AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AMENDMENT No. 1, dated as of November 22, 1996 (the "Amendment"), to the
Agreement and Plan of Merger dated as of October 16, 1996 (the "Merger
Agreement"), among Xxxxx Healthcare Corporation, a Nevada corporation
("Parent"), OHC Acquisition Co., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and OrNda Healthcorp., a Delaware corporation (the
"Company").
WHEREAS, Parent, Sub and the Company have agreed to amend the Merger
Agreement to make certain modifications to certain provisions governing employee
benefit matters;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. AMENDMENT TO THE MERGER AGREEMENT. Exhibit C to the Merger Agreement is
hereby amended and restated to read in its entirety as set forth in Attachment 1
hereto.
2. MISCELLANEOUS. Except as expressly amended and modified hereby, the
Merger Agreement is hereby reaffirmed and remains in full force and effect. This
Amendment may be executed in several counterparts, each of which shall be deemed
an original and all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
XXXXX HEALTHCARE CORPORATION
By: /s/ XXXXXXX X. XXXXXXXX
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive
Officer
Attest:
By: /s/ XXXXX XXXXX
--------------------------------------
Name: Xxxxx Xxxxx
Title: Senior Administrative
Assistant
OHC ACQUISITION CO.
By: /s/ XXXXXXX X. XXXXXXXX
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive
Officer
Attest:
By: /s/ XXXXX XXXXX
--------------------------------------
Name: Xxxxx Xxxxx
Title: Senior Administrative
Assistant
ORNDA HEALTHCORP
By: /s/ W. XXXXX XXXXX
-----------------------------------
Name: W. Xxxxx Xxxxx
Title: Executive Vice President and
Chief Operating Officer
Attest:
By: /s/ XXXXXX X. XXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
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ATTACHMENT 1
CERTAIN BENEFITS
1. From and after the Effective Time, Parent will cause the Surviving
Corporation to honor, pay and perform all obligations under each Plan (including
but not limited to under each employment, severance, termination or similar
agreement or arrangement with any current or former officer or other employee of
Company or any Company Subsidiary) in accordance with the terms thereof in
effect as of the date hereof (or, with the written approval of Parent, as the
same may be amended from time to time after the date hereof).
2. Except as may otherwise be required under any collective bargaining
agreement, Parent will cause each employee pension, welfare, incentive, fringe
and other benefit and compensation plan and program of Parent and its
subsidiaries (the "Parent Benefit Programs") to provide for the participation
therein of the officers and other employees of Company and the Company
Subsidiaries (collectively, the "Company Employees"), in each case, pursuant to
the terms of such Parent Benefit Program applicable to similarly situated
officers and other employees of Parent and its subsidiaries. In connection
therewith, Parent will cause each Parent Benefit Program to (i) recognize for
all purposes under each such program all service completed by each Company
Employee prior to the Effective Time with Company, any Company Subsidiary or any
of their respective affiliates or predecessors to the same extent such service
was recognized immediately prior to the Effective Time under a comparable Plan
and (ii) waive (except with respect to any Parent Benefit Program providing
disability benefits) any actively-at-work requirements and exclusions for
pre-existing conditions of the Company Employees and their dependents and to
recognize any co-payments, deductibles or similar amounts or costs incurred by
any such Company Employee under a comparable Plan during the plan year in which
the commencement of such Company Employee's participation in the applicable
Parent Benefit Program occurs.
3. Effective on the date hereof, Company (subject to consultation with
Parent as to the specific terms thereof) will implement and, for the two-year
period following the Effective Time, Parent will, or will cause the Surviving
Corporation to, continue to maintain a severance plan (the "Severance Plan") (i)
covering all of the employees of Company located at (or otherwise employed
full-time to perform services for) the Company's headquarters in Nashville,
Tennessee or one of its regional offices located in Irvine, California, Phoenix,
Arizona or Miami, Florida and the Chief Executive Officer of each hospital
operated by Company or a Company Subsidiary (each, a "Hospital CEO"), other than
any such employee who, as of the Effective Time, is covered by an effective
employment agreement or Severance Protection Agreement, and (ii) otherwise
containing the terms and providing the benefits described herein. The Severance
Plan will provide for the payment of the severance benefits described herein to
each covered employee whose employment is terminated after the date hereof and
on or prior to the second anniversary of the Effective Time by Company, a
Company Subsidiary or the Surviving Corporation (other than for "cause" as to be
defined in the Severance Plan) or by such employee for "Good Reason," as defined
in Section 4. Severance benefits provided under the Severance Plan will be paid
in cash, on a salary continuation basis consistent with Parent's existing
payroll practices, commencing upon an eligible employee's termination of
employment, at a rate equal to such employee's highest rate of annual base
salary in effect during the period from the date hereof to the date of such
termination (the "Measurement Period") for a period of time as follows: (i) in
the case of an employee having the title at the relevant time of Assistant
Vice-President or Hospital CEO, one year, (ii) in the case of an employee having
the title at the relevant time of Director, nine months, (iii) in the case of an
employee having the title at the relevant time of Manager, six months, (iv) in
the case of an employee who, at the relevant time, is otherwise classified as an
exempt employee, four months and (v) in the case of an employee who, at the
relevant
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time, is classified as a non-exempt employee, a period of months determined in
accordance with the following schedule:
NUMBER OF YEARS
OF SERVICE COMPLETED FACTOR FOR
PRIOR TO TERMINATION DETERMINING
OF EMPLOYMENT SEVERANCE PAY
------------------------------------------------------------------ ----------------
less than one year................................................ two months
one year but less than three years................................ three months
three years but less than five years.............................. four months
five or more years................................................ five months
Solely in the case of an employee having the title at the relevant time of
Assistant Vice-President, such employee will also receive at the time such
employee would next have been eligible to receive an annual bonus, an amount
equal to the greatest of (I) such employee's highest annual target incentive
bonus for any fiscal or calendar year beginning during the Measurement Period,
(II) such employee's highest annual bonus paid for any fiscal or calendar year
ending during the Measurement Period or (III) such employee's annual target
bonus for the fiscal year of the Company ending August 31, 1996.
Any covered Employee entitled to severance benefits under the Severance Plan
will, in addition to the payments described above, be entitled to continue
participation in Parent's 401(k) qualified savings plan (or, if such
participation is not permitted under the terms of such plan, equivalent benefits
on a non-qualified basis) and in those Parent Benefit Programs providing
medical, life, and other welfare benefits (excluding any Parent Benefit Program
providing disability benefits) in which such employee was a participant
immediately prior to the date of termination of employment, for the period
ending on the earlier of (x) the last date with respect to which salary
continuation payments are required to be made to such employee in accordance
with the terms hereof and (y) the date comparable coverage (including coverage
of pre-existing conditions) is provided to such employee under a plan of a new
employer, at a cost to such employee no greater than the cost, if any, of such
coverage to such employee immediately prior to his termination of employment.
Benefits under the Sever ance Plan will be in lieu of any other severance
benefits to which any such covered employee may otherwise be entitled under the
terms of any other plan or arrangement of Parent, Company or any subsidiary.
4. For purposes of Section 3, "Good Reason" for termination by the employee
of the employee's employment shall mean the occurrence (without the employee's
express written consent) of any one of the following acts or failures to act by
Parent, the Company, or the Surviving Corporation, as the case may be, unless,
in the case of any act or failure to act described below, such act or failure to
act is corrected prior to the date of termination of employment:
(I) a material diminution in the employee's title, authorities or
responsibilities from those in effect immediately prior to such termination
or, if greater, those in effect immediately prior to the Effective Time;
(II) a reduction in the employee's annual base salary or hourly salary as
in effect immediately prior to the Effective Time except for
across-the-board salary reductions similarly affecting all similarly
situated employees of the Company and all similarly situated employees of
any person in control of the Company;
(III) the relocation of the employee's office at which he is to perform
his duties, to a location that increases his one-way commute by more than
thirty (30) miles from his commute to the location at which the employee
performed his duties immediately prior to the Effective Time, except for
required travel on Company's business to an extent substantially consistent
with his business travel obligations prior to the Effective Time; or
(IV) the failure to continue to provide the employee with benefits
substantially similar in value to the employee in the aggregate to those
enjoyed by the employee under Company's pension, life
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insurance, medical, health and accident, or disability plans in which the
employee was participating immediately prior to the Effective Time, unless
the employee participates after the Effective Time in other comparable
benefit plans generally available to employees of the Company and employees
of any person in control of the Company.
5. The Company shall take all necessary action to provide that, not later
than five (5) business days prior to the Effective Time, (i) any outstanding
options to purchase Shares under Company's Stock Purchase Plan shall terminate
(the "Stock Purchase Plan Termination Date"), and (ii) all amounts allocated to
each participant's account under the Company Stock Purchase Plan shall thereupon
(x) be used to purchase from Company newly-issued whole Shares at a price equal
to the lesser of (a) 85% of the closing price per Share on the New York Stock
Exchange on September 1, 1996 and (b) 85% of the closing price per Share on the
New York Stock Exchange on the Stock Purchase Plan Termination Date, or (y)
returned to the participant. At the Effective Time, any Shares so purchased will
be treated as provided in Section 3.1 of the Agreement. From and after the date
hereof, participants in the Stock Purchase Plan will not be permitted to
increase the rate of their contributions to the Stock Purchase Plan.
6. With respect to the Plans listed on Schedule A hereto (the "Change in
Control Plans"), Parent and Company confirm that, pursuant to the terms of the
Change in Control Plans as in effect on the date hereof, the approval by Company
shareholders of the Merger (or, with respect to the form of Indemnification
Agreement, the consummation of the Merger) will constitute a Change in Control
for purposes of such plans (assuming, where explicitly provided in the
applicable plan or agreement, that the Company's Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer (i) changes after the Change of
Control or within 180 days thereafter, except as the result of their death or
Disability, or (ii) changes prior to the Change of Control at the direction of
Parent).
7. Parent hereby acknowledges and agrees that, effective as of the date
hereof and to induce Executive (as defined below) to remain in the employment of
Company during the transition period beginning on the date hereof, the
Employment Agreement, dated as of May 1, 1996 (the "Employment Agreement"), by
and between Company and Xxxxxxx X. Xxxxx (the "Executive") will be amended and
supplemented to provide that (i) on or prior to December 31, 1996, the Company
will make a lump sum cash payment to Executive (the "Advance") in an amount
equal to approximately $2.1 million, as an advance payment of a portion of the
benefits that are payable to Executive under Section 11(d)(ii) of the Employment
Agreement in the event of a Change in Control of Company (as defined therein)
and the subsequent termination of Executive's employment, (ii) in the event of
the termination of Executive's employment under the circumstances described in
Section 11(d) of the Employment Agreement, the lump sum cash payment to which
Executive will then be entitled under Section 11(d)(ii) of the Employment
Agreement in connection with such termination will be reduced by an amount equal
to the Advance and will otherwise be paid to Executive in accordance with
Section 11(d)(iv) of the Employment Agreement and (iii) in the event that (x)
the Merger is not consummated on or prior to August 1, 1997 (the "Expiration
Date") or (y) Executive's employment is not terminated under the circumstances
described in Section 11(d) of the Employment Agreement prior to the first
anniversary of the Effective Time (the "First Anniversary"), Executive's base
salary, annual and long-term incentive compensation bonuses, stock option
compensation, severance payments and other compensation will be reduced by an
aggregate amount equal to the Advance in such manner and in such increments as
Company or the Surviving Corporation, as the case may be, deems appropriate;
provided, however, that in the event Executive's employment is terminated by
Executive without Good Reason or by Parent, Company or the Surviving Corporation
for "cause" (as defined in the Employment Agreement), Executive shall repay to
Company within ten (10) business days following the date of such termination of
employment an amount equal to the excess, if any, of (a) the amount of the
Advance over (b) the aggregate amount by which Executive's base salary, annual
and long-term incentive compensation bonuses, stock option compensation,
severance payments and other compensation have been reduced as provided above.
In addition, Company and Parent shall cooperate in taking such reasonable
actions as may be necessary to preserve the deductibility under section 162(m)
of the Code of the Advance, including (without limitation) by terminating
Executive's employment with or position as an executive officer of Company prior
to the Effective Time, provided, that
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no such action will be taken that would adversely affect Executive's entitlement
to the severance benefits provided under Section 11(d)(ii) of the Employment
Agreement or preclude the acceleration of the exercisability of Executive's
employee stock options pursuant to the terms of Company's 1994 Management Equity
Plan.
8. From and after the date hereof, Parent acknowledges and agrees that, in
the case of each Company Employee who (i) may be subject to the excise tax on
"excess parachute payments" under Section 280G of the Code by reason of the
acceleration of the vesting of certain Employee Stock Options in connection with
the Merger and (ii) elects to exercise any vested Employee Stock Options prior
to the end of the 1996 calendar year, to assist such Company Employee in
satisfying his obligations to pay the exercise price and income tax withholding
obligations associated with the exercise of any such Employee Stock Options (the
"Aggregate Exercise Obligations"), Company may, upon the request of such Company
Employee, and in accordance with the terms of the applicable stock option
agreement and stock option plan (i) withhold a number of Shares having a fair
market value, as defined in the Company's 1994 Management Equity Plan, equal to
the applicable Aggregate Exercise Obligations, or (ii) subject to all
applicable margin rules, extend a loan to such Company Employee, in the
principal amount of such Aggregate Exercise Obligations, which loan shall (w)
bear interest at an annual rate equal to the average cost of Company's bank
indebtedness obligations outstanding as of the date of such loan, (x) be secured
by all the Shares purchased with the proceeds of such loan (or by other property
of equal value acceptable to Company and Parent), (y) have a term not to exceed
one year, with such loan coming due upon the earlier sale of the Shares securing
such loan, and (z) be subject to such other terms and conditions as Company and
Parent shall reasonably require; provided, that such Share withholding or
secured loan shall be subject to the condition that such action would not
preclude the treatment of the Merger as a pooling of interests for accounting or
financial reporting purposes.
9. It is agreed that the "caps" described under the employment agreements
for Messrs. Xxxxxx, Xxxxx and Xxxxx and under the form of Severance Protection
Agreement for purposes of Section 280G of the Code apply only to reduce
severance and other amounts payable under such agreements, and do not apply to
the acceleration of stock options under Company's 1994 Management Equity Plan.
10. Parent hereby acknowledges and agrees that, effective as of the date
hereof and to induce certain Company officers named below (the "Designated
Officers") to remain in the employment of the Company at least during the
transition period beginning on the date hereof, the Company and each such
Designated Officer will enter into an agreement which will provide that (i) on
or prior to December 31, 1996, the Company will make a lump sum cash payment to
each Designated Officer (each a "Special Advance" and, collectively, the
"Special Advances") in the following amounts: Xxxxxxx Xxxxxx-$600,000; Xxxxxxxx
Xxxxxx-$506,250; Xxxx Xxxxxx-$450,000; Xxxxxxx Xxx-$400,000; and Xxxxxxx
Xxxxxxxxx-$5,000, as advance payments of a portion of the benefits that are
payable to each such Designated Officer under Sections 6.01(A) and 6.01(B) of
their respective Severance Protection Agreements in the event of a Change in
Control of Company (as defined therein) and the subsequent termination of any
such Designated Officer's employment, (ii) in the event of termination of a
Designated Officer's employment under the circumstances described in Section
6.01 of his Severance Protection Agreement, the lump sum cash payment to which
such Designated Officer will then be entitled under Sections 6.01(A) and 6.01(B)
of his Severance Protection Agreement in connection with such termination will
be reduced by an amount equal to the Special Advance previously paid to such
Designated Officer and will otherwise be paid to such Designated Officer in
accordance with Section 6.03 of his Severance Protection Agreement and (iii) in
the event that (x) the Merger is not consummated on or prior to August 1, 1997
(the "Expiration Date") or (y) the employment of any Designated Officer is not
terminated under the circumstances described in Section 6.01 of his Severance
Protection Agreement prior to the first anniversary of the Effective Time (the
"First Anniversary"), the base salary, annual and long-term incentive
compensation bonuses, stock option compensation, severance payments and other
compensation of any such Designated Officer will be reduced by an aggregate
amount equal to the Special Advance previously paid to such Designated Officer
in such manner and in such increments as Company or the Surviving Corporation,
as the case may be, deems appropriate; provided, however, that in the event the
employment of any Designated Officer is
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terminated by any Designated Officer without Good Reason or by Parent, Company
or the Surviving Corporation for "cause" (as defined in the respective Severance
Protection Agreements), any such Designated Officer shall repay to Company
within ten (10) business days following the date of such termination of
employment an amount equal to the excess, if any, of (a) the amount of the
Special Advance previously paid to such Designated Officer over (b) the
aggregate amount by which such Designated Officer's base salary, annual and
long-term incentive compensation bonuses, stock option compensation, severance
payments and other compensation have been reduced as provided above. In
addition, Company and Parent shall cooperate in taking such reasonable actions,
if any, as may be necessary to preserve the deductibility under section 162(m)
of the Code of the Special Advances, including (without limitation) by
terminating any such Designated Officer's employment with or position as an
officer of Company prior to the Effective Time, provided, that no such action
will be taken that would adversely affect any such Designated Officer's
entitlement to the severance benefits provided under Section 6.01 of his
Severance Protection Agreement or preclude the acceleration of the
exercisability of the employee stock options of any such Designated Officer
pursuant to the terms of Company's 1994 Management Equity Plan.
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SCHEDULE A
1. Xxxxxx, Xxxxx and Xxxxx Employment Agreements
2. Indemnification Agreement with Xxxxxx X. Xxxxxxx and any other
indemnification agreement of substantially the same form (the "form of
Indemnification Agreement")
3. 1994 Management Equity Plan and any stock option agreement evidencing
options granted thereunder that does not define the term "Change of Control"
other than as defined in such plan
4. Outside Directors Stock Option Plan and any stock option agreement
evidencing options granted thereunder that does not define the term "Change of
Control" other than as defined in such plan
5. Incentive Bonus Plan
6. 1994 Annual Incentive Plan for Officers
7. Severance Protection Agreement with Xxxxxx X. Xxxxxxx and any other
severance protection agreement of substantially the same form (the "form of
Severance Protection Agreement")
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