<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
BEVERLY ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
BEVERLY ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
BEVERLY ENTERPRISES, INC.
1200 SOUTH WALDRON ROAD
SUITE 155
FORT SMITH, ARKANSAS 72903
(501) 452-6712
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1994
To the Stockholders of Beverly Enterprises, Inc.:
The Annual Meeting of Stockholders of Beverly Enterprises, Inc., will be
held at the Holiday Inn, 700 Rogers Avenue, Fort Smith, Arkansas, on Thursday,
May 19, 1994, at 10:00 a.m., for the following purposes:
1. To elect seven members of the Board of Directors;
2. To approve Amendment No. 1 to the Beverly Enterprises, Inc. 1993
Long-Term Incentive Stock Plan;
3. To approve the Beverly Enterprises, Inc. Annual Incentive Plan;
4. To approve the Beverly Enterprises, Inc. Non-Employee Directors' Stock
Option Plan;
5. To ratify the appointment of Ernst & Young as independent auditors for
1994; and
6. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Nominees for election as directors at the Annual Meeting and any
adjournments thereof (the "Annual Meeting") are Beryl F. Anthony, Jr., David R.
Banks, Curt F. Bradbury, James R. Greene, Jon E. M. Jacoby, Louis W. Menk, and
Will K. Weinstein, all of whom are presently serving as directors of the
Company.
The Board of Directors has fixed the close of business on March 21, 1994,
as the record date for the determination of stockholders who are entitled to
notice of and to vote at the Annual Meeting. A list of stockholders entitled to
vote at the Annual Meeting will be open to the examination of any stockholder
for any purpose germane to the Annual Meeting at the offices of Beverly
Enterprises, Inc., 1200 South Waldron Road, Suite 155, Fort Smith, Arkansas,
during ordinary business hours for ten days prior to the Annual Meeting.
We encourage you to attend the Annual Meeting. Whether you are able to
attend or not, we urge you to indicate your vote on the enclosed proxy card FOR
the election of directors named in the attached Proxy Statement, FOR approval of
Amendment No. 1 to the Beverly Enterprises, Inc. 1993 Long-Term Incentive Stock
Plan, FOR approval of the Beverly Enterprises, Inc. Annual Incentive Plan, FOR
approval of the Beverly Enterprises, Inc. Non-Employee Directors' Stock Option
Plan and FOR ratification of the appointment of Ernst & Young as independent
auditors for 1994. Please sign, date and return the proxy card promptly in the
enclosed envelope. If you attend the Annual Meeting, you may vote in person even
if you have previously mailed a proxy card.
By Order of the Board of Directors
ROBERT W. POMMERVILLE
Secretary
April 19, 1994
Fort Smith, Arkansas
<PAGE> 3
BEVERLY ENTERPRISES, INC.
1200 SOUTH WALDRON ROAD
SUITE 155
FORT SMITH, ARKANSAS 72903
(501) 452-6712
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1994
The accompanying proxy is solicited by the Board of Directors of Beverly
Enterprises, Inc. (the "Company") to be voted at the Annual Meeting of
Stockholders to be held May 19, 1994, and any adjournments of the meeting (the
"Annual Meeting"). It is anticipated that this proxy material will be mailed on
or about April 19, 1994, to stockholders of record on March 21, 1994.
A copy of the annual report of the Company for the year ended December 31,
1993, including consolidated financial statements, is enclosed herewith. THE
COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY PERSON SOLICITED HEREBY, UPON THE
WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1993, FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. SUCH REQUESTS SHOULD BE DIRECTED TO ROBERT W. POMMERVILLE,
SECRETARY OF THE COMPANY, AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES, 1200
SOUTH WALDRON ROAD, P.O. BOX 3324, FORT SMITH, ARKANSAS 72913-3324, (501)
452-6712.
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised. A proxy may be revoked by filing with the Secretary of the
Company (i) a signed instrument revoking the proxy, or (ii) a duly executed
proxy bearing a later date. A proxy may also be revoked if the person executing
the proxy is present at the meeting and elects to vote in person. If the proxy
is not revoked, it will be voted by those therein named.
VOTING PROCEDURES
The close of business on March 21, 1994 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. As of the close of business on such date, the Company has
outstanding and entitled to vote 83,046,602 shares of Common Stock, par value
$.10 per share (the "Common Stock"). Each holder of shares of Common Stock is
entitled to one vote per share on each matter to be considered. Stockholders are
not permitted to cumulate votes for the purpose of electing directors or
otherwise.
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote will constitute a quorum for the transaction of business
at the Annual Meeting.
A plurality of the votes cast in person or by proxy and entitled to vote at
the Annual Meeting is required for the election of directors. The affirmative
vote of the holders of shares of Common Stock representing a majority of votes
is required for (a) the approval of Amendment No. 1 to the Beverly Enterprises,
Inc. 1993 Long-Term Incentive Stock Plan, (b) the approval of the Beverly
Enterprises, Inc. Annual Incentive Plan, (c) the approval of the Beverly
Enterprises, Inc. Non-Employee Directors' Stock Option Plan, (d) the
ratification of the appointment of Ernst & Young as independent auditors for
1994 and (e) the approval of such other matters (other than the election of
directors) as may properly come before the Annual Meeting.
<PAGE> 4
Abstention and broker non-votes have the same effect as votes against
proposals presented to stockholders other than the election of directors. They
have no effect on the election of directors. A broker non-vote occurs when a
nominee holding shares for a beneficial owner votes on one proposal, but does
not vote on another proposal because the nominee does not have discretionary
voting power and has not received instruction from the beneficial owner.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 21, 1994, relating
to the beneficial ownership of Common Stock by each person known by the Company
to own beneficially more than five percent of the outstanding shares of Common
Stock, based upon filings made by such persons with the Securities and Exchange
Commission. Percentages in the table were calculated based on the number of
shares of Common Stock outstanding and entitled to vote at March 21, 1994.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
SHARES OF OF TOTAL
COMMON COMMON
NAME STOCK STOCK
------------------------------------------------------------- --------- --------
<S> <C> <C>
The Equitable Life Assurance Society......................... 5,263,640(1) 6.05%
787 Seventh Avenue
New York, NY 10019
RCM Capital Management....................................... 4,651,350(1) 5.35%
RCM Limited L.P.
RCM General Corporation
(collectively "RCM")
Four Embarcadero Center, Suite 2900
San Francisco, CA 94111
</TABLE>
- ---------------
(1) At January 10, 1993, The Equitable Life Assurance Society had sole voting
power with respect to 5,236,240 shares and sole dispositive power with
respect to 5,263,640 shares. At February 10, 1994, RCM had sole voting power
with respect to 3,352,100 shares, sole dispositive power with respect to
4,606,350 shares and shared dispositive power with respect to 45,000 shares.
2
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 21, 1994, the amount of the
Company's Common Stock beneficially owned by each of its directors, each
executive officer named in the Summary Compensation Table and all directors and
executive officers as a group based on information obtained from such persons.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
SOLE
VOTING OPTIONS PERCENTAGE
AND EXERCISABLE OTHER OF
INVESTMENT WITHIN 60 BENEFICIAL COMMON
POWER DAYS OWNERSHIP TOTAL STOCK
---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Beryl F. Anthony, Jr..................... 0 15,000 0 15,000 *
David R. Banks........................... 126,516(1) 255,000 1,509(2) 383,025 *
Curt F. Bradbury......................... 2,000 15,000 0 17,000 *
James R. Greene.......................... 500 15,000 0 15,500 *
Boyd W. Hendrickson...................... 35,722(1) 97,000 0 132,722 *
Jon E. M. Jacoby......................... 0 15,000 0 15,000 *
Ronald C. Kayne.......................... 48,000 26,000 0 74,000 *
Louis W. Menk............................ 0 0 5,000(3) 5,000 *
T. Jerald Moore.......................... 48,027(1) 6,000 0 54,027 *
Bobby W. Stephens........................ 135,937(1) 164,000 9,900(4) 309,837 *
Will K. Weinstein........................ 0 15,000 0 15,000 *
All Executive Officers and Directors as a
Group (18 Persons)..................... -- -- -- 1,393,094 1.60
</TABLE>
- ---------------
* Percentage of Common Stock owned does not exceed 1%.
(1) Includes shares allocated to the employee through participation in the
Company's Employee Stock Purchase Plan, according to the latest statement
for said plan.
(2) Shares owned by family members, for which Mr. Banks is custodian.
(3) Shares held by a trust over which Mr. Menk has investment and revocation
power.
(4) 9,900 shares owned by family members.
PROPOSAL 1 -- ELECTION OF DIRECTORS
One of the purposes of the Annual Meeting is to elect seven directors to
hold office until the 1995 annual meeting and until successors are elected and
qualified. Nominees for election as directors at the Annual Meeting are Beryl F.
Anthony, Jr., David R. Banks, Curt F. Bradbury, James R. Greene, Jon E. M.
Jacoby, Louis W. Menk and Will K. Weinstein, all of whom are presently serving
as directors of the Company.
Joe T. Ford, who served as a director since 1991, resigned from the Board
of Directors in February, 1994.
Unless otherwise directed on the proxy card, the proxy holders named
therein will vote FOR the election of the nominees named above. By appropriate
indication on the proxy card, stockholders may instruct the proxy holders to
vote for some but not all of the nominees named above or withhold authority for
all of the nominees. In the event that any nominee is unable to serve, an event
not now anticipated, the proxies will then be voted FOR any nominee who shall be
designated by the present Board of Directors to fill the vacancy.
3
<PAGE> 6
The following table contains certain information as of March 21, 1994, with
respect to the persons who have been nominated to serve as directors for the
term beginning May 19, 1994.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES DIRECTOR
NAME AGE WITH THE COMPANY SINCE
-------------------------------- --- ------------------------ --------
<S> <C> <C> <C>
Beryl F. Anthony, Jr.(d)(e) 56 Director 1993
David R. Banks(c)(e) 57 Chairman of the Board, 1979
President and Chief
Executive Officer
Curt F. Bradbury(a)(d) 44 Director 1989
James R. Greene(a)(d) 72 Director 1991
Jon E. M. Jacoby(b)(c)(e) 55 Director 1987
Louis W. Menk(b)(d) 75 Director 1989
Will K. Weinstein(c) 53 Director 1989
</TABLE>
- ---------------
(a) Member of the Audit Committee
(b) Member of the Compensation Committee
(c) Member of the Finance Committee
(d) Member of the Quality Assurance Committee
(e) Member of the Nominating Committee
The following is the business experience of the persons who have been
nominated to serve as directors of the Company.
Beryl F. Anthony, Jr. Mr. Anthony served as a member of the United States
Congress until 1992 and was Chairman of the Democratic Congressional Campaign
Committee from 1987 through 1990. In 1993, he became a partner in the law firm
of Winston & Strawn in Washington, D.C. Mr. Anthony serves as a director of
Anthony Forest Products Company.
David R. Banks. Mr. Banks has served as President since October, 1979,
Chief Executive Officer since May, 1989 and Chairman of the Board since March,
1990. Mr. Banks is a director of Nationwide Health Properties, Inc., Ralston
Purina Company, Wal-Mart Stores, Inc. and Wellpoint Health Networks Inc., and
trustee for the University of the Ozarks.
Curt F. Bradbury. Mr. Bradbury is Chairman, Chief Executive Officer,
President and a director of Worthen Banking Corporation, a bank holding company.
Mr. Bradbury joined Worthen in 1985 as Assistant to the President, and prior
thereto was a Vice President in the Corporate Finance Department of Stephens
Inc., and Manager of its Bank Services Division.
James R. Greene. Mr. Greene's principal occupation has been that of a
director and consultant to various U.S. and international businesses since 1986.
He is a director of ASARCO, Inc., a number of mutual funds of Alliance Capital
Management Corporation, American Reliance Group Inc., Buck Engineering Company
and Bank Leumi.
Jon E. M. Jacoby. Mr. Jacoby is Executive Vice President, Chief Financial
Officer and a director of Stephens Group, Inc., an energy, agricultural and
investment firm. Mr. Jacoby has held the indicated positions with Stephens
Group, Inc., since 1986, and prior to that time, served as Manager of the
Corporate Finance Department and Assistant to the President of Stephens Inc. Mr.
Jacoby is a director of Medicus Systems, Inc., the Delta Queen Steamboat Company
and Delta and Pine Land Company, Inc.
Louis W. Menk. Mr. Menk is Chairman of Black Mountain Gas Company. Mr. Menk
retired in 1982 as Chairman and Chief Executive Officer of International
Harvester Company, the predecessor to Navistar International Corporation.
Will K. Weinstein. Mr. Weinstein has been Managing Partner of Genesis
Merchant Group, an investment banking firm, and the sole General Partner of
W.I.G. Securities since 1989, and was President of WIG, Inc.
4
<PAGE> 7
from 1987 to 1989. From 1982 to 1987, Mr. Weinstein was Managing Partner of
Montgomery Securities. He is a director of DHL Corporation.
During 1993, there were six meetings of the Board of Directors. Each
director attended 75% or more in the aggregate of the meetings of the Board and
committees on which he served.
In 1993, directors, other than Mr. Banks, received a retainer fee of
$18,000 for serving on the Board and an additional fee of $1,000 for each Board
or committee meeting attended. Effective January 1, 1994, the annual retainer
fee was raised to $22,000. Mr. Banks, the current Chairman of the Board,
President and Chief Executive Officer of the Company, received no additional
cash compensation for serving on the Board or its committees.
The Finance Committee, which met seven times during 1993, reviews the
Company's financial strategy and certain financial transactions, and interacts
with the Company's lenders.
The Audit Committee, which met four times during 1993, reviews and acts, or
reports to the Board, with respect to various auditing and accounting matters,
including the selection of the Company's independent auditors, the scope of
audit procedures, the nature of services to be performed for the Company by and
the fees to be paid to the independent auditors, oversight of the Company's
internal audit function, the performance of the Company's independent auditors
and the accounting practices of the Company.
The Nominating Committee, which met one time during 1993, is empowered to
recommend to the Board of Directors nominees for election as directors and
persons to fill director vacancies and newly created directorships, recruit
potential director candidates, recommend changes to the Board of Directors
concerning the responsibilities and composition of the Board of Directors and
its committees. In addition, the Nominating Committee will review stockholders'
suggestions of nominees for director that are submitted in writing in compliance
with Section 16 of the Company's by-laws which require written notice be given
to the Secretary of the Company not less than 50 days nor more than 75 days
prior to the Annual Meeting.
The Quality Assurance Committee, which met six times during 1993, monitors
the quality assurance process of the Company and reports to the Board on
progress made toward reaching quality assurance goals.
The Compensation Committee met four times during 1993. See the Compensation
Committee Report on Executive Compensation starting at Page 12 for a discussion
of the Compensation Committee functions.
PROPOSAL 2 -- APPROVAL OF AMENDMENT NO. 1
TO THE BEVERLY ENTERPRISES, INC.
1993 LONG-TERM INCENTIVE STOCK PLAN
At the last annual meeting, the stockholders approved the Beverly
Enterprises, Inc. 1993 Long-Term Incentive Stock Plan ("Long-Term Incentive
Stock Plan"). On March 17, 1994 the Board of Directors of the Company
unanimously approved Amendment No. 1 to the 1993 Long-Term Incentive Stock Plan
("Amendment No. 1"), and the Board of Directors directed that Amendment No. 1 be
submitted for stockholder approval at the Annual Meeting. Amendment No. 1 will
become effective upon the affirmative vote of a majority of the shares of Common
Stock voting at the Annual Meeting.
The purpose of Amendment No. 1 is to comply with the requirements of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), so
that the compensation expense resulting from awards under the 1993 Long-Term
Incentive Stock Plan to certain executive officers whose compensation exceeds $1
million may be deductible by the Company for federal income tax purposes (see
"$1 Million Limit on Compensation" discussed on page 14 of this Proxy
Statement). The affected executive officers are described in Code Section
162(m), and they may from time to time be participants under the 1993 Long-Term
Incentive Stock Plan (collectively, the "Section 162(m) Participants"). The
executive officers named in the Summary Compensation Table may become Section
162(m) Participants for a Plan Year.
A brief background description of the 1993 Long-Term Incentive Stock Plan
is provided below. Following such description is a summary description of the
changes included in Amendment No. 1.
5
<PAGE> 8
BACKGROUND DESCRIPTION OF THE PLAN
The 1993 Long-Term Incentive Stock Plan is intended to assist the Company
in motivating, attracting, and retaining key employees, by encouraging the
ownership of Common Stock and providing incentives for continued service to the
Company. The Compensation Committee of the Board of Directors administers the
Plan, and in its sole discretion designates the key employees who are to be
participants under the Plan.
The 1993 Long-Term Incentive Stock Plan authorizes the award of incentive
stock options, restricted stock, nonqualified stock options, performance units,
performance shares, or other stock unit awards (collectively, the "Awards").
All Awards are granted under the Plan in the sole discretion of the
Compensation Committee. The maximum number of shares of Common Stock that may be
issued pursuant to Awards under the Plan is 3,000,000. The Committee may, in its
sole discretion, adjust the aggregate number of available shares of Common Stock
or the price and number of shares outstanding as Awards, in the case of certain
capital adjustments, such as stock dividends, stock splits, or
recapitalizations.
The 1993 Long-Term Incentive Stock Plan will expire on June 30, 2003,
unless terminated by the Board of Directors as of an earlier date.
DESCRIPTION OF AMENDMENT NO. 1
The changes included in Amendment No. 1 relate only to Awards made to
Section 162(m) Participants under the 1993 Long-Term Incentive Stock Plan, which
changes are generally more restrictive. The principal changes in Amendment No. 1
are described below.
Designating Section 162(m) Participants. The Compensation Committee is
required to designate the Section 162(m) Participants before the beginning of
any "Performance Period" under the Plan. A "Performance Period" is the calendar
year and the time period during which performance goals are to be met.
Performance Measures. All performance measures, goals, standards, formulas,
or criteria relating to Section 162(m) Participants (collectively, "Performance
Measures") for a Performance Period must be established by the Compensation
Committee in writing prior to the beginning of the Performance Period, or by
such later date as may be permitted under Code Section 162(m). All such
Performance Measures must be objective, and must satisfy the third party
"objectivity" standards under Code Section 162(m). Performance Measures must not
allow for any discretion to increase an Award due to the satisfaction of a
performance goal, although discretion to lower such an Award is permitted.
Performance Measures may include alternate and multiple Performance
Measures, and may be based on one or more business criteria. The Compensation
Committee will consider factors such as earnings per share, return on equity,
revenue growth, cash flow, and income and operating margins in establishing
Performance Measures for a Performance Period.
Determination of Awards. The award and payment of any Award to a Section
162(m) Participant is contingent upon the attainment of the Performance Measures
applicable to the Section 162(m) Participant for the Performance Period. The
Compensation Committee is required to certify in writing that such Performance
Measures have been satisfied.
The maximum Award that may be paid to any Section 162(m) Participant as a
performance share, performance unit, or other stock unit award for a Performance
Period is 100 percent of such Participant's base salary on the first day of the
Performance Period. The maximum number of shares of Common Stock subject to
Options and Restricted Stock granted to any Section 162(m) Participant for a
Performance Period is 300,000.
FEDERAL INCOME TAX CONSEQUENCES
Under the recently enacted Code Section 162(m), the Company's deduction is
generally limited to $1 million per year for compensation paid to Section 162(m)
Participants, unless certain requirements are met
6
<PAGE> 9
to qualify compensation to performance-based criteria. The amendments in
Amendment No. 1 are designed to ensure the Company, and its subsidiaries or
affiliates, a federal income tax deduction for any Awards paid to Section 162(m)
Participants covered under the 1993 Long-Term Incentive Stock Plan.
Recommendations of the Board of Directors
The Board of Directors of the Company recommends a vote FOR the proposal to
approve Amendment No. 1 to the 1993 Long-Term Incentive Stock Plan. Proxies
received by the Board of Directors will be so voted unless stockholders specify
a contrary choice.
PROPOSAL 3 -- APPROVAL OF THE
BEVERLY ENTERPRISES, INC.
ANNUAL INCENTIVE PLAN
On March 17, 1994, the Board of Directors of the Company unanimously
approved the adoption of the Beverly Enterprises, Inc. Annual Incentive Plan
(the "Annual Incentive Plan"), and the Board of Directors directed that the Plan
be submitted for stockholder approval at the Annual Meeting. The Annual
Incentive Plan will become effective upon the affirmative vote of a majority of
the shares of Common Stock voting at the Annual Meeting. No awards or payments
will be made pursuant to the Annual Incentive Plan if the Plan is not approved
by the stockholders of the Company.
The Annual Incentive Plan was approved in furtherance of the compensation
philosophy outlined in the Compensation Committee Report on Executive
Compensation (see page 13), which recognizes the importance of developing
executive compensation policies that are directly aligned and consistent with
the strategic goals and objectives of the Company. The major provisions of the
Annual Incentive Plan are described below.
SUMMARY DESCRIPTION OF THE PLAN
The following description of the Annual Incentive Plan is qualified in its
entirety by reference to the Annual Incentive Plan, a copy of which is attached
as Exhibit "A" to this Proxy Statement.
Purpose. The Annual Incentive Plan is intended to provide the covered
Participants with incentive awards for their contributions to the Company's
success, and to do so through an ongoing program designed to reinforce the
Company's strategic plan and related financial and operating objectives.
Eligibility and Participation in the Plan. All executives and other key
employees of the Company, or of a subsidiary or affiliate of the Company, are
eligible to be selected for participation under the Annual Incentive Plan. The
Compensation Committee of the Board of Directors has the full and final
authority, in its discretion, to determine those executives and other key
employees who will be designated as Participants under the Annual Incentive
Plan. The Compensation Committee will from time to time establish participation
criteria for the selection of Participants under the Annual Incentive Plan. The
Company estimates that the number of persons who initially may be eligible to
participate under the Annual Incentive Plan is approximately 72. No person will
automatically be entitled to participate under the Annual Incentive Plan for any
Plan Year. Directors who are not employees of the Company, or of its
subsidiaries or affiliates, are not eligible for participation under the Annual
Incentive Plan.
Certain executive officers of the Company who are described in Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and who
may have compensation in excess of $1 Million for a year, could from time to
time become Participants under the Annual Incentive Plan (collectively, the
"Section 162(m) Participants"). To satisfy the requirements of Code Section
162(m), there are various, generally more restrictive, Plan provisions which
apply to Section 162(m) Participants, and not to other Plan Participants (the
"Non-162(m) Participants"). Section 162(m) Participants must be designated for
Annual Incentive Plan participation by the Compensation Committee prior to the
beginning of each Plan Year, or by such later date as may be permitted under
Code Section 162(m).
7
<PAGE> 10
Administration. The Annual Incentive Plan will be administered by the
Compensation Committee of the Board of Directors. The Compensation Committee has
full power to administer and interpret the Annual Incentive Plan to carry out
its purposes, as well as to designate Plan Participants, and determine the
conditions under which awards are granted under the Annual Incentive Plan.
The members of the Compensation Committee will be indemnified by the
Company against liabilities and expenses, including attorneys' fees, which they
may reasonably incur in the defense of any action, suit or proceeding to which
they may be a party by reason of any action taken or failure to act under the
Plan.
Annual Award Program. Each Plan Year (which is the calendar year), the
Compensation Committee, in its sole discretion, will establish the standards,
goals, targets, performance measures, and evaluation criteria and guidelines
(collectively the "Performance Measures") that will be applicable in making
awards under the Annual Incentive Plan for the Plan Year. Such Performance
Measures may include individual target and maximum incentive opportunities, as
well as performance goals and measurements applicable to individuals, groups of
Participants, or Company-wide performance.
Performance Measures may also include alternate and multiple Performance
Measures, and may be based on one or more business criteria. The Compensation
Committee will consider factors such as earnings per share, return on equity,
revenue growth, cash flow, and income and operating margins in establishing
Performance Measures for a Plan Year.
All Performance Measures applicable to Section 162(m) Participants must be
established in writing by the Compensation Committee prior to the beginning of
each Plan Year, or by such other later date as may be permitted under Section
162(m) of the Code. Such Performance Measures must also be objective, and
satisfy the third party "objectivity" standards under Section 162(m) of the
Code. Additionally, all Performance Measures applicable to Section 162(m)
Participants must not allow for any discretion to increase an award due to the
satisfaction of a performance goal, although discretion to lower such an award
is permitted.
Award Determination; Eligibility for Award. The Compensation Committee will
approve individual awards to Annual Incentive Plan Participants each Plan Year.
Such determinations will be in accordance with the Performance Measures
established by the Compensation Committee for the Plan Year. To be eligible to
receive an award for the Plan Year, a Participant must be an employee of the
Company, or of a subsidiary or an affiliate of the Company, on the last day of
the Plan Year. Participants who retire, die, become disabled, or terminate for
another reason approved by the Compensation Committee before the last day of the
Plan Year are also eligible to receive an award for the Plan Year. In the case
of an eligible Participant's death, award payments are made to the deceased
Participant's beneficiary.
The payment of any award to an eligible Section 162(m) Participant is
contingent upon the Section 162(m) Participant's attainment of any Performance
Measures which are applicable to such Participant. Prior to the payment of any
award to an eligible Section 162(m) Participant, the Compensation Committee will
certify in writing that the Performance Measures applicable to such Participant
have been satisfied.
Payment of Award. The Compensation Committee will determine the time and
form of payment of all awards under the Plan. Award payments may be made before
or after the close of a Plan Year, and payments will normally be in a lump sum,
although a different form could be directed by the Compensation Committee. The
Compensation Committee will also designate whether an award payment is to be
made in cash, Common Stock, or any combination thereof. To the extent any award
under the Annual Incentive Plan is paid in Common Stock, such payment will be
considered to be an award under the 1993 Long-Term Incentive Stock Plan, and the
terms and provisions of such plan, including any transfer, vesting, or sale
restrictions, will also apply to such Common Stock award.
Other Benefits. The Compensation Committee may from time to time award a
special benefit to a Participant, other than a Section 162(m) Participant, in
addition to and separate from any other award granted in accordance with the
Performance Measures for a Plan Year. The Compensation Committee will designate
the time and form of payment for any such special award.
8
<PAGE> 11
Plan Funding and Limitation on Benefits. The aggregate amount of awards
payable under the Annual Incentive Plan will equal the sum of all required award
payments. The Compensation Committee may from time to time establish an
incentive award pool for making awards under the Plan. The maximum award that
may be paid to any Section 162(m) Participant for a Plan Year is 100 percent of
such Participant's base salary on the first day of the Plan Year.
Amendment and Termination of the Plan. The Compensation Committee may
amend, terminate, or modify the Annual Incentive Plan at any time, including
amendments deemed necessary or desirable to correct any defect or supply an
omission or reconcile any inconsistency in the Plan or in any award granted
under the Plan. Any amendment or modification of the Plan will not require
stockholder approval, except to the extent that such approval is required
pursuant to the rules under Section 16 of the Securities and Exchange Act of
1934, the Code, under rules and regulations of the exchange or system on which
the Common Stock is listed or reported, or pursuant to other applicable laws,
rules or regulations. No amendment, termination, or modification of the Plan may
in any manner affect awards theretofore granted without the consent of the
Participant. The Compensation Committee must determine that an amendment or
modification is in the best interest of all persons to whom awards have
therefore been granted, but in no event may such amendment or modification
result in an increase in the amount of compensation payable pursuant to such
award.
Estimate of Benefits. The amounts that will be paid pursuant to the Plan
are not currently determinable. The amounts that would have been awarded for
1993 if the Plan had been in effect are as follows:
NEW PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE($)
---------------------------------------------------------------------- ---------------
<S> <C>
David R. Banks, Chairman of the Board,
President and Chief Executive Officer............................... $ 234,000
Ronald C. Kayne, Executive Vice President............................. $ 96,460
T. Jerald Moore, Executive Vice President............................. $ 87,500
Boyd W. Hendrickson, Executive Vice President......................... $ 109,200
Bobby W. Stephens, Executive Vice President........................... $ 91,000
Executive Group....................................................... $ 925,182
Non-executive Director Group.......................................... $ 0
Non-executive Officer Employee Group.................................. $ 309,341
</TABLE>
The Company's Chief Executive Officer and the next four highest-paid
officers listed above could become Section 162(m) Participants for a Plan Year.
FEDERAL INCOME TAX CONSEQUENCES
Under the present federal income tax regulations, Participants will realize
ordinary income equal to the amount of the award received in the year of
receipt. The Company will receive a deduction for the amount constituting
ordinary income to the Participant, provided that the Plan satisfies the
requirements of Code Section 162(m), which limits the deductibility of
nonperformance-related compensation paid to certain corporate executives. It is
the Company's intention that the Plan be applied and administered in a manner
which maximizes the deductibility of compensation for the Company under Code
Section 162(m).
9
<PAGE> 12
Recommendation of the Board of Directors
The Board of Directors of the Company recommends a vote FOR the proposal to
approve the Beverly Enterprises, Inc. Annual Incentive Plan. Proxies received by
the Board of Directors will be so voted unless stockholders specify a contrary
choice.
PROPOSAL 4 -- APPROVAL OF THE
BEVERLY ENTERPRISES, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Company maintains the 1993 Long-Term Incentive Stock Plan for its
officers and other key employees. The nonemployee Directors on the Company's
Board of Directors are not eligible to participate under the 1993 Long-Term
Incentive Stock Plan.
On March 17, 1994, the Board of Directors of the Company unanimously
approved the adoption of the Beverly Enterprises, Inc. Nonemployee Directors'
Stock Option Plan (the "Stock Plan"), and the Board of Directors directed that
the Stock Plan be submitted for stockholder approval at the Annual Meeting. The
Stock Plan will become effective upon the affirmative vote of a majority of the
shares of Common Stock voting at the Annual Meeting. No stock options will be
granted under the Stock Plan if the Plan is not approved by the stockholders of
the Company.
The purpose of the Stock Plan is to build a proprietary interest among the
nonemployee Directors on the Board of Directors, and thereby secure for the
Company's stockholders the benefits associated with stock ownership by those who
will oversee the Company's future growth and success. The major provisions of
the Stock Plan are described below.
SUMMARY DESCRIPTION OF THE PLAN.
The following description of the Stock Plan is qualified in its entirety by
reference to the Beverly Enterprises, Inc. Nonemployee Directors' Stock Option
Plan, a copy of which is attached as Exhibit "B" to this Proxy Statement.
Eligibility. Each member of the Board of Directors of the Company who is
not an employee of the Company, or any subsidiary or affiliate of the Company,
will be eligible to receive a grant of stock options under the Stock Plan. The
eligible status of such a Director will terminate as to future stock option
grants at the time the individual ceases to be a Director, or the individual
becomes an employee of the Company, or any subsidiary or affiliate of the
Company.
Administration. The Stock Plan will be administered by the Board of
Directors of the Company. The Board of Directors has full power to administer
and interpret the Stock Plan to carry out its purpose. It is expected that the
Board of Directors will designate Company personnel to assist it in carrying out
its responsibilities under the Stock Plan.
The members of the Board of Directors will be indemnified by the Company
against liabilities and expenses, including attorneys' fees, which they may
reasonably incur in the defense of any action, suit or proceeding to which they
may be a party by reason of any action taken or failure to act under the Stock
Plan.
Options; Exercise Price. Each eligible Nonemployee Director under the Stock
Plan is automatically granted an option to purchase 2,500 shares of Common Stock
on June 1 of each year during the term of the Stock Plan, with the first option
grant scheduled for June 1, 1994. The maximum number of shares available for
grant and issuance under the Stock Plan is 200,000.
All options under the Stock Plan are granted at 100 percent of the fair
market value of Common Stock on the relevant grant date.
In the case of events such as stock dividend, stock splits,
recapitalizations, or other changes in the Company's capitalization, an
automatic adjustment will be made to the number of unexercised shares, the
number of shares to be granted in the future, and the aggregate number of shares
which are available for
10
<PAGE> 13
option grants under the Stock Plan. The automatic adjustment is designed to
ensure that the eligible Nonemployee Directors maintain the same proportionate
position after the particular event as before the event.
An option granted under the Stock Plan may be evidenced by a written
instrument describing the terms and conditions of the grant. Options granted
under the Stock Plan are not assignable or transferable by the eligible
Nonemployee Director, other than by will or the laws of descent and
distribution, or under a qualified domestic relations order. During the
Nonemployee Director's lifetime, an option is exercisable only by the
Nonemployee Director, or, in the case of an incapacity, by a person properly
appointed to act on the Nonemployee Director's behalf.
Vesting; Exercise of Options. Each option granted under the Stock Plan
becomes exercisable on the June 1 following its grant. For example, options
granted on June 1, 1994 are scheduled to become exercisable on June 1, 1995.
In no event is an option granted under the Stock Plan exercisable prior to
six months from the date the option is granted. Subject to the six months
holding period stated in the previous sentence (the "six month holding period"),
an option becomes immediately exercisable upon the death or disability of a
Nonemployee Director prior to the scheduled exercise date for the option.
Additionally, subject to the six month holding period, an option becomes
immediately exercisable in the event of a "Change in Control" of the Company,
which is defined in the Stock Plan.
When the eligibility of a Nonemployee Director ceases for a reason other
than death, disability, or a Change in Control, options which are not
exercisable at that time are forfeited; and exercisable options must be
exercised within ninety days from the date the Nonemployee Director loses
eligible status.
Options may be exercised by the delivery of cash or shares of Common Stock
owned for more than six months, or any combination of such forms of payment.
Term of Plan and Option. Unless terminated earlier by the Board of
Directors, the Stock Plan will terminate on May 31, 2004. Options granted prior
to such termination date continue to be exercisable in accordance with the terms
of the Stock Plan.
Each option granted under the Stock Plan will automatically expire ten
years from the date the option is granted.
Amendment and Termination of the Plan. The Board of Directors may amend,
terminate, or modify the Stock Plan at any time without stockholder approval,
including amendments necessary to conform with Rule 16b-3 of the Securities
Exchange Act of 1934 (the "Exchange Act"), unless the particular amendment or
modification requires stockholder approval under Section 16 of the Exchange Act,
the Internal Revenue Code of 1986, as amended (the "Code"), under the rules and
regulations of the exchange or system on which the Common Stock is listed or
reported, or pursuant to other applicable laws, rules or regulations. Currently,
Rule 16b-3 under the Exchange Act requires stockholder approval of any
amendments which would materially modify the Plan's eligibility requirements, or
materially increase the available shares of Common Stock available under the
Stock Plan or the benefits of the Eligible Nonemployee Directors.
FEDERAL INCOME TAX CONSEQUENCES
A Nonemployee Director who is granted a stock option under the Stock Plan
will not recognize taxable income at the time of the grant, but will generally
recognize income upon the exercise of the stock option. The amount of income
recognized upon the exercise of the stock option will be measured by the excess,
if any, of the fair market value of the shares of Common Stock at the time of
exercise over the exercise price. The Company will generally be entitled to a
corresponding deduction for the amount of income recognized by the Nonemployee
Director.
The foregoing does not purport to be a complete summary of the federal
income tax considerations that are relevant to stock options granted under the
Stock Plan. Additionally, the tax consequences under applicable state, local or
foreign tax laws may not be the same as under the federal income tax laws.
11
<PAGE> 14
Recommendation of the Board of Directors
The Board of Directors of the Company recommends a vote FOR the proposal to
approve the Beverly Enterprises, Inc. Nonemployee Directors' Stock Option Plan.
Proxies received by the Board of Directors will be so voted unless stockholders
specify a contrary choice in the proxies.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors (the
Committee) is composed of three independent, nonemployee Directors. The
Committee's overall philosophy is to develop executive compensation policies
that are directly aligned and consistent with the strategic goals and objectives
of the Company. The Committee approves the design of compensation programs and
evaluates their effectiveness. The Committee also reviews and establishes
overall compensation programs and levels for members of senior management.
COMPENSATION PHILOSOPHY
The Company's primary business objective is to maximize long-term
shareholder value. To accomplish the Company's objectives, the Company has
developed a business strategy which focuses on gross revenue and earnings per
share while maintaining consistently high levels of quality.
Our compensation philosophy and the underlying compensation programs are
designed to directly support the Company's overall business objectives by:
- Allowing the Company to recruit, retain and develop highly qualified
executive and employee talent
- Directly linking individual compensation with Company, region, area,
facility and individual performance
- Maintaining compensation levels that are competitive (targeted at the
median of a size adjusted comparator group) within our industry and
general industry
- Emphasizing the at risk portion of compensation through our incentive
programs which properly reflect and reward for both short-and long-term
performance
- Promoting stock ownership
- Encouraging stock retention
The Committee evaluates each element of compensation and total
compensation. We rely on input from the Chief Executive Officer and an
independent compensation consultant to assist us in the process. The Company's
markets for compensation comparison purposes are companies in the long-term care
industry, other industry segments of health care providers and other service
organizations similar in size and structure. The Committee annually reviews and
approves the sources of data used in the evaluation of compensation. The
companies considered in the review of compensation levels are not the same
companies that are used for presentation of total shareholder return in the
performance graph. The Committee believes its most direct competitors for
executive talent are not necessarily the same as its competitors for the
investment dollar, and as such, has selected a larger group of comparators. In
addition, the volatility of the long-term care industry and our relative size
limits the number of direct individual company comparators.
BASE SALARY
The Committee regularly reviews the base salary of each member of the
executive group. We target the size adjusted median (50th percentile) of the
appropriate competitive market level. The Committee also considers the level and
scope of responsibility, experience and internal equity. No specific weighting
is assigned to these criteria.
The base salary for Mr. Banks, Chairman of the Board, President and Chief
Executive Officer of the Company, and other senior executives was reviewed at
the December 9, 1993 meeting of the Committee.
12
<PAGE> 15
Based on the Company's financial and operational performance in 1993, Mr. Banks'
salary was adjusted to $540,000 which represents a four percent increase over
the previous year. Specific criteria considered by the Committee in reaching
this decision were competitive compensation data and the Company's quality and
overall economic performance as measured by the Company's performance relative
to budget and improved internal quality scores. No specific weighting is
assigned to these criteria.
ANNUAL INCENTIVES
The annual incentive plans are designed to provide a direct link between
Company and individual performance over the short term and long term. The
Company maintains two plans with similar operating characteristics, one for
field operations and one for corporate management. Both plans have as their
primary performance criteria the overall quality of our service being provided.
If acceptable levels of quality are being provided, measured against an internal
standard as defined by the Quality Assurance Committee of the Board, then
earnings performance for the Company or the individual area of responsibility,
as appropriate, is measured. We also consider the individual's performance as
measured against specific goals and overall contribution. Each factor was
considered without specific weighting. Following these guidelines, Mr. Banks was
awarded a bonus for 1993 performance in the amount of $235,000. This compares to
a bonus for 1992 performance of $180,000.
LONG-TERM INCENTIVES
Long-term incentives are delivered through the Company's stock option and
restricted stock program. Stock options are used to reward management's
contribution over the long term, with the reward measured by the subsequent
appreciation in stock price. Stock options are always granted at fair market
value. Restricted stock is used to encourage and promote retention. At December
31, 1993, Mr. Banks owned 227,910 shares of the Company's Common Stock and is
vested with options to purchase 215,000 shares of the Company's Common Stock at
varying prices. Mr. Banks will also be vested in options to purchase 40,000
shares of the Company's Common Stock in each of May, 1994 and May, 1995. For
1993, the Company awarded Mr. Banks a stock option for 100,000 shares and 3,357
shares of restricted stock under the 1993 Long-Term Incentive Stock Plan. These
amounts were determined from a competitive analysis of compensation which
targeted the award size at the median for similar organizations without regard
to the amount of current stock holdings. Stock options are emphasized over
restricted stock. Mr. Banks was also awarded the opportunity to earn 8,393
phantom units under the new long-term incentive plan (Equity Incentive Plan).
STOCK OWNERSHIP REQUIREMENT
To align management's interests with those of shareholders, the Company has
implemented a new stock ownership requirement. Each of the corporate officers is
required to own Beverly securities based on a multiple of the officer's base
salary. Failure to comply may result in reduction in or suspension from
participation in the Company's incentive plans. The CEO is required to own
securities with a market value of three times his base salary. As of December
31, 1993, Mr. Banks' ownership level exceeds this requirement.
$1 MILLION LIMIT ON COMPENSATION
Recently enacted Section 162(m) of the Internal Revenue Code generally
limits the corporate deduction for compensation paid to executive officers named
in the proxy to $1 million, unless certain requirements are met, qualifying the
compensation as performance based. Qualifying the compensation requires the
awards be based solely on objective criteria.
13
<PAGE> 16
The Committee desires that all incentive compensation programs for the
officer group be qualified as performance based, thus ensuring the corporation
retains the tax deductibility. The Committee therefore approved a change in the
design and operation of both the annual and long-term incentive plans, effective
for 1994.
COMPENSATION COMMITTEE
Joe T. Ford
Jon E.M. Jacoby
Louis W. Menk
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Ford, who resigned from the Board of Directors in February, 1994, is
Chairman of the Board, President, Chief Executive Officer and a Director of
ALLTEL Corporation. For the year ended December 31, 1993, a subsidiary of the
Company had certain transactions with a subsidiary of ALLTEL Corporation as
described in "Certain Transactions With Management and Others", p. 20.
Mr. Jacoby is Executive Vice President, Chief Financial Officer and a
Director of Stephens Group, Inc. For the year ended December 31, 1993, the
Company had certain transactions with Stephens Inc., an affiliate of Stephens
Group, Inc. as described in "Certain Transactions with Management and Others",
p. 20.
14
<PAGE> 17
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the Chief
Executive Officer and the other four most highly compensated individuals in the
Company as to whom the total annual salary and bonus for the year ended December
31, 1993, exceed $100,000. All of these individuals are executive officers of
the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
AWARDS
ANNUAL -----------------------
COMPENSATION OTHER RESTRICTED
------------------ ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARDS SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2)(3)(4) ($)(6) (#) ($)(2)(5)
- --------------------------------- ------ ------- ------- ------------ ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Banks 1993 519,231 235,000 0 100,000 48,345
Chairman of the 1992 497,692 180,000 0 0 18,136
Board, President & 1991 425,000 150,000 0 0 0
Chief Executive Officer
Boyd W. Hendrickson 1993 311,538 109,000 0 50,000 18,815
Executive Vice 1992 298,462 90,000 0 0 21,640
President -- Operations 1991 250,000 75,000 0 0 0
& Marketing
Ronald C. Kayne 1993 280,492 69,000 79,219 0 50,000 26,238
Executive Vice 1992 264,231 66,250 0 0 11,929
President & President -- 1991 240,000 50,000 0 0 0
Pharmacy Corporation
of America
T. Jerald Moore(7) 1993 229,807 75,000 65,363 632,500 128,000 11,712
Executive Vice
President -- Managed Care
Bobby W. Stephens 1993 259,615 91,000 0 50,000 32,421
Executive Vice 1992 249,230 75,000 0 0 16,800
President -- 1991 225,000 50,000 0 0 0
Development
</TABLE>
- ---------------
(1) Twenty percent of the bonus shown in this column was paid in restricted
stock issued at fair market value on February 15, 1994. Amount paid in
restricted stock for each named executive officer is as follows: Mr.
Banks -- $47,000; Mr. Hendrickson -- $21,800; Mr. Kayne -- $13,800; Mr.
Moore -- $15,000; and Mr. Stephens -- $18,200. Eighty percent of the bonus
shown consists of cash payments made in 1994 with respect to 1993
performance.
(2) Pursuant to the Securities and Exchange Commission's rules, amounts prior to
1992 are not required to be shown for Other Annual Compensation and All
Other Compensation and have been excluded from the presentation herein.
(3) Pursuant to the Securities and Exchange Commission's rules, amounts for any
named executive officer which do not exceed the lesser of $50,000 or ten
percent of the named executive officers' salary and bonus have been excluded
from the presentation herein.
(4) Includes the following amounts that were paid either directly to third
parties or to the named executive officer in connection with his relocation:
(a) relocation allowance of $79,219 was paid to Mr. Kayne, pursuant to the
First Amendment to Agreement Concerning Benefits Upon Severance entered into
between the Company and Mr. Kayne during 1993, in connection with his
relocation from Arkansas to Colorado; and (b) relocation costs and expenses
of $47,590 and reimbursement of taxes payable on relocation costs and
expenses paid by the Company, $17,773 was paid to Mr. Moore in connection
with his relocation to Arkansas from Connecticut.
15
<PAGE> 18
(5) For 1993, All Other Compensation includes:
(a) A car allowance payment as follows: Mr. Banks -- $7,500; Mr.
Hendrickson -- $7,500; Mr. Kayne -- $7,644; Mr. Moore -- $6,894; and
Mr. Stephens -- $7,500.
(b) Company match of employee contributions to the Company's Employee Stock
Purchase Plan of $2,340 each for Messrs. Banks and Stephens and $1,800
for Mr. Hendrickson.
(c) Payments under the Executive Medical Plan during 1993 as follows: Mr.
Banks -- $7,723; Mr. Hendrickson -- $6,960; Mr. Kayne -- $3,076; Mr.
Moore -- $3,447; and Mr. Stephens -- $9,010.
(d) Payment by the Company in 1993 of premiums under its Executive Life
Insurance Plan on behalf of Mr. Banks -- $3,721; Mr.
Hendrickson -- $2,120; Mr. Kayne -- $1,855; Mr. Moore -- $1,047; and
Mr. Stephens -- $1,103.
(e) Imputed income for life insurance provided under the Company's regular
life insurance plan for amounts in excess of $50,000: Mr.
Banks -- $1,125; Mr. Hendrickson -- $435; Mr. Kayne -- $1,125; Mr.
Moore -- $324; and Mr. Stephens -- $435.
(f) The Beverly Enterprises, Inc. Executive Retirement Plan, (the
"Executive Retirement Plan") provides that, depending on the Company's
profits, the Company will match each participant's annual contribution,
based on a sliding scale relating years of service with the Company, up
to a maximum of six percent of a participant's compensation. The
Executive Retirement Plan also provides that the Company will pay each
participant additional compensation approximately equivalent to the tax
liability such participant shall accrue as a result of the Company's
contribution. During 1993, the Company contributed 50 percent of the
maximum match permitted under the Executive Retirement Plan for each
participant. The Company made the following contribution to the
Executive Retirement Plan for each of the following named executive
officers (these figures include both the employer match and the
additional compensation for reimbursement of taxes): Mr.
Banks -- $25,936; Mr. Kayne -- $12,538; and Mr. Stephens -- $12,033.
(6) As indicated in footnote (1), restricted stock was issued as part of the
bonus for 1993. This restricted stock was issued on February 15, 1994 and
therefore is not included in the holdings as of December 31, 1993. The
$632,500 Restricted Stock Award to Mr. Moore consists of a grant of 20,000
shares of restricted stock on January 28, 1993 at which time the closing
price of the Company's Common Stock was $13.25 and a grant of 28,000 shares
of restricted stock on July 15, 1993 at which time the closing price of the
Company's Common Stock was $13.125. Based on the closing price for the
Company's Common Stock of $13.25, as reported on the New York Stock
Exchange, at December 31, 1993 the number and value of aggregate restricted
stock holdings are as follows: Mr. Banks -- 52,000 shares, $689,000; Mr.
Hendrickson -- 32,000 shares, $424,000; Mr. Kayne -- 32,000 shares,
$424,000; Mr. Moore -- 48,000 shares, $636,000; Mr. Stephens -- 32,000
shares, $424,000.
(7) Mr. Moore was elected an executive officer of the Company in January, 1993.
During 1992, prior to becoming an employee, Mr. Moore received a payment in
the amount of $2,250 in conjunction with his participation in a bonus
program.
16
<PAGE> 19
The following tables set forth certain information at December 31, 1993 and
for the fiscal year then ended with respect to stock options granted to and
exercised by the individuals named in the Summary Compensation Table above. No
stock appreciation rights have been granted and no options have been granted at
an option price below fair market value on the date of the grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT
DATE
INDIVIDUAL GRANTS VALUE
---------------------------------------------------- --------
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS GRANT
OPTIONS/ GRANTED TO EXERCISE DATE
SARS EMPLOYEES OR BASE PRESENT
GRANTED IN FISCAL PRICE EXPIRATION VALUE
NAME (#) YEAR ($/SH) DATE ($)
- --------------------------------------- ---------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
David R. Banks......................... 100,000(1) 9.70% 12.50 12/08/98 551,000(5)
Boyd W. Hendrickson.................... 50,000(1) 4.84% 12.50 12/08/98 275,500(5)
Ronald C. Kayne........................ 50,000(1) 4.84% 12.50 12/08/98 275,500(5)
T. Jerald Moore........................ 30,000(2) 13.25 01/27/05 273,600(6)
42,000(3) 12.13 07/14/05 351,120(7)
6,000(4) 12.13 07/14/03 45,660(8)
50,000(1) 12.39% 12.50 12/08/98 275,500(5)
Bobby W. Stephens...................... 50,000(1) 4.84% 12.50 12/08/98 275,500(4)
All executive officers
as a group (12 Persons).............. 707,000 68.44%
All non-executive officers and
employees
as a group (18 Persons).............. 326,000 31.56%
</TABLE>
- ---------------
(1) Stock options granted on December 9, 1993 under the Beverly Enterprises,
Inc. 1993 Long-Term Incentive Stock Plan. Options for 25 percent of these
shares become fully exercisable one year from the grant date and 25 percent
per year thereafter on a cumulative basis.
(2) Stock options granted on January 28, 1993 under the 1985 Beverly
Non-Qualified Stock Option Plan. Options for 20 percent of these shares
become fully exercisable one year from the grant date and 20 percent per
year thereafter on a cumulative basis.
(3) Stock options granted on July 15, 1993 for 42,000 shares under the 1985
Beverly Non-Qualified Stock Option Plan. Options for 20 percent of these
shares become fully exercisable one year from the grant date and 20 percent
per year thereafter on a cumulative basis.
(4) Stock options granted on July 15, 1993 for 6,000 shares under the Beverly
Enterprises, Inc. 1993 Long-Term Incentive Stock Plan. Options for 20
percent of these shares become fully exercisable one year from the grant
date and 20 percent per year thereafter on a cumulative basis.
(5) Based upon the Black-Scholes Option Valuation Model, which estimates the
present dollar value of Company Common Stock to be $5.51 per option share.
The actual value, if any, an executive may realize will depend on the
excess of the stock price over the exercise price on the date the option is
exercised, so that there is no assurance the value realized will be at or
near the value estimated by the Black-Scholes Model. The assumptions
underlying the Black-Scholes Model include: (a) an expected volatility of
.4137 based on a daily measure over 12 months prior to the grant date, (b)
a risk-free rate of return of 5.15 percent, which approximates the
five-year Treasury bond rate on the grant date, (c) no dividend on the
Company's Common Stock, and (d) a five-year period from the grant until
exercise.
(6) Based upon the Black-Scholes Option Valuation Model, which estimates the
present dollar value of Company Common Stock to be $9.12 per option share.
The actual value, if any, an executive may realize will depend on the
excess of the stock price over the exercise price on the date the option is
exercised, so
17
<PAGE> 20
that there is no assurance that the value realized will be at or near the
value estimated by the Black-Scholes model. The assumptions underlying the
Black-Scholes model include (a) an expected volatility of .3653 based on a
daily measure over twelve months prior to the grant date, (b) a risk-free
rate of return of 7.25 percent, which approximates the twelve-year Treasury
bond rate at the date of grant, (c) no dividend on the Company's Common
Stock, and (d) a twelve-year period from the grant until exercise.
(7) Based on the Black-Scholes Option Valuation Model, which estimates the
present dollar value of Company Common Stock to be $8.36 per option share.
The actual value, if any, any executive may realize will depend on the
excess of the stock price over the exercise price on the date the option is
exercised, so that there is no assurance the value realized will be at or
near the value estimated by the Black-Scholes model. The assumptions
underlying the Black-Scholes model include (a) an expected volatility of
.4086 based on a daily measure over twelve months prior to the grant date,
(b) a risk-free rate of return of 6.25 percent, which approximates the
twelve-year Treasury bond rate at the date of grant, (c) no dividend on the
Company's Common Stock, and (d) a twelve-year period from time of grant
until exercise.
(8) Based on the Black-Scholes Option Valuation model, which estimates the
present dollar value of Company Common Stock to be $7.61 per option share.
The actual value, if any, any executive may realize will depend on the
excess of the stock price over the exercise price on the date the option is
exercised, so that there is no assurance the value realized will be at or
near the value estimated by the Black-Scholes model. The assumptions
underlying the Black-Scholes model include (a) an expected volatility of
.4086 based on a daily measure over twelve months prior to the grant date,
(b) a risk-free rate of return of 5.81 percent, which approximates the
ten-year Treasury bond rate at the date of grant, (c) no dividend on the
Company's Common Stock, and (d) a ten-year period from time of grant until
exercise.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS
SHARES FY-END 12/31/93 FY-END 12/31/93
ACQUIRED (#) ($)(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISES (#) REALIZED ($)(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------------ -------------- --------------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
David R. Banks..................... 0 -- 180,000 215,000 1,232,250 1,890,750
Boyd W. Hendrickson................ 15,000 133,000 102,000 71,000 496,000 824,250
Ronald C. Kayne.................... 29,000 240,892 102,000 0 496,000 0
T. Jerald Moore.................... 0 -- 113,000 0 43,500 0
Bobby W. Stephens.................. 0 -- 102,000 138,000 496,000 1,215,750
</TABLE>
- ---------------
(1) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise, multiplied by the number of shares to which the exercise relates.
(2) The closing price for the Company's Common Stock as reported by the New
York Stock Exchange on December 31, 1993, was $13.25. Value is calculated
on the basis of the difference between the option exercise price and
$13.25, multiplied by the number of shares of Common Stock underlying the
option.
18
<PAGE> 21
PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
returns for the Company, the S&P 500 Composite Index and an index of peer
companies selected by the Company. The stock price performance shown on the
graph below is not necessarily indicative of future price performance.
<TABLE>
<CAPTION>
Beverly
Measurement Period Enterprises,
(Fiscal Year Covered) Inc. S&P 500 Peer Group
------------ ------- ----------
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 96.00 131.59 129.81
1990 138.00 127.49 167.15
1991 142.00 166.17 230.38
1992 208.00 178.81 336.87
1993 212.00 196.00 360.86
</TABLE>
The total cumulative return on investment (change during the year in stock
price plus reinvested dividends) for each of the periods for the Company, the
S&P 500 Composite Index and the group of peer companies is based on the stock
price or the composite index on December 31, 1988.
The graph above compares the performance of the Company with that of the
S&P 500 Composite Index, and a group of peer companies, including the Company,
with the investment weighted on market capitalization. Companies in the peer
group are as follows: Beverly Enterprises, Inc., Geriatrics & Medical Centers,
Inc., Greenery Rehabilitation Group Inc., Manor Care, Inc. and Summit Health
LTD. These companies were approved by the Compensation Committee.
Vari-Care, Inc., which was in the peer group last year, has been removed
because of its acquisition during 1993.
OTHER PLANS
Deferred Compensation Plan
As of July 18, 1991, the Company amended and restated the Deferred
Compensation Plan to allow no future grants, to close and pay out accounts with
balances of $10,000 or less, and to fix accounts with balances, in excess of
$10,000 using the closing price on the New York Stock Exchange on July 18, 1991,
of $11.00 to credit to participants' Special Ledger Accounts. Messrs. Banks,
Hendrickson, Kayne and Stephens maintain accounts in the Deferred Compensation
Plan and are paid interest at a rate of nine percent per annum.
Termination of Employment and Change-in Control Arrangements
The Company adopted a severance policy, as of December 1, 1989, which
provides assistance in the form of a lump sum severance payment to active,
full-time, corporate or regional office employees who are
19
<PAGE> 22
permanently, involuntarily and without cause separated from all employment with
the Company or its successor. Severance pay is calculated based upon an
employee's base weekly pay, position and continuous past service with the
Company as of the last day of the employee's active employment. David R. Banks,
Boyd W. Hendrickson, Ronald C. Kayne, T. Jerald Moore and Bobby W. Stephens
would receive $249,231, $124,615, $132,462, $80,000 and $124,615, respectively,
if they were entitled to a severance payment as of January 1, 1994.
In connection with the relocation of the Company's corporate headquarters
to Fort Smith, Arkansas, the Company entered into Agreements Concerning Benefits
Upon Severance (the "Agreement") with certain executives including Messrs.
Banks, Hendrickson, Kayne and Stephens. Pursuant to such agreements, in the
event of a Change in Control (as defined) of the Company or a Material Change
(as defined) in the terms of employment of the executive, such executive may
voluntarily terminate his employment and become entitled to receive one year's
salary and reimbursement from the Company for moving expenses to any part of the
continental United States. During 1993, Mr. Kayne's Agreement was amended in
connection with his relocation from Arkansas to Colorado.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
The Company's officers and directors are required to file initial reports
of ownership and reports of change in ownership with the Securities and Exchange
Commission (SEC). Officers and directors are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on information provided to the Company by individual officers
and directors, the Company believes that during 1993 all filing requirements
applicable to officers and directors have been complied with subject to the
following exceptions. Form 5's were filed during 1994 by Gary Weatherly, Vice
President-Management Information Systems, and John Williams, Vice
President-Reimbursement, to report holdings and transactions, respectively, that
should have been reported during 1993.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
Beverly California Corporation entered into a data processing agreement
effective August 1, 1992, with a wholly-owned subsidiary of ALLTEL Corporation.
Joe T. Ford, a director of the Company until February 28, 1994, is the Chairman
of the Board, President, Chief Executive Officer and a Director of ALLTEL
Corporation. Beverly California Corporation paid approximately $10,179,000
pursuant to such agreement during 1993.
John E. M. Jacoby, a Director of the Company, serves as Executive Vice
President, Chief Financial Officer and a Director of Stephens Group, Inc. For
the year ended December 31, 1993, the Company paid to Stephens Group, Inc. or
its affiliates, approximately $2,179,743>, including underwriting fees in
connection with the refunding of certain industrial revenue bonds and the
issuance of the Company's $2.75 Cumulative Convertible Exchangeable Preferred
Stock, the issuance of Series A and Series B of the Company's First Mortgage
Bonds, and the issuance of the Company's 8.75% Notes.
PROPOSAL 5 -- RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young as auditors for the
Company for the year ended December 31, 1994, subject to ratification by the
stockholders. Ernst & Young audited the Company's consolidated financial
statements for the year ended December 31, 1993, and, together with its
predecessor, Arthur Young & Company, has been the Company's auditors since 1965.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting and will be given the opportunity to make a statement if they desire to
do so. It is also expected that they will be available to respond to appropriate
questions from stockholders at the Annual Meeting.
20
<PAGE> 23
Recommendation of the Board of Directors
The Board of Directors of the Company recommends a vote FOR the proposal to
ratify the appointment of Ernst & Young as independent auditors for 1994.
Proxies received by the Board of Directors will be so voted unless stockholders
specify a contrary choice.
STOCKHOLDER PROPOSALS
December 20, 1994, is the date by which proposals of stockholders intended
to be presented at the 1995 Annual Meeting of Stockholders must be received by
the Company for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by the Company. In
addition to use of the mails, proxies may be solicited by directors, officers
and regular employees of the Company personally and by telephone or facsimile.
The Company may reimburse persons holding shares in their own names, or in the
names of the nominees, for expenses such persons incur in obtaining instructions
from beneficial owners of such shares. The Company has also engaged Georgeson &
Company Inc. to solicit proxies for a fee not to exceed $8,000 plus $6 per call
to individual stockholders or NOBO's if assigned, plus out-of-pocket expenses.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
Annual Meeting, but if other matters do properly come before the Annual Meeting,
it is intended that the persons named in the proxy will vote on said matters in
accordance with their best judgment.
ROBERT W. POMMERVILLE
Secretary
April 19, 1994
Fort Smith, Arkansas
21
<PAGE> 24
EXHIBIT A
BEVERLY ENTERPRISES, INC.
ANNUAL INCENTIVE PLAN
(EFFECTIVE AS OF JANUARY 1, 1994)
ARTICLE I.
ESTABLISHMENT AND PURPOSE
1.1 Establishment of Plan. BEVERLY ENTERPRISES, INC., a Delaware
corporation ("Company") hereby establishes this incentive award plan for
Participants, which plan as amended from time to time shall be known as the
"BEVERLY ENTERPRISES, INC. ANNUAL INCENTIVE PLAN" ("Plan").
1.2 Purpose. The purpose of the Plan is to provide its Participants with
incentive awards where they have contributed to their Employer's success, and to
do so through an ongoing program designed to reinforce such Employer's strategic
plan and related financial and operating objectives.
1.3 Applicability of the Plan. The provisions of this Plan shall be
applicable only with respect to those Participants who are designated for
participation in this Plan from and after January 1, 1994, the effective date of
this Plan.
1.4 Effective Date. This Plan shall be effective as of January 1, 1994,
subject to the approval of this Plan by the Board of Directors and the Company's
shareholders, as provided in this Section 1.4. To become effective, this Plan
must be approved by the Board of Directors and by the affirmative vote of the
holders of a majority of shares of the common stock of the Company present, or
represented, and entitled to vote at a meeting of the Company's stockholders
called for such purpose. Absent such approvals prior to January 1, 1995, this
Plan shall terminate and cease to be of any further force or effect and all
awards hereunder shall be null and void.
ARTICLE II.
DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Whenever used as a capitalized term in the Plan, the
following terms shall have the respective meanings set forth below, unless
otherwise expressly provided:
(a) "Affiliate" means "affiliate" as defined in Rule 12b-2 under the
Exchange Act.
(b) "AIP Award" means the annual incentive plan award approved by the
Compensation Committee for an eligible Participant for a particular Plan
Year, as provided in Section 5.1.
(c) "AIP Award Guidelines" means the standards, targets, performance
measurement and evaluation criteria and guidelines to be used to determine
AIP Awards for a particular Plan Year, as provided in Section 4.1.
(d) "AIP Program" means the program for determining the awarding of
AIP Awards for a particular Plan Year, consisting of the AIP Award
Guidelines for such Plan Year, as provided in Section 4.1.
(e) "Beneficiary" means the person, persons or trust designated by a
Participant as provided in Section 9.3.
(f) "Board" or "Board of Directors" means the Board of Directors of
the Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended, and
the regulations issued thereunder, as the same may be amended from time to
time.
(h) "Company" means Beverly Enterprises, Inc., or any successor
thereto.
A-1
<PAGE> 25
(i) "Compensation Committee" means the Compensation Committee of the
Board of Directors, which Committee is a standing committee of such Board.
The general powers, duties and responsibilities of the Compensation
Committee as regards this Plan are described in Section 4.2.
(j) "Covered Participant" means a Participant who is a "covered
employee" as defined in Section 162(m)(3) of the Code, or who the
Compensation Committee believes will be such a covered employee for a Plan
Year, and who the Compensation Committee believes will have remuneration in
excess of $1,000,000 for the Plan Year, as provided in Section 162(m) of
the Code.
(k) "Employee" means an individual who is an employee of the Company
or an Affiliate.
(l) "Employer" means the Company or any Affiliate which is
participating under the Plan with the consent of the Board of Directors.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(n) "Long-Term Incentive Stock Plan" means the "Beverly Enterprises,
Inc. 1993 Long-Term Incentive Stock Plan", as amended from time to time.
(o) "Participant" means an Employee of an Employer who has been
designated as a Participant under this Plan, as provided in Section 3.1.
(p) "Plan" means the "Beverly Enterprises, Inc. Annual Incentive
Plan" as set forth in this document, and as the same may be amended from
time to time.
(q) "Plan Year" means the 12-month period beginning each January 1 and
ending on December 31 of such year. The first Plan Year shall be the period
beginning January 1, 1994 and ending December 31, 1994.
2.2 Gender and Number; Headings. Except when otherwise indicated by the
context, any masculine terminology when used in this Plan shall also include the
feminine gender, and the definition of any term in the singular shall also
include the plural. Headings of Articles and Sections herein are included solely
for convenience, and if there is any conflict between such headings and the text
of the Plan, the text shall control.
ARTICLE III.
PARTICIPATION
3.1 Participation. The Compensation Committee shall designate the Employees
of each participating Employer who are to be the Participants under this Plan.
Such designations may be based on participation criteria established by the
Compensation Committee from time to time. The designation of Participants shall
be made for each Plan Year, and the Participants designated for a particular
Plan Year may be identified by reference to the subject Plan Year (e.g., the
Participants designated for the 1994 Plan Year may be referred to as "1994
Participants"). The Compensation Committee may establish such procedures as it
deems appropriate for notifying each Participant of his status as a Participant
under the Plan. Section 5.5 contains additional provisions relating to the
designation of Participants under the Plan.
ARTICLE IV.
ANNUAL AIP PROGRAM; ADMINISTRATION OF PLAN
4.1 Annual AIP Program. For each Plan Year, the Compensation Committee
shall establish the AIP Program for that Plan Year. Such AIP Program for the
particular Plan Year shall consist of such standards, targets, performance
measurement and evaluation criteria and guidelines as the Compensation Committee
determines to be applicable in awarding AIP Awards for the relevant Plan Year,
all of which shall collectively be known as the "AIP Award Guidelines" for that
Plan Year. The AIP Program established for a particular Plan Year may include
any of the following elements, as determined in the sole discretion of the
Compensation Committee:
A-2
<PAGE> 26
(a) An incentive award pool for purposes of determining the dollar
amount which shall be available for AIP Awards and other benefits under the
Plan for the Plan Year;
(b) Financial and strategic performance goals for each participating
Employer;
(c) Performance measurement and weighting criteria and guidelines for
each Employer, including corporate-wide performance, where applicable;
(d) Individual target and maximum incentive opportunities for
Participants or groups of Participants;
(e) Performance measurement and weighting criteria and guidelines for
Participants or groups of Participants;
(f) Guidelines and requirements for the development of Participant
goals and objectives; and
(g) Such other standards, criteria, measurements, requirements and
guidelines as the Compensation Committee may from time to time determine
shall be applicable with respect to the subject Plan Year.
The AIP Program established for each Plan Year, including the AIP Award
Guidelines applicable thereto, may be identified by reference to the subject
Plan Year (e.g., the AIP Program for 1994 may be referred to as the "1994 AIP
Program"). The AIP Program so established for each Plan Year shall be
communicated to such Company and other participating Employer personnel as the
Compensation Committee deems necessary to assist in the maintenance of the AIP
Program for such Plan Year. The AIP Program for each Plan Year (including the
AIP Award Guidelines included therein) shall be maintained with the records of
the Plan for reference purposes. The Compensation Committee may change or modify
the AIP Program established for a particular Plan Year in any respect, and at
any time.
4.2 Compensation Committee. The Plan shall be administered by the
Compensation Committee. The Compensation Committee shall have the full general
power, authority and discretion to administer the Plan and construe, interpret
and apply its provisions. Without limiting the generality thereof, the
Compensation Committee shall have the following powers, duties and authorities
as regards its administration and activities as regards the Plan:
(a) To establish an AIP Program for each Plan Year, as provided in
Section 4.1;
(b) To approve AIP Awards or other benefit payments for Participants
for each Plan Year, as provided in Section 5.1;
(c) To establish, maintain and interpret such rules, regulations and
requirements as it deems necessary or advisable as regards the
administration and maintenance of the Plan, including the amendment and
modification of such rules, regulations and requirements;
(d) To resolve all questions relating to the eligibility of
Participants;
(e) To resolve all questions relating to a Participant's right to
receive any AIP Award payment or other benefits under the Plan;
(f) To determine the time, manner and form of payment with respect to
any AIP Award payments or other benefits under the Plan;
(g) To engage any administrative, legal, consulting, clerical or other
services it deems appropriate in administering the Plan;
(h) To construe and interpret the Plan, and any administrative rules
relating thereto, as necessary and to carry out the purposes of this Plan;
(i) To resolve all questions of fact relating to any questions or
determinations relating to the administration of the Plan;
A-3
<PAGE> 27
(j) To compile and maintain all records it determines to be necessary,
appropriate and convenient in connection with the administration of the
Plan;
(k) To delegate or appoint such other parties as it determines to be
necessary to carry out a general or specific function as regards the
administration of the Plan; and
(l) To take all such other actions, and to make such determinations,
as are necessary to administer the Plan and carry out its purposes.
All actions taken or determinations made by the Compensation Committee as
regards the Plan shall be final, binding and conclusive upon all parties. The
membership of the Compensation Committee, and the rules relating to its conduct,
voting and actions, shall be governed by the rules establishing the Compensation
Committee as a standing committee of the Board of Directors. Members of the
Compensation Committee shall not participate directly in any action or
determination regarding their own interests under the Plan.
4.3 Expenses. Any expenses relating to the administration of this Plan
shall be borne by the Employers as may be determined by the Compensation
Committee.
4.4 Indemnification and Exculpation. The members of the Compensation
Committee, its agents, and officers, directors, and employees of the Company or
any other Employer shall be indemnified and held harmless by the Company against
and from any and all loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by them in connection with or resulting from any claim,
action, suit, or proceeding to which they may be a party or in which they may be
involved by reason of any action taken or failure to act under this Plan and
against and from any and all amounts paid by them in settlement (with the
Company's written approval) or paid by them in satisfaction of a judgment in any
such action, suit, or proceeding. The foregoing provision shall not be
applicable to any person if the loss, cost, liability, or expense is due to such
person's gross negligence or willful misconduct.
ARTICLE V.
AIP AWARDS; PAYMENT OF AWARDS
5.1 AIP Awards. Each Plan Year, the Compensation Committee shall approve
such individual AIP Awards for the Participants covered under the Plan for the
Plan Year as the Compensation Committee in its sole discretion shall deem
appropriate. Company personnel acting at the direction of the Compensation
Committee shall prepare such preliminary calculations and reports regarding
proposed AIP Award amounts as the Compensation Committee may request. Such
information shall be prepared in accordance with the Compensation Committee's
AIP Award Guidelines for the subject Plan Year, and in accordance with such
other performance measurement standards as the Compensation Committee may direct
from time to time. The Compensation Committee shall provide that each
Participant for a Plan Year be notified of the amount and terms of his AIP Award
for the subject Plan Year. Such notification shall be at such time and in such
manner as determined by the Compensation Committee.
5.2 Eligibility for AIP Award. To be eligible to receive any AIP Award as
may be approved for the Participant for a particular Plan Year, as provided in
Section 5.1, such Participant must satisfy one of the following eligibility
conditions:
(a) He must be employed as an Employee on the last day of the Plan
Year;
(b) He must have retired, died or incurred a disability during the
Plan Year if he is not employed as an Employee on the last day of the Plan
Year; or
(c) He must have terminated employment as an Employee before the last
day of the Plan Year for another reason as recognized by the Compensation
Committee.
Unless the Compensation Committee otherwise specifically provides, a
Participant who does not meet one of the foregoing employment eligibility
conditions for a particular Plan Year shall not be eligible to receive payment
of an AIP Award for such Plan Year.
A-4
<PAGE> 28
5.3 Time and Form of Payment. All AIP Awards for a particular Plan Year
shall be paid to or with respect to the eligible Participants for such Plan Year
at such time or times as the Compensation Committee may determine, which may be
before or following the close of the particular Plan Year to which such AIP
Awards relate. Normally, all AIP Award payments shall be in a lump sum; however,
the Compensation Committee may from time to time direct the payment of any AIP
Award in a different payment form. The Compensation Committee shall designate
whether an AIP Award is to be paid in cash, Company stock, other form of
property or benefit, or any combination thereof.
5.4 Death of Participant. In the event a Participant who is eligible to
receive an AIP Award dies before payment thereof is made to him, the payment of
such AIP Award shall be made to his designated Beneficiary.
5.5 Other Benefit Payments. From time to time, the Compensation Committee
may grant a special benefit award under this Plan to any Employee that it
considers to have made a key contribution to the continuing success of his
Employer. The Compensation Committee may grant such benefit awards with respect
to a Plan Year at any time during or following the particular Plan Year. All
such benefit awards so granted under the Plan shall be in addition to any AIP
Awards otherwise awarded under the Plan. An Employee who is designated as a
Participant as regards eligibility for an AIP Award for a Plan Year may also be
granted a benefit award under this Section 5.5. Any Employee who is not
otherwise designated as a Participant eligible for an AIP Award, but who is
designated to receive a benefit award under this Section 5.5, shall be
considered a Participant under the Plan for the relevant Plan Year as regards
such benefit award. The Compensation Committee shall designate the time, form
and medium of payment of any benefit award granted pursuant to this Section 5.5.
5.6 Award Payments in Stock. To the extent any AIP Award (or portion
thereof) or other benefit under the Plan is paid in Company stock, as may be
directed under Section 5.3 or Section 5.5, such payment shall be considered to
be an award under Article IX of the Long-Term Incentive Stock Plan. As such an
award, any Participant receiving such award under this Plan and Article IX of
the Long-Term Incentive Stock Plan who is also covered by the Long-Term
Incentive Stock Plan shall be subject to any applicable sale, transfer,
exercise, or vesting restrictions, and to such other terms and provisions under
the Long-Term Incentive Stock Plan or award agreements issued pursuant thereto,
as regards such stock and the award, exercise and payment thereof. Any such
term, condition or provisions in Long-Term Incentive Stock Plan or award
agreement as regards such stock, or the Participant's rights thereto, shall
control over any provision in this Plan to the contrary.
ARTICLE VI.
FUNDING OF THE PLAN
6.1 Funding. All amounts paid under this Plan shall be paid from the
general assets of the participating Employers. AIP Award payments and other
benefit payments under this Plan shall be reflected on the accounting records of
the Employers, but neither this Plan nor the maintenance of such accounting
records shall be construed to create, or require the creation of, a trust,
custodial account, or escrow account with respect to any Participant. No
Participant shall have any right, title, or interest whatsoever in or to any
investment reserves, accounts, or funds, that the Employers may purchase,
establish, or accumulate to aid in providing the unfunded AIP Award payments or
other benefits described in the Plan. Nothing contained in this Plan, and no
action taken pursuant to its provisions, shall create, or be construed to
create, a trust or fiduciary relationship of any kind between an Employer, the
Compensation Committee and a Participant or any other person. Participants shall
not acquire any interest under the Plan greater than that of an unsecured
general creditor of an Employer.
A-5
<PAGE> 29
ARTICLE VII.
MERGER; AMENDMENT; TERMINATION
7.1 Merger, Consolidation, or Acquisition. In the event of a merger,
consolidation, or acquisition where an Employer is not the surviving
organization, unless the successor or acquiring organization shall elect to
continue and carry on the Plan, this Plan shall terminate with respect to such
Employer, and no additional benefits shall accrue for the Participants of such
organization. Unpaid AIP Award payments or other benefits shall continue to be
paid as scheduled unless the successor or acquiring organization elects to
accelerate payment.
7.2 Amendment. The Compensation Committee may amend or modify this Plan at
any time, for any reason, and in any manner. Such actions by the Compensation
Committee shall be binding upon all other Employers. Any such amendment or
modification of the Plan shall not require shareholder approval, except to the
extent that such approval is required pursuant to the rules under Section 16 of
the Exchange Act, by any national securities exchange or system on which the
Company's stock is listed or reported, or under any other applicable Federal or
state law. Notice of any amendment or modification of the Plan shall be given to
Participants and other interested parties in such manner and at such time as
provided by the Compensation Committee.
7.3 Termination. The Board of Directors may terminate this Plan at any
time, for any reason, and in any manner. In the event of the termination of the
Plan pursuant to this Section 7.3, no further AIP Award payments or other
benefits shall accrue under this Plan, and amounts which are then payable with
respect to a prior Plan Year shall continue to be an obligation of the Employer
and shall be paid as scheduled. No AIP Award payments or other payments shall be
made with respect to the Plan Year in which the Plan is terminated, unless
otherwise provided by the Board of Directors.
ARTICLE VIII.
SPECIAL PROVISIONS APPLICABLE TO COVERED PARTICIPANTS
8.1 Provisions Applicable to Covered Participants. Notwithstanding any
other provision of this Plan to the contrary, any AIP Awards and other benefits
paid to Covered Participants under this Plan shall be subject to the following
conditions:
(a) All AIP Guidelines or other performance measures, goals,
standards, formulas, or criteria relating to Covered Participants
("Performance Measures") for a Plan Year shall be established by the
Compensation Committee in writing prior to the beginning of the Plan Year,
or by such other later date for such Plan Year as may be permitted under
Section 162(m) of the Code. Performance Measures may include alternate and
multiple Performance Measures, and may be based on one or more business
criteria. In establishing Performance Measures, the Compensation Committee
shall consider an internal budget for factors such as earnings per share,
return on equity, revenue growth, cash flow, income and operating margins.
(b) The Performance Measures must be objective and must satisfy the
third party "objectivity" standards under Section 162(m) of the Code.
(c) The Performance Measures shall not allow for any discretion by the
Compensation Committee as to an increase in any AIP Award or other benefit,
but discretion to lower an AIP Award or other benefit is permissible.
(d) The award and payment of any AIP Award or other benefit under this
Plan to a Covered Participant with respect to a Plan Year shall be
contingent upon the attainment of the Performance Measures that are
applicable to such Covered Participant. The Compensation Committee shall
certify in writing prior to the payment of any such AIP Award or other
benefit that such applicable Performance Measures relating to the AIP Award
or other benefit were satisfied. Approved minutes of a meeting of the
Compensation Committee may be used for this purpose.
A-6
<PAGE> 30
(e) As provided in Sections 1.4 and 9.1, this Plan is subject to
shareholder approval, and all AIP Awards or other benefits to Covered
Participants under this Plan are expressly contingent on and subject to
such shareholder approval.
(f) The maximum AIP Award or other benefit that may be paid to any
Covered Participant under the Plan for any Plan Year is 100 percent of the
Covered Participant's base salary as of the first day of that Plan Year.
(g) All AIP Awards or other benefits to Covered Participants under
this Plan shall be further subject to such other conditions, restrictions,
and requirements as the Compensation Committee may determine to be
necessary to carry out the purposes of this Article VIII.
ARTICLE IX.
GENERAL PROVISIONS
9.1 Shareholder Approval. The effectiveness of the Plan and of the grant of
AIP awards or other benefits under this Plan are subject to shareholder approval
of the Plan as provided in Section 1.4.
9.2 Nonalienation. No AIP Award or other benefit payable at any time under
the Plan shall be subject in any manner to alienation, sale, transfer,
assignment, pledge, attachment, garnishment, or encumbrance of any kind, and
shall not be subject to or reached by any legal or equitable process (including
execution, garnishment, attachment, pledge, or bankruptcy) in satisfaction of
any debt, liability, or obligation, prior to receipt. Any attempt to alienate,
sell, transfer, assign, pledge, or otherwise encumber any such benefit, whether
presently or thereafter payable, shall be void. Notwithstanding the foregoing
provisions of this Section 9.2, no AIP Award or other benefit amount payable
under the Plan shall be payable until and unless any and all amounts
representing debts or other obligations owed to the Company or other Employer by
the Participant with respect to whom such amount would otherwise be payable
shall have been fully paid.
9.3 Beneficiary Designation. A Participant may designate a Beneficiary who
upon his death is to receive an AIP Award payment that otherwise would have been
paid to him under the Plan. All Beneficiary designations shall be in writing and
on a form approved by the Compensation Committee for such purpose, and any such
designation shall only be effective if and when delivered to the Compensation
Committee or its representative during the lifetime of the Participant. Absent
any specific Beneficiary designation with respect to this Plan, a Participant's
designated Beneficiary for purposes of this Plan shall be the same person or
persons as designated as his beneficiary to receive life insurance proceeds
under the Employer's group term life insurance coverage for such Participant. In
the event there is not a Beneficiary designation on file for the Participant,
such Participant's Beneficiary shall be deemed to be the Participant's surviving
spouse, or if there is no such spouse, the Participant's estate.
9.4 Effect on Other Benefit Plans. AIP Award or other benefit amounts paid
under this Plan shall only be considered as compensation under the employee
benefit plans of the Employers as determined and provided under the provisions
of such plans.
9.5 Employer-Employee Relationship. The establishment of this Plan shall
not be construed as conferring any legal or other rights upon any Employee or
any person for a continuation of employment, nor shall it interfere with the
rights of an Employer to discharge any Employee or otherwise act with relation
to the Employee. An Employer may take any action (including discharge) with
respect to any Employee or other person and may treat such person without regard
to the effect which such action or treatment might have upon such person as a
Participant under this Plan.
9.6 Incompetence. Every person receiving or claiming an AIP Award or other
benefit payments under the Plan shall be conclusively presumed to be mentally
competent until the date on which the Compensation Committee receives a written
notice, in a form and manner acceptable to the Compensation Committee, that such
person is incompetent, and that a guardian, conservator, or other person legally
vested with the care of such person's person or estate has been appointed;
provided, however, that if the Compensation Committee shall find that any person
to whom an AIP Award or other benefit payment is payable under the Plan is
unable
A-7
<PAGE> 31
to care for such person's affairs because of incompetency, any payment due
(unless a prior claim therefor shall have been made by a duly appointed legal
representative) may be paid in a manner as approved by the Compensation
Committee. Any such payment so made shall be a complete discharge of any
liability therefor under the Plan.
9.7 Binding on Employer, Participants and Their Successors. This Plan shall
be binding upon and inure to the benefit of the Employers, their successors and
assigns and the Participants, their heirs, executors, administrators and legal
representatives. The provisions of this Plan shall be applicable with respect to
each Employer separately, and AIP Award or other benefit amounts payable
hereunder shall be paid by the Employer of the particular Participant.
9.8 Status Under ERISA. This Plan is not maintained as and is not intended
to be an "employee benefit plan" under the Employee Retirement Income Security
Act of 1974, as amended.
9.9 Tax Liability. An Employer may withhold from any payment hereunder any
taxes required to be withheld and such sum as the Employer may reasonably
estimate to be necessary to cover any taxes for which the Employer may be liable
and which may be assessed with regard to such payment.
9.10 Severability. In the event any provision of this Plan shall be held
invalid or illegal for any reason, any illegality or invalidity shall not affect
the remaining parts of this Plan, but this Plan shall be construed and enforced
as if the illegal or invalid provision had never been inserted, and the Company
shall have the privilege and opportunity to correct and remedy such questions of
illegality or invalidity by amendment as provided in this Plan.
9.11 Applicable Law. This Plan shall be governed by, construed, and
administered in accordance with the laws of the State of Arkansas, except to the
extent such laws are preempted by the laws of the United States.
A-8
<PAGE> 32
EXHIBIT B
BEVERLY ENTERPRISES, INC.
NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
(EFFECTIVE AS OF JUNE 1, 1994)
ARTICLE I.
ESTABLISHMENT AND PURPOSE
1.1. Establishment of the Plan. Beverly Enterprises, Inc., a Delaware
corporation ("Company") hereby establishes a stock option plan as set forth in
this document, which plan as amended from time to time shall be known as the
"Beverly Enterprises, Inc. Nonemployee Directors' Stock Option Plan" ("Plan").
1.2 Purpose. The purpose of the Plan is to build a proprietary interest
among the Company's Nonemployee Directors and thereby secure for the Company's
shareholders the benefits associated with common stock ownership by those who
will oversee the Company's future growth and success.
1.3 Applicability of the Plan. The provisions of this Plan are applicable
only to individuals who, on or after June 1, 1994, are Nonemployee Directors.
1.4 Effective Date. This Plan shall be effective as of June 1, 1994,
subject to the approval of this Plan by the Board of Directors and the Company's
shareholders, as provided in this Section 1.4. To become effective, this Plan
must be approved by the Board of Directors and by the affirmative vote of the
holders of a majority of shares of Common Stock present, or represented, and
entitled to vote at a meeting of the Company's stockholders called for such
purpose. Absent such approvals prior to January 1, 1995, this Plan shall
terminate and cease to be of any further force or effect and all grants of
Options hereunder shall be null and void.
ARTICLE II.
DEFINITIONS AND CONSTRUCTION
2.1 Definitions. Whenever used as a capitalized term in the Plan, the
following terms shall have the respective meanings set forth below, unless
otherwise expressly provided:
(a) "Affiliate" means "affiliate" as defined in Rule 12b-2 under the
Exchange Act.
(b) "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 under the Exchange Act.
(c) "Board" or "Board of Directors" means the Board of Directors of
the Company.
(d) "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(1) Any Person, corporation or other entity or group becomes the
Beneficial Owner of shares of the Company having 30 percent
or more of the total number of votes that may be cast for
the election of members of the Board; or
(2) As the result of, or in connection with, any tender or exchange
offer, merger or other business combination, sale of assets
or contested election, or any combination of the foregoing
(a "Transaction"), the persons who were members of the Board
before the Transaction shall cease to constitute a majority
of the Board of Directors of the Company or any successor to
the Company or its assets; or
(3) If at any time (A) the Company shall consolidate with, or merge
with, any other Person and the Company shall not be the
continuing or surviving corporation, (B) any Person shall
consolidate with, or merge with, the Company, and the Company
shall be the continuing or surviving corporation and in
connection therewith, all or part of the outstanding
Common Stock shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other
B-1
<PAGE> 33
property, (C) the Company shall be a party to a statutory share exchange
with any other Person after which the Company is a Subsidiary of any
other Person, or (D) the Company shall sell or otherwise transfer 50
percent or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons.
(e) "Code" means the Internal Revenue Code of 1986, as amended, and
the regulations issued thereunder, as the same may be amended from time to
time.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Beverly Enterprises, Inc., or any successor
thereto.
(h) "Effective Date" means June 1, 1994, subject to the approvals as
described in Section 1.4.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(j) "Fair Market Value" means, on any given date, the closing price of
Common Stock as reported on the New York Stock Exchange composite tape on
such day or, if no shares of Common Stock were traded on the New York Stock
Exchange on such day, then on the next preceding day that Common Stock was
traded on such Exchange, all as reported by such source as the Board may
select.
(k) "Grant Date" means June 1 of each calendar year during the period
this Plan remains in effect. The first "Grant Date" under the Plan is June
1, 1994.
(l) "Nonemployee Director" means an individual who is a member of the
Board and who is not an employee of the Company or any Subsidiary or
Affiliate thereof.
(m) "Option" means an option granted under this Plan to purchase a
share or shares of Common Stock.
(n) "Participant" means a Nonemployee Director to whom an Option has
been granted under this Plan.
(o) "Person" means "person" as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d)(3) of the Exchange Act.
(p) "Plan" means the "Beverly Enterprises, Inc. Nonemployee Directors'
Stock Option Plan" as set forth in this document, and as the same may be
amended from time to time.
(q) "Subsidiary" means a corporation at least 50 percent of the
combined voting power of all classes of stock of which is owned by the
Company, either directly or through one or more of its Subsidiaries.
(r) "Vesting Date" means, with respect to any Options granted as of a
particular Grant Date, the next June 1 following such Grant Date. The first
Vesting Date under the Plan is June 1, 1995.
2.2 Gender and Number; Headings. Except when otherwise indicated by the
context, any masculine terminology when used in this Plan shall also include the
feminine gender, and the definition of any term in the singular shall also
include the plural. Headings of Articles and Sections herein are included solely
for convenience, and if there is any conflict between such headings and the text
of the Plan, the text shall control.
ARTICLE III.
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility; Participation. Each Nonemployee Director shall be eligible
to participate under this Plan and to receive a grant of an Option in accordance
with the provisions of this Plan.
3.2 Initial Grant of Stock Options. Each Nonemployee Director as of the
Effective Date shall automatically be granted an Option to purchase 2,500 shares
of Common Stock, effective as of the Effective
B-2
<PAGE> 34
Date. Each individual who first becomes a Nonemployee Director after the
Effective Date shall automatically be granted an Option to purchase 2,500 shares
of Common Stock, effective as of the Grant Date which is coincident with or next
following the date on which such individual becomes a Nonemployee Director. All
Options granted under this Section 3.2 shall be subject to the Common Stock
availability provisions of Section 4.1.
3.3 Subsequent Grants of Stock Options. Each Nonemployee Director who has
received an initial grant of an Option, as described in Section 3.2, shall
automatically be granted an Option to purchase an additional 2,500 shares of
Common Stock as of each Grant Date subsequent to the initial Grant Date
applicable to such Nonemployee Director and during the term of this Plan, with
each such subsequent grant being effective as of the applicable Grant Date. To
be eligible to receive such an Option grant with respect to any such Grant Date,
the Nonemployee Director must be a Nonemployee Director on such Grant Date. All
Options granted under this Section 3.3 shall be subject to the Common Stock
availability provisions of Section 4.1.
ARTICLE IV.
COMMON STOCK AVAILABLE
4.1 In General. Subject to adjustment as provided in Section 4.2, an
aggregate of 200,000 shares of Common Stock shall be available for grant and
issuance pursuant to the provisions of this Plan. Such shares may be authorized
and unissued shares or may be shares issued and thereafter acquired by the
Company. If an Option shall expire or terminate for any reason without having
been exercised in whole or in part, the unpurchased shares of Common Stock
subject to such Option shall again be available for subsequent Option grants
under the Plan.
4.2 Adjustment in Event of Changes in Capitalization. In the event of a
stock dividend, stock split, or combination of shares, recapitalization or other
change in the Company's capitalization, or other distribution with respect to
holders of the Company's Common Stock other than normal cash dividends, an
automatic adjustment shall be made in the number and kind of shares as to which
outstanding Options or portions thereof then unexercised shall be exercisable
and in the available shares set forth in Section 4.1, to the end that the
proportionate interest of the Participant or eligible Nonemployee Director shall
be maintained as before the occurrence of such event. Such adjustment in
outstanding Options shall be made without change in the total price applicable
to the unexercised portion of such Options and with a corresponding adjustment
in the Option price per share. Automatic adjustment shall also be made in the
number and kind of shares subject to Options subsequently granted under Article
III of the Plan.
ARTICLE V.
TERMS AND CONDITIONS OF STOCK OPTIONS
5.1 Exercise of Stock Options.
(a) Option Exercisability. Each Option granted as of a particular
Grant Date shall be exercisable on or after the Vesting Date with respect
to such Grant Date, subject to the provisions of Section 5.1(b) and (c).
(b) Immediate Vesting For Death, Disability, and Change of
Control. Notwithstanding the provisions of Section 5.1(a), an Option
granted to any Participant shall become immediately exercisable in full
upon the first to occur of --
(1) The death of the Participant, in which case the Option may be
exercised by the Participant's executor or administrator, or
if not so exercised, by the legatees or distributees of his
or her estate or by such other person or persons to whom the
Participant's rights under the Option shall pass by will or
by the applicable laws of descent and distribution;
(2) Such time as the Participant ceases to be a member of the Board
by reason of his or her disability and
B-3
<PAGE> 35
(3) Change in Control.
(c) Holding Periods. Any Option may not be exercised for at least six
months after the grant thereof. Should this Section 5.1(c) require
modification or be unnecessary to comply with the requirements of Section
16 of and Rule 16b-3 under the Exchange Act, the Board may waive such
provision and/or amend this Plan to add to or modify the provisions hereof
accordingly.
(d) Termination Other Than Death or Disability. In the event the
Participant ceases to be a Nonemployee Director of the Company for any
reason other than death or disability when no Change of Control has
occurred, and such termination occurs prior to the time an Option granted
to such Participant has become exercisable, such Option shall terminate
with respect to the shares as to which the Option is not then exercisable
and all rights of the Participant to such shares shall terminate without
further obligation on the part of the Company. As regards any Option which
is exercisable by the Participant at such time, such Participant must
exercise such Option within 90 days following the date the Participant so
ceased to be a Nonemployee Director; and, any such Option remaining
unexercised as of the close of such period shall expire.
5.2 Exercise Price. The exercise price of an Option for a share of Common
Stock shall be 100 percent of the Fair Market Value of such Common Stock on the
Grant Date relating to such Option.
5.3 Expiration of Options.
(a) In General. An Option shall expire ten years from the Grant Date
relating to such Option, unless terminated earlier in accordance with the
Plan.
(b) Death of Participant. In the event a Participant ceases to be a
Nonemployee Director of the Company by reason of death, including without
limitation in the event that a Participant dies after ceasing to be a
member of the Board by reason of disability, any Option granted to such
Participant hereunder that has not been fully exercised at the time of the
Participant's death may be exercised at any time within the greater of
(1) one year after the date of death, or --
(2) the remainder of the period in which such Participant could
have exercised the Option had the Participant not died. In
the event any Option is exercised by the executors,
administrators, legatees, or distributees of the estate of a
deceased Participant, the Company shall be under no obligation
to issue Common Stock thereunder unless and until the Company
is satisfied that the person or persons exercising the Option
are the duly appointed legal representatives of the deceased
optionee's estate or the proper legatees or distributees
thereof.
5.4 Exercise and Payment of Exercise Price.
(a) Number of Shares. Subject to the terms and conditions of the Plan,
an Option shall, to the extent then exercisable, be exercisable in whole or
in part by giving written notice to the Company stating the number of
shares with respect to which the Option is being exercised, accompanied by
payment in full for such shares; provided, however, that there shall be no
such exercise at any one time as to fewer than 100 shares or all of the
remaining shares then purchasable by the person or persons exercising the
Option, if fewer than 100 shares.
(b) Payment Methods. An Option may be paid for by --
(1) delivery of cash or a check payable to the order of the Company
in an amount equal to the exercise price of such Option, or
(2) by delivery to the Company of shares of Common Stock of the
Company already owned by the Participant for more than six
months and having a Fair Market Value equal in amount to the
exercise price of the Option being exercised, provided that
such method is consistent with applicable tax laws, or
(3) by any combination of such methods of payment.
B-4
<PAGE> 36
5.5 Rights as a Shareholder. Except as specifically provided by the Plan,
the grant of an Option shall not give a Participant rights as a shareholder; and
the Participant will obtain such rights only upon actual receipt of Common
Stock.
5.6 Documentation of Option Grants. Option grants shall be evidenced by
written instruments prescribed by the Board from time to time. The instruments
may be in the form of agreements to be executed by both the Participant and the
Company or certificates, letters or similar instruments, which need not be
executed by the Participant, but acceptance of which will evidence agreement to
the terms of the grant.
5.7 Nontransferability of Options. No Option granted under the Plan shall
be assignable or transferable by the Participant to whom it is granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution or pursuant to a "qualified domestic relations order" as defined
under Section 414(p) of the Code. Any such attempted assignment or transfer in
violation of this Section 5.7 shall be null and void. During the life of the
Participant, the Option shall be exercisable only by such person or, in the
event of incapacity, by the person or person properly appointed to act on his or
her behalf.
ARTICLE VI.
REGULATORY COMPLIANCE
6.1 Issuance or Delivery of Shares. The issuance or delivery of any shares
of Common Stock subject to exercisable Options may be postponed by the Board for
such period as may be required to comply with any applicable requirements under
the Federal securities laws, any applicable listing requirements of any national
securities exchange, or any requirements under any law or regulation applicable
to the issuance or delivery of such shares. The Company shall not be obligated
to issue or deliver any such shares if the issuance or delivery thereof would
constitute a violation of any provision of any law or of any regulation of any
governmental authority or any national securities exchange.
6.2 Amendments for Compliance. Sections 2.1(l), 2.1(n), 3.1, 3.2 and 3.3
shall not be amended more than once every six months, other than to comport with
changes in the Code or other applicable Federal or state law. Should any
provision of this Section 6.2 require modification or be unnecessary to comply
with the requirements of Section 16 of and Rule 16b-3 under the Exchange Act,
the Board may waive such provision and/or amend this Plan to add to or modify
the provision hereof accordingly.
ARTICLE VII.
ADMINISTRATION
7.1 Plan Administration. The Plan shall be administered by the Board. The
Board shall have all the powers vested in it by the terms of the Plan, such
powers to include authority within the limitations described herein to prescribe
the form of the agreement embodying grants of Options. The Board shall have the
power to construe the Plan, to determine all questions arising thereunder, and
to adopt and amend such rules and regulations for the administration of the Plan
as it may deem desirable. Any decision of the Board in the administration of the
Plan, as described herein, shall be final and conclusive. The Board may from
time to time delegate certain of its administrative responsibilities under the
Plan to Company personnel or to a committee. The Board may act only by a
majority of its members in office, except that the members thereof may authorize
any one or more of their number or any officer of the Company to execute and
deliver documents on behalf of the Board. No member of the Board shall be liable
for anything done or omitted to be done other than by such member's own willful
misconduct or as expressly provided by statute.
7.2 Indemnification and Exculpation. The members of the Board, its agents,
and officers and employees of the Company shall be indemnified and held harmless
by the Company against and from any and all loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by them in connection with or
resulting from any claim, action, suit, or proceeding to which they may be a
party or in which they may be involved by reason of any action taken or failure
to act under this Plan and against and from any and all amounts paid by them in
settlement (with the Company's written approval) or paid by them in satisfaction
of
B-5
<PAGE> 37
a judgment in any such action, suit, or proceeding. The foregoing provision
shall not be applicable to any person if the loss, cost, liability, or expense
is due to such person's gross negligence or willful misconduct.
ARTICLE VIII.
AMENDMENT AND TERMINATION
8.1 Amendment. Except as provided in Section 6.2, the Board shall have the
right to amend or modify the Plan in full or in part at any time and from time
to time; provided, however, that unless required by law, no such amendment or
modification shall --
(a) affect any right or obligation with respect to any Option grant
theretofore made,
(b) in any manner affect the restrictions set forth in Section 6.2, or
(c) unless previously approved by the shareholders of the Company,
where such approval is necessary to satisfy then applicable requirements of
Federal securities laws, the Code, or rules of any stock exchange on which
the Company's Common Stock is listed --
(1) in any manner materially affect the eligibility requirements
set forth in Sections 3.1, 3.2 and 3.3,
(2) materially increase the number of shares of Common Stock
available for or subject to Options, or
(3) materially increase the benefits to Participants under the
Plan.
8.2 Termination.
(a) In General. The Board shall have the right to terminate the Plan
at any time; provided, however, that Options which are granted on or before
the termination date shall remain exercisable in accordance with their
respective terms after the termination of the Plan.
(b) Termination Date. Unless terminated earlier by the Board, the Plan
shall terminate on May 31, 2004; provided, however, that Options which are
granted on or before such date shall remain exercisable in accordance with
their respective terms after the termination of the Plan.
ARTICLE IX.
MISCELLANEOUS
9.1 Shareholder Approval. The effectiveness of the Plan and of the grant of
all Options under the Plan are subject to shareholder approval as provided in
Section 1.4. The Company's obligation to issue and deliver shares of Common
Stock under the Plan is subject to the approval of any governmental authority
required in connection with the authorization, issuance, or delivery of Common
Stock.
9.2 No Right to Reelection. Nothing in the Plan shall be deemed to create
any obligation on the part of the Board to nominate any Nonemployee Director for
reelection by the Company's shareholders, nor confer upon any Nonemployee
Director the right to remain a member of the Board for any period of time, or at
any particular rate of compensation.
9.3 Withholding. It shall be a condition to the obligation of the Company
to issue shares of Common Stock upon exercise of an Option, that the optionee
(or any beneficiary or person entitled to act under Section 5.1(b)) pay to the
Company, upon its demand, such amount as may be requested by the Company for the
purpose of satisfying any liability to withhold Federal, state, local, or
foreign income or other taxes. Such amount may be paid by the Participant by
cash or check or by authorizing the Company to withhold shares of Common Stock
with a Fair Market Value equal to such Participant's withholding obligation. If
the amount requested is not paid, the Company may refuse to issue shares of
Common Stock.
B-6
<PAGE> 38
9.4 Severability. In the event any provision of this Plan shall be held
invalid or illegal for any reason, any illegality or invalidity shall not affect
the remaining parts of this Plan, but this Plan shall be construed and enforced
as if the illegal or invalid provision had never been inserted, and the Company
shall have the privilege and opportunity to correct and remedy such questions of
illegality or invalidity by amendment as provided in this Plan.
9.5 Status Under ERISA. This Plan is not maintained as and is not intended
to be an "employee benefit plan" under the Employee Retirement Income Security
Act of 1974, as amended.
9.6 Applicable Law. The Plan shall be governed by, construed, and
administered in accordance with the laws of the State of Arkansas, except to the
extent such laws are preempted by the laws of the United States.
B-7
<PAGE> 39
BEVERLY ENTERPRISES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David R. Banks, Boyd W. Hendrickson and
Robert W. Pommerville, each of them, as proxies, each with the power to appoint
his substitute, to represent and to vote as designated below, all the shares of
common stock of Beverly Enterprises, Inc. held of record by the undersigned on
March 21, 1994 at the Annual Meeting of Stockholders to be held on May 19, 1994
or any adjournment thereof.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. This Proxy when properly
executed will be voted in the manner directed herein by the undersigned. If no
specification is made, the Proxy will be voted FOR the election of the
directors named in the Proxy Statement, FOR the APPROVAL of Amendment No. 1 to
the Beverly Enterprises, Inc. 1993 Long-Term Incentive Stock Plan, FOR the
APPROVAL of the Beverly Enterprises, Inc. Annual Incentive Plan, FOR the
APPROVAL of the Beverly Enterprises, Inc. Non-Employee Directors' Stock Option
Plan, and FOR the appointment of Ernst & Young as independent auditors for
1994.
(Continued and to be signed and dated on the reverse side.)
<PAGE> 40
<TABLE>
<S> <C>
/ /
1. ELECTION OF DIRECTORS: Beryl F. Anthony, Jr., David R. Banks, Curt F. Bradbury, James R. Greene, Jon E.M. Jacoby, Louis W. Menk
and Will K. Weinstein.
FOR EACH NOMINEE WITHHOLD AUTHORITY
LISTED ABOVE / / TO VOTE FOR EACH NOMINEE ABOVE / /
(INSTRUCTION: To withhold authority to vote for any individual nominee or nominees, write that name or names on the space
provided below.)
_______________________________________________________________________________________________________________________________
If any nominee named above declines or is unable to serve as a director, the persons named as proxies, and each of them shall
have full discretion to vote for any other person who may be nominated.
APPROVAL DISAPPROVAL ABSTENTION APPROVAL DISAPPROVAL ABSTENTION
OF OF WITH RESPECT TO OF OF WITH RESPECT TO
2. Amendment No. 1 to 4. The Beverly Enter-
the Beverly Enter- prises, Inc. Non-
prises, Inc. 1993 / / / / / / Employee Directors' / / / / / /
Long-Term Incentive Stock Option Plan
Stock Plan.
APPROVAL DISAPPROVAL ABSTENTION APPROVAL DISAPPROVAL ABSTENTION
OF OF WITH RESPECT TO OF OF WITH RESPECT TO
3. The Beverly Enter- 5. Appointment of Ernst
prises, Inc. Annual & Young as Indepen-
Incentive Plan / / / / / / dent Auditors for / / / / / /
1994
NOTE: Please sign exactly as name appears on this Proxy.
When shares are held by joint tenants, both should sign.
When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated: _____________________________________________, 1994
__________________________________________________________
__________________________________________________________
Signature of Stockholder(s)
Please sign, date and return today in the enclosed
envelope. This Proxy will not be used if you attend the
meeting in person and so request.
Please date, sign and return promptly in the accompanying envelope. Votes must be indicated (X) in Black or Blue Ink. / /
</TABLE>
