<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended March 31, 1996
----------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______________ to ________________
Commission File Number: 1-12306
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Integrated Health Services, Inc.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2428312
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10065 Red Run Boulevard, Owings Mills, MD 21117
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(Address of principal executive offices) (Zip Code)
(410) 998-8400
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(Registrant's telephone, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Number of shares of common stock of the registrant outstanding as of
May 8, 1996: 22,423,264 shares.
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INTEGRATED HEALTH SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page
------
Item 1. - Condensed Financial Statements -
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Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Earnings
for the three months ended March 31, 1996
and 1995 4
Consolidated Statement of Changes in
Stockholders' Equity for the three
months ended March 31, 1996 5
Consolidated Statements of Cash Flows
for the three months ended March 31, 1996
and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II: OTHER INFORMATION
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Page 2 of 19
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<TABLE>
<CAPTION>
INTEGRATED HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
March 31, December 31,
1996 1995
-------------- --------------
<S> <C> <C>
Assets
------
Current Assets:
Cash and cash equivalents $ 29,560 38,917
Temporary investments 2,320 2,387
Patient accounts and third-party payor settlements
receivable, less allowance for doubtful receivables
of $31,093 at March 31, 1996 and $29,570 at December 31, 1995 247,065 230,282
Supplies, inventories, prepaid expenses
and other current assets 26,467 25,629
Income tax receivable 13,567 16,517
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Total current assets 318,979 313,732
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Property, plant and equipment, net 790,200 747,870
Intangible assets 311,919 298,290
Other assets 104,486 73,838
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Total assets $ 1,525,584 1,433,730
============= ============
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Current maturities of long-term debt $ 5,179 5,404
Accounts payable and accrued expenses 152,972 172,013
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Total current liabilities 158,151 177,417
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Long-term Debt:
Convertible subordinated debentures 258,750 258,750
Revolving and long-term debt, less current maturities 593,354 506,507
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Total long-term debt 852,104 765,257
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Deferred income taxes 53,777 52,279
Deferred gain on sale-leaseback transactions 6,964 7,249
Stockholders' equity:
Preferred stock, authorized 15,000,000 shares; no shares
issued and outstanding - -
Common stock, $0.001 par value. Authorized 150,000,000
shares; issued 22,259,520 at March 31, 1996 and 21,785,334 at
December 31, 1995 (including 400,600 treasury shares) 22 22
Additional paid-in capital 419,604 410,345
Retained earnings 47,752 33,951
Treasury stock, at cost (400,600 shares at March 31, 1996
and December 31, 1995) (12,790) (12,790)
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Net stockholders' equity 454,588 431,528
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Total liabilities and stockholders' equity $ 1,525,584 1,433,730
============= ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
Page 3 of 19
<PAGE>
INTEGRATED HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands, except per share amounts)
Three Months Ended
March 31,
--------------------
1996 1995
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Net Revenues:
Basic medical services $ 97,216 $ 89,336
Specialty medical services 219,525 176,158
Management services and other 10,532 9,141
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Total revenues 327,273 274,635
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Costs and expenses:
Operating expenses 248,973 207,304
Corporate administrative and general 15,093 12,402
Depreciation and amortization 9,196 8,960
Rent 17,656 16,066
Interest, net 14,214 7,330
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Total costs and expenses 305,132 252,062
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Earnings before equity in earnings of
affiliates and income taxes 22,141 22,573
Equity in earnings of affiliates 300 315
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Earnings before income taxes 22,441 22,888
Federal and state income taxes 8,640 8,812
----- -----
Net earnings $ 13,801 $ 14,076
====== ======
Per Common Share:
Net earnings - Primary $ 0.62 $ 0.61
Net earnings - Fully Diluted 0.54 0.53
====== ======
See accompanying Notes to Consolidated Financial Statements
Page 4 of 19
<PAGE>
INTEGRATED HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
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<S> <C> <C> <C> <C> <C>
Balance at December 31, 195 $ 22 $410,345 $33,951 $(12,790) $431,528
Issuance of 385,542 shares of
common stock in connection with
acquisitions - 8,000 - - 8,000
Issuance of 34,287 shares of common
stock in connection with employee
stock purchase plan - 771 - - 771
Exercise of employee stock options
for 54,357 shares of common - 488 - - 488
Net earnings - - 13,801 - 13,801
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Balance at March 31, 1996 $ 22 $419,604 $47,752 $(12,790) $454,588
======================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements
Page 5 of 19
<PAGE>
INTEGRATED HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Three Months Ended
March 31,
---------------
1996 1995
---- ----
Cash flows from operating activities:
Net earnings $ 13,801 $14,076
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Undistributed results of joint ventures (55) (192)
Depreciation and amortization 9,196 8,960
Deferred income taxes and other non-cash items 1,142 1,250
Amortization of gain on sale-leaseback transactions (285) (234)
Increase in patient accounts and third-party
payor settlements receivable, net (15,260) (18,597)
Increase in supplies, inventory, prepaid
expenses and other current assets (788) (3,629)
Increase (decrease) in accounts payable and
accrued expenses (22,928) 1,015
Decrease in income taxes receivable 2,950 -
Increase in income taxes payable - 4,243
------ ------
Net cash provided (used) by operating activitie (12,227) 6,892
Cash flows from financing activities:
Proceeds from issuance of capital stock, net 1,259 5,584
Proceeds from long-term borrowings 96,737 52,054
Repayment of long-term debt (11,286) (29,636)
Deferred financing costs (73) (184)
------ ------
Net cash provided by financing activities 86,637 27,818
------ ------
Cash flows from investing activities:
Sale of temporary investments 67 311
Purchase of temporary investments - (3,106)
Business acquisitions (16,581) (24,000)
Purchase of property, plant and equipment (34,936) (24,395)
Intangible assets (1,947) (2,400)
Other assets (30,370) (18,444)
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Net cash used by investing activities (83,767) (72,034)
------- -------
Decrease in cash and cash equivalents (9,357) (37,324)
Cash and cash equivalents, beginning of period 38,917 60,689
------ ------
Cash and cash equivalents, end of period $ 29,560 $23,365
========== ======
See accompanying Notes to Consolidated Financial Statements
Page 6 of 19
<PAGE>
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Basis of Presentation and Significant Accounting Policies
The consolidated financial statements included herein do not contain all
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles. For further information, such as the significant accounting
policies followed by Integrated Health Services, Inc. ("IHS" or
"Company"), refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K/A for the
year ended December 31, 1995. In the opinion of management, the
consolidated financial statements include all necessary adjustments
(consisting of only normal recurring accruals) for a fair presentation
of the financial position and results of operations for the interim
periods presented. The results of operations for the interim periods
presented are not necessarily indicative of the results that may be
expected for the full year. The Company's historical financial
statements for the three months ended March 31, 1995 have been restated
to include the results of operations of IntegraCare, Inc., which the
Company merged with in August 1995 in a transaction accounted for as a
pooling of interest for accounting and financial reporting purposes.
Note 2: Earnings Per Share
Primary earnings per share is computed based on the weighted average
number of common and common equivalent shares outstanding during the
periods. Common stock equivalents include options and warrants to
purchase common stock, assumed to be exercised using the treasury stock
method. Fully diluted earnings per share is computed as described above,
except that the weighted average number of common equivalent shares is
determined assuming the dilution resulting from the issuance of the
aforementioned options and warrants at the higher of the end-of-period
price per share, or the weighted average price for the period, and the
issuance of common shares upon the assumed conversion of the convertible
subordinated debentures. Additionally, interest expense and amortization
of underwriting costs related to such debentures are added, net of tax,
to income for the purpose of calculating fully diluted earnings per
share. Such amounts and the resulting net earnings for fully diluted
earnings per share purposes are summarized as follows for the three
months ended March 31, 1996 and 1995, respectively:
Page 7 of 19
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1996 1995
---- ----
Net earnings $13,801 14,076
` Adjustment for interest and underwriting
costs on convertible debentures 2,472 2,472
----- -----
Net earnings for fully diluted EPS $16,273 16,548
======= ======
Weighted average shares-Primary 22,257 23,204
Weighted average shares-Fully Diluted 30,317 31,272
====== ======
Note 3: New Acquisitions and Management Contracts
In January 1996, the Company entered into agreements to manage
four assisted living facilities in California and Ohio having a
total of 234 beds.
On January 29, 1996, the Company purchased Vintage Health Care
Center, a 220 bed skilled nursing and assisted living facility
in Denton, Texas for $6.9 million.
On March 19, 1996, the Company acquired Rehab Management
Systems, Inc. ("RMS"), which operates rehabilitation therapy
clinics in central Florida. RMS also manages one therapy and
one physician clinic. Total purchase price was $10.0 million,
including $8.0 million representing the issuance of 385,542
shares. In addition, the Company incurred direct costs of
acquisitions of $2.9 million. Total goodwill at the date of
acquisition was $12.7 million.
In addition, during the first quarter, the Company acquired two
mobile x-ray companies. Total purchase price aggregated
approximately $1.3 million. Total goodwill at the date of
acquisition aggregated $1.2 million.
Note 4: Proposed New Revolving Credit Facility
In May 1996, the Company accepted commitments for a $700
million revolving credit facility, including a $100 million
letter of credit subfacility, from Citibank, N.A., as
Administrative Agent, and certain other lenders (the "New
Credit Facility"). The New Credit Facility will initially
consist of a $700 million revolving loan which reduces to $560
million on June 30, 2000 and $315 million on June 30, 2001,
with a final maturity on June 30, 2002. The $100 million
subcommitment for letters of credit will remain at $100 million
until final maturity. The New Credit Facility will be
guaranteed by the Company's subsidiaries and secured by a
pledge of all of the stock of substantially all of the
Company's subsidiaries. The new credit facility will replace
the Company's existing $500 million credit facility. The
Company expects to record an extraordinary loss on the early
extinguishment of debt in the second quarter of 1996.
Note 5: Proposed Divestitures
In developing its post-acute healthcare system, the Company
continuously evaluates whether owning and operating businesses
which provide certain ancillary services, or contracting with
third
Page 8 of 19
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parties for such services, is more cost-effective. As a result,
the Company is continuously evaluating its existing operations
to determine whether to retain or divest operations.
Accordingly, the Company may divest certain divisions or assets
in the future.
Note 6: Subsequent Events
In May 1996, the Company acquired a geriatric care facility for
$4.25 million. In addition, the Company has reached agreements
in principle to purchase a hospice company in Chicago, Illinois
for approximately $8.0 million, a home health agency in
Memphis, Tennessee for approximately $2.0 million, four
diagnostic companies for approximately $20.4 million and an
outpatient clinic for approximately $2.3 million. There can be
no assurance that any of these pending acquisitions will be
consummated on the proposed terms, on different terms, or at
all.
In February 1996, the Company entered into an agreement to
acquire First American Health Care of Georgia, Inc. ("First
American"), a provider of home health services in 23 states,
principally Alabama, California, Florida, Georgia, Michigan,
Pennsylvania and Tennessee for $150 million, plus an earnout of
up to $127.5 million based on the home health care operations
of First American in the years 1999 through 2002. Subsequent to
the execution of the acquisition agreement, First American
filed for protection under the federal bankruptcy laws.
Consummation of the acquisition is subject to a number of
conditions, some of which are beyond the Company's control,
including approval of the acquisition by the bankruptcy court,
resolution of the HCFA claims seeking repayment from First
American of certain disallowed reimbursements under Medicare,
which claims IHS believes relate to personal or corporate
expenses, rather than care-related expenses, regulatory
approvals and approval from the Company's lenders and other
third parties. During the first quarter of 1996, the Company
loaned $18.1 million to First American to fund certain of First
American's liabilities. There can be no assurance that these
conditions will be satisfied. Also, there can be no assurance
that the First American acquisition will be consummated on the
proposed terms or at all.
Page 9 of 19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996
Compared to Three Months Ended March 31, 1995
Net revenues for the three months ended March 31, 1996 increased $52.6
million, or 19%, to $327.3 million from the comparable period in 1995.
Approximately 19% of the increase in revenues was attributable to the addition
of 11 facilities (4 owned, 3 leased and 4 managed facilities) subsequent to
March 31, 1995 and approximately 18% due to the acquisition of companies
providing home health and mobile x-ray and electrocardiogram services. The
remaining increase was due primarily to facilities and ancillary companies
acquired during the first quarter of 1995 and increased revenues from facilities
and ancillary companies in operation during both periods.
Basic medical services revenue increased 9% from $89.3 million to $97.2
million. Of the $97.2 million in basic medical services revenue in 1996, $8.1
million, or 8%, was attributable to the acquisition of 433 leased beds and 662
owned beds representing 3 leased and 4 owned facilities, respectively,
subsequent to March 31, 1995. Basic medical services revenue of facilities in
operation during both periods decreased during the three months ended March 31,
1996, as a result of skilled nursing beds being converted to Medical Specialty
Unit (MSU) beds after March 31, 1995.
Specialty medical services revenue increased 25% from $176.2 million to
$219.5 million. Of the $43.4 million increase, $11.4 million, or 26%, was
attributable to revenue from acquisitions subsequent to March 31, 1995. The
remaining increase is due to increased revenue from facilities and ancillary
companies in operation in both periods, facilities and ancillary companies
acquired during the first quarter of 1995 as well as skilled nursing beds being
converted to MSU beds after March 31, 1995 and increases in ancillary revenue.
Page 10 of 19
<PAGE>
Management services and other revenues increased 15% from $9.1 million to
$10.5 million. This increase was primarily attributable to the addition of 4 new
management contracts in the first quarter of 1996 and the addition of 34 managed
facilities during the first quarter of 1995, partially offset by the termination
in the fourth quarter of 1995 of a managed contract to manage 23 facilities.
Also, the Company purchased two facilities that were previously managed and
currently leases three facilities that were previously managed.
Total expenses for the period increased to $305.1 million from $252.1
million, an increase of 21%. Of the $53.0 million increase, $41.7 million, or
79%, was due to an increase in operating expenses. The increase in operating
expenses resulting from acquisitions consummated subsequent to March 31, 1995
was $16.1 million, or 39%, for the three months ended March 31, 1996. The
remainder of the increase in operating expense primarily resulted from costs
related to the increased medical activity level of the Company's patients, and
facilities and ancillary companies acquired during the three months ended March
31, 1995.
Corporate administrative and general expenses for the three months ended
March 31, 1996 increased by $2.7 million, or 22%, over the comparable period in
1995. This increase primarily represents additional operations, information
systems, accounting, finance and other personnel to support the growth in
acquisition of owned, leased and managed facilities and ancillary businesses.
Depreciation and amortization increased to $9.2 million during the three months
ended March 31, 1996, a 3% increase as compared to $9.0 million in the same
period in 1995. Rent expense increased by $1.6 million, or 10%, over the
comparable period in 1995, primarily as a result of the addition subsequent to
March 31, 1995 of 3 leased facilities which were previously managed by the
Company, which increase was partially offset by the reduction in rent expense
resulting from the acquisition subsequent to March 31, 1995, of two facilities,
which were previously leased by the Company. Interest expense, net increased
94%, or $6.9 million, during the three months ended March 31, 1996 to $14.2
million in the first quarter of 1996.
Page 11 of 19
<PAGE>
The increase in interest expense was primarily due to the addition of the
Company's $115 million, 9-5/8% Senior Subordinated Debentures due 2002 in May
1995 and increased borrowings under the Company's current $500
million credit and term loan facility.
Earnings before equity in earnings of affiliates and income taxes decreased
by 2% to $22.1 million for the three months ended March 31, 1996, as compared to
$22.6 million for the comparable period in the prior year.
Earnings before income taxes decreased by 2% to $22.4 million for the three
months ended March 31, 1996, as compared to $22.9 million for the comparable
period in the prior year. The provision for federal and state income taxes was
$8.6 million for the three months ended March 31, 1996, and $8.8 million for the
same period in the prior year. Net earnings and fully diluted earnings per share
for the quarter were $13.8 million in 1996, or 54 cents per share, as compared
to $14.1 million or 53 cents per share for the same period in 1995. Weighted
average shares (fully diluted) decreased 1.0 million shares, or 3% to 30.3
million shares from the comparable period in 1995.
Page 12 of 19
<PAGE>
Liquidity and Capital Resources
At March 31, 1996, the Company had working capital of $160.8 million, as
compared with $136.3 million at December 31, 1995. The increase in working
capital was primarily due to an increase in patient accounts and third party
payor settlements receivable and other current assets and a decrease in accounts
payable and accrued expenses. There were no material capital commitments for
capital expenditures as of March 31, 1996. Net patient accounts and third-party
payor settlements receivable increased $16.8 million to $247.1 million at March
31, 1996, as compared to $230.3 million at December 31, 1995. Of the $16.8
million increase in accounts receivable, $1.5 million was attributable to
related services businesses acquired subsequent to December 31, 1995 and $15.3
million was due to increased accounts receivable at facilities in operation and
related services businesses owned at both December 31, 1995 and March 31, 1996.
Patient accounts receivable were $243.1 million at March 31, 1996, as compared
with $226.8 million at December 31, 1995. Third-party payor settlements
receivable from federal and state governments (i.e., Medicare and Medicaid cost
reports) was $35.1 million at March 31, 1996, as compared to $33.0 million at
December 31, 1995. Approximately $10.2 million, or 29%, of the third-party payor
settlements receivable from federal and state governments at March 31, 1996
represent the costs for its MSU patients which exceed regional reimbursement
limits established under Medicare.
The Company's cost of care for its MSU patients generally exceeds regional
reimbursement limits established under Medicare. The success of the Company's
MSU strategy will depend in part on its ability to obtain reimbursement for
those costs which exceed the Medicare established reimbursement limits by
obtaining waivers of these cost limitations. The Company has submitted waiver
requests for 133 cost reports, covering all cost report periods through December
31, 1994. To date, final action has been taken by the Health Care Financing
Administration ("HCFA") on all 133 waiver requests covering cost report periods
through December 31, 1994. The Company's final rates as approved
Page 13 of 19
<PAGE>
by HCFA represent approximately 96% of the requested rates as submitted in the
waiver requests. There can be no assurance, however, that the Company will be
able to recover its excess costs under any waiver requests which may be
submitted in the future. The Company's failure to recover substantially all
these excess costs would adversely affect its results of operations and could
adversely affect its MSU strategy.
Net cash used by operating activities for the three months ended March 31,
1996, was $12.2 million as compared to $6.9 million provided by operating
activities for the comparable period in 1995. This resulted primarily from a
decrease in accounts payable and accrued expenses and an increase in accounts
receivable.
Net cash provided by financing activities was $86.6 million for the three
month period in 1996 as compared to $27.8 million provided by financing
activities for the comparable period in 1995. In both periods, the Company
received net proceeds from long-term borrowings and made repayments on certain
debt.
Net cash used by investing activities was $83.8 million for the three month
period ended March 31, 1996 as compared to $72.0 million used by investing
activities for the three month period ended March 31, 1995. Cash used for the
acquisition of facilities and ancillary company acquisitions was $16.6 million
in 1996 as compared to $24.0 million for 1995. Cash used for the purchase of
property, plant and equipment was $34.9 million in 1996 and $24.4 million in
1995.
The Company's contingent liabilities (other than liabilities in respect of
litigation) aggregated approximately $54.3 million as of March 31, 1996. The
Company is obligated to purchase its GreenBriar facility upon a change in
control of the Company. The net purchase price of the facility is approximately
$4.0 million. The lessor of this facility has the right to require Messrs.
Robert Elkins and Timothy Nicholson to purchase all or any part of 13,944 shares
of common stock owned by it at a per share purchase price equal to the sum of
$12.25 per share plus 9% simple interest per annum from May 8, 1988 until the
date of such
Page 14 of 19
<PAGE>
purchase. The Company has agreed to purchase such shares if Messrs. Elkins and
Nicholson fail to do so. The amount aggregated approximately $338,000 at March
31, 1996. The Company has guaranteed approximately $6.6 million of the lessor's
indebtedness. The Company is required, upon certain defaults under the lease, to
purchase its Orange Hills facility at a purchase price equal to the greater of
$7.1 million or the facility's fair market value. The Company has jointly and
severally guaranteed a $1.2 million construction loan made to River City Limited
Partnership in which the Company has a 30% general partnership interest. The
Company has guaranteed approximately $3.9 million of a construction loan for
Trizec, the entity from which the Company purchased the Central Park Lodges
facilities. The Company entered into a guaranty agreement whereby the Company
guaranteed approximately $4.2 million owed by Tutera Group, Inc. and Sunset
Plaza Limited Partnership, a partnership affiliated with a partnership in which
the Company has a 49% interest, to Finova Capital Corporation. The Company has
guaranteed approximately $8.7 million owed by Litchfield Asset Management
Corporation to National Health Investors, Inc. The Company has established
several irrevocable letters of credit with the Bank of Nova Scotia totalling
$15.3 million at March 31, 1996 to secure certain of the Company's workers'
compensation, health benefits and other obligations. The Company has guaranteed
a maximum of $3.0 million owed by Dunns Creek and Lanier Manor to National
Health Investors. In addition, the Company has obligations under operating
leases aggregating approximately $256.5 million at March 31, 1996. In addition,
with respect to certain acquired businesses the Company is obligated to make
certain contingent payments if earnings of the acquired business increase or
earnings targets are met.
The liquidity of the Company will depend in large part on the timing of
payments by private third-party and governmental payors, including payments in
excess of regional cost reimbursement limitations established under Medicare.
Costs in excess of the regional reimbursement limits relate primarily to the
delivery of services and patient care to the Company's MSU patients.
Page 15 of 19
<PAGE>
The Company anticipates that cash from operations and borrowings under
revolving credit facilities will be adequate to cover its scheduled debt
payments and future anticipated capital expenditure requirements throughout
1996. The Company expects to continue to be growth oriented in 1996 through the
expansion of its existing operations, continued implementation of its MSU
programs and by the acquisition of additional facilities and ancillary companies
and the entry into agreements to manage additional facilities.
Page 16 of 19
<PAGE>
Part II: Other Information
Item 5. - Other Information
None
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Employment Agreement dated January 1, 1994 between
Integrated Health Services, Inc. and Robert N.
Elkins
10.2 Amendment No. 1 to Employment Agreement dated as of
January 1, 1995 between Integrated Health Services,
Inc. and Robert N. Elkins
10.3 Employment Agreement dated as of January 1, 1994
between Integrated Health Services, Inc. and
Lawrence P. Cirka
10.4 Amendment to Employment Agreement dated as of
January 1, 1995 between Integrated Health Services,
Inc. and Lawrence P. Cirka
10.5 Employment Agreement dated as of October 1, 1995
between Integrated Health Services, Inc. and C.
Christian Winkle
10.6 Amendment to Employment Agreement dated as of
January 1, 1996 between Integrated Health Services,
Inc. and Dennis A. Cahill
Page 17 of 19
<PAGE>
10.7 Amendment to Employment Agreement dated as of April
1, 1996 between Asia Care and John L. Silverman
27 Financial Data Schedule
(b) Reports on Form 8-K
None
Page 18 of 19
<PAGE>
- SIGNATURES -
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTEGRATED HEALTH SERVICES, INC.
By: /s/ Robert N. Elkins
---------------------------------
Robert N. Elkins
Chief Executive Officer
By: /s/ W. Bradley Bennett
---------------------------------
W. Bradley Bennett
Senior Vice President and
Chief Accounting Officer
By: /s/ Eleanor C. Harding
---------------------------------
Eleanor C. Harding
Senior Vice President Finance
Dated: May 14, 1996
Page 19 of 19
<PAGE>
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").
<PAGE>
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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<PAGE>
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)."
<PAGE>
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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<PAGE>
"(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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<PAGE>
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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<PAGE>
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 LAWRENCE P. CIRKA
(hereinafter referred to as the "Executive").
W I T N E S S E T H:
WHEREAS, effective July 1, 1992, the Executive entered into an
employment agreement with the Company (the "Prior Agreement");
WHEREAS, the parties desire to amend and restate the
Prior Agreement;
WHEREAS, Section 7.3 of the Prior Agreement permits the
parties to amend the Prior Agreement in a writing signed by both parties; and
WHEREAS, the Company wishes to continue to employ the
Executive and to ensure his continued services of the Executive for the Term (as
hereinafter defined), and the Executive desires to continue to be employed by
the Company for upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual agreements herein contained, the parties, intending to be legally
bound, hereby agree, in lieu of the Prior Agreement, as follows:
<PAGE>
ARTICLE I
EMPLOYMENT RELATIONSHIP
-----------------------
1.1 Employment. The Company and the Executive agree that the
Executive shall be employed as Senior Vice President and Chief Operating Officer
of the Company; provided, however, that if the Executive is promoted to the
position of Executive Vice President, he shall hold this position in lieu of his
position as Senior Vice President. During the Term, the Executive shall have the
customary powers, responsibilities and authorities of persons holding his
position in corporations of the size, type and nature of the Company. The
Executive shall only report to and be responsible directly to the Chief
Executive Officer of the Company.
1.2 Exclusive Employment. During the Term, the Executive
agrees to devote his working time, on substantially a full-time basis, to the
performance of his services for the Company or its affiliates and subsidiaries
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) engaging in charitable and community affairs, so long as they
are consistent with his duties and responsibilities under this Agreement, (b)
managing his personal investments, and (c) subject to the consent of the Chief
Executive Officer, serving on the boards of directors of other companies.
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)
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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 one hundred twenty (120) 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.
ARTICLE II
COMPENSATION
------------
2.1 Salary. The Executive shall receive a base salary at an
initial rate of Four Hundred Thousand Dollars ($400,000) 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 Four Hundred Thousand Dollars ($400,000) 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
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<PAGE>
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 6- 1/4% 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 no less than 25% of Salary
plus an additional 6-1/4% 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 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,
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<PAGE>
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) comprehensive individual health insurance, including
dependent coverage;
(b) life insurance coverage in the amount of $1,000,000, any
proceeds of which shall be payable to the Executive's designated
beneficiary or his estate;
(c) four (4) weeks paid vacation annually;
(d) 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));
(e) 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; and
(f) 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.
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 enter into agreements which provide for the grant of
certain equity-based compensation or rights to the Executive.
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<PAGE>
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 one hundred twenty (120) 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 Chief Executive Officer
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).
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(b) Notwithstanding anything in Section 3.2(a) to the
contrary, a termination shall not be for Cause unless (i) the Chief Executive
Officer notifies the Executive of his intention to terminate the Executive for
Cause (which notice shall set forth the conduct alleged to constitute Cause)
(the "Cause Notice"); and (ii) the Executive does not cure his conduct (to the
reasonable satisfaction of the Chief Executive Officer) 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 both 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, the
position of Chief Operating Officer or Senior Vice President
of the Company, or if promoted to the position of Executive
Vice President, removal or dismissal from the position of
Executive Vice President; provided, however, that it shall not
be "Good Reason" if the Executive is removed from the position
of Senior Vice President on the date he becomes, or while he
holds the position of, Executive Vice President, and
(iv) a reduction in Salary or a material reduction in
benefits (other than a reduction in Salary permitted by
Section 2.1); and
(2) the resignation by the Executive within one (1) year of
one or both of the following:
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(i) a "Change of Control", as defined in Section 3.3(b), or
(ii) the date the individual who is Chief Executive Officer
and Chairman of the Board of the Company as of the Effective
Date ceases to hold such position,
provided in the case of either (i) or (ii) 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 two
hundred seventy (270) days after the event described in (i) or (ii).
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 be
Good Reason, and (ii) the Company 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
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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 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
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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 greater of i) 50% 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;
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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 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;
and (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. 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
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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) ofthe amount or amounts that are necessary to place the
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 Chief Executive Officer 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 effective date of the
Executive's termination. Any question as to the existence, extent, or
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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 Company.
(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 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
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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
(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
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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.
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4.2 Non-Competition. (a) 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 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, 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 or indirectly in
the business of owning, operating or managing any (1) healthcare facility or
business, including but not limited to, any subacute healthcare facility,
rehabilitation hospital, nursing home, or home health care business, or (2) any
other business similar to a business which is or was owned, operated or managed
by the Company during the Term or during the period that this Section 4.2 shall
apply to the Executive, unless such business comprises
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<PAGE>
(and has during the preceding twelve (12) month period comprised) less than five
percent (5%) of the Company's gross revenues; and, in the case of any facility
or business described, in either case, which competes with any such type of
facility or business then operated by the Company or any of its subsidiaries.
This provision shall not be construed to prohibit the Executive from 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 serving as a director of any such company. 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. In the event that the
Executive materially violates the covenants contained in this Article IV, after
his termination of employment under circumstances which entitle him to payments
or benefits under Section 3.4, the Company may, at its election, upon ten (10)
days' prior notice, terminate the Severance Period and cease providing the
Executive with such payments and benefits. In addition, the Executive
acknowledges and agrees that the amount of damages in the event of the
Executive's breach of this Article IV will be 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.
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<PAGE>
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.
6.2 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and the Executive
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<PAGE>
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, except as
provided 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,
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<PAGE>
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 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 N. Elkins
If to the Executive: Lawrence P. Cirka
13005 Jerome Jay Drive
Hunt Valley, MD 21030
Copy to:
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
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<PAGE>
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:
(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
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<PAGE>
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 Shareholder Approval. If the options granted by the Company to the
Executive on November 22, 1993, are not approved by shareholders by June 30,
1994, this Agreement shall be deemed effective with the exception of Section 4.2
(Non-Competition) which shall be replaced in its entirety by the text of Section
5.2 (Non-Competition) of the Prior Agreement. The reference in the text of
Section 5.2 to Article IV shall be changed to refer to Section 3 of the
Agreement. The amendment and restatement of this Agreement or the failure of the
shareholders, by June 30, 1994, to approve the options granted by the Company to
the Executive on November 22, 1993, in no way changes any right of the Executive
to any options granted to date.
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 force and effect except that this Section 6.11 shall not
apply to the extent Section 6.10 is held unenforceable.
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<PAGE>
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 N. Elkins /s/ Lawrence P. Cirka
--------------------------- ------------------------
Lawrence P. Cirka
Name: Robert N. Elkins
-------------------------
Title: Chief Executive Officer
------------------------
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<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
This AMENDMENT 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 LAWRENCE P. CIRKA
(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 to the Agreement as follows:
1. The first sentence of Section 1.1 of the Agreement shall be revised
to read as follows: "The Company and the Executive agree that the Executive
shall be employed as President and Chief Operating Officer of the Company."
2. 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.
3. The Executive's Salary as defined in Section 2.1 of the Agreement
shall be Five Hundred Fifty Thousand Dollars ($550,000) and all references to
Four Hundred Thousand
<PAGE>
Dollars ($400,000) within Section 2.1 are hereby amended to read Five Hundred
Fifty Thousand Dollars ($550,000).
4. Within Section 2.2 of the Agreement concerning the Executive's
Bonus, all references to "6-1/4%" are hereby amended to read "12-1/2%"; all
references to "no less than 25%" are hereby amended to read "50%"; and 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."
5. Within Section 2.3 of the Agreement, Section 2.3(e) is revised to
read as follows: "(e) one hundred percent (100%) of a one-time initiation fee
and 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;" and 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)."
6. The following paragraph is added to Section 2.4 of the Agreement:
"As additional compensation for the performance by the Executive of his
services hereunder, the Company shall grant to the Executive an
incentive stock option to purchase 300,000 shares of common stock of
the Company pursuant to the Company's Senior Executives' Stock Option
Plan, as amended, or any other plan, subject to the approval of the
shareholders of the Company at the May 1996 Annual Meeting of
Shareholders (the "Option"). The Option shall become exercisable
according to the following schedule: 25% shall become exercisable
immediately following shareholder approval and 75% shall become
exercisable in equal annual installments over four (4) years from the
date on which the Option was approved by the Board of Directors of the
Company. The price per share for purposes of this Section 2.4 shall be
the price on the date on which the Board of Directors approves this
Option. In the event that Executive is terminated by the Company
without cause or the Executive terminates this Agreement according to
Section 3.3, the unvested portion of the Option granted under this
Section 2.4 shall vest immediately. In the event that the shareholders
do not approve the Option at the May 1996 meeting, the
2
<PAGE>
Company shall give Executive a similar economic incentive of equal
value to be mutually agreed upon by Executive and the Company."
7. The following sentence is hereby added to the end of Section 1.2 of
the Agreement: "Subject to the consent of the Chief Executive Officer and
subject to the limitations of Section 4.2, 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."
8. The fist 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 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."
9. Within Section 3.4 (a) concerning Severance, the reference in the
second paragraph to "thirty-six (36) months" is hereby amended to read "sixty
(60) months."
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%)."
3
<PAGE>
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. The last sentence of Section 4.2 of the Agreement is struck in its
entirety and the following new sentence is added in its place: "Subject to the
provisions of Section 1.2, 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 PLC ("Speciality Care") or Community Care of America, Inc.
("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)."
13. All capitalized terms within this Amendment shall have the meanings
set forth in the Agreement.
14. 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.
4
<PAGE>
15. 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.
16. 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 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 Elkins /s/ Lawrence P. Cirka
--------------------------- ---------------------
Lawrence P. Cirka
Name: Robert Elkins
------------------------
Title: Chairman & CEO
------------------------
- - --------------------------
5
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT is made effective as of October, 1995 (the "Effective
Date"), by and between INTEGRATED HEALTH SERVICES, INC., a Delaware corporation
(hereinafter referred to as the "Company"), and C. CHRISTIAN WINKLE (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. The Company hereby employs the Executive in the
position of Executive Vice President - Operations of the Company, with such
responsibilities as may be assigned to Executive from time to time by the
Company's Chief Executive Officer and/or President. Executive shall report to
and be responsible to the individual who is Chief Executive Officer and/or
President of the Company for the period hereinafter set forth, and the Executive
hereby accepts such 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
<PAGE>
the best of his ability. Notwithstanding the foregoing, nothing in this
Agreement shall preclude the Executive from (a) engaging in charitable and
community affairs, so long as they are consistent with his duties and
responsibilities under this Agreement, (b) managing his personal investments,
and (c) serving on the boards of directors of other companies with the consent
of the President or the individual to whom the Executive reports.
1.2 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 anniversary 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 one hundred twenty (120) days
prior to any Anniversary Date. In the event the Company elects not to renew this
Agreement with appropriate notice as provided herein, the Company may buy out
the remaining term of the Agreement through the payment of severance to the
Executive as provided in Section 3.4.
ARTICLE II
COMPENSATION
------------
2.1 Salary. The Executive shall receive a base salary at an initial
rate of Three Hundred Thousand Dollars ($300,000) 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
- 2 -
<PAGE>
(but not below Three Hundred Thousand Dollars ($300,000)) 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 twelve
(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 Chief Executive
Officer or the President. Once adjusted, such adjusted amount shall constitute
Salary for purposes of this Agreement.
2.2 Bonuses.
-------
(a) The Company shall pay Executive a one-time signing bonus
in the amount of Forty Thousand Dollars ($40,000) upon the execution of this
Agreement.
(b) 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 discretionary bonus ("Bonus") based on the Executive's
performance, benefit to the Company at large, and the extent to which the
Company equals or exceeds the Target. Such Bonus shall be discretionary except
that if the Company's earnings per share equal or exceed the Target then the
Executive shall receive a bonus of not less than twenty-five percent (25%) of
his salary.
2.3 Executive 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) comprehensive individual health insurance, including
dependent coverage;
- 3 -
<PAGE>
(b) life insurance coverage in the amount of Five Hundred
Thousand Dollars ($500,000) any proceeds of which shall be payable to
the Executive's designated beneficiary or his estate;
(c) three (3) weeks paid vacation annually;
(d) 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));
(e) an automobile allowance and automobile insurance coverage
in the total amount of One Thousand Dollars ($1,000) per month, and as
increased from time to time.
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 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),
- 4 -
<PAGE>
the Executive shall be entitled to severance as set forth in Section 3.4. Upon
the expiry of the term hereof, 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 Chief Executive Officer that Cause exists. For
purposes of this Agreement, Cause shall mean any or all of the following:
(i) the Executive materially fails to perform his
duties hereunder;
(ii) a material breach by the Executive of his
covenants under Sections 4.1 or 4.2;
(iii) Executive is convicted of any felony.
(iv) Executive commits theft, larceny or embezzlement
of 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 party to whom the
Executive reports notifies the Executive, in writing, of his intention to
terminate the Executive for Cause (which notice shall set forth the conduct
alleged to constitute Cause) (the "Cause Notice"); and (ii) the Executive does
not cure his conduct (to the reasonable satisfaction of the party to whom the
Executive reports), within sixty (60) days after the receipt of the Cause
Notice.
- 5 -
<PAGE>
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 both 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, the
position of Executive Vice President - Field Operations which
is not concurrent with a promotion in title and/or position,
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 of a
"Change of Control," as defined in Section 3.3(b).
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 be
Good Reason, and (ii) the Company 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).
Notwithstanding any of the foregoing, if there is a "Change of Control"
as defined hereafter, the Company shall cause the Executive's outstanding
options which are not
- 6 -
<PAGE>
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").
(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 twenty percent (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
- 7 -
<PAGE>
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 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 at the end of the term hereof, 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 an immediate Acceleration of
Equity Rights in favor of the Executive. In addition, the Company shall pay the
Executive an amount (the "Severance Amount") equal to one and one-half (1 1/2)
times the sum of (1) his Salary in the year of Termination or the immediately
preceding year, whichever is greater; and (2) the Bonus Amount which shall be
the greater of i) the Executive's Bonus in the year of termination or in the
immediately preceding calendar year, whichever is greater. 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
- 8 -
<PAGE>
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 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 eighteen (18) 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 or the preceding year, whichever is greater ("Continued
Benefits") including, but not limited to those benefits and perquisites set
forth in Section 2.3 hereof. Such allowances, benefits and coverages, etc., to
be not less than those in effect on the Effective Date of Executive's
termination or the preceding year, whichever is greater. 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.
3.5 Termination for Disability. (a) The Company may terminate the
Executive following a determination by the Chief Executive Officer 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
- 9 -
<PAGE>
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 effective date of the Executive's termination.
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 Company.
(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 eighteen (18) 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 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 be paid to the Executive (in the case of
his
- 10 -
<PAGE>
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
- 11 -
<PAGE>
(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
- 12 -
<PAGE>
(iii) information independently developed by the Executive, the development of
which was not a breach of this Agreement.
4.2 Non-Competition. (a) During the Term and for a period of eighteen
(18) months thereafter (or in the event of the termination of Executive's
employment under any provision herein 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, 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 or indirectly in
the business of owning, operating or managing any (1) healthcare facility or
business, including but not limited to, any subacute healthcare facility,
rehabilitation hospital, nursing home, or home health care business, or (2) any
other business similar to a business which is or was owned, operated or managed
by the Company during the Term or during the period that this Section 4.2 shall
apply to the Executive, unless such business comprises (and has during the
preceding twelve (12) month period comprised) less than five percent (5%) of the
Company's gross revenues; and, in the case
- 13 -
<PAGE>
of any facility or business described, in either case, which competes with any
such type of facility or business then operated by the Company or any of its
subsidiaries. This provision shall not be construed to prohibit the Executive
from 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 serving as a director of any such
company. 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. In the event that the Executive
materially violates the covenants contained in this Article IV, after his
termination of employment under circumstances which entitle him to payments or
benefits under Section 3.4, the Company may, at its election, upon ten (10)
days' prior notice, terminate the Severance Period and cease providing the
Executive with such payments and benefits. In addition, the Executive
acknowledges and agrees that the amount of damages in the event of the
Executive's breach of this Article IV will be 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.
- 14 -
<PAGE>
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 Maryland.
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.
- 15 -
<PAGE>
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, except as provided 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
- 16 -
<PAGE>
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: Lawrence P. Cirka
If to the Executive: C. Christian Winkle
-----------------------------
-----------------------------
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 Attorneys' Fees. Upon presentation of an invoice, the Company shall
pay directly or reimburse the Executive for all reasonable attorneys' fees and
costs incurred by the Executive:
- 17 -
<PAGE>
(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 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 force and effect.
- 18 -
<PAGE>
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/ Lawrence P. Cirka /s/ C. Christian Winkle
---------------------------- -------------------------
C. Christian Winkle
Name: Lawrence P. Cirka
---------------------------
Title: President & C.O.O
---------------------------
- 19 -
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
This AMENDMENT is made effective as of January 1, 1996 (the
"Effective Date"), by and between INTEGRATED HEALTH SERVICES, INC., a Delaware
corporation (hereinafter referred to as the "Company"), and DENNIS CAHILL
(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 to the Agreement as follows:
1. The Executive's title as set forth in Section 1.1 of the Agreement
is hereby amended to be: Executive Vice President - Mergers and Acquisitions.
2. Section 1.1 of the Agreement is further amended to read that the
Executive shall report to and shall be assigned his responsibilities by the
Chief Executive Officer of the Company.
3. The Executive's Salary as defined in Section 2.1 of the Agreement
shall be Three Hundred Forty Thousand Dollars ($340,000) and all references to
Two Hundred Twenty-
<PAGE>
Five Thousand Dollars ($225,000) within Section 2.1 are hereby amended to read
Three Hundred Forty Thousand Dollars ($340,000).
4. The following Sections 2.3(g) and 2.3(h) are hereby inserted after
Section 2.3(f) of the Agreement: "(g) one hundred percent of a one-time
initiation fee for membership at the Caves Valley Golf Club, the membership of
which shall be in the name of the Executive and shall be the Executive's upon
termination of this Agreement."
(h) Executive shall be eligible to participate in and
shall continue to participate in the Company's Supplemental Executive Retirement
Plan (SERP)."
5. Section 3.1 of the Agreement is hereby deleted in its entirety and
the following Section 3.1 is inserted in its place:
"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 expiry of the term
hereof, the Executive shall be entitled to severance as set
forth in Section 3.4. Upon the Executive's 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."
2
<PAGE>
6. The following paragraph is hereby added to Section 3.4 of the
Agreement:
"If the Executive is terminated for Cause during the Term of
this agreement or within one (1) year after a Change of
Control or thereafter, the Company shall pay the Executive his
Severance Amount in one lump sum within ten (10) days after
the Executive's date of Termination. Such severance amount,
however, shall not include any calculation based on the
Executive's Bonus Amount but only the Executive's salary in
his year of Termination or the immediately preceding calendar
year, whichever is greater."
7. All capitalized terms within this Amendment shall have the meanings
set forth in the Agreement.
8. 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.
9. 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.
10. 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).
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amendment 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/ Lawrence P. Cirka /s/Dennis Cahill
--------------------------- -------------------------
Dennis Cahill
Name: Lawrence P. Cirka
---------------------------
Title: President/C.O.O.
---------------------------
4
<PAGE>
Amendment To Employment Agreement
---------------------------------
This amendment ("Amendment") is made as of April 1, 1996 between Asia
Care, Inc. ("Employer") and John L. Silverman ("Employee") as an amendment to
the Employment Agreement dated June 5, 1995 between Employer and Employee (the
"Agreement").
Whereas, Employee and Employer desire to amend the Agreement to clarify
the terms of Section 3.4(e) concerning the definition of "Good Reason";
Now, therefore, it is agreed:
1. Section 3.4(e)(2) is deleted in its entirety and the following
Section 3.4(e)(2) is substituted for the original text:
" (2) the resignation by the Executive within one (1) year of
one or both of the following:
(i) a "Change of Control", as defined in Section
3.4(e)(2), and/or
(ii) the date the individual who is Chief Executive
Officer and Chairman of the Board of IHS as of the Effective
Date or the individual who is President of IHS as of the
Effective Date ceases to hold such position,
provided in the case of either (i) or (ii) 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 two
hundred seventy (270) days after the event described in (i) or (ii).
Notwithstanding the foregoing, a termination on account of a reason
described in Subsection 3.4(e)(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 be Good Reason, and (ii) the
Company 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).
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 IHS in which IHS is not the
continuing or surviving corporation or pursuant to
1
<PAGE>
which shares of IHS' common stock would be converted into cash,
securities or other property, other than a merger of IHS in which the
holders of IHS' 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 IHS, or
(ii) the stockholders of IHS shall approve any plan or proposal for
liquidation or dissolution of IHS, 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 twenty percent (20%) or more of IHS' outstanding
common stock (other than pursuant to a plan or arrangement entered into
by such person and IHS) and such person discloses its intent to effect
a change in the control or ownership of IHS 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 IHS 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 IHS provided
that, any director of IHS who was not a director as of the Effective
Date shall be deemed to be an Incumbent Director if such director was
elected to the Board of IHS 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 3.4(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."
2. All terms of the Agreement not modified herein, shall remain in full
force and effect.
2
<PAGE>
In witness whereof, the parties have executed this amendment as of the date
above written.
ASIA CARE, INC.
By: /s/ Lawrence P. Cirka /s/ John L. Silverman
----------------------------- ------------------------------
JOHN L. SILVERMAN
3
<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
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<SECURITIES> 2,320
<RECEIVABLES> 278,158
<ALLOWANCES> (31,093)
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<PP&E> 790,200
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0
0
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