4 Mitigation. The Executive shall not be required to
mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise nor may any payments provided for under
this Section be reduced by any amounts earned by the Executive as a result of a
breach of the Executive's covenants in Article IV.
6.5 Survivorship. The respective rights and obligations of the
parties hereunder shall survive the termination of this Agreement to the extent
necessary to preserve the rights and obligations of the parties under this
Agreement.
6.6 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
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authorities state that delivery cannot be accomplished, if sent by registered of
certified mail, return receipt requested.
If to the Company: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, Maryland 21117
Attn: Robert Walkingshaw
If to the Executive: Robert N. Elkins
10600 Park Heights Avenue
Owings Mills, MD 21117
Copy to: Alvin Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
6.7 Indemnification. The Company agrees to maintain Director's
and Officer's liability insurance at a level not less than the level in effect
on the Effective Date, or to the extent such level is increased during the Term,
at such increased level; provided, however, that the level of insurance may be
decreased with the Executive's consent. To the extent not covered by such
liability insurance, the Company shall indemnify and hold the Executive harmless
to the fullest extent permitted by Delaware law against any judgments, fines,
amounts paid in settlement and reasonable expenses (including reasonable
attorneys' fees), and advance amounts necessary to pay the foregoing at the
earliest time and to the fullest extent permitted by law, in connection with any
claim, action or proceeding (whether civil or criminal) against the Executive as
a result of his serving as an officer or director of the Company or in any
capacity at the request of the Company in or with regard to any other entity,
employee benefit plan or enterprise. This indemnification shall be in effect
during the Term and thereafter and shall be in addition to and not in lieu of
any other indemnification rights the Executive may otherwise have.
6.8 Attorney's Fees. Upon presentation of an invoice, the
Company shall pay directly or reimburse the Executive for all reasonable
attorney's fees and costs incurred by the Executive:
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(a) in connection with the negotiation, preparation and
execution of this Agreement; and
(b) in connection with any dispute brought by the Executive
over the terms of this Agreement unless there is a determination that the
Executive had no reasonable basis for his claim.
6.9 Arbitration. Except as otherwise provided in Section 4.3,
any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration, conducted before a panel of three
arbitrators in Baltimore, Maryland, in accordance with the rules of the American
Arbitration Association then in effect, and judgement may be entered on the
arbitrators' award in any court having jurisdiction. The Company shall pay all
costs of the American Arbitration Association and the arbitrator. Each party
shall select one arbitrator, and the two so designated shall select a third
arbitrator. If either party shall fail to designate an arbitrator within seven
(7) days after arbitration is requested, or if the two arbitrators shall fail to
select a third arbitrator within fourteen (14) days after arbitration is
requested, then an arbitrator shall be selected by the American Arbitration
Association upon application of either party. Notwithstanding the foregoing, the
Executive shall be entitled to seek specific performance from a court of the
Executive's right to be paid until the date of termination during the pendency
of any dispute or controversy arising under or in connection with this Agreement
and the Company shall have the right to obtain injunctive relief from a court.
6.10 Voidability. If the options granted by the Company to the
Executive on October 25, 1993, and November 22, 1993, are not approved by
shareholders by June 30, 1994, this Agreement shall be deemed void as of the
Effective Date and shall have no force or effect.
6.11 Severability. No provision in this Agreement if held
unenforceable shall in any way invalidate any other provisions of this
Agreement, all of which shall remain in full
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force and effect except that this Section 6.11 shall not apply to the extent
Section 6.10 is held unenforceable.
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
- - ------- ---------
Integrated Health Services,
Inc., a Delaware corporation
By: /s/ Robert Walking Shaw /s/ Robert N. Elkins
------------------------ -------------------
Robert N. Elkins
Name: Robert Walking Shaw
------------------------
Title: Director
------------------------
By: /s/ Lawrence P. Cirka
------------------------
Name: Lawrence P. Cirka
------------------------
Title: Chief Operating Officer
------------------------
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AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
---------------------------------------
This AMENDMENT No. 1 is made effective as of January 1, 1995 (the
"Effective Date"), by and between INTEGRATED HEALTH SERVICES, INC., a Delaware
corporation (hereinafter referred to as the "Company"), and ROBERT N. ELKINS
(hereinafter referred to as the "Executive").
W I T N E S S E T H:
WHEREAS, effective January 1, 1994, the Executive entered into an
employment agreement with the Company (the "Agreement");
WHEREAS, the parties desire to amend the Agreement;
WHEREAS, Section 5.3 of the Agreement permits the parties to amend the
Agreement in a writing signed by both parties.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements herein contained, the parties, intending to be legally bound,
hereby agree to amend the Agreement as follows:
1. The Term of the Agreement as defined in Section 1.3 shall be five
(5) years and all references to three (3) years within Section 1.3 are hereby
amended to read five (5) years.
2. The Executive's Salary as defined in Section 2.1 of the Agreement
shall be Seven Hundred Fifty Thousand Dollars ($750,000) and all references to
Five Hundred Thousand Dollars ($500,000) within Section 2.1 are hereby amended
to read Seven Hundred Fifty Thousand Dollars ($750,000).
3. Within Section 2.2 of the Agreement concerning the Executive's
Bonus, all references to "cash" are hereby amended to read "cash or shares of
the Company's common stock pursuant to the Company's Cash Bonus Replacement Plan
or any combination thereof."
4. The following Section 2.3(g) shall be added to Section 2.3 of the
Agreement:
"(g) Executive shall be eligible to participate in the Company's
Supplemental Executive Retirement Plan (SERP)."
5. The definition of "Good Reason" as set forth in Section 3.3(a) of
the Agreement is amended by adding a subparagraph (4) thereto as follows:
"(4) the relocation of the Executive to an office which is
more than fifteen (15) miles from his then principal residence."
6. The first two (2) sentences of Section 3.4(a) of the Agreement are
amended to read in their entirety as follows:
"If the Executive resigns for Good Reason, or is terminated
without Cause, or if the Company gives the Executive notice of its
intention not to extend the Term, in accordance with Article II, the
Company shall cause to become fully vested any of the Executive's stock
which is then subject to any risk of forfeiture, and shall cause to
become fully vested and immediately exercisable the Executive's
outstanding options which are not immediately exercisable and any
employee benefits (including, without limitation, any benefits under
the Company's Supplemental Executive Retirement Plan) which are then
held by the Executive, and shall cause to lapse any restrictions on
equity held by the Executive which are scheduled to lapse solely
through the passage of time (such events collectively referred to as
"Acceleration of Equity Rights"). In addition, the Company shall pay
the Executive an amount (the "Severance Amount") equal to five (5)
times the sum of (1) his Salary; and (2) the "Bonus Amount" which shall
be the greatest of (i) 100% of the Executive's Salary in the year of
termination, (ii) the Executive's Bonus in the immediately preceding
calendar year, or (iii) the Executive's Bonus in the calendar year
which was immediately prior to the year immediately preceding the year
of termination."
7. The second paragraph of Section 3.4(a) of the Agreement (which
paragraph begins with the phrase "In addition ...") is amended by changing all
references to thirty-six (36) months to sixty (60) months and changing clause
(ii) thereof to read in its entirety as follows:
"(ii) the right to continue to occupy and utilize, at no cost
to the Executive, for a period of sixty (60) months following the
effective date of the Executive's termination, the Executive's then
current Company office space with office equipment and furnishings, or
any other office space with office equipment and furnishings, all of
which are comparable to that provided to the Executive at the time of
his termination and which is reasonably acceptable to the Executive;"
8. The said second paragraph of Section 3.4(a) of the Agreement is
further amended by adding thereto a clause (v) as follows:
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"(v) the right, but not the obligation, on the part of the
Executive to purchase from the Company the Pilatus C12 aircraft
currently owned by the Company, or any other plane owned by the
Company, at a price equal to the then book value of such aircraft, and
to lease or purchase from the Company at a fair market rental or
acquire at book value the hangar space currently under such
construction for such aircraft at the Naples, Florida, airport;"
9. The said second paragraph of Section 3.4(a) of the Agreement is
further amended by adding thereto a clause (vi) as follows:
"(vi) the right, but not the obligation, to acquire from the
Company, for no additional consideration, an assignment of the
Company's leasehold interest in the fourth and fifth floors of the
Company's offices located at 8889 Pelican Bay Boulevard, Suite 500,
Naples, Florida 33963, in which event the Executive will assume all of
the Company's obligations arising in respect of such leasehold interest
from and after the date of such assignment, provided that the Company
will continue to pay the rent and other expenses pertaining to the
Executive's office, equipment, and furnishings in accordance with
clause (ii) above."
10. Within Section 3.4(b) concerning excise tax on "excess parachute
payments," the reference to "three-quarters (3/4)" is hereby amended to read
"one-hundred percent (100%)."
11. Section 3.4(b) of the Agreement is further amended by adding
thereto the following:
"To effect this indemnification, the Company shall pay the
Executive an additional amount that is sufficient to pay any
excise tax imposed on the Executive by Section 4999 of the
Code, plus the excise tax, income tax (federal, state and
local), employment taxes and medicare hospitalization taxes
imposed on the Executive on account of the Company's
indemnification payments. The determination of any additional
amount that must be paid under this section must be made by
the Company in good faith."
12. All capitalized terms within this Amendment shall have the meanings
set forth in the Agreement.
13. The amendments contained herein are the only amendments to the
Agreement and all other provisions of the Agreement shall remain in full force
and effect.
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14. This Amendment 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.
15. This Amendment constitutes the entire agreement between the parties
and supersedes the Agreement and all other prior agreements, either oral or
written, with respect to the provisions stated herein; provided, however, that
this Agreement does not supersede any agreements pertaining to stock options
which have been previously granted, except to the extent that any such option
agreement contains provisions which are contrary to the provisions of this
Agreement (including provisions regarding the Acceleration of Equity Rights).
IN WITNESS WHEREOF, the Company has caused this Amendment to be signed
by its duly authorized officers and its corporate seal to be hereto affixed, and
the Executive has hereunto set the Executive's hand on the day and year first
above written.
COMPANY EXECUTIVE
- - ------- ---------
INTEGRATED HEALTH SERVICES,
INC., a Delaware corporation
By: /s/Robert N. Elkins
------------------------- -------------------------
Robert N. Elkins
Name:
------------------------
Title:
-----------------------
- - ------------------------------
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