INTEGRATED HEALTH SERVICES INC
EXHIBIT 10.4
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>


                    SEPARATION AGREEMENT AND GENERAL RELEASE

         This Separation Agreement and General Release (the "Agreement") is made
and entered into as of the  Effective  Date of this  Agreement  (as set forth in
Paragraph 15 hereof),  by and between Stephen P. Griggs ("Griggs"),  residing at
440 Minnehaha Road,  Maitland,  FL 32751 and Integrated  Health  Services,  Inc.
("IHS"),  located at 910 Ridgebrook Road,  Sparks, MD 21152, on behalf of itself
and any and all past and present parents, affiliates and subsidiary corporations
(individually and collectively, the "Company").

         WHEREAS,  Griggs,  employment with the Company will be terminated as of
the Effective Date (as defined in Paragraph 15 hereof);

         WHEREAS, the Company and Griggs (the "Parties") wish to put any and all
disputes behind them;

         NOW,  THEREFORE,  for and in  consideration  of the mutual promises and
covenants  herein  contained  and  for  good  and  valuable  consideration,  the
sufficiency  of  which is  hereby  acknowledged,  the  Parties  hereby  agree as
follows:

         1.  TERMINATION  OF PRIOR  AGREEMENTS AND  UNDERSTANDINGS.  The Parties
agree that any prior agreements and understandings between them, whether oral or
written and of whatever nature,  are hereby canceled,  terminated and superseded
by this Agreement and shall be of no further force or effect.

         2. SPECIAL PAYMENT. The Company shall pay or cause to be paid to Griggs
$3,000,000 (three million U.S. dollars),  less applicable  payroll  withholdings
and deductions (the "Special Payment") as follows:

            (a) $1,000,000 (one million U.S. dollars),  within ten (10) business
days of the Effective Date; and

            (b)  $2,000,000   (two  million  U.S.   dollars)  in  equal  monthly
installments  over a period of three (3) years,  commencing  on the first day of
the first month following the Effective Date.

         The payments set forth in Paragraph  2(a) and (b) shall be made by wire
transfer,  payable to the order of  "Stephen  P.  Griggs"  and shall be wired to
Griggs at his bank address listed in Paragraph 16 below. Upon the effective date
of a confirmed plan of reorganization for the Company,  the balance of the funds
due  pursuant to Section  2(b) hereof shall be placed with an agreed upon escrow
agent who shall be directed to make each monthly  payment  unless  instructed by
Court order to cease or suspend such payment.

         3. PURPOSE OF SPECIAL  PAYMENT.  The Company is providing and Griggs is
accepting  the  Special  Payment  in full and  complete  satisfaction  of all of
Griggs'  Claims (as defined in Paragraph 5. hereof),  up to the Effective  Date,
against the Company, affiliated persons or partnerships, their successors and


<PAGE>

assigns,  and  any  and all of  their  past  and  present  directors,  officers,
shareholders,   consultants,  agents,  representatives,   attorneys,  employees,
employee benefit plans and plan fiduciaries (collectively,  the "Releases").  In
consideration of the Special  Payment,  Griggs shall transfer to the Company all
of his right,  title and interest in any equity security,  or option relating to
any equity  security,  of the Company,  Griggs shall cause to be sold within ten
(10) days of the Effective Date,  equity  securities held by his IRA, his spouse
or his children.  This Agreement is intended to be and is a complete termination
of Griggs'  interest in the Company.  Griggs  acknowledges  that he may not have
been, in the absence of this Agreement,  entitled to the consideration set forth
in this  Agreement.  Griggs  further  acknowledges  (i) the  sufficiency  of the
consideration  for this Agreement  generally and specifically for the release of
any such Griggs's Claims,  as defined in Paragraph 5 hereof, up to the Effective
Date of this  Agreement,  he may have  ever had,  may now have or may  hereafter
assert against the Releasees including without limitation,  claims arising under
the Age Discrimination in Employment Act of 1967, as amended by, inter alia, the
Older Workers  Benefit  Protection Act of 1990; and (ii) that no other monies or
other  consideration,  except as expressly set forth in this Agreement,  are due
and owing to him or on his behalf, or to his attorneys, by the Company or any of
the other Releasees. Griggs and his attorneys, represent, warrant and agree that
neither Griggs nor his attorneys  shall (a) make any claim,  or (b) commence any
action or proceeding  against the Company or any of the other  Releasees.  Among
other  things,  except for any claims that may arise  under  Sections 2 and 6 of
this Agreement,  Griggs hereby agrees not to file a Proof of Claim or a Proof of
Equity  Interest  in the  bankruptcy  case  of the  Company;  and to  waive  all
distributions to be made in such bankruptcy case.

         4. NO  ADMISSIONS.  This  Agreement does not constitute an admission by
the Company or any of the other Releasees of any violation of any contract or of
any  statute,  constitution  or  common  law  of any  federal,  state  or  local
government of the United States or of any other country or political subdivision
thereof,  and Griggs, the Company and each of the other Releasees expressly deny
any such violation or liability.

         5. GENERAL RELEASE BY GRIGGS.

            (a) Except for indemnification which Griggs is entitled to under the
By-laws of the Company,  and the Company's payment  obligation under Paragraph 2
hereof,  in  consideration  of this  Agreement and the monies and other good and
valuable  consideration  provided to Griggs pursuant to this  Agreement,  Griggs
hereby irrevocably and unconditionally  releases,  waives and forever discharges
the Company and each of the other Releasees, from any and all actions, causes of
action, claims, demands, damages, rights, remedies and liabilities of whatsoever
kind or character, in law or equity, suspected or unsuspected, known or unknown,
past or present, that he has ever had, may now have, or may later assert against
the Releasees,  whether or not arising out of or related to Griggs's  employment
with or the  performance  of any  services to or on behalf of the Company or the
termination  of that  employment  and those services or any other cause from the
beginning  of time  to the  Effective  Date  hereof,  (hereinafter  collectively
referred to as "Griggs's Claims"),  including without limitation: (i) any claims
arising  out of or related to any  federal,  state  and/or  local labor or civil
rights laws  including,  without  limitation,  the federal  Civil Rights Acts of
1866, 1871, 1964 and 1991, the Pregnancy Discrimination Act of 1978, the Age

                                       2
<PAGE>


Discrimination  in Employment  Act of 1967, as amended by, inter alia, the Older
Workers  Benefit  Protection Act of 1990, the National Labor  Relations Act, the
Worker Adjustment and Retraining  Notification Act, the Family and Medical Leave
Act  of  1993,  the  Employee  Retirement  Income  Security  Act  of  1974,  the
Consolidated  Omnibus  Budget  Reconciliation  Act of 1985,  the Americans  with
Disabilities  Act of 1990,  the Fair Labor  Standards  Act of 1938,  the Florida
Civil Rights Act of 1992,  Florida Labor laws and Florida Wage and Hour Laws as
each may have been amended  from time to time;  and (ii) any and all of Griggs's
Claims  arising out of or related to any  contract,  any and all other  federal,
state or local  constitutions,  statutes,  rules or  regulations,  or under  any
common  law right of any kind  whatsoever,  or under the laws of any  country or
political subdivision, including, without limitation, any of Griggs's Claims for
any kind of  tortious  conduct  (including,  but not  limited  to,  any claim of
defamation  or  distress),  promissory  or  equitable  estoppel,  breach  of the
Company's policies, rules, regulations,  handbooks or manuals, breach of express
or implied contract or covenants of good faith, wrongful discharge or dismissal,
and/or failure to pay or provide in whole or part any  relocation  allowances or
expense reimbursements,  compensation,  bonus,  incentive  compensation,  profit
sharing, deferred stock, stock bonus awards or stock bonus incentives,  stock or
unit Options, purchase, sale, or ownership of the stock of the Company or any of
the  other  Releasees,  overtime  compensation,  severance  pay or  benefits  or
payments of any kind whatsoever, including disability and medical benefits, back
pay, front pay or any compensatory,  special or consequential damages,  punitive
or liquidated damages, attorneys' fees, costs, disbursements or expenses, or for
any other reason or thing.

         (b) To the fullest extent permitted by law, Griggs represents, warrants
and agrees  that he shall not lodge any formal or informal  complaint  in court,
with any  federal,  state or local  agency or any other forum  arising out of or
related  to  Griggs's  Claims or  Griggs's  employment  with or  performance  of
services  to or on behalf of the  Company or any of the other  Releasees  or the
termination  of that  employment  or other  services,  or for any other  reason.
Griggs hereby  represents and warrants that he has brought no complaint,  claim,
charge,  action or proceeding  against the Company or any of the other Releasees
in any  jurisdiction or forum.  Griggs further  represents,  warrants and agrees
that he has not in the past and will not in the future  assign  any of  Griggs's
Claims to any person, corporation or other entity.

         (c)  Execution of this  Agreement by Griggs  operates as a complete bar
and defense  against any and all of Griggs's  Claims  against the Company and/or
the other  Releasees.  If Griggs should hereafter make any of Griggs's Claims in
any charge, complaint, action, claim or proceeding against the Company or any of
the  Releasees,  the Agreement may be raised as and shall  constitute a complete
bar to any such charge,  complaint,  action, claim or proceeding and the Company
and/or the  Releasees  shall be  entitled to and shall  recover  from Griggs all
costs  incurred,  cinlcuding  attorneys'  fees,  in  defending  against any such
charge, complaint, action, claim or proceeding.

         (d) Griggs shall indemnify the Company to the extent of any claims made
against the Company or the other Releasees by Griggs spouse, children or Griggs'
IRA.

                                       3

<PAGE>

         6. RELEASE AND INDEMNIFICATION BY THE COMPANY

            (a)  In  consideration   of  this  Agreement,   the  Company  hereby
irrevocably and unconditionally  releases,  waives and forever discharges Griggs
from any and all actions,  causes of action, claims, demands,  damages,  rights,
remedies and liabilities of whatsoever kind or character, in law or equity, past
or present,  that it has ever had,  may now have,  or may later  assert  against
Griggs arising out of or related to Griggs's  employment with the Company or the
termination of that  employment;  provided,  however,  that the Company does not
intend to and is not releasing Griggs of any actions, causes of actions, claims,
demands,  damages,  rights,  remedies and  liabilities  asserted or which may be
asserted against the Company or any of the other Releases by any federal,  state
or local government,  agency or authority ("Government Company"), arising out of
or  related to Griggs'  intentional  and  knowing  acts or  omissions,  provided
further that Griggs is and will be released of all  Government  Claims solely to
the extent  Griggs would  otherwise be entitled to  indemnification  pursuant to
Section 145(a) of the Delaware  General  Corporation  Law (as in existence as of
the  Effective  Date),  or under the  By-laws of IHS.  The  released  claims are
hereinafter collectively referred to as "Company Claims."

            (b) To the fullest extent permitted by law, the Company  represents,
warrants and agrees not to lodge any formal or informal complaint in court, with
any federal,  state or local agency or any other forum arising out of or related
to Company's  Claims.  The Company  hereby  represents  and warrants that it has
brought no complaint,  claim, charge, action or proceeding against Griggs in any
jurisdiction or forum.

            (c)  Execution  of  this  Agreement  by the  Company  operates  as a
complete bar and defense  against any and all of the  Company's  Claims  against
Griggs.  If the Company should hereafter make any of the Company's Claims in any
charge, complaint, action, claim or proceeding against Griggs, the Agreement may
be raised as and shall constitute a complete bar to any such charge,  complaint,
action, claim, proceeding and Griggs shall be entitled to and shall recover from
the Company all costs incurred,  including attorneys' fees, in defending against
any such charge, complaint, action, claim or proceeding.

            (d) The Company  recognizes that prior to its bankruptcy filing, the
By-laws of IHS provided for certain  indemnification  rights for Griggs  arising
out of or relating to his employment with Rotech Medical Corporation  ("Rotech")
and the Company  agrees that  notwithstanding  this  Agreement,  Griggs  remains
entitled to such  indemnification  rights.  However,  it is expressly agreed and
understood  that  nothing  set forth in this  Agreement, nor its  execution,  is
intended to eliminate, modify, expand, elevate or change the scope or bankruptcy
priority  status of any  indemnification  rights  Griggs  may have  against  the
Company or the indemnification  rights as set forth in the By-laws of IHS. Prior
to the Effective  Date, the Company will deliver to Griggs a copy of its current
Directors and Officers insurance policy, and it agrees not to modify that policy
as it relates to Griggs.

                                       4

<PAGE>


            (e) Each of the  foregoing  subparagraphs  (a),  (b), (c) and (d) of
this Paragraph 6 is conditional upon the validity of the representations made by
Griggs as set forth in this Agreement.

         7.  AGREEMENT  ENFORCEABLE.  Nothing  contained  herein is  intended to
prevent Griggs or the Company from enforcing this Agreement.

         8. CONFIDENTIALITY.

            (a)  Griggs  represents,  warrants  and  agrees  that he  will  not,
directly  or  indirectly,  use or  disclose,  or  permit  or aid  the  use by or
disclosure  to any  person,  firm,  entity or  corporation,  of any  privileged,
confidential  or  proprietary  business  information  relating  to the  business
affairs, clients,  customers,  business partners, plans, proposals,  finances or
financial  condition  of the  Company or any of the other  Releasees  which such
information  Griggs received as a consequence of his employment with the Company
("Confidential  Information"),  except (i) with the  Company's  express  written
consent;  (ii) in direct  response to any subpoena  initiated  against or served
upon Griggs; or (iii) in response to a request for information from an agency of
the  government  of the United  States or a sovereign  government of any foreign
nation  ("Government  Agency") as part of an active  investigation  ("Government
Request").   In  the  event  that   disclosure   is  sought  from  Griggs  under
subparagraphs  (ii) or (iii) in  response to any such  subpoena or  Governmental
Request, Griggs shall give the Company immediate written notice of such subpoena
or Governmental  Request.  Except as expressly  authorized here,  Griggs further
represents,  warrants  and  agrees  that he has not and will  not,  directly  or
indirectly,  use or  disclose,  or  permit or aid the use or  disclosure  to any
person, firm, entity or corporation of any information arising out of or related
to the business affairs of the Company.

            (b) Griggs is obligated to surrender and  represents  that he has or
will surrender to the Company on or before the Effective Date, all confidential,
proprietary  and  other  property  of the  Company  and the other  Releasees  in
whatever form retained (e.g., written,  mechanical,  electronic) including,  but
not limited to, all documents,  papers, contracts, drafts, data, records, plans,
proposals,  software, lists, indices, notes, files, papers, computers,  computer
tapes, computer files, e-mail and all other electronic  communications  records,
disks or  materials  and other  information  and  property,  in  whatever  form,
including  any copies  thereof,  in the  possession  of or under the  control of
Griggs including,  but not limited to, any such items in the possession or under
the control of his attorneys.  Griggs hereby certifies that he and his attorneys
have fully complied with this representation.

            (c) On and after the date of this  Agreement,  except as required by
law or in  connection  with any  authorized  governmental  investigation,  for a
period of twenty-seven  (27) months from the Effective  Date,  neither Griggs on
the one hand,  the Company  including  its officers or  directors,  on the other
hand, shall make disparaging oral or written comments as against the other.

            (d) The  provisions  of this  Paragraph 8 are  material and critical
terms of this Agreement.

                                       5

<PAGE>


         9. NON-COMPETITION.

            (a) Griggs hereby represents, warrants and agrees that, subject only
to the  express  exceptions  set  forth  in  Paragraph  9(b),  for a  period  of
twenty-seven  (27)  months,  commencing  on March 15,  2000  (the  "Commencement
Date").  Griggs shall not,  directly or  indirectly  in the  continental  United
States:

                (i) raid or  divert or  interfere  with the  Company's  business
      relationships  with  its  customers,  vendors,   advertisers,   investors,
      suppliers  or other  persons or entities  with which the Company  conducts
      business; or

                (ii)  own,  manage,  operate,  control  or  participate  in  the
      ownership,  management,  operation  or control of, or be  connected  as an
      officer,  employee,  consultant,  partner, director, or otherwise with, or
      have financial interest in, or aid or assist anyone else in the conduct of
      any entity or business that competes with the business of the Company.

                The  activities  set forth in  Paragraphs  9(1)(i)  and (ii) are
hereinafter collectively referred to as the "Competitive Activities."

            (b)  Expressly   excluded  from  Paragraph   9(a)  are   Competitive
Activities:

                (i)    At any time in  the following counties in Texas: Counties
      of Bexar, Comad, Guadalupe and all  counties  contiguous  to  these  three
      counties;

                (ii)   Commencing August 1, 2000 in Texas, New Mexico, Arkansas,
      Louisiana, Oklahoma and Kansas; and

                (iii)  Commencing  August  1,  2001  in all  states  west of the
      Mississippi River.

            (c) Paragraph 9(a) does not apply to any business which  exclusively
manufactures products, equipment, or medication for the medical industry, except
that,  notwithstanding the foregoing,  Paragraph 9(a) will apply to any business
which is in the  business of home health  services,  home  medical  equipment or
which otherwise competes with the Company.

            (d) The  provisions  of this  Paragraph 9 are  material and critical
terms of this Agreement.


        10. NON-SOLICITATION.

            (a) Griggs hereby represents, warrants and agrees that, subject only
to the express  exceptions set forth in Paragraph  10(b),  for a period of three
(3) years,  commencing on the Commencement  Date,  Griggs shall not, directly or
indirectly solicit or induce any employee, agent

                                       6

<PAGE>

or  consultant  of the  Company  to leave the  employ of or to cease  performing
services for the Company and to become employed or engaged or otherwise work for
or with another person,  firm,  enterprise  corporation or other entity.  Griggs
further represents,  warrants and agrees not to hire, contract with or otherwise
employ or engage any  employee,  agent or consultant of the Company or cause any
employee, agent or consultant to be hired away from the Company. For purposes of
this Paragraph 10(a),  "any employee,  agent or consultant of the Company" shall
include any individual  employed or performing services for by the company as of
February 2, 2000, or thereafter.  Notwithstanding the foregoing,  nothing herein
is intended to prohibit  Griggs from hiring an employee,  agent or consultant at
least one year after the  termination of that employee's  employment,  agency or
consultancy with the Company.

            (b) Nothing set forth herein shall prohibit Griggs from employing an
agent or consultant in the medical industry which already provides services to a
multitude of companies including the Company at the same time.

            (c) The  non-solicitation  restrictions set forth in Paragraph 10(a)
shall not  apply to  employees,  agents  or  consultants  of the  Company  whose
annualized  total  compensation  paid  by  the  Company  was  less  than $45,000
(forty-five thousand U.S. dollars) per year as of the time immediately preceding
any offer to such employees, agents or consultants by Griggs; provided, however,
that  notwithstanding  anything  contained  herein,  Griggs may not, directly or
indirectly solicit or induce any employee, agent or consultant of the Company to
leave the employ of or cease  performing  services for the Company and to become
employed or engaged or otherwise  work with another  person,  firm,  enterprise,
corporation or other entity for the first three months after the Effective Date.

            (d) The  provisions  of this  Paragraph 10 are material and critical
terms of this Agreement.

       11.  REMEDIES FOR BREACH.

            (a) In the event that  either  Party  breaches,  violates,  fails or
refuses to comply with any of the provisions,  terms or conditions or any of the
warranties or representations of this Agreement (the "Breach"),  the Other Party
shall have sole  discretion to bring an action to recover  against the breaching
Party damages, including reasonable attorneys' fees, accruing to the Other Party
as a consequence of the Breach.

            (b)  Regardless  of and in  addition  to any  right  to  damages  or
equitable  relief  the  Company  may have,  in the event that  Griggs  breaches,
violates fails or refuses to comply with any of his warranties, representations,
or covenants in this  Agreement,  the Company  shall be entitled to cease making
payments under this  Agreement and to recover  against Griggs the full amount of
all  payments  the  Company had  provided  to or on behalf of Griggs  under this
Agreement  only if the Company  first obtains a judgment or finding by any court
having  jurisdiction  that  Griggs was in Breach and that the  Company  has been
damaged in that amount.


                                       7

<PAGE>


            (c) Griggs acknowledges and agrees (i) that the services he provided
to  the  Company  were  of  a  special,   unique,  unusual,   extraordinary  and
intellectual  character giving them a peculiar value; (ii) that in the course of
performing his duties on behalf of the Company,  Griggs was permitted  access to
some or all of the Company's trade secrets and other confidential or proprietary
information;  and (iii) that the foregoing  acknowledgment and agreements by him
in  this  Paragraph  11(c)  are  an  adequate  and  appropriate  basis  for  his
representations,  warranties and agreements in the above  Paragraphs 8, 9 and 10
and for the remedies for breach to which he is agreeing in this Paragraph 11(c).
Accordingly,  Griggs  acknowledges  and agrees that money  damages would be both
incalculable and an insufficient remedy for any breach of Paragraphs 8, 9 and 10
of this  agreement and that any such actual or  threatened or continuing  breach
will cause the Company irreparable harm. In the event of any actual,  threatened
or continuing  breach of Paragraphs 8, 9 and 10  specifically  enforced  against
Griggs by way of temporary, preliminary and/or permanent injunction by any court
having jurisdiction, without the posting of any bond or security by the Company.
Such right and  remedy  shall be in  addition  to, and not in lieu of, any other
rights and remedies  available to the Company  under law or in equity.  Further,
Griggs agrees that should the Company commence an action for injunctive  relief,
the  Company  shall have the right in the same  proceeding  and court to recover
against  Griggs the money  damages  causes by such  breach,  including,  but not
limited to, the reasonable attorneys' fees and costs of the Company.

            (d) The General Release by Griggs and the Release by the Company and
all other terms and conditions of this Agreement  shall remain in full force and
effect  regardless of the remedies and/or damages available under this Paragraph
11.

            (e) Upon violation of any of Paragraphs  12(a) through (c) and 13(a)
through (c) of this Agreement,  the Company's obligation to make any prospective
payments to Griggs  hereunder shall terminate and, in lieu thereof,  the Company
shall make such prospective payments to Kaye, Scholer,  Fierman, Hays & Handler,
LLP, as counsel for the Company, pursuant to an escrow agreement as set forth in
Exhibit B. Thereafter, such payments shall only be made to Griggs by the Company
upon order of the Bankruptcy Court (as defined in Paragraph 14(e) hereof).

        12. REPRESENTATIONS BY GRIGGS

            To the best of Griggs' personal knowledge,  Griggs hereby represents
that:

            (a) Rotech Medical Corporation  ("Rotech") is in compliance with all
Governmental   Requirements   (as  defined   herein).   Except  for  notices  of
non-compliance  as to which Rotech has taken corrective action acceptable to the
applicable governmental agency, Griggs has not, within the period of twelve (12)
months  preceding the date of this  Agreement,  received any written notice from
any governmental agency that Rotech fails to comply in any material respect with
any applicable  federal,  state, local or other governmental laws or ordinances,
or any  applicable  order,  rule or regulation of any federal,  state,  local or
other  governmental  agency having  jurisdiction  over Rotech and its operations
("Governmental Requirements").

                                       8

<PAGE>


            (b)  Rotech is  qualified  for  participation  in the  Medicare  and
Medicaid  programs.  Griggs is aware of  pending  government  investigations  in
Montana; Mississippi,  Iowa; New Mexico; and the Lincare Qui Tam Litigation (the
"Government Investigations"). With the exception of previous disclosures made in
connection with the Government  Investigations,  to the best of Griggs' personal
knowledge  (i) he is not aware of any facts which  would give rise to  liability
under the  Government  Investigations;  (ii) the Company has no  liability  with
respect to recoupment from the Medicare or Medicaid programs, or any other third
party reimbursement source. Griggs had no personal knowledge of the assertion of
any recoupment claim that arose out of any  transactions  completed prior to the
date  hereof,  and no Medicare or Medicaid  investigation,  survey,  or audit is
pending or, to the personal knowledge of Griggs,  threatened with respect to the
operation of Rotech,  except to the extent that such  investigation,  survey, or
audit is routine and is not reasonably  likely to have a material adverse effect
on Rotech. To Grigg's personal knowledge, no Rotech employees have committed any
offense which may serve as the basis for suspension,  restriction,  or exclusion
of Rotech from the  Medicare  and  Medicaid  programs  and Rotech is in material
compliance with all Conditions and Standards of Participation in the Medicare or
Medicaid Programs.

            (c) The Health Care Compliance Questionnaire heretofore delivered to
Griggs by the  Company  will,  as of the  Effective  Date,  have been  fully and
accurately completed and will not contain any material  misstatement of any fact
and will not omit any fact that  would  have to be stated in order not to render
any response to such questionnaire materially misleading.

            (d) Neither Griggs, nor any director/trustee,  officer,  controlling
person or  employee  of Rotech,  and no  affiliate  of Rotech,  (a) has used any
corporate  funds of  Rotech  to make any  illegal  or  unlawful  payment  to any
officer, employee, representative,  agent of any corporation,  government, or to
any political party or official thereof,  including,  without limitation, any of
same that would violate the Foreign  Corrupt  Practices Act of 1977, as amended;
or (b) has made or received  any illegal  payment,  bribe,  kickback,  political
contribution  or  other  similar  questionable  payment  for  any  referrals  or
recommendations, or otherwise, in connection with the operation of Rotech.

            (e) Griggs has not received any improper  payments  from the Company
or the other Releasees.

            (f) Prior to the  commencement of the litigation  entitled Rotech v.
Loftis et al.  Adv.  No.  00473  pending  in the  Bankruptcy  Court in  Delaware
("Loftis  Litigation"),  Griggs did not participate in nor did he have knowledge
that Rotech employees may have stolen or were planning to steal assets, business
records or corporate  opportunities of Rotech, all as more particularly  alleged
in the Loftis Litigation.

            (g) None of the representations and warranties made pursuant to this
Agreement  contains any untrue  statement  of material  fact or omits to state a
material fact necessary,  in light of the circumstance  under which it was made,
in order to make any such representation not misleading in any material respect.



                                       9

<PAGE>

     13.  The  Company believes, based on information made known to it as of the
date hereof and the representations made by Griggs herein:

     (a)  Griggs  on behalf of the Company and Rotech acted in good faith and in
a  manner  he  reasonably believed to be in or not  to the best interests of the
Company and Rotech.

     (b)  Griggs  on behalf of the Company and Rotech had no reasonable cause to
believe his conduct was unlawful.

     (c)  Griggs  complied  in  all  material  respects  with  all  Governmental
Requirements.


     14. MISCELLANEOUS PROVISIONS.

     (a)  No oral understanding, statements, promises or inducements contrary to
the  terms  of  this  Agreement  exist.  This  Agreement  cannot  be  changed or
terminated orally.

     (b)  Failure  to enforce my provision of this Agreement shall not prejudice
or  constitute  a  waiver  of  the  enforcement  of  that provision in any other
instance.

     (c)  Should  any  provision  of  this Agreement be held invalid, illegal or
unenforceable,  it  shall  be  deemed  to  be  modified  so that its purpose can
lawfully  be  effectuated and the balance of this Agreement shall remain in full
force and effect.

     (d)  This  Agreement  shall  extend  to,  be binding upon, and inure to the
benefit of the Parties and their respective successors, heirs and assigns.

     (e) This  Agreement  shall be governed by and construed in accordance  with
the laws of the State of Delaware.  Any dispute over any term in this Agreement,
or any action or  proceeding  between the  Parties to enforce  the terms  hereof
shall be commenced  only in the  Bankruptcy  Court  administering  the Company's
Bankruptcy  Court  administering  the  Company's  bankruptcy  case  ("Bankruptcy
Court"),  and the Parties  hereby  submit to the exclusive  jurisdiction  of the
Bankruptcy Court and further agree not to assert that any action brought in such
jurisdiction has been brought in an inconvenient  forum.  The Company's  payment
obligations  set  forth  in  Paragraph  2(b)  hereof  shall  be  entitled  to an
administrative expense priority.

     (f) This  Agreement may be executed in any number of  counterparts  each of
which when so executed  shall be deemed to be an original  and all of which when
taken together shall constitute one and the same agreement. A telecopy signature
on this Agreement shall have the same force and effect as an original signature.
10
<PAGE>

     (g) As used in this  Agreement,  the  connectives  "and" and "or"  shall be
construed either disjunctively or conjunctively as necessary to bring within the
meaning or scope of the  provisions  of this  Agreement  all meanings that might
otherwise be construed to be outside of the meaning or scope of such provision.


     (h)  In  the  event  of  ambiguity, this Agreement or any of its provisions
shall  not  be construed for or against either Party on the basis of which Party
drafted the particular language at issue.

     15. EFFECTIVE DATE/REVOCATION.  Griggs may revoke this Agreement in writing
at any time during a period of seven (7)  calendar  days after the  execution of
this Agreement by both of the Parties (the "Revocation Period").  This Agreement
shall be  effective  and  enforceable  automatically  on the first day after the
occurrence of the following  two events:  (a) the date of the actual  receipt by
the Company's  counsel,  Kaye,  Scholer,  Fierman,  Hays & Handler,  LLP (to the
attention of Michael  Crames,  Esq.) of the  Certificate  of  Non-Revocation  of
Separation  Agreement and General  Release (the form of which is attached hereto
as Exhibit A) executed and dated by Griggs at least one day after  expiration of
the  Revocation  Period  and (b) the entry of an order of the  Bankruptcy  Court
approving  this Agreement  which order has not been appealed,  vacated or stayed
and the time period for taking an appeal  thereof has  expired  (the  "Effective
Date").

     16.  NOTICES.  Any  notices  or  requests  under this Agreement shall be in
writing, addressed as follows:


          (a)      If to Griggs:

                   Stephen P. Griggs
                   440 Minnehaha Road
                   Maitland, FL 32751
                   Telephone No. (407) 647-4711
                   Fax No. (407) 647-2972

                   Wire Transfer Instructions:

                   For the Account of Stephen P. Griggs
                   Suntrust Bank, Central Florida
                   Orlando, FL 32801
                   Account No. 0700-700722901
                   ABA Number 063102152
                                       11
<PAGE>



                   With a copy to:

                   Brown, Rudnick, Freed & Gesmer
                   One Financial Center
                   Boston, MA 02111
                   Telephone No. (617) 856-8513
                   Fax No. (617) 856-8201


                   Attention: Peter J. Antoszyk, Esq.


          (b)      If to the Company:

                   Integrated Health Services, Inc.
                   910 Ridgebrook Road
                   Sparks, MD 21152
                   Telephone No. (410) 773-100
                   Fax No. (410) 773-1325


                   Attention: Marshall Elkins, Esq., General Counsel

                   With a copy to:

                   Kaye, Scholer, Fierman, Hays & Handler, LLP
                   425 Park Avenue
                   New York, NY 10022
                   Telephone No. (212) 836-8564
                   Fax No. (212) 836-6157


                   Attention: Arthur Steinberg, Esq.


     17.  COOPERATION.  Through the Effective Date, Griggs shall continue to act
in  accordance  with the best  interests  of Rotech to the extent  requested  by
Robert Elkins.  Griggs recognizes that after the execution of this Agreement and
the filing of the  pleading  for approval  thereof,  but prior to the  Effective
Date, the Company may replace him as president;  however he will remain employed
by the Company until the Effective  Date,  and the Company  agrees to diligently
act in good faith to have the Agreement approved by the Bankruptcy Court.


     IN SIGNING THIS SEPARATION AGREEMENT AND GENERAL RELEASE (THE "AGREEMENT"),
GRIGGS ACKNOWLEDGES THAT:


     (A)  HE HAS READ AND UNDERSTANDS THIS AGREEMENT AND HE IS HEREBY ADVISED IN
WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT;

                                       12
<PAGE>

     (B)  HE  HAS  SIGNED THIS AGREEMENT VOLUNTARILY, AFTER BEING ADVISED BY HIS
ATTORNEYS,  AND  UNDERSTANDS  THAT  THIS  AGREEMENT  CONTAINS  A  FULL AND FINAL
RELEASE OF ALL OF GRIGGS' CLAIM;


     (C)  HE HAS BEEN OFFERED AT LEAST TWENTY-ONE (21) CALENDAR DAYS TO CONSIDER
THIS AGREEMENT; AND


     (D)  THIS  AGREEMENT  IS  NOT  MADE IN CONNECTION WITH AN EXIT INCENTIVE OR
OTHER EMPLOYEE TERMINATION PROGRAM OFFERED TO A GROUP OR CLASS OF EMPLOYEES.


---------------------------                 ------------------------- , 2000
   Stephen P. Griggs                         Date of Execution by Griggs


INTEGRATED HEALTH, SERVICES INC.


By:-------------------------                ------------------------- , 2000
   C. Taylor Pickett                        Date of Execution by Company



                                       13

<PAGE>

                                   EXHIBIT A

                       CERTIFICATION OF NON-REVOCATION OF
                    SEPARATION AGREEMENT AND GENERAL RELEASE

     I  hereby  certify  and  represent that seven (7) calendar days have passed
since  the  Parties  signed  the  Separation  Agreement and General Release (the
"Agreement")  and  that  I  have NOT exercised my right to revoke that Agreement
pursuant  to the Older Workers Benefit Protection Act of 1990. I understand that
the  Company  and  the  other  Releases, in providing me with benefits under the
Agreement,  are relying on this Certificate, and that I can no longer revoke the
Agreement.

  /s/ Stephen P. Griggs                      7/12
 -------------------------      ------------------------- , 2000
   Stephen P. Griggs            Date of Execution by Griggs


IMPORTANT:

     THIS  CERTIFICATE  SHOULD BE SIGNED,  DATED AND  RETURNED TO THE  COMPANY'S
COUNSEL,  KAYE,  SCHOLER,  FIERMAN,  HAYS & HANDLER,  LLP (TO THE  ATTENTION  OF
MICHAEL  CRAMES,  ESQ.),  425 PARK AVENUE,  NEW YORK, NEW YORK 10022, NO EARLIER
THAT ON THE EIGHTH (8TH)  CALENDAR  DAY AFTER THE  AGREEMENT IS EXECUTED BY BOTH
PARTIES.


<PAGE>

                                   EXHIBIT B


                                ESCROW AGREEMENT



     This  ESCROW  AGREEMENT  (the  "Escrow  Agreement")  is dated July __, 2000
among  Integrated  Health  Services, Inc. ("IHS"), Stephen P. Griggs ("Griggs"),
and  Kaye,  Scholer,  Fierman,  Hays  &  Handler,  LLP, as escrow agent ("Escrow
Agent").

     IHS  and  Griggs  have  entered  into  a  Separation  Agreement and General
Release,   as   amended,   dated  as  of  ____________,  2000  (the  "Separation
Agreement").  Upon  an  alleged  breach  of  any of Paragraphs 12(a) through (c)
and/or  13(a)  through (c) of the Separation Agreement, IHS's obligation to make
any  prospective  payments  to Griggs pursuant to the Separation Agreement shall
terminate  and,  in  lieu thereof, IHS shall make such prospective payments (the
"Deposit")  to  the  Escrow  Agent.  This Escrow Agreement shall control how the
Deposit  is  to  be  maintained  by  the  Escrow Agent and is to be disbursed to
either IHS or Griggs.

     It is agreed as follows:

     1. ESCROW  DEPOSIT. The Deposit shall be held in escrow by the Escrow Agent
pursuant  to  and  in  accordance  with  this Escrow Agreement. The Escrow Agent
shall  invest the Deposit in (i) interest or non-interest bearing accounts in or
certificates  of  deposit  of  any  of the following banks: Fleet National Bank,
Bankers  Trust  Company,  The  Chase  Manhattan  Bank, Citibank, N.A., or Morgan
Guaranty  Trust Company of New York, or (ii) obligations of the United States of
America  maturing  within  ten  days of the date of investment. Escrow Agent may
invest  the Deposit in one or more of the investments permitted by the preceding
sentence,  and  may  change  those  investments from time to time, all as it may
determine  in  its sole and absolute discretion. Escrow Agent shall have no duty
to  maximize  the  return  on the Deposit and shall be fully protected in making
any investment or combination of investments permitted by this Section.

     2. DISBURSEMENT  AFTER  ORDER OF THE COURT. Upon receipt by Escrow Agent of
an  order (the "Order") of the Bankruptcy Court stating how the Deposit is to be
disbursed,  Escrow  Agent  shall  release  the  sum  specified  in  the Order in
accordance  with  the  Order.  The "Bankruptcy Court" means the bankruptcy court
administering IHS's bankruptcy case.

     3. ESCROW  AGENT  AS  COUNSEL  TO IHS. Griggs acknowledges that he is aware
that  Escrow  Agent is acting as counsel to IHS and its affiliates in connection
with  the  Separation  Agreement,  the  bankruptcy  case  of  IHS,  this  Escrow
Agreement  and  other  matters, and agrees that Escrow Agent's acting under this
Escrow  Agreement  shall not affect its ability to act as counsel to IHS and its
affiliates  in  any  manner, including, but not limited to, any claim, action or
proceeding  with  respect  to  this  Escrow  Agreement  or the disposition of or
entitlement to the Deposit.

     4. ESCROW AGENT.
<PAGE>

     4.1 GENERAL. Escrow  Agent  shall act as escrow agent and hold and disburse
the  Deposit  pursuant to the terms and conditions of this Escrow Agreement. Its
duties  under  this  Escrow  Agreement  shall  cease  upon  disbursement  of the
Deposit.

     4.2 LIMITED  DUTIES. Escrow Agent undertakes to perform only such duties as
are  expressly  set  forth in this Escrow Agreement. Escrow Agent shall incur no
liability  whatsoever to IHS or Griggs, except for its own willful misconduct in
its capacity as escrow agent.

     4.3 LIMITED   RESPONSIBILITIES. Escrow  Agent's  sole  responsibility  upon
receipt  of  the  Order  is  to  follow  the  provisions thereto relating to the
disbursement of the Deposit.

     4.4 RESIGNATION. Escrow  Agent may resign and be discharged from its duties
or  obligations hereunder by giving notice of such resignation to IHS and Griggs
specifying  a  date  upon  which such resignation shall take effect, whereupon a
successor  escrow agent shall be appointed by IHS and Griggs or, if no agreement
is   reached  by  IHS  and  Griggs  within  ten  (10)  days  of  Escrow  Agent's
resignation,  by the Bankruptcy Court. Escrow Agent shall be entitled to release
the Deposit to any successor escrow agent so appointed.

     4.5 INDEMNIFICATION. IHS  and  Griggs hereby jointly and severally agree to
indemnify  Escrow  Agent  for,  and  to  hold  it  harmless  against,  any loss,
liability,  damage  or  expense incurred without bad faith on the part of Escrow
Agent  arising  out of or in connection with its entering into and/or performing
under  this Escrow Agreement, including the cost and expense (including, but not
limited  to,  attorneys' fees, which may consist in whole or in part of the time
charges  at their standard rates of partners of and attorneys employed by Escrow
Agent) of investigating or defending itself against any claim or liability.

     5. ESCROW  AGENT  NOT  AFFECTED  BY OTHER AGREEMENTS. This Escrow Agreement
expressly  sets forth all the duties of Escrow Agent with respect to any and all
matters  pertinent  hereto.  No implied duties or obligations shall be read into
this  Escrow  Agreement  against  Escrow Agent. Escrow Agent, in its capacity as
such,  shall  not  be bound by the provisions of any agreement among the parties
except  this Escrow Agreement and shall have no duty to inquire into, or to take
into  account  its  knowledge of, the terms and conditions of any agreement made
or entered into in connection with this Escrow Agreement.

     6. NOTICES. All  notices,  requests, demands and other communications under
this  Agreement  shall be in writing and shall be deemed to have been duly given
(i)  on  the date of service if served personally on the party to whom notice is
to  be given, (ii) on the day of transmission if sent by facscimile transmission
to  the  facsimile number given below, and telephonic confirmation of receipt is
obtained  promptly  after  completion  of  transmission,  (iii) on the day after
delivery  to  Federal  Express  or similar overnight courier or the Express Mail
service  maintained  by  the United States Postal Service, or (iv) upon receipt,
if  mailed  to  the  party  to  whom notice is to be given, by first class mail,
registered  or  certified,  postage prepaid and properly addressed, to the party
as follows:


                                       2
<PAGE>


If to IHS:              Integrated Health Services, Inc.
                        910 Ridgebrook Road
                        Sparks, MD 21152
                        Attn: Marshall Elkins, Esq.
                        Telephone: (410) 773-1000
                        Facsimile: (410) 773-1325

Copy to:                Kaye, Scholer, Fierman, Hays & Handler, LLP
                        425 Park Avenue
                        New York, NY 10022
                        Attention: Arthur Steinberg, Esq.
                        Telephone: (212) 836-8201
                        Facsimile: (212) 836,8211

If to Griggs:           Stephen P. Griggs
                        440 Minnehaha Road
                        Maitland, FL 32751
                        Telephone: (407) 647-4711
                        Facsimile:(407) 647-2972

Copy to:                Brown, Rudnick, Freed & Gesmer
                        One Financial Center
                        Boston, MA 02111
                        Telephone: (617) 856-8513
                        Facsimile: (617) 856-8201
                        Attention: Peter J. Antoszyk Esq.

If to Escrow Agent:     Kaye, Scholer, Fierman, Hays & Handler, LLP
                        425 Park Avenue
                        New York, NY 10022
                        Attention: Arthur Steinberg, Esq.
                        Telephone: (212) 836-8201
                        Facsimile: (212) 836-8211

Any  party  may  change  its address for the purpose of this Section 6 by giving
the other party notice of its new address in the manner set forth above.

     7. MISCELLANEOUS.

     7.1 JURISDICTION. Any   action   or   proceeding  seeking  to  enforce  any
provision  of, or based on any right arising out of, this Escrow Agreement shall
be brought against any of the parties only

                                       3
<PAGE>

in  the  Bankruptcy  Court  and  the  parties  hereby  consent  to the exclusive
jurisdiction  of  the  Bankruptcy Court and further agree not to assert that any
action brought in such jurisdiction has been brought in an inconvenient form.

     7.2 CAPTIONS. The  captions in this Escrow Agreement are for convenience of
reference  only  and  shall not be given any effect in the interpretaion of this
Escrow Agreement.

     7.3 NO  WAIVER. The  failure  of a party of insist upon strict adherence to
any  term  of  this  Escrow  Agreement on any occasion shall not be considered a
waiver  or  deprive  that  party  of  the right thereafter to insist upon struct
adherence  to  that  term or any other term of this Escrow Agreement. Any waiver
must be in writing.

     7.4 EXCLUSIVE   AGREEMENT;  AMENDMENT;  ASSIGNMENT. This  Escrow  Agreement
supersedes  all  prior  agreements among the parties with respect to its subject
matter,  is  intended  as a complete and exclusive statement of the terms of the
agreement  among  the  parties  with  respect  thereto  and cannot be changed or
terminated  orally. No party may assign any rights or delegate any of its duties
under  this  Escrow  Agreement  without  the  prior written consent of the other
parties  hereto,  and  this  Escrow Agreement shall be binding upon and inure to
the  benefit  of  the  successors  and  assigns of the parties hereto and to any
successor escrow agent appointed in accordance with Section 4.4.

     7.5 COUNTERPARTS. This  Escrow  Agreement  may be executed in counterparts,
each  which  shall  be  considered  an original, but all of which together shall
constitute  the  same  instrument.  Telecopy  signatures  shall  be  treated  as
original for purposes hereof.

     7.6 GOVERNING  LAW. This  Escrow  Agreement  and  all amendments hereof and
waivers  and  consents  hereunder shall be governed by, and all disputes arising
hereunder  shall  be  resolved  in  accordance with the laws of the State of New
York, without regard to the conflicts of law principles thereof.


                                   * * * * *


                                     INTEGRATED HEALTH SERVICES, INC.



                                     By:
                                        ---------------------------------------

                                     Title:
                                          -------------------------------------


                                     STEPHEN P. GRIGGS



                                     ------------------------------------------



                                       4
<PAGE>

                                     ESCROW AGENT:


                                     KAYE, SCHOLER, FIERMAN,
                                      HAYS & HANDLER, LLP, as Escrow Agent



                                     By:
                                        ---------------------------------------

                                     Title:
                                          -------------------------------------

                                       5

</TEXT>
</DOCUMENT>
