<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 1995
REGISTRATION NO. 33-57663
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
BEVERLY ENTERPRISES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8051 95-4100309
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1200 SOUTH WALDRON, NO. 155
FORT SMITH, ARKANSAS 72903
(501) 452-6712
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT W. POMMERVILLE, EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
BEVERLY ENTERPRISES, INC.
5111 ROGERS AVENUE, SUITE 40-A
FORT SMITH, ARKANSAS 72919-0155
(501) 452-6712
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
H. WATT GREGORY, III, ESQ.
MICHAEL E. KARNEY, ESQ.
GIROIR & GREGORY, PROFESSIONAL ASSOCIATION
111 CENTER STREET, SUITE 1900
LITTLE ROCK, ARKANSAS 72201
(501) 372-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE(1)(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.10 par value 14,959,209 Shares Not Applicable 141,659,171.875 $48,848
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 457(f), the registration fee was computed on the basis of
the market value of the number of shares of PMSI Common Stock to be
exchanged in the Merger (9,066,187 shares), computed in accordance with Rule
457(c) on the basis of the average of the bid and asked prices per share of
such stock on the Nasdaq National Market on February 7, 1995 ($15.625).
(2) On February 13, 1995, a registration fee of $48,848 was paid by the
Registrant in connection with the initial filing of this Registration
Statement No. 33-57663. No additional fee is required to be paid with the
filing of this Amendment No. 1 to the Registration Statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
BEVERLY ENTERPRISES, INC.
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B)
<TABLE>
<CAPTION>
LOCATION OR CAPTION IN PROSPECTUS/
FORM S-4 ITEM CONSENT SOLICITATION STATEMENT
- -------------------------------------------------- --------------------------------------------
<C> <C> <S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement 1. Form S-4 Cover Page; Outside Front
Outside Front Cover Page of Prospectus Cover Page of Prospectus; Cross
Reference Sheet
2. Inside Front and Outside Back Cover 2. Available Information; Incorporation
Pages of Prospectus of Certain Documents by Reference;
Table of Contents
3. Risk Factors, Ratio of Earnings to 3. Summary; Certain Considerations
Fixed Charges and Other Information
4. Terms of the Transaction 4. Summary; The Merger; The Merger
Agreement; Management and Operations
of Beverly after the Merger;
Description of Beverly Capital Stock;
Comparative Rights of Stockholders of
Beverly and PMSI
5. Pro Forma Financial Information 5. Summary
6. Material Contacts with the Company 6. Merger
Being Acquired
7. Additional Information Required for 7. *
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Counsel 8. *
9. Disclosure of Commission Position on 9. *
Indemnification for Securities Act
Liabilities
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 10. Available Information; Incorporation
Registrants of Certain Documents by Reference;
Summary; Recent Developments of
Beverly; Management and Operations of
Beverly after the Merger
11. Incorporation of Certain Information 11. Incorporation of Certain Documents by
by Reference Reference
12. Information with Respect to S-2 or S-3 12. *
Registrants
13. Incorporation of Certain Information 13. *
by Reference
14. Information with Respect to 14 *
Registrants Other Than S-3 or S-2
Registrants
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
LOCATION OR CAPTION IN PROSPECTUS/
FORM S-4 ITEM CONSENT SOLICITATION STATEMENT
- -------------------------------------------------- --------------------------------------------
<C> <C> <S> <C> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 15. *
Companies
16. Information with Respect to S-2 or S-3 16. Available Information; Incorporation
Companies of certain Documents by Reference;
Summary
17. Information with Respect to Companies 17. *
Other Than S-3 or S-2 Companies
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or 18. Incorporation of Certain Documents by
Authorizations are to be Solicited Reference; Summary; Recent
Developments of Beverly; The Special
Meeting; The Merger; The Merger
Agreement; Management and Operations
of Beverly after the Merger;
Description of Beverly Capital Stock;
Comparative Rights of Stockholders of
Beverly and PMSI
19. Information if Proxies, Consents or 19. *
Authorizations are not to be Solicited
or in an Exchange Offer
</TABLE>
- ---------------
*Item is omitted because answer is negative or item is not applicable.
<PAGE> 4
[PMSI LETTERHEAD]
, 1995
Dear Shareholder:
Enclosed are a Notice of Consent Solicitation of Shareholders, a
Prospectus/Consent Solicitation Statement and a written consent (the "Consent
Solicitation") pertaining to Pharmacy Management Services, Inc., a Florida
corporation ("PMSI"). The purpose of the Consent Solicitation is to request your
approval of the merger (the "Merger") of PMSI with and into Beverly Acquisition
Corporation ("Acquisition"), a wholly-owned subsidiary of Beverly Enterprises,
Inc. ("Beverly"), pursuant to an Agreement and Plan of Merger dated December 26,
1994, as amended, among PMSI, Beverly and Acquisition (the "Merger Agreement")
and the transactions contemplated thereby. The Consent Solicitation will
commence on or about , 1995 and will expire on the earlier of: (i)
June 30, 1995; or (ii) the date that PMSI notifies its shareholders that the
Merger, the Merger Agreement and the transactions contemplated thereby have
received the affirmative vote by written consent of the holders of a majority of
the shares of PMSI common stock entitled to vote on such matters, although such
notification date shall not be earlier than , 1995.
Pursuant to the Merger Agreement, PMSI will be merged with and into
Acquisition with Acquisition remaining a wholly-owned subsidiary of Beverly and
all of the assets and liabilities of PMSI will become assets and liabilities of
Acquisition. Each issued and outstanding share of PMSI common stock will be
converted into the right to receive that number of shares of Beverly common
stock equal to the quotient of $16.50 divided by the mean arithmetic average of
the daily closing sales price per share (rounded to the nearest whole cent) of
the Beverly common stock as reported on the New York Stock Exchange during the
ten consecutive trading days ending on the second trading day immediately
preceding the effective time of the Merger. Subject to certain exceptions as
further discussed in the Prospectus/Consent Solicitation Statement, the exchange
ratio will not be less than 0.9167 nor more than 1.3469. The PMSI Board of
Directors, after careful consideration, has adopted the plan of merger as set
forth in the Merger Agreement and recommends that shareholders vote FOR approval
of the Merger, the Merger Agreement and the transactions contemplated thereby.
The Prospectus/Consent Solicitation Statement contains a description of various
factors associated with the Merger, including the federal income tax
consequences, the basis for converting PMSI common stock into Beverly common
stock, the factors described under "CERTAIN CONSIDERATIONS", the financial
condition and historical operating results of PMSI and Beverly, recent
developments concerning Beverly, the markets and historical market prices of the
respective common stocks and the comparative rights of stockholders of Beverly
and PMSI.
All shareholders are urged to vote by written consent during the Consent
Solicitation. The affirmative vote by written consent of a majority of the
outstanding shares of PMSI common stock will be necessary for approval of the
Merger and the Merger Agreement. A failure to vote will have the same effect as
a vote against the Merger and the Merger Agreement. Accordingly, it is important
that your shares be represented and, therefore, we urge you to promptly sign and
date the enclosed written consent and return it in the accompanying
pre-addressed envelope, which requires no postage if mailed within the United
States.
Should you require assistance in completing your written consent or if you
have any questions about the voting procedure or the accompanying
Prospectus/Consent Solicitation Statement, please feel free to contact David L.
Redmond, PMSI's Secretary, at (813) 626-7788.
Very truly yours,
CECIL S. HARRELL
Chairman of the Board and
Chief Executive Officer
<PAGE> 5
PHARMACY MANAGEMENT SERVICES, INC.
8611 QUEEN PALM DRIVE
TAMPA, FLORIDA 33619
NOTICE OF CONSENT SOLICITATION OF SHAREHOLDERS
To the Shareholders of Pharmacy Management Services, Inc.:
Notice is hereby given that written consents will be solicited from the
shareholders (the "Consent Solicitation") of Pharmacy Management Services, Inc.,
a Florida corporation ("PMSI"), for the following purpose:
To vote on a proposal to approve the merger (the "Merger") of
PMSI with and into Beverly Acquisition Corporation, a Delaware
corporation ("Acquisition"), and a wholly-owned subsidiary of Beverly
Enterprises, Inc., a Delaware corporation ("Beverly"), pursuant to an
Agreement and Plan of Merger dated December 26, 1994, as amended,
among PMSI, Beverly and Acquisition (the "Merger Agreement"), and the
transactions contemplated thereby, as described in the accompanying
Prospectus/Consent Solicitation Statement in which the Merger
Agreement is included as Appendix A.
The Consent Solicitation will begin on , 1995 and expire on the
earlier of: (i) June 30, 1995; or (ii) the date that PMSI notifies its
shareholders that the Merger, the Merger Agreement and the transactions
contemplated thereby have received the affirmative vote by written consent of
the holders of a majority of the shares of PMSI common stock entitled to vote on
such matters, although such notification date shall not be earlier than
, 1995.
The Board of Directors of PMSI has fixed the close of business on ,
1995, as the record date for the determination of shareholders entitled to
notice of the Consent Solicitation and to vote on the foregoing proposal and
only shareholders of record at such time will be entitled to notice of the
Consent Solicitation and to vote on the foregoing proposal. Accompanying this
notice are a form of written consent and a Prospectus/Consent Solicitation
Statement containing more detailed information with respect to the matters to be
considered in conjunction with the Consent Solicitation.
THE BOARD OF DIRECTORS OF PMSI UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE MERGER AND THE MERGER AGREEMENT.
IN ORDER TO ASSURE THAT YOUR SHARES ARE VOTED IN THE CONSENT SOLICITATION,
PLEASE COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED CONSENT, WHICH IS
BEING SOLICITED BY THE BOARD OF DIRECTORS OF PMSI. AN ADDRESSED RETURN ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR THAT
PURPOSE.
By Order of the Board of Directors,
DAVID L. REDMOND
Secretary
Tampa, Florida
, 1995
<PAGE> 6
BEVERLY ENTERPRISES, INC.
COMMON SHARES, $.10 PAR VALUE
(14,959,209 SHARES)(1)
PROSPECTUS
PHARMACY MANAGEMENT SERVICES, INC.
CONSENT SOLICITATION STATEMENT
This Prospectus of Beverly Enterprises, Inc., a Delaware corporation
("Beverly"), relates to up to 14,959,209 shares ("Beverly Shares") of common
stock, par value $.10 per share ("Beverly Common Stock"), to be issued to the
shareholders of Pharmacy Management Services, Inc., a Florida corporation
("PMSI"), upon consummation of the proposed merger (the "Merger") of PMSI with
and into Beverly Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Beverly ("Acquisition"), pursuant to the terms and
subject to the conditions of the Agreement and Plan of Merger dated December 26,
1994, as amended by Amendment No. 1 to the Merger Agreement dated as of
, 1995 (the "Merger Agreement") among Beverly, Acquisition and PMSI.
See "THE MERGER AGREEMENT." Following the Merger, Acquisition will be the
surviving corporation (the "Surviving Corporation"), will remain a wholly-owned
subsidiary of Beverly and will change its name to "Pharmacy Management Services,
Inc." The Merger Agreement is attached hereto as Appendix A and is incorporated
herein by reference.
This Prospectus also serves as a consent solicitation statement of PMSI for
use in connection with the solicitation of written consents of its shareholders
to approve the Merger, the Merger Agreement and the transactions contemplated
thereby (the "Consent Solicitation"). See "SUMMARY -- The Consent Solicitation"
and "THE CONSENT SOLICITATION." The Consent Solicitation will commence on or
about , 1995 and will expire on the earlier of: (i) June 30, 1995;
or (ii) the date that PMSI notifies its shareholders that the Merger, the Merger
Agreement and the transactions contemplated thereby have received the
affirmative vote by written consent of the holders of a majority of the shares
of PMSI common stock entitled to vote on such matters, although such
notification date shall not be earlier than , 1995.
Upon consummation of the Merger, all shares of common stock, par value $.01
per share, of PMSI ("PMSI Common Stock") will be converted into the right to
receive shares of Beverly Common Stock. See "SUMMARY -- The Merger" and "THE
MERGER AGREEMENT -- Conversion of PMSI Common Stock."
The outstanding shares of Beverly Common Stock are, and Beverly Shares
offered hereby will be listed for trading on the New York Stock Exchange (the
"NYSE") and the Pacific Stock Exchange (the "PSE") under the symbol "BEV." On
April 13, 1995, the last sale price for Beverly Common Stock as reported on the
NYSE composite tape was $15 3/8. See "RECENT DEVELOPMENTS OF BEVERLY."
FOR CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN EVALUATING THE MERGER,
SEE "CERTAIN CONSIDERATIONS."
This Prospectus/Consent Solicitation Statement is first being mailed to the
shareholders of record of PMSI as of , 1995, on or about
, 1995.
THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/CONSENT SOLICITATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- ---------------
(1) Each issued and outstanding share of PMSI Common Stock will be converted
into the right to receive that number of shares of Beverly common stock
equal to the quotient of $16.50 divided by the mean arithmetic average of
the daily closing sales price per share (rounded to the nearest whole cent)
of the Beverly common stock as reported on the New York Stock Exchange
during the ten consecutive trading days ending on the second trading day
immediately preceding the Effective Time of the Merger, subject to a minimum
of $12.25 and a maximum of $18.00 per share. Accordingly, the number of
Beverly Shares to be issued upon consummation of the Merger could range from
8,310,671 to 14,959,209 shares. See "SUMMARY -- The Merger" and "THE MERGER
AGREEMENT -- Conversion of PMSI Common Stock."
The date of this Prospectus/Consent Solicitation Statement is ,
1995.
<PAGE> 7
AVAILABLE INFORMATION
Beverly and PMSI are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by Beverly and PMSI can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at
the regional offices of the Commission located at 7 World Trade Center, New
York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60601. Copies of such materials can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 at prescribed rates. The shares of Beverly Common Stock
are listed on the New York Stock Exchange, 20 Broad Street, New York, New York
10005 and the Pacific Stock Exchange, 301 Pine Street, San Francisco, California
94104. The shares of PMSI Common Stock are traded on the Nasdaq National Market
System, 1735 K Street, N.W., Washington, D.C. 20006-1506.
Beverly has filed a Registration Statement on Form S-4 (the "Registration
Statement") with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to Beverly Shares to be issued in
connection with the Merger. This Prospectus/Consent Solicitation Statement also
constitutes the prospectus of Beverly filed as part of the Registration
Statement. This Prospectus/Consent Solicitation Statement does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement and any amendments thereto, including
exhibits filed as a part thereof, are available for inspection and copying as
set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
BEVERLY
The following documents filed by Beverly with the Commission under the
Exchange Act are incorporated by reference herein:
1. Annual Report on Form 10-K for the year ended December 31, 1994, (the
"1994 Beverly 10-K");
2. The portions of the Proxy Statement for the Annual Meeting of
Stockholders to be held May 18, 1995 that have been incorporated by
reference in the 1994 Beverly 10-K;
3. Current Report on Form 8-K dated April 6, 1995.
4. Current Report on Form 8-K dated December 14, 1994, as amended February
10, 1995, on Form 8-K/A;
5. Registration Statement on Form 8-A relating to Beverly Common Stock
dated August 21, 1990, and any amendment or report filed for the purpose
of updating such description; and
6. Registration Statement on Form 8-A relating to Beverly Common Stock
Purchase Rights dated September 29, 1994 and any amendment or report
filed for the purpose of updating such description.
PMSI
This Prospectus/Consent Solicitation Statement is accompanied by PMSI's
1994 Annual Report on Form 10-K for the fiscal year ended July 31, 1994, as
amended and restated April 6, 1995 on Form 10-K/A (Amendment No. 3), and by
PMSI's Quarterly Report on Form 10-Q for the quarter ended January 31, 1995, as
amended April 4, 1995 on Form 10-Q/A (Amendment No. 1), as filed with the
Commission, which are
ii
<PAGE> 8
attached hereto as Appendix G and Appendix H, respectively. The following
documents and information filed by PMSI with the Commission under the Exchange
Act are incorporated by reference herein:
1. Annual Report on Form 10-K for the fiscal year ended July 31, 1994,
as amended October 24, 1994 on Form 10-K/A (Amendment No. 1),
November 23, 1994, on Form 10-K/A (Amendment No. 2) and April 6,
1995, on Form 10-K/A (Amendment No. 3);
2. The Quarterly Reports on Form 10-Q for the fiscal quarters ended
October 31, 1994, as amended January 4, 1995 on Form 10-Q/A
(Amendment No. 1), and January 31, 1995, as amended April 4, 1995 on
Form 10-Q/A (Amendment No. 1); and
3. Current Report on Form 8-K dated December 26, 1994.
All documents filed by Beverly or PMSI with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and
until the termination of the Consent Solicitation shall be deemed to be
incorporated by reference herein and shall be a part hereof from the date of
filing of such documents. The information with respect to Beverly and PMSI
contained in this Prospectus/Consent Solicitation Statement does not purport to
be complete and should be read together with the information in the documents
incorporated by reference herein. Any statements contained in a document
incorporated by reference herein or contained in this Prospectus/Consent
Solicitation Statement shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein (or in any other
subsequently filed document which also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
THIS PROSPECTUS/CONSENT SOLICITATION STATEMENT INCORPORATES BY REFERENCE
DOCUMENTS WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH
DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE) WILL BE PROVIDED WITHOUT CHARGE BY FIRST
CLASS MAIL TO ANY PERSON TO WHOM THIS PROSPECTUS/CONSENT SOLICITATION STATEMENT
IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON. REQUESTS FOR BEVERLY
DOCUMENTS SHOULD BE DIRECTED TO BEVERLY ENTERPRISES, INC., 5111 ROGERS AVENUE,
SUITE 40-A, FORT SMITH, ARKANSAS 72919-1000, (501) 452-6712, ATTN: ROBERT W.
POMMERVILLE, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY
, 1995. REQUESTS FOR PMSI DOCUMENTS SHOULD BE DIRECTED TO PHARMACY
MANAGEMENT SERVICES, INC., 3611 QUEEN PALM DRIVE, TAMPA, FLORIDA 33619, (813)
626-7788, ATTN: DAVID L. REDMOND, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH
REQUEST SHOULD BE MADE BY , 1995.
------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS/CONSENT SOLICITATION STATEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS/CONSENT SOLICITATION STATEMENT
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO
PURCHASE, THE SECURITIES OFFERED BY THIS PROSPECTUS/CONSENT SOLICITATION
STATEMENT, OR THE SOLICITATION OF A CONSENT FROM ANY PERSON, IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR CONSENT
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS/CONSENT SOLICITATION
STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES MADE UNDER THIS
PROSPECTUS/CONSENT SOLICITATION STATEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF BEVERLY OR PMSI
SINCE THE DATE OF THIS PROSPECTUS/CONSENT SOLICITATION STATEMENT.
iii
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... ii
Beverly............................................................................. ii
PMSI................................................................................ ii
SUMMARY............................................................................... 1
Beverly............................................................................. 1
Recent Developments.............................................................. 1
Acquisition......................................................................... 1
PMSI................................................................................ 1
The Consent Solicitation............................................................ 2
Vote Required....................................................................... 2
The Merger.......................................................................... 2
Conversion of PMSI Common Stock.................................................. 2
Recommendation of the Board of Directors of PMSI................................. 3
Opinion of PMSI Financial Advisor................................................ 3
Interests of Certain Persons in the Merger....................................... 3
Effective Time and Closing Date of the Merger.................................... 3
Exchange of PMSI Stock Certificates.............................................. 3
No Dissenters' Rights............................................................ 3
Accounting Treatment............................................................. 4
Certain Federal Income Tax Consequences.......................................... 4
Resale Restrictions.............................................................. 4
Stock Exchange Listing........................................................... 4
Conditions to the Merger......................................................... 4
Termination...................................................................... 4
Termination Fee.................................................................. 5
Certain Considerations.............................................................. 5
Markets and Market Prices........................................................... 6
Beverly.......................................................................... 6
PMSI............................................................................. 6
Beverly Selected Consolidated Financial Data........................................ 7
PMSI Selected Consolidated Financial Data........................................... 8
Selected Unaudited Pro Forma Combined Per Share Data................................ 9
RECENT DEVELOPMENTS OF BEVERLY........................................................ 11
CERTAIN CONSIDERATIONS................................................................ 12
Governmental Regulation and Reimbursement........................................... 12
Increased Labor Costs and Availability of Personnel................................. 12
Certain Anti-Takeover Provisions.................................................... 13
THE CONSENT SOLICITATION.............................................................. 14
Matters to be Voted upon by the PMSI Shareholders................................... 14
Termination Date.................................................................... 14
Record Date......................................................................... 14
</TABLE>
iv
<PAGE> 10
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Vote Required....................................................................... 14
General.......................................................................... 14
Shareholders' Agreement.......................................................... 14
Irrevocable Proxies.............................................................. 15
Exemptions From Certain Provisions of the FBCA................................... 15
Revocation of Consents.............................................................. 15
Solicitation of Written Consents.................................................... 16
No Dissenters' Rights............................................................... 16
THE MERGER............................................................................ 17
General............................................................................. 17
Background of the Merger............................................................ 17
Reasons for Merger; Recommendation of PMSI Board.................................... 19
Opinion of PMSI Financial Advisor................................................... 21
Comparable Company Analysis...................................................... 23
Comparable Merger and Acquisition Transactions Analysis.......................... 23
Leveraged Buyout Analysis........................................................ 23
Exchange Ratio Analysis.......................................................... 24
Premium Analysis................................................................. 24
Other Factors and Comparative Analyses........................................... 24
Interests of Certain Persons in the Merger.......................................... 24
General.......................................................................... 24
Stock Options.................................................................... 24
Registration Rights Agreement.................................................... 25
PMSI Director and Officer Indemnification........................................ 26
Other Agreements................................................................. 27
Accounting Treatment................................................................ 27
Certain Federal Income Tax Consequences............................................. 27
Regulatory Approval................................................................. 29
Resale Restrictions................................................................. 30
Stock Exchange Listing.............................................................. 30
THE MERGER AGREEMENT.................................................................. 31
General............................................................................. 31
Conversion of PMSI Common Stock..................................................... 31
General.......................................................................... 31
Possible Fluctuation in the Number of Beverly Shares to be Issued and Ceiling and
Floor Provisions................................................................ 31
Conversion of PMSI Options.......................................................... 32
Exchange Procedures................................................................. 32
Representations and Warranties...................................................... 33
Certain Covenants................................................................... 33
No Solicitation of Transactions..................................................... 34
Benefit Plans....................................................................... 35
Conditions.......................................................................... 35
Termination......................................................................... 36
Termination Fee..................................................................... 37
Expenses............................................................................ 37
Amendments and Waivers.............................................................. 38
Alternative Merger Structure........................................................ 38
</TABLE>
v
<PAGE> 11
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MANAGEMENT AND OPERATIONS OF BEVERLY AFTER THE MERGER................................. 39
Management.......................................................................... 39
Operations.......................................................................... 39
DESCRIPTION OF BEVERLY CAPITAL STOCK.................................................. 41
Authorized Capital Stock............................................................ 41
Beverly Preferred Stock............................................................. 41
Beverly Common Stock................................................................ 41
Beverly Common Stock Purchase Rights................................................ 42
COMPARATIVE RIGHTS OF STOCKHOLDERS OF BEVERLY AND PMSI................................ 45
Board of Directors; Removal; Filling Vacancies...................................... 45
Beverly.......................................................................... 45
PMSI............................................................................. 45
Action by Written Consent; Special Meetings......................................... 45
Beverly.......................................................................... 45
PMSI............................................................................. 45
Business Combinations............................................................... 45
Beverly.......................................................................... 45
PMSI............................................................................. 46
DGCL............................................................................. 46
FBCA............................................................................. 46
Amendment of Certificate of Incorporation, Articles of Incorporation and Bylaws..... 47
Beverly.......................................................................... 47
PMSI............................................................................. 47
Indemnification..................................................................... 48
Beverly.......................................................................... 48
PMSI............................................................................. 48
Other Items......................................................................... 48
Beverly.......................................................................... 48
PMSI............................................................................. 48
LEGAL MATTERS......................................................................... 49
EXPERTS............................................................................... 49
APPENDIX A - Form of Agreement and Plan of Merger, as amended......................... A-1
APPENDIX B - Form of Articles of Merger............................................... B-1
APPENDIX C - Form of Certificate of Merger............................................ C-1
APPENDIX D - Form of Affiliate Agreement.............................................. D-1
APPENDIX E - Form of Registration Rights Agreement.................................... E-1
APPENDIX F - Opinion of Smith Barney Inc.............................................. F-1
APPENDIX G - PMSI Annual Report on Form 10-K for the fiscal year ended July 31, 1994,
as amended and restated April 6, 1995 on Form 10-K/A (Amendment No. 3)... G-1
APPENDIX H - PMSI Quarterly Report on Form 10-Q for the fiscal quarter ended January
31, 1995, as amended April 4, 1995 on Form 10-Q/A (Amendment No. 1)...... H-1
</TABLE>
vi
<PAGE> 12
SUMMARY
The following summary of certain information contained elsewhere in this
Prospectus/Consent Solicitation Statement (the "Prospectus/Consent Solicitation
Statement") does not purport to be complete and is qualified in its entirety by
reference to the full text, including the Appendices attached hereto. As used in
this Prospectus/Consent Solicitation Statement, "Beverly" refers to Beverly
Enterprises, Inc., a Delaware corporation, and "PMSI" refers to Pharmacy
Management Services, Inc., a Florida corporation, and unless the context
otherwise requires, such entities and their respective subsidiaries. The
information contained in this Prospectus/Consent Solicitation Statement with
respect to Beverly and its affiliates has been supplied by Beverly, and the
information with respect to PMSI and its affiliates has been supplied by PMSI.
Certain capitalized terms which are used but not defined in this summary are
defined elsewhere in this Prospectus/Consent Solicitation Statement.
BEVERLY
Beverly is the largest provider of long-term health care in the United
States. At January 31, 1995, Beverly operated 727 nursing facilities with 78,061
licensed beds. The facilities are located in 33 states and the District of
Columbia, and range in capacity from 20 to 388 beds. At January 31, 1995,
Beverly also operated 40 retirement and congregate living projects containing
2,518 units, 65 pharmacies and pharmacy-related outlets, six transitional
hospitals containing 274 beds and four home health care entities. Beverly's
facilities had average occupancy of 88.5%, 88.5% and 88.4% during the years
ended December 31, 1994, 1993 and 1992, respectively.
Beverly's principal executive offices are located at 1200 South Waldron
Road, No. 155, Fort Smith, Arkansas 72903, and its telephone number is (501)
452-6712.
Recent Developments
On April 6, 1995, Beverly announced its intention to spin off, in a
tax-free distribution to its stockholders, 80% or more of its wholly-owned
subsidiary, Pharmacy Corporation of America ("PCA"), a provider of institutional
pharmacy services to nursing homes, hospitals and other institutional customers
throughout the United States. Subject to numerous conditions and events which
have not been met or determined as of the time of this Prospectus/Consent
Solicitation Statement, the spin-off is contemplated to occur by the end of
1995. If the Merger described in this Prospectus/Consent Solicitation Statement
is consummated, stockholders of PMSI who become and remain Beverly stockholders
will participate in the distribution of PCA shares on the same basis as other
stockholders of Beverly. See "RECENT DEVELOPMENTS OF BEVERLY."
ACQUISITION
Acquisition is a wholly-owned Delaware subsidiary of Beverly whose purpose
is to facilitate Beverly's acquisition of PMSI and to be the Surviving
Corporation of the Merger.
PMSI
PMSI is a leading independent nationwide provider of medical cost
containment and managed care services to worker's compensation payors and
claimants. PMSI offers services that address essentially all of an injured
worker's health care related needs, from the time of job-related injury through
return to employment, or home care as needed. Its services include first notice
of injury reporting, case management, a preferred provider organization and
pharmacy benefit management through both a national retail pharmacy network and
home delivery of prescription drugs, medical supplies and medical equipment.
PMSI believes that these services enhance the quality of care for the injured
worker while containing the cost of care for the insurer or other payor of
worker's compensation benefits.
PMSI's executive offices are located at 3611 Queen Palm Drive, Tampa,
Florida 33619 and its telephone number is (813) 626-7788. Certain information
with respect to PMSI's business and operations is attached to this
Prospectus/Consent Solicitation Statement as Appendices G and H. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE - PMSI."
1
<PAGE> 13
THE CONSENT SOLICITATION
This Prospectus/Consent Solicitation Statement is being furnished to the
shareholders of PMSI in connection with the Consent Solicitation. During the
Consent Solicitation, the shareholders of PMSI will consider and vote by written
consent on a proposal to approve the Merger, the Merger Agreement and the
transactions contemplated thereby. See "THE CONSENT SOLICITATION." The Consent
Solicitation will commence on or about , 1995 and will expire on the
earlier of: (i) June 30, 1995; or (ii) the date that PMSI notifies its
shareholders that the Merger, the Merger Agreement and the transactions
contemplated thereby have received the affirmative vote by written consent of
the holders of a majority of the shares of PMSI Common Stock entitled to vote on
such matters, although such notification date shall not be earlier than
, 1995. The record date for the Consent Solicitation is as of the
close of business on , 1995. Voting rights for PMSI are vested in the
holders of PMSI Common Stock, with each share of PMSI Common Stock entitled to
one vote on each matter coming before the shareholders. As of April 13, 1995,
there were 9,125,507 shares of PMSI Common Stock outstanding held by
approximately 284 holders of record.
VOTE REQUIRED
The favorable vote of the holders of a majority of the outstanding shares
of PMSI Common Stock is required for approval of the Merger and the Merger
Agreement. As of , 1995, directors, executive officers and affiliates
of PMSI were the beneficial owners of approximately % of the outstanding
shares of PMSI Common Stock (excluding shares which may be acquired
upon exercise of options or other rights which are exercisable within 60 days of
, 1995). Pursuant to the terms of an agreement (the "Shareholders'
Agreement") entered into by and between Beverly and two major shareholders of
PMSI (the "Shareholders") in conjunction with the Merger Agreement, 4,534,219
shares of PMSI Common Stock beneficially owned by the Shareholders as of
, 1995, or % of the outstanding PMSI Common Stock, will be voted in favor
of the Merger, the Merger Agreement and the transactions contemplated thereby.
See "THE CONSENT SOLICITATION -- Vote Required." As part of the Shareholders'
Agreement and concurrently therewith, the Shareholders executed and delivered
Irrevocable Proxies (as defined) giving Beverly the right to vote such
Shareholders' shares of PMSI Common Stock in favor of the Merger, the Merger
Agreement and the transactions contemplated thereby, and the Merger Agreement
obligates Beverly to do so. The stockholders of Beverly are not required to and
will not vote on the Merger, the Merger Agreement or the transactions
contemplated thereby. See "THE CONSENT SOLICITATION -- Vote Required."
THE MERGER
Conversion of PMSI Common Stock. At the Effective Time (as defined) of the
Merger: (i) PMSI will be merged with and into Acquisition, with Acquisition
remaining a wholly-owned subsidiary of Beverly and with all of the assets and
liabilities of PMSI becoming assets and liabilities of Acquisition; (ii)
Acquisition will change its name to "Pharmacy Management Services, Inc.;" (iii)
each issued and outstanding share of PMSI Common Stock will be converted into
the right to receive that number of Beverly Shares equal to the quotient of
$16.50 divided by the mean arithmetic average of the daily closing sales price
per share (rounded to the nearest whole cent) of the Beverly Common Stock during
the ten (10) consecutive trading days ending on the second trading day
immediately preceding the Effective Time, as reported on the NYSE (such
arithmetic mean is hereinafter defined as the "Beverly Share Closing Price")
subject to certain ceiling and floor adjustments as further described in this
Prospectus/Consent Solicitation Statement (such quotient is hereinafter defined
as the "Exchange Ratio"); and (iv) each PMSI Option (as defined) outstanding as
of the Effective Time will be assumed by Beverly and converted into the right to
receive a number of Beverly Shares adjusted in accordance with the Option
Exchange Ratio (as defined). Fractional shares will not be issued in connection
with the Merger. A PMSI shareholder otherwise entitled to a fractional share
will be paid cash in lieu of such fractional share in an amount equal to the
product of the Beverly Share Closing Price of a share of Beverly Common Stock
multiplied by the fractional percentage of a share of Beverly Common Stock to
which such holder would otherwise be entitled. See "THE MERGER -- Interests of
Certain Persons in the Merger," "THE MERGER AGREEMENT -- Conversion of PMSI
Common Stock," "-- Conversion of PMSI Options" and "-- Exchange Procedures."
2
<PAGE> 14
Assuming that the Merger was consummated on , 1995 and that
Beverly Shares were issued pursuant to the Merger Agreement, former
PMSI shareholders would own, based upon shares of Beverly Common Stock
then outstanding and the Beverly Share Closing Price determined as of that date,
approximately % of the issued and outstanding Beverly Common Stock.
Recommendation of the Board of Directors of PMSI. THE BOARD OF DIRECTORS OF
PMSI (THE "PMSI BOARD") HAS UNANIMOUSLY APPROVED THE MERGER, THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND UNANIMOUSLY RECOMMENDS
APPROVAL THEREOF BY THE SHAREHOLDERS OF PMSI. The PMSI Board believes that the
terms of the Merger are fair to and in the best interests of PMSI and its
shareholders. For a discussion of the factors considered by the PMSI Board in
reaching its decision, see "THE MERGER -- Reasons for the Merger; Recommendation
of the PMSI Board."
Opinion of PMSI Financial Advisor. On December 19, 1994, in connection with
the evaluation of the proposed Merger Agreement by the PMSI Board, Smith Barney
Inc. ("Smith Barney") rendered an oral opinion to the PMSI Board to the effect
that, as of such date and based upon and subject to certain matters, the
consideration to be received in the Merger by the holders of PMSI Common Stock
was fair, from a financial point of view, to such holders. Smith Barney has
subsequently confirmed its oral opinion by delivery of a written opinion dated
as of the date of this Prospectus/Consent Solicitation Statement. A copy of the
full text of the written opinion of Smith Barney, which sets forth the
assumptions made, procedures followed, matters considered and limitations on the
review undertaken, is attached to this Prospectus/Consent Solicitation Statement
as Appendix F and should be read carefully in its entirety. See "THE MERGER --
Opinion of PMSI Financial Advisor."
Interests of Certain Persons in the Merger. In considering the
recommendation of the PMSI Board with respect to the Merger and the Merger
Agreement and the transactions contemplated thereby, PMSI shareholders should be
aware that certain members of the management of PMSI and the PMSI Board have
certain interests in the Merger that are in addition to the interests of PMSI
shareholders generally. See "THE MERGER -- Interests of Certain Persons in the
Merger" and "THE MERGER AGREEMENT -- Certain Covenants."
Effective Time and Closing Date of the Merger. The Merger will become
effective upon the later of (i) the date and time that the Articles of Merger
(as defined) are filed with the Department of State of Florida; or (ii) the date
and time when the Certificate of Merger (as defined) is filed with the Secretary
of State of the State of Delaware (the "Effective Time"). The closing of the
Merger, the Merger Agreement and the transactions contemplated thereby will
occur at the offices of counsel to PMSI in Tampa, Florida at 10:00 a.m., Tampa,
Florida time, or at such other place as the parties agree on the fifth (5th)
business day after all conditions precedent to the consummation of the Merger
(other than those conditions that are to be satisfied only at the closing of the
Merger Agreement) have been satisfied or, if permissible, waived by the party
entitled to satisfaction of the condition (the "Closing Date"). It is
anticipated that the Closing Date will occur concurrently with or immediately
prior to the Effective Time. Subject to the satisfaction (or waiver) of the
other conditions to the obligations of Beverly and PMSI to consummate the
Merger, the parties currently expect that the Merger will be consummated on or
about , 1995 or as soon thereafter as such conditions are satisfied.
See "THE MERGER AGREEMENT -- General."
Exchange of PMSI Stock Certificates. Upon consummation of the Merger, each
holder of a stock certificate or stock certificates representing shares of PMSI
Common Stock outstanding immediately prior to the Merger will, upon the
surrender thereof (duly endorsed, if required) to a designated exchange agent
(the "Exchange Agent"), be entitled to receive a certificate or certificates
representing the number of whole Beverly Shares into which such shares of PMSI
Common Stock will have been automatically converted as a result of the Merger.
After the consummation of the Merger, the Exchange Agent will mail a letter of
transmittal with instructions to all holders of record of PMSI Common Stock as
of the Effective Time for use in surrendering their stock certificates in
exchange for certificates representing Beverly Shares. PMSI stock certificates
should not be surrendered until the letter of transmittal and instructions are
received. See "THE MERGER AGREEMENT -- Exchange Procedures."
No Dissenters' Rights. Holders of PMSI Common Stock are not entitled to
appraisal rights in connection with the Merger. See "THE MERGER -- No
Dissenters' Rights."
3
<PAGE> 15
Accounting Treatment. The Merger will be treated as a purchase for
accounting and financial reporting purposes in accordance with Accounting
Principles Board Opinion No. 16, "Business Combinations", as amended ("APB
Opinion No. 16"). See "THE MERGER -- Accounting Treatment."
Certain Federal Income Tax Consequences. PMSI has received the written
advice of Giroir & Gregory, Professional Association, ("Giroir & Gregory")
counsel to Beverly, to the effect that no gain or loss will be recognized by
PMSI or its shareholders on the exchange of shares of PMSI Common Stock for
Beverly Common Stock (except with respect to cash received in lieu of a
fractional interest in Beverly Common Stock). See "THE MERGER -- Certain Federal
Income Tax Consequences" and "THE MERGER AGREEMENT -- Conditions."
Resale Restrictions. Beverly Shares received by PMSI shareholders in the
Merger will be freely transferable, except that Beverly Shares received by
persons who are deemed to be "affiliates" (as such term is defined in the rules
and regulations promulgated under the Securities Act) of PMSI at the time of the
Consent Solicitation may be resold by them only in certain permitted
circumstances. See "THE MERGER -- Resale Restrictions."
Stock Exchange Listing. The Merger Agreement provides that Beverly will
list on the NYSE and PSE the Beverly Shares and any shares of Beverly Common
Stock issuable upon exercise of the PMSI Options to be assumed by Beverly. See
"THE MERGER -- Stock Exchange Listing."
Conditions to the Merger. The obligations of Beverly, Acquisition and PMSI
to consummate the Merger are subject to the satisfaction of certain conditions,
including, among others: (i) obtaining the requisite stockholder approval; (ii)
PMSI's receipt of a legal opinion with respect to the tax consequences of the
Merger; (iii) the expiration of any waiting periods applicable to the
consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") or exemption therefrom; (iv) since the
date of the Merger Agreement there must not have occurred any Material Adverse
Effect (as defined in the Merger Agreement) with respect to each party thereto;
(v) the absence of any law, final non-appealable order, or a pending or
threatened action, suit or proceeding, whether completed, pending or threatened,
by a court or governmental authority, that would prohibit consummation of the
Merger; and (vi) other conditions customary in merger transactions. Any
condition precedent to the closing obligation of Beverly, Acquisition or PMSI
may be waived by such party without any notice to, or approvals by, the
shareholders of such party. Beverly and PMSI received notice of early
termination of the waiting periods under the HSR Act on February 10, 1995. See
"THE MERGER -- Certain Federal Income Tax Consequences," "THE
MERGER -- Accounting Treatment" and "THE MERGER AGREEMENT -- Conditions."
Termination. The Merger Agreement may be terminated, and the transactions
contemplated thereby abandoned by all the parties thereto, at any time on or
before the Effective Time, whether or not the Merger Agreement is approved by
PMSI shareholders, as follows: (i) by written agreement of termination among
Beverly, Acquisition and PMSI that has been approved by their respective Boards
of Directors; (ii) by Beverly or PMSI, (a) if PMSI's shareholders do not approve
the Merger, or (b) if without the fault of the terminating party, the Effective
Time has not occurred before June 30, 1995; except that Beverly will not have
the right to terminate the Merger Agreement based upon the fact that the
Effective Time has not occurred before June 30, 1995 if the Consent Solicitation
is held before June 30, 1995 and Beverly or Acquisition does not vote in favor
of the Merger all of the shares of PMSI Common Stock that Beverly or Acquisition
beneficially owns or then has the right or power to vote with respect to the
Merger pursuant to a proxy or voting agreement; (iii) by Beverly or PMSI if a
governmental authority or state or federal court in the United States adopts,
enters, or issues a final and non-appealable order, or adopts, enacts, enforces,
or holds applicable to the Merger a law, that directly or indirectly (a)
declares the Merger to be illegal; or (b) permanently enjoins, restrains or
otherwise prohibits the acquisition of PMSI by Beverly and Acquisition (or any
of their respective affiliates or subsidiaries) pursuant to the Merger; (iv) by
PMSI, if (a) it receives an Acquisition Proposal (as defined) that the Board of
Directors determines in good faith in the exercise of its fiduciary duties to
shareholders under applicable law, as determined based on an opinion of outside
legal counsel and the advice of its financial advisors, has a per share value
greater than the price per share then being offered for the shares of PMSI
Common Stock pursuant to the Merger Agreement, and (b) the value being offered
for the shares of PMSI
4
<PAGE> 16
Common Stock pursuant to the Merger Agreement, as reasonably determined by the
PMSI Board of Directors, is not increased within three (3) business days after
the first announcement of such Acquisition Proposal to be equal to or greater
than that being offered pursuant to such Acquisition Proposal; (v) by PMSI, (a)
if the Beverly Share Closing Price is lower than $10.00 or (b) if Smith Barney,
Inc. withdraws its written opinion as of the date of the Merger Agreement or as
of the date of the Prospectus/Consent Solicitation Statement to the effect that,
based on the assumptions and qualifications stated in that opinion, the
consideration to be received by the holders of the shares of PMSI Common Stock
pursuant to the Merger is fair to them from a financial point of view (the
"Fairness Opinion"); (vi) by PMSI, if Beverly or Acquisition fails to perform in
any material respect any obligation required by the Merger Agreement to be
performed by them (or either of them) on or before the effective date of the
termination; (vii) by Beverly, if PMSI fails to perform in any material respect
any obligation required by the Merger Agreement to be performed by it on or
before the effective date of the termination; (viii) by Beverly, if PMSI either
(a) amends, modifies, or withdraws in any material respect adverse to Beverly or
Acquisition its approval or recommendation of the Merger and the Merger
Agreement, or (b) recommends to its shareholders any Acquisition Proposal of
another person; or (ix) by Beverly, if a governmental authority or a state or
federal court in the United States adopts, enters or issues a final and
non-appealable order, or adopts, enacts, enforces, or holds applicable to the
Merger, a law that directly or indirectly (a) prohibits the ownership or
operation by Beverly and Acquisition (or any of its affiliates or subsidiaries)
of all or a significant portion of the assets, business or properties of PMSI
and its subsidiaries, taken as a whole, or (b) compels Acquisition (or any of
its affiliates or subsidiaries) to segregate or dispose of all or a significant
portion of the assets, business or properties of PMSI and its subsidiaries,
taken as a whole. See "THE MERGER AGREEMENT -- Termination."
Termination Fee. If the Merger Agreement is terminated pursuant to either
clause (iv) or clause (viii) as set forth above, or if PMSI receives an
Acquisition Proposal before the Merger Agreement is terminated, Smith Barney
subsequently withdraws its Fairness Opinion, PMSI thereafter terminates the
Merger Agreement pursuant to clause (v) as set forth above and PMSI accepts any
Acquisition Proposal within one (1) year after the effective date of its
termination of the Merger Agreement, then in any such case, PMSI shall promptly,
but in no event later than ten (10) business days after the effective date of
the termination or the date when PMSI accepts the Acquisition Proposal (as the
case may be) pay to Beverly a termination fee in cash of $5,000,000, in
satisfaction and full settlement of all liabilities and obligations of PMSI to
Beverly and Acquisition under the Merger Agreement. Payment by PMSI of the
foregoing fee will relieve it of any further liability for any breach of the
Merger Agreement. Notwithstanding the foregoing, PMSI will not be obligated to
pay that fee to Beverly if Beverly or Acquisition is in breach of the Merger
Agreement in any material respect at the time the Merger Agreement is
terminated. See "THE MERGER AGREEMENT -- Termination Fee."
CERTAIN CONSIDERATIONS
Approximately 80% of Beverly's net operating revenues were derived from
federal and state health care programs for the years ended December 31, 1994 and
1993. These programs are highly regulated and subject to budgetary constraints
and statutory and regulatory changes. Beverly's operations could be adversely
affected by such regulatory changes. Additionally, in the past Beverly has
experienced shortages in the availability of trained professionals to staff its
facilities and increases in its labor costs, and Beverly expects labor costs to
continue to increase. See "CERTAIN CONSIDERATIONS."
Certain provisions of Beverly's Certificate of Incorporation and Bylaws
might make an unsolicited acquisition of control of Beverly more difficult or
expensive. Beverly has also adopted a stockholder rights plan which might also
make an unsolicited acquisition of Beverly more difficult or expensive. See
"CERTAIN CONSIDERATIONS" and "DESCRIPTION OF BEVERLY CAPITAL STOCK -- Beverly
Common Stock Purchase Rights."
If the Merger is not consummated, both Beverly and PMSI will continue to
operate as independent health care companies in substantially the same manner as
Beverly and PMSI have prior and subsequent to entering into the Merger
Agreement. In addition, Beverly and PMSI may decide to continue to seek to enter
into alternative transactions similar to those contemplated by the Merger
Agreement.
5
<PAGE> 17
MARKETS AND MARKET PRICES
Beverly. Beverly Common Stock is listed for trading on the NYSE and the
PSE. The table below sets forth, for the periods indicated, the range of high
and low sales prices of Beverly Common Stock on the NYSE composite tape.
Beverly's year end is December 31.
<TABLE>
<CAPTION>
PRICES
--------------------
HIGH LOW
---- ----
<S> <C> <C>
1993
First Quarter........................................ $14 3/4 $ 9 1/2
Second Quarter....................................... 12 7/8 10 3/8
Third Quarter........................................ 13 3/8 9 1/4
Fourth Quarter....................................... 13 3/4 10
1994
First Quarter........................................ $16 1/8 $12 3/8
Second Quarter....................................... 14 1/4 12 1/8
Third Quarter........................................ 15 5/8 11 3/4
Fourth Quarter....................................... 15 7/8 13 3/4
1995
First Quarter........................................ $14 3/4 $12 1/2
Second Quarter (through April 13).................... 16 1/8 14 1/4
</TABLE>
Beverly is subject to certain restrictions under its banking arrangements
related to the payment of cash dividends on its common stock. During 1994, 1993
and 1992, no cash dividends were paid on Beverly's Common Stock and no future
cash dividends are currently planned.
At April 13, 1995, there were 7,688 record holders of Beverly Common Stock.
PMSI. PMSI Common Stock is traded on the Nasdaq National Market ("Nasdaq")
under the symbol PMSV. The table below sets forth, for the periods indicated,
the range of high and low bid prices of PMSI's Common Stock as reported by
Nasdaq. PMSI's fiscal year end is July 31.
<TABLE>
<CAPTION>
PRICES
-------------------
HIGH LOW
---- ----
<S> <C> <C>
1993
First Quarter........................................ $ 9 $ 6 1/2
Second Quarter....................................... 9 1/2 6 1/4
Third Quarter........................................ 8 3/4 4 3/4
Fourth Quarter....................................... 7 1/2 5
1994
First Quarter........................................ $ 9 $ 6 3/4
Second Quarter....................................... 8 1/4 6
Third Quarter........................................ 9 6 1/4
Fourth Quarter....................................... 10 1/2 6 1/2
1995
First Quarter........................................ $16 1/2 $ 9 1/2
Second Quarter....................................... 18 1/2 14 3/8
Third Quarter (through April 13)..................... 16 15 1/2
</TABLE>
No cash dividends were paid on PMSI Common Stock during fiscal years 1994
and 1993 and none are expected to be paid during fiscal year 1995. PMSI is not
subject to any restrictions with respect to the payment of cash dividends,
although its bank credit agreement requires it to maintain a minimum tangible
net worth at the end of each fiscal year. As of July 31, 1994, the required
minimum tangible net worth was $14.0 million, and PMSI's tangible net worth,
calculated in accordance with the bank credit agreement, was $21.4 million. The
required minimum tangible net worth of PMSI as of July 31, 1995 is $15.0
million.
At April 13, 1995, there were 284 record holders of PMSI Common Stock.
6
<PAGE> 18
BEVERLY SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated statement of operations data for each
of the five years in the period ended December 31, 1994 and selected
consolidated balance sheet data as of December 31, 1994, 1993, 1992, 1991 and
1990 are derived from consolidated financial statements of Beverly, adjusted to
give effect to a merger in September, 1994 between Beverly and American
Transitional Hospitals, Inc. The data should be read in conjunction with the
consolidated financial statements, related notes, other financial information
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference in this Prospectus/Consent Solicitation
Statement. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "AVAILABLE
INFORMATION."
<TABLE>
<CAPTION>
AT OR FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net operating revenues............................. $ 2,969,239 $ 2,884,451 $ 2,607,756 $ 2,308,307 $ 2,117,868
Interest income.................................... 14,578 15,269 14,502 20,048 24,455
----------- ----------- ----------- ----------- -----------
Total revenues................................. 2,983,817 2,899,720 2,622,258 2,328,355 2,142,323
Costs and expenses:
Operating and administrative:
Wages and related.............................. 1,600,580 1,593,410 1,486,191 1,358,639 1,258,758
Other.......................................... 1,114,916 1,069,536 921,750 770,748 712,586
Interest......................................... 64,792 66,196 70,943 79,243 86,991
Depreciation and amortization.................... 88,734 82,938 80,226 78,057 63,566
Restructuring costs.............................. -- -- 57,000 -- --
----------- ----------- ----------- ----------- -----------
Total costs and expenses....................... 2,869,022 2,812,080 2,616,110 2,286,687 2,121,901
----------- ----------- ----------- ----------- -----------
Income before provision for income taxes,
extraordinary charge and cumulative effect of
change in accounting for income taxes............ 114,795 87,640 6,148 41,668 20,422
Provision for income taxes......................... 37,882 29,684 4,203 12,430 7,279
----------- ----------- ----------- ----------- -----------
Income before extraordinary charge and cumulative
effect of change in accounting for income
taxes............................................ 76,913 57,956 1,945 29,238 13,143
Extraordinary charge, net of income taxes of $1,188
in 1994, $1,155 in 1993 and $5,415 in 1992....... (2,412) (2,345) (8,835) -- --
Cumulative effect of change in accounting for
income taxes..................................... -- -- (5,454) -- --
----------- ----------- ----------- ----------- -----------
Net income (loss).................................. $ 74,501 $ 55,611 $ (12,344) $ 29,238 $ 13,143
=========== =========== =========== =========== ===========
Net income (loss) applicable to common shares...... $ 66,251 $ 31,173 $ (13,344) $ 29,238 $ 12,143
=========== =========== =========== =========== ===========
Income (loss) per share of common stock:
Before redemption premium on Series A preferred
stock, extraordinary charge and cumulative
effect of change in accounting for income
taxes.......................................... $ .79 $ .66 $ .01 $ .36 $ .18
Redemption premium on Series A preferred stock... -- (.25) -- -- --
----------- ----------- ----------- ----------- -----------
Before extraordinary charge and cumulative effect
of
change in accounting for income taxes.......... .79 .41 .01 .36 .18
Extraordinary charge............................. (.03) (.03) (.11) -- --
Cumulative effect of change in accounting for
income taxes................................... -- -- (.07) -- --
----------- ----------- ----------- ----------- -----------
Net income (loss)................................ $ .76 $ .38 $ (.17) $ .36 $ .18
=========== =========== =========== =========== ===========
Shares used to compute per share amounts........... 87,087,000 81,207,000 77,685,000 81,218,000 66,151,000
CONSOLIDATED BALANCE SHEET DATA:
Total assets....................................... $ 2,322,578 $ 2,000,804 $ 1,859,361 $ 1,677,851 $ 1,625,781
Current portion of long-term obligations........... $ 60,199 $ 43,125 $ 30,466 $ 35,846 $ 50,918
Long-term obligations, excluding current portion... $ 918,018 $ 706,917 $ 712,896 $ 629,245 $ 694,689
Stockholders' equity............................... $ 827,244 $ 742,862 $ 593,505 $ 600,443 $ 499,490
OTHER DATA:
Patient days....................................... 26,766,000 29,041,000 29,341,000 29,334,000 30,139,000
Average occupancy percentage....................... 88.5% 88.5% 88.4% 88.1% 87.3%
Number of nursing home beds........................ 78,058 85,001 89,298 90,228 91,414
Number of employees................................ 82,000 89,000 93,000 93,000 92,000
</TABLE>
7
<PAGE> 19
PMSI SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated statement of operations data for each
of the five years in the period ended July 31, 1994 and selected consolidated
balance sheet data as of July 31, 1994, 1993, 1992, 1991 and 1990 are derived
from consolidated financial statements of PMSI. The selected consolidated
statement of operations data for the six months ended January 31, 1995 and 1994
and the selected consolidated balance sheet data as of January 31, 1995 and 1994
are derived from PMSI's unaudited condensed consolidated financial statements.
The unaudited condensed consolidated financial statements include adjustments,
consisting of normal recurring accruals, which PMSI considers necessary for a
fair presentation of the financial position and the results of operations for
these periods. Operating results for the six months ended January 31, 1995 are
not necessarily indicative of the results that may be expected for the entire
year ending July 31, 1995. The data should be read in conjunction with the
consolidated financial statements, related notes and other financial information
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," included or incorporated by reference in this Prospectus/Consent
Solicitation Statement. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE"
and "AVAILABLE INFORMATION."
<TABLE>
<CAPTION>
AT OR FOR THE SIX
MONTHS ENDED
JANUARY 31, AT OR FOR THE YEARS ENDED JULY 31,
------------------- ----------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------- ------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net revenues(1).......................... $60,512 $55,467 $113,149 $109,934 $106,116 $81,686 $55,681
Gross margin............................. 18,606 15,509 32,440 30,677 29,692 20,704 13,573
Operating income (loss).................. 4,367 2,999 7,137 5,566 (1,376) 3,209 3,340
Income (loss) before income taxes........ 4,588 2,678 6,582 4,846 (2,771) 2,976 2,929
Net income (loss)........................ 2,416 1,584 4,256 2,782 (2,011) 1,893 1,969
Per common share:
Net income (loss)...................... $ .26 $ .17 $ .47 $ .30 $ (.25) $ .21 $ .27
Cash dividends......................... -- -- -- -- -- -- --
Weighted average number of common shares
outstanding............................ 8,998 8,683 8,721 8,692 8,725 8,795 7,161
CONSOLIDATED BALANCE SHEET DATA:
Total assets............................. $54,437 $54,353 $ 53,962 $ 59,700 $ 61,305 $59,258 $32,672
Trade receivables, net................... 20,418 19,904 20,690 18,274 20,810 20,506 11,409
Inventories.............................. 4,107 4,348 3,487 5,118 7,766 12,163 10,177
Working capital.......................... 15,934 10,588 16,747 12,969 21,554 23,986 26,661
Current maturities of
long-term debt......................... 755 6,898 789 4,258 3,344 1,374 --
Long-term debt........................... 744 3,740 5,793 11,695 18,246 15,645 --
Redeemable convertible preferred stock... -- 1,200 1,200 1,200 1,200 1,200 --
Shareholders' equity..................... 42,026 34,028 37,091 32,480 29,966 32,301 28,802
</TABLE>
- ---------------
(1) Net revenues for fiscal years 1993, 1992 and 1991 were favorably affected by
revenues from Technical Medical Devices, Inc., a subsidiary that was sold on
November 15, 1992. Net revenues for fiscal years 1993, 1992 and 1991
included $2.8 million, $10.3 million and $9.1 million, respectively, of
revenues from Technical Medical Devices, Inc.
8
<PAGE> 20
SELECTED UNAUDITED PRO FORMA COMBINED PER SHARE DATA
The following table sets forth comparative per common share book value and
net income from continuing operations data of (a) Beverly and PMSI; (b) Beverly
pro forma combined to give effect to the Merger as if the Merger had occurred on
January 1, 1994 and (c) the PMSI equivalent pro forma of one share of PMSI
Common Stock. The following information should be read in conjunction with the
historical financial statements of Beverly and PMSI incorporated by reference in
this Prospectus/Consent Solicitation Statement or appearing elsewhere herein and
the selected consolidated financial data appearing elsewhere herein. See
"AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "THE
SUMMARY -- Beverly Selected Consolidated Financial Data," "THE SUMMARY -- PMSI
Selected Consolidated Financial Data" and PMSI CONSOLIDATED FINANCIAL
STATEMENTS. The following data is not necessarily indicative of the results
which actually would have been obtained if the Merger had been consummated in
the past or of results which may be obtained in the future.
<TABLE>
<CAPTION>
PMSI
BEVERLY EQUIVALENT
BEVERLY PMSI PRO FORMA PRO
HISTORICAL HISTORICAL COMBINED(2)(5) FORMA(3)(5)
---------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Book value per common share:
1994(1).......................................... $ 7.91 $ 4.61 $ 8.58 $ 10.11
Income per common and common equivalent share from
continuing operations:
Year ended 1994(1)............................... $ .79 $ .56 $ .73 $ .86
Cash dividends declared per share:
Year ended 1994.................................. -- -- -- --
Market value of securities on December 23,
1994(4).......................................... $14.25 $ 17 N/A $ 14.42
</TABLE>
- ---------------
(1) Beverly historical data is as of or for the year ended December 31, 1994.
PMSI historical data is as of or for the twelve months ended January 31,
1995. The Beverly Pro Forma Combined per share data reflects the
combination of such amounts, adjusted for the purchase, assuming a
conversion ratio of 1.17857 Beverly Shares ($16.50/$14) for each share of
PMSI Common Stock outstanding.
(2) The unaudited Beverly pro forma combined book value per share is based on
the outstanding shares of Beverly Common Stock at the end of 1994 plus the
Beverly Shares to be issued in connection with the Merger, assuming a
conversion ratio of 1.17857 Beverly Shares for each share of PMSI Common
Stock outstanding. The unaudited Beverly pro forma combined income per
common and common equivalent share from continuing operations is based on
the weighted average number of shares of Beverly Common Stock outstanding
plus the weighted average outstanding shares of PMSI Common Stock times the
assumed conversion ratio of 1.17857.
(3) PMSI Equivalent Pro Forma book value and income per share data is calculated
by multiplying Beverly Pro Forma Combined per share data by 1.17857, which
is the assumed conversion ratio. PMSI Equivalent Pro Forma market value is
calculated by dividing PMSI's market value on December 23, 1994 by the
assumed conversion ratio of 1.17857.
(4) The last trading day preceding the public announcement of the Merger.
9
<PAGE> 21
(5) The number of Beverly Shares to be issued upon consummation of the Merger
could range from 8,310,671 to 14,959,209 shares, depending upon the Beverly
Share Closing Price. In addition, a $1 change in the market value of
Beverly Common Stock could significantly impact the Beverly Shares to be
issued to consummate the Merger and the pro forma combined and equivalent
pro forma data. Summarized below are the book value per common share and
income per common and common equivalent share from continuing operations
data for 1994 on a pro forma combined and equivalent pro forma basis to
reflect certain hypothetical changes in the market value of Beverly Common
Stock. See "The Merger Agreement -- Conversion of PMSI Common Stock."
<TABLE>
<CAPTION>
BEVERLY PMSI
PRO FORMA EQUIVALENT
COMBINED PRO FORMA
--------- ---------
<S> <C> <C>
Book value per common share assuming a Beverly Share Closing
Price of:
$12.25........................................................ $8.45 $ 11.38
$13.00........................................................ 8.51 10.80
$15.00........................................................ 8.65 9.51
$18.00........................................................ 8.80 8.07
Income per common and common equivalent share from continuing
operations assuming a Beverly Share Closing Price of:
$12.25........................................................ $ .72 $ .97
$13.00........................................................ .72 .91
$15.00........................................................ .73 .80
$18.00........................................................ .75 .69
</TABLE>
10
<PAGE> 22
RECENT DEVELOPMENTS OF BEVERLY
On April 6, 1995 Beverly announced that its Board of Directors had on that
date approved a plan to spin off to Beverly's stockholders 80% or more of the
common stock of Pharmacy Corporation of America ("PCA"), a wholly-owned
subsidiary of Beverly which provides institutional pharmacy services to nursing
homes, hospitals and other institutional customers throughout the United States.
The spin-off is intended to be structured as a tax-free distribution to
Beverly's stockholders under Section 355 of the Internal Revenue Code of 1986,
as amended. The spin-off is subject to numerous conditions and events which have
not been met or determined as of the date of this Prospectus/Consent
Solicitation Statement, including obtaining the contemplated fundings described
below, obtaining regulatory and other third party approvals and confirmation by
independent advisors of the intended tax treatment of the transaction. Beverly
does not presently intend to seek a ruling from the Internal Revenue Service
concerning the proposed spin-off. As of the date of this Prospectus/Consent
Solicitation Statement, no conversion or distribution ratio has been established
by Beverly with respect to a specific number of shares of common stock of PCA to
which each Beverly stockholder would be entitled to receive in the distribution.
Beverly anticipates that the record date for determining those stockholders of
Beverly who will be entitled to participate in the distribution will occur by
the end of 1995, and accordingly, if the Merger between Acquisition and PMSI
described in this Prospectus/Consent Solicitation Statement is consummated
within the time contemplated by the Merger Agreement, those persons who are
presently PMSI stockholders and who become and remain Beverly stockholders will
be entitled to participate in the distribution on the same basis as other
Beverly stockholders.
In connection with the proposed spin-off transaction, on April 13, 1995
Beverly announced that it was also contemplating a public offering of up to
19.9% of PCA's common stock prior to the distribution of the remainder of such
stock to Beverly's stockholders. Beverly also announced that PCA may borrow up
to $275,000,000 from banks and other institutional lenders. Neither the amount
of proceeds from any future public offering of PCA's common stock nor the amount
or terms of any anticipated PCA indebtedness is determinable at this time. It is
expected, however, that substantially all of PCA's assets would be pledged to
secure the borrowings. Although no commitments have been sought or received by
Beverly or PCA as of the date of this Prospectus/Consent Solicitation Statement,
Beverly has held informal discussions with various prospective lenders and has
received informal indications from them that the financing appears feasible.
Proceeds from PCA's borrowings and the public offering of PCA's common stock, if
successfully completed, would be used to repay intercompany indebtedness to
Beverly, with any remaining proceeds to be paid to Beverly as a dividend. No
determination has been made by Beverly as to specific use of any cash proceeds
received by it from these proposed transactions. The offering of PCA's common
stock would be subject to customary regulatory and lender approvals, as well as
market conditions at the time, and the proposed PCA borrowings would be subject
to the execution of definitive agreements, the approval of Beverly's and PCA's
respective Boards of Directors, and other conditions customary in similar
transactions. There can be no assurances, however, that a public offering of
PCA's common stock will be successfully completed or that PCA will be able to
obtain any funds through borrowings with third parties. Because of the material
uncertainties associated with the proposed spin-off of PCA and related
transactions as described above, there can be no assurances that any of these
transactions will be concluded or, if ultimately concluded, will not be
materially different from those described above.
11
<PAGE> 23
CERTAIN CONSIDERATIONS
GOVERNMENTAL REGULATION AND REIMBURSEMENT
Approximately 80% of Beverly's net operating revenues were derived from
federal and state health care programs for the years ended December 31, 1994 and
1993. These programs are highly regulated and are subject to budgetary
constraints and other developments. Beverly's operations could be adversely
affected by regulatory developments such as mandatory increases in the scope and
quality of care to be afforded nursing home residents and revisions in licensing
and certification standards. Furthermore, governmental reimbursement programs
are subject to statutory and regulatory changes, retroactive rate adjustments,
administrative rulings and governmental funding restrictions, all of which may
materially increase or decrease the rate of program payments to Beverly for its
services. There can be no assurance that payments under governmental and private
third party payor programs will remain at levels comparable to present levels or
will, in the future, be sufficient to cover the costs allocable to patients
eligible for reimbursement pursuant to such programs. In addition, there can be
no assurance that facilities owned, leased or managed by Beverly, or the
provision of services and supplies by Beverly, now or in the future, will
initially meet or continue to meet the requirements for participation in such
programs. Beverly could be adversely affected by the continuing efforts of
governmental and private third party payors to contain the amount of
reimbursement for health care services. In an attempt to reduce federal and
state expenditures, there have been, and Beverly expects that there will
continue to be, a number of proposals to limit Medicaid and Medicare
reimbursement for health care services.
Health care system reform continues to be a high priority for the federal
and certain state governments. Although no comprehensive health care reform
legislation has been implemented, the active discussion and issues raised by the
Clinton Administration, Congress and various other groups have impacted the
health care delivery system. Pressures to contain costs and cover a larger
percentage of the population have heightened public awareness and scrutiny over
the health care market. Reform proposals still under consideration include
insurance market reforms to increase the availability of group health insurance
to small businesses, requirements that all businesses offer health insurance
coverage to their employees and the creation of a single governmental health
insurance plan that would cover all citizens. These proposals, as well as
industry and other groups' recommendations, will likely impact the form and
content of any future health care reform legislation. As a result, Beverly is
unable to predict the type of legislation or regulations that may be adopted and
their impact on Beverly. There can be no assurance that any health care reform
or other changes within the health care market will not adversely affect
Beverly's future financial position, results of operations or cash flows.
As a general matter, increases in Beverly's operating costs result in
higher patient rates under Medicaid programs in subsequent periods. However,
Beverly's results of operations will continue to be affected by the time lag in
most states between increases in reimbursable costs and the receipt of related
reimbursement rate increases. Medicaid rate increases, adjusted for inflation,
are generally based upon changes in costs for a full calendar year period. The
time lag before such costs are reflected in permitted rates varies from state to
state, with a substantial portion of the increases taking effect up to 18 months
after the related cost increases.
INCREASED LABOR COSTS AND AVAILABILITY OF PERSONNEL
In recent years, Beverly has experienced increases in its labor costs
primarily due to higher wages and greater benefits intended to attract and
retain qualified personnel, increased staffing levels in its nursing facilities
due to greater patient acuity and the hiring of therapists on staff. Beverly
expects labor costs to continue to increase in the future; however, it is
anticipated that any increase in costs will generally result in higher patient
rates in subsequent periods, subject to the time lag in most states, of up to 18
months, between increases in reimbursable costs and the receipt of related
reimbursement rate increases.
Currently, Beverly is not experiencing a nursing shortage. Periodically in
the past, however, the health care industry, including Beverly's long-term care
facilities, has experienced a shortage of nurses to staff health care
operations. Beverly competes with other health care providers for nursing
personnel and a nursing shortage could force Beverly to pay higher salaries and
make greater use of registry (temporary nursing and
12
<PAGE> 24
related personnel). A lack of qualified nursing personnel might also result in
reduced census or require Beverly to admit patients requiring a lower level of
care, both of which could adversely affect operating results.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Certificate of Incorporation and Bylaws of
Beverly might make an unsolicited acquisition of control of Beverly more
difficult or expensive. Furthermore, Beverly has adopted a stockholder rights
plan which also might make an unsolicited acquisition of Beverly more difficult
or expensive. See "DESCRIPTION OF BEVERLY CAPITAL STOCK -- Beverly Common Stock
Purchase Rights."
13
<PAGE> 25
THE CONSENT SOLICITATION
MATTERS TO BE VOTED UPON BY THE PMSI SHAREHOLDERS
During the Consent Solicitation, the holders of shares of PMSI Common Stock
will be asked to consider and vote by written consent upon a proposal to approve
the Merger, the Merger Agreement and the transactions contemplated thereby.
Shareholders of PMSI are requested to complete, date, sign and promptly return
the accompanying form of consent in the enclosed envelope.
THE PMSI BOARD HAS ADOPTED THE PLAN OF MERGER AS SET FORTH IN THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT PMSI SHAREHOLDERS VOTE FOR APPROVAL
AND ADOPTION OF THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY BY PROMPTLY EXECUTING AND DELIVERING THE ENCLOSED WRITTEN
CONSENT.
TERMINATION DATE
The Consent Solicitation will commence on or about , 1995 and
will expire on the earlier of: (i) June 30, 1995; or (ii) the date that PMSI
notifies its shareholders that the Merger, the Merger Agreement and the
transactions contemplated thereby have received the affirmative vote by written
consent of the holders of a majority of the shares of PMSI Common Stock entitled
to vote on such matters, although such notification date shall not be earlier
than , 1995.
RECORD DATE
Only holders of record of PMSI Common Stock at the close of business on
, 1995 (the "Record Date") will be entitled to receive notice of
the Consent Solicitation and to vote with respect to the Merger, the Merger
Agreement and the transactions contemplated thereby.
VOTE REQUIRED
General. The Merger Agreement will require the affirmative vote of a
majority of the outstanding shares of PMSI Common Stock. Each share of PMSI
Common Stock is entitled to one vote. AS OF THE RECORD DATE, BEVERLY WILL HAVE
THE RIGHT TO VOTE 4,534,219 SHARES OF PMSI COMMON STOCK REPRESENTING % OF
THE OUTSTANDING SHARES OF PMSI COMMON STOCK. BEVERLY IS REQUIRED TO VOTE ALL
SUCH SHARES IN FAVOR OF THE MERGER PROPOSAL. See "-- Shareholders' Agreement"
and "-- Irrevocable Proxies." On the Record Date, PMSI directors, executive
officers and affiliates may be deemed to beneficially own shares of
PMSI Common Stock (excluding shares which may be acquired upon
exercise of options and other rights that are exercisable within sixty (60) days
of , 1995) or approximately % of the then outstanding shares
of PMSI Common Stock. The directors, executive officers and affiliates of PMSI
have indicated that they intend to vote their shares for approval of the Merger
and the Merger Agreement.
Shareholders' Agreement. Concurrently with the execution of the Merger
Agreement on December 26, 1994, the Cecil S. Harrell Revocable Trust, dated
October 1, 1990 (the "CSH Trust"), which as of , 1995 owned
3,774,169 shares or % of PMSI Common Stock, and the James N. Harrell
Revocable Trust, dated June 15, 1990 (the "JNH Trust" and together with the CSH
Trust, the "Shareholders"), which as of , 1995 owned 760,050
shares or % of PMSI Common Stock, entered into the Shareholders' Agreement
with Beverly, which owns 100 shares of PMSI Common Stock. The execution of the
Shareholders' Agreement by the Shareholders was requested by Beverly as a
condition precedent to its execution of the Merger Agreement. Pursuant to the
Shareholders' Agreement, the Shareholders have agreed to vote their shares of
PMSI Common Stock in favor of the Merger, the Merger Agreement and the
transactions contemplated thereby. In addition, the Shareholders have agreed
that they will not, without the prior written consent of Beverly (which consent
must not be unreasonably withheld), sell or otherwise transfer their shares of
PMSI Common Stock. As of the date of the Shareholders' Agreement, each
Shareholder has also delivered Irrevocable Proxies to Beverly, as described
below.
14
<PAGE> 26
The Shareholders' Agreement terminates on the later of: (i) consummation of
the Merger; (ii) termination of the Merger Agreement; (iii) the 180th day after
termination of the Merger Agreement by PMSI if (a) the Effective Time of the
Merger has not occurred before June 30, 1995, (b) PMSI receives an Acquisition
Proposal that the PMSI Board of Directors determines in good faith in the
exercise of its fiduciary duties under applicable law has a per share value
greater than the price per share offered by the Merger Agreement and the value
being offered by Beverly is not increased within three (3) business days after
the first announcement of the Acquisition Proposal, or (c) Smith Barney
withdraws its opinion as of the execution date of the Merger Agreement or as of
the date of this Prospectus/Consent Solicitation Statement to the effect that
the consideration to be received by holders of PMSI Common Stock is fair from a
financial point of view; or (iv) the 180th day after termination of the Merger
Agreement by Beverly if (a) PMSI fails to perform in any material respect any
obligation required by the Merger Agreement on or before the Effective Time of
the Merger Agreement or (b) PMSI amends, modifies or withdraws in any material
respect adverse to Beverly or Acquisition its approval or recommendation of the
Merger Agreement or the Merger or recommends to the PMSI shareholders any
Acquisition Proposal. Mr. Cecil S. Harrell, who is a co-trustee of the CSH
Trust, is also the Chairman, Chief Executive Officer and a director of PMSI. Mr.
Bertram T. Martin, Jr., who is a co-trustee of the CSH Trust, is also the
President, Chief Operating Officer and a director of PMSI. Mr. James N. Harrell,
who is the trustee of the JNH Trust, is the brother of Cecil S. Harrell.
Irrevocable Proxies. Pursuant to the Shareholders' Agreement and
concurrently with the execution thereof, each of the Shareholders executed and
delivered a Power of Attorney and Irrevocable Proxy (the "Irrevocable Proxies")
giving Beverly the power to vote all of the shares of PMSI Common Stock owned by
the Shareholders: (i) in favor of the Merger, the Merger Agreement and the
transactions contemplated thereby; (ii) in opposition to any Acquisition
Proposal and (iii) in opposition to any proposal to amend PMSI's Articles of
Incorporation. The Irrevocable Proxies do not confer upon Beverly any right or
power to vote, consent, abstain or withhold authority to vote the shares of PMSI
Common Stock owned by the Shareholders as to any matter not enumerated above,
including routine corporate actions and proceedings involving the election of
directors, ratification of independent public accountants and the adoption,
amendment or ratification of any benefit or compensation plan for officers,
directors, or employees of PMSI or any of its subsidiaries. The Irrevocable
Proxies are coupled with an interest, are irrevocable and have been granted in
consideration for the Merger Agreement and the Shareholders' Agreement. The
Irrevocable Proxies terminate on the date that the Shareholders' Agreement
terminates as described above. As required by the Merger Agreement, Beverly will
vote in favor of the Merger, the Merger Agreement and the transactions
contemplated thereby all the shares of PMSI Common Stock that it has the right
to vote with respect thereto (including the PMSI shares subject to the
Irrevocable Proxies) and will execute and deliver to PMSI its written consent as
soon as the Consent Solicitation begins.
Exemptions From Certain Provisions of the FBCA. The Board of Directors of
PMSI has amended its bylaws to provide that Section 607.0902 of the Florida
Business Corporation Act (the "FBCA"), informally known as the "Control Share
Acquisition Statute," does not apply to acquisitions of PMSI's Common Stock
including the acquisitions contemplated by the Merger, the Merger Agreement, the
Shareholders' Agreement, the Irrevocable Proxies and the transactions
contemplated thereby. Further, the Merger and the execution of the Merger
Agreement, the Shareholders' Agreement and the Irrevocable Proxies were approved
by a majority of PMSI's "disinterested" directors. Therefore, Section 607.0901
of the FBCA, informally known as the "Affiliated Transactions Statute," will not
apply to these transactions. See "COMPARATIVE RIGHTS OF STOCKHOLDERS OF BEVERLY
AND PMSI -- Business Combinations."
REVOCATION OF CONSENTS
The FBCA provides that a written consent will not be effective to approve
the Merger and the Merger Agreement unless, within sixty (60) days from the date
of the earliest dated consent, written consents signed by the holders of a
majority of the outstanding shares of PMSI Common Stock have been delivered to
PMSI in the manner required by the FBCA. Any shareholder may revoke a written
consent at any time prior to the date when PMSI receives the required number of
consents to approve the Merger and the Merger Agreement, by delivering to David
L. Redmond, Secretary of PMSI, at 8611 Queen Palm Drive, Tampa, Florida 33619, a
15
<PAGE> 27
written or facsimile transmission notice of revocation. Notice of revocation
must contain a description of the PMSI Common Stock to which it relates
(including the certificate numbers(s)) and be signed by the PMSI shareholder in
the same manner as the consent was executed. Any revoked consent will be deemed
not to have been validly given for the purpose of the Consent Solicitation
unless the revoked consent is validly redelivered. Properly revoked consents may
be redelivered at any time prior to the termination of the Consent Solicitation.
SOLICITATION OF WRITTEN CONSENTS
PMSI will bear the cost of the Consent Solicitation with respect to the
Merger, the Merger Agreement and the transactions contemplated thereby, except
that Beverly will bear the cost of printing and mailing this Prospectus/Consent
Solicitation Statement. In addition to solicitation by mail, the directors,
officers and employees of PMSI and their respective subsidiaries may solicit
consents from PMSI shareholders by telephone or telegram or in person. Such
persons will not be additionally compensated, but will be reimbursed for
reasonable out-of-pocket expenses incurred in connection with such solicitation.
Arrangements will also be made with brokerage firms, nominees, fiduciaries and
other custodians for the forwarding of solicitation materials to the beneficial
owners of shares held of record by such persons, and PMSI will reimburse such
persons for their reasonable out-of-pocket expenses in connection therewith.
NO DISSENTERS' RIGHTS
Pursuant to the FBCA, no holder of PMSI Common Stock will have any
dissenters' rights in connection with, or as a result of, the matters to be
acted upon in conjunction with the Consent Solicitation.
PMSI SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR WRITTEN
CONSENTS.
16
<PAGE> 28
THE MERGER
GENERAL
The Merger Agreement provides for a business combination between Beverly
and PMSI in which PMSI would be merged with and into Acquisition, a wholly-owned
subsidiary of Beverly, and the holders of PMSI Common Stock would be issued
Beverly Shares in a transaction to be treated as a purchase for accounting
purposes in accordance with APB Opinion No. 16 and as a tax-free reorganization
for federal income tax purposes. As a result of the Merger, PMSI would become a
wholly-owned subsidiary of Beverly. The discussion in this Prospectus/Consent
Solicitation Statement of the Merger and the description of the Merger's
principal terms are subject to and qualified in their entirety by reference to
the Merger Agreement, a copy of which is attached to this Prospectus/Consent
Solicitation Statement as Appendix A and which is incorporated herein by
reference.
BACKGROUND OF THE MERGER
In early June 1994, the PMSI Board decided to consider a possible sale or
merger of PMSI and to engage a financial advisor to assist it in doing so. This
action was prompted by the uncertainty associated with health care reform, the
rapid consolidation occurring in the health care industry, a desire to enhance
the value and liquidity of the shareholders' investment in PMSI, and the receipt
of certain expressions of interest from third parties about acquiring PMSI or
one of its subsidiaries. Several investment banking firms were interviewed by a
committee of the PMSI Board on June 28 and 29, 1994, and thereafter, PMSI
engaged Smith Barney to serve as financial advisor to the PMSI Board in
connection with its consideration of a possible sale or merger of PMSI.
After considering strategic alternatives and holding preliminary
discussions with an interested party, the PMSI Board requested that Smith Barney
conduct a market canvass to determine the potential interest of third parties in
an acquisition of PMSI. The market canvass began in mid-August. Upon execution
of a confidentiality and standstill agreement, interested parties were furnished
a confidential memorandum regarding PMSI and were invited to participate in a
competitive bidding procedure (the "Review Procedure"). Ultimately, 38 companies
were canvassed regarding their interest in acquiring PMSI, and 15 companies
executed confidentiality and standstill agreements with PMSI and were furnished
a confidential memorandum of information regarding PMSI to facilitate their
evaluation of a potential acquisition transaction.
Representatives of Beverly met with a representative of PMSI on August 26,
1994, to express their interest in acquiring PMSI and executed a confidentiality
and standstill agreement with PMSI on September 22, 1994. On September 25, 1994,
PMSI furnished to Beverly a confidential memorandum, and on September 26, 1994,
PMSI sent to Beverly and other potential bidders a letter of instructions for
the Review Procedure. The letter of instructions indicated the following: (1)
the principal objectives of the PMSI Board in considering acquisition proposals
were to maximize the value of PMSI for its shareholders and to expeditiously
consummate an acquisition of PMSI with a party committed to continuing the
growth and development of PMSI's business; (2) the purpose of the Review
Procedure was to provide an orderly and efficient method for the PMSI Board to
ascertain and evaluate the level of acquisition interest and, ultimately, to
obtain specific acquisition proposals; (3) the Review Procedure was expected to
consist of at least two phases -- the submission of preliminary indications of
interest, followed by the submission of definitive acquisition offers after an
opportunity for an in-depth evaluation of PMSI; (4) an interested party would
not be informed of the names of other interested parties participating in any
phase of the Review Procedure; (5) except for public disclosures required by
applicable law, neither the preliminary indication of interest nor any
definitive acquisition proposal submitted by an interested party would be
disclosed to any other interested party; and (6) if after reviewing the
confidential memorandum regarding PMSI an interested party desired to conduct an
in-depth evaluation of PMSI with the objective of making a definitive
acquisition proposal, it should submit by no later than October 11, 1994, a
written, non-binding, preliminary indication of its level of interest in an
acquisition of PMSI.
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Pursuant to the Review Procedure, Beverly submitted a preliminary
indication of interest in acquiring PMSI in a merger transaction having a value
of $15.00 per PMSI share. Beverly was notified on October 17, 1994, that it was
one of the interested parties which would be afforded an opportunity to conduct
an in-depth evaluation of PMSI that would consist of inspecting its facilities,
meeting with its senior management, and reviewing corporate records of PMSI that
would be made available to every participant in the second phase of the Review
Procedure. The letter of instructions for the second phase of the Review
Procedure notified Beverly that, if it remained interested in acquiring PMSI
after completing this additional investigation, Beverly should submit a written
acquisition offer by November 14, 1994. On October 28, 1994, PMSI publicly
announced that it was considering acquisition overtures. Following that public
announcement, two additional companies expressed interest in a possible
acquisition of PMSI, executed confidentiality and standstill agreements with
PMSI, received a confidential memorandum regarding PMSI and were invited to
participate in the Review Procedure.
On November 2 and 3, 1994, representatives of Beverly toured PMSI's
facilities in Tampa, Florida, met with PMSI's senior management, and reviewed
the corporate records of PMSI that were made available to participants in the
second phase of the Review Procedure. On November 15, 1994, senior officers of
Beverly met with senior officers of PMSI in Tampa, Florida, and discussed the
possibility of a merger transaction which would result in the acquisition by
Beverly of PMSI. On the same day, Beverly also submitted its response to PMSI's
invitation for acquisition offers. This response included Beverly's revisions to
the form of acquisition agreement provided by PMSI pursuant to the Review
Procedure, a proposal to have the two largest shareholders of PMSI enter into
the Shareholders' Agreement and Irrevocable Proxies with respect to the
transaction, and an offer to acquire PMSI in a tax-free merger in which Beverly
would pay, in newly-issued shares of Beverly Common Stock, $16.50 for each
outstanding share of PMSI Common Stock.
During the period of November 16 through November 18, 1994, representatives
of PMSI and Beverly engaged in recurring telephone discussions regarding
particular terms of Beverly's acquisition proposal and continuing due diligence
matters, including the value to be ascribed to PMSI shares, the structure of the
exchange ratio and Beverly's proposed revisions to the form of acquisition
agreement. Simultaneously, PMSI attempted to obtain a better offer from another
bidder. In response to requests from PMSI, Beverly increased its offer to $17.50
per PMSI share on November 17, 1994, and, assuming satisfactory resolution of
all open issues and due diligence items, to $18.00 per PMSI share on November
18, 1994. Beverly also modified its offer to provide for a floating exchange
ratio based on the average trading price of Beverly Common Stock shortly before
the closing of the proposed merger (subject to a ceiling of $18.00 and a floor
of $12.50) and to allow PMSI to terminate the merger transaction if such closing
price for Beverly Common Stock were lower than $10.00.
On the evening of November 18, 1994, the PMSI Board determined that the
Beverly acquisition proposal was the best and highest one available, and Beverly
was offered an opportunity to negotiate a definitive merger agreement with PMSI.
Face-to-face negotiations between Beverly and PMSI began in Tampa, Florida the
next day, November 19, 1994, and continued until they were terminated by Beverly
on November 21, 1994, after the parties reached an impasse.
Informal telephone discussions between PMSI and Beverly representatives and
their financial advisors continued, however, during the next two weeks regarding
open issues and alternative transaction structures. Beverly continued its due
diligence and expressed continuing interest in an acquisition transaction with
PMSI, but indicated that any renewal of acquisition negotiations would need to
be predicated on valuing PMSI at $16.50 per share. PMSI sought a better
acquisition offer from another bidder in the Review Procedure, but none
materialized.
The Beverly Board of Directors held a regular meeting on December 8, 1994
to consider, among other things, the proposal to merge with PMSI, the various
provisions in the then-current draft of the Merger Agreement and the
transactions contemplated thereby, and the proposed offering price. At such
meeting, members of Beverly's senior management reviewed, among other things,
the background of the proposed Merger, each company's alternatives, the
strategic rationale for and the potential risks and benefits of the proposed
Merger, a summary of the due diligence findings to date, a financial and
valuation analysis of the transaction and the terms of the Merger Agreement. At
the conclusion of such meeting, the Beverly Board of
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Directors approved the proposed Merger, subject to resolution of all open issues
to the satisfaction of Beverly's senior management.
On December 14, 1994 Beverly and PMSI resumed face-to-face negotiations in
Tampa, Florida. During these discussions, which included representatives of the
Shareholders, Beverly agreed to lower the floor of the floating exchange ratio
from $12.50 to $12.25 per share. These negotiations continued through December
16, 1994. Thereafter, the parties continued to discuss transactional issues by
telephone through December 23, 1994.
The PMSI Board held several special meetings during December to consider
the status of discussions with prospective bidders (including Beverly) regarding
a possible sale or merger of PMSI and, following the resumption of negotiations
with Beverly, to address the progress of the renewed negotiations with Beverly
and review summaries and preliminary drafts of the proposed acquisition
agreement. At a special meeting on the evening of December 19, 1994, following
presentations from its legal counsel and Smith Barney and receipt of Smith
Barney's oral opinion to the effect that, as of that date and based upon and
subject to certain matters, the consideration to be received in the proposed
merger by the holders of PMSI Common Stock was fair to such holders from a
financial point of view, the PMSI Board approved the Merger and authorized the
execution of a definitive merger agreement with Beverly and Acquisition in
substantially the form presented to and reviewed by the directors at the
meeting, subject to any changes (other than a change in the merger consideration
or the terms of the exchange ratio) as the officers executing it considered
necessary or appropriate.
After representatives of Beverly and PMSI resolved a few remaining issues,
the Merger Agreement was executed by PMSI, Beverly and Acquisition on the
evening of December 26, 1994, and the proposed Merger was publicly announced by
PMSI and Beverly on the next morning.
When the Merger Agreement was executed on December 26, 1994, the parties
contemplated that the Merger would be accounted for as a "pooling of interests"
under APB Opinion No. 16. In April, 1995, following the announcement by Beverly
of its proposed spin-off of its subsidiary PCA to Beverly stockholders, the
parties concluded that the Merger could no longer be accounted for as a pooling
of interests and the parties amended the Merger Agreement to reflect such
conclusion. See "Recent Developments of Beverly."
REASONS FOR MERGER; RECOMMENDATION OF PMSI BOARD
The PMSI Board has unanimously approved and authorized the Merger and the
Merger Agreement and recommends approval thereof by PMSI's shareholders based on
the PMSI Board's determination that the aggregate consideration to be received
by PMSI shareholders pursuant to the Merger is fair to them from a financial
point of view and that the Merger is in the best interests of PMSI, its
shareholders and its nonshareholder constituencies. In making its recommendation
and those determinations, the PMSI Board considered the advice of its
management, legal counsel, and financial advisor and the following factors:
(a) Beverly's acquisition proposal was the best and highest available
acquisition offer received after a market canvass of 38 potential
acquirers, an ensuing competitive bidding procedure, and a public
announcement on October 28, 1994 that PMSI was considering acquisition
overtures, and no other bidder made any further offer or proposal in
responses to invitations to do so after PMSI received Beverly's final
offer;
(b) The total acquisition value of PMSI to be obtained in the Merger
compares favorably with trading multiples of healthcare companies in
comparable lines of business and recent acquisition multiples for health
care companies in comparable lines of business, and a comparable value
would be difficult to achieve under current market conditions through the
possible alternatives to a sale or merger of PMSI, including a share
repurchase, a leveraged buyout, a break-up sale of PMSI's business units,
or a continuation of PMSI as an autonomous publicly held company;
(c) The value of $16.50 per share to be received by holders of PMSI
Common Stock pursuant to the Merger represents (i) a premium of
approximately 80% over the last reported sales price ($9.13) of PMSI Common
Stock in the Nasdaq National Market System on June 28, 1994, the date when
PMSI engaged Smith Barney as its financial advisor, (ii) a premium of
approximately 40% over the last reported sales price ($11.75) of PMSI
Common Stock in Nasdaq National Market System on both
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September 27, 1994, the 30th day before PMSI publicly announced on October
28, 1994, that it was considering acquisition overtures, and October 11,
1994, the date when PMSI received preliminary indications of interest from
interested parties, and (iii) a premium of approximately 22% over the last
reported sales price ($13.50) of PMSI Common Stock in the Nasdaq National
Market System on October 27, 1994, the day before PMSI publicly announced
that it was considering acquisition overtures;
(d) The strategic and synergistic effect of a business combination
with Beverly, including (i) the marketing and competitive consequences,
(ii) the compatibility of Beverly's businesses with PMSI's, (iii) Beverly's
business plans for PMSI and their effects on PMSI's corporate
constituencies, and (iv) the advantages of PMSI aligning with a larger
company with greater capital resources in view of the rapid consolidation
occurring in the health care industry and the uncertainties associated with
health care reform;
(e) The terms and conditions of the Merger, including (i) the
structure of the transaction as a tax-free reorganization for federal
income tax purposes, (ii) the nature, adequacy, and fairness of the
consideration to be received in the Merger by PMSI's shareholders, (iii) a
floating exchange ratio within a collar that assures that PMSI shareholders
will receive the value of $16.50 per PMSI share in the Merger so long as
the Beverly Closing Share Price used to calculate the exchange ratio for
the Merger is not lower than $12.25 or higher than $18.00 per share (see
section 2.2 of the Merger Agreement attached as Appendix A), (iv) the right
to terminate the Merger Agreement if the Beverly Closing Share Price is
lower than $10.00 per share or if Smith Barney withdraws its Fairness
Opinion dated the date of this Prospectus/Consent Solicitation Statement
(see section 7.3(e) of the Merger Agreement), and (v) the provision for
payment to Beverly of a termination fee in the sum of $5,000,000 if the
Merger Agreement is terminated under certain circumstances, which the PMSI
Board concluded would increase the cost to a third party of acquiring PMSI
but was nonetheless appropriate because the fee was a condition precedent
to Beverly's acquisition proposal, the fee was unlikely to unduly deter
other bidders, and the existence of other viable buyers who did not
participate in the Review Procedure was unlikely (see " THE MERGER
AGREEMENT -- Termination Fee" for a description of the termination fee);
(f) The Merger Agreement permits the PMSI Board (i) in response to
unsolicited inquiries or proposals and in the discharge of its fiduciary
duties based on an opinion of outside legal counsel, to furnish information
to, and participate in discussions and negotiations with, third parties
relating to an acquisition transaction involving PMSI and (ii) to terminate
the Merger Agreement if a higher acquisition offer is made and not matched
by Beverly or Acquisition, although the Merger Agreement prohibits PMSI
from initiating, soliciting, or intentionally encouraging anyone to make an
acquisition proposal;
(g) The presentations and financial analyses of its financial advisor
and the financial advisor's oral opinion rendered on December 19, 1994
(which has been confirmed in writing as of the date of this
Prospectus/Consent Solicitation Statement) to the effect that, as of the
date of the opinion and based upon and subject to certain matters, the
consideration to be received in the Merger by the holders of PMSI Common
Stock was fair to such holders from a financial point of view;
(h) Oral presentations and written summaries by its legal counsel
regarding the proposed transaction and the terms and conditions of the
Merger Agreement;
(i) The trading history of the PMSI Common Stock and the Beverly
Common Stock and the relative superior liquidity of the Beverly Common
Stock;
(j) Information with respect to the management, business operations,
financial condition, financial performance, and business and financial
prospects of PMSI and Beverly, as well as the likelihood of achieving those
prospects, and the going-concern value of PMSI (as reflected in part by its
historical and projected operating results);
(k) The likelihood that the Merger would be consummated, including the
experience, reputation, and financial capability of Beverly;
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(l) The impact of the Merger on the general long-term interests,
prospects, and objectives of PMSI, and the legal, social, economic, and
other effects of the Merger on PMSI's customers, employees, and suppliers
and the societies and communities in which PMSI operates;
(m) The desire of major shareholders to enhance the value and
liquidity of their investment in PMSI Common Stock;
(n) The improved earnings trend of PMSI, which could lead to higher
market value for PMSI Common Stock, but which the PMSI Board concluded
could not be sustained without substantial revenue growth and capital
investment;
(o) Recent reports of financial analysts and the general level of the
trading price of PMSI Common Stock after October 28, 1994 (the date when
PMSI publicly announced that it was considering acquisition overtures),
which indicated a per share value for PMSI Common Stock of more than
$16.50, but which the PMSI Board concluded were not determinative of the
acquisition value of PMSI because the higher per share value was not
supported by PMSI's market check or available from any participant in the
Review Procedure; and
(p) The risks of postponing or discontinuing PMSI's consideration of a
possible acquisition after having announced it was considering acquisition
overtures, including the adverse effect on current earnings of the
associated costs, the likelihood that the market price of PMSI Common Stock
would decline substantially, and the potential adverse effect on its
customers, employees and business activities of perceived uncertainty
regarding PMSI's future plans.
In considering the foregoing factors, the PMSI Board attributed significant
importance to the factors set forth in clauses (a), (b), (e) and (g) above, but
otherwise took all the factors into consideration as a whole without assigning
any relative weight to them.
THE PMSI BOARD UNANIMOUSLY RECOMMENDS THAT PMSI SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY.
OPINION OF PMSI FINANCIAL ADVISOR
Smith Barney was retained by PMSI to act as its financial advisor in
connection with the PMSI Board's consideration of a possible sale or merger of
PMSI. In connection with such engagement, PMSI requested that Smith Barney
evaluate the fairness, from a financial point of view, to the holders of PMSI
Common Stock of the consideration to be received by such holders in the Merger.
On December 19, 1994, in connection with the evaluation of the proposed Merger
Agreement by the PMSI Board, Smith Barney rendered an oral opinion to the PMSI
Board to the effect that, as of such date and based upon and subject to certain
matters, the consideration to be received in the Merger by the holders of PMSI
Common Stock was fair, from a financial point of view, to such holders. Smith
Barney has confirmed such oral opinion by delivery of a written opinion dated
the date of this Prospectus/Consent Solicitation Statement. The assumptions
made, matters considered and limitations on the review undertaken in the
December 19, 1994 opinion were substantially the same as those contained in the
opinion dated the date of this Prospectus/Consent Solicitation Statement and
attached hereto as Appendix F. In connection with its opinion dated the date of
this Prospectus/Consent Solicitation Statement, Smith Barney performed
procedures to update certain of its analyses and reviewed the assumptions on
which such analyses were based and the factors considered in connection
therewith.
In arriving at its opinion, Smith Barney reviewed, in connection with its
oral opinion of December 19, 1994, a current draft of the Merger Agreement and,
in connection with its written opinion dated the date of this Prospectus/Consent
Solicitation Statement, the Merger Agreement and this Prospectus/Consent
Solicitation Statement, and held discussions with certain senior officers,
directors and other representatives and advisors of PMSI and certain senior
officers and other representatives and advisors of Beverly concerning the
businesses, operations and prospects of PMSI and Beverly. Smith Barney examined
certain publicly available business and financial information relating to PMSI
and Beverly as well as certain financial forecasts and other data for PMSI which
was provided to Smith Barney by the management of PMSI. Smith Barney reviewed
the financial terms of the Merger as set forth in the Merger Agreement in
relation to, among other things: current and historical market prices and
trading volumes of the PMSI Common Stock and Beverly Common Stock;
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the respective companies' historical earnings; and the capitalization and
financial condition of each of PMSI and Beverly. Smith Barney considered, to the
extent publicly available, the financial terms of certain other transactions
recently effected which Smith Barney considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose businesses Smith
Barney considered relevant in evaluating PMSI and Beverly. Smith Barney also
evaluated the potential pro forma financial impact of the Merger on Beverly. In
addition to the foregoing, Smith Barney conducted such other analyses and
examinations and considered such other financial, economic and market criteria
as Smith Barney deemed necessary to arrive at its opinion. Smith Barney noted
that its opinion was necessarily based upon information available, and
financial, stock market and other conditions and circumstances existing and
disclosed, to Smith Barney as of the date of its opinion.
In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information publicly available or furnished to or otherwise reviewed
by or discussed with Smith Barney. With respect to financial forecasts and other
information provided to or otherwise reviewed by or discussed with Smith Barney,
the management of PMSI advised Smith Barney that such forecasts and other
information were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of PMSI as to the future
financial performance of PMSI. Smith Barney also assumed, with the consent of
the PMSI Board, that the Merger will be treated as a purchase for accounting
purposes in accordance with APB Opinion No. 16 and as a tax-free reorganization
for federal income tax purposes. Smith Barney's opinion relates to the relative
values of PMSI and Beverly. Smith Barney did not express an opinion as to what
the value of the Beverly Common Stock actually will be when issued to PMSI
shareholders pursuant to the Merger or the price at which the Beverly Common
Stock will trade subsequent to the Merger. In addition, Smith Barney did not
make or obtain an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of PMSI or Beverly nor did Smith Barney
make any physical inspection of the properties or assets of PMSI or Beverly. In
connection with its engagement, Smith Barney approached, and held discussions
with, certain third parties to solicit indications of interest in a possible
acquisition of PMSI. In addition, although Smith Barney evaluated the
consideration to be received in the Merger by the holders of PMSI Common Stock
from a financial point of view, Smith Barney was not asked to and did not
recommend the specific consideration payable in the Merger. No other limitations
were imposed by PMSI on Smith Barney with respect to the investigations made or
procedures followed by Smith Barney in rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SMITH BARNEY DATED THE DATE OF THIS
PROSPECTUS/CONSENT SOLICITATION STATEMENT, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED
HERETO AS APPENDIX F AND IS INCORPORATED HEREIN BY REFERENCE. PMSI SHAREHOLDERS
ARE URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. SMITH BARNEY'S OPINION
IS DIRECTED ONLY TO THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED IN THE
MERGER BY THE HOLDERS OF PMSI COMMON STOCK FROM A FINANCIAL POINT OF VIEW AND
HAS BEEN PROVIDED SOLELY FOR THE USE OF THE PMSI BOARD IN ITS EVALUATION OF THE
MERGER, DOES NOT ADDRESS ANY OTHER ASPECTS OF THE MERGER OR RELATED TRANSACTION
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE IN CONNECTION WITH THE CONSENT SOLICITATION. THE SUMMARY
OF THE OPINION OF SMITH BARNEY SET FORTH IN THIS PROSPECTUS/CONSENT SOLICITATION
STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION.
In preparing its opinion to the PMSI Board, Smith Barney performed a
variety of financial and comparative analyses, including those described below
that were performed by Smith Barney in connection with its oral opinion rendered
to the PMSI Board on December 19, 1994. The summary of such analyses does not
purport to be a complete description of the analyses underlying Smith Barney's
opinion. The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant methods
of financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. In arriving at its opinion, Smith Barney did not attribute
any particular weight to any analysis or factor considered by it, but rather
made qualitative judgments as to the significance and relevance of each analysis
and factor.
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Accordingly, Smith Barney believes that its analyses must be considered as a
whole and that selecting portions of its analyses and factors, without
considering all analyses and factors, could create a misleading or incomplete
view of the processes underlying such analyses and its opinion. In its analyses,
Smith Barney made numerous assumptions with respect to PMSI and Beverly,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of PMSI and
Beverly. The estimates contained in such analyses are not necessarily indicative
of actual values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by such analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty.
Comparable Company Analysis. Using publicly available information, Smith
Barney analyzed, among other things, the market values and trading multiples of
PMSI and selected companies. Since there was no publicly-traded company directly
comparable to PMSI, Smith Barney selected the following companies engaged in
similar lines of businesses: Diagnostek Inc., CorVel Corporation, HealthCare
COMPARE and GMIS, Inc. (collectively, the "Selected Companies"). Smith Barney
compared market values as multiples of historical net income and projected net
income for the calendar years ended 1994 and 1995, and compared adjusted market
values (equity market value, plus debt and preferred stock, less cash) to, among
other things, historical net revenue and earnings before interest, taxes,
depreciation and amortization ("EBITDA"). Smith Barney also compared debt to
capitalization ratios, profit margins, historical revenue growth and projected
earnings per share ("EPS") growth of the Selected Companies with those of PMSI.
Net income and EPS projections for PMSI and the Selected Companies were analyzed
based on the consensus estimates of selected investment banking firms. Smith
Barney also analyzed the EPS projections of PMSI based on internal estimates of
the management of PMSI. This analysis resulted in a per share equity valuation
reference range for PMSI of $11.83 to $24.41 (with a mean of $15.93 and a median
of $14.27).
Comparable Merger and Acquisition Transactions Analysis. Using publicly
available information, Smith Barney analyzed the transaction multiples in
selected mergers and acquisition transactions. Since there was no publicly
available information relating to an acquired company directly comparable to
PMSI, Smith Barney selected the following healthcare transactions involving
workers' compensation, specialty managed care and employee benefit provider
companies that are engaged in similar lines of business as PMSI: BCBS
Michigan/State Accident Fund; Value Health, Inc./Community Care Network;
Physicians Corporation of America/Combined Risk & Insurance Management Services,
Inc.; CareAmerica/CE Health Compensation & Liability; Foundation Health
Corporation/California Compensation Insurance Company; Peer Review Analysis/Care
Analysis; FHP International Corporation/Greatstates; Value Health, Inc/Stokely
Health Services & Complete Pharmacy Network; Preferred Health Care/ Diversified
Medical Resources and Adjustco, Inc.; Equifax, Inc./Health Economics
Corporation; Medco Containment Services, Inc./American Biodyne; Investor
Group/Administrators Network; First Financial Management Corporation /ALTA
Health Strategies; and Healthsource, Inc./Employee Benefit Administration. Smith
Barney compared transaction values as multiples of latest 12 months revenue,
EBITDA, earnings before interest and taxes ("EBIT") and net income. This
analysis resulted in a per share equity valuation reference range for PMSI of
$9.37 to $17.14 (with a mean of $12.90 and a median of $11.71).
No company, transaction or business used in the comparable company and
comparable merger and acquisition transactions analyses as a comparison is
identical to PMSI, Beverly or the Merger. Accordingly, an analysis of the
results of the foregoing is not entirely mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the acquisition or
public trading value of the comparable companies or the business segment or
company to which they are being compared.
Leveraged Buyout Analysis. Smith Barney performed an analysis designed to
determine the price that could be paid by a financial investor to complete a
leveraged buyout (an "LBO") of PMSI, based both on management's projections and
a more conservative case taking into account the potential volatility in the
earnings stream of PMSI as a result of a highly leveraged capital structure. For
purposes of such analysis, Smith Barney assumed, among other things, that (i) an
LBO investor would require a five-year return on its equity investment of
approximately 30%, (ii) PMSI could be sold at multiples of latest 12 months EBIT
of
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between 18.0x and 18.5x and (iii) the transaction could be financed using a
capital structure consisting of 50% senior debt at an assumed interest rate of
8%, 25% subordinated debt at an assumed interest rate of 12%, and 25% equity.
This analysis resulted in a per share equity valuation for PMSI of $9.17 based
on the conservative case and $15.54 based on management projections.
Exchange Ratio Analysis. Smith Barney reviewed and analyzed the historical
ratio of the daily closing prices of PMSI Common Stock to Beverly Common Stock
based on various averages during the 30-day through 360-day periods preceding
the announcement of the Merger. The exchange ratios of the daily closing price
of one share of PMSI Common Stock to one share of Beverly Common Stock ranged
from a low of 0.64 to a high of 0.85 over the periods analyzed, as compared to
the implied exchange ratio in the Merger of 1.15 based on a closing sale price
of Beverly Common Stock of $14.375 on December 15, 1994.
Premium Analysis. Smith Barney analyzed the implied premium payable in the
Merger and the premiums paid in approximately 23 selected healthcare
transactions from 1993 through 1994 based on stock prices one day prior to the
announcement of such transactions and one month prior to the announcement of
such transactions. The implied premium payable in the Merger, based on the
closing sale price for PMSI common stock as of June 28, 1994 (the date when PMSI
engaged Smith Barney as its financial advisor), was 80.7%. The ranges of
premiums for the selected health care transactions were between 8.43% to 132.18%
(with a mean of 47.68%) as of one day prior to the announcement date of such
transaction and 6.33% to 125.52% (with a mean of 58.09%) as of one month prior
to the announcement date of such transaction, as compared to the implied premium
payable in the Merger as of one day and 30 days prior to October 28, 1994 (the
date on which PMSI publicly announced that it was considering acquisition
overtures) of 22.2% and 40.4%, respectively. Based on a closing sale price of
PMSI Common Stock 30 days prior to October 28, 1994 of $11.75, this analysis
resulted in a per share equity valuation reference range for PMSI of $12.49 to
$26.50 (with a mean of $18.58 and a median of $18.17).
Other Factors and Comparative Analyses. In rendering its opinion, Smith
Barney considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (i) PMSI's historical and
projected financial results; (ii) Beverly's historical financial results; and
(iii) the history of trading prices for PMSI Common Stock and Beverly Common
Stock.
Pursuant to the terms of Smith Barney's engagement, PMSI has agreed to pay
Smith Barney for its services in connection with the Merger an aggregate
financial advisory fee equal to approximately $2.1 million. PMSI also has agreed
to reimburse Smith Barney for reasonable travel and other out-of-pocket expenses
incurred by Smith Barney in performing its services, including the reasonable
fees and expenses of its legal counsel, and to indemnify Smith Barney and
related persons against certain liabilities, including liabilities under the
federal securities laws, arising out of Smith Barney's engagement.
Smith Barney has advised PMSI that, in the ordinary course of business, it
may actively trade the equity and debt securities of PMSI and Beverly for its
own account or for the account of its customers and, accordingly, may at any
time hold a long or short position in such securities.
Smith Barney is a nationally recognized investment banking firm and was
selected by PMSI based on Smith Barney's experience and expertise. Smith Barney
regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. In considering the recommendation of the PMSI Board with respect
to the Merger, the Merger Agreement and the transactions contemplated thereby,
PMSI shareholders should be aware that certain members of the management of PMSI
and the PMSI Board have certain interests in the Merger that are in addition to
the interests of shareholders of PMSI generally.
Stock Options. As provided in the Merger Agreement, by virtue of the
Merger, all options to purchase PMSI Common Stock (a "PMSI Option" or the "PMSI
Options") outstanding at the Effective Time under the PMSI 1990 Incentive and
Non-statutory Stock Option Plan effective as of December 23, 1989 (as amended)
and pursuant to the Restricted Stock Option Agreement dated June 14, 1993 (as
amended), by
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and between PMSI and Bertram T. Martin, Jr., and the Restricted Stock Option
Agreement dated June 14, 1993 (as amended), by and between PMSI and David L.
Redmond (collectively, the "PMSI Stock Option Plans"), whether or not then
exercisable, will be assumed by Beverly and converted into and become options to
purchase Beverly Common Stock. Each PMSI Option assumed by Beverly will be
exercisable upon the same terms and conditions as under the applicable PMSI
Stock Option Plans and applicable option agreements issued thereunder and
Beverly will assume the PMSI Stock Option Plans for such purposes. Pursuant to
the terms of the PMSI Stock Option Plans, all the PMSI Options become fully
vested and immediately exercisable upon a "change in control" (as defined in
each of the PMSI Stock Option Plans), and the Merger will constitute a "change
in control" within the meaning of all the PMSI Stock Option Plans.
PMSI has entered into agreements with each of the holders of restricted
options under the Restricted Stock Option Agreements described above (the
"Restricted Options") to amend the restricted options issued thereunder by: (i)
deleting the provision for the Restricted Options to expire on the 30th day
after the effective date of a "change of control," as defined in the Restricted
Options; (ii) deleting PMSI's obligation to make cash payments to the holders of
the Restricted Options if they are not exercised within thirty (30) days after
the date of a "change in control" (as defined); and (iii) extending the exercise
period following a termination of employment (a) from thirty (30) days to ninety
(90) days generally, (b) to one hundred fifty (150) days during the first thirty
(30) days after a change in control (as defined in the Restricted Stock Option
Agreement), and (c) to one hundred twenty (120) days during the second thirty
(30) days after a "change in control."
Pursuant to the Merger Agreement, at and after the Effective Time: (i) each
PMSI Option assumed by Beverly may be exercised solely for Beverly Common Stock;
(ii) the number of shares of Beverly Common Stock subject to each PMSI Option
will be equal to the product, rounded to the nearest whole share, of (A) the
number of shares of PMSI Common Stock subject to the PMSI Options immediately
prior to the Effective Time, times (B) the Exchange Ratio (such product is
hereinafter defined as the "Option Exchange Ratio"); and (iii) the per share
exercise price for each such PMSI Option will be equal to the quotient of (A)
the per share exercise price for the shares of PMSI Common Stock otherwise
purchasable pursuant to each PMSI Option immediately prior to the Effective Time
divided by (B) the Exchange Ratio, rounded to the nearest full cent. As of
, 1995, there were PMSI Options outstanding to purchase an aggregate of
shares of PMSI Common Stock at an average exercise price of $ per
share. Of these PMSI Options, directors and executive officers of PMSI held PMSI
Options to purchase shares of PMSI Common Stock at an average exercise
price of $ per share. If the Merger had been consummated on , 1995
with an Exchange Ratio of , the PMSI Options held by directors and
executive officers of PMSI would be converted into options for Beverly
Shares at an average exercise price of $ per share. See "THE MERGER
AGREEMENT -- Conversion of PMSI Options."
Registration Rights Agreement. Pursuant to the terms and conditions of the
Merger Agreement, Beverly, Acquisition, PMSI and certain shareholders of PMSI
who beneficially own, immediately after the Effective Time, more than three
percent (3%) of the outstanding Beverly Shares shall enter into a registration
rights agreement (the "Registration Rights Agreement") in the form of Appendix E
attached to this Prospectus/ Consent Solicitation Statement, by which Beverly
shall grant certain rights to register Beverly Shares issued to such
shareholders pursuant to the Merger Agreement. As of the date of this
Prospectus/Consent Solicitation Statement, the only holder of PMSI Common Stock
who would be eligible to execute the Registration Rights Agreement is the CSH
Trust.
The Registration Rights Agreement applies to Beverly Shares owned by, or
issuable to, the CSH Trust on or after the date of the Merger Agreement
resulting from the Merger, a stock split, stock dividend, capital adjustment,
recapitalization, reorganization, reclassification or similar transaction,
shares issued or distributed in an exchange, conversion or substitution, or
otherwise. The Registration Rights Agreement is for a term beginning on the date
of the Merger Agreement and ending on the earlier of (i) two (2) years from the
date of the Merger Agreement; or (ii) the date when the CSH Trust ceases to own
at least 1,000,000 Beverly Shares. Notwithstanding anything in the Registration
Rights Agreement to the contrary, the rights conferred to the CSH Trust will be
suspended and inoperative whenever and for so long as Beverly otherwise has a
registration statement in effect with the Commission that covers the shares of
the CSH Trust subject to the Registration
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<PAGE> 37
Rights Agreement, in which case the duration of Beverly's obligations under the
Registration Rights Agreement shall be extended for a period corresponding to
the duration of said suspension.
At any time during the term of the Registration Rights Agreement, upon
receipt of a written request from the CSH Trust specifying the number of Beverly
Shares that the CSH Trust desires to register for public sale, Beverly promptly
shall prepare and file with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"), a registration statement covering a public
offering of those Beverly Shares and shall use all reasonable efforts to cause
the registration statement to be effective as soon as is practicable. The CSH
Trust is entitled to exercise this demand registration right up to two times,
and shall use all reasonable efforts to include in each demand registration at
least 1,000,000 of the Beverly Shares. If the CSH Trust intends to distribute
the registered Beverly Shares by means of an underwriting, the CSH Trust shall
sell the registered Beverly Shares through one or more underwriters as selected
by Beverly with the approval of the CSH Trust (which approval shall not be
unreasonably withheld). Beverly shall not include in a registration of Beverly
Shares for the CSH Trust pursuant to the exercise of any demand registration
right under the Registration Rights Agreement any debt or equity securities of
Beverly or any other person, without the advance approval of the CSH Trust,
which shall not be unreasonably withheld. Beverly may postpone filing with the
Commission for a reasonable period of time (not to exceed 75 days) a
registration statement for a demand registration requested by the CSH Trust, but
only if Beverly's Board of Directors reasonably determines that based upon
either the written advice of Beverly's legal counsel or an investment banking
firm representing Beverly in connection with a pending public offering, a
postponement is necessary to avoid either the premature public disclosure of a
pending material event that would likely jeopardize the outcome or success of
the pending event or is necessary to avoid jeopardizing the success of a pending
public offering.
The Registration Rights Agreement further provides that if Beverly, at any
time during the term of the Registration Rights Agreement, authorizes a
registration of any securities under the Securities Act on Form S-1, S-2 or S-3,
it shall include in that registration any of the Beverly Shares that the CSH
Trust elects to register for public sale to the extent permitted by certain
conditions to Beverly's obligations as set forth under the Registration Rights
Agreement and by the applicable registration form. If the total number of
Beverly Shares which the CSH Trust request to be included in any offering
involving an underwriting of Beverly Shares being issued by Beverly for its own
account or the account of others exceeds the number which the underwriters
reasonably believe is compatible with the success of the offering, Beverly shall
only be required to include in the offering, after the inclusion of all shares
of Beverly Common Stock which Beverly desires to sell, so many Beverly shares as
the underwriters believe will not jeopardize the success of the offering. In
addition, and notwithstanding anything in the Registration Rights Agreement to
the contrary, Beverly is not required to include in a registration any of the
Beverly Shares owned by the CSH Trust when the registration by Beverly relates
to certain issuances of securities other than Beverly Common Stock, unless the
other securities are convertible or exchangeable into Beverly Common Stock.
Beverly's obligations under the Registration Rights Agreement to register
any Beverly Shares owned by the CSH Trust are subject to certain conditions, as
follows: (i) the minimum number of Beverly Shares that the CSH Trust must
include in a registration request is the lesser of 1,000,000 shares or all of
the shares owned by the CSH Trust; (ii) the CSH Trust must provide to Beverly
all information required and reasonably requested by Beverly to enable Beverly
to comply with any applicable laws or regulations; and (iii) if the registration
is a piggy-back registration, the inclusion of the Beverly Shares in the
registration must not violate any provisions of the Securities Act or any other
rules promulgated thereunder, or any contractual obligation of Beverly.
PMSI Director and Officer Indemnification. Pursuant to the Merger
Agreement, by virtue of the Merger, Beverly has agreed that for a continuous
period of six (6) years after the Effective Time, Beverly will (i) indemnify,
(ii) maintain directors' and officers' ("D&O") liability insurance with respect
to, and (iii) take all necessary actions to assure that the Certificate of
Incorporation and/or Bylaws of Acquisition following the Effective Time will
contain indemnification provisions relating to, the conduct of the persons that
were PMSI directors and officers prior to the Effective Time. Beverly has agreed
to maintain indemnification provisions in the Surviving Corporation's
Certificate of Incorporation and/or Bylaws at least as favorable as those
contained in the PMSI Articles of Incorporation or Bylaws. The D&O liability
insurance policy to be maintained by Beverly shall provide to every current or
former officer and director of PMSI or any of its subsidiaries who is
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currently covered by PMSI's existing D&O liability insurance policy coverage
with respect to matters occurring on or before the Effective Time that has
terms, scope and amounts of coverage (including the coverage period, the insured
claims, the claims reporting period and the amount of any retention, deductible
or co-insurance) that are substantially equivalent to those of the existing
policy, or if substantially equivalent insurance coverage is unavailable, that
represents the best coverage available. For the first year after the Effective
Time, Beverly shall elect to extend PMSI's existing D&O liability insurance
policy for the "extended reporting period" provided therein. After the first
year, Beverly may procure insurance from any financially sound insurer that it
selects; provided, however, that notwithstanding the foregoing, neither Beverly
nor Acquisition is required, in order to procure or maintain the foregoing D&O
liability insurance coverage, to pay an annual premium in excess of $200,000 for
years 2 through 6.
Other Agreements. Following the Effective Time, Beverly will take all
reasonable steps so that employees of PMSI, who remain employed by PMSI after
the Effective Time, will be entitled to receive the same benefits that other
employees of Beverly subsidiaries are generally eligible to receive. In
addition, Beverly shall cause Acquisition to maintain, through July 31, 1995,
the incentive compensation plans currently in effect for officers of PMSI and
its subsidiaries and shall pay incentive compensation to the eligible
participants under such plans in accordance therewith and otherwise consistent
with PMSI's past practices. Finally, Beverly shall assume and pay when due, or
cause Acquisition to assume and pay when due, without offset, deferral,
deduction, counterclaim or interruption, all rights and benefits of employees of
PMSI and its subsidiaries that are vested or accrued on or before the Effective
Time, or that become vested or accrued as a result of the transactions
contemplated by the Merger Agreement, including all plans sponsored or
maintained by PMSI or its subsidiaries, all employment agreements, all severance
agreements and all director and officer indemnity agreements. Approval of the
Merger by the shareholders of PMSI will constitute a "Change in Control" under
preexisting Severance Agreements between the Company and eight of its officers.
Each of these Severance Agreements provides a severance compensation benefit
equal to two times the officer's total annual cash compensation for an
involuntary or constructive termination of employment within two years following
a "Change in Control." A constructive termination includes, among other things,
a demotion in office, a reduction in job duties and responsibilities, certain
salary reductions, and a job relocation. Each Severance Agreement expires
automatically, without further obligation, on the earlier of (A) the second
anniversary of the date of a Change in Control or (B) if occurring before a
Change in Control, when the officer attains age 62 or ceases for any reason to
be employed by PMSI. In addition, PMSI unilaterally may terminate a Severance
Agreement without any obligation to the officer upon the occurrence of certain
events specified in the Severance Agreement.
In December 1994, PMSI paid a $110,000 cash bonus to David L. Redmond, its
Secretary, Senior Vice President and Chief Financial Officer, for extraordinary
services in connection with PMSI's activities leading to the Merger Agreement
and has agreed to indemnify him from any excise tax imposed by section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), on any severance
compensation paid pursuant to his Severance Agreement or any other severance
benefit (such as the vesting of PMSI options pursuant to the Merger) that
constitutes an "excess parachute payment" under section 28OG of the Code and
from any state and federal income tax on any such indemnity payment. See "THE
MERGER AGREEMENT -- Conditions" and "-- Benefit Plans."
ACCOUNTING TREATMENT
The Merger will be treated as a purchase for accounting and financial
reporting purposes in accordance with APB Opinion No. 16. Under this method of
accounting, the purchase price will be allocated to assets acquired and
liabilities assumed based on their estimated fair values, at the Effective Time.
Operating results of Beverly will not include operating results of PMSI prior to
the Effective Time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
of the Merger. This summary is based upon the opinion of counsel delivered by
Giroir & Gregory, Professional Association (the "Tax Opinion"). The Tax Opinion,
which is based on certain assumptions and subject to certain limitations
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and qualifications noted in the Tax Opinion, sets forth the opinion that the
Merger will constitute a "reorganization" (a "Reorganization") within the
meaning of Section 368 of the Code. This summary is provided for information
purposes only and relates only to PMSI Common Stock held as a capital asset
within the meaning of Section 1221 of the Code by persons who are citizens or
residents of the United States. It may not apply to a shareholder who acquired
his shares of PMSI Common Stock pursuant to the exercise of employee stock
options or rights or otherwise as compensation. This summary does not discuss
tax consequences to categories of holders that are subject to special rules,
such as foreign persons, tax-exempt organizations, insurance companies,
financial institutions and dealers in stocks and securities. In addition, the
following discussion does not address the tax consequences of transactions
effectuated prior to or after the Merger (whether or not such transactions are
in connection with the Merger), including without limitation, transactions in
which shares of PMSI Common Stock are acquired or in which Beverly Shares are
disposed. No rulings will be sought from the Internal Revenue Service ("IRS")
with respect to the federal income tax consequences of the Merger. Accordingly,
PMSI SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER.
The following discussion is based on the Code, applicable United States
Treasury regulations, judicial authority, and administrative rulings and
practice, all as of the date hereof. The IRS is not precluded from adopting a
contrary position. In addition, there can be no assurance that future
legislative, judicial or administrative changes or interpretations will not
adversely affect the accuracy of the statements and conclusions set forth
herein. Any such changes or interpretations could be applied retroactively and
could affect the tax consequences of the Merger to Beverly, Acquisition, PMSI
and their respective shareholders.
Subject to the limitations and qualifications referred to herein,
qualification of the Merger as a Reorganization will generally result in the
following tax consequences:
(i) no gain or loss will be recognized by Beverly, Acquisition, or
PMSI as a result of the Merger;
(ii) no gain or loss will be recognized by the PMSI shareholders upon
the receipt of Beverly Common Stock solely in exchange for PMSI Common
Stock in connection with the Merger (except as discussed below with respect
to cash received in lieu of a fractional interest in Beverly Common Stock);
and
(iii) the tax basis and holding period of Beverly Common Stock to be
received by the PMSI shareholders in the Merger will be the same as the tax
basis and holding period of PMSI Common Stock surrendered in exchange
therefor (reduced by any amount allocable to a fractional share interest
for which cash is received).
(iv) a PMSI shareholder who is entitled to receive cash in lieu of a
fractional share interest of Beverly Common Stock in connection with the
Merger will generally recognize a gain (or loss) equal to the difference
between such cash amount and the shareholder's basis in the fractional
share interest as long as the cash payment is not essentially equivalent to
a dividend. In such event, any gain or loss recognized will be a capital
gain (or loss) if PMSI Common Stock is held by such shareholder as a
capital asset at the Effective Time. See "THE MERGER AGREEMENT -- Exchange
Procedures."
The Tax Opinion neither binds the IRS nor precludes the IRS from adopting a
contrary position. The Tax Opinion is subject to certain assumptions and
qualifications and based on the truth and accuracy of certain representations
made by Beverly, Acquisition, PMSI and shareholders of PMSI, including
representations in certificates to be delivered to counsel by the respective
managements of Beverly, Acquisition and PMSI. As a condition to Beverly's
obligation to consummate the Merger Agreement, to its counsel's obligation to
render the Tax Opinion and notwithstanding the Registration Rights Agreement to
be executed between Beverly and the Trust on the Closing Date, Beverly shall
have received a certificate from PMSI and each of the Shareholders as of the
date of this Prospectus/Consent Solicitation Statement and as of the Closing
Date providing certain representations and warranties. Pursuant to the
certificate from the Shareholders, the Shareholders will represent and warrant
that they have no present plan, intention, or arrangement to
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sell, transfer or otherwise dispose of a number of Beverly Shares to be received
pursuant to the Merger Agreement that would reduce the former PMSI shareholders'
ownership of Beverly Shares to a number of Beverly Shares having a value as of
the Effective Time of the Merger, of less than fifty percent (50%) of the value
of all of the issued and outstanding PMSI Common Stock immediately prior to the
Effective Time (which number of Beverly Shares is referred to as a "significant
equity interest"). As of , 1995, the Shareholders owned 4,534,219
shares representing % of PMSI Common Stock. Of particular importance will be
certain assumptions and representations of PMSI and the Shareholders relating to
the "continuity of interest" requirement. See "-- Interests of Certain Persons
in the Merger."
To satisfy the continuity of interest requirement, PMSI shareholders must
not, pursuant to a plan or intent existing at or prior to the Merger, dispose of
or transfer either (i) their PMSI Common Stock in anticipation of the Merger or
(ii) the Beverly Shares to be received in the Merger (collectively, "Planned
Dispositions"), such that the PMSI shareholders, as a group, would no longer
have a significant equity interest as long as the Beverly Shares received in the
Merger (after taking into account Planned Dispositions), in the aggregate,
represent a substantial portion of the entire consideration received by the PMSI
shareholders in the Merger. If the continuity of interest requirement is not
satisfied, the Merger would not be treated as a Reorganization.
Even if the Merger qualifies as a Reorganization, a recipient of Beverly
Shares would recognize gain to the extent that such shares were considered to be
received in exchange for services or property (other than solely PMSI Common
Stock). All or a portion of such gain may be taxable as ordinary income. In
addition, gain would have to be recognized to the extent that a PMSI shareholder
was treated as receiving (directly or indirectly) consideration other than
Beverly Common Stock in exchange for the shareholder's PMSI Common Stock. Such
other consideration is generally referred to as "boot."
A successful IRS challenge to the Reorganization status of the Merger (as a
result of a failure of the "continuity of interest" requirement or otherwise)
would result in a PMSI shareholder recognizing gain or loss with respect to each
share of PMSI Common Stock surrendered equal to the difference between the
shareholder's basis in such share and the fair market value, as of the Effective
Time, of the Beverly Common Stock so received and his holding period for such
stock would begin the day after the Merger.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS BASED ON CURRENT LAW.
EACH PMSI SHAREHOLDER IS URGED TO CONSULT HIS OWN TAX ADVISOR CONCERNING THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS AND ANY PROPOSED
CHANGES IN SUCH TAX LAWS.
REGULATORY APPROVAL
Under the HSR Act, and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), the Merger could not be consummated until
notifications were given and certain information was furnished to the FTC and
the Antitrust Division of the Department of Justice (the "Antitrust Division")
and specified waiting period requirements had been satisfied. Beverly and PMSI
each filed notification and report forms under the HSR Act with the FTC and the
Antitrust Division on January 30, 1995, and received notification of the early
termination of the applicable waiting periods under the HSR Act on February 10,
1995. At any time before or after the consummation of the Merger, the Antitrust
Division or the FTC could take such action under the antitrust laws as it deems
necessary and desirable in the public interest, including seeking to enjoin the
consummation of the Merger or seeking divestiture of substantial assets of
Beverly or PMSI. At any time before or after the Effective Time, and
notwithstanding that the HSR Act waiting period has expired, any state could
take such action under the antitrust laws as it deems necessary or desirable.
Such action might include seeking to enjoin the consummation of the Merger or
seeking divestiture of PMSI or businesses of Beverly or PMSI by Beverly. Private
parties may also seek to take legal action under the antitrust laws under
certain circumstances.
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RESALE RESTRICTIONS
All Beverly Shares received by PMSI shareholders in the Merger will be
freely transferable, except that Beverly Shares received by persons who are
deemed to be Affiliates of PMSI prior to the Merger may be resold by them only
in transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 in the case of such persons who become
Affiliates of Beverly) or as otherwise permitted under the Securities Act.
Persons who may be deemed to be Affiliates of PMSI or Beverly generally include
individuals or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and directors of such
party as well as principal stockholders of such party. The Merger Agreement
requires PMSI to exercise its reasonable best efforts to cause each of its
Affiliates to execute a written agreement in the form of Appendix D to this
Prospectus/Consent Solicitation Statement to the effect that such person will
not offer to sell, transfer or otherwise dispose of any of the Beverly Shares
issued to such person in or pursuant to the Merger unless: (a) such sale,
transfer or other disposition has been registered under the Securities Act; (b)
such sale, transfer or other disposition is made in conformity with Rule 145
under the Securities Act; or (c) in the opinion of counsel, such sale, transfer
or other disposition is exempt from registration under the Securities Act. See
"-- Interest of Certain Persons in the Merger."
STOCK EXCHANGE LISTING
The Merger Agreement provides that Beverly Shares to be issued pursuant to
the Merger Agreement and any shares of Beverly Common Stock issuable upon
exercise of the PMSI Options to be assumed by Beverly will be listed by Beverly
on the NYSE and the PSE.
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, a form of which is attached as Appendix A to this Prospectus/Consent
Solicitation Statement and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Merger Agreement.
GENERAL
Pursuant to the Merger Agreement, subject to the terms and conditions
thereof at the Effective Time, PMSI will be merged with and into Acquisition (a
wholly-owned subsidiary of Beverly). Acquisition will be the Surviving
Corporation in the Merger. The Merger will have the effects set forth in the
Delaware General Corporation Law (the "DGCL") and the FBCA. Upon the
satisfaction or waiver of all conditions to the Merger, and provided that the
Merger Agreement has not been terminated or abandoned, Beverly, Acquisition and
PMSI will cause a Certificate of Merger in the form of Appendix C to this
Prospectus/Consent Solicitation Statement to be executed, acknowledged and filed
with the Secretary of State of the State of Delaware as provided in Section 252
of the DGCL (the "Certificate of Merger") and shall cause Articles of Merger in
the form of Appendix B to this Prospectus/Consent Solicitation Statement to be
executed, acknowledged and filed with the Secretary of State of the State of
Florida as provided in Section 607.1105 of the FBCA (the "Articles of Merger").
CONVERSION OF PMSI COMMON STOCK
General. Subject to provisions for payments of cash in lieu of issuing
fractional shares, and without any action on the part of the holders thereof,
each issued share of PMSI Common Stock that is outstanding immediately before
the Effective Time (except for shares held in treasury by the Company, and
shares beneficially owned by Beverly, Acquisition, or any direct or indirect
subsidiary of Beverly or PMSI, as discussed below) will be converted in the
Merger into that number of Beverly Shares calculated in accordance with the
Exchange Ratio as follows:
(i) If the Beverly Share Closing Price is not lower than $12.25 or not
higher than $18.00, each share of PMSI Common Stock will be converted into
that number of Beverly Shares equal to the Exchange Ratio of $16.50 divided
by the Beverly Share Closing Price;
(ii) If the Beverly Share Closing Price is higher than $18.00, each
share of PMSI Common Stock will be converted into 0.9167 Beverly Shares;
and
(iii) If the Beverly Share Closing Price is lower than $12.25, each
share of PMSI Common Stock will be converted into 1.3469 Beverly Shares.
Each issued share of PMSI Common Stock, if any, that is held in treasury by
PMSI and each issued and outstanding PMSI Share that is beneficially owned by
Beverly, Acquisition or any direct or indirect subsidiary of Beverly or PMSI
immediately before the effective time will be canceled and retired.
Possible Fluctuation in the Number of Beverly Shares to be Issued and
Ceiling and Floor Provisions. The number of Beverly Shares to be issued pursuant
to the Merger Agreement fluctuates depending upon the Beverly Share Closing
Price, subject to certain limitations. For example, if a holder of PMSI Common
Stock held 2,000,000 shares of PMSI Common Stock, and the Beverly Share Closing
Price was $15.00, the PMSI shareholder would be entitled to receive 2,200,000
Beverly Shares, calculated by multiplying the Exchange Ratio ($16.50 divided by
$15.00, or 1.1) by the number of shares of PMSI Common Stock held by the
shareholder immediately prior to the Effective Time (2,000,000 shares). If the
Beverly Share Closing Price is higher than $18.00, the PMSI shareholder would be
entitled to receive 1,833,333 Beverly Shares, calculated by multiplying the
Exchange Ratio ($16.50 divided by $18.00, or .9167) by the number of shares of
PMSI Common Stock held by the shareholder immediately prior to the Effective
Time (2,000,000 shares). Finally, if the Beverly Share Closing Price is lower
than $12.25, the PMSI shareholder would be entitled to receive 2,693,877 Beverly
Shares, calculated by multiplying the Exchange Ratio ($16.50 divided by $12.25,
or 1.3469) by the number of shares of PMSI Common Stock held by the shareholder
immediately prior to the Effective Time (2,000,000 shares).
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Notwithstanding the foregoing, if the Beverly Share Closing Price is lower
than $12.25 and if Beverly adopts, authorizes or consummates a spin off, split
up, restructuring, recapitalization, reorganization, partial or complete
liquidation, or special or extraordinary dividend or distribution in respect of
the Beverly Shares that (i) is effective or has a record date before the
Effective Time and (ii) results or will result in Beverly's stockholders
receiving cash, property, or equity securities of Beverly or any of its direct
or indirect subsidiaries, each share of PMSI Common Stock will instead be
converted into that number of Beverly Shares equal to the Exchange Ratio of
$16.50 divided by the greater of $10.00 or the Beverly Share Closing Price. In
addition, PMSI may terminate its obligations under the Merger Agreement if the
Beverly Share Closing Price is lower than $10.00. See "-- Conditions" and
"RECENT DEVELOPMENTS OF BEVERLY."
CONVERSION OF PMSI OPTIONS
At the Effective Time, Beverly will assume all of the rights and
obligations of PMSI under the PMSI Stock Option Plans then in effect. Each PMSI
Option that has not been fully exercised before the Effective Time will be
converted into an option to purchase Beverly Shares. The number of Beverly
Shares which may be purchased with each assumed PMSI Option will equal the
product (rounded to the nearest whole share) of the Exchange Ratio multiplied by
the number of unexercised shares of PMSI Common Stock subject to the PMSI
Option. The per share exercise price for the Beverly Shares will equal the
quotient (rounded to the nearest whole cent) of the exercise price for each
share of PMSI Common Stock subject to an unexercised assumed PMSI Option divided
by the Exchange Ratio. Beverly and PMSI intend that Beverly's assumption of the
PMSI Options will comply with Section 424(a) of the Code and will not constitute
a modification of such options, and further that every stock option that
qualified as an "incentive stock option" under Section 422 of the Code
immediately before the Effective Time will continue to so qualify after its
assumption by Beverly. Within ten (10) business days following the Effective
Time, Beverly shall file a registration statement on Form S-8 (or other
appropriate form) with the Commission to register the Beverly Shares issuable
upon exercise of the assumed PMSI Options. The Merger Agreement provides that
the PMSI shareholder approval of the Merger, the Merger Agreement and the
transactions contemplated thereby will also constitute shareholder approval of
the PMSI 1990 Incentive and Non-statutory Stock Option Plan effective as of
December 23, 1989, as amended to date for purposes of Rule 16b-3, as promulgated
by the Commission under the Exchange Act. See "THE MERGER -- Interests of
Certain Persons."
EXCHANGE PROCEDURES
Promptly after the Effective Time, the Exchange Agent will mail to each
person who was, at the Effective Time, a holder of record of shares of PMSI
Common Stock, a letter of transmittal to be used by such holders in forwarding
their certificates representing shares of PMSI Common Stock ("Stock
Certificates"), and instructions for effecting the surrender of the Stock
Certificates in exchange for certificates representing Beverly Shares. Upon
surrender to the Exchange Agent of such letter of transmittal, together with a
Stock Certificate for cancellation, the holder of such Stock Certificate will be
entitled to receive a certificate representing that number of whole shares of
Beverly Common Stock, cash in lieu of any fractional shares (as described
below), and any declared and payable dividends and distributions (collectively,
the "Merger Consideration") that such holder has the right to receive for the
Stock Certificate surrendered, and the Stock Certificate so surrendered will be
canceled. PMSI SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE A LETTER OF TRANSMITTAL.
Beverly will not issue fractional shares of Beverly Common Stock. Any
holder of PMSI Common Stock otherwise entitled under the Merger Agreement to
receive a fractional share will receive a cash payment in an amount (rounded up
to the nearest whole cent) equal to the Beverly Share Closing Price multiplied
by the applicable fractional percentage of a share of Beverly Common Stock to
which such holder would otherwise be entitled.
A PMSI shareholder will not be entitled to receive dividends or other
distributions in respect of shares of Beverly Common Stock or other securities
represented by a Stock Certificate until the shareholder properly surrenders the
Stock Certificate for exchange. See "RECENT DEVELOPMENTS OF BEVERLY." Subject to
the effect of applicable laws, following proper surrender of any such Stock
Certificate, Beverly shall pay to the holder of certificates representing
Beverly Shares issued in exchange therefor: (i) at the time of
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such surrender, the amount of any dividends or other distributions on the
Beverly Shares with a record date after the Effective Time and payable before
surrender and not paid, less the amount of any required withholding taxes; and
(ii) at the appropriate payment date, the amount of dividends or other
distributions in respect of the Beverly Shares with a record date after the
Effective Time and a payment date subsequent to surrender thereof, less the
amount of any required withholding taxes.
At and after the Effective Time, there will be no record transfers of
outstanding shares of PMSI Common Stock. Stock Certificates presented to Beverly
after the Effective Time will be canceled and exchanged for the Merger
Consideration.
Any portion of the monies set aside for cash payments in lieu of fractional
interests and any Beverly Shares that are unclaimed by the former PMSI
shareholders one year after the Effective Time will be remitted and redelivered
to Beverly by the Exchange Agent upon demand of Beverly. Thereafter, any holder
of a Stock Certificate that has not been surrendered for exchange may surrender
that certificate to Beverly and (subject to applicable escheat, abandoned
property and similar laws) receive in exchange and substitution for it the
Merger Consideration. Notwithstanding the foregoing, none of PMSI, Beverly, the
Exchange Agent or any other person will be liable to any former holder of shares
of PMSI Common Stock for any cash or shares properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
Shareholders will not be entitled to interest with respect to the Merger
Consideration.
In the event that any Stock Certificate has been lost, stolen or destroyed,
upon the delivery to the Exchange Agent of (i) evidence satisfactory to the
Exchange Agent and Beverly that the Stock Certificate has been lost, destroyed
or wrongfully taken; (ii) an indemnity bond sufficient to hold Beverly and the
Exchange Agent harmless; and (iii) evidence reasonably satisfactory to Beverly
and the Exchange Agent that the person claiming ownership of such Stock
Certificate is the registered owner of the PMSI Common Stock previously
represented by such Stock Certificate that has been lost, destroyed or
wrongfully taken and such person would otherwise be entitled to exchange such
Stock Certificate for the Merger Consideration, the Exchange Agent will issue
the Merger Consideration in exchange for the lost, stolen or destroyed Stock
Certificate.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties
relating to, among other things: (a) the due incorporation, corporate power and
good standing of Beverly and PMSI and similar corporate matters; (b) the
authorization, execution, delivery and enforceability of the Merger Agreement;
(c) the capital structure of Beverly and PMSI; (d) the subsidiaries of PMSI; (e)
the filing with the Commission of all required forms, reports, schedules and
statements by Beverly and PMSI; (f) the preparation of the financial statements
of Beverly, PMSI and their respective subsidiaries; (g) conflicts under charters
or bylaws and violations of any instruments or law and required consents or
approvals; (h) real estate owned and leased by PMSI; (i) absence of undisclosed
liabilities and certain changes with respect to Beverly and PMSI; (j) taxes of
Beverly and PMSI; (k) retirement and other employee benefit plans of PMSI; (l)
brokers' and finders' fees due with respect to the Merger; (m) compliance with
environmental laws by PMSI; and (n) other representations and warranties
customary in merger transactions.
CERTAIN COVENANTS
Each of Beverly and PMSI (and its subsidiaries) has agreed to, among other
things,: (i) conduct their respective operations in the ordinary course in
substantially the same manner as theretofore conducted; (ii) cooperate in the
prompt preparation and filing of all Commission and other required or necessary
filings with governmental agencies and documents relating to the Merger; (iii)
take all reasonable action required to cause the Merger to be treated as a
reorganization under Section 368(a)(1)(A) of the Code and (iv) to use all
reasonable efforts to obtain and deliver to each other certain agreements in the
form of Appendix D to this Prospectus/Consent Solicitation Statement from
"affiliates" as such term is defined under Rule 145 of the Securities Act or by
applicable accounting rules. In addition, Beverly and PMSI have agreed that,
among other things, prior to the consummation of the Merger, Beverly and PMSI
each shall: (i) maintain itself as a validly existing corporation in good
standing under the laws of its state of incorporation; (ii) conduct its affairs
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and business consistent with its usual and ordinary course of business; and
(iii) sustain and preserve in all material respects its goodwill and business
organization and all of its advantageous business relationships.
Beverly, without limiting the generality of the foregoing, has also agreed
not to: (i) create, issue or permit to be outstanding any class of common stock
superior in right to the Beverly Common Stock with respect to voting, dividend
or liquidation rights; or (ii) issue any Beverly Common Stock for cash
consideration which is below then-current market prices, less any normal
underwriting discounts or commissions and expenses of sale, except for
immaterial issuances in connection with employee compensation or employee
incentive plans.
Additionally, PMSI, without limiting the generality of the foregoing, shall
not (and shall cause each of its subsidiaries not to): (i) grant or permit a
lien on, sell, lease, exchange, transfer or otherwise dispose of or grant to any
person a right or option to lease, purchase or otherwise acquire, any material
amount of its assets or properties, including the capital stock of its
subsidiaries, any indebtedness owed to it and any rights of value to it (except
in the ordinary course of business consistent with past practice and except for
certain intercompany transfers); (ii) sell, issue, award, grant, pledge, redeem,
purchase or otherwise acquire, transfer or encumber any shares of its capital
stock, any securities convertible into or exchangeable for any shares of its
capital stock, or any rights, options or warrants to acquire any shares of its
capital stock or any securities convertible into or exchangeable for any shares
of its capital stock; (iii) reclassify any outstanding common stock into a
different class or number of shares or otherwise change its authorized
capitalization, or pay, declare or set aside for payment a dividend or other
distribution in respect of any shares of its capital stock whether payable in
cash, stock or other property; (iv) borrow any money, issue any debt securities
or assume, indorse or guarantee, or become a surety, accommodation party or
otherwise responsible for an obligation or indebtedness of a person other than
itself and any of its subsidiaries (except for borrowings under existing credit
agreements made in the usual and ordinary course of business or as otherwise
disclosed to Beverly); (v) authorize, recommend, consummate or otherwise enter
into an agreement providing for a merger, dissolution, consolidation,
restructuring, recapitalization, reorganization, partial or complete
liquidation, or the acquisition or disposition of a material amount of assets or
securities of or by it, except as otherwise permitted by the Merger Agreement;
(vi) amend, renew, waive, breach, extend, modify, enter into, release in any
respect or relinquish any right or benefit under any mortgage, agreement,
instrument, obligation or other commitment which would be material to PMSI;
(vii) settle or compromise any material claim, liability, tax assessment or
financial contingency; (viii) change the purpose or character of its business,
amend its bylaws or articles of incorporation or (except as required to comply
with generally accepted accounting principles) change its accounting methods,
practices or principles; (ix) enter into any transaction with any of its
officers, directors, affiliates or shareholders (except in the usual and
ordinary course of business and on an arm's length basis); or (x) discontinue or
materially diminish any insurance coverage applicable to its assets, properties
or business operations.
NO SOLICITATION OF TRANSACTIONS
PMSI has agreed to cease and cause to be terminated any existing
activities, discussions, or negotiations with any person (including PMSI, any of
its subsidiaries, or any of their respective officers, directors, or affiliates,
but excluding Beverly, Acquisition, and their respective affiliates or
subsidiaries) previously contacted with respect to an offer or proposal to
acquire for $50,000,000 or more in value any assets or equity securities of PMSI
or any of its subsidiaries (whether pursuant to a merger, purchase,
consolidation, reorganization, tender offer, exchange offer, share exchange, or
other business combination of any kind) (an "Acquisition Proposal"). During the
term of the Merger Agreement, subject to fiduciary obligations of the PMSI Board
of Directors under applicable law, and in the absence of a material breach of
the Merger Agreement by Beverly or Acquisition, PMSI shall not, and PMSI shall
instruct and use reasonable efforts to cause its agents, officers, directors,
employees, and other representatives (including any attorney, accountant, or
investment banker retained by it or any of its subsidiaries) not to, directly or
indirectly, (a) solicit, initiate, or intentionally encourage the submission of
any Acquisition Proposal, (b) participate in discussions or negotiations with
any person regarding any Acquisition Proposal by that person or (c) furnish to
any person any nonpublic business or financial information regarding PMSI or any
of its subsidiaries in connection with any Acquisition Proposal. Notwithstanding
the foregoing, PMSI may furnish information to, and may
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participate in discussions or negotiations with, any person regarding an
unsolicited Acquisition Proposal, if the PMSI Board determines in good faith,
based on an opinion of outside legal counsel, that a failure to furnish the
information or participate in the discussions or negotiations would likely
conflict with the proper discharge of the fiduciary duties of the PMSI Board of
Directors. Furthermore, nothing in the Merger Agreement prevents the PMSI Board
of Directors from taking, and disclosing to PMSI shareholders, a position
contemplated by Commission Rules 14d-9 and 14e-2(a)(2) or (3) under the Exchange
Act with respect to a tender offer. PMSI shall promptly notify Beverly of any
Acquisition Proposal that it receives, including the material terms and
conditions of it and the identity of the person or group making the Acquisition
Proposal, and shall keep Beverly informed of the status and terms of any request
for information or any discussion or negotiation. The Merger Agreement does not
permit PMSI to enter into any definitive agreement with respect to an
Acquisition Proposal during the term of the Merger Agreement.
BENEFIT PLANS
After the Effective Time, Beverly will take all action required so that
employees of PMSI who are employed by Beverly or any of its subsidiaries
following the Effective Time will be entitled to receive benefits no less
favorable than those which other employees of Beverly subsidiaries are eligible
to receive and will be entitled to participate in any and all benefits in which
employees of Beverly subsidiaries are generally able to participate. Beverly has
further agreed that after the Effective Time it will use its best efforts to
cause PMSI employees' respective terms of service with PMSI to be credited
toward any required terms of service with Beverly or its subsidiaries for
purposes of eligibility or vesting accrual under any employee benefit, welfare
or compensation plan of Beverly or its subsidiaries. See "THE MERGER -- Interest
of Certain Persons."
CONDITIONS
The respective obligations of Beverly and PMSI to consummate the Merger are
subject to the fulfillment of each of the following conditions: (i) the
requisite shareholder approval in accordance with the FBCA and PMSI's bylaws and
articles of incorporation shall have been obtained; (ii) any waiting period
applicable to consummation of the Merger Agreement under the HSR Act shall have
expired or been terminated or there shall be an exemption therefrom; (iii) the
Merger Registration Statement must have been declared effective by the
Commission, a stop order must not be in effect or threatened by the Commission
with respect to the Merger Registration Statement, and an investigation or legal
proceeding by the Commission suspending or seeking to suspend the effectiveness
of the Merger Registration Statement must not be pending or threatened; and (iv)
all orders, permits, consents, licenses, approvals, franchises, certificates,
registrations and other authorizations from governmental authorities necessary
to consummate the Merger must have been obtained. The applicable waiting periods
under the HSR Act were terminated on February 10, 1995.
In addition, Beverly's obligation to consummate the Merger is subject to
the satisfaction, unless waived, of certain other conditions including, among
others: (i) that the representations and warranties of PMSI are true and correct
in all material respects as of December 26, 1994 and that such representations
and warranties will be true and correct in all material respects as of the
Closing Date; (ii) that all consents and approvals of any third party required
by PMSI in connection with the execution, delivery and performance of the Merger
Agreement shall have been obtained or made; (iii) that PMSI shall have performed
and complied with its covenants and obligations under the Merger Agreement in
all material respects; (iv) that Beverly shall have received a "comfort" letter
from PMSI's independent accountants covering certain matters customarily
included in comfort letters relating to transactions similar to the Merger; (v)
that from the date of the Merger Agreement through the Closing Date, there shall
not have occurred any Material Adverse Effect (as defined in the Merger
Agreement) with respect to PMSI; (vi) that no law or final non-appealable order
has been issued, adopted, enacted, entered or enforced by, and no action, suit
or proceeding shall be pending or threatened before, any court or agency against
the parties that would prevent consummation of the transactions contemplated by
the Merger Agreement; (vii) that Beverly and Acquisition shall have received
from PMSI's legal counsel an opinion substantially consistent with, and with
respect to certain matters set forth in an exhibit to the Merger Agreement;
(viii) the settlement, conclusion or termination (unless Beverly notifies PMSI
otherwise within twenty (20) days after the date of the Merger Agreement) of
certain enumerated administrative complaints filed against PMSI with the Board
of Pharmacy of the Florida
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Department of Business; and (ix) that Beverly, Acquisition and their legal
counsel shall have received from PMSI and certain shareholders thereof tax
opinion certificates in substantially the form as provided in an exhibit to the
Merger Agreement previously agreed to by Beverly and PMSI. In addition, the
administrative complaints filed against PMSI by the Board of Pharmacy of the
Florida Department of Business have been settled. The settlement requires PMSI
to pay a civil fine of $4,500 and comply with the pharmacy statutes and
regulations as interpreted by the Board of Pharmacy, which will require PMSI to
cease using pharmacy technicians to solicit refills and use pharmacists to
perform this function instead.
PMSI's obligation to consummate the Merger is also subject to the
satisfaction, unless waived, of certain other conditions, including, among
others: (i) that the representations and warranties of Beverly are true and
correct in all material respects as of December 26, 1994 and that such
representations and warranties are true and correct in all material respects as
of the Closing Date; (ii) that Beverly shall have performed and complied with
its covenants and obligations under the Merger Agreement in all material
respects; (iii) that from the date of the Merger Agreement through the Closing
Date, there shall not have occurred a Material Adverse Effect with respect to
Beverly; (iv) that PMSI shall have received a reaffirmation from its financial
advisor as of the date that the Prospectus/Consent Solicitation Statement is
mailed to PMSI's shareholders to the effect that the consideration to be
received by the holders of shares of PMSI Common Stock in the Merger is fair to
them from a financial point of view and such opinion must not have been revoked
or withdrawn; (v) the NYSE must have approved for listing all of the Beverly
Shares to be issued pursuant to the Merger; (vi) that PMSI shall have received
from Beverly's outside legal counsel a written opinion, as of the Closing Date,
in form and substance reasonably satisfactory to PMSI, as to certain tax
consequences of the Merger; and (vii) that PMSI shall have received from
Beverly's outside legal counsel an opinion substantially consistent with, and
with respect to the matters set forth in a form as set forth in an exhibit to
the Merger Agreement. Any of the conditions precedent to the closing obligations
of Beverly, Acquisition or PMSI may be waived by such party without notice to,
or approval by, the shareholders of such party.
TERMINATION
The Merger Agreement may be terminated, and the transactions contemplated
thereby abandoned by all the parties thereto, at any time on or before the
Effective Time, whether or not the Merger Agreement is approved by PMSI
shareholders, as follows: (i) by written agreement of termination among Beverly,
Acquisition and PMSI that has been approved by their respective Boards of
Directors; (ii) by Beverly or PMSI (a) if PMSI's shareholders do not approve the
Merger, or (b) if without the fault of the terminating party, the Effective Time
has not occurred before June 30, 1995; except that Beverly will not have the
right to terminate the Merger Agreement based upon the fact that the Effective
Time has not occurred before June 30, 1995 if the Consent Solicitation is held
before June 30, 1995 and Beverly or Acquisition does not vote in favor of the
Merger all of the shares of PMSI Common Stock that Beverly or Acquisition
beneficially owns or then has the right or power to vote with respect to the
Merger pursuant to a proxy or voting agreement; (iii) by Beverly or PMSI if a
governmental authority or state or federal court in the United States adopts,
enters, or issues a final and non-appealable order, or adopts, enacts, enforces,
or holds applicable to the Merger a law, that directly or indirectly (a)
declares the Merger to be illegal; or (b) permanently enjoins, restrains or
otherwise prohibits the acquisition of PMSI by Beverly and Acquisition (or any
of their respective affiliates or subsidiaries) pursuant to the Merger; (iv) by
PMSI, if (a) it receives an Acquisition Proposal that the Board of Directors
determines in good faith in the exercise of its fiduciary duties to shareholders
under applicable law, as determined based on an opinion of outside legal counsel
and the advice of its financial advisors as to the financial capability of the
person making the Acquisition Proposal, has a per share value greater than the
price per share then being offered for the shares of PMSI Common Stock pursuant
to the Merger Agreement, and (b) the value being offered for the shares of PMSI
Common Stock pursuant to the Merger Agreement, as reasonably determined by the
PMSI Board of Directors, is not increased within three (3) business days after
the first announcement of such Acquisition Proposal to be equal to or greater
than that being offered pursuant to that Acquisition Proposal; (v) by PMSI, (a)
if the Beverly Share Closing Price is lower than $10.00 or (b) if Smith Barney,
Inc. withdraws its written opinion as of the date of the Merger Agreement or as
of the date of the Prospectus/Consent Solicitation Statement to the effect that,
based on the assumptions and qualifications stated in that opinion, the
consideration to be received by the holders of the shares of PMSI
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Common Stock pursuant to the Merger is fair to them from a financial point of
view; (vi) by PMSI, if Beverly or Acquisition fails to perform in any material
respect any obligation required by the Merger Agreement to be performed by them
(or either of them) on or before the effective date of the termination; (vii) by
Beverly, if PMSI fails to perform in any material respect any obligation
required by the Merger Agreement to be performed by it on or before the
effective date of the termination; (viii) by Beverly, if PMSI either (a) amends,
modifies, or withdraws in any material respect adverse to Beverly or Acquisition
its approval or recommendation of the Merger and the Merger Agreement, or (b)
recommends to its shareholders any Acquisition Proposal of another person; or
(ix) by Beverly, if a governmental authority or a state or federal court in the
United States adopts, enters or issues a final and non-appealable order, or
adopts, enacts, enforces, or holds applicable to the Merger, a law that directly
or indirectly (a) prohibits the ownership or operation by Beverly and
Acquisition (or any of its affiliates or subsidiaries) of all or a significant
portion of the assets, business or properties of PMSI and its subsidiaries,
taken as a whole, or (b) compels Acquisition (or any of its affiliates or
subsidiaries) to segregate or dispose of all or a significant portion of the
assets, business or properties of PMSI and its subsidiaries, taken as a whole.
Termination of the Merger Agreement by any party pursuant to clauses (ii)
through (ix) as set forth above, will be valid only if a notice of termination,
signed by or on behalf of the party electing the termination, is given to all
other parties to the Merger Agreement. Termination of the Merger Agreement in
accordance with clause (i) above will be effective as of the date specified in
the parties' written agreement of termination. Termination of the Merger
Agreement in accordance with clause (iii) or (ix) above will be effective on the
effective date of the law or order that makes the Merger illegal or permanently
enjoins, restrains or prohibits consummation of the Merger. Termination of the
Merger Agreement pursuant to any other clause above will be effective when the
notice of termination is given to the other parties to the Merger Agreement by
the party electing the termination.
If the Merger Agreement is terminated in accordance with the provisions of
(i), (ii), (iii), (v) or (ix), as set forth above, a party to the Merger
Agreement (and its officers, directors and shareholders) will not have any
further right, liability or obligation with respect to any other party to the
Merger Agreement (or to any parties' officers, directors or shareholders).
Additionally, if the Merger Agreement is terminated pursuant to clause (iv), as
set forth above, Beverly and Acquisition shall not assert any claim for tortious
interference against PMSI. Except as otherwise provided below, nothing in the
Merger Agreement relieves any party from liability for damages actually incurred
by another party as a result of any breach of the Merger Agreement by it. If the
Merger Agreement is terminated, the party shall hold in strict confidence and
not exploit in any manner any data or information obtained from each other.
TERMINATION FEE
If either (a) the Merger Agreement is terminated pursuant to either clause
(iv) or clause (viii) as set forth above or (b) PMSI receives an Acquisition
Proposal before the Merger Agreement is terminated, Smith Barney subsequently
withdraws its Fairness Opinion, PMSI thereafter terminates the Merger Agreement
pursuant to clause (v) as set forth above and PMSI accepts any Acquisition
Proposal within one (1) year after the effective date of its termination of the
Merger Agreement, then in either such case, PMSI shall promptly, but in no event
later than ten (10) business days after the effective date of the termination or
the date when PMSI accepts the Acquisition Proposal (as the case may be), pay to
Beverly a termination fee in cash of $5,000,000, in satisfaction and full
settlement of all liabilities and obligations of PMSI to Beverly and Acquisition
under the Merger Agreement. Payment by PMSI of the foregoing fee will relieve it
of any further liability for any breach of the Merger Agreement. Notwithstanding
the foregoing, PMSI will not be obligated to pay that fee to Beverly if Beverly
or Acquisition is in breach of the Merger Agreement in any material respect at
the time when the Merger Agreement is terminated.
EXPENSES
Beverly and PMSI will bear their own respective costs and expenses in
connection with the Merger, except that Beverly shall pay all filing and
registration fees of the Commission and state securities regulatory
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authorities and all costs incurred in connection with the printing of this
Prospectus/Consent Solicitation Statement and the Registration Statement of
which it is a part.
AMENDMENTS AND WAIVERS
The Merger Agreement provides that Beverly, Acquisition and PMSI may
mutually amend any provisions of the Merger Agreement at any time prior to the
Effective Time; provided, however, that no amendment of any provisions of the
Merger Agreement shall be valid unless such amendment shall be in writing and
signed by all of the parties to the Merger Agreement and, with respect to
Beverly, Acquisition or PMSI, is approved and authorized pursuant to a
resolution duly adopted by its respective board of directors. After approval of
the Merger, the Merger Agreement and the transactions contemplated thereby by
PMSI's shareholders, the Merger Agreement may not be amended or modified by the
parties thereto in any respect to (i) alter or change the Merger Consideration;
(ii) alter or change any term of Acquisition's Certificate of Incorporation, or
(iii) alter or change any other provision of the Merger Agreement which would,
individually or in the aggregate, have a material adverse effect on PMSI or its
shareholders, unless in each case PMSI subsequently obtains the approval of its
shareholders prior to the Effective Time. The Merger Agreement also provides
that no delay or course of dealing by a party to the Merger Agreement shall
operate as a waiver of any power, right or remedy of such party, and
additionally, that a written waiver of a power, right or remedy under any
provision of the Merger Agreement by a party thereto shall not constitute a
waiver of any succeeding exercise of such power, right or remedy or a waiver of
the provision itself.
ALTERNATIVE MERGER STRUCTURE
Beverly and PMSI reserve the right to change the structure of the Merger so
that Acquisition would merge with and into PMSI, rather than PMSI merging with
and into Acquisition. PMSI shareholder approval of the Merger Agreement shall be
deemed to include approval of this alternative structure of the Merger. Any such
change in the structure of the Merger would not be made unless Beverly and PMSI
are satisfied that such change would not effect the tax consequences of the
Merger.
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MANAGEMENT AND OPERATIONS OF BEVERLY AFTER THE MERGER
MANAGEMENT
The directors and executive officers of Beverly and Acquisition (which
directors and executive officers are the same as Beverly's) will continue in
such capacities following the Merger. Information with respect to the directors
and executive officers of Beverly, executive compensation of Beverly executive
officers and information regarding security ownership of Beverly Common Stock is
contained in Beverly's Proxy Statement for its 1995 Annual Meeting of
Stockholders, relevant portions of which are incorporated by reference in this
Prospectus/Consent Solicitation Statement. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
The directors and certain executive officers of PMSI, including Cecil S.
Harrell, Chairman and Chief Executive Officer of PMSI, will no longer serve in
such capacities with respect to either Beverly or Acquisition immediately
following the Effective Time. Information with respect to the directors and
executive officers of PMSI, executive compensation of PMSI executive officers
and information regarding security ownership of PMSI Common Stock is contained
in PMSI's Form 10-K/A (Amendment No. 3), which is incorporated by reference in
this Prospectus/Consent Solicitation Statement. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
Neither Beverly nor PMSI is aware of any material relationships between
Beverly or its directors or executive officers and PMSI or its directors or
executive officers, except as contemplated by the Merger Agreement or as
described herein, including the materials incorporated herein by reference.
OPERATIONS
Beverly is the largest provider of long-term health care in the United
States. At January 31, 1995, Beverly operated 727 nursing facilities with 78,061
licensed beds. The facilities are located in 33 states and the District of
Columbia, and range in capacity from 20 to 388 beds. At January 31, 1995,
Beverly also operated 40 retirement and congregate living projects containing
2,518 units, 65 pharmacies and pharmacy-related outlets, six transitional
hospitals containing 274 beds and four home health care entities. Beverly's
facilities had average occupancy of 88.5%, 88.5% and 88.4% during the years
ended December 31, 1994, 1993 and 1992, respectively. See "RECENT DEVELOPMENTS
OF BEVERLY."
Health care system reform proposals and continuing pressure on health care
providers to be more cost effective in the delivery of patient care have changed
the nation's health care delivery system. These reform proposals, pressures to
contain costs and factors such as an aging population and market competition
continue to influence Beverly's operating strategy.
Beverly's traditional business of providing skilled nursing care to the
elderly in its long-term care facilities continues to be its largest line of
business. However, as payors seek cost-effective alternatives to acute care and
rehabilitation hospitals, the long-term care setting has emerged as a
lower-cost, high-quality option for certain patients who require subacute, post
acute, transitional and rehabilitative care.
Pressures within the health care system to contain costs have resulted in
demands on long-term care providers, such as Beverly, to deliver care to
patients who traditionally have been treated in higher-cost settings. Such
patients require a high degree of ancillary services such as pharmaceutical
products and rehabilitative care. Payment to Beverly for these higher-acuity
services is typically at a higher rate than for traditional custodial nursing
care, yet the costs to Beverly of delivering these services also is higher than
nursing-only services.
The key elements of Beverly's operating strategy reflect both the
traditional emphasis on providing skilled nursing care as well as the evolving
health care marketplace. Accordingly, Beverly seeks to increase its census,
especially as it relates to managed care, commercial insurance and other
private-pay patients as well as Medicare patients. Furthermore, Beverly seeks to
expand its outpatient and rehabilitative care capabilities and utilization
through increasing its attractiveness to managed care payors and younger
patients.
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In order to attract such patients, Beverly facilities must be able to
deliver a variety of ancillary services at competitive prices. The majority of
Beverly's expansion in ancillary services has been accomplished through internal
growth. However, Beverly has concluded that one option to achieve
cost-effectiveness in its delivery of ancillary services is to more directly
participate in the health care delivery system. Consistent with this strategy,
Beverly purchased two institutional pharmacies in late 1994 and is aggressively
replacing contracted therapists with employees.
Beverly management believes that the acquisition of PMSI will expand
Beverly's pharmacy business into new markets including home delivery and
workers' compensation. The case management aspect of PMSI enhances Beverly's
ability to deliver services to outpatients by providing access to the workers'
compensation market. Existing PMSI management will be critical to Beverly's and
PCA's success in meeting the needs of these markets. As a result, it is not
anticipated that significant reductions will be made to PMSI's workforce.
Beverly and PCA will utilize existing PMSI management to take advantage of their
expertise and market specialization. See "RECENT DEVELOPMENTS OF BEVERLY."
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DESCRIPTION OF BEVERLY CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Beverly has the authority to issue 325,000,000 shares of capital stock, of
which 300,000,000 are common stock, par value $.10 per share ("Beverly Common
Stock"), and 25,000,000 are preferred stock, par value $1.00 per share ("Beverly
Preferred Stock"). At March 31, 1995, Beverly had outstanding 85,724,523 shares
of Beverly Common Stock and 3,000,000 shares of Beverly Series B Preferred Stock
(as defined).
BEVERLY PREFERRED STOCK
Under Beverly's Certificate of Incorporation, Beverly's Board of Directors
may from time to time establish and issue one or more series of preferred stock
and fix the designations, powers, preferences and rights of the shares of such
series and the qualification, limitations or restrictions thereon, including,
but not limited to, the fixing of the dividend rights, dividend rate or rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the liquidation
preferences, in each case, if any, of any wholly unissued series of Beverly
Preferred Stock. Any such series may rank on a parity with or (subject to the
class voting rights of the Beverly Series B Preferred Stock) senior to the
Beverly Series B Preferred Stock with respect to dividends, distributions and
liquidation, and any such series may have greater or lesser voting rights than
the Beverly Series B Preferred Stock.
Beverly has outstanding 3,000,000 shares of $2.75 Cumulative Convertible
Exchangeable Preferred Stock (the "Beverly Series B Preferred Stock"), with a
liquidation value of $50 per share. The Beverly Series B Preferred Stock is
convertible into 11,252,813 shares of Beverly's Common Stock. The holders of the
Beverly Series B Preferred Stock are entitled to receive out of legally
available funds, when and as declared by Beverly's Board of Directors, quarterly
cash dividends equal to $2.75 per share (aggregate of $8,250,000 per annum).
Except as required by law, holders of the Beverly Series B Preferred Stock have
no voting rights unless dividends on the Beverly Series B Preferred Stock have
not been paid in an aggregate amount equal to at least six full quarters
(whether or not consecutive), in which case holders of the Beverly Series B
Preferred Stock will be entitled to elect two additional directors to Beverly's
Board of Directors to serve until such dividend arrearage is eliminated. Beverly
has paid all required quarterly dividends on the Beverly Series B Preferred
Stock since its issuance in 1993. The Beverly Series B Preferred Stock is
exchangeable, in whole or in part (but in no more than two parts), at the option
of Beverly, on any dividend payment date beginning November 1, 1995, for
Beverly's 5 1/2% Convertible Subordinated Debentures due August 1, 2018 (the
"5 1/2% Debentures"), at the rate of $50 principal amount of 5 1/2% Debentures
for each share of the Beverly Series B Preferred Stock. The Beverly Series B
Preferred Stock is redeemable at any time on and after August 1, 1996, in whole
or in part, only at the option of Beverly, initially at a redemption price of
$51.925 per share, and thereafter at prices decreasing ratably annually to $50
per share on and after August 1, 2003, plus accrued and unpaid dividends.
BEVERLY COMMON STOCK
Holders of Beverly Common Stock are entitled to receive such dividends as
are declared by the Board of Directors, subject to the preference of the Beverly
Series B Preferred Stock and any other outstanding Beverly Preferred Stock, and
are entitled to cast one vote per share on all matters voted upon by
stockholders. There is no cumulative voting for the election of directors and
Beverly Common Stock does not have any preemptive rights. Upon liquidation of
Beverly, holders of Beverly Common Stock are entitled to share equally and
ratably in any assets available for distribution to them, after payment or
provision for liabilities and amounts owing with respect to the Beverly Series B
Preferred Stock and any other outstanding Beverly Preferred Stock. Payment and
declaration of dividends on Beverly Common Stock and purchases of shares thereof
by Beverly are subject to certain restrictions if Beverly fails to pay dividends
on its Beverly Series B Preferred Stock and will be subject to restrictions if
Beverly fails to pay dividends on any other series of Beverly Preferred Stock
ranking prior to Beverly Common Stock as to the payment of dividends. Beverly is
subject to certain restrictions under its banking arrangements related to the
payment of cash dividends on its common stock.
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The Registrar and Transfer Agent for Beverly Common Stock is The Bank of
New York.
BEVERLY COMMON STOCK PURCHASE RIGHTS
The Beverly Board of Directors has adopted a stockholders rights plan,
pursuant to which one common stock purchase right (a "Right" or "Rights") was
issued with respect to each share of Beverly Common Stock (the "Common Shares"),
outstanding at the close of business on November 2, 1994 (the "Record Date").
Each Right entitles the registered holder thereof, after the Right becomes
exercisable and until September 28, 2004 (or the earlier redemption, exchange,
or termination of the Right), to purchase from Beverly one Common Share at a
price of $70 per share, subject to adjustment (the "Purchase Price"). The
description and terms of the Rights are set forth in a Rights Agreement dated
September 29, 1994 (the "Rights Agreement") between Beverly and the Bank of New
York, as Rights Agent (the "Rights Agent").
The Rights are represented by the Common Share certificates and are not
exercisable until a Distribution Date (as defined). A Distribution Date is
defined as the earlier of the following: (i) ten (10) days following the Shares
Acquisition Date (the first date of a public announcement by Beverly or an
Acquiring Person which reveals the existence of an Acquiring Person) or (ii) the
tenth day after the date of the commencement of, or of the first public
announcement of the intent of any person (other than Beverly, any of its
Subsidiaries, or any of its Employee Benefit Plans) to commence a tender or
exchange offer which would result in any Person becoming the beneficial owner of
common shares aggregating 15% or more of the outstanding Beverly Common Shares
(an "Acquiring Person"). The Board of Directors of Beverly may postpone, under
certain circumstances, one or more times, a Distribution Date beyond the dates
set forth above. As soon as practicable, after a Distribution Date, the Rights
Agent will send to each record holder of Beverly Common Shares, as of the close
of business on a Distribution Date, a certificate for Rights evidencing one
Right for each Common Share. The Rights will first become exercisable on a
Distribution Date, unless earlier redeemed or exchanged, and may then begin
trading separately. The Rights will not at any time have any voting rights.
Each holder of a Right (other than those owned by the Acquiring Person
which shall be void) will have the right to receive upon exercise that number of
Common Shares having a market value of two times the then current Purchase Price
of one Right if one of the following events is triggered: (1) a person becomes
an Acquiring Person (except under certain circumstances where cash offers for
all outstanding Common Shares are approved by the Board of Directors of
Beverly); or (2) if Beverly is the surviving corporation in a merger with an
Acquiring Person or any Associate or Affiliate (as defined in Section 12b-2 of
the Exchange Act) of any Acquiring Person, and the Common Shares were not
changed or exchanged. In the event that a person or group becomes an Acquiring
Person, or Beverly is acquired in a merger or other business combination
transaction where more than 50% of its assets or earning power was sold, proper
provision shall be made so that each holder of a Right shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction would have the market value of two times
the then current Purchase Price of one Right.
The Board of Directors has the right at any time prior to an acquisition by
an Acquiring Person of 50% or more of the then outstanding Common Shares to
cause Beverly to acquire the Rights (other than those owned by the Acquiring
Person which are void) in exchange for that number of Common Shares which has an
aggregate value, per Right, equal to the excess of the value of the Common
Shares issuable upon exercise of a Right after a person becomes an Acquiring
Person over the Purchase Price.
The Board of Directors may redeem the Rights in whole at a price of $.01
per Right (the "Redemption Price") at any time prior to the close of business on
the tenth day following the public announcement of an Acquiring Person. The
ten-day redemption period may be changed by a majority of the Board of Directors
under certain circumstances. The right to exercise the Rights will immediately
terminate upon action by the Board of Directors to redeem the Rights and the
holders of the Rights will only have the right to receive the Redemption Price.
The Rights will expire on September 28, 2004, unless earlier redeemed or
exchanged.
The Purchase Price, the number of shares covered by each Right and the
number of Rights outstanding are subject to adjustment from time to time to
prevent dilution. Such adjustments may be made in the event
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Beverly (i) declares a stock dividend on, or a subdivision, combination or
reclassification of, the Common Shares, (ii) upon the grant to holders of the
Common Shares of certain rights or warrants to subscribe for or purchase Common
Shares or convertible securities at less than the current market price of the
Common Shares or (iii) upon the distribution to holders of the Common Shares of
evidences of indebtedness, securities or assets (excluding regular periodic cash
dividends at a rate not in excess of 125% of the last regular periodic cash
dividend paid, or if not previously paid, at a rate not to exceed 50% of the
average net income per share of Beverly for the four quarters ending immediately
prior to the payment of such dividend, or dividends payable in Common Shares
(which dividends will be subject to the adjustment described in clause (i)
above) or of subscription rights or warrants (other than those referred to
above).
No adjustment in the Purchase Price will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase Price. No
fractional shares will be issued and in lieu thereof, a payment in cash will be
made based on the market price of the Common Shares on the last trading date
prior to the date of exercise.
Until a Right is exercised, the holder thereof will have no rights as a
stockholder of Beverly beyond those as an existing stockholder, including,
without limitation, the right to vote or to receive dividends.
Any provisions of the Rights Agreement may be amended by the Board of
Directors of Beverly prior to a Distribution Date. After a Distribution Date,
Beverly and the Rights Agent may amend or supplement the Rights Agreement
without the approval of any holders of Right Certificates to cure any ambiguity,
to correct or supplement any provision contained therein which may be defective
or inconsistent with any other provisions therein, to shorten or lengthen any
period under the Rights Agreement (requiring a majority of the Board of
Directors under certain circumstances), or so long as the interest of the
holders of Right Certificates (other than an Acquiring Person or an affiliate or
associate of an Acquiring Person) are not adversely affected, thereby, to make
any other provision in regard to matters or questions arising thereunder which
Beverly and the Rights Agent may deem necessary or desirable, including but not
limited to extending the Final Expiration Date. Beverly may at any time prior to
a Person becoming an Acquiring Person amend the Rights Agreement to lower the
thresholds described above to not less than the greater of (i) any percentage
greater than the largest percentage of the outstanding Common Shares then known
by Beverly to be beneficially owned by any person or group of affiliated or
associated persons and (ii) 10%.
The Rights will cause substantial dilution to a person or group that
acquires 15% or more of Beverly's Common Stock on terms not approved by
Beverly's Board of Directors, except pursuant to an offer conditioned on
substantial number of Rights being acquired. The Rights should not interfere
with any merger or other business combination approved by the Board of Directors
prior to ten days after the time that a Person or group has become an Acquiring
Person, as the Rights may be redeemed by Beverly at $.01 per Right prior to such
time.
On April 6, 1995, the Board of Directors approved certain amendments to the
Rights Agreement, and directed that the Plan, as amended, be submitted to a
binding vote of stockholders at the Annual Meeting scheduled for May 18, 1995.
The amendments to the Rights Agreement (the "Amendments") adopted by the Board
of Directors provide for the following:
Stockholder Referendum. Prior to the adoption of the Amendments, redemption
of the Rights Agreement was solely within the discretion of Beverly's Board of
Directors. Pursuant to the Amendments, redemption of the Rights (as well as
elimination of the Rights Agreement) will be submitted to a binding stockholder
vote if an offer for all outstanding shares meeting certain conditions, as
described below, is made and within sixty (60) days thereafter, Beverly's Board
of Directors has not either redeemed the Rights or approved a financially
superior alternative transaction. Beverly's Board of Directors must redeem the
Rights if holders of a majority of the outstanding Beverly Common Stock vote to
request such redemption to allow the completion of that offer or a financially
superior offer. The Amendments thus give Beverly's stockholders the power to
cause the redemption of the Rights to allow completion of an offer meeting the
specified conditions, regardless of Beverly's Board of Directors' position on
that offer.
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The conditions of the offer that would trigger a stockholder referendum are
as follows: (i) the offer must be for all outstanding shares of Beverly Common
Stock at the same price; (ii) the portion of the offer that is for cash must be
fully financed; (iii) any portion of the offer that is non-cash consideration
must be in the form of New York Stock Exchange listed securities and the offer
must provide tax-deferred treatment for stockholders; and (iv) the offer cannot
be subject to financing, funding or due diligence conditions.
Term of Plan. Prior to the adoption of the Amendments, the Rights Agreement
was scheduled to expire in 2004. Pursuant to the Amendments, the Rights
Agreement will now expire at Beverly's 1998 annual meeting unless holders of a
majority of the shares voting at Beverly's 1998 annual meeting vote
affirmatively to extend the term of the Plan. If Beverly's stockholders approve
the extension at Beverly's 1998 Annual Meeting, the Rights Agreement will expire
at Beverly's 2001 annual meeting.
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COMPARATIVE RIGHTS OF STOCKHOLDERS OF BEVERLY AND PMSI
The rights of Beverly stockholders are governed by Beverly's Certificate of
Incorporation (the "Beverly Certificate"), Beverly's Bylaws, and by the DGCL.
The rights of PMSI shareholders are currently governed by the PMSI Articles of
Incorporation, PMSI's Bylaws, and by the FBCA. After the Merger, the rights of
PMSI shareholders who receive Beverly Shares in the Merger will thereafter be
governed by the Beverly Certificate, Beverly's Bylaws, and by the DGCL. The
following discussion describes the material differences in the rights of
stockholders of Beverly and shareholders of PMSI.
BOARD OF DIRECTORS; REMOVAL; FILLING VACANCIES
Beverly. Article III of the Beverly Bylaws provides that the number of
directors which shall comprise the full Board of Directors of the corporation
shall be fixed by resolution of the Board of Directors. There are currently
seven members on the Beverly Board of Directors. The Beverly Bylaws, pursuant to
Article III, Section 5, provide that the entire Board of Directors or any
individual Director may be removed, with or without cause, from office by a
majority of the outstanding shares entitled to vote, subject to any rights of
holders of Beverly Preferred Stock. Vacancies in the Board of Directors may be
filled by a majority of the remaining Directors in office, though less than a
quorum, or by a sole remaining Director, except that a vacancy created by the
removal of a Director may only be filled by the affirmative vote of a majority
of the shares entitled to vote and represented at a duly held meeting at which a
quorum is present.
PMSI. Article III of the PMSI Bylaws provides that the number of directors,
which shall constitute the whole Board of Directors, shall not be less than one
(1) nor more than nine (9) and shall be fixed by the shareholders at any annual
or special meeting. Any director may be removed by the shareholders if in the
shareholders' judgment it is in the best interests of PMSI. Vacancies on the
Board of Directors may be filled, pursuant to Section 10 of Article III of
PMSI's Bylaws, by a majority of the directors then in office, though less than a
quorum, and such chosen director shall hold office for the unexpired term of
such director's predecessor in office.
ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
Beverly. The Beverly Certificate provides that Beverly stockholders may not
act by written consent without a stockholders' meeting for which notice of such
meeting has been provided to Beverly stockholders. Special meetings of Beverly
stockholders may be called at any time and for any purposes but only by a
majority of the Board of Directors, the Chairman of the Board or the President
of Beverly.
PMSI. Section 10 of Article II of the PMSI Bylaws provides that any action
which may be taken at any meeting of the PMSI shareholders may be taken without
a meeting, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all stock entitled to vote thereon were present and voted.
Section 2 of Article II of the PMSI Bylaws provides that special meetings of the
shareholders may be called for any purposes by the President, the Board of
Directors or shareholders holding at least ten (10) percent of the outstanding
shares entitled to vote, and shall be called by the President or the Secretary
at the written request of a majority of the Board of Directors then in office.
BUSINESS COMBINATIONS
Beverly. The Beverly Certificate provides that any "Business Combination"
(hereinafter referred to as a "Beverly Business Combination") involving Beverly
and a person who beneficially owns, directly or indirectly, 10% or more of
Beverly's capital stock (a "Beverly Interested Stockholder") entitled to vote
generally for the election of directors ("Voting Stock") must be approved by the
affirmative vote of not less than eighty percent (80%) of the Voting Stock (the
"Beverly Voting Requirement"). The Beverly Voting Requirement does not apply if
the majority of the Disinterested Directors (defined as a member of the Board of
Directors of Beverly, other than the Beverly Interested Stockholder, who was a
director prior to the time the Interested Stockholder became an Interested
Stockholder, or any director who was recommended for election by the
Disinterested Directors) determine that (i) the Beverly Business Combination has
been approved by a majority of the
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Disinterested Directors; or (ii) the Beverly Interested Stockholder is the
beneficial owner of not less than 80% of the Voting Stock and has declared its
intention to vote in favor of or approve such Beverly Business Combination; or
(iii) the fair market value of the consideration per share to be received or
retained by the stockholders is not less than the highest price per share paid
by such Beverly Interested Stockholder for any shares of stock within the
two-year period prior to the Beverly Business Combination, whether before or
after the Beverly Interested Stockholder became a Beverly Interested
Stockholder, subject to the limitations that the Beverly Interested Stockholder
shall not have received the benefit, directly or indirectly of any loans,
advances, guarantees, pledges or other financial assistance provided by Beverly,
whether in anticipation of or in connection with such Beverly Business
Combination.
PMSI. The PMSI Certificate and its Bylaws do not provide for a "Business
Combination" provision.
DGCL. Section 203 of the DGCL, which is applicable to Beverly as a Delaware
corporation, provides that, subject to certain exceptions specified therein, a
corporation shall not engage in any business combination with any "interested
stockholder" for a three-year period following the date that such stockholder
becomes an interested stockholder unless (i) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding shares held by directors who are also officers
and employee stock purchase plans in which employee participants do not have the
right to determine confidentially whether plan shares will be tendered in a
tender or exchange offer); or (iii) on or subsequent to such date, the business
combination is approved by the board of directors of the corporation and by the
affirmative vote at an annual or special meeting, and not by written consent, of
at least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. Except as specified in Section 203 of the DGCL, an
interested stockholder is defined to include (a) any person that is the owner of
15% or more of the outstanding voting stock of the corporation or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation, at any time within three years
immediately prior to the relevant date and (b) the affiliates and associates of
any such person. Under certain circumstances, Section 203 of the DGCL may make
it more difficult for a person who would be an "interested stockholder" to
effect various business combinations with a corporation for a three-year period,
although the corporation's certificate of incorporation or stockholders may
elect to exclude a corporation from the restrictions imposed thereunder.
Article VIII, Section 6 of Beverly's Bylaws excludes Beverly from the
requirements imposed under Section 203 of the DGCL. This exclusion cannot be
amended or repealed by the Beverly Board of Directors.
FBCA. Section 607.0901 of the FBCA, informally known as the "Affiliated
Transactions Statute," provides that the approval of the holders of two-thirds
( 2/3) of the voting shares of a company, other than the shares owned by an
Interested Shareholder (as defined below), would be required to effectuate
certain transactions, including without limitation a merger, consolidation, sale
of assets, sale of shares, liquidation or dissolution of the corporation, and
reclassification of securities involving a corporation and an Interested
Shareholder (an "Affiliated Transaction"). An "Interested Shareholder" is
defined as the beneficial owner of 10% of the voting shares outstanding. The
foregoing special voting requirement is in addition to the vote required by any
other provision of the FBCA or a corporation's articles of incorporation.
The special voting requirement does not apply in any of the following four
circumstances: (i) the Affiliated Transaction is approved by a majority of the
corporation's disinterested directors; (ii) the Interested Shareholder has owned
80% of the corporation's voting stock for five years: (iii) the Interested
Shareholder owns more than 90% of the corporation's voting shares; (iv) the
corporation has not had more than 300 shareholders of record at any time during
the three years preceding the announcement of the event; (v) the corporation is
an investment company registered under the Investment Company Act of 1940; and
(vi) all of the following conditions are met: (a) the cash and fair value of
other consideration to be paid per share to all holders of voting shares equals
the highest per share price calculated pursuant to various methods set forth in
Section 607.0901; (b) the consideration to be paid in the Affiliated Transaction
is in the same form as
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previously paid by the Interested Shareholder; (c) during the portion of the
three years proceeding the announcement date that the Interested Shareholder has
been an Interested Shareholder, except as approved by a majority of the
disinterested directors, there shall have been no default in payment of
preferred stock dividends, no decrease in common stock dividends, no increase in
the voting shares owned by the Interested Shareholder, and no benefit to the
Interested Shareholder from loans, guaranties or other financial assistance or
tax advantages provided by the corporation. This requirement is not applicable
to the Merger because, as provided by Section 607.0901, a majority of PMSI's
"disinterested" directors have approved the Merger, the Merger Agreement and the
transactions contemplated thereby. See "THE CONSENT SOLICITATION -- Consent
Required."
Section 607.0902 of the FBCA, known informally as the "Florida
Control -- Share Acquisition Statute," provides that the voting rights to be
accorded Control Shares (as defined below) of a Florida corporation that has (i)
100 or more shareholders; (ii) its principal place of business, its principal
office or substantial assets in Florida, and (iii) either (a) more than 10% of
its shareholders residing in Florida, (b) more than 10% of its shares owned by
Florida residents or (c) 1,000 shareholders residing in Florida, must be
approved by a majority of each class of voting securities of the corporation
before the Control Shares will be granted any voting rights. "Control Shares"
are defined in the FBCA to be shares of the issuing corporation owned by such
person, that would entitle such person to exercise, either directly or
indirectly, voting power within any of the following ranges; (1) 20% or more but
less than 33% of all voting power of the corporation's voting securities, (2)
33% or more but less than a majority of all voting power of the corporation's
voting securities or (3) a majority or more of all of the voting power of the
corporation's voting securities. A "Control Share Acquisition" is defined in the
FBCA as an acquisition, either directly or indirectly, by any person of
ownership of, or the power to direct the exercise of voting power with respect
to, outstanding Control Shares. Section 607.0902 also indicates that, if
provided in the articles of incorporation or bylaws of a corporation, Control
Shares may be redeemed by the corporation for fair value in certain
circumstances. Finally, unless otherwise provided in a corporation's articles of
incorporation or bylaws prior to a Control Share Acquisition, in the event
Control Shares are accorded full voting rights and the acquiring person has
acquired Control Shares with a majority or more of all voting power, all
shareholders shall have dissenters' rights. This requirement is not applicable
to the Merger because, as provided by Section 607.0902, (a) PMSI has amended its
Bylaws to provide that the requirement does not apply to acquisitions of shares
of PMSI Common Stock and (b) the transaction will be consummated pursuant to a
statutory merger and PMSI is a party to the Merger Agreement.
AMENDMENT OF CERTIFICATE OF INCORPORATION, ARTICLES OF INCORPORATION AND BYLAWS
Beverly. Article XI of the Beverly Certificate provides that the amendment
or repeal of Article XI shall require the affirmative vote of the holders of 80%
of the combined voting power of the outstanding Voting Stock, voting together in
a single class. Article XV of the Beverly Certificate provides that, except for
Article XI, the Beverly Certificate may be amended, altered or repealed as
authorized by the DGCL. Pursuant to the DGCL, Beverly's Certificate may be
amended if the Board of Directors adopts a resolution setting forth the proposed
amendment, declares its advisability and calls a stockholders' meeting for
consideration of such amendment. At the meeting, the amendment must be approved
by a majority of the outstanding shares entitled to vote.
Article IX of Beverly's Bylaws provides that the Bylaws may be amended or
repealed by the vote of holders of a majority of the outstanding shares entitled
to vote. Article IX also provides that, except for the exclusion from Section
203 of the DGCL and subject to the rights of stockholders, the Board of
Directors may adopt, amend or repeal the Bylaws.
PMSI. Pursuant to the FBCA, a majority of the shareholders entitled to vote
must approve amendments to the articles of incorporation, except for certain
types of amendments that the corporation's board of directors may adopt without
shareholder approval, unless precluded from doing so in the corporations's
articles of incorporation. Article XIV of the PMSI Bylaws provides that the PMSI
Bylaws may be amended, altered, or repealed by the board of directors; provided
that any bylaw or amendment thereto which has been adopted by the board of
directors may be altered, amended or repealed by a vote of the shareholders
entitled to vote
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thereon, or a new bylaw in lieu thereof may be adopted by the shareholders.
Bylaws that have been altered, amended or adopted by a vote of the shareholders
may not be altered, amended or repealed by a vote of the board of directors
until two (2) years has elapsed since the vote of the shareholders, however.
INDEMNIFICATION
Beverly. Article XIII of Beverly's Certificate provides indemnification by
Beverly to the full extent permitted by law, under the DGCL, to any director or
officer of Beverly who is made or threatened to be made a defendant or witness
to any action, suit or proceeding by reason of their position. Beverly has
limited the liability of its directors, in accordance with the DGCL, to Beverly
or its stockholders for monetary damages for breach of fiduciary duty except
where such exemption is not permitted under the DGCL.
PMSI. Article VI of PMSI's Bylaws also provides for indemnification by PMSI
of PMSI's directors or officers to the full extent permitted by the FBCA. PMSI
may not indemnify its directors and officers with respect to any action, suit,
or proceeding by or in the right of PMSI where the person has been adjudged to
be liable for negligence or misconduct in the performance of his duty to PMSI
unless indemnity is deemed proper by the court in which the action or suit was
brought. Subject to limited exceptions, section 607.0831 of the FBCA exonerates
directors from personal liability for monetary damages for any vote, decision,
statement or failure to act, regarding corporate policy or management.
In addition, indemnity agreements have been executed between PMSI and
certain officers and directors of PMSI. The reason for this additional
protection is the uncertainty of the indemnification provisions of PMSI's Bylaws
due to the board of directors or shareholders' ability to amend the PMSI Bylaws
at any time to limit or decrease the indemnification currently afforded to the
directors and officers. Pursuant to these agreements, PMSI must indemnify and
hold harmless the director or officer from every indemnified loss and advance
all costs of defense of any proceeding, subject to the indemnitee's undertaking
to repay all advances if he or she ultimately is not entitled to
indemnification. The obligation to indemnify is absolute, unconditional, and not
subject to any setoff, defense, deduction, or counterclaim that PMSI may have
against the director or officer. PMSI, however, is not required to indemnify a
director or officer if the indemnified loss results from any of the following:
(a) a violation of Section 16(b) of the Securities and Exchange Act of 1934, as
amended; (b) a violation of criminal law; (c) a transaction from which the
director or officer received an improper personal benefit; (d) willful
misconduct or a conscious disregard for the best interests of PMSI; or (e) a
transaction for which the director is liable pursuant to section 607.0834 of the
FBCA for certain distributions from the corporation to its shareholders.
OTHER ITEMS
Beverly. Article XII of the Beverly Certificate provides for the prevention
of the payment of greenmail by requiring that the holders of at least a majority
of the combined voting power of the Beverly Voting Stock, voting as a single
class, approve any direct or indirect purchase or other acquisition by Beverly
of any Voting Stock of any class from any Beverly Interested Stockholder. The
Beverly Certificate specifically authorizes "self-dealing transactions" (as
defined in the Beverly Certificate) if (i) the approval of a majority of
Disinterested Directors, or (ii) the affirmative vote of the holders of a
majority of the combined voting power of the Voting Stock, voting together as a
single class, is obtained. Beverly has a Common Stock Purchase Rights Plan. See
"DESCRIPTION OF BEVERLY CAPITAL STOCK -- Beverly Common Stock Purchase Rights."
PMSI. Neither the PMSI Articles of Incorporation nor the Bylaws contain any
similar provisions regarding greenmail payments or self-dealing transactions.
PMSI has not adopted a Common Stock Purchase Rights Plan.
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LEGAL MATTERS
The validity of the issuance of Beverly Shares being offered hereby will be
passed upon for Beverly by Giroir & Gregory, Professional Association, Little
Rock, Arkansas. The federal income tax consequences in connection with the
Merger will be passed upon by Giroir & Gregory, Professional Association, Little
Rock, Arkansas.
EXPERTS
The consolidated financial statements of Beverly Enterprises, Inc. at
December 31, 1994 and 1993, and for each of the three years in the period ended
December 31, 1994, appearing in Beverly Enterprises, Inc.'s Annual Report on
Form 10-K, for the year ended December 31, 1994, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of PMSI at July 31, 1994 and 1993 and
for each of the three years in the period ended July 31, 1994, appearing in
PMSI's 1994 Annual Report on Form 10-K, as amended, for the fiscal year ended
July 31, 1994, have been audited by Coopers & Lybrand L.L.P., independent
accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is executed on
December 26, 1994 by PHARMACY MANAGEMENT SERVICES, INC. (the "Company"), a
Florida corporation, BEVERLY ENTERPRISES, INC. ("Parent"), a Delaware
corporation, and BEVERLY ACQUISITION CORPORATION ("Purchaser"), a Delaware
corporation and a wholly owned subsidiary of Parent, to record their agreement
regarding the acquisition of the Company by Purchaser.
RECITALS
A. The Boards of Directors of Parent, Purchaser, and the Company have
agreed to effect the merger provided for in this Agreement on the terms and
subject to the conditions set forth in this Agreement.
B. For federal income tax purposes, the parties intend that the merger
provided for in this Agreement will qualify as a reorganization within the
meaning of section 368 of the Internal Revenue Code of 1986, as amended, and for
financial and accounting purposes will be accounted for as a "pooling of
interests."
C. Parent, Purchaser, and the Company desire to make certain
representations, warranties, and agreements contained in this Agreement in
connection with the merger.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants, and agreements contained in this Agreement, Parent,
Purchaser, and the Company agree as follows:
1. FORM AND INTERPRETATION.
1.1 DEFINITIONS. As used in this Agreement and the exhibits to it, the
following capitalized terms have the definitions attributed to them:
"Acquisition Proposal" means an offer or proposal from any person
(including the Company, any of its subsidiaries, or any of their respective
officers, directors, or affiliates, but excluding Parent, Purchaser, and
their respective affiliates or subsidiaries) to acquire for $50,000,000 or
more in value any assets or equity securities of the Company or any of its
subsidiaries (whether pursuant to a merger, purchase, consolidation,
reorganization, tender offer, exchange offer, share exchange, or other
business combination of any kind).
"Agreement" means this Agreement and Plan of Merger, as originally
executed by the parties and as subsequently amended or modified by them in
accordance with its terms.
"AICPA Statement" means Statement of Auditing Standards No. 72 with
respect to Letters for Underwriters and Certain Other Requesting Parties
promulgated by the American Institute of Certified Public Accountants.
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"Articles of Merger" means the Articles of Merger in the form attached
as Exhibit "A," to be executed by Purchaser and the Company on the Closing
Date and filed with the Department of State of Florida to effectuate the
Merger.
"Board of Directors" means the Board of Directors of the Company.
"Certificate of Merger" means the Certificate of Merger in the form
attached as Exhibit "B," to be executed by Purchaser on the Closing Date
and filed with the Secretary of State of Delaware in accordance with
sections 103 and 252 of the DGCL.
"Closing Date" means the fifth business day after all the conditions
precedent to the consummation of the Merger specified in sections 4.3, 4.4,
and 4.5 (other than those conditions that are to be satisfied only at the
closing of this Agreement) have been satisfied or (if permissible) waived
by the party entitled to satisfaction of the condition.
"Closing Price" means the mean arithmetic average of the daily closing
sales price per share (rounded to the nearest whole cent) of the Parent
Shares during the ten consecutive trading days ending on the second trading
day immediately preceding the Effective Time, as reported on the Stock
Exchange.
"Code" means the United States Internal Revenue Code of 1986, as
amended, or any law or regulations enacted to replace that Code.
"Company" means Pharmacy Management Services, Inc., a Florida
corporation and a party to this Agreement.
"Company Disclosure Schedule" means the disclosure schedule dated
December 26, 1994, that is contemplated by this Agreement and has been
separately furnished to Parent by the Company.
"Company SEC Documents" means all forms, notices, reports, schedules,
statements, and other documents filed by the Company with the SEC during
the period from July 31, 1992, to and including the Execution Date, whether
or not constituting a "filed" document, and includes all proxy statements,
registration statements, amendments to registration statements, periodic
reports on Forms 10-K, 10-Q, and 8-K, and annual and quarterly reports to
shareholders.
"Company Share Price" means $16.50 per Company Share.
"Company Shares" means shares of the Company's common stock, $.01 par
value.
"Confidentiality Agreement" means the confidentiality letter agreement
dated September 23, 1994, between Parent and the Company.
"DGCL" means the Delaware General Corporation Law as in effect on the
Closing Date.
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"Dissenting Shares" means any shares of the Preferred Stock that are
issued and outstanding immediately before the Effective Time and are owned
by a shareholder who does not vote those shares in favor of approval of the
Merger, this Agreement, and the Plan of Merger and timely and properly
notifies the Company of his or her intention to dissent from the Merger and
demand payment of the fair value of those shares pursuant to sections
607.1301, 607.1302, and 607.1320 of Florida Corporation Law.
"Effective Time" means the later of (a) the date and time when the
Articles of Merger are filed by the Department of State of Florida, or (b)
the date and time when the Certificate of Merger is filed with the
Secretary of State of Delaware.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and includes all rules and regulations promulgated under that act.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended, and includes all rules and regulations of the SEC
promulgated under that act.
"Exchange Agent" means the bank or trust company designated by Parent
pursuant to section 2.5 to act as the exchange agent for the Merger.
"Exchange Ratio" means the number of Parent Shares into which a
Company Share issued and outstanding immediately before the Effective Time
will be converted in the Merger, as determined in accordance with section
2.2.
"Execution Date" means the date when this Agreement is executed by
Parent, Purchaser, and the Company, as stated in the preamble to this
Agreement.
"Financial Contingency" means a direct or indirect liability,
obligation, or indebtedness of a person that arises upon the occurrence of
an event, condition, circumstance, or act or omission of another person,
and includes (a) asserted claims, legal proceedings, administrative
proceedings, and other loss contingencies," as determined pursuant to
Statement of Financial Accounting Standards No. 5, (b) a Liability,
obligation, or indebtedness of another person that a person has assumed,
indorsed, guaranteed, or become a surety, accommodation party, or
responsible in any other way for, except for guaranties and indorsements
made in connection with the deposit of items for collection in the ordinary
course of business, (c) agreements to purchase, repurchase, or otherwise
acquire any liability, obligation, or indebtedness or any collateral
therefor, (d) agreements to fund any deficiency, to protect any obligee
against loss to provide funds for the repayment of any liability,
obligation, or indebtedness of another person, to keep well or maintain the
solvency of any business organization, or to maintain the level of any
particular asset, liability, or item of income of any business
organization, and (e) an agreement for the purchase of materials, supplies,
or other property that requires payment
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regardless of whether the materials, supplies, or other property are
delivered or tendered to the purchaser.
"Florida Corporation Law" means the Florida Business Corporation Act
Chapter 607, Florida Statutes (1994), as in effect on the Closing Date.
"Hazardous Material" means urea, solid waste, polychlorinated
biphenyls (PCBs), paint containing lead, formaldehyde foam insulation,
discharges of sewage or effluent, and all toxic, hazardous, and radioactive
waste, material, pollutants, substances, and contaminants that are
regulated by any local, state, or federal environmental law, whether or not
classified as hazardous under those laws.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and includes all rules and regulations promulgated by the Federal
Trade Commission under that Act.
"Lien" means a restriction on the use or transferability of property
and a claim or charge on any interest in property securing an obligation
owed to, or claimed by, a person other than the owner of the property,
whether the claim or charge exists by reason of statute, contract or common
law, and includes a lien or security interest arising from a pledge,
mortgage, indenture, encumbrance, hypothecation, trust receipt, deed of
trust, conditional sale, security agreement, or collateral assignment and a
lease, bailment, or consignment for security purposes.
"Material Adverse Effect" refers to the magnitude of the consequence
of a particular fact, event, condition, or circumstance to either Parent or
the Company and means that the fact, event, condition, or circumstance had,
has, or will likely have an adverse effect on the then existing assets,
business, prospects, financial condition, or results of operations of the
party or any of its subsidiaries that is material to the party and its
subsidiaries taken as a whole, and any adverse effect that involves or
would involve the loss, disposition, or impairment of an asset or the
accrual or payment of a cost, expense, or liability (including damages)
will be "material" to a party and its subsidiaries, taken as a whole, only
if it exceeds $25,000,000 as to Parent or Purchaser or $1,000,000 as to the
Company, except that the materiality of any claim against the Company by
any former, present, or purported shareholder of the Company in connection
with the transactions contemplated by this Agreement will be determined
without regard to whether the actual or potential costs, expenses, and
damages of the claim exceed $1,000,000.
"Merger" means the merger of the Company with and into Purchaser that
is contemplated by this Agreement.
"Merger Consideration" means the number of Parent Shares and any cash
payment in lieu of a fractional Parent Share into which any Company Shares
reconverted as a result of the Merger.
"Merger Registration Statement" means the Registration Statement on
Form S-4 to be filed by Parent with the SEC under the Securities Act for
the purpose of registering the Parent Shares to be
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issued to the Company's shareholders pursuant to the Merger, and includes
all amendments and supplements to it.
"Parent" means Beverly Enterprises, Inc., a Delaware corporation and a
party to this Agreement.
"Parent Disclosure Schedule" means the disclosure schedule dated
December 26, 1994, that is contemplated by this Agreement and has been
separately furnished to the Company by Parent and Purchaser.
"Parent SEC Documents" means all forms, notices, reports, schedules,
statements, and other documents filed by Parent with the SEC during the
period from December 31, 1992, to and including the Execution Date, whether
or not constituting a "filed" document, and includes all proxy statements,
registration statements, amendments to registration statements, and
periodic reports on Forms 10-K, 10-Q and 8-K, and annual and quarterly
reports to shareholders.
"Parent Shares" means shares of Parent's common stock, $.10 par value.
"Plan" means every employee benefit, welfare, or compensation plan,
trust, program, practice, agreement, or arrangement that provides benefits
or compensation to any current or former officer, director, or employee of
the Company or any of its subsidiaries or his or her survivors, including
any bonus, thrift, pension, savings, incentive, insurance, retirement,
stock bonus, stock option, stock purchase, profit sharing, loan guarantee,
early retirement, deferred compensation, medical reimbursement,
supplemental retirement, relocation assistance, stock appreciation right,
severance or termination compensation, employee loan or credit extension,
and dental, vision, medical, or other health care plan.
"Plan of Merger" means the plan of merger of the Company with and into
Purchaser that is set forth in Article I of the Articles of Merger.
"Preferred Stock" means the Redeemable Series "A" $.72 Cumulative
Convertible Preferred Stock of the Company.
"Proxy Statement" means the prospectus/proxy statement constituting
part of the Merger Registration Statement and to be distributed to
shareholders of the Company in connection with the Special Meeting, and
includes all amendments and supplements to it.
"Purchaser" means Beverly Acquisition Corporation, a Delaware
corporation a wholly owned subsidiary of Parent, and a party to this
Agreement.
"Purchaser Shares" means shares of Purchaser's common stock, $.01 par
value.
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"Restricted Options" means all the outstanding and unexercised,
nonqualified options to purchase shares of the Company's common stock, $.01
par value, that have been granted by the Company pursuant to the Restricted
Stock Option Agreement dated June 14, 1993, between the Company and Bertram
T. Martin, Jr., and the Restricted Stock Option Agreement dated June 14,
1993, between the Company and David L. Redmond.
"Retirement Plan" means an employee pension benefit plan that is
subject to Title IV of ERISA or the minimum funding standards of section
412 of the Code and is (a) maintained by a person or its subsidiary for the
benefit of employees of the person or any of its subsidiaries, (b)
maintained by a member of a controlled or affiliated group of trades,
businesses, corporations, or service organizations that, together with the
person or any of its subsidiaries, are treated as a single employer under
section 414(b), (c), (m), or (o) of ERISA, for the benefit of employees of
any member of that group, or (c) a "multiemployer plan" maintained pursuant
to one or more collective bargaining agreements with more than one employer
under which the person or any of its subsidiaries makes, accrues, or has
made or accrued contributions.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the United States Securities Act of 1933, as
amended, and includes all rules and regulations of the SEC promulgated
under that Act.
"Site" means each parcel of real estate now or previously owned or
leased by the Company or any of its subsidiaries or on which operations are
or were conducted by the Company or any of its subsidiaries.
"Special Meeting" means the special meeting of shareholders of the
Company referred to in section 3.6, to be held to vote on approval of the
Merger, this Agreement, the Plan of Merger, and the other transactions
contemplated by this Agreement.
"Stock Exchange" means the New York Stock Exchange, the principal
trading market in which the Parent Shares are traded.
"Stock Option Plan" means the 1990 Incentive and Non-statutory Stock
Option Plan of the Company that was adopted by the Board of Directors and
approved by the Company's shareholders on December 23, 1989, as amended to
date.
"Stock Options" means all the outstanding and unexercised options to
purchase shares of the Company's common stock, $.01 par value, that have
been granted by the Company under the Stock Option Plan before the
Execution Date.
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"Surviving Corporation" means, following the Merger, Purchaser or any
other affiliate or subsidiary of Parent or Purchaser into which Purchaser
is merged, combined, or liquidated at any time on or after the Effective
Time.
1.2 OTHER RECURRING WORDS. As used in this Agreement and the exhibits to
it, (a) the words "consent" and "approval" are synonymous, (b) the word
"including" is always without limitation, (c) neuter words should be construed
to include correlative feminine and masculine words, (d) words in the singular
number include words in the plural number and vice versa, and (e) the following
uncapitalized words and terms have the meanings ascribed to them:
"affiliate" has the meaning attributed to it in Rule 12b-2 under the
Exchange Act.
"beneficial owner" has the meaning attributed to it under Rule 13d-3
under the Exchange Act, and the terms "beneficially owned" and "beneficial
ownership" have the same meaning as "beneficial owner."
"business day" has the meaning attributed to it in Rule 14d-1(c)(6)
under the Exchange Act.
"costs" includes the fees, costs, and expenses of experts, attorneys,
mediators, witnesses, arbitrators, collection agents, and supersedeas
bonds, whether incurred before or after demand or commencement of legal
proceedings, and whether incurred pursuant to trial, appellate, mediation,
bankruptcy, arbitration, administrative, or judgment-execution proceedings.
"days" means calendar days, including Sundays, Saturdays, and
holidays.
"governmental authority" includes a government, a public body or
authority, and any governmental body, agency, authority, department, or
subdivision, whether domestic or foreign or local, state, regional, or
national.
"group" has the meaning attributed to that term in Rule 13d-5(b)(1)
under the Exchange Act.
"law" includes a state or national code, rule, statute, ordinance, or
regulation and the common law arising from final, nonappealable decisions
of governmental authorities and state or federal courts in the United
States.
"order" includes an order, decree, ruling, judgment, or injunction.
"person" includes, in addition to a natural person, a group, trust,
syndicate, corporation, cooperative, association, partnership, business
trust, joint venture, limited liability company, unincorporated
organization, and governmental authority.
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"subsidiary," when used in reference to any particular party, means a
corporation with respect to which the party either (i) is required to
consolidate the reporting of its financial information in accordance with
generally accepted accounting principles, or (ii) is a beneficial owner of
either at least 20% of any class of the corporation's securities or
securities of the corporation representing at least 20% of the voting power
of all the corporation's outstanding securities that are entitled to vote
in the election of its directors.
Accounting terms used, but not otherwise defined, in this Agreement are to be
construed and interpreted in accordance with "generally accepted accounting
principles" in effect on the Execution Date, as described in Accounting
Standards Board SAS No. 69 and established by various pronouncements of the
Accounting Principles Board, the Financial Accounting Standards Board, and the
American Institute of Certified Public Accountants.
1.3 HEADINGS; EXHIBITS; REFERENCES. The headings preceding the text of the
sections of this Agreement are solely for convenient reference and neither
constitute a part of this Agreement nor affect its meaning, interpretation, or
effect. All exhibits and schedules referred to in this Agreement are an integral
part of it and are incorporated by reference in it. Unless otherwise expressly
stated, a reference in this Agreement to a section, exhibit, or schedule is to a
section, exhibit, or schedule of this Agreement. If this Agreement is assigned
by a party in accordance with its terms, all references in this Agreement to
that party will pertain to the assignee, and the parties shall revise the
exhibits as necessary or appropriate to substitute the assignee for the assignor
under this Agreement.
1.4 GOVERNING LAW. The validity, construction, enforcement, and
interpretation of this Agreement are governed by the laws of the State of
Florida and the federal laws of the United States of America, excluding the laws
of those jurisdictions pertaining to the resolution of conflicts with laws of
other jurisdictions. The parties waive any rule of law that would require any
ambiguity in this Agreement to be construed against the party who drafted it.
1.5 SEVERABILITY. The parties have executed this Agreement with the
intention that every provision of it is valid, lawful, and enforceable.
Accordingly, each provision of this Agreement should be applied and interpreted
so it is valid, lawful, and enforceable. If a provision of this Agreement (or
the application of it) is held by a court to be invalid, unlawful, or
unenforceable under applicable law, however, that provision will be considered
separable from the remaining provisions of this Agreement, will be reformed and
enforced to the extent that it is valid and lawful, and will not affect the
validity, lawfulness, or enforceability of any other provision of this Agreement
or the application of that provision to a person or circumstance in which it is
valid, lawful, and enforceable, unless the invalidity affects the lawfulness of
Purchaser's acquisition of the Company, in which case either Parent or the
Company may terminate this Agreement as provided in section 7.3(c).
1.6 DIRECT OR INDIRECT ACTION. When any provision of this Agreement
requires or prohibits any particular action to be taken by a person, the
provision applies regardless of whether the action is taken directly or
indirectly by the person.
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1.7 EXECUTION AND EFFECTIVENESS. The parties may execute this Agreement in
counterparts. Each executed counterpart of this Agreement will constitute an
original document, and all executed counterparts, together, will constitute the
same agreement. This Agreement will become effective on the Execution Date when
each party has executed and delivered to every other party a counterpart of it.
1.8 ENTIRE AGREEMENT. This Agreement records the entire understanding of
the parties regarding the subjects addressed in it and supersedes any prior or
contemporaneous agreement, understanding, or representation, oral or written, by
them, except for the Confidentiality Agreement, which will continue in full
force and effect in accordance with its terms.
2. THE MERGER.
2.1 PLAN OF MERGER. Subject to the terms and conditions of this Agreement,
and in accordance with the DGCL and Florida Corporation Law, the Company shall
be merged with and into Purchaser pursuant to the Plan of Merger. Purchaser will
be the surviving corporation in the Merger, and the separate corporate existence
of the Company will cease as a result of the Merger. The Merger will have the
effects provided in the DGCL and Florida Corporation Law.
2.2 MERGER CONSIDERATION. Pursuant to the Plan of Merger, all the issued
Company Shares will be converted or cancelled at the Effective Time of the
Merger as follows:
(a) Each issued Company Share that is held in treasury by the Company
and each issued and outstanding Company Share that is beneficially owned by
Parent, Purchaser, or any direct or indirect subsidiary of Parent or the
Company immediately before the Effective Time will be cancelled and
retired;
(b) Dissenting Shares will be converted into a right to be paid the
fair value of those shares as determined pursuant to Florida Corporation
Law, unless a holder of Dissenting Shares fails to exercise and perfect,
effectively withdraws, or otherwise ceases to have those dissenters' rights
in accordance with section 607.1320 of Florida Corporation Law, in which
case those Dissenting Shares will be converted into the Merger
Consideration; and
(c) Subject to the provision in the Plan of Merger for cash payments
in lieu of issuing fractional shares, each issued Company Share that is
outstanding immediately before the Effective Time (except for Dissenting
Shares, shares held in treasury by the Company, and shares beneficially
owned by Parent, Purchaser, or any direct or indirect subsidiary of Parent
or the Company) will be converted into that number of Parent Shares
calculated as follows:
(i) If the Closing Price is not lower than $12.25 or not higher
than $18.00, each Company Share will be converted into that number of
Parent Shares equal to the quotient (rounded to four decimal points) of
the Company Share Price divided by the Closing Price;
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(ii) If the Closing Price is higher than $18.00, each Company Share
will be converted into that number of Parent Shares equal to the
quotient (rounded to four decimal points) of the Company Share Price
divided by $18.00; and
(iii) If the Closing Price is lower than $12.25, each Company Share
will be converted into that number of Parent Shares equal to the
quotient (rounded to four decimal points) of the Company Share Price
divided by $12.25, except that, if Parent adopts, authorizes, or
consummates after the Execution Date a spin off, split up,
restructuring, recapitalization, reorganization, partial or complete
liquidation, or special or extraordinary dividend or distribution in
respect of the Parent Share (other than a stock split, stock dividend,
recapitalization, of combination of shares that involves only an
increase or decrease in the number of outstanding Parent Shares and is
covered by section 2.6) that is effective or has a record date before
the Effective Time and results or will result in Parent's shareholders
receiving cash, property, or equity securities of Parent or any of its
direct or indirect subsidiaries, each Company Share will be converted
instead into that number of Parent Shares equal to the quotient (rounded
to four decimal points) of the Company Share Price divided by the
greater of $10.00 or the Closing Price.
If the Closing Price is lower than $10.00, however, the Company may (but is not
obligated to) terminate this agreement by notifying Parent on or before 6:00
P.M., Tampa, Florida time, on the day before the Closing Date of the Merger.
2.3 ARTICLES OF MERGER; CERTIFICATE OF MERGER. On the Closing Date,
Purchaser and the Company shall (a) complete the Articles of Merger by inserting
the Exchange Ratio and the name and address of the Exchange Agent, (b) execute
the Articles of Merger in accordance with the requirements of Florida
Corporation Law, (c) execute the Certificate of Merger in accordance with the
requirements of the DGCL, (d) file the executed Certificate of Merger with the
Secretary of State of Delaware, and (e) deliver the executed Articles of Merger
to the Department of State of Florida for filing. Purchaser shall pay to the
Secretary of State of Delaware and the Department of State of Florida all fees
required for the filing of the Certificate of Merger and the Articles of Merger
and to effectuate the Merger.
2.4 STOCK OPTIONS. The Stock Options and Restricted Options that are not
exercised before the Effective Time will be assumed by Parent and converted into
options to purchase Parent Shares as follows:
(a) ASSUMPTION OF OPTIONS. Parent shall assume at the Effective Time
of the Merger all the rights and obligations of the Company under the Stock
Option Plan and every Stock Option and Restricted Option that has not been
fully exercised on the Closing Date as provided above. Each Stock Option
and Restricted Option that has not been exercised before then will be
converted at the Effective Time of the Merger into an option to purchase
that number of Parent Shares equal to
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the product (rounded to the nearest whole share) of (i) the Exchange Ratio,
multiplied by (ii) the number of unexercised shares of the Company common stock
subject to the Stock Option or Restricted Option immediately before the
Effective Time, at a per share exercise price equal to the quotient (rounded to
the nearest whole cent) of (A) the exercise price per share of the unexercised
shares of Company common stock under the option immediately before the Effective
Time, divided by (B) the Exchange Ratio, without any change in the other terms
and conditions of the option. At its election, Parent may deliver to the holder
of that Stock Option or Restricted Option a supplement to the holders' stock
option agreement that evidences the foregoing change in the securities subject
to the option. Before the Closing Date, the Company (through the Board of
Directors or, if appropriate, any committee administering the Stock Option Plan)
shall adopt any necessary resolutions, use its best efforts to obtain any
required consent of the holders of Stock Options and Restricted Options, and
take all other reasonable action as is appropriate to adjust the terms of the
Stock Options, the Restricted Options, and the Stock Option Plan to provide that
all Stock Options and Restricted Options outstanding at the Effective Time will
be amended and converted at the Effective Time into an option to purchase Parent
Shares as provided above.
(b) TAX TREATMENT OF ASSUMED OPTIONS. Parent and the Company intend
that Parent's assumption of Stock Options and Restricted Options pursuant
to the Merger will constitute "issuing or assuming a stock option in a
transaction to which section 424(a) applies" for purposes of section
424(h)(3) of the Code and not a "modification," and that every Stock Option
that qualified as an "incentive stock option" under section 422 of the Code
immediately before the Effective Time will continue to qualify as an
"incentive stock option" after it is assumed by Parent. The assumption of a
Stock Option or Restricted Option by Parent pursuant to the Merger will not
entitle the holder of it to any "additional benefits," within the meaning
of section 424(a)(2) of the Code, that the holder did not have before the
assumption.
(c) SEC RULE 16B-3. The approval of the Merger and this Agreement by
the shareholders of the Company will also constitute approval of the Stock
Option Plan for purposes of SEC Rule 16b-3 under the Exchange Act. Upon
assumption of Stock Options and the Stock Option Plan pursuant to the
Merger and until all the assumed Stock Options expire or are exercised in
accordance with their terms, Parent shall administer the Stock Options and
the Stock Option Plan so the Stock Options continue to qualify for the
exemptions from section 16 of the Exchange Act that are provided by SEC
Rule 16b-3. In addition, Parent (through its board of directors or, if
appropriate, any committee administering the Stock Option Plan after the
Effective Time) shall take all necessary action to assure that the Stock
Option Plan complies with all the conditions of SEC Rule 16b-3 that are
necessary for the Stock Options to qualify for exemption under that Rule.
(d) RESERVATION AND LISTING OF SHARES. Parent shall reserve from its
authorized but unissued Parent Shares and keep available until all the
Stock Options and Restricted Options assumed by Parent in the Merger expire
or are exercised that number of Parent Shares that will be
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issuable upon exercise of those options. Further, Parent shall reserve for
listing on the Stock Exchange (or any other national securities exchange or
inter-dealer quotation system in which the Parent Shares are then traded),
upon official notice of issuance pursuant to exercise of the Stock Options
and Restricted Options assumed by Parent in the Merger, that number of
Parent Shares that will be issuable upon full exercise of all those
options, and Parent shall maintain that listing for so long as the Parent
Shares are listed on a national securities exchange or an inter-dealer
quotation system.
(e) FORM S-8 REGISTRATION. Parent shall file with the SEC under the
Securities Act, within ten business days after the Effective Time, a
registration statement on Form S-8 (or other appropriate registration form)
to register all the Parent Shares issuable upon exercise of the Stock
Options or Restricted Options assumed by Parent in the Merger. Parent shall
use its best efforts to cause that registration statement to become
effective as promptly as practicable and shall maintain the current
effectiveness of that registration statement until all the Stock Options
and Restricted Options assumed by Parent in the Merger expire or are
exercised.
The Company has entered into an agreement with each holder of a Restricted
Option (a copy of which has been delivered to Parent) that provides for the
Restricted Options to be amended at the Effective Time to delete the provision
for the Restricted Options to expire on the 30th day after the effective date of
a "Change in Control" (as defined in the Restricted Options), to eliminate the
Company's obligation to make cash payments to the holders of the Restricted
Options if they are not exercised with in 30 days after the date of the Special
Meeting, and to extend the exercise period following termination of employment
from 30 days to 90 days generally, to 150 days during the first 30 days after a
Change in Control, and to 120 days during the second 30 days after a Change in
Control.
2.5 EXCHANGE AGENT. Before the Merger Registration Statement is filed with
the SEC, Parent shall designate a bank or trust company reasonably acceptable to
the Company to act as the Exchange Agent for the Merger to (a) exchange
certificates representing Parent Shares for certificates representing Company
Shares that are converted into Parent Shares in the Merger, and (b) make cash
payments to holders of Company Shares that are converted in the Merger in lieu
of issuing fractional Parent Shares to which they otherwise would be entitled.
On or before the Closing Date, Parent shall cause to be deposited with the
Exchange Agent, in trust for the exclusive benefit of the holders of Company
Shares that be converted into Parent Shares in the Merger, funds sufficient to
make the cash payments contemplated by section 1.5 (fractional shares) of the
Plan of Merger and shall issue and deposit with the Exchange Agent certificates
representing the aggregate number of Parent Shares constituting the Merger
Consideration. The Exchange Agent shall invest the funds deposited with it as
Parent directs, but only in the following investments: (i) direct obligations of
the United States of America; (ii) obligations for which the full faith and
credit of the United States of America is pledged to provide for the payment of
the principal and interest; (iii) commercial paper rated of the highest quality
by Moody's Investor Services. Inc. or Standard & Poor's Corporation or (iv)
certificates of deposit issued by a commercial bank having at least $100,000,000
in capital, surplus, and undivided profits. The maturities of those investments
must permit the Exchange Agent to pay promptly to eligible
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shareholders of the Company any cash due to them as a result of the Merger. The
Exchange Agent shall remit to Parent any net interest and other earnings from
investment of the funds deposited by Parent.
2.6 EXCHANGE RATIO ADJUSTMENTS. The prices that are specified in section
2.2 and used to determine when the Exchange Ratio becomes fixed ($12.25 and
$18.00) and when the Company may elect to terminate this Agreement ($10.00) will
be proportionately adjusted to account for any increase or decrease in the
number of outstanding Parent Shares that results from (a) a stock split, stock
dividend, recapitalization, or combination of shares that occurs or has a record
date after the Execution Date and before the Effective Time or (b) any issuance
of Parent Shares pursuant to an exercise of "Rights" under the Rights Agreement
dated as of September 29, 1994, between Parent and The Bank of New York, as
Rights agent, or any similar plan. The adjustment will be calculated by (a) each
of those fixed prices ($10.00, $12.25, and $18.00), by (b) the quotient of total
number of Parent Shares outstanding on the Execution Date divided by (ii) the
total number of Parent Shares outstanding immediately after the occurrence of
the event. For example, if Parent were to effect a two-for-one forward stock
split of Parent Shares after the Execution Date so the total number of Parent
Shares outstanding immediately after the occurrence of the split would be equal
to twice the number Of Parent Shares outstanding on the Execution Date, each of
the fixed prices specified in section 2.2 ($10.00, $12.25, and $18.00) would be
reduced by one half.
3. FURTHER AGREEMENTS.
3.1 TRANSACTION EXPENSES. Whether or not the Merger a consummated, each
party shall pay all its own costs and expenses (including fees and disbursements
of accountants, legal counsel, financial advisors, and other consultants) that
it incurs in connection the Merger and this Agreement, except as provided in
sections 7.4, 7.5, and 8.3, and except that Parent shall pay all filing and
registration fees of the SEC and state securities regulatory authorities and all
costs incurred in connection with the printing of the Proxy Statement and the
Merger Registration Statement.
3.2 PUBLIC ANNOUNCEMENTS. The Parties promptly shall advise, consult, and
cooperate with each other before issuing, or permitting any of their respective
agents officers, directors, employees, or subsidiaries to issue, any press
release, or public announcement to any third party concerning this Agreement or
the transactions contemplated by it. In addition, each party shall furnish to
the other party a copy of every press release, public announcement, and SEC
filing that mentions this Agreement or the transactions contemplated by it, in
advance of filing or issuing the document.
3.3 CONSENT AND GUARANTY OF PARENT. By executing this Agreement, Parent (as
the sole shareholder of Purchaser) approves the Merger and consents to the
execution, delivery, and performance of this Agreement by Purchaser, and this
consent will be treated for all purposes as an affirmative vote duly adopted at
a meeting of the sole shareholder of Purchaser held for that purpose. Parent
shall take, or shall cause its direct and indirect subsidiaries to take, all
further action that is advisable or necessary to authorize Purchaser's
execution, delivery, and performance of this Agreement. In addition, Parent
irrevocably and unconditionally guarantees to the Company and each of its
shareholders the full and punctual payment and performance by Purchaser of all
its obligations under this Agreement.
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3.4 ACCESS AND INFORMATION. During the period after the Execution Date and
before the Closing Date, and subject to the provisions of the Confidentiality
Agreement, the Company shall at all reasonable times during normal business
hours: (a) afford Parent and Purchaser (and their representatives and
professional advisors) complete access to its and its subsidiaries' books,
records, contracts, officers, employees, and properties; (b) permit Parent and
Purchaser (and their representatives and professional advisors) to make such
examinations of its and its subsidiaries' books, records, contracts, officers,
employees, and properties, and conduct such other investigation, as they
consider appropriate in connection with the transactions contemplated by this
Agreement; and (c) furnish to Parent and Purchaser (and their representatives
and professional advisors) all existing financial, operating, and other data and
information concerning it and its subsidiaries as they reasonably request.
During the period after the Execution Date and before the date of the Special
Meeting, Parent shall at all reasonable times during normal business hours
afford the Company (and its representatives and professional advisors, including
Smith Barney Inc.) with reasonable access to all Parent SEC Documents and to all
books, records, contracts, officers, employees, and properties of Parent and its
subsidiaries as are necessary to allow the Company, to verify compliance by
Parent and Purchaser with their representations and warranties in this Agreement
and to allow Smith Barney Inc. to reaffirm its fairness opinion as required
pursuant to section 4.5(d). Each party to this Agreement will use its best
efforts to cause its independent public accountants to afford to every other
party to this Agreement and its independent public accountants complete access
to the independent public accountants' work papers pertaining to it and its
subsidiaries.
3.5 SEC FILINGS. Parent and the Company shall cooperate in the preparation
and filing with the SEC of a preliminary Proxy Statement and Merger Registration
Statement in accordance with the Securities Act as soon as practicable after the
Execution Date. They shall furnish to one another all information required to
prepare the definitive Proxy Statement and Merger Registration Statement
(including financial statements and supporting schedules and certificates and
reports of independent public accountants). Parent shall file the Merger
Registration Statement with the SEC and use all reasonable efforts (a) to
respond to comments of the SEC (if any) in connection with those filings, (b) to
have the Merger Registration Statement declared effective by the SEC as promptly
as practicable, and (c) take all action necessary to obtain, before the
Effective Time, all permits, approvals, and registrations under applicable state
securities or "Blue Sky" laws to ensure that its issuance of the Parent Shares
to the Company's shareholders does not violate any of those laws. Promptly after
the SEC declares the Merger Registration Statement effective, Parent and the
Company shall cause the definitive Proxy Statement to be mailed to the Company's
shareholders and, if necessary after the definitive Proxy Statement has been
mailed to the Company's shareholders, to promptly circulate amended or
supplemental material. Parent and Purchaser shall not file the Merger
Registration Statement with the SEC or mail the Proxy Statement to the Company's
shareholders until those documents have been approved by the Company and its
legal counsel. After the Effective Time, Parent shall promptly file all reports
and statements required to be filed by it pursuant to sections 13, 14, and 15(d)
under the Exchange Act.
The Company warrants that none of the information regarding the Company and
its officers, directors, and subsidiaries that is supplied by the Company to
Parent for inclusion in the Proxy Statement or Merger Registration Statement
will contain, at the time the Merger Registration Statement is filed with the
SEC, at the time the Merger Registration Statement is declared effective by the
SEC, and (with respect to
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the Proxy Statement only) at the time the Proxy Statement is mailed to the
Company's shareholders, any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading. During the period after
the effective date of the Merger Registration Statement and before the Effective
Time, the Company shall promptly notify Parent of any intervening event or
condition with respect to the Company or its officers, directors, or
subsidiaries that causes the Proxy Statement or Merger Registration Statement to
omit any material fact required to be stated in them or to contain any false or
misleading statement of material fact regarding the Company or its officers,
directors, or subsidiaries. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act.
Parent warrants that the Proxy Statement and the Merger Registration
Statement will comply in all material respects with the Exchange Act, the
Securities Act, and all applicable state securities laws and will not contain,
at the time the Merger Registration Statement is filed with the SEC, at the time
the Merger Registration Statement is declared effective by the SEC, and (with
respect to the Proxy Statement only) at the time the Proxy Statement is mailed
to the Company's shareholders, any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they are made, not misleading (except for
any statement made in conformity with information regarding the Company and its
officers, directors, and subsidiaries that was furnished in writing to Parent by
the Company for the express purpose of inclusion in the Proxy Statement and
Merger Registration Statement, as to which Parent and Purchaser make no
representation).
Neither Parent nor the Company shall amend or supplement the Proxy
Statement or the Merger Registration Statement without the approval of the other
party. Parent shall promptly notify the Company, after it receives notice of it,
of the time when the Merger Registration Statement has become effective or any
supplement or amendment to it has been filed, the issuance of any stop order,
the suspension of the qualification of the Parent Shares issuable in connection
with the Merger for offering or sale in any jurisdiction, any request by the SEC
for amendment of the Proxy Statement or the Merger Registration Statement, or
any comments by the SEC on the Merger Registration Statement, requests by the
SEC for additional information, and all responses to SEC comments or requests
for additional information.
3.6 SHAREHOLDER APPROVAL. The Company shall call and hold as soon as
practicable after the SEC declares the Merger Registration Statement effective a
meeting of its shareholders in accordance with Florida Corporation Law for the
purpose of approving the Merger, this Agreement, the Plan of Merger, and the
other matters contemplated by this Agreement and, through its Board of Directors
and subject to the fiduciary obligations of the Board of Directors under
applicable law, shall recommend that its shareholders approve the Merger and
this Agreement and use its best efforts to solicit the requisite vote of
approval including promptly mailing the Proxy Statement to its shareholders. The
Company shall not mail the Proxy Statement to its shareholders, however, until
(a) the outstanding shares of the Preferred Stock have been converted into
Company Shares pursuant to the terms of the Company's articles of incorporation;
(b) the Company has received an opinion of Smith Barney Inc. dated the Execution
Date and reaffirmed as of the date of the Proxy Statement to the effect that, as
of its date, the consideration to be received by the Company's shareholders
pursuant to the Merger is fair to them from a financial
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point of view; (c) Parent has received from Coopers & Lybrand LLP, independent
public accountants for the Company, a "comfort" letter dated as of the date of
the Proxy Statement, in form and substance reasonably satisfactory to Parent, as
to the procedures undertaken by them with respect to the financial statements of
the Company and its subsidiaries that are included in the Proxy Statement and
the other matters contemplated by the AICPA Statement and customarily included
in comfort letters relating to transactions similar to the Merger (d) Parent,
Purchaser, and their counsel must have received from the Company a certificate
in substantially the form of Exhibit "G" addressed to Parent, Purchaser, and
their counsel; and (e) Parent, Purchaser, and their counsel must have received
from each of (i) Cecil S. Harrell, individually and as settlor and co-trustee of
the Cecil S. Harrell Revocable Trust, u/a/d October 1, 1990, as amended and
restated, and (ii) James N. Harrell, individually and as settlor and trustee of
the James N. Harrell Revocable Trust, u/a/d June 15, 1990, as amended and
restated, a certificate in substantially the form of Exhibit "H" addressed to
Parent, Purchaser, and their counsel. Parent and Purchaser shall vote in favor
of approval of the Merger, this Agreement, the Plan of Merger, and the other
matters contemplated by this Agreement all Company Shares that either of them
beneficially owns or then has the right or power to vote with respect to the
Merger pursuant to a proxy or shareholder voting agreement.
3.7 MUTUAL COOPERATION; OTHER FILINGS. Each of the parties to this
Agreement shall cooperate with the other parties and use its best efforts to
take all action and do all things that are proper, advisable, or necessary to
consummate the transactions contemplated by this Agreement, including (a)
effecting all necessary filings and registrations with governmental authorities
and responding to all related requests for additional information, (b) obtaining
before the Closing Date all necessary orders, permits, consents, licenses,
approvals, authorizations, and qualifications from governmental authorities, (c)
defending any litigation or other legal proceedings challenging the Merger, this
Agreement, or the consummation of the transactions contemplated by this
Agreement, and (d) seeking relief from any order that enjoins, impairs, or
restrains the ability of the parties to consummate the transactions contemplated
by this Agreement. Notwithstanding the foregoing, (i) the Company will not be
required to commit to a divestiture transaction that is to be consummated before
the Closing Date and (ii) neither Parent nor any of its affiliates or
subsidiaries will be required to segregate or dispose of all or a significant
portion of the assets, businesses, or properties of the Company or any of its
subsidiaries, taken as a whole.
As soon as practicable after the Execution Date, Parent and the Company
shall prepare and file all other filings, applications, and registrations
required under the HSR Act, the Exchange Act, or other applicable law with
respect to the transactions contemplated by this Agreement. Parent shall furnish
to the Company and its representatives and professional advisors all information
concerning Parent, Purchaser, and their respective officers, directors,
affiliates, and shareholders that is reasonably necessary for the Company (A) to
prepare, ascertain the accuracy and completeness of, and file a Pre-Merger
Notification and Report pursuant to the HSR Act, and (B) to respond to any
request from the Federal Trade Commission or the United States Department of
Justice for additional information or documentary materials in connection with
the filing of a Pre-Merger Notification and Report under the HSR Act. The
Company shall keep, and shall cause each of its officers, directors, affiliates,
representatives, and professional advisors to keep, all such information
confidential to the same extent that Parent is required to keep information
confidential pursuant to the Confidentiality Agreement. The Company shall
furnish to Parent and Purchaser and their representatives and professional
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advisors all information concerning the Company and its officers, directors,
affiliates, and shareholders that is reasonably necessary for Parent and
Purchaser to take the actions specified in clauses (A) and (B) of the preceding
sentence and to verify the warranties, representations, and satisfaction of the
conditions precedent of the Company under this Agreement.
3.8 ACQUISITION PROPOSALS. Immediately after the execution of this
Agreement, the Company shall cease and cause to be terminated any existing
activities, discussions, or negotiations with any party previously contacted
with respect to an Acquisition Proposal. During the term of this Agreement,
subject to fiduciary obligations of the Board of Directors under applicable law,
and in the absence of a material breach of this Agreement by Parent or
Purchaser, the Company shall not, and the Company shall instruct and use
reasonable efforts to cause its agents, officers, directors, employees, and
other representatives (including any attorney, accountant or investment banker
retained by it or any of its subsidiaries) not to, directly or indirectly, (a)
solicit, initiate, or intentionally encourage the submission of any Acquisition
Proposal, (b) participate in discussions or negotiations with any person
regarding any Acquisition Proposal by that person, or (c) furnish to any person
any non-public business or financial information regarding the Company or any of
its subsidiaries in connection with any Acquisition Proposal. Notwithstanding
the foregoing, the Company may finish information to, and may participate in
discussions or negotiations with, any person regarding an unsolicited
Acquisition Proposal, if the Board of Directors of the Company determines in
good faith, based on an opinion of outside legal counsel, that a failure to
furnish the information or participate in the discussions or negotiations would
likely conflict with the proper discharge of the fiduciary duties of the
Company's directors. Furthermore, nothing in this section prevents the Board of
Directors from taking, and disclosing to the Company's shareholders, a position
contemplated by SEC Rules 14d-9 and 14e-2(a)(2) or (3) under the Exchange Act
with respect to a tender offer. The Company shall promptly notify Parent of any
Acquisition Proposal that it receives, including the material terms and
conditions of it and the identity of the person or group making the Acquisition
Proposal, and shall keep Parent informed of the status and terms of any request
for information or any discussion or negotiation. Nothing in this section 3.8
permits the Company to enter into any agreement with respect to an Acquisition
Proposal during the term of this Agreement.
3.9 RESERVATION AND LISTING OF PARENT SHARES. Parent shall reserve from its
authorized but unissued Parent Shares and keep available until the Effective
Time that number of Parent Shares that will be issuable pursuant to the Merger.
If the number of authorized and unissued Parent Shares is insufficient at any
time to effect the conversion of all the Company Shares that are then issued and
outstanding, Parent shall take all requisite corporate action to increase its
authorized but unissued Parent Shares to that number of shares that will be
sufficient to convert all the then outstanding Company Shares into Parent Shares
pursuant to the Merger. Also, Parent, at its sole expense, shall reserve for
listing on the Stock Exchange, upon official notice of issuance pursuant to the
Merger, that number of Parent Shares that will be issuable in exchange and
substitution for Company Shares in the Merger and shall maintain that listing
while those shares remain outstanding.
3.10 CONDUCT OF BUSINESS PENDING MERGER. From the Execution Date until the
Effective Time, and except as authorized or contemplated by this Agreement or
otherwise approved in advance in writing by the other party, each of Parent and
the Company shall, and they shall cause each of their respective subsidiaries
to, maintain
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itself as a validly existing corporation with active status under the laws of
its state of incorporation, conduct its affairs and business according to its
usual and ordinary course of business, and use its best efforts to sustain and
preserve in all material respects its goodwill and business organization and all
its advantageous business relationships with lenders, customers, suppliers, and
healthcare providers. Without limiting the generality of the foregoing, Parent
shall not do any the following:
(i) create, issue, or permit to be outstanding any class of common
stock that is superior in right to the Parent Shares with respect to
voting, dividend, or liquidation rights; or
(ii) issue any Parent Shares for a cash consideration below
then-current market prices, less normal underwriting discounts or
commissions and expenses of sale, except for issuances in connection with
employee compensation or employee incentive plans that in the aggregate
would not have a Material Adverse Effect.
Without limiting the generality of the foregoing, the Company shall not do, and
it shall cause each of its subsidiaries not to do, any the following:
(a) Grant or permit a Lien on, sell, lease, exchange, transfer, or
otherwise dispose of, or grant to any person a right or option to lease
purchase, or otherwise acquire, any material amount of its assets or
property (including the capital stock of its subsidiaries, any indebtedness
owed to it, and any rights of value to it), except in the usual and
ordinary course of business consistent with past practice, and except for
intercompany transfers between Parent and its subsidiaries and the Company
and its subsidiaries;
(b) Sell, issue, award, grant, pledge, redeem, purchase, or otherwise
acquire, transfer, or encumber any shares of its capital stock, any
securities convertible into or exchangeable for any shares of its capital
stock, or any rights, options, or warrants to acquire any shares of its
capital stock or any securities convertible into or exchangeable for any
shares of its capital stock, except to the extent permitted by sections 3.8
and 7.3(d), and except for the issuance of Company Shares upon conversion
of the Preferred Stock, or exercise of the Stock Options or Restricted
Options;
(c) Reclassify any outstanding Company Shares into a different class
or number of shares or otherwise change its authorized capitalization, or
pay, declare, or set aside for payment a dividend or other distribution in
respect of any shares of its capital stock (whether payable in cash, stock
or other property), except that (i) Company may declare and pay regular
dividends on the Preferred Stock, and (ii) the Company's subsidiaries may
declare and pay cash dividends and distributions to the Company or any of
its other direct or indirect subsidiaries;
(d) Borrow any money, issue any debt securities, or assume, indorse,
or guarantee or become a surety, accommodation party, or otherwise
responsible for, an obligation or indebtedness of a person other than
itself and any of its subsidiaries, except for (i) borrowings under
existing bank credit agreements in the usual and ordinary course
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of business, and (ii) borrowings to fund capital expenditures and
improvements as disclosed in the Company Disclosure Schedule;
(e) Authorize, recommend, consummate, or enter into an agreement
providing for a merger dissolution, consolidation, restructuring,
recapitalization, reorganization, partial or complete liquidation, or the
acquisition or disposition of a material amount of assets or securities of
or by it, except for intercompany transfers and reorganizations, except to
the extent permitted by sections 3.8 and 7.3(d);
(f) Amend, renew, waive, breach, extend, modify, enter into, release
in any respect or relinquish any right or benefit under, any mortgage,
agreement, instrument, obligation, or other commitment that would have a
Material Adverse Effect on the Company;
(g) Settle or compromise any claim, liability, tax assessment, or
Financial Contingency for an amount that has or is reasonably likely to
have a Material Adverse Effect on the Company;
(h) Change the purpose or character of its business, amend its bylaws
or articles of incorporation, or (except as required to comply with
applicable law or generally accepted accounting principles) change its
accounting methods, practices, or principles;
(i) Enter into any transaction with any of its officers, directors,
affiliates, or shareholders, except in the usual and ordinary course of
business and on an arm's length equivalent basis;
(j) Discontinue (except for policy renewals and changes in insurers)
or materially diminish any insurance coverage applicable to its assets,
properties, and business operations; or
(k) Authorize, or offer or agree to do, any of the foregoing acts.
3.11 EMPLOYEE BENEFITS. Consistent with the last three paragraphs of this
section, Parent shall assume and pay when due, or cause the Surviving
Corporation to assume and pay when due, without offset, deferral, deduction,
counterclaim, or interruption (other than as required by applicable law), all
rights and benefits of employees of the Company and its subsidiaries that are
vested or accrued on or before the Effective Time, or that become vested or
accrued as a result of the transactions contemplated by this Agreement, under
the terms of all Plans sponsored or maintained by the Company or any of its
subsidiaries, including the Restricted Options, all employment agreements, all
severance agreements, accrued vacation and sick leave time, the Company's
Deferred Compensation Plan for Non-Employees, the Stock Option Plan and all
Stock Options, all director and officer indemnity agreements, and the
Profit-Sharing and Retirement Savings Plan of the Company and its subsidiaries
(copies of all of which have been furnished or made available to Parent by the
Company). In addition, Parent shall cause the Surviving Corporation to maintain
through July 31, 1995 (the current fiscal year of the Company), the incentive
compensation plans currently in effect for officers of the Company and its
subsidiaries (copies of which have been furnished or made available to Parent by
the Company) and shall pay, incentive compensation to the eligible participants
under those plans in accordance with the term of the Plans and otherwise
consistent with the Company's past practices.
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The Company shall terminate immediately before the closing of the Merger
every "employee pension plan" (as defined section 3(2) of ERISA) that is
sponsored or maintained by the Company or any of its subsidiaries and, to the
extent permitted by law, shall distribute all the assets of the Plan to the
beneficiaries who are entitled to them in accordance with the terms of the Plan
and applicable law, or, if that distribution is not permitted by law, the
Company shall transfer the assets of the Plan to an appropriate "employee
pension benefit plan" (as defined in section 3(2) of ERISA) that is sponsored or
maintained by Parent or any of its subsidiaries. Parent shall assume all the
responsibilities of the Company and its subsidiaries for COBRA continuation
healthcare coverage after the Effective Time.
After the Effective time, Parent shall provide, or cause the Surviving
Corporation to provide, to employees of the Company and its subsidiaries who are
employed by Parent or any of its direct or indirect subsidiaries after the
Effective Time ("Transferred Employees") employee benefits that are no less
favorable than the employee benefits that Parent and its subsidiaries provide to
their own similarly situated employees, as reasonably determined by Parent in
good faith. In furtherance of the foregoing, Parent shall cause the Surviving
Corporation to adopt on or promptly after the Closing Date employee benefit
plans that are no less favorable than the employee benefit plans generally
available on the Closing Date to the similarly situated employees of Parent or
its subsidiaries.
To the extent that service is relevant for purposes of eligibility or
vesting accrual (but not for purposes of determining the level of benefits
payable) under any Plan sponsored or maintained by parent, the Surviving
Corporation, or any direct or indirect subsidiary of Parent, parent and
Purchaser shall use their best efforts to cause the Transferred Employees to be
given full credit for their respective periods of service with the Company or
its subsidiaries before the Effective Time. In addition, Parent shall use its
best reasonable efforts to assure that every Plan that is sponsored or
maintained by Parent or any of its direct or indirect subsidiaries and provides
dental, vision, medical, or other healthcare benefits to any Transferred
Employee of any of its subsidiaries (a) gives that employee full credit toward
its deductibles and co-insurance amounts for deductibles and co-insurance
payments incurred or satisfied by the employee for the same period under any
similar Company Plan and (b) waives any preexisting condition limitation for any
employee who was covered for that condition under a Company Plan providing
healthcare benefits.
3.12 INDEMNIFICATION. Parent and Surviving Corporation shall provide for
the insurance and indemnification of current and former officers and directors
of the Company as follows:
(a) For a continuous period of six years after the Effective Time,
Parent and the Surviving Corporation jointly and severally shall indemnify
and hold harmless every officer and director of the Company or any of its
subsidiaries who currently has rights to indemnification from the Company
with respect to matters occurring on or before the Closing Date, to the
same extent and on the same terms and conditions as they are now entitled
to indemnification pursuant to the Company's Articles of Incorporation,
Florida Corporation Law, and the existing indemnity agreements between the
Company and each of its directors and officers (copies of which have been
furnished or made available to the Parent by the Company);
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(b) Parent shall take all requisite action to assure that the
Certificate of Incorporation and Bylaws of the Surviving Corporation will
contain for a continuous period of at least six years following the
Effective Time provisions relating to the indemnification of those persons
who were officers and directors of the Company at any time before the
Effective Time that are at least as favorable to those persons as the
indemnification provisions that are currently contained in the Company's
Bylaws and Articles of Incorporation; and
(c) For a continuous period of six years after the Effective Time,
Parent shall maintain, or cause the Surviving Corporation to maintain,
directors' and officers' liability insurance that provides to every current
or former officer and director of the Company or any of its subsidiaries
who currently is covered by the Company's existing directors' and officers'
liability insurance policy (a copy of which has been furnished or made
available to Parent) coverage with respect to matters occurring on or
before the Closing Date and that has terms, scope, and amounts of coverage
(including the coverage period, the insured claims, the claims reporting
period, and the amount of any retention, deductible, or co-insurance) that
are substantially equivalent to those of the existing policy, or, if
substantially equivalent insurance coverage is unavailable, that represents
the best available coverage. For the first year after the Effective Time,
Parent shall elect to extend the Company's existing directors' and
officers' liability insurance policy for the "Extended Reporting Period"
provided in it, by delivering to the insurer under the Company's existing
directors' and officers' liability insurance policy, within 20 days
following the Effective Time, written notice of the election to extend the
policy coverage for a period of one year together with payment of the
additional premium due. Parent shall furnish to any insured person, upon
request, a copy of that written election and evidence of that payment.
After the first year, Parent may procure the insurance from any financially
sound insurer that it selects. Notwithstanding the foregoing, neither
Parent nor the Surviving Corporation is required, in order to procure or
maintain the foregoing directors' and officers' liability insurance
coverage, to pay an annual premium in excess of $200,000 (the "Maximum
Annual Premium"). If substantially equivalent directors' and officers'
liability insurance coverage cannot be obtained, or if it can be obtained
only by paying an annual premium in excess of the Maximum Annual Premium,
Parent or the Surviving Corporation shall purchase as much coverage as can
be obtained by paying the Maximum Annual Premium.
3.13 AFFILIATE AGREEMENTS. The Company shall deliver to Parent at least 30
days before the Special Meeting a list of the names and addresses of those
persons who the Company considers to be, as of the record date for the Special
Meeting, "affiliates" of the Company for purposes of SEC Rule 145 under the
Securities Act. The Company shall provide to Parent such documents and
information as Parent reasonably requests for purposes of reviewing that list.
The Company shall use all reasonable efforts to cause each person who is
identified in that letter as an affiliate of the Company to deliver to Parent
before the Closing Date a written agreement in substantially the form of Exhibit
"C," providing that the person agrees not to sell, pledge, transfer or otherwise
dispose of the Parent Shares to be received in the Merger, except in compliance
with the Securities Act, and, if the Merger qualifies for the
"pooling-of-interests" method of accounting, until such time as financial
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results covering at least 30 days of combined operations of Parent and the
Company have been published by Parent. Until the Effective Time, the Company
shall amend and supplement the foregoing letter and use its best efforts to
cause each additional person who is identified as an "affiliate" of the Company
to execute a written agreement in substantially the form of Exhibit "C."
Parent shall deliver to the Company at lest 30 days before the special
Meeting, a list of the names and addresses of those persons who parent considers
to be, on the record date for the Special Meeting, "affiliates" of Parent and
Purchaser for purposes of SEC Rule 145 under the Securities Act. Parent shall
provide to the Company such documents and information as the Company reasonably
requests for purposes of reviewing that list. Parent shall deliver to the
Company before the closing Date a certificate signed by Chief Financial Officer
of Parent and Purchaser stating that none of the persons identified on its list
as "affiliate" identified in Parent's list beneficially owns any Company Shares.
Parent shall use its best efforts to cause that person to deliver to Parent and
the Company before the Closing Date a written agreement in substantially the
form of Exhibit "C," providing that the person agrees not to sell, pledge,
transfer, or otherwise dispose of the Parent Shares to be received in the
Merger, except in compliance with the Securities Act, and if the Merger
qualifies for the "pooling-of-interests" method of accounting, until such time
as financial results covering at least 30 days of combined operations of Parent
and the Company have been published by Parent. Until the Effective Time, Parent
shall amend and supplement its letter and use its best efforts to cause each
additional person who is identified as an "affiliate" of Parent and Purchaser
and beneficially owns any Company Shares to execute a written agreement in
substantially the form of Exhibit "C."
3.14 TAX TREATMENT OF MERGER. Parent, Purchaser, and the Company shall (a)
treat the Merger as a tax-free "reorganization" under section 368(a)(1)(A) of
the Code, (b) report the Merger and all related transactions for federal income
tax purposes in a manner consistent with that treatment, (c) take all reasonable
action required to cause the Merger to be treated as a "reorganization" under
section 368(a)(1)(A) of the code, and (d) not take any action that could
disqualify the Merger from "reorganization" status under section 368(a)(1)(A) of
the Code.
3.15 REGISTRATION RIGHTS. On the Closing Date, Parent shall execute and
deliver to every shareholder of the Company who executes an Affiliate Agreement
in the form of Exhibit "C" and will beneficially own immediately after the
Effective time more than 3% of the then outstanding Parent Shares (after giving
effect to the Merger) a Registration Rights Agreement in the form of Exhibit
"D" that provides to that person demand and piggyback registration rights with
respect to all Parent Shares acquired by that person pursuant to the Merger.
3.16 CONFIDENTIALITY AGREEMENT. For purposes of the Confidentiality
Agreement, the Company approves (a) the acquisition of beneficial ownership of
Company Shares by Parent and Purchaser pursuant to this Agreement, (b) the
conversion of Company Shares into the right to receive Parent Shares pursuant to
the Merger, and (c) the other transactions contemplated by this Agreement.
3.17 RESTRUCTURING OF MERGER. Upon mutual agreement of Parent and the
Company, the Merger will be restructured in the form of a reverse triangular
merger of Purchaser into the Company, with the Company being the Surviving
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Corporation. In that event, the parties shall modify this Agreement as
appropriate to reflect that form of merger.
4. THE CLOSING.
4.1 CLOSING DATE. Unless this Agreement has been terminated in accordance
with section 7.3, and subject to the conditions precedent set forth in sections
4.3, 4.4, and 4.5, the parties shall consummate the transactions contemplated by
this Agreement on the Closing Date at the law offices of Glenn Rasmussen &
Fogarty, 100 South Ashley Drive, Suite 1300, Tampa, Florida, 10:00 a.m. Tampa,
Florida, time, or at such other place as the parties agree. Whether or not this
Agreement is approved by any of their shareholders, an agreement among Parent,
Purchaser, and the Company to change the place of closing of the transactions
contemplated by this Agreement will not require the approval of any of their
respective shareholders.
4.2 CLOSING OBLIGATIONS. On the Closing Date, (a) the Company shall (i)
tender to Parent the amendments of the Restricted Options that are required by
section 2.4, (ii) shall execute the Articles of Merger, and (iii) deliver to
Parent and Purchaser the certificate specified in section 4.4(d), the opinion of
counsel specified in section 4.4(f), the reaffirmation of the "comfort" letter
specified in section 4.4(g), and all other documents or certificates that are
required to be delivered by it to Parent or Purchaser on or before the Closing
Date and have not been previously delivered, and (b) Parent and Purchaser shall
(i) execute the Articles of Merger, (ii) file the Articles of Merger with the
Florida Department of State, (iii) file the Certificate of Merger with the
Secretary of State of Delaware, (iv) pay all fees required for those filings and
to effectuate the Merger, and (v) deliver to the Company the certificate
specified in section 4.5(g), the opinion of counsel specified in section 4.5(f),
the evidence of the Stock Exchange listing approval specified in section 4.5(e),
and all other documents or certificates that are required to be delivered by
Parent or Purchaser to the Company on or before the Closing Date and have not
been previously delivered.
4.3 CLOSING CONDITIONS OF EACH PARTY. The respective obligations of each
party to this Agreement to effect the Merger and consummate the other
transactions contemplated by this Agreement are subject to the following
conditions precedent, each of which must be satisfied on or before the Closing
Date, unless waived by all the parties to this Agreement, to the extent
permitted by law:
(a) The shareholders of the Company must have approved the Merger, the
Plan of Merger, and this Agreement by the requisite vote in accordance with
Florida Corporation Law and the Company's Bylaws and Articles of
Incorporation;
(b) The applicable waiting periods under the HSR Act must have expired
or been terminated;
(c) The Merger Registration Statement must have been declared
effective by the SEC, a stop order must not be in effect or threatened by
the SEC with respect to the Merger Registration Statement, and an
investigation or legal proceeding by the SEC suspending or seeking to
suspend the effectiveness of the Merger Registration Statement must not be
pending or threatened; and
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(d) All orders, permits, consents, licenses, approvals, franchises,
certificates, registrations, and other authorizations from governmental
authorities that are necessary to consummate the Merger (including all Blue
Sky and state securities permits, approvals, registrations, and
qualifications) must have been obtained.
4.4 CLOSING CONDITIONS OF PARENT AND PURCHASER. The obligations of Parent
and Purchaser to effect the Merger and to consummate the other transactions
contemplated by this Agreement are further subject to the following conditions
precedent, each of which must be satisfied on or before the Closing Date, unless
waived by Parent and Purchaser:
(a) The representations and warranties of the Company contained in
this Agreement must be true and correct in all material respects as of the
Execution Date and as of the Closing Date;
(b) The Company must have performed in all material respects all
agreements and obligations under this Agreement that are required to be
performed by it on or before the Closing Date;
(c) Since the Execution Date, there must not have occurred any event
that constitutes a Material Adverse Effect on the Company, except that any
fact, event, condition, or circumstance that is described in this Agreement
or the Company Disclosure Schedule or that is a reasonable consequence of
any fact, event, condition, or circumstance that is described in this
Agreement or the Company Disclosure Schedule, will not be deemed to be a
Material Adverse Effect, unless the fact, event, condition, or circumstance
constitutes (i) an enforcement proceeding by a governmental authority
against Parent or Purchaser, or (ii) an enforcement proceeding by a
governmental authority against the Company or any of its subsidiaries in
which the governmental authority seeks sanctions that would materially
impair or restrict the conduct of the business of the Company and its
subsidiaries by Parent and Purchaser after the Effective Time; and
(d) Parent and Purchaser must have received a certificate signed by
the Company's Chief Executive Officer and Chief Financial Officer stating
that (i) all representations and warranties of the Company contained in
this Agreement were true and correct in all material respects as of the
Execution Date and are true and correct in all material respects as of the
Closing Date, and (ii) all agreements and obligations in this Agreement to
be performed by the Company on or before the Closing Date have been
performed by the Company in all material respects;
(e) A law or final nonappealable order must not have been issued,
adopted, enacted, entered, or enforced by, and a suit, action, or
proceeding by a governmental authority must not be pending or threatened in
writing before, any governmental authority or any state or federal court in
the United States that (directly or indirectly) does or seeks to do any of
the following: (i) declare the Merger to be illegal; (ii) permanently
enjoin, restrain, or otherwise prohibit the acquisition of the Company by
Parent and Purchaser (or any of their respective affiliates or
subsidiaries) pursuant to the Merger; (iii) prohibit the ownership or
operation by Parent and Purchaser (or any of its affiliates or
subsidiaries)
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of all or a significant portion of the assets, business, or properties of
the Company and its subsidiaries, taken as a whole; or (iv) compel
Purchaser (or any of its affiliates or subsidiaries) to segregate or
dispose of all or a significant portion of the assets, business, or
properties of the Company and its subsidiaries, taken as a whole;
(f) Parent and Purchaser must have received from the Company's legal
counsel an opinion substantially consistent with, and with respect to the
matters set forth in, Exhibit "E," addressed to Parent and Purchaser and
dated as of the Closing Date;
(g) Coopers & Lybrand LLP must have reaffirmed as of the Closing Date
the "comfort" letter that it furnished to parent pursuant to section
3.6(c);
(h) Unless Parent notifies the Company to the contrary within 20 days
after the Execution Date, the administrative complaints filed against the
Company by the Board of Pharmacy of the Florida Department of Business and
Professional Regulation and designated as Case Nos. 92-00488, 92-01875,
92-01880, 92-04225, 91-09726 must have been settled, concluded, or
terminated;
(i) Parent must have received from Ernst & Young LLP an opinion that
the Merger will be treated as a "pooling of interests" under applicable
accounting standards;
(j) Parent, Purchaser, and their counsel must have received from the
Company a certificate in substantially the form of Exhibit "G," addressed
to Parent, Purchaser, and their counsel and dated as of the Closing Date;
(k) Parent, Purchaser, and their counsel must have received from each
of (i) Cecil S. Harrell, individually and as settlor and as co-trustee of
the Cecil S. Harrell Revocable Trust, u/a/d October 1, 1990, as amended and
restated, and (ii) James N. Harrell, individually and as settlor and as
trustee of the James N. Harrell Revocable Trust, u/a/d June 15, 1990, as
amended and restated, a certificate in substantially the form of Exhibit
"H," addressed to Parent, Purchaser, and their counsel and dated as of the
Closing Date; and
(l) All consents and approvals from third parties that are necessary
for the Company to consummate the Merger must have been obtained.
4.5 CLOSING CONDITIONS OF THE COMPANY. The Company's obligations to effect
the Merger and to consummate the other transactions contemplated by this
Agreement are further subject to the following conditions precedent, each of
which must be satisfied on or before the Closing Date, unless waived by the
Company;
(a) The representations and warranties of Parent and Purchaser
contained in this Agreement must be true and correct in all material
respects as of the Execution Date and as of the Closing Date;
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(b) Parent and Purchaser must have performed in all material respects
all their respective agreements and obligations under this Agreement that
are required to be performed by them on or before the Closing Date;
(c) Since the Execution Date, there must not have occurred any event
that constitutes a Material Adverse Effect on Parent;
(d) Smith Barney Inc. must have reaffirmed as of the date when the
Proxy Statement was mailed to the Company's shareholders its written
opinion to the effect that, as of the date of the Proxy Statement, the
consideration to be received by the holders of Company Shares in the Merger
is fair to them from a financial point of view and that opinion must not
have been revoked or withdrawn;
(e) The Stock Exchange must have approved the listing, upon official
notice of issuance, of all Parent Shares to be issued to shareholders of
the Company pursuant to the Merger;
(f) The Company must have received from Parent's outside legal counsel
a favorable written opinion, addressed to the Company, dated as of the
Closing Date, and reasonably satisfactory in form and substance to the
Company, to the effect that for federal income tax purposes: (i) the Merger
will qualify as a "reorganization" under section 368(a)(1) of the Code;
(ii) no gain or loss will be recognized by the Company's shareholders as a
result of the Merger, to the extent that they exchange their Company Shares
for Parent Shares pursuant to the Plan of Merger; and (iii) the bases and
holding periods of Parent Shares issued in exchange and substitution for
Company Shares pursuant to the Merger will be the same as the bases and
holding periods of the Company Shares exchanged for those Parent Shares;
(g) The Company must have received a certificate signed by Parent's
Chief Executive Officer and Chief Financial Officer stating that (i) all
representations and warranties of Parent and Purchaser contained in this
Agreement were true and correct in all material respects as of the
Execution Date and are true and correct in all material respects as of the
Closing Date, and (ii) all agreements and obligations in this Agreement to
be performed by Parent or Purchaser on or before the Closing Date have been
performed by each of them in all material respects;
(h) The Company must have received from Parent's outside legal counsel
an opinion substantially consistent with, and with respect to the matters
set forth in, Exhibit "F," addressed to the Company and dated as of the
Closing Date; and
(i) All consents and approvals from third parties that are necessary
for Parent or Purchaser to consummate the Merger must have been obtained.
4.6 WAIVER OF CONDITIONS PRECEDENT. A waiver of any condition precedent to
the closing obligations of a party will be valid and effective only if approved
in writing by the Chief Executive Officer of the party, and any unsatisfied
condition precedent will be deemed waived (without further action) by the
consummation of
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the Merger and the other transactions contemplated by this Agreement. The Chief
Executive Officer of a party may waive any condition precedent to the party's
closing obligations without any notice to, or approvals by, the shareholders of
the party.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Parent and Purchaser the following:
5.1 CORPORATE POWER AND ORGANIZATION. The Company is a corporation duly
incorporated and validly existing in active status under the laws of the State
of Florida, has the requisite corporate power and authority to carry on its
business as currently conducted, and possesses all orders, permits, consents,
licenses, approvals, franchises, certificates, registrations, and other
authorizations from governmental authorities that are necessary to conduct its
current business, except for those the absence of which would not have, in the
aggregate, a Material Adverse Effect on the Company. The Company is duly
qualified to do business as a foreign corporation and in good standing in every
jurisdiction where it owns or leases any material property or its business
activities require it to so qualify, except for those jurisdictions where the
failure to be so qualified or in good standing would not have, in the aggregate,
a Material Adverse Effect on the Company. The Company previously furnished or
made available to Parent copies of its Bylaws and Articles of Incorporation,
which are accurate and complete as of the Execution Date, except for the Bylaw
amendment described in section 5.10(d).
5.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has the requisite
corporate power and authority to enter into this Agreement, to perform its
obligations under this Agreement, and, subject to approval of this Agreement by
its shareholders as required by applicable law, to consummate the Merger. Except
as disclosed in the Company Disclosure Schedule, and except to the extent that
any contrary circumstance is cured, waived, or terminated without material cost
to the Company before the Closing Date, the execution, delivery, and performance
of this Agreement by the Company:
(a) will not conflict with the Company's Bylaws or Articles of
Incorporation;
(b) have been duly authorized by all requisite corporate action of the
Company and, except for any approval of the Merger, this Agreement, and the
Plan of Merger by its shareholders as required by applicable law, no other
corporate proceedings on the part of the Company or its shareholders are
necessary to authorize this Agreement or consummate the transactions
contemplated by it;
(c) will not breach, violate, suspend, or terminate (or create any
right of suspension or termination), cause the imposition of a penalty,
permit acceleration of the maturity of any liability or obligation of the
Company or any of its subsidiaries, constitute a default or any event that
(with notice or lapse of time or both) would constitute a default, under or
pursuant to any material bond, lease, order, mortgage, agreement,
indenture, instrument, deed of trust, promissory note, security agreement,
or other commitment to which the Company or any of its subsidiaries is a
party or any of their respective property is subject, except to the extent
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that any of the foregoing would not have, in the aggregate, a Material
Adverse Effect on the Company;
(d) will not result in the creation or attachment of a Lien on any
property of the Company or any of its subsidiaries, except to the extent
that the Lien would not have a Material Adverse Effect on the Company;
(e) subject to complying with the laws specified in the next clause,
will not violate any law or order of the State of Florida applicable to the
businesses of the Company and its subsidiaries and, except for any
violation that would not have a Material Adverse Effect on the Company,
will not violate any other law or order applicable to the businesses of the
Company and its subsidiaries; and
(f) does not require any notice to, filing or registration with, or
consent, license, approval, or authorization of, any governmental
authority, except to the extent advisable or necessary to comply with the
DGCL, the HSR Act, the Exchange Act, the Securities Act, Florida
Corporation Law, and applicable securities, corporation, and "takeover"
laws of various states.
This Agreement has been duly executed and delivered by the Company to Parent and
Purchaser, and, assuming it constitutes a valid and binding obligation of each
of Parent and Purchaser, this Agreement is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that its enforceability is limited by application of general
principles of equity and by bankruptcy, insolvency, moratorium, debtor relief,
and similar laws of general application affecting the enforcement of creditor
rights and debtor obligations.
5.3 AUTHORIZED CAPITALIZATION. The authorized capital stock of the Company
consists exclusively of 20,000,000 shares of common stock, $.01 par value, and
3,000,000 shares of preferred stock, of which there is designated 100,000 shares
of Redeemable Series "A" $.72 Cumulative Convertible Preferred Stock, $.01 par
value, all of which are issued and outstanding, 100,000 shares of Series "B"
$.98 Convertible Preferred Stock, $.01 par value, none of which are issued and
outstanding, 100,000 shares of Series "C" $.98 Convertible Preferred Stock, $.01
par value, none of which are issued and outstanding, and 500,000 shares of
Series "D" $.96 Cumulative Convertible Preferred Stock, $.01 par value, none of
which are issued or outstanding. As of the Execution Date, (a) 8,888,687 shares
of common stock are validly issued, outstanding, fully paid, non-assessable, and
free of any preemptive rights, (b) no shares of either the Company's common
stock or preferred stock are held in the treasury of the Company or any of its
subsidiaries, (c) 1,020,000 shares of the Company's common stock are reserved
for issuance pursuant to the exercise of stock options granted or authorized for
grant under plans and agreements, of which options for 535,150 shares are
outstanding under the Stock Option Plan and the Restricted Options, and (d)
100,000 shares of the Company's common stock are reserved for issuance upon
conversion of the Preferred Stock. The Company does not plan a stock split,
stock dividend, or other distribution of any of its capital stock. Except as
described above and in the Company Disclosure Schedule, (i) the Company does not
have authorized or outstanding any other class of debt or equity securities or
any rights, options, warrants, agreements, or commitments of any kind obligating
it to issue any shares of its capital stock, any securities convertible into or
ex-
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changeable for shares of its capital stock, or any rights, options, or warrants
to acquire any shares of its capital stock, and (ii) there are no proxies,
voting trusts, shareholder agreements, or other agreements or understandings to
which the Company is a party or is bound with respect to the voting of any
Company Shares. None of the unissued Company Shares are the subject of an SEC
registration statement under the Securities Act that is currently effective or
pending SEC review, except for the Registration Statements on Form S-8 (SEC
Registration Nos. 33-37549 and 33-80078) that cover 800,000 Company Shares
issuable upon the exercise of stock options granted or to be granted under the
Stock Option Plan. The Company has previously furnished or made available to
Parent and Purchaser copies of the letter agreements dated December 14 and 19,
1994, between the Company and Alice T. and Ronald S. Hall, pursuant to which
they agree to convert all their outstanding shares of Preferred Stock into
Company Shares promptly after December 31, 1994, and have executed and delivered
to the Company an Irrevocable Notice of Preferred Stock Conversion dated
December 20, 1994, and effective January 1, 1995.
5.4 SUBSIDIARIES. Except as disclosed on the Company Disclosure Schedule,
(a) the Company does not have any direct or indirect subsidiaries and does not
own or control, directly or indirectly, any equity or other ownership interest
in any other corporation, partnership, joint venture, or business organization,
and (b) neither the Company nor any of its subsidiaries is a partner or
participant in, or conducts any part of its business through, any partnership,
joint venture, or similar arrangement. Each of the Company's subsidiaries is a
corporation duly incorporated and validly existing in active status under the
laws of the State of Florida, has the requisite corporate power and authority to
carry on its business as currently conducted, and possesses all orders, permits,
consents, licenses, approvals, franchises, certificates, registrations, and
other authorizations from governmental authorities that are necessary to conduct
its current business, except for those the absence of which would not have, in
the aggregate, a Material Adverse Effect on the Company. Each of the Company's
subsidiaries is duly qualified to do business as a foreign corporation and in
good standing in every jurisdiction where it owns or leases any material
property or its business activities require it to so qualify, except for those
jurisdictions where the failure to so qualify would not have, in the aggregate,
a Material Adverse Effect on the Company. The Company previously furnished or
made available to Parent copies of the bylaws and articles of incorporation of
each of its subsidiaries, which are accurate and complete as of the Execution
Date. All the issued and outstanding shares of capital stock of each of the
Company's subsidiaries are validly issued, fully paid, nonassessable, and owned
of record and beneficially by the Company, free and clear of any Lien, proxy,
voting trust, shareholder agreement, or other agreement with respect to the
voting or transfer of any of those shares. Except for the class of capital stock
owned by the Company, none of the Company's subsidiaries has authorized or
outstanding any other class of debt or equity securities or any rights, options,
warrants, agreements, or commitments of any kind obligating it to issue any
shares of its capital stock, any securities convertible into, or exchangeable or
exercisable for, shares of its capital stock, or any rights, options, or
warrants to acquire any shares of its capital stock.
5.5 SEC FILINGS. The Company has filed with the SEC all forms, reports,
schedules, and statements that were required to be filed by it with the SEC
since July 31, 1992, and previously has furnished or made available to Parent
accurate and complete copies of all the Company SEC Documents. As of their
respective dates, the Company SEC Documents were prepared in accordance with the
Exchange Act and the Securities Act and did not contain any untrue statement of
a material fact
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or omit to state a material fact required to be stated in those documents or
necessary to make the statements in those documents not misleading, in light of
the circumstances under which they are made. The Company shall deliver to Parent
as soon as they become available accurate and complete copies of any report or
statement that it mails to its shareholders generally or files with the SEC
during the period after the Execution Date and before the Closing Date. As of
their respective dates, these reports and statements will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in them or necessary to make the statements in them not misleading, in
light of the circumstances under which they are made (except for any information
in them that is furnished by Parent or Purchaser for the express purpose of
inclusion in SEC filings, as to which the Company makes no representation), and
these reports and statements will comply in all material respects with all
applicable requirements of the Exchange Act and the Securities Act.
5.6 FINANCIAL STATEMENTS. The audited consolidated financial statements
and unaudited consolidated interim financial statements of the Company and its
subsidiaries that are included or incorporated in the Company SEC Documents were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as otherwise indicated in
the notes to them) and fairly present the consolidated financial position,
results of operations, and cash flows from operating, investing, and financing
activities of the Company and its subsidiaries as of the dates and for the
periods indicated, except that the unaudited consolidated interim financial
statements in the Company SEC Documents are subject to normal year-end
adjustments and were prepared in accordance with the instructions to SEC Form
10-Q and, accordingly, omit or condense certain footnotes and other information
normally included in financial statements prepared in accordance with generally
accepted accounting principles. The consolidated financial statements of the
Company and its subsidiaries that are included or incorporated in any subsequent
report or statement that the Company mails to its shareholders generally or
files with the SEC during the period after the Execution Date and before the
Closing Date (except for any information in them that is furnished by Parent or
Purchaser, as to which the Company makes no representation) will be prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as otherwise indicated in them, the
notes to them, or any related report of the Company's independent accountants)
and will fairly present the financial information that they purport to present,
except that the unaudited, consolidated interim financial statements will be
subject to normal year-end adjustments and will omit or condense certain
footnotes and other information normally included in financial statements
prepared in accordance with generally accepted accounting principles.
5.7 SUBSEQUENT EVENTS. Except as contemplated by this Agreement or
disclosed in the Company SEC Documents or the Company Disclosure Schedule, none
of the following has occurred since the date of the most recent consolidated
balance sheet of the Company and its subsidiaries that is included in the
Company SEC Documents: (a) any event that had, or is reasonably likely to have,
a Material Adverse Effect on the Company; (b) any change by the Company in its
accounting methods, practices, or principles, except as required to comply with
applicable law or a change in generally accepted accounting principles; (c) any
commitment or transaction by the Company or any of its subsidiaries that had, or
is reasonably likely to have, a Material Adverse Effect on the Company and was
not in the usual and ordinary course of business; (d) any declaration, payment,
or setting aside for payment of any dividends or other distributions (whether in
cash, stock or property)
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in respect of the Company Shares, except for accrual and payment of regular
dividends on the Preferred Stock; or (e) any event, action, or condition that
(i) is of the type prohibited by section 3.10, (ii) constitutes an agreement by
the Company to do anything described in clauses (a)-(d) above, or (iii) if it
had occurred before the Execution Date, would have made any representation or
warranty by the Company in this Agreement inaccurate in any material respect.
5.8 LEGAL COMPLIANCE. The Company and its subsidiaries are not in
violation of any law or order of any court or governmental authority that is
applicable to them, their businesses, or their properties, including the
so-called "Stark" law, 42 U.S.C. Section 1395nn, and comparable state laws and
laws prohibiting rebates, kickbacks, or fee-splitting to or with any person,
except as disclosed in the Company SEC Documents or the Company Disclosure
Schedule, and except for any violations that would not have, in the aggregate, a
Material Adverse Effect on the Company. Except as set forth in the Company
Disclosure Schedule, (a) there are not actions pending or (to the best knowledge
of the Chief Executive Officer and Chief Financial Officer of the Company)
threatened that question the validity of this Agreement, any documents to be
delivered to Parent or Purchaser by the Company in connection with this
Agreement, or any action taken or to be taken by the Company in connection with
the transactions contemplated by this Agreement; and (b) there is not any
pending or (to the best knowledge of the Chief Executive Officer and Chief
Financial Officer of the Company) threatened action by a state or federal
governmental authority that names the Company or any of its subsidiaries as a
party. The Company will deliver to Parent and Purchaser, upon request, a true
and complete copy of any material permit, license, or other governmental
authorization relating to the business operations of the Company and its
subsidiaries.
5.9 BROKERAGE. The Company has not used or engaged a broker, finder or
investment banking firm that is entitled to any fee, commission, or other
remuneration in connection with the Merger, except for Smith Barney Inc., whose
fee arrangements were disclosed by the Company to Parent on or before the
Execution Date.
5.10 COMPANY ACTION. The Board of Directors has received the opinion of
Smith Barney Inc. to the effect that, as of the Execution Date and based on the
assumptions and qualifications stated in that opinion, the consideration to be
received by the holders of the Company Shares pursuant to the Merger is fair to
them from a financial point of view. The Company confirms that the Board of
Directors has done the following by unanimous action: (a) approved and
authorized the Merger, the Plan of Merger, this Agreement, and the other
transactions contemplated by this Agreement; (b) determined that the
consideration to be received by its shareholders pursuant to the Merger is fair
to them from a financial point of view; (c) duly adopted a resolution
recommending approval of the Merger, the Plan of Merger, and this Agreement by
its shareholders; (d) duly adopted an amendment to the Company's Bylaws
providing that section 607.0902 of Florida Corporation Law does not apply to
"control-share acquisitions" (within the meaning of that section) of the Company
Shares; and (e) approved the Merger and this Agreement for purposes of section
607.0901 of Florida Corporation Law. The Company has not taken and will not take
any action described in Accounting Principles Board Opinion No. 16 that would
prevent Parent from accounting for the Merger as a pooling of interests.
5.11 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any of
its subsidiaries have any liabilities, obligations, Financial contingencies,
leases under which they are lessees and that have a term from inception
(including renewal
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options) exceeding one year, or unusual commitments of any kind, except for (a)
those disclosed in any part of the Company Disclosure Schedule, (b) those
accrued, reserved, or disclosed in the unaudited consolidated balance sheet of
the Company and its subsidiaries as at October 31, 1994, and the accompanying
notes thereto, (c) liabilities, obligations, and Financial Contingencies that
have been incurred in the usual and ordinary course of business since the date
of that balance sheet, and (d) leases, liabilities, obligations, and Financial
Contingencies that, in the aggregate, would not have a Material Adverse Effect
on the Company.
5.12 ENVIRONMENTAL MATTERS. Except as disclosed in the Company SEC
Documents or the Company Disclosure Schedule:
(a) None of the Company, its subsidiaries, or their respective
officers have received any formal or informal notification from any
governmental authority or other person that it allegedly was a contributor
to, or a potentially responsible party in connection with, any place at
which Hazardous Material was stored, treated, released, or disposed;
(b) None of the Company, its subsidiaries, or their respective
officers have received, or are aware of, any notice, warning letter, or
consent order relating to a violation of any safety or environmental law
with respect to any Site or the operation and maintenance of their
businesses:
(c) None of the Company, its subsidiaries, or their respective
officers are or have been a party to any civil or criminal litigation or to
any administrative proceeding by a governmental authority involving
allegations of (i) a violation of any safety or environmental law, (ii) the
release of any Hazardous Material or petroleum substance into the
environment (whether in or outside the workplace), or (iii) any personal
injury or property damage resulting from the use, storage, disposal,
treatment, generation, manufacture, or other handling of any Hazardous
Material or petroleum substance on any Site or other property; and
(d) To the best knowledge of the Company's Chief Executive Officer
and Chief Financial Officer:
(i) the Company and its subsidiaries have operated their businesses
in compliance with all health, safety, occupational, and environmental
protection laws and orders, including the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the Resource Conservation
& Recovery Act (42 U.S.C. Section 6901 et seq.), the Safe Drinking Water
Act (21 U.S.C. Section 7401 et seq.), and the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.) ("CERCLA"), all as amended;
(ii) neither the Company not any of its subsidiaries have disposed
or arranged (by contract, agreement, or otherwise), within the meaning
of section 107(a)(3) of CERCLA, for the disposal of any Hazardous
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Material that was used, generated, or handled by any of them at any
off-site location that at the time of the disposal was listed or
proposed for inclusion on the National Priority List promulgated
pursuant to CERCLA or any list promulgated by any governmental authority
for the purpose of identifying sites that pose an imminent danger to
health and safety; and
(iii) each of the Company and its subsidiaries has been issued, and
will maintain until the Closing Date, all permits, licenses,
certificates, and approvals required from any governmental authority
that are required for its operations with respect to (A) air emissions,
(B) noise emissions, (C) discharges of surface water or groundwater, (D)
solid or liquid waste disposal of toxic or hazardous substances or
wastes, and (E) compliance with any other health, safety, or
environmental law or order, and an accurate and complete list of any
such material permits, licenses, certificates, or approvals is set forth
in the Company Disclosure Schedule.
The Company has furnished or made available to Parent and Purchaser (1) all
notices of violation from governmental authorities relating to safety and
environmental laws and orders and all environmental studies performed by or on
behalf of the Company, any of its subsidiaries, or any governmental authority,
or any other party, that pertain to the Company or any of its subsidiaries, and
(2) all material, reports, or other documents relating to any safety or
environmental matter referred to in this section or disclosed in the Company SEC
Documents or the Company Disclosure Schedule.
5.13 TAXES. Except for matters disclosed in the Company Disclosure
Schedule, except for taxes, tax returns, and tax reports for any tax period for
which no taxes are owed or the applicable limitation period has expired, and
except for any tax liabilities that would not have, in the aggregate, a Material
Adverse Effect on the Company:
(a) the Company and each of its subsidiaries has filed as of the
Execution Date, and will have filed as of the Closing Date, all local,
state, federal, and foreign tax returns and reports required to be filed by
it (or on its behalf as part of a consolidated group) for tax periods
ending before those dates (taking into account all extensions of time
allowed by law) and has paid, or will have paid before the Closing Date,
all taxes shown on those returns as owed for the periods covered by the
returns, including all withholding or other payroll related taxes shown on
those returns;
(b) neither the Company nor any of its subsidiaries knows of any audit
or examination by any taxing authority that is pending, in progress, or
threatened and that is likely to result in it becoming subject to any
additional taxes, interest, penalties, or other similar charges as a result
of either a failure to file or accurately file as required by applicable
law any tax return or to pay any amount shown to be due on any tax return,
including any taxes, interest, penalties, or other similar
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charges resulting from obtaining an extension of time to file any return or
to pay any tax;
(c) no assessment, notice of deficiency, or other similar
communication has been received by the Company or any of its subsidiaries
with respect to any tax that has not been paid, withheld, discharged, or
fully accrued or reserved on the Company's books of account, and no
amendment or application for refund has been filed or is planned with
respect to any tax return that pertains to any such tax; and
(d) neither the Company nor any of its subsidiaries has entered into
any agreement with any taxing authority, including the Internal Revenue
service, waiving or extending any statute of limitation with respect to any
tax return.
The Company and each of its subsidiaries shall terminate as of the Closing Date
every tax-sharing agreement to which they are a party so it is prospectively
inoperative for any taxable year (whether the current year, a future year, or a
past year).
5.14 EMPLOYEE PLANS. Except as disclosed in the Company Disclosure
Schedule, the Company has previously furnished or made available to Parent
current, accurate, and complete copies of (a) the text of each Plan sponsored or
maintained by the Company or its subsidiaries for their employees (to the extent
reduced to writing) or a written summary of the Plan (if the Plan has not been
reduced to writing), and (b) with respect to each Plan covered by section 3(3)
of ERISA, (i) the most recent summary plan description (as described in section
102 of ERISA), (ii) any summary of material modifications that has been
distributed to participants or filed with the United States Department of Labor
but that has not been incorporated in an updated summary plan description
furnished pursuant to (ii) above, and (iii) the annual report (as described in
section 103 of ERISA) for the most recent plan year for which an annual report
has been prepared (including any actuarial and financial statements, opinions,
and schedules required by form 5500 or section 103 of ERISA), and (iv) any trust
agreement, administration agreement, investment management agreement, contract
with an insurance company or service provider, or other contract, agreement, or
insurance policy associated with the Plan. Except as disclosed on the Company
Disclosure Schedule, (A) every Plan sponsored or maintained by the Company or
its subsidiaries has been operated in substantial compliance with applicable
laws, including ERISA and the Code, (B) the Company's Chief Executive Officer
and Chief Financial Officer do not know of any facts, including any prohibited
transaction or "reportable event" as defined in section 4043(b) of ERISA, that
would subject the Company or any of its subsidiaries to any tax or penalty in an
amount that would have a Material Adverse Effect on the Company, (C) neither the
Company nor any of its subsidiaries has maintained a Retirement Plan, maintains
any Retirement Plan with an accumulated funding deficiency, as defined in
section 302(a)(2) of ERISA, or has any current liability for Retirement Plan
termination or withdrawal under Title IV of ERISA, (D) there is not any claim,
grievance, litigation, arbitration, or other legal proceeding pending or
threatened against the Company or any of its subsidiaries involving any Plan,
other that routine claims for benefits made in the ordinary course for which
plan administrative review procedures have not been exhausted, and (E) neither
the Company nor any of its subsidiaries is a party to any collective bargaining
agreement or has been a contributing employer with respect to any "multiemployer
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plan" (within the meaning of Section 3(37) of ERISA) at any time during the
preceding six years. None of the Company's or any of its subsidiaries' employees
is represented by a union.
5.15 REAL PROPERTY: LEASED PROPERTIES. Neither the Company nor any of its
subsidiaries owns any real property. The Company Disclosure Schedule lists every
lease of real or personal property that is used in the operation of the
businesses of the Company and its subsidiaries and that requires annual rental
payments of $50,000 or more, including in each case the names of the lessor and
lessee and the location of the property subject to the lease. Except as
disclosed in the Company Disclosure Schedule, (a) the Company or a subsidiary of
the Company has a valid leasehold interest in the property subject to each of
the leases listed on the Company Disclosure Schedule, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting
creditors' rights and remedies generally; (b) neither the Company nor any of its
subsidiaries is in default of any of those leases to which it is a party; (c) no
current party to any of those leases has made or notified the Company or any of
its subsidiaries of a claim with respect to any breach or default by them under
any of those leases; and (d) none of the leases listed on the Company Disclosure
Schedule are subject to any sublease, license, or other agreement granting to
any other person any right to the use, occupancy, or enjoyment of all or any
part of the property that is subject to the lease. The Company shall deliver to
Parent and Purchaser, at any time upon request, a true and complete copy of any
lease listed on the Company Disclosure Schedule.
5.16 MATERIAL CONTRACTS. The Company Disclosure Schedule lists all the
following contracts that are in effect as of the date of this Agreement and to
which the Company or any of its Subsidiaries is a party:
(a) any contract or agreement containing covenants limiting the
freedom of the Company or any of its subsidiaries to engage in any line of
business or to compete with any person;
(b) any written employment agreement that involves annual payments by
the Company or its subsidiaries in excess of $50,000;
(c) any written agreement with any director, officer, or shareholder
of the Company or any subsidiary that is not terminable without penalty or
liability arising from the termination, except for any agreement that,
pursuant to its terms, provides benefits that are available generally to
all officers, directors, or employees of the Company or any of its
subsidiaries.
(d) any joint venture agreement or shareholder agreement;
(e) any contract or other agreement to guaranty any debt, liability,
or obligation of any person in excess of $50,000, except for a person with
whom the Company is required to consolidate its financial information in
accordance with generally accepted accounting principles; or
(f) any indemnity agreement that is actually known by the Chief
Executive Officer or Chief Financial Officer of the Company to have arisen
in connection with any sale or disposition by the Company
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or any of its subsidiaries of more than $50,000 of assets, other than sales
of assets in the ordinary course of business.
5.17 CUSTOMERS. Except as disclosed on the Company Disclosure Schedule or
promptly disclosed to Parent after it occurs, to the actual knowledge of the
Chief Executive Officer and Chief Financial Officer of the Company, there has
not been since July 31, 1994, any change in the business relationship of the
Company or any of its subsidiaries with any of their respective customers who
paid to the Company more than $3,000,000 in revenue during its fiscal year ended
July 31, 1994, which change had, or is reasonably likely to have, a Material
Adverse Effect on the Company.
5.18 RECEIVABLES. To the best knowledge of the Company's Chief Financial
Officer, all accounts receivable of the Company and its subsidiaries that are
recorded in the Company's balance sheets at July 31 and October 31, 1994,
represent valid claims against debtors for sales or other charges arising on or
before the respective balance sheet date, are not subject to discount except for
normal cash discounts, and have been appropriately reduced to their estimated
net realizable value.
5.19 INSURANCE. The Company Disclosure Schedule lists all material
policies of insurance (including the names and addresses of all insurers) that
are in force on the Execution Date and insure the Company, its subsidiaries, or
any of their assets or employees, including policies of fire, life, theft,
disability, employee fidelity, workers' compensation, and other casualty and
liability insurance, and the Company will continue to maintain following the
Closing Date substantially the same insurance coverages that are in force on the
Execution Date. The Company will deliver to Parent and Purchaser, upon request,
true and complete copies of any material insurance policy listed on the Company
Disclosure Schedule, including all amendments, supplements, modifications, or
side letters relating thereto.
5.20 ACCURACY OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties by the Company in this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading.
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser jointly and severally represent and warrant to the
Company the following:
6.1 CORPORATE POWER AND ORGANIZATION. Parent is a corporation duly
incorporated and validly existing in good standing under the laws of Delaware,
and Purchaser is a corporation duly incorporated and validly existing in good
standing under the laws of the State of Delaware. Each of Parent and Purchaser
has the requisite corporate power and authority to carry on its business as
currently conducted, possesses all orders, permits, consents, licenses,
approvals, franchises, certificates, registrations, and other authorizations
from governmental authorities that are necessary to conduct its current
business, except for those the absence of which would not have, in the
aggregate, a Material Adverse Effect on Parent, and is qualified to do business
as a foreign corporation and in good standing in every jurisdiction where it
owns or leases any material property or its business activities require it to so
qualify, except for those jurisdictions where the failure to so qualify
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would not have, in the aggregate, a Material Adverse Effect on Parent. All of
the issued and outstanding capital stock of Purchaser is owned of record and
beneficially by Parent. Parent and Purchaser previously furnished or made
available to the Company copies of their respective Bylaws and Articles of
Incorporation, which are accurate and complete as of the Execution Date.
6.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of Parent and Purchaser
has the requisite corporate power and authority to enter into this Agreement, to
perform its obligations under this Agreement, and to consummate the Merger.
Except as disclosed in the Parent Disclosure Schedule, and except to the extent
that any contrary circumstance is cured, waived, or terminated before the
Closing Date, the execution, delivery, and performance of this Agreement by each
of Parent and Purchaser:
(a) have been duly authorized by all requisite corporate action of
Parent and Purchaser;
(b) will not conflict with their respective Bylaws and Articles of
Incorporation;
(c) will not breach, violate, suspend, or terminate (or create any
right of suspension, or termination), cause the imposition of a penalty,
permit acceleration of the maturity of any liability or obligation of
Parent or any of its subsidiaries, constitute a default or any event that
(with notice or lapse of time or both) would constitute a default, under or
pursuant to any material bond, lease, order, mortgage, agreement,
indenture, instrument, deed of trust, promissory note, security agreement,
or other commitment to which Parent or any of its subsidiaries is a party
or any of their respective property is subject, except to the extent that
any of the foregoing would not have, in the aggregate, a Material Adverse
Effect on Parent;
(d) will not result in the creation or attachment of a Lien on any
property of Parent or any of its subsidiaries, except to the extent that
the lien would not have a Material Adverse Effect on the Parent;
(e) subject to compliance with the laws specified in the next clause,
will not violate any law or order applicable to Parent or Purchaser or any
of their respective property, except for any violation that would not have
a Material Adverse Effect on Parent; and
(f) does not require any notice to, filing or registration with, or
consent, license, approval, or authorization of, any governmental
authority, except to the extent advisable or necessary to comply with the
DGCL, the HSR Act, the Exchange Act, the Securities Act, Florida
Corporation Law, applicable laws of the jurisdiction where it is
incorporated, and applicable securities, corporation, and "takeover" laws
of various states.
Parent's and Purchaser's respective boards of directors have approved and
authorized the Merger, the Plan of Merger, this Agreement, and the other
transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered to the Company by each of Parent and Purchaser and,
assuming it constitutes a valid and binding obligation of the Company, this
Agreement is a valid and binding obligation of each of Parent and Purchaser,
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enforceable against each of them in accordance with its terms, except to the
extent that its enforceability is limited by application of general principles
of equity and by bankruptcy, insolvency, moratorium, debtor relief, and similar
laws of general application affecting the enforcement of creditor rights and
debtor obligations.
6.3 AUTHORIZED CAPITALIZATION. The authorized capital stock of Parent
consists exclusively of 300,000,000 shares of common stock, $.10 par value, and
25,000,000 shares of preferred stock, $1.00 par value, of which 3,000,000 shares
of Series B $2.75 Cumulative Convertible Exchangeable Preferred Stock are issued
and outstanding. The authorized capital stock of Purchaser consists exclusively
of 3,000 Purchaser Shares, of which 1,000 shares are validly issued,
outstanding, fully paid, non-assessable, and free of any preemptive rights. As
of the Execution Date, (a) 85,620,061 Parent Shares are validly issued,
outstanding, fully paid, non-assessable, and free of any preemptive rights, (b)
3,972,208 Parent Shares are held in the treasury of the Company or its
subsidiaries, and (c) 24,899,676 shares are reserved for issuance pursuant to
the exercise of purchase or conversion rights of outstanding warrants, stock
options, and convertible securities. Neither Parent nor Purchaser plans a stock
split, stock dividend, or other distribution of capital stock. Except as
described above, Parent and Purchaser do not have authorized or outstanding any
other class of debt or equity securities or any rights, options, warrants,
agreements, or commitments of any kind obligating it to issue any shares of its
capital stock, any securities convertible into or exchangeable for shares of its
capital stock, or any rights, options, or warrants to acquire any shares of its
capital stock. There are no proxies, voting trusts, shareholder agreements, or
other agreements or understandings to which Parent or any of its subsidiaries is
a party or is bound with respect to the voting of any Parent Shares. Except as
disclosed in the Parent Disclosure Schedule, and except for Parent Shares
reserved for issuance pursuant to the exercise of purchase or conversion rights
of outstanding stock options and convertible securities, none of the unissued
Parent Shares are the subject of an SEC registration statement under the
Securities Act that is currently effective or pending SEC review.
6.4 SUBSIDIARIES. Parent does not have any direct or indirect "significant
subsidiaries" (as defined in Rule 1-02(v) under SEC Regulation S-X), except as
disclosed in the Parent Disclosure Schedule. Each of Parent's subsidiaries is a
corporation duly incorporated and validly existing in good standing under the
laws of the state of its incorporation, has the requisite corporate power and
authority to carry on its business as currently conducted, and possesses all
orders, permits, consents, licenses, approvals, franchises, certificates,
registrations, and other authorizations from governmental authorities that are
necessary to conduct its current business, except for those the absence of which
would not have, in the aggregate, a Material Adverse Effect on Parent. Each of
Parent's subsidiaries is duly qualified to do business as a foreign corporation
and in good standing in every jurisdiction where it owns or leases any property
or its business activities require it to so qualify, except for those
jurisdictions where the failure to so qualify would not have, in the aggregate,
a Material Adverse Effect on Parent. Parent and Purchaser previously furnished
or made available to the Company copies of their respective Bylaws and
Certificates of Incorporation, which are accurate and complete as of the
Execution Date. To the best knowledge of the Chief Financial Officer of Parent,
all the issued and outstanding shares of the capital stock of each direct or
indirect "significant subsidiary" of Parent (as defined in Rule 1-02(v) under
SEC Regulation S-X) that are owned by Parent or any of its other subsidiaries
are free from any adverse claim of ownership.
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6.5 SEC FILINGS. Parent has filed with the SEC on a timely basis all
forms, reports, schedules, and statements that were required to be filed by it
with the SEC since December 31, 1992, and previously has furnished or made
available to the Company accurate and complete copies of all the Parent SEC
Documents. As of their respective dates, the Parent SEC Documents were prepared
in accordance with the Exchange Act and the Securities Act did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in those documents or necessary to make the statements in those
documents not misleading, in light of the circumstances under which they were
made. Parent shall deliver to the Company as soon as they become available
accurate and complete copies of any report or statement that it mails to its
shareholders generally or files with the SEC during the period after the
Execution Date and before the Closing Date. As of their respective dates, these
reports and statements will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated in them or necessary to
make the statements in them not misleading, in light of the circumstances under
which they are made (except for any information in them that is provided in
writing by the Company for the express purpose of inclusion in SEC filings, as
to which Parent and Purchaser make no representation), and these reports and
statements will comply in all material respects with all applicable requirements
of the Exchange Act and the Securities Act.
6.6 FINANCIAL STATEMENTS. The audited consolidated financial statements
and unaudited consolidated interim financial statements of Parent and its
subsidiaries that are included or incorporated in the Parent SEC Documents were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as otherwise indicated in
the notes to them) and fairly present the consolidated financial position,
results of operations, and cash flows from operating, investing, and financing
activities of Parent and its subsidiaries as of the dates and for the periods
indicated, except that the unaudited consolidated interim financial statements
in the Parent SEC Documents are subject to normal year-end adjustments and were
prepared in accordance with the instructions to SEC Form 10-Q and, accordingly,
omit or condense certain footnotes and other information normally included in
financial statements prepared in accordance with generally accepted accounting
principles. The consolidated financial statements of Parent and its subsidiaries
that are included or incorporated in any subsequent report or statement that
Parent mails to its shareholders generally or files with the SEC during the
period after the Execution Date and before the Closing Date (except for any
information in them that is furnished by the Company, as to which Parent and
Purchaser make no representation) will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as otherwise indicated in them, the notes to them, or any
related report of Parent's independent accountants) and will fairly present the
financial information that they purport to present, except that the unaudited,
consolidated interim financial statements will be subject to normal year-end
adjustments and will omit or condense certain footnotes and other information
normally included in financial statements prepared in accordance with generally
accepted accounting principles.
6.7 SUBSEQUENT EVENTS. Except as contemplated by this Agreement or
disclosed in the Parent SEC Documents or the Parent Disclosure Schedule, none of
the following has occurred since the date of the most recent consolidated
balance sheet of Parent and its subsidiaries that is included in the Parent SEC
Documents: (a) any event that had, or is reasonably likely to have, a Material
Adverse Effect on Parent; (b) and change by Parent in its accounting methods,
practices, or principles,
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except as required to comply with applicable law or a change in generally
accepted accounting principles; (c) any commitment or transaction by Parent or
any of its subsidiaries that had, or is reasonably likely to have, a Material
Adverse Effect on Parent and was not in the ordinary course of business; or (d)
any event, action, or condition that (i) is of the type prohibited by section
3.10, (ii) constitutes an agreement by Parent or Purchaser to do anything
described in clauses (a)-(d) above, or (iii) if it had occurred before the
Execution Date, would have made any representation or warranty by Parent or
Purchaser in this Agreement inaccurate in any material respect. Parent does not
have any plan as of the Execution Date to adopt, effect, or authorize a spin
off, split up, restructuring, recapitalization, reorganization, partial or
complete liquidation, or special or extraordinary dividend or distribution that
would be expected to be effective or have a record date before the Effective
Time and result in Parent's shareholders receiving cash, property, or equity
securities of Parent or any of its direct or indirect subsidiaries.
6.8 LEGAL COMPLIANCE. Parent and its subsidiaries are not in violation of
any law or order of any court or governmental authority that is applicable to
them, their businesses, or their properties, including the so-called "Stark"
law, 42 U.S.C. Section 1395nn, and comparable state laws and laws prohibiting
rebates, kickbacks, or fee-splitting to or with any person, except as disclosed
in the Parent SEC Documents or the Parent Disclosure Schedule, and except for
any violations that would not have, in the aggregate, a Material Adverse Effect
on Parent.
6.9 BROKERAGE. Parent and Purchaser have not used or engaged a broker,
finder, or investment banking firm that is entitled to any fee, commission, or
other remuneration in connection with the Merger or this Agreement, except for
Donaldson, Lufkin & Jenrette Securities Corporation.
6.10 ABSENCE OF UNDISCLOSED LIABILITIES. Parent and its subsidiaries do
not have any liabilities, obligations, or Financial Contingencies, except for
(a) those disclosed on any part of the Parent Disclosure Schedule, (b) those
accrued, reserved, or disclosed in the unaudited consolidated balance sheet of
Parent and its subsidiaries as at September 30, 1994, and the accompanying notes
thereto, (c) liabilities, obligations, and Financial Contingencies that have
been incurred in the usual and ordinary course of business since the date of
that balance sheet, and (d) liabilities, obligations, and Financial
Contingencies that in the aggregate would not have a Material Adverse Effect on
Parent.
6.11 TAXES. Parent has filed with the proper governmental authorities all
material tax returns, reports, declarations, and information returns and
statements that are required by law to be filed by it and its subsidiaries for
tax periods ending before the Execution Date (taking into account all extensions
of time allowed), and has paid, withheld, or adequately accrued or reserved on
its books of account in accordance with generally accepted accounting principles
all taxes that are required to be paid for those tax periods, except in all
cases for (i) matters disclosed on the Parent Disclosure Schedule, (ii) taxes
and tax returns, reports, statements, and declarations for any tax period for
which no taxes are owed or the applicable limitations period has expired, and
(iii) any tax liabilities that would not have, in the aggregate, a Material
Adverse Effect on Parent. Neither Parent nor any of its "significant
subsidiaries" (as defined in Rule 1-02(v) under SEC Regulation S-X) has filed an
election under section 341(f) of the Code to be treated as a collapsible
corporation.
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6.12 PARENT SHARES. The Parent Shares to be issued to shareholders of the
Company pursuant to the Merger, when so issued, will be duly authorized, validly
issued, fully paid, non-assessable, and free and clear of any Liens, preemptive
rights, or restriction on transfer, except for any transfer restrictions imposed
by state and federal securities laws.
6.13 ACCURACY OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties made by Parent or Purchaser in this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
7. WAIVER; EXTENSION; AMENDMENT; TERMINATION.
7.1 WAIVERS AND EXTENSIONS. A waiver of any provision of this Agreement
will be valid and effective only if it is evidenced by a writing signed by or on
behalf of the party against whom the waiver is sought to be enforced and, with
respect to Parent, Purchaser, or the Company, is approved and authorized
pursuant to a resolution duly adopted by its board of directors. At any time on
or before the Closing Date, and regardless of whether this Agreement is approved
by the Company's shareholders, the parties to this Agreement may (a) extend the
time for performance of any covenant, agreement, or obligation of any other
party under this Agreement, or (b) waive any condition precedent to its own
obligations under this Agreement or waive performance of any covenant,
agreement, or obligation of any other party under this Agreement. No delay or
course of dealing by a party to this Agreement in exercising a power, right, or
remedy under this Agreement will operate as a waiver of any power, right, or
remedy of that party, except to the extent expressly manifested in a writing
signed by or on behalf of that party. In addition, the written waiver by a party
of a power, right, or remedy under any provision of this Agreement will not
constitute a waiver of any succeeding exercise of the power, right, or remedy or
a waiver of the provision itself.
7.2 AMENDMENT. An amendment or modification of this Agreement or any
provision or exhibit of it will be valid and effective only if it is in writing,
signed by or on behalf of each party to this Agreement and, with respect to
Parent, Purchaser, or the Company, approved and authorized pursuant to a
resolution duly adopted by its board of directors. The parties to this Agreement
may amend or modify this Agreement at any time before the Effective Time,
whether before or after the Special Meeting. After approval of the Merger and
this Agreement by the Company's shareholders at the Special Meeting, however,
the parties shall not amend or modify this Agreement in any respect to (a) alter
or change the Merger Consideration to be received by the Company's shareholders
pursuant to the Merger, (b) alter or change any term of the Certificate of
Incorporation of the Surviving Corporation to be effected by the Merger, or (c)
alter or change any other term or condition of this Agreement, if the change or
alteration, individually or together with all other changes and alterations,
would materially and adversely affect the Company or the holders of shares of
any class or series of the Company's capital stock, unless in each case the
Company subsequently obtains the approval of its shareholders with respect to
the amendment or modification before the Effective Time.
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7.2 TERMINATION. Notwithstanding anything contained in this Agreement to
the contrary, this Agreement can be terminated, and the transactions
contemplated by it abandoned by all the parties, at any time before the Closing
Date, whether or not this Agreement is approved by the Company's shareholders:
(a) By a written agreement of termination among Parent, Purchaser,
and the Company that has been approved by their respective boards of
directors;
(b) By Parent of the Company, (i) if the Company's shareholders do
not approve the Merger, or (ii) if without the fault of the terminating
party the Effective Time has not occurred before June 30, 1995; except that
Parent will not have a right to terminate this Agreement pursuant to this
subsection 7.3(b) if the Special Meeting is held before June 30, 1995, and
Parent or Purchaser does not vote in favor of the Merger at the Special
Meeting all the Company Shares that it beneficially owns or then has the
right or power to vote with respect to the Merger pursuant to a proxy or
voting agreement;
(c) By Parent or the Company, if a governmental authority or a state
or federal court in the United States adopts, enters, or issues a final
nonappealable order, or adopts, enacts, enforces, or holds applicable to
the Merger a law, that directly or indirectly (i) declares the Merger to be
illegal; or (ii) permanently enjoins, restrains, or otherwise prohibits the
acquisition of the Company by Parent and Purchaser (or any of their
respective affiliates or subsidiaries) pursuant to the Merger;
(d) By the Company; if (i) it receives and Acquisition Proposal that
the Board of Directors determines in good faith in the exercise of its
fiduciary duties to shareholders under applicable law, as determined based
on an opinion of an outside legal counsel and the advise of its financial
advisor as to the financial capability of the person making the Acquisition
Proposal, has a per share value greater than the price per share then being
offered for the Company Shares pursuant to this Agreement, and (ii) the
value being offered for the Company Shares pursuant to this Agreement, as
reasonable determined by the Board of Directors, is not increased within
three business days after the first announcement of such Acquisition
Proposal to be equal to or greater than that being offered pursuant to that
Acquisition Proposal;
(e) By the Company (i) if the Closing Price is lower that $10.00 or
(ii) if Smith Barney Inc. withdraws its written opinion as of the Execution
Date or as of the date of the Proxy Statement to the effect that, based on
the assumptions and qualifications stated in that opinion, the
consideration to be received by the holders of the Company Shares pursuant
to the Merger is fair to them from a financial point of view;
(f) By the Company, if Parent or Purchaser fails to perform in any
material respect any obligation required by this Agreement to be performed
by them (or either of them) on or before the effective date of the
termination;
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(g) By Parent, if the Company fails to perform in any material respect
any obligation required by this Agreement to be performed by it on or
before the effective date of the termination;
(h) By Parent, if the Company either (i) amends, modifies, or
withdraws in any material respect adverse to Parent or Purchaser its
approval or recommendation of the Merger and this Agreement, or (ii)
recommends to its shareholders any acquisition Proposal of another person;
or
(i) By Parent, if a governmental authority or a state or federal court
in the United States adopts, enters or issues a final and nonappealable
order, or adopts, enacts, enforces, or holds applicable to the Merger a
law, that directly or indirectly (i) prohibits the ownership or operation
by Parent and Purchaser (or any of its affiliates or subsidiaries) of all
or a significant portion of the assets, business, or properties of the
Company and its subsidiaries, taken as a whole, or (ii) compels Purchaser
(or any of its affiliates or subsidiaries) to segregate or dispose of all
or a significant portion of the assets, business, or properties of the
Company and its subsidiaries, taken as a whole.
Termination of this Agreement by any party pursuant to clauses (b) through (i)
above will be valid only if a notice of termination, signed by or on behalf of
the party electing the termination, is given to all the other parties to this
Agreement. Termination of this Agreement in accordance with clause (a) above
will be effective as of the date specified in the parties' written agreement of
termination. Termination of this Agreement in accordance with clause (c) or (i)
above will be effective on the effective date of the law or order that makes the
Merger illegal or permanently enjoins, restrains, or prohibits consummation of
the Merger. Termination of this Agreement pursuant to any other clause above
will be effective when the notice of termination is given to the other parties
to this Agreement by the party electing the termination.
7.4 EFFECT OF TERMINATION. If this Agreement is terminated in accordance
with the provisions of sections 7.3(a), (b), (c), (e), or (i), a party to this
Agreement (and its officers, directors, shareholders) will not have any further
right, liability, or obligation with respect to any other party to this
Agreement (or to any party's officers, directors, or shareholders).
Additionally, if this Agreement is terminated pursuant to section 7.3(d), Parent
and Purchaser shall not assert any claim for tortious interference against the
Company. Except as otherwise provided in this section 7.4 or section 7.5,
nothing in this Agreement relieves any part from liability for damages actually
incurred by another party as a result of any breach of this Agreement by it. If
this Agreement is terminated, the parties shall hold in strict confidence and
not exploit in any manner any data or information obtained from each other.
7.5 TERMINATION PAYMENT. If either (a) this Agreement is terminated
pursuant to section 7.3(d) or section 7.3(h), or (b) the Company receives an
Acquisition Proposal before this Agreement is terminated, Smith Barney Inc.
subsequently withdraws its written "fairness" opinion described in section
7.3(e), the Company thereafter terminates this Agreement pursuant to section
7.3(e), and the
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Company accepts any Acquisition Proposal within one year after the effective
date of its termination of this Agreement, then in either case the Company shall
promptly (but in no event later than ten business days after the effective date
of the termination or the date when the Company accepts the Acquisition
Proposal, as the case may be) pay to Parent a termination fee in cash of
$5,000,000, in satisfaction and full settlement of all liabilities and
obligations of the Company to Parent and Purchaser under this Agreement. Payment
by the Company of the foregoing fee will relieve it of any further liability for
any breach of this Agreement. Notwithstanding the foregoing, the Company will
not be obligated to pay that fee to Parent if Parent or Purchaser is in breach
of this Agreement in any material respect at the time when this Agreement is
terminated.
8. MISCELLANEOUS.
8.1 TIME OF ESSENCE. Time is of the essence in the performance and
satisfaction by each party of each duty, condition, agreement, and obligation to
be performed or satisfied by the party under this Agreement.
8.2 ASSIGNMENT. This Agreement is not assignable by operation of law or
otherwise by any party to this Agreement without the advance written approval of
every other party to this Agreement, which it may withhold in its sole
discretion. Any attempted assignment of this Agreement by a party without the
advance written approval of all the other parties will be invalid and
unenforceable against the other parties. Notwithstanding the foregoing,
Purchaser may assign its rights under this Agreement to any direct or indirect
wholly owned subsidiary of Parent which, pursuant to a written agreement that is
reasonably acceptable to the Company as to form and substance, agrees to make
all the representations and warranties of Purchaser under this Agreement, to
assume all of Purchaser's duties, covenants, agreements, and obligations under
this Agreement, and to be bound by all the provisions of this Agreement that are
applicable to Purchaser, but that assignment will not relieve Purchaser from the
performance of its duties, covenants, agreements, and obligations under this
Agreement.
8.3 LEGAL PROCEEDINGS. In any mediation, arbitration, or legal proceeding
arising out of this Agreement, the losing party shall reimburse the prevailing
party, on demand, for all costs incurred by the prevailing party in enforcing,
defending, or prosecuting any claim arising out of this Agreement. An agent,
officer, director, employee, or shareholder of a party to this Agreement (other
than Parent) is not personally liable for any breach of a covenant, warranty,
agreement, or representation of any party to this Agreement, except for any
breach resulting from a fraud perpetrated by that person.
8.4 NOTICES. Unless this agreement expressly permits it to be given
orally, every notice, consent, demand, and approval required or permitted by
this Agreement will be valid only if it is (a) in writing (whether or not the
applicable provision of this Agreement states that it must be in writing), (b)
delivered personally or by telecopy, commercial courier, or first class, postage
prepaid, United States mail (whether or not certified or registered and
regardless of whether a return receipt is requested or received by the sender),
and (c) addressed by the sender to the intended recipient as follows:
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(a) If to the Company:
Pharmacy Management Services, Inc.
3611 Queen Palm Drive
Tampa, Florida 33619
Telecopy: (813) 623-1167
Attention: Cecil S. Harrell
David L. Redmond
with a copy to:
Glenn Rasmussen & Fogarty
100 South Ashley Drive, Suite 1300
Tampa, Florida 33602
Telecopy: (813) 229-5946
Attention: Robert C. Rasmussen
Sharon Docherty Danco
(b) If to Parent or Purchaser:
Beverly Enterprises, Inc.
5111 Rogers Avenue, Suite 40-A
Fort Smith, Arkansas 72919-0155
Telecopy: (501) 452-3760
Attention: David R. Banks
Robert D. Woltil
with a copy to:
Giroir & Gregory
111 Center Street, Suite 1900
Little Rock, Arkansas 72201
Telecopy: (501) 374-2380
(501) 372-2475
Attention: H. Watt Gregory, III
or to such other address as the intended recipient may designate by notice given
to every other party to this Agreement in the manner provided in this section. A
validly given notice, consent, demand, or approval will be effective on the
earlier of its receipt, if delivered personally or by telecopy or commercial
courier, of the fifth business day after it is postmarked by the United States
Postal Service, if delivered by first class, postage prepaid, United States
mail. Each party to this Agreement shall promptly notify every other party of
any change in its mailing address.
8.5 THIRD PARTY RIGHTS. This Agreement is binding on, and inures to the
benefit of, every approved assignee and successor in interest of a party to it.
Nothing in this Agreement, whether express or implied, is intended or should be
construed to confer or grant to any person (other than the parties to this
Agreement
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and their respective approved assignees and successors in interest) any claim,
right, remedy, or privilege under or because of this Agreement or any provision
of it, except as follows: (a) the current and former officers and directors of
the Company or any of its subsidiaries are third-party beneficiaries of the
provisions of section 3.12, (b) the holders of all Stock Options and Restricted
Options outstanding on the Execution Date are third-party beneficiaries of the
provisions of section 2.4, and (c) each current and former officer, director, or
employee of the Company or any of its subsidiaries who is a party to an
indemnity, employment, or severance agreement with the Company or any of its
subsidiaries or who is a participant under the Company's Deferred Compensation
Plan for Non-Employees is a third-party beneficiary of the provisions of section
3.11.
8.6 SURVIVAL OF PROVISIONS. The representations and warranties of each
party in this Agreement will terminate at the Effective time and will not
survive the consummation of the Merger, except for the representations and
warranties of Parent in section 6.12. All the duties and obligations of each
party under this Agreement will expire when fully performed and discharged any
duty or obligation that is required to be performed or completed on or before
the Closing Date will be deemed completely waived, discharged, or performed by
the consummation of the Merger.
EXECUTED: December 26, 1994, in Tampa Florida
BEVERLY ENTERPRISES, INC.
By: s/Robert D. Woltil (SEAL)
Name: Robert D. Woltil
Title: Executive Vice President
and Chief Financial Officer
BEVERLY ACQUISITION CORPORATION
By: s/Robert D. Woltil (SEAL)
Name: Robert D. Woltil
Title: Executive Vice President
and Chief Financial Officer
PHARMACY MANAGEMENT
SERVICES, INC.
By: s/Cecil C. Harrell (SEAL)
Cecil S. Harrell
Chief Executive Officer and
Chairman of the Board
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<PAGE> 107
FORM OF
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 to Agreement and Plan of Merger (this "Amendment
No. 1") is entered into as of April __, 1995 by and among PHARMACY MANAGEMENT
SERVICES, INC. (the "Company"), a Florida corporation, BEVERLY ENTERPRISES,
INC. ("Parent"), a Delaware corporation, and BEVERLY ACQUISITION CORPORATION
("Purchaser"), a Delaware corporation and a wholly owned subsidiary of Parent.
WHEREAS, the Company, Parent and Purchaser on December 26, 1994
entered into that certain Agreement and Plan of Merger (the "Agreement")
pursuant to which the Company and Purchaser have agreed that at the Effective
Time (as defined in the Agreement) the Company will be merged with and into
Purchaser pursuant to and in accordance with the Agreement, the Florida
Business Corporation Act and the Delaware General Corporation Law; and
WHEREAS, the parties no longer intend that the Merger (as defined in
the Agreement) qualify for financial and accounting purposes as a "pooling of
interests;" and
WHEREAS, the parties, being duly authorized hereunto by their
respective Boards of Directors, desire to enter into this Amendment No. 1 to
reflect the foregoing, and for other purposes as hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants, and agreements contained in this
Amendment No. 1, Parent, Purchaser, and the Company agree as follows:
1. Definitions. Capitalized terms used in this Amendment No. 1 and not
otherwise defined shall have the meanings ascribed to such terms as set forth
in the Agreement.
2. Closing Conditions of Parent and Purchaser. Section 4.4(I) of the
Agreement is deleted in its entirety.
3. Company Action. The last sentence of Section 5.10 of the Agreement is
deleted in its entirety.
4. Affiliate Agreements. The form of agreement to be executed by each of
the persons identified by the Company and Parent pursuant to Section 3.13 of
the Agreement to be the respective "affiliates" of the Company and Parent,
shall be in the form attached hereto as Exhibit "1" and incorporated herein by
reference.
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5. All Other Provisions of Agreement Unaffected. Except as expressly
provided to the contrary in this Amendment No. 1, each and all of the
provisions of the Agreement shall remain unaffected by this Amendment No. 1,
and shall continue unabated and in full force and effect without any
diminution, modification, amendment or restriction whatsoever.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to
Agreement and Plan of Merger to be executed and delivered in Tampa, Florida on
and as of the date first written above.
BEVERLY ENTERPRISES, INC.
By:__________________________(SEAL)
Name:
Title:
BEVERLY ACQUISITION CORPORATION
By:__________________________(SEAL)
Name:
Title:
PHARMACY MANAGEMENT
SERVICES, INC.
By:__________________________(SEAL)
Name:
Title:
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<PAGE> 109
APPENDIX B
ARTICLES OF MERGER
TO MERGE
PHARMACY MANAGEMENT SERVICES, INC.
INTO
BEVERLY ACQUISITION CORPORATION
PHARMACY MANAGEMENT SERVICES, INC. (the "Company"), a Florida corporation,
and BEVERLY ACQUISITION CORPORATION ("Purchaser") or the "Surviving
Corporation"), a Delaware corporation and a wholly owned subsidiary of BEVERLY
ENTERPRISES, INC., ("Parent"), a Delaware corporation, execute the following
Articles of Merger pursuant to section 607.1105 of the Florida Business
Corporation Act, chapter 607, Florida Statutes (the "Act"), to effectuate a
merger of the Company with and into Purchaser (the "Merger"):
ARTICLE I
PLAN OF MERGER
The plan of merger of the Company into Purchaser (the "Plan of Merger") is
as follows:
1.1 PARTIES TO MERGER. The parties to the Merger are Purchaser and the
Company (the "Constituent Corporations").
1.2 AUTHORIZED CAPITAL STOCK. The Authorized capital stock of Parent,
Purchaser, and the Company is as follows:
(a) PARENT. The authorized capital stock of Parent consists of the
following: (i) 300,000,000 shares of common stock, $.10 par value (the "Parent
Shares"), of which [ ] shares are issued and outstanding, [ ]
shares are held by Parent in treasury, and [ ] shares are reserved for
issuance pursuant to the exercise of purchase or conversion rights of
outstanding warrants, stock options, and convertible securities; and (ii)
25,000,000 shares of preferred stock, $1.00 par value, of which 3,000,000 shares
of Series B $2.75 Cumulative Convertible Exchangeable Preferred Stock are issued
and outstanding.
(b) PURCHASER. The authorized capital stock of Purchaser consists of
3,000 shares of common stock, $.01 par value (the "Purchaser Shares"), of which
1,000 shares are issued, outstanding, and owned by Parent; and
(c) THE COMPANY. The authorized capital stock of the Company consists
of the following (collectively, the "Company Shares"): (i) 20,000,000 shares of
common stock, $01. par value, of which [ ] shares are issued and
outstanding; and (ii) 3,000,000 shares of preferred stock, of which there are
designated (A) 100,000 shares of Redeemable Series "A" $.72 Cumulative
Convertible Preferred Stock, $.01 par value, all of which are issued and
outstanding, (B) 100,000 shares of Series "B" $.98 Convertible Preferred Stock,
$.01 par value, none of which are issued and outstanding, (C) 100,000 shares of
Series C $.98 Convertible Preferred Stock, $.01 par value, none of which are
issued and outstanding, and (D) 500,000 shares of Series "D" $.96 Cumulative
Convertible Preferred Stock, %.01 par value, none of which are issued or
outstanding.
<PAGE> 110
1.3 THE MERGER. In accordance with the act and pursuant to the terms and
conditions of this Plan of Merger and the Agreement and Plan of Merger dated
December 26, 1994, among Parent, Purchaser, and the Company (the "Acquisition
Agreement"), the Company will be merged with and into Purchaser and the Merger
will become effective (the "Effective Time") as of the later of (a) the date and
time when these Articles of Merger are filed by the Department of State of
Florida, or (b) the date and time when a Certificate of Merger is executed by
Purchaser and filed with the Secretary of State of Delaware in accordance with
sections 103 and 252 of the Delaware General Corporation Law (the "DGCL").
Purchaser will be the surviving corporation in the Merger and will be governed
by the laws of the State of Delaware. As a result of the Merger, the separate
corporate existence of the Company will cease at the Effective Time. Promptly
after these Articles of Merger are fully executed by the Constituent
Corporations, Purchaser shall deliver them to the Department of State of Florida
(the "Department") for filing and pay to the Department all fees required for
their filing and to effectuate the Merger.
1.4 CONVERSION AND CANCELLATION OF SHARES. As a result of the Merger and
without any further action by the Constituent Corporations or any shareholder of
the Company, all the issued Company Shares will be converted or cancelled at the
Effective Time of the Merger as Follows:
(a) Each issued Company Share that is held in treasury by the Company
and each issued and outstanding Company Share that is beneficially owned by
Parent, Purchaser, or any direct or indirect subsidiary of Parent or the
Company immediately before the Effective Time will be cancelled and
retired; and
(b) Subject to the provision below for cash payments in lieu of
issuing fractional shares, each issued Company Share that is outstanding
immediately before the Effective Time (except for "Dissenting Shares" as
defined in section 1.6 below, and except for shares held in treasury by the
Company or beneficially owned by Parent, Purchaser, or any direct or
indirect subsidiary of Parent or the Company) will be converted into
[ ] Parent Shares (the "Exchange Ratio"), as determined pursuant to
section 2.2 of the acquisition Agreement.
Each option to purchase shares of the Company's common stock that is
outstanding immediately before the Effective Time of the Merger and has not been
exercised will be converted at the Effective Time of the Merger into an option
to purchase that number of Parent Shares equal to the Product (rounded to the
nearest whole share) of (i) the exchange Ratio, multiplied by (ii) the number of
unexercised shares of Company common stock subject to the option immediately
before the Effective Time, at a per share exercise price equal to the quotient
(rounded to the nearest whole cent) of (A) the exercise price per share of the
unexercised shares of Company common stock under the option immediately before
the Effective Time, divided by (B) the Exchange Ratio, without any change in the
other terms and conditions of the option. At its election, Parent may deliver to
the holder of that option a supplement to the holders' stock option agreement
that evidences the foregoing change in the securities subject to the option.
None of the issued shares of Purchase Stock will be converted or cancelled
as a result of the Merger, but will remain issued shares of the Surviving
Corporation.
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<PAGE> 111
1.5 NO FRACTIONAL SHARES. Fractional Parent Shares will not be issued to
holders of Company Shares pursuant to the Merger. Instead, Parent shall pay to
each shareholder of the Company who otherwise would be entitled to receive a
fractional Parent Share as a result of the Merger, upon surrender of each
certificate representing the holder's company Shares that were converted into
Parent Shares as a result of the Merger (a "Converted Company Certificate"), a
cash sum (rounded up to the nearest whole cent) equal to the market value of the
fractional share as of the Effective Time, which will be computed by multiplying
(a) the fraction of a Parent Share to which the Company shareholder otherwise
would be entitled by (b) the mean arithmetic average (rounded up to the nearest
whole cent) of the daily closing sale prices per share of the Parent Shares
during the ten consecutive trading days ending on the second trading day
immediately preceding the Effective Time, as reported on the national securities
exchange or other principal trading market in which the Parent Shares are then
traded. If the foregoing method of valuation of a fractional Parent Share is
impossible or inapplicable for any reason, the Constituent Corporations shall
jointly determine by written agreement the market value of a Parent Share as of
the Effective Time for the purpose of making cash payments in lieu of issuing
fractional shares. A Shareholder of the Company who is entitled to receive a
cash payment in lieu of a fractional Parent Share will not receive any scrip or
certificate evidencing that right or have any voting, dividend, or other rights
with respect to any fractional Parent Share.
1.6 DISSENTING SHARES. Notwithstanding anything in this Plan of Merger to
the contrary, shares of any class of preferred stock of the Company that were
issued and outstanding immediately before the Effective Time and are owned by a
shareholder of the Company who did not vote those shares in favor of approval of
the Merger, this Plan of Merger, and the Acquisition Agreement and has timely
and properly notified the Company of his or her intention to dissent from the
Merger and demand payment of the fair value of those shares pursuant to sections
607.1301, 607.1302, and 607.1320 of the Act (the "Dissenting Shares") will not
be converted into Parent Shares, unless the holder of the Dissenting Shares
fails to exercise and perfect, effectively withdraws, or otherwise ceases to
have those dissenters' rights in accordance with section 607.1320 of the Act. If
a holder of Dissenting Shares fails to exercise and perfect, effectively
withdraws, or otherwise ceases to have the right to obtain payment of the fair
value of the Dissenting Shares, the Dissenting Shares will be deemed to have
been converted into Parent Shares at the Effective Time, and that shareholder
thereafter will have the right to receive the number of whole Parent Shares and
any cash payment in lieu of a fractional Parent Share (together, the "Merger
Consideration") into which the Dissenting Shares were converted pursuant to the
Merger.
1.7 EFFECTS OF MERGER. The Merger will have the legal effects provided by
section 607.1106 of the Act. At the Effective Time, the Surviving Corporation
will become a wholly owned subsidiary of Parent and the holders of Converted
Company Certificates will cease to have any rights as shareholders of the
Company, except for properly exercised dissenters' rights pursuant to sections
607.1301, 607.1302, and 607.1320 of the Act and the right to receive the Merger
Consideration upon surrender of their Converted Company Certificates in the
manner provided in section 1.8 below. The Merger is intended to qualify for the
"pooling-of-interests" method of accounting for business combinations and as a
tax-free reorganization under section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended.
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1.8 EXCHANGE OF CERTIFICATES. Parent and Purchaser have designated [name
and address of the exchange agent designated by Parent pursuant to section 2.6
of the Acquisition Agreement] (the "Exchange Agent") as their agent for the
purpose of exchanging certificates representing Parent Shares for Converted
Company Certificates and making cash payments in lieu of issuing fractional
Parent Shares. To exchange a Converted Company Certificate for a certificate
representing Parent Shares, a shareholder of the Company must surrender to the
Exchange Agent the Converted Company Certificate, together with a properly
executed transmittal letter in the form supplied to the shareholder by the
Exchange Agent. Upon surrender to the Exchange Agent of a Converted Company
Certificate and a duly executed form of transmittal letter, the Surviving
Corporation shall cause the Exchange Agent to promptly cancel the Converted
Company Certificate and issue to the person surrendering it the Merger
Consideration into which the Company Shares represented by it were converted
pursuant to the Merger. Delivery to Parent of Company Shares will occur, and
risk of loss and title to those shares will pass to Parent, when the Exchange
Agent receives the Converted Company Certificate representing those shares and a
duly executed form of transmittal letter for those shares. A check in payment of
the market value of a fractional Parent Share or certificate representing the
Parent Shares into which the Company Shares represented by a Converted Company
Certificate were converted pursuant to the Merger will not be issued in the name
of a person other than the registered owner of the Converted Company
Certificate, unless (a) that Converted Company Certificate has been properly
endorsed (or is accompanied by a duly executed stock transfer power) and is
otherwise in form acceptable to the Exchange Agent for transfer to that person,
and (b) the person requesting the exchange pays any transfer or other taxes that
are attributable to issuing the certificate representing Parent Shares to a
person other than the registered owner of the Converted Company Certificate. A
Converted Company Certificate that is not surrendered to the Exchange Agent
after the Effective Time in the manner provided above will not be transferrable
on the stock record books of the Company or the Surviving Corporation and will
represent for all corporate purposes, except the payment of dividends and
distributions, only a right to receive the Merger consideration for the Company
Shares that were previously represented by the certificate. Except as otherwise
provided above, Parent and Purchaser shall pay all excise, transfer, and similar
taxes imposed on the issuance of Parent Shares pursuant to the Merger.
1.9 LOST, STOLEN, AND DESTROYED CERTIFICATES. If a Converted Company
Certificate has been lost, destroyed, or wrongfully taken and, consequently,
cannot be surrendered to the Exchange Agent in exchange for the Merger
Consideration, the Exchange Agent nevertheless shall issue to the registered
owner of the Company Shares previously represented by that certificate the
Merger Consideration into which they were converted in the Merger, upon that
person's delivery to the Exchange Agent of the following: (a) evidence
satisfactory to Parent and the Exchange Agent that the Converted Company
Certificate has been lost, destroyed, or wrongfully taken; (b) an indemnity bond
sufficient to hold Parent and exchange Agent harmless; and (c) evidence
reasonably satisfactory to Parent and the Exchange Agent that the person
claiming the Merger Consideration is the registered owner of the Company Shares
previously represented by the Converted Company Certificate that has been lost,
destroyed, or wrongfully taken and otherwise would be entitled to exchange that
certificate for the Merger Consideration pursuant to this Plan of Merger.
Notwithstanding the foregoing, the Exchange Act shall not issue any Merger
Consideration to any person in respect of any Converted Company Certificate that
has been purportedly lost, destroyed, or wrongfully taken, if Parent
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or the Exchange Agent has actual notice that any Company Shares previously
represented by the certificate have been transferred to a bona fide purchaser.
1.10 DIVIDENDS AND DISTRIBUTIONS. A holder of a Converted Company
Certificate will not be entitled to receive any dividends or other distributions
in respect of the Parent Shares into which the Company Shares represented by the
certificate were converted pursuant to the Merger until the certificate is
surrendered to the Exchange Agent in the manner specified above in exchange for
a certificate representing Parent Shares. If a dividend or other distribution is
paid by Parent in respect of the Parent Shares after the Effective Time but
before a holder of a Converted Company Certificate surrenders it to the Exchange
Agent, the dividend or distribution payable in respect of the parent Shares into
which the Company Shares previously represented by that Converted Company
Certificate were converted pursuant to the Merger will be accrued without
interest and paid by Parent to the holder of that Converted Company Certificate
promptly after it is surrendered to the exchange Agent in the manner specified
above.
1.11 UNCLAIMED MERGER CONSIDERATION. Any funds or Parent Shares provided
to the Exchange Agent by Parent for payment and issuance to former shareholders
of the Company in exchange and substitution for Company Shares that were
converted into the Merger Consideration pursuant to the Merger and have not been
claimed by the former shareholders of the Company within one year after the
Effective Time will be remitted and redelivered by the Exchange Agent to Parent
upon its demand. Thereafter, any holder of a Converted Company Certificate that
has not been surrendered for exchange may surrender that certificate to Parent
and (subject to applicable escheat, abandoned property, and similar laws)
receive in exchange and substitution for it the Merger Consideration for the
Company Shares previously represented by it.
1.12 STOCK TRANSFER BOOKS. After the Effective Time, no transfers of
Company Shares will be registered on the stock transfer books of the Surviving
Corporation. If Converted Company Certificates are presented to the Surviving
Corporation after the Effective Time, they will be cancelled and exchanged for
one or more certificates representing that number of whole Parent Shares into
which the Company Shares previously represented by the surrendered certificate
were converted as a result of the Merger, plus any cash payment due in respect
of any fractional parent Share.
1.13 BYLAWS AND CERTIFICATE OF INCORPORATION. The Bylaws and Certificate
of Incorporation of Purchaser in effect at the Effective Time will be the Bylaws
and Certificate of Incorporation of the Surviving Corporation, until they are
amended in accordance with their terms and the DGCL.
1.14 DIRECTORS AND OFFICERS. The officers and directors of Purchaser in
office at the Effective Time will be the initial officers and directors of the
Surviving Corporation, and each of those persons will hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the DGCL and Purchaser's Bylaws and
Certificate of Incorporation or until the person's earlier death, resignation,
or removal from office.
1.15 FURTHER ASSURANCES. At the request of Purchaser or any assignee or
successor in interest of Purchaser at any time and from time to time after the
Effective Time, the officers and directors of the Company last in office shall
execute and deliver to purchaser any new, additional, or confirmatory agreement,
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instrument, or other document, and take or cause to be taken further action, as
is necessary or appropriate to vest, record, confirm, perfect, or otherwise
establish Purchaser's right, title, and interest in and to all rights, powers,
property, franchises, immunities, and privileges of the Company or to otherwise
carry into effect the intent and purposes of this Plan of Merger.
1.16 TERMINATION AND ABANDONMENT. This Plan of Merger can be terminated
and the Merger abandoned as provided in the Act and the Acquisition Agreement,
without any action or approval of the shareholders of the Constituent
Corporations.
ARTICLE II
EFFECTIVE DATE OF MERGER
The Merger will become effective at the Effective Time.
ARTICLE III
ADOPTION DATE OF PLAN OF MERGER
The Plan of Merger was adopted by Parent, as the sole shareholder of
Purchaser, at a meeting of its Board of Directors held on December __, 1994, and
by the shareholders of the Company at a special meeting held on ____________,
1995.
EXECUTED: [____________________], 1995
BEVERLY ACQUISITION CORPORATION
By:______________________________
Name:________________________
Title:_______________________
PHARMACY MANAGEMENT SERVICES, INC.
By:______________________________
Name:________________________
Title:_______________________
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STATE OF ARKANSAS
COUNTY OF SEBASTIAN
The foregoing document was acknowledged before me this __________ day of
[____________________], 1995, by [_______________________________], as
[____________________________], of Beverly Acquisition Corporation, a Delaware
corporation, on behalf of the corporation. He/She is personally known to me or
has produced a [________________________] driver's license as identification.
____________________________________
Name:_______________________________
Notary Public
Notarial Seal or Stamp:
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing document was acknowledged before me this __________ day of
[____________________], 1995, by [_______________________________], as
[____________________________], of Beverly Acquisition Corporation, a Delaware
corporation, on behalf of the corporation. He is personally known to me or has
produced a Florida driver's license as identification.
____________________________________
Name:_______________________________
Notary Public
Notarial Seal or Stamp:
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<PAGE> 116
APPENDIX C
CERTIFICATE OF MERGER
OF
BEVERLY ACQUISITION CORPORATION
(A DELAWARE CORPORATION)
Pursuant to Section 252(b) of the General Corporation Law of the State of
Delaware, Beverly Acquisition Corporation, a Delaware corporation, certifies the
following:
FIRST: The names of the constituent corporations (the "Constituent
Corporations") are Beverly Enterprises, Inc. ("Beverly"), a Delaware
corporation, the sole stockholder and parent corporation of Beverly Acquisition
Corporation (the "Surviving Corporation"), a Delaware corporation, and Pharmacy
Management Services, Inc. ("PMSI"), a Florida corporation.
SECOND: The Surviving Corporation, a wholly owned subsidiary of Beverly,
will be the surviving corporation of the merger of PMSI with and into the
Surviving Corporation (the "Merger").
THIRD: The Agreement and Plan of Merger by and among PMSI, Beverly, and the
Surviving Corporation dated December 26, 1994 (the "Merger Agreement"), has been
approved, adopted, certified, executed, and acknowledged by each of the
Constituent Corporations in accordance with Section 252(c) of the General
Corporation Law of the State of Delaware.
FOURTH: Upon effectiveness of the Merger, "ARTICLE FIRST" of the Surviving
Corporation's Certificate of Incorporation dated December 15, 1994, will be
amended to read as follows:
The name of the Corporation is:
PHARMACY MANAGEMENT SERVICES, INC.
FIFTH: Upon effectiveness of the Merger, the Surviving Corporation's
Certificate of Incorporation dated December 15, 1994, as amended by this
Certificate of Merger and any amendments required by the Merger Agreement, will
be the Certificate of Incorporation of the Surviving Corporation.
SIXTH: The executed Merger Agreement is on file at the principal place of
business of the Surviving Corporation at 5111 Rogers Avenue, Suite 40-A, Fort
Smith, Arkansas 72919-1000.
SEVENTH: A copy of the executed Merger Agreement will be furnished by the
Surviving Corporation, upon request and without cost, to any shareholder of the
Constituent Corporations.
EIGHTH: The authorized capital stock of PMSI consists of 20,000,000 shares
of common stock, $.01 par value, of which [ ] shares are issued and
outstanding, and 3,000,000 shares of preferred stock, of which there are
designated (A) 100,000 shares of Redeemable Series "A" $.72 Cumulative
Convertible Preferred Stock, $.01 par value, none of which are issued and
outstanding, (B) 100,000 shares of Series "B" $.98 Convertible Preferred Stock,
$.01 par value, none of which are issued
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and outstanding, (C) 100,000 shares of Series C $.98 Convertible Preferred
Stock, $.01 par value, none of which are issued and outstanding, and (D) 500,000
shares of Series "D" $.96 Cumulative Convertible Preferred Stock, $.01 par
value, none of which are issued and outstanding.
NINTH: This Certificate of Merger will be effective on its filing date with
the Secretary of State of Delaware. The Merger will be effective as of the later
of (a) the date and time when this Certificate of Merger is duly executed and
filed with the Secretary of State of Delaware, or (b) the date and time when
articles of merger are duly executed by PMSI and the Surviving Corporation and
filed by the Department of State of Florida in accordance with the provisions of
sections 617.1105 and 607.1107 of the Florida Business Corporation Act.
IN WITNESS WHEREOF, the Surviving Corporation has caused this Certificate
of Merger to be executed by its officers thereunto duly authorized as of the
___ day of _______________, 1995.
BEVERLY ACQUISITION CORPORATION
By:___________________________(SEAL)
, President
ATTEST:
_________________________________
, Secretary
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APPENDIX D
AFFILIATE AGREEMENT
This Affiliate Agreement (this "Agreement") is executed by BEVERLY
ENTERPRISES, INC. ("Parent"), a Delaware corporation, and the undersigned
director, shareholder, or executive officer ("Executive") of PHARMACY MANAGEMENT
SERVICES, INC. (the "Company"), a Florida corporation, in connection with the
Agreement and Plan of Merger dated December 26, 1994 (the "Acquisition
Agreement"), among Parent, the Company, and BEVERLY ACQUISITION CORPORATION
("Purchaser"), a Florida corporation and wholly owned subsidiary of Parent.
Parent and Executive agree as follows:
1. BACKGROUND. The Acquisition Agreement provides for the merger of the
Company with and into Purchaser (the "Merger") in a transaction in which the
issued and outstanding shares of the Company's capital stock (the "Company
Stock") will be converted into shares of Parent's common stock $.10 par value
("Parent Stock"), on the terms and conditions set forth in the Acquisition
Agreement. The parties to the Acquisition Agreement intend for the Merger to
qualify as a tax-free "reorganization" for federal income tax purposes and for
the "pooling of interests" method of financial accounting for business
combinations. Executive might be considered to be an "affiliate" of the Company
for purposes of both the requirements for use of the "pooling-of-interests"
method of accounting and Rule 145 promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), although nothing in this Agreement should be construed as an
admission that Executive constitutes an "affiliate" for either of those
purposes.
2. PURPOSE AND SCOPE. This Agreement is executed by Parent and Executive to
qualify the Merger for the tax and accounting treatment described above and to
ensure compliance with the Securities Act in connection with resales of any
securities acquired by Executive as a result of the Merger. This Agreement
applies to the following securities that are beneficially owned by Executive
after the effective date of the Merger (collectively, the "Restricted
Securities"): (a) all shares of Parent Stock that Executive acquires in the
Merger in exchange and substitution for shares of Company Stock; (b) any shares
of Parent Stock issued pursuant to the exercise of any option, warrant, or other
right to acquire shares of Company Stock that is held by Executive as of the
effective date of the Merger specified in the Acquisition Agreement (the
"Effective Time"); (c) any securities (whether or not Parent Stock) issued or
distributed to Executive in respect of, or in exchange and substitution for, any
of the shares of Parent Stock described in the preceding clauses, whether
pursuant to a split-up, spin-off, stock split, stock dividend, capital
adjustment, recapitalization, reorganization, reclassification, or other similar
transaction; and (d) any right, option, or other interest with respect to any of
the foregoing securities.
3. COVENANTS, WARRANTIES, AND REPRESENTATIONS OF EXECUTIVE. Executive
understands that treatment of the Merger as a "pooling of interests" for
financial accounting purposes depends on the accuracy and performance of the
ensuing covenants, warranties, and representations of Executive in this
Agreement and that Parent, the Company, and their respective legal counsel and
independent accounting firms will rely on those covenants, warranties, and
representations in connection
<PAGE> 119
with the Merger. Executive warrants, covenants, and represents to Parent the
following:
(a) Executive has full power and authority to execute this Agreement,
to make the representations and warranties set forth in it, and to perform
the obligations to be performed by Executive under it;
(b) Executive currently does not own any Parent Stock, except as
indicated at the end of this Agreement;
(c) Executive is the beneficial owner, as determined pursuant to SEC
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of the number of shares of Company Stock set forth on the
signature page of this Agreement, which includes all shares of Company
Stock as to which Executive has sole or shared voting or investment power
and all shares of Company Stock issuable upon the exercise of any
outstanding rights, options, and warrants to acquire Company Stock;
(d) Even though the shares of Parent Stock to be issued to Executive
as a result of the Merger have been (or will be) registered with the SEC
under the Securities Act pursuant to an effective registration statement on
Form S-4, Executive understands that (i) because of Executive's status as a
possible "affiliate" of the Company, Executive may sell, pledge, transfer,
exchange, or otherwise dispose of any Restricted Securities, or offer or
agree to do so, only if the transaction is registered with the SEC under
the Securities Act or qualifies for any available exemption from
registration under that Act, and (ii) except as otherwise provided in a
separate agreement between Parent and Executive, Parent has not agreed, and
is not obligated, to register any sale or offer transfer of Restricted
Securities for Executive with the SEC under the Securities Act;
(e) Except as contemplated by the Acquisition Agreement, Executive
shall not sell, pledge, transfer, exchange, or otherwise dispose of any
Restricted Securities, or offer or agree to do so, unless (i) the
transaction is executed in compliance with all applicable conditions
(including any volume limitations) of SEC Rule 145(d), (ii) the transaction
has been registered with the SEC under the Securities Act pursuant to an
effective registration statement, (iii) Executive has delivered to Parent a
written opinion of legal counsel reasonably satisfactory to Parent that
registration of the transaction is not required under the Securities Act,
or (iv) Executive has delivered to Parent a "no-action" or interpretative
letter to Executive (or Executive's legal counsel) from an authorized
representative of the SEC to the effect that the SEC would not take
enforcement action, or the SEC staff would not recommend that the SEC take
enforcement action, if the transaction is effected without registration
under the Securities Act;
(f) Executive understands that any routine sales of Restricted
Securities in reliance on SEC Rule 145 can be made only while that Rule
applies to the securities and then only in accordance with the terms and
conditions of paragraph (d) of that Rule, including any applicable volume
limitation;
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(g) Executive understands that, in furtherance of the transfer
restrictions stated above, (i) Parent will issue stop transfer instructions
to the transfer agent for Parent Stock to restrict an impermissible sale or
other transfer of Restricted Securities, (ii) Parent will cause to be
placed on each certificate representing any Restricted Securities a legend
in substantially the following form:
The shares represented by this certificate were issued in a transaction
subject to Rule 145 promulgated by the Securities Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), and, consequently, cannot be sold or otherwise
transferred at any time absent (a) compliance with the conditions of
Rule 145(d), (b) registration of the transaction with the SEC under the
Securities Act, or (c) receipt by the issuer of these shares of a
written opinion of legal counsel or other evidence reasonably
satisfactory to it that registration of the transaction is not required
under the Securities Act.
and (iii) Parent will cause a legend substantially identical to the one
described above to be placed on every new stock certificate that is issued
upon a transfer or exchange of any Restricted Securities, unless the
transferee acquires the securities in a transaction that is registered with
the SEC under the Securities Act or that is executed in compliance with all
the applicable conditions of SEC Rule 145(d); and
(h) Notwithstanding any other provision of this Agreement to the
contrary, if the Merger qualifies for the "pooling-of-interests" method of
accounting, Executive shall not sell, pledge, transfer, exchange, or
otherwise dispose of, or in any other way reduce Executive's risk of
ownership or investment in, any Company Stock or any Restricted Securities
during the period beginning on the date when Executive executes this
Agreement and continuing until such time after the Effective Time as Parent
has published financial results covering at least 30 days of combined
post-merger operations of Parent and the Company, whether published in the
form of a quarterly earnings report, an effective registration statement
filed with the SEC, a post-effective amendment to a registration statement
filed with the SEC, a periodic report to the SEC on Form 10-K, 10-Q, or
8-K, or any other public filing, release, or announcement that includes
combined sales and net income of Parent and the Company for at least 30
days of combined post-merger operations.
4. COVENANTS, WARRANTIES, AND REPRESENTATIONS OF PARENT. Parent covenants,
warrants, and represents to Executive the following:
(a) On and after the Effective Time and for as long as is necessary to
permit Executive to sell all the Restricted Securities pursuant to SEC Rule
145 and, to the extent applicable, SEC Rule 144 under the Securities Act,
Parent shall file on a timely basis all reports required to be filed by it
pursuant to section 13 or 15(d) of the Exchange Act;
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(b) Parent shall remove the restrictive legend described above and
cancel all stop transfer instructions applicable to any certificates
representing Restricted Securities that are sold or otherwise transferred
by Executive to a third party in compliance with the provisions of this
Agreement;
(c) Parent acknowledges that it will promptly authorize a transfer of
any Restricted Securities that are sold by Executive pursuant to SEC Rule
145(d) if it receives separate representation letters in customary form
from Executive and the broker making the sale that confirm that all
applicable conditions of SEC Rules 145(d) have been satisfied in connection
with the transaction, and if it does not have any reasonable basis to
believe that the sale was not made in compliance with the conditions of SEC
Rule 145(d); and
(e) Upon request of the Executive, Parent shall remove the restrictive
legend on, and cancel any stop transfer instructions applicable to, every
certificate representing Restricted Securities, if the provisions of SEC
Rule 145(d)(ii) have been satisfied.
5. LEGAL MATTERS. The validity, construction, enforcement, and
interpretation of this Agreement are governed by the laws of the State of
Delaware and the federal laws of the United States of America, excluding the
laws of those jurisdictions pertaining to the resolution of conflicts with laws
of other jurisdictions. The parties (a) consent to the personal jurisdiction of
the state and federal courts having jurisdiction over Hillsborough County,
Florida, or Sebastian County, Arkansas, (b) stipulate that Hillsborough County,
Florida, or Sebastian County, Arkansas, in the case of a state court proceeding,
and the Middle District of Florida, or the Ft. Smith Division of the Western
District of Arkansas, in the case of a federal court proceeding, are proper and
convenient nonexclusive venues for all legal proceedings arising out of this
Agreement, and (c) waive any defense, whether asserted by motion or pleading,
that Hillsborough County, Florida, Sebastian County, Arkansas, the Middle
District of Florida, or the Ft. Smith Division of the Western District of
Arkansas is an improper or inconvenient venue. In any mediation, arbitration, or
legal proceeding arising out of this Agreement, the losing party shall reimburse
the prevailing party on demand, for all costs incurred by the prevailing party
in enforcing, defending, or prosecuting any claim arising out of this Agreement,
including all fees, costs, and expenses of agents, experts, attorneys,
witnesses, mediators, arbitrators, and supersedes bonds, whether incurred
pursuant to trial, appellate, mediation, arbitration, bankruptcy,
administrative, or judgment-execution proceedings.
6. WAIVER; AMENDMENT. A waiver of any provision of this Agreement will be
valid and effective only if it is evidenced by a writing signed by or on behalf
of the party against whom the waiver is sought to be enforced. No delay or
course of dealing by a party to this Agreement in exercising a power, right, or
remedy under this Agreement will operate as a waiver of any power, right, or
remedy of that party, except to the extent expressly manifested in a writing
signed by or on behalf of that party. In addition, the written waiver by a party
of a power, right, or remedy under any provision of this Agreement will not
constitute a waiver of any succeeding exercise of the power, right, or remedy or
a waiver of the provision itself. An amendment or modification of this Agreement
or any provision or exhibit
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of it will be valid and effective only if it is in writing and signed by or on
behalf of each party to this Agreement.
7. COMPLETE AGREEMENT; BINDING EFFECT. Except for the Acquisition
Agreement, this Agreement contains the entire understanding between the parties
regarding the subjects addressed in it and supersedes any prior or
contemporaneous agreement, understanding, or representation, oral or written, by
either of them. This Agreement is binding on, and inures to the benefit of, any
assignee of Parent and any successor in interest of Parent and Executive.
8. NOTICES. Every demand, notice, consent, or approval required or
permitted to be given by a party under this Agreement will be valid only if it
is (a) in writing (whether or not the applicable provision of this Agreement
states that is must be in writing), (b) delivered personally or by telecopy,
commercial courier, or first class, postage prepaid, United States mail (whether
or not certified or registered and regardless of whether a return receipt is
requested or received by the sender), and (c) addressed by the sender to the
intended recipient as follows:
(a) IF TO PARENT:
Beverly Enterprises, Inc.
5111 Rogers Avenue, Suite 40-A
Fort Smith, AR 72919-0155
Telecopy: (501) 452-3760
Attention: Robert D. Woltil
WITH A COPY TO:
H. Watt Gregory
Giroir & Gregory
111 Center Street, Suite 1900
Little Rock, AR 72201
Telecopy: (501) 374-2380
(b) IF TO EXECUTIVE:
WITH A COPY TO:
or to such other address as the intended recipient may designate by notice given
to the other party in the manner provided in this section. A validly given
demand, notice, consent, or approval will be effective on the earlier of its
receipt, if it is delivered personally or by telecopy or commercial courier, or
the fifth business day after it is postmarked by the United States Postal
Service, it if is delivered by first
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class, postage prepaid, United States mail. Each party to this Agreement shall
promptly notify the other party of any change in its mailing address.
9. TERMINATION. Before the Merger occurs, this Agreement will terminate
concurrently with any termination of the Acquisition Agreement. After the Merger
occurs, this Agreement will terminate, all restrictive legends will be promptly
removed from all certificates representing the Restricted Securities that are
then beneficially owned by Executive, and all stop transfer instructions
regarding those Restricted Securities will be promptly cancelled, if: (i) all
those Restricted Securities are registered with the SEC for sale and sold by
Executive pursuant to an effective registration statement under the Securities
Act; (ii) Executive notifies Parent that Executive has held all the Restricted
Securities for at lease three years since the Effective Time and is not, and has
not been for at least three months, an affiliate of Parent; or (iii) Executive
delivers to Parent a written opinion of legal counsel reasonable satisfactory to
Parent, or a "no-action" or interpretative letter to Executive (or Executive's
legal counsel) from an authorized representative of the SEC, to the effect that
Executive may publicly sell or otherwise transfer all the Restricted Securities
without registration under the Securities Act and, therefore, the restrictive
legend and stock transfer instructions are no longer required. Notwithstanding
the preceding sentence, this Agreement will not terminate after the Merger until
Parent has published financial results covering at least 30 days of combined
post-merger operations of Parent and the Company.
10. EXECUTIVE AND EFFECTIVENESS. The parties may execute this Agreement in
counterparts. Each executed counterpart will constitute an original document,
and all executed counterparts, together, will constitute the same agreement.
This Agreement will become effective when each party has executed and delivered
to the other a counterpart of its.
EXECUTED: ____________________, 1995, in Tampa, Florida.
<TABLE>
<S> <C>
"EXECUTIVE" BEVERLY ENTERPRISES, INC.
________________________________ By:___________________________
Name:___________________________ Name:______________________
Title:_____________________
Number of Shares of Company
Stock Beneficially Owned:_________________________
Number of Shares of Company
Stock Issuable under Outstanding
Options Owned:____________________________________
Number of Shares of Parent
Stock Beneficially Owned:_________________________
</TABLE>
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APPENDIX E
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is executed by BEVERLY
ENTERPRISES, INC. (the "Company"), a Delaware corporation, and the undersigned
persons (the "Shareholders"), in connection with the merger (the "Merger") of
PHARMACY MANAGEMENT SERVICES, INC. ("PMSI"), a Florida corporation, with and
into BEVERLY ACQUISITION CORPORATION ("Purchaser"), a Delaware corporation and a
wholly owned subsidiary of the Company, pursuant to the terms and conditions of
the Agreement and Plan of Merger dated December 26, 1994, among PMSI, Purchaser,
and the Company. Parent and the Shareholders execute this Agreement to record
their agreement regarding the Company's grant to the Shareholders of certain
rights to register shares of the Company's common stock, $.10 par value (the
"Common Stock") issued to the Shareholders pursuant to the Merger. The Company
and the Shareholders agree as follows:
1. SCOPE AND PURPOSE. This Agreement applies to the following shares of
Common Stock that are owned by, or issuable to, the Shareholders on and after
the effective date of this Agreement (collectively, the "Shares"): (a) all the
shares of Common Stock that are issued or issuable by the Company to the
Shareholders pursuant to the Merger; (b) all additional shares of Common Stock
issued or distributed to the Shareholders in respect of the shares of Common
Stock described in clause (a) above pursuant to a stock split, stock dividend,
capital adjustment, recapitalization, reorganization, reclassification, or other
similar transaction; (c) all shares of Common Stock issued or distributed to the
Shareholders in respect of any shares of Common Stock acquired pursuant to any
of the transactions described in clauses (a) - (b) above; and (d) any securities
(whether or not Common Stock) issued or distributed to the Shareholders in
exchange, conversion, or substitution for any of the foregoing shares of Common
Stock, whether pursuant to a merger, split-up, spin-off, share exchange,
consolidation, reorganization, recapitalization, reclassification, or otherwise.
Upon the occurrence of any transaction or event described in this paragraph, the
number of shares specified in Sections 3, 4 and 5(a) will be appropriately
adjusted.
2. TERM. This Agreement is for a term beginning on its execution date and
ending on the earlier of the following: (a) two years from the date of this
Agreement; or (b) the date when the Shareholders cease to own at least 1,000,000
shares. Notwithstanding anything in this Agreement to the contrary, the
registration rights conferred on the Shareholders pursuant to Sections 3 and 4
will be suspended and inoperative whenever and for as long as the Company
otherwise has a registration statement in effect with the SEC under the
Securities Act that covers the Shares, in which case the duration of the
Company's obligations hereunder shall be extended for a period corresponding to
the duration of said suspension. The suspension of the Shareholders'
registration rights under this Agreement will not affect the respective
agreements and obligations of the Company and the Shareholders under the other
provisions of this Agreement, and those provisions will apply to every sale or
issuance of the Shares pursuant to a registration statement of the Company that
is in effect with the SEC under the Securities Act. In addition, the suspension
of the Shareholders' registration rights under Sections 3 and 4 will not excuse
the Company from registering in accordance with this Agreement any
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Shares that are the subject of a piggy-back registration request that was
validly made by the Shareholders before the registration statement of the
Company that triggered the suspension was declared effective by the SEC.
3. DEMAND REGISTRATION RIGHTS. At any time during the term of this
Agreement, upon receipt of a written request from any Shareholder specifying the
number of Shares that the Shareholders and any other Shareholder desire to
register for public sale, the Company promptly shall prepare and file with the
SEC under the Securities Act a registration statement covering a public offering
of those Shares and shall use all reasonable efforts to cause the registration
statement to become effective as soon as is practicable. If permitted by the
Securities Act, the Company shall use a Form S-3 registration statement (or any
successor form) to register Shares pursuant to this Section 3. If it is
ineligible to use a Form S-3 registration statement, the Company may use any
other form of SEC registration statement that it considers appropriate, as long
as the Company is eligible to use the form and the form does not impair in any
way the Shareholders' ability to publicly offer and sell any Shares compared to
such ability if the Company were eligible to use Form S-3. The Shareholders, as
a group, are entitled to exercise this demand registration right up to two
times, and shall use all reasonable efforts to include in each demand
registration at least 1,000,000 of the Shares. The Shareholders shall state in
their request for registration whether they intend to distribute the registered
Shares by means of an underwriting. If the Shareholders intend to distribute the
registered Shares by means of an underwriting, the Shareholders shall sell the
registered Shares through one or more underwriters (or a syndicate managed by
one or more underwriters) that are selected by the Company with the approval of
the selling Shareholders (which he shall not unreasonably withhold), and the
Company shall join the selling Shareholders in entering into an underwriting
agreement with the selected underwriter or underwriters, which will provide
(among other things) for the Company, the selling Shareholders, an each
underwriter (and each person who controls each underwriter within the meaning of
Section 15 of the Securities Act) to grant to each other reciprocal
indemnification against liabilities under the Securities Act. The Company shall
not include in a registration of Shares for any Shareholders pursuant to the
exercise of a demand registration right under this Section any debt or equity
securities of the Company or any other person, without the advance approval of
the selling Shareholders, which it shall not unreasonably withhold. The Company
stipulates, however, that the Shareholders will not be unreasonable to withhold
its approval if it reasonably believes that including any debt or equity
securities of the Company or any other person in their demand registration will
adversely affect the Shareholders' ability to publicly sell all the Shares for
which they have requested the demand registrations.
Notwithstanding anything in this Agreement to the contrary, the Company may
postpone filing with the SEC for a reasonable period of time (not to exceed 75
days) a registration statement for a demand registration requested by the
Shareholders, but only if: (a) the Company's Board of Directors reasonably
determines that (i) based on the written advice of the Company's legal counsel,
the postponement is necessary to avoid premature public disclosure of a pending
material event that would likely jeopardize the outcome of success of the
pending event, or (ii) based on the written advice of the investment banking
firm representing the Company in connection with a pending public offering of
its securities, the postponement is necessary to avoid jeopardizing the success
of the pending public offering; (b) the Company notifies the Shareholders of the
postponement and the duration of it within five days after the determination by
its Board of Directors; and (c) the Company delivers to the Shareholders with
the notice of postponement
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(i) a certificate, signed by its Chief Executive Officer and Chief Financial
Officer stating that the condition described in clause (a)(i) or (a)(ii) has
occurred, and (ii) in the case of clause (a)(ii), a copy of the written advice
that the Company's Board of Directors received from its investment banker.
Upon receipt of a request from the Shareholders for a demand registration,
the Company promptly shall notify the Shareholders of any fact, event, or
circumstance that reasonably could be expected to require or lead to a
postponement of the filing of a registration statement for the demand
registration requested by the Shareholders. If the Company postpones the filing
with the SEC of a registration statement for a demand registration requested by
the Shareholders (as permitted by this paragraph), (x) the Shareholders may
elect to withdraw their request for the demand registration at any time during
the duration of the postponement specified in the Company's notice to the
Shareholders of the postponement, and the withdrawn demand registration will not
count as an exercise of the Shareholders' demand registration rights, and (y)
the term of this Agreement shall be extended for a period corresponding to the
duration of the postponement.
4. PIGGY-BACK REGISTRATION RIGHTS. If the Company, at any time or from time
to time during the term of this Agreement, authorizes a registration of any
securities under the Securities Act on Form S-1, S-2, or S-3 (or any
registration form promulgated by the SEC in substitution of one of those forms),
it shall include in that registration any of the Shares that any Shareholder
elects to register for public sale, to the extent permitted by Section 5 and the
applicable registration form. The Company promptly shall notify the Shareholders
of each proposed registration, and, if it receives from any Shareholder a
written request within 10 days after that notice, the Company shall include in
its registration the lesser of (a) the number of Shares specified in the
Shareholders' registration request, or (b) that number of Shares permitted
pursuant to Subsection 6(k). If the registration will involve an underwritten
distribution of Common Stock by the Company (but not in the case of an
underwritten distribution of securities other than Common Stock), subject to the
provisions of the following paragraph, (i) the Company shall include in the
underwriting all the Shares that the Shareholders are entitled to include in the
registration, (ii) the Shareholders shall sell the registered Shares through the
underwriter or syndicate of underwriters selected by the Company, and (iii) the
Shareholders shall enter into an underwriting agreement with the underwriter or
syndicate of underwriters selected by the Company, which will provide (among
other things) for the Company, the Shareholders, and each underwriter (and each
person who controls each underwriter within the meaning of Section 15 of the
Securities Act) to grant to each other (and to each person who controls each of
them within the meaning of Section 15 of the Securities Act) reciprocal
indemnification against liabilities under the Securities Act, subject to such
limitations as are appropriate to reflect the parties' respective interests in
the underwriting.
In connection with any offering involving an underwriting of shares of
Common Stock being issued by the Company for its own account or for the account
of others pursuant to a registration statement prepared pursuant to this Section
3, the Company shall not be required to include any of the Shares in the
registration statement, unless the Shareholders accept and agree to the terms of
the underwriters selected by the Company. If the total number of Shares which
the Shareholders request to be included in any offering involving an
underwriting of shares of Common Stock being issued by the Company for its own
account or for the account of others (the "Requested Shares") exceeds the number
which the underwriters reasonably believe is compatible with the success of the
offering (and if the
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underwriters so certify to Shareholders in writing), the Company shall only be
required to include in the offering, after the inclusion of all of the shares of
Common Stock which the Company desires to sell, so many Requested Shares as the
underwriters believe will not jeopardize the success of the offering. In such
case, the Requested Shares to be included shall be apportioned among all holders
pro rata according to the number of Shares owned by each holder entitled to
participate in such offering.
The Company is not required to include any of the Shares in a registration
that covers any of the following: (A) securities proposed to be issued in
exchange for assets or securities of another corporation; (B) debt securities
not convertible into, or exchangeable for, shares of the Common Stock; (C)
securities to be issued pursuant to a transaction registered on Form S-4 (or any
registration form promulgated by the SEC in substitution of that form); or (D) a
stock option, stock bonus, stock purchase, or other employee benefit or
compensation plan or securities issued or issuable pursuant to any such plan.
5. CONDITIONS TO REGISTRATION. The Company's obligations under this
Agreement to register any Shares owned by the Shareholders are subject to the
following conditions:
(a) The minimum number of Shares that the Shareholders must include in
a registration request pursuant to Section 3 is the lesser of (i) 1,000,000
Shares or (ii) all of the Shares owned by the Shareholders;
(b) The Shareholders must provide to the Company all information, and
take all action, as the Company reasonably requests with reasonable advance
notice, to enable it to comply with any applicable law or regulation or to
prepare the registration statement that will cover the Shares that will be
included in the registration;
(c) Before the filing of a registration statement pertaining to the
registration, the Shareholders must deliver to the Company an agreement
containing the following agreements and representations:
(i) The Shareholders shall furnish to the Company all information,
and take all action, as the Company reasonably requests with reasonable
advance notice, to enable it to comply with any applicable law, rule,
regulation, or SEC pronouncement in connection with the registration;
(ii) All sales of the Shares included in the registration will be
made in a manner contemplated by the SEC's General Instructions for use
of the applicable registration statement form;
(iii) The Shareholders promptly shall notify the Company in writing
when all the Shares included in the registration have been sold, and, if
any of them are not sold before the 91st day after the effective date of
the registration statement, the Shareholders promptly shall notify the
Company of the number of Shares sold during the three-month period
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following the effective date of the registration and during each ensuing
six-month period, until all the Shares included in the registration have
been sold;
(iv) The Shareholders shall pay all sales commissions and
underwriting discounts;
(v) If, during the effectiveness of the registration statement for
the registration, the Company notifies the Shareholders of the
occurrence of any intervening event that, in the opinion of the
Company's legal counsel, causes the prospectus included in the
registration statement not to comply with the Securities Act, the
Shareholders, promptly after receipt of the Company's notice, shall
cease making any offers, sales, or other dispositions of the Shares
included in the registration until the Shareholders receive from the
Company copies of a new, amended, or supplemented prospectus complying
with the Securities Act (which the Company agrees to do as promptly as
practicable);
(vi) If the Company is selling any Common Stock for cash
consideration pursuant to the registration, the Shareholders shall sell
those Shares that are included in the registration on the same terms
(including the method of distribution) as those on which the other
shares of Common Stock included in the registration will be offered and
sold;
(vii) to the extent requested by the Company and the managing
underwriter of the offering to which the registration relates, the
Shareholders shall not offer, sell, or otherwise transfer, for a
reasonable period of time (to be determined by the underwriter, but not
to exceed 90 days) after the effective date of the registration
statement, any shares of Common Stock that are owned by it and not
included in the registration, except for any testamentary disposition or
any gift of Common Stock to a donee who agrees to be bound by this
registration; and
(d) If the registration is a piggy-back registration pursuant to
Section 4, the inclusion of the Shares in the registration must not violate
any provisions of the Securities Act, any rules or regulations promulgated
under the Securities Act, or any contractual obligation of the Company.
6. ADDITIONAL COVENANTS OF THE COMPANY. If the Company is required to
register any of the Shares pursuant to this Agreement, the Company shall:
(a) Not grant to anyone any registration rights of any kind that would
be superior to the registration rights granted to the Shareholders in this
Agreement;
(b) Take all action that is necessary or appropriate to obtain,
maintain, and keep the registration statement current and effective,
including the filing of all post-effective amendments to the registration
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statement or supplements of the prospectus, until the earlier of: (i) the
date when the Company receives notice from the Shareholders that all the
Shares included in the registration statement have been sold; or (ii) the
90th day following the later of (A) the date when the SEC declares the
registration statement effective, or (B) the date when the Shareholders are
permitted by the managing underwriter of the registered offering to begin
selling any of the Shares included in the registration; after the foregoing
period, the Company will not be obligated to take any action to keep the
registration statement current and effective;
(c) If, during the period set forth in Section 6(b), any event occurs
that necessitates, in the opinion of the Shareholders' legal counsel, an
amendment or supplement to any prospectus in order to make the prospectus
not misleading in light of the circumstances existing at the time it is
delivered to the Shareholders, the Company promptly (i) shall amend or
supplement the prospectus to the extent required so the prospectus, as
amended or supplemented, will not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances existing at the time the
prospectus is delivered to a purchaser, not misleading, and (ii) shall
furnish to the Shareholders a reasonable number of copies of both any
amendment or supplement to the prospectus that it prepares, and any filing
pursuant to Section 13(a), 13(c), or 14 under Securities Exchange Act of
1934, as amended (the "Exchange Act"), that it makes, to effectuate the
amendment or supplement of the prospectus;
(d) During the period when a prospectus is required to be delivered
under the Securities Act, the Company promptly shall file all documents
required to be filed by it with the SEC pursuant to Section 13(a), 13(c),
or 14 of the Exchange Act;
(e) Furnish to the Shareholders, without charge, the following: (i) a
copy of the EDGAR confirmation and an "Edgarized" version of the
registration statement and each amendment to it, including all exhibits,
documents, and financial statements filed with them or incorporated by
reference in them; (ii) that number of conformed copies of the registration
statement and each amendment to it, including all financial statements but
excluding all exhibits and other documents filed with them or incorporated
by reference in them, as the Shareholders may reasonable request; and (iii)
promptly after the filing of the registration statement, and thereafter
from time to time during the period when a prospectus is required to be
delivered under the Securities Act, as many copies of each preliminary,
definitive, and amended or supplemented prospectus as the Shareholders may
reasonably request;
(f) Refrain from filing any registration statement, amendment to a
registration statement, or supplement to a prospectus, in each case
relating to the Shares if a copy of it previously has not been furnished to
the Shareholders, or if in the written opinion of counsel for the
Shareholders (a copy of which shall be delivered to the Company) it does
not comply with the Securities Act and all applicable rules and regulations
promulgated under the Securities Act;
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(g) Promptly notify the Shareholders in writing of the following: (i)
the date when the registration statement or any post-effective amendment to
it becomes effective, and the date when any amendment to the registration
statement or supplement to a prospectus is filed with the SEC; (ii) the
issuance by the SEC of a stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose; (iii) the suspension of qualification of any Shares for sale in
any jurisdiction or the initiation of any proceedings for that purpose; and
(iv) the Company's intention to file an amendment to the registration
statement, or a supplement to any prospectus, that differs from the
prospectus on file when the registration statement became effective and
including documents deemed to be incorporated by reference into a
prospectus;
(h) Use all reasonable efforts to prevent the SEC from issuing a stop
order suspending the effectiveness of the registration statement or, if a
stop order is issued, to obtain the withdrawal of it at the earliest
possible moment;
(i) To the extent requested by the Shareholders, take all reasonable
action necessary to qualify any Shares included in the registration for
offer and sale under the "Blue Sky" or securities laws of those states of
the United States of America that the Shareholders designate in writing to
the Company and maintain those qualifications in effect for as long as is
required for the distribution of the Shares included in the registration,
except that the Company is not required to qualify to transact business as
a foreign corporation in any state in which it has not then so qualified;
(j) Otherwise use it best efforts to comply with all applicable rules
and regulations of the SEC, and, if so required by the Securities Act,
generally make available to the Company's security holders as soon as
practicable, but not later than 60 days after the close of the period
covered thereby, an earnings statement (in form complying with the
provisions of Section 11(a) of the Securities Act), which need not be
certified by independent public accountants unless required by the
Securities Act or the rules and regulations under the Securities Act,
covering a twelve-month period beginning not later than the first day of
the Company's fiscal quarter next following the effective date of the
registration statement; and
(k) If the Shareholders so request, include in each piggy-back
registration pursuant to Section 4 that number of Shares that in the
opinion of the managing underwriter of the offering for which the
registration is undertaken, will not adversely affect the public offering
of the other securities that have been requested to be included in the
registration, without excluding any other securities from the registration.
7. PAYMENT OF EXPENSES. Except as otherwise provided in Section 5(c)(iv),
the Company shall pay all costs and expenses incident to every registration of
any Shares under this Agreement, including the following: the registration fee
of the SEC; the fee of the New York Stock Exchange; the premium for any
indemnity insurance policy with respect to the offering subject to registration;
the expenses of
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qualifying any Shares for sale under the "Blue Sky," securities laws, and legal
investment laws of any state, including filing fees and legal fees and costs
pertaining to the qualification and the preparation of any Blue Sky and Legal
Investment Survey or Memorandum; the fees and expenses of the Company's legal
counsel and independent public accountants in connection with the registration;
the cost of preparing, printing, and delivering the registration statement, all
related prospectuses, and all amendments and supplements to the registration
statement or any prospectus; and all other costs and expenses of obtaining and
maintaining the effectiveness of the registration statement.
8. INDEMNIFICATION. In connection with each registration of any Shares
under the Securities Act pursuant to this Agreement, the Shareholders (to the
extent of the aggregate offering price of those Shares registered for the
Shareholders in the registration) shall indemnify and hold harmless the Company
(and every person who controls the Company within the meaning of Section 15 of
the Securities Act) from and against all cost, loss, claims, damage, expense,
and liability to which any of them becomes subject under the Securities Act or
any state securities laws (including fines, interest, penalties, amounts paid in
settlement, and costs reasonably incurred in investigating, defending, and
settling any claim), to the extent that they arise out of, or are based on, any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement (or any amendment to it), or any prospectus (or any
amendment or supplement to it), that relates to the sale of any Shares, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, but only if the untrue
statement or alleged untrue statement, or the omission or alleged omission, was
made in reliance upon, and in conformity with, information furnished to the
Company in writing by the Shareholders, expressly for use in the registration
statement (or any amendment to it) or any related prospectus (or any amendment
or supplement to it).
The Company shall indemnify and hold harmless the Shareholders (and every
person who controls the Shareholders within the meaning of Section 15 of the
Securities Act) against any and all costs, loss, claims, damage, expense, and
liability to which any of them becomes subject under the Securities Act or any
state securities laws (including fines, interest, penalties, amounts paid in
settlement, and costs reasonably incurred in investigating, defending, and
settling any claim) to the extent that they arise out of, or are based on, any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement (or any amendment to it), or any prospectus (or any
amendment or supplement to it), that relates to the sale of any Shares, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except for an untrue
statement or omission, or an alleged untrue statement or omission, that was
included in the registration statement (or any amendment to it) or in any
prospectus (or any amendment or supplement to it) in reliance on, and in
conformity with, written information furnished to the Company by the
Shareholders expressly for use in the registration statement (or any amendment
to it) or any related prospectus (or any amendment or supplement to it).
Each indemnified party promptly shall notify each indemnifying party of any
claim asserted or action commenced against it that is subject to the
indemnification provisions of this Section, but failure to so notify an
indemnifying party will not relieve the indemnifying party from any liability
pursuant to these indemnity
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provisions or otherwise, unless the failure materially prejudices the rights or
obligations of the indemnifying party. Without limiting what might be materially
prejudicial to an indemnifying party, the failure of an indemnified party to
notify an indemnifying party of a lawsuit within ten days after the date when
the indemnified party is served with a copy of the complaint, petition or other
pleading asserting the indemnifiable claim will be considered materially
prejudicial to the rights and obligations of any indemnifying party who was not
also served with a copy of the complaint, petition, or other pleading asserting
the indemnifiable claim.
The indemnifying party may participate at is own expense in the defense,
or, if the indemnifying party so elects within a reasonable time, the
indemnifying party may assume the defense, of any action commenced against the
indemnified party that is the subject of indemnification under this section. If
the indemnifying party elects to assume the defense of an indemnified action,
however, the indemnifying party shall engage to defend the action legal counsel
reasonably satisfactory to the indemnified party. If the indemnifying party
elects to assume the defense of any indemnified action, the indemnified party,
and each controlling person who is a defendant in the action, will be entitled
to employ separate counsel and participate in the defense of the action at its
own expense.
An indemnified party shall not settle an indemnified claim or action
without the prior written consent of the indemnifying party and the indemnifying
party will not be liable for any settlement made without its consent. The
indemnifying party shall notify the indemnified party whether or not it will
consent to a proposed settlement within ten days after it receives from the
indemnified party notice of the proposed settlement, summarizing all the terms
and conditions of settlement. The indemnifying party's failure to notify the
indemnified party within that ten-day period whether or not it consents to the
proposed settlement will constitute its consent to the proposed settlement.
This indemnity does not apply to any untrue statement or omission, or any
alleged untrue statement or omission that was made in a preliminary prospectus
but remedied or eliminated in the final prospectus (including any amendment or
supplement to it), if a copy of the definitive prospectus (including any
amendment or supplement to it) was delivered to the person asserting the claim
at or before the time required by the Securities Act and the delivery of the
definitive prospectus (including any amendment or supplement to it) constitutes
a defense to the claim asserted by the person.
9. REMEDIES: GOVERNING LAW. The validity, interpretation, construction, and
enforcement of this agreement are governed by the laws of the State of Florida
and the federal laws of the United States of America, excluding the laws of
those jurisdictions pertaining to resolution of conflicts with laws of other
jurisdictions. The proper, exclusive, and convenient venues for all legal
proceedings arising out of this Agreement are either Sebastian County, Arkansas,
or Hillsborough County, Florida, and the Company and the Shareholders waive any
defense, whether asserted by motion or pleading, that Sebastian County,
Arkansas, or Hillsborough County, Florida, is an improper or inconvenient venue.
The Company and the Shareholders consent to the personal jurisdiction of the
state and federal courts in either Sebastian County, Arkansas, or Hillsborough
County, Florida, with respect to any litigation arising out of this Agreement.
In any mediation, arbitration, litigation, or other legal proceeding arising out
of this Agreement, the losing party shall reimburse the
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prevailing party, on demand, for all costs incurred by the prevailing party in
connection with the proceeding.
The Company acknowledges that its breach of this Agreement would result in
irreparable and continuing injury to the Shareholders for which an adequate
remedy at law would not exist. Accordingly, if the Company breaches any
obligation owed to the Shareholders under this Agreement, the Shareholders,
without excluding or limiting any other available remedy, will be entitled to
entry of an order granting an injunction or specific performance compelling the
Company to comply with this Agreement, without proof of monetary damages or an
inadequate remedy at law. The Company shall reimburse the Shareholders for all
costs incurred by the Shareholders to enforce this Agreement. If the
Shareholders are required to post a bond to enforce the Company's obligations
under this Agreement, the Company stipulates that a bond in the amount of $5,000
will be sufficient. The covenants of the Company in this Agreement are
independent of any obligation of the Shareholders to the Company, other than
pursuant to this Agreement, and are not subject to any set-off, defense,
mitigation, or counterclaim based on any claim that the Company might have
against the Shareholders, other than pursuant to this Agreement.
10. NOTICES. Every notice, consent, demand, approval, and request required
or permitted by this Agreement will be valid only if it is in writing, delivered
personally or by telecopy, commercial courier, or first class, postage prepaid
United States mail (whether or not certified or registered and regardless of
whether a return receipt is received by the sender), and addressed by the sender
to the party who is the intended recipient at its address most recently
designated to the other party by notice given in accordance with this Section. A
validly given notice, consent, demand, approval, or request will be effective on
the earlier of its receipt, if delivered personally, by telecopy, or by
commercial courier, or the third day after it is postmarked by the United States
Postal Service, if it is delivered by United States mail. Each party promptly
shall notify the other party of any change in its principal mailing address.
11. FORM AND INTERPRETATION. The headings preceding the text of the
sections of this Agreement are solely for convenient reference and neither
constitute a part of this Agreement nor affect its meaning, interpretation, or
effect. Unless otherwise expressly indicated, all references in this Agreement
to a section are to a section of this Agreement. As used in this Agreement, (a)
the word "including" is always without limitation, (b) the word "days" refers to
calendar days, including Saturdays, Sundays, and holidays, (c) words in the
singular number include words of the plural number and vice versa, (d) the word
"person" includes, in addition to a natural person, a trust, corporation,
partnership, joint venture, association, unincorporated organization, public
body or authority, and a government or any governmental body, agency, authority,
department, or subdivision, and (e) the word "costs" includes the fees, costs,
and expenses of agents, experts, attorneys, witnesses, mediators, arbitrators,
and supersedeas bonds, whether incurred before or after demand or commencement
of any legal proceedings, and whether incurred pursuant to trial, appellate,
mediation, arbitration, bankruptcy, administrative, or judgment-execution
proceedings. Whenever possible, each provision of this Agreement should be
construed and interpreted so that it is valid and enforceable under applicable
law. However, if a provision in this Agreement is held by a court to be invalid
or unenforceable under applicable law, that provision will be deemed separable
from the remaining provisions of this Agreement and will not affect the
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validity, interpretation, or effect of other provisions of this Agreement or the
application of that provision to circumstances in which it is valid and
enforceable.
12. ASSIGNMENT; THIRD PARTY RIGHTS. This Agreement is binding on, and
inures to the benefit of, every assignee and successor of a party to this
Agreement and to the heirs or personal representatives of Shareholders or their
assignees. The Shareholders may assign their rights under this Agreement to or
for the benefit of any member of the Shareholders' immediate family, or to not
more than one bona fide pledgee of some or all the Shares, or both. The Company
shall not assign its rights, or delegate any of its duties, obligations, or
responsibilities, under this Agreement without the advance written approval of
the Shareholders, which it may withhold in its sole discretion, and any
assignment or delegation by the Company without the advance written approval of
the Shareholders will be invalid and ineffective against the Shareholders.
Nothing in this Agreement, whether express or implied, is intended or should be
construed to confer upon, or to grant to, any person, except the parties to this
Agreement and their respective successors and authorized assignees, any right,
remedy, or claim under or because of either this Agreement or any provision of
it.
13. INTEGRATION; MODIFICATION. This Agreement records the final, complete,
and exclusive understandings among the parties regarding the subject matter of
this Agreement and supersedes any prior or contemporaneous agreement,
understanding, or representation, oral or written, by either of them. A waiver,
amendment, discharge, extension, termination, or modification of this Agreement
will be valid and effective only if it is in writing and signed by both the
parties to this Agreement. A written waiver of a right, remedy, or obligation
under any provision of this Agreement will not constitute a waiver of the
provision itself, a waiver of any succeeding right, remedy, or obligation under
the provision, or a waiver of any other right, remedy, or obligation under this
Agreement.
14. PERFORMANCE OF AGREEMENT. Time is of the essence with respect to the
performance or satisfaction of every covenant, agreement, and obligation of the
Company under this Agreement. When any provision of this Agreement requires or
prohibits action to be taken by a person, the provision applies regardless of
whether the action is taken directly or indirectly by the person.
15. EXECUTION; EFFECTIVE DATE. The parties may execute this Agreement in
counterparts. Each executed counterpart will constitute an original document,
and all of them, together, will constitute the same agreement. This Agreement
will become effective on the execution date stated below, when each party has
executed and delivered a counterpart to the other party.
EXECUTED: ____________________, 1995.
BEVERLY ENTERPRISES, INC.
By:___________________________(SEAL)
Name:_____________________
Title:____________________
WITNESSES:
___________________________
___________________________
(As to the Company)
-11-
<PAGE> 135
<TABLE>
<S> <C>
"SHAREHOLDERS"
CECIL S. HARRELL REVOCABLE
TRUST, u/a/d October 1, 1990,
WITNESSES: as amended and restated
___________________________ By:___________________________
Cecil S. Harrell, as
___________________________ Co-Trustee
(As to Trustee)
___________________________ By:___________________________
Bertram T. Martin, Jr.,
___________________________ as Co-Trustee
(As to Trustee)
</TABLE>
<PAGE> 136
APPENDIX F TO COME
<PAGE> 137
APPENDIX G
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 3)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended July 31, 1994
Commission File No. 0-18366
PHARMACY MANAGEMENT SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
Florida 59-1482767
(State of Incorporation) (IRS Employer Identification No.)
</TABLE>
3611 Queen Palm Drive
Tampa, Florida 33619
(Address of Principal Executive Offices)
(813) 626-7788
(Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
<TABLE>
<CAPTION>
Total Market Value of Voting
Class of Outstanding Shares Stock Held by Nonaffiliates
Common Stock at September 20, 1994 at September 20, 1994
------------------------- ---------------------- -----------------------------
<S> <C> <C>
Common Stock 8,750,193 $48,800,429
$.01 par value
</TABLE>
Exhibit Index on Page 24
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 138
The Registrant (1) deletes the reference on the cover page and on the
exhibit index to the incorporation by reference of its Annual Report to
Shareholders for the fiscal year ended July 31, 1994, in Part III of the Form
10-K and (2) amends Items 1, 5, 7, 8, and 14 of its Annual Report on Form 10-K
for the fiscal year ended July 31, 1994, as filed on September 26, 1994, and as
amended on October 24 and November 23, 1994, and restates that report in its
entirety as follows:
PART I
ITEM 1. BUSINESS
Pharmacy Management Services, Inc. was incorporated in Florida in 1972 and
is a holding company for seven wholly owned subsidiaries. Pharmacy Management
Services, Inc. (together with its consolidated subsidiaries, the "Company") is a
leading independent nationwide provider of medical cost containment and managed
care services, providing professionally managed solutions for containing the
escalating costs of workers' compensation. The Company offers services that
address essentially all of an injured worker's healthcare related needs, from
the time of the job-related injury through return to employment or home care.
These services enhance the quality of care for the injured worker while
containing the cost of care for the insurer or other payor of workers'
compensation benefits.
BUSINESS DEVELOPMENT
The Company's original business provides insurance companies and other
payors of workers' compensation with home delivery of prescription drugs,
medical supplies and medical equipment to long-term, high-cost, injured workers
who are receiving workers' compensation benefits. Since its initial public
offering in 1990, the Company has expanded and diversified its services through
acquisitions and internal development.
In fiscal year 1991, the Company acquired the preferred provider
organization operated by MedView Services, Incorporated, the computer software
design business of Insurance Software Packages, Inc. and the case management and
vocational counseling businesses of Resource Opportunities, Inc. and Nancy Sapp
& Associates, Inc. During the past four fiscal years, the Company has internally
developed an on-line retail prescription drug card, medical bill auditing and
utilization review services, a first notice of injury reporting service, and a
variety of computer driven-products designed to reduce the administrative costs
of processing workers' compensation claims.
In 1992, the Company determined that the business of selling
electro-medical therapy products to physical therapy and rehabilitation clinics
that it began in 1989 and conducted through its subsidiary, Technical Medical
Devices, Inc., was not compatible with its business strategy. On November 15,
1992, the Company sold substantially all the assets of that business to Staodyn,
Inc., a manufacturer of electro-medical therapy products. (See Notes 11 and 14
of the Notes to Consolidated Financial Statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations.")
In fiscal year 1993, the Company changed the way it manages and markets its
business units. The Company decentralized the operating management of its
business units under subsidiary presidents while improving centralized executive
and financial controls. In addition, the Company integrated for the first time
its complete line of managed care services and implemented a solutions-based
marketing strategy.
In fiscal year 1994, the Company continued to focus on integration of its
managed care services to provide seamless solutions to manage and control the
workers' compensation costs of customers. In addition, the Company began a
process redesign project to reduce operating costs and improve response to
customers' needs in the home delivery service business.
WORKERS' COMPENSATION OVERVIEW
Workers' compensation is an employee benefit that is mandated and
delineated by state law. Workers' compensation laws require employers to provide
medical disability benefits to employees who suffer job-
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<PAGE> 139
related injuries and disabilities, without cost-sharing by the injured employee.
Although they vary from state to state, workers' compensation laws usually
require the employer to compensate an injured worker for lost wages and to pay
all the costs of remedial medical care and treatment, including prescription
drugs, medical supplies and medical equipment. The federal government
administers a similar program for federal employees. Employers provide these
statutory benefits to their employees through self-insurance, participation in
state-run funds, or the purchase of insurance from commercial insurance
companies.
Workers' compensation laws cover a broad spectrum of job-related injuries
ranging from less severe injuries, such as cuts and bruises, to acute injuries,
such as paralysis, severe burns, dismemberment and lower back pain. Injured
employees sometimes suffer significant emotional and physical trauma and are
absent from work for several days or even months or years, depending on the
severity of the injury. Workers who suffer long-term injuries typically incur
substantial out-of-pocket expenses each month for the prescription drugs,
medical supplies and medical equipment required for the remedial care and
treatment of their injury. The injured worker submits a claim for reimbursement
of these expenses to the local office of the applicable insurer or other payor
of workers' compensation benefits.
Employers, insurance companies and other payors of workers' compensation
benefits seek ways to control the escalating volume and costs of workers'
compensation claims. Although most states prohibit employers from restricting a
claimant's choice of healthcare provider, many states allow employers to direct
employees to a specific primary healthcare provider at the onset of medical
treatment, subject to an employee's right to change physicians after a specified
period of time. These restrictions impede an employer's ability to use a health
maintenance organization, a preferred provider organization or similar managed
care arrangement. In addition, workers' compensation laws differ from state to
state, making it difficult for payors and multi-state employers to adopt uniform
policies to manage, control and administer medical and pharmacy benefits and
their associated costs. Consequently, managing the cost of workers' compensation
requires methods that are tailored to each employer's applicable medical
benefits and regulatory environment.
SUMMARY OF SERVICES
The Company's managed care and medical cost containment solutions include
the following: first notice of injury reporting; case management and vocational
counseling; a preferred provider organization of physicians, hospitals, clinics,
and other ancillary providers; an on-line retail prescription drug card; home
delivery of prescription drugs, medical supplies and medical equipment and an
array of computer software solutions to reduce a payor's administrative costs.
The Company does not have any patents, licenses, trademarks, franchises or
concessions that are material to its business, except for its corporate
trademarks. Compliance with applicable environmental laws is not expected to
have a material effect on the Company's earnings, capital expenditures or
competitive position.
HOME DELIVERY SERVICE
The Company's primary service business is the home delivery of prescription
drugs, medical supplies and medical equipment to long-term, high-cost, injured
workers who are receiving workers' compensation benefits. The Company ships
prescription drugs, medical supplies and medical equipment to all 50 states from
a central distribution and warehouse facility in Tampa, Florida. This service
accounted for approximately 73.2%, 75.2% and 70.7% of the Company's consolidated
revenues in fiscal years 1994, 1993 and 1992, respectively. Approximately 75% of
the home delivery pharmacy revenues are derived from prescription and over-the-
counter drugs. Generic drugs constitute about 35-38% of all drug shipments and
approximately 19% of all drug revenues.
The Company works directly with workers' compensation payors to provide
their claims representatives with the appropriate training and on-site
assistance to identify potential long-term, high-cost claimants. After
identifying these claimants, the Company coordinates with the claims
representative, the claimant's treating physician and (as appropriate) the
claimant's attorney and rehabilitation nurse to determine the prescription
drugs, medical supplies and medical equipment that are required for the care and
treatment of the claimant's injury and the requisite schedule for supplying
those items.
2
<PAGE> 140
A claimant orders prescribed items from the Company using a toll-free
telephone number. The order is processed by the Company's team of registered
pharmacists and medical equipment supply technicians who determine the
following: (1) whether the prescribing physician is authorized by the payor; (2)
whether the ordered item is related to the claimant's injury; (3) whether the
order is excessive or the refill is earlier than prescribed; and (4) whether any
prescription drug that is ordered is duplicative of any other drug being
provided to the claimant. Medical goods are shipped to the claimants for home
delivery primarily by Federal Express, United Parcel Service or United States
mail.
The Company's screening procedures identify requested items that have not
been prescribed by an authorized physician, have not been prescribed at the
frequency or in the quantity requested by the claimant, or are unrelated to the
claimant's work-related injury. These items are not sent to the claimant or
billed to the payor and are reported to the payor as avoided costs.
The Company's order fulfillment procedures also include a series of medical
quality control checks to verify all pertinent claimant information, the method
and timing of the shipment, that the prescribed items are consistent with the
diagnosis and any special instructions, and that the requested medication will
not cause a drug interaction that could be harmful to the claimant. In addition,
a pharmacist reviews each drug prescription to assure that it complies with all
documentation requirements of applicable pharmacy law.
The Company's home delivery service benefits both the payor and the
claimant. This service helps the payor contain costs by providing competitively
priced goods and controlling unauthorized or excessive use of prescription
drugs, medical supplies and medical equipment. The Company's single monthly
invoice per claimant helps reduce the payor's processing costs, and the Company
provides the payor with comprehensive reports on each claimant that enable the
payor to identify usage trends and estimate future costs.
The Company's home delivery service offers convenience to a claimant by
eliminating cash payments, avoiding the delay and inconvenience of submitting
claims for reimbursement, delivering products directly to the claimant's home,
responding promptly to claimant inquiries, and offering substantially all the
medical goods needed by the claimant from a single, readily accessible source.
The Company's home delivery service currently requires approximately
$3.5-$4.0 million of inventory to satisfy the rapid delivery needs of its
customers. The Company's pharmacy stocks approximately 5,000 different brand
name and generic prescription drugs and over 2,000 items of medical supply or
equipment, including wheelchairs, hospital beds, whirlpool baths and
electro-medical therapy products. The Company purchases pharmaceuticals directly
from manufacturers and through wholesalers. To the maximum extent possible, it
purchases in volumes sufficient to obtain lower prices and in advance of
anticipated price increases and takes advantage of any special discounts or
other financial incentives from manufacturers.
PREFERRED PROVIDER ORGANIZATION
The Company employs a two-pronged strategy to reduce the medical expenses
incurred by group health, auto medical, and workers' compensation claimants. The
Company controls the volume of medical expenses through the use of pre-admission
and concurrent medical utilization review, and it reduces the cost of medical
treatment through bill auditing, retrospective medical utilization review, and
the use of its preferred provider organization (PPO). This two-pronged strategy
enables the Company to compete effectively for business with large HMO and other
managed care companies.
The Company operates one of the largest preferred provider organizations in
the nation, covering 22 states and including over 79,000 physicians, 1,800
hospitals, and 12,000 ancillary providers. The Company's PPO network comprises a
full array of providers, including physicians, laboratories, radiological
facilities, outpatient surgical centers, mental health providers, physical
therapists, chiropractors, and other ancillary providers. The Company has over
30 full-time employees who focus solely on network development to respond to the
PPO's growing client base. By establishing contractual relationships with the
complete range of providers, the Company is able to impact most healthcare costs
and to facilitate referrals within the network for all needed care. The
Company's PPO reduces workers' compensation, auto medical and group medical
expense by controlling the cost of services provided by participating healthcare
providers and benefits the
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<PAGE> 141
patients by offering screened and credentialed healthcare providers who are
conveniently located throughout the country. The Company's PPO accounted for
12.6%, 8.9% and 7.3% of the Company's consolidated revenues in fiscal years
1994, 1993 and 1992, respectively.
The Company has developed a "Gatekeeper" program that integrates its PPO
with utilization review and case management services. To access the program, an
employer directs an injured worker to a physician in the Company's "Gatekeeper"
network who is designated as a Managed Care Coordinator (MCC). The injured
worker is given an identification card by the employer at the time of injury.
The injured worker presents that identification card to the MCC when seeking
treatment. The identification card indicates the instructions the provider
should follow for approval of treatment plans, pre-certification of medical
procedures and referrals to specialists. Through the pre-admission and
concurrent medical utilization review procedures, the Company controls
hospitalization expenses by reducing inpatient admissions and the duration of
hospital stays. In addition, all provider bills are reviewed for appropriate
coding, for compliance with approved treatment and for conformity with state fee
schedules or usual and customary charges. Finally, all bills are reduced
according to the PPO contractual agreement.
The Company also offers manual bill auditing and retrospective medical
utilization review services, including auditing of hospital and chiropractic
bills. These services, performed primarily by Company-employed registered
nurses, verify that medical care was delivered to the patient, that the
healthcare provider was authorized to provide the rendered service, that the
healthcare was appropriate and covered by workers' compensation and that the
charges for the rendered medical services were usual and customary.
CASE MANAGEMENT AND VOCATIONAL REHABILITATION SERVICES
The Company offers on-site medical case management and vocational
rehabilitation services through 26 offices in 12 states. The Company provides
medical case management for injuries that are complex or catastrophic or for
which a prolonged recovery is anticipated. In cases of work related injuries, a
small number of severe injuries make up a large portion of the total dollar
amount spent. These are the injuries that are managed by the Company's case
managers and vocational rehabilitation professionals. The Company's case
managers confer with the patient, the patient's family, the attending physician
and the other healthcare providers to identify the appropriate rehabilitative
treatment, to provide the payor with a realistic estimate of long-term exposure
and to select the most cost-effective healthcare alternatives, including
transferring the patient from a hospital to an alternative care facility. The
case managers also may coordinate the delivery of the necessary care or services
and arrange for special pricing of those services. The goal is to manage the
quality of care while eliminating unneeded treatment and lengthy inpatient and
outpatient treatment.
In some states, vocational rehabilitation is a statutorily mandated
workers' compensation benefit. Vocational rehabilitation assists an injured
employee to return to his or her former employment or another job with similar
economic value. Vocational rehabilitation services include retraining, job
analysis, job modification, vocational testing, job placement assistance,
transferable skill analysis, work capacity assessments, and labor market
surveys. These services reduce workers' compensation costs by expediting the
injured employee's return to work.
RETAIL PRESCRIPTION DRUG CARD
The Company provides a retail prescription drug card service for workers'
compensation payors. The service enables injured workers to obtain prescription
drugs at no cost from the network of over 30,000 participating retail pharmacies
throughout the country by presenting an identification card. The identification
card provides access to the Company's on-line system for adjudication of
prescription drugs. This service controls the relatedness to the injury, type,
cost, quality and frequency of prescription drugs dispensed to an injured
worker.
Upon presentation of the insured worker's prescription drug card, the
network pharmacy accesses the Company's on-line computer database to determine
whether the prescription request is approved or rejected. Approximately 30% of
all prescription requests are denied. The Company's computer system verifies the
following within seconds: (1) whether the injured worker is eligible for
benefits; (2) whether the prescription
4
<PAGE> 142
is for a drug that is typically covered by workers' compensation benefits; (3)
whether the prescription relates to the person's work-related injury; (4)
whether the injured worker's utilization pattern is within acceptable
guidelines; (5) whether any drug interaction problem exists; (6) whether the
prescription complies with any required generic drug guidelines; and, (7)
whether the prescription pricing conforms to the contract between the pharmacy
and the Company. The Company negotiates volume discounts with the participating
pharmacies and passes the savings on to the payors who use this service.
Approved transactions are filled at no cost to the injured worker. The pharmacy
is paid by the Company for approved transactions on a periodic basis, and the
Company is reimbursed by the payor.
The service provides savings for the payor of up to 30-35% savings of the
allowable reimbursements in states having workers' compensation fee schedules.
These savings are derived from: (1) discounts of at least 10% from the workers'
compensation fee schedule according to the Company's contractual agreements with
the pharmacies participating in the network; (2) real-time, injury-specific
pharmacy benefit management that is updated daily and achieves consistent
savings of up to 20%; and (3) administrative cost savings resulting from one
invoice per claimant per month and the availability of consolidated invoice
reporting to facilitate the payment of all claims with one check.
Through this service and the Company's home delivery of prescription drugs
service, the Company provides the payor with comprehensive control over the
prescription drug program for workers' compensation claimants. The retail
prescription drug card controls acute drug purchases and the home delivery
service manages the drug maintenance requirements. For those prescription drugs
that are purchased outside its network, the Company offers prescription bill
auditing services to reduce prices to applicable statutory fee schedules and to
prevent duplicate billing or overutilization.
FIRST NOTICE OF INJURY
The Company provides an internally developed first notice of injury
reporting service for all 50 states. This service not only assists in timely
preparation and distribution of regulatorily required injury reports, which are
different for each state, but also provides employers with early intervention
for managed care options, including preferred provider referrals to clinics,
hospitals and physicians. The Company's employees are available 24 hours per
day, seven days per week to receive toll-free employer telephone calls, prepare
reports of injury and notify appropriate parties.
ADMINISTRATIVE SOFTWARE
The Company also offers a broad range of computer software systems designed
to perform provider bill review and medical bill audit for insurance carriers,
self-insured employers and third-party administrators. The systems enable a
payor to significantly reduce over-payments and ensure compliance with
individual state-mandated fee schedule requirements. The Company's microcomputer
based software products include applications for workers' compensation claims
administration, group health claims administration, and multi lines (general
liability, fire and casualty, long-term disability, auto medical) claims
administration and workers' compensation medical bill auditing for states with
fee schedules or "usual and customary" fee requirements. The Company currently
has an installed base of approximately 235 systems.
MARKETING
The Company markets its products and services nationally through its own
sales representatives to insurance companies, state insurance funds, third-party
administrators and employers who fund and administer their own workers'
compensation programs. The Company serves over 35,000 claims representatives in
approximately 15,000 claims offices, representing approximately 4,000 payors. No
one payor represents 10% or more of the Company's business.
COMPETITION
The healthcare cost containment industry is highly fragmented and
competitive. The intensity of competition probably will increase. The Company's
principal competition consists of local retail pharmacies,
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<PAGE> 143
local medical equipment suppliers, branch offices of national medical equipment
supply companies, local and regional case management and vocational
rehabilitation companies and several preferred provider organizations. The
Company competes primarily on the basis of the effectiveness and responsiveness
of its managed care and cost containment services and, to a lesser extent, on
price. The Company believes that its specialization in workers' compensation,
its array of integrated services, its independence from insurance companies, its
integrated management information systems and its ability to offer comprehensive
solutions on a nationwide basis enhance its ability to compete in the workers'
compensation market.
The Company believes that it currently does not have any significant,
direct competitor who offers the same or a similar combination of products,
services and information in the workers' compensation market. A number of
competitors have substantial financial resources and experience in workers'
compensation and could expand their present services to compete with the
Company. In addition, payors of workers' compensation benefits could decide to
devote resources to performing the services that the Company provides.
EMPLOYEES
At July 31, 1994, the Company had approximately 900 employees, of which
approximately 400 were nurses, pharmacists and other skilled medical
technicians. None of the Company's employees are covered by a collective
bargaining agreement. The Company's relations with employees have been generally
satisfactory, and it has not experienced any work stoppages attributable to
labor disputes.
ITEM 2. PROPERTIES
The Company is primarily a service company, so it does not have any
materially important physical properties, aside from leased office facilities.
The Company leases two office buildings at 3611 and 3625 Queen Palm Drive in
Tampa, Florida, that serve as its principal offices and contain 100,000 square
feet and 73,000 square feet, respectively. The leases on these facilities expire
in 2003 and 2006, respectively. The Company's wholly owned subsidiary, MedView
Services, Incorporated, leases a 22,000 square-foot office building in the
Detroit, Michigan, area pursuant to a lease that expires in 1996. MedView and
another wholly owned subsidiary, Resource Opportunities, Inc., lease a total of
approximately 54,400 square feet of office space at 32 locations throughout the
country pursuant to mostly short-term leases expiring within the next two years.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its property is subject to any pending
material legal proceedings, except for ordinary routine litigation incidental to
the Company's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded in the Nasdaq National Market System
under the symbol PMSV. The table below sets forth the high and low bid prices of
the Company's common stock, as reported in the Nasdaq National Market System,
for each quarter during the past two fiscal years. Cash dividends were not paid
on common shares during any of these periods, and the Company does not
anticipate that dividends will be paid on common shares in the foreseeable
future. The Company's revolving credit loan agreement with two banks requires
the Company to maintain a tangible net worth, as defined, of at least $14.0
million at July 31, 1994 and $15.0 million at July 31, 1995. The Company's
tangible net worth, as defined, was
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$21.4 million at July 31, 1994. At July 31, 1994, the Company had approximately
300 record holders of its common stock.
<TABLE>
<CAPTION>
1994 1993
----------------------- -----------------------
FISCAL QUARTER HIGH LOW HIGH LOW
------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
First............................................ $ 9 $6 3/4 $9 $6 1/2
Second........................................... 8 1/4 6 9 1/2 6 1/4
Third............................................ 9 6 1/4 8 3/4 4 3/4
Fourth........................................... 10 1/2 6 1/2 7 1/2 5
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
consolidated financial statements and notes thereto.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JULY 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net revenues.......................... $113,149 $109,934 $106,116 $81,686 $55,681
Gross margin.......................... 32,440 30,677 29,692 20,704 13,573
Operating income (loss)............... 7,137 5,566 (1,376) 3,209 3,340
Income (loss) before income taxes..... 6,582 4,846 (2,771) 2,976 2,929
Net income (loss)..................... $ 4,256 $ 2,782 $ (2,011) $ 1,893 $ 1,969
Per common share:
Net income (loss)................... $ 0.47 $ 0.30 $ (0.25) $ 0.21 $ 0.27
Cash dividends...................... -- -- -- -- --
Weighted average number of common
shares outstanding.................. 8,721 8,692 8,725 8,795 7,161
</TABLE>
<TABLE>
<CAPTION>
JULY 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION
Total assets.......................... $53,962 $59,700 $61,305 $59,258 $32,672
Trade receivables, net................ 20,690 18,274 20,810 20,506 11,409
Inventories........................... 3,487 5,118 7,766 12,163 10,177
Working capital....................... 16,747 12,969 21,554 23,986 26,661
Current maturities of long-term
debt................................ 789 4,258 3,344 1,374 --
Long-term debt........................ 5,793 11,695 18,246 15,645 --
Redeemable convertible preferred
stock............................... 1,200 1,200 1,200 1,200 --
Shareholders' equity.................. 37,091 32,480 29,966 32,301 28,802
</TABLE>
- ---------------
NOTE: Net revenues for fiscal years 1993, 1992, and 1991 were favorably affected
by revenues from Technical Medical Devices, Inc., a subsidiary that was sold on
November 15, 1992. (See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Notes 11 and 14 of the Notes to
Consolidated Financial Statements.)
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<PAGE> 145
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company's management has continued its efforts to improve operations
by:
(1) decentralizing operating management, while maintaining
centralized executive and financial controls;
(2) maintaining effective controls over the Company's variable
expenses, trade receivables and inventories; and
(3) concentrating on providing professional managed solutions for
workers' compensation payors and claimants.
The operating efficiencies and improved cash flow achieved by these actions have
permitted the Company to concentrate on increasing its market share for its home
delivery service, its preferred provided organization (PPO), its case management
and its related ancillary services, while developing its on-line retail
prescription drug card and its first notice of injury reporting service.
The following table presents the ratios of certain financial items to net
revenues for each of the last three fiscal years:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Net revenues................................................ 100.0% 100.0% 100.0%
Cost of revenues............................................ 71.4 72.1 72.0
----- ----- -----
Gross margin................................................ 28.6 27.9 28.0
Costs and expenses:
Selling, general and administrative....................... 19.3 20.1 20.5
Depreciation and amortization............................. 3.0 2.7 2.1
Restructuring charges..................................... -- -- 6.7
----- ----- -----
Operating income (loss)..................................... 6.3 5.1 (1.3)
Other income (expense):
Interest expense, net..................................... (0.5) (1.0) (1.3)
Gain on sale of TMD....................................... -- 0.9 --
Write-off of goodwill..................................... -- (0.6) --
----- ----- -----
Income (loss) before income taxes........................... 5.8 4.4 (2.6)
Provision (benefit) for income taxes........................ 2.0 1.9 (0.7)
----- ----- -----
Net income (loss)........................................... 3.8% 2.5% (1.9)%
===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
NET REVENUES
Net revenues for fiscal year 1994 increased slightly to approximately
$113.1 million, compared to approximately $109.9 million for fiscal year 1993.
Substantially all of this increase was attributable to increased volumes from
the PPO and case management services, resulting primarily from more customers
and greater market penetration. The pricing for PPO and case management services
changed only slightly during the comparative fiscal years. The net revenues of
the home delivery service remained relatively constant from fiscal year 1993 to
fiscal year 1994 because of a significant increase in the percentage of generic
drug prescriptions dispensed. The percentage of generic drug prescriptions
dispensed relative to all drug prescriptions dispensed is expected to continue
to increase during the next two years. This trend is likely to slow
8
<PAGE> 146
revenue growth, but should not have a material effect on the Company's operating
income from the sale of prescription drugs. Although generic prescription drugs
sell at lower prices than brand-name prescription drugs, the gross margins for
generic prescription drugs are substantially higher than they are for brand-name
prescription drugs.
Net revenues for fiscal year 1993 increased slightly to approximately
$109.9 million, compared to approximately $106.1 million for fiscal year 1992.
Net revenues for fiscal years 1993 and 1992 included $2.8 million and $10.3
million, respectively, of revenues from Technical Medical Devices, Inc. ("TMD"),
a former subsidiary that was sold to Staodyn, Inc. on November 15, 1992.
Excluding the TMD revenue, approximately 75% of the increase in revenues in
fiscal year 1993 was attributable to increased volumes of business from payors
and claimants in the home delivery service, while approximately 25% of the
increase represents increased volumes of business from the PPO and case
management services, resulting from more customers and greater market
penetration.
COST OF REVENUES
Cost of revenues as a percentage of net revenues decreased to 71.4% in
fiscal year 1994, compared to 72.1% in fiscal year 1993. The reduction is
attributed to a greater percentage of generic drugs being dispensed through the
home delivery service and the increased volume in the Company's PPO and case
management services.
Cost of revenues as a percentage of net revenues was relatively constant
for fiscal years 1993 and 1992. A slight increase in the cost of revenues as a
percentage of revenues in the home delivery service was partially offset by
lower cost of revenues in the PPO and case management services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses as a percentage of net
revenues declined in each of the past two fiscal years and were 19.3%, 20.1% and
20.5% for fiscal years 1994, 1993 and 1992, respectively. The decrease in fiscal
year 1994 was primarily attributable to increased volumes in the PPO and case
management services and to selling and operational efficiencies in the other
services as a result of improved management controls and systems. The
improvement in fiscal year 1993 was primarily attributable to selling and
operational efficiencies attained by the home delivery service as a result of
improved management controls and systems.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization was approximately $3,427,000, $2,967,000 and
$2,169,000 for fiscal years 1994, 1993 and 1992, respectively. The year-to-year
increases in depreciation and amortization are attributable to capital
expenditures for computer equipment and software.
RESTRUCTURING CHARGES
During the fourth quarter of fiscal year 1992, the Company recorded pre-tax
restructuring charges of approximately $7,097,000 ($4,400,000 after-tax or $.50
per common share) primarily related to the revaluation of certain assets of TMD
to their estimated liquidation value in anticipation of the liquidation or sale
of TMD and, to a minor extent, charges associated with changes in senior
management, increased allowances for warranty claims on software installation
and write-offs of certain software development costs.
INTEREST EXPENSE
Net interest expense amounted to $580,000, $1,034,000 and $1,363,000 for
fiscal years 1994, 1993 and 1992, respectively. The Company reduced its interest
expense in fiscal year 1994, compared to fiscal year 1993, as a result of an
$8.5 million reduction in bank borrowings. The Company reduced its interest
expense in fiscal year 1993, compared to fiscal year 1992, as a result of both
repayment of bank borrowings ($6.5 million) and a reduction of approximately
0.75% in the average interest rate of the Company's bank borrowings.
9
<PAGE> 147
GAIN ON SALE OF TMD
During fiscal year 1993, the Company recognized a non-recurring gain of
$950,000 on the sale of TMD. This amount represents the value, net of
transaction costs, assigned to the Staodyn common stock that the Company
received as part of the consideration in the sale of TMD. The Company also
received $500,000 cash and a $2,700,000 note receivable from Staodyn, which
approximated the liquidation value of the tangible assets of TMD sold to
Staodyn. Additional gains or losses from the sale of TMD could be recognized
depending on the realizable value of the Staodyn, Inc. common stock received by
the Company in the transaction, which were recorded at a discount of $2.20 per
share to their then current market value of $5.00 per share to reflect the
illiquidity resulting from the volatility of the trading price of the stock and
restrictions on resale imposed by state and federal securities laws and PMSI's
agreements with Staodyn. (See Note 11 of Notes to Consolidated Financial
Statements).
WRITE-OFF OF GOODWILL
During fiscal year 1993, the Company wrote off approximately $620,000 of
goodwill, which had been allocated to the 1991 acquisition of the bill auditing
business of Insurance Software Packages, Inc. ("ISP"). The Company's preferred
provider organization (the "PPO"), which was acquired in May 1991, also had a
bill auditing business and, when the bill auditing business of ISP was
integrated with the bill auditing business of the PPO in November 1992, the
Company determined that it was no longer appropriate to have this goodwill
allocated to the bill auditing business of ISP reflected in its records. The
Company monthly evaluates the existence of goodwill impairment on the basis of
whether the goodwill is fully recoverable from the projected nondiscounted cash
flows of each business unit. If the projected nondiscounted cash flows for a
particular business unit indicates that the value of the related goodwill or
other intangible assets might not be recoverable over the expected amortization
period, then the carrying value of the related goodwill or other intangible
assets and/or the amortization period are adjusted accordingly. Other than the
$620,000 write-off of goodwill in fiscal year 1993, no other impairment of
goodwill or reduction of the amortization period has been determined to be
appropriate.
PROVISION (BENEFIT) FOR INCOME TAXES
The combined effective federal and state income tax rate of the Company for
fiscal year 1994 was 35.3%, compared to a 42.6% effective rate for fiscal year
1993 and a 27.4% tax benefit for losses incurred in fiscal year 1992. The
effective rate for fiscal year 1994 is approximately 2.5% lower than would be
expected primarily due to the impact of research and development tax credits of
approximately $380,000. The effective rate in fiscal year 1993 was approximately
5% higher than would normally be expected because of the write-off of goodwill
mentioned above, which is not deductible for income tax purposes.
INFLATION
The Company has not experienced significant increases in either the cost of
products or operating expenses due to inflation. Inflation is not expected to
adversely affect the Company in the future, unless it increases significantly.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $16,747,000 of working capital at July 31, 1994, compared
with $12,969,000 and $21,554,000 at the end of fiscal years 1993 and 1992,
respectively. The increase in working capital in fiscal year 1994 was primarily
attributable to a reduction of the current maturities of long-term debt from the
Company's positive cash flow from operating activities. The working capital
decrease in fiscal year 1993, compared to fiscal year 1992, stemmed from a
reduction in current assets (primarily trade receivables and inventories) of
approximately $6 million in fiscal year 1993 and an increase in current
liabilities of approximately $3 million (primarily trade accounts payable and
the current portion of long-term debt). The cash flow resulting from this
reduction in working capital was used to reduce long-term debt during fiscal
year 1993 by $6.5 million.
10
<PAGE> 148
Management believes that the Company's working capital is sufficient to maintain
its current level of operations and its projected levels of operations over the
next 12 to 18 months.
The Company had positive cash flow from operating activities of $8,627,000
for fiscal year 1994 compared to $11,796,000 for fiscal year 1993 and $904,000
for fiscal year 1992. Increases in trade receivables of approximately $2,400,000
and reductions in accounts payable of approximately $815,000 accounted for the
major portion of the difference between fiscal years 1994 and 1993. In fiscal
year 1993, improvement in cash flow from operating activities resulted primarily
from improved control of trade receivables and inventories, from collection of
trade receivables of TMD that were retained in connection with its sale and from
tax refunds related to the restructuring charges in fiscal year 1992.
Net trade receivables at year end were $20,690,000, $18,274,000 and
$20,810,000 for fiscal years 1994, 1993 and 1992, respectively. The increase in
trade receivables in fiscal year 1994 is attributable to increased use of the
on-line retail prescription drug card and increased PPO revenues. The PPO
historically has more days of sales outstanding in trade receivables than the
Company's other businesses. The number of days of revenues in trade receivables
was 57.8 at July 31, 1994, compared to 55.9 at July 31, 1993 and 63.4 at July
31, 1992. The decrease in fiscal year 1993 is primarily attributable to the sale
of TMD and the collection of approximately $2,500,000 of TMD receivables
retained by the Company.
Inventories at year end were $3,487,000, $5,118,000 and $7,766,000 for
fiscal years 1994, 1993 and 1992, respectively. The decrease in fiscal year 1994
was primarily due to improved inventory turnover and the increase in the generic
drug mix in the home delivery of prescription drugs. The decrease in fiscal year
1993 was primarily attributable to the sale of TMD, which included approximately
$2,700,000 of inventories.
The Company has revolving lines of credit with two banks that allow it to
borrow up to $15 million at variable rates that currently approximate the banks'
prime rates. The amount available for borrowing at July 31, 1994 was
approximately $10.4 million. The Company believes that its cash flow from
operating activities (in excess of $8 million in each of the last two fiscal
years), together with the funds available under its credit facility
(approximately $10.4 million at July 31, 1994), will be sufficient to satisfy
the Company's anticipated capital requirements for the next 12 to 18 months. The
Company's $15 million revolving credit lines expire on November 30, 1997.
The Company anticipates that capital expenditures for fiscal year 1995,
primarily for computer equipment and software, will be approximately $3.5
million and that its capital expenditures requirements for the next several
years will grow no faster than the rate of growth of the Company's revenue. The
Company believes that it will be able to generate sufficient funds internally to
meet its short-term capital expenditure requirements.
Healthcare reform is a major national priority, but the impact of reform on
the Company is not presently determinable. None of the pending healthcare reform
bills would directly affect workers' compensation.
The Company's future liquidity will continue to be dependent on its
operating cash flow and management of trade receivables and inventories.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary financial information required
by this item are included at the end of this report and described under Item 14
of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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<PAGE> 149
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors of the Company are as follows:
Cecil S. Harrell (age 60) is the founder of the Company and has been its
Chief Executive Officer since the Company's inception in 1972 and Chairman of
the Board since December 1991. Before founding the Company, Mr. Harrell served
as President of several retail and institutional pharmacies and was a sales
representative for Eli Lilly & Company. Mr. Harrell is a registered pharmacist
and currently serves on the Board of Directors of the American Managed Care
Pharmacy Association. Mr. Harrell has been a director of the Company since 1972.
Bertram T. Martin, Jr. (age 44) was elected President and Chief Operating
Officer of the Company in June 1993. From 1985 until June 1993, he was a Vice
President, director, and shareholder of Tunstall Consulting, Inc., a corporate
financial consulting business. Mr. Martin has been a director of the Company
since 1989 and is a member of the Compensation Committee.
David N. Campbell (age 65) is a business consultant. From 1973 until his
retirement in 1989, Mr. Campbell was employed in various executive capacities
with TECO Energy, Inc. and its subsidiary Tampa Electric Company, serving most
recently as Senior Vice President/Staff Services for TECO Energy, Inc. Mr.
Campbell has been a director of the Company since 1991, is the Chairman of the
Compensation Committee, and is a member of the Audit Committee.
Peter T. Pruitt (age 61) has been an Executive Vice President of Willis
Corroon Corporation since November 1993, and previously served as President and
Chief Operating Officer of Frank B. Hall & Co., Inc. from 1985 until April 1993.
Mr. Pruitt became a director of the Company in 1994.
W. Seymour Holt (age 65) was a Vice President of health care accounts and
administration for Eli Lilly and Company from 1990 until 1993. He previously
served as Vice President and General Manager of Dista Products, a marketing
division of Eli Lilly and Company, from the division's inception in 1972. He was
associated with Eli Lilly and Company for 35 years, serving in various
management and marketing positions. Mr. Holt became a director of the Company in
1993 and is the Chairman of the Audit Committee.
The directors are elected to serve until the next Annual Meeting of the
Company's shareholders or until their successors are duly elected and qualified.
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- -------------------------- --- ------------------------------------------------------
<S> <C> <C>
Cecil S. Harrell.......... 60 Chairman of the Board and Chief Executive Officer
Bertram T. Martin, Jr..... 44 President and Chief Operating Officer
David L. Redmond.......... 43 Secretary, Treasurer, Senior Vice President and
Chief Financial Officer
Debra Cerre-Ruedisili..... 39 Senior Vice President and Chief Operating Officer,
MedView Services, Incorporated (wholly owned
subsidiary)
Michael W. Clark.......... 38 President, Prescription Management Services, Inc.
(wholly owned subsidiary)
Alice T. Hall............. 56 President, Resource Opportunities, Inc. (wholly owned
subsidiary)
Michael J. Leep........... 34 Vice President of Operations, Resource Opportunities,
Inc.
</TABLE>
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<PAGE> 150
<TABLE>
<CAPTION>
NAME AGE OFFICE
- -------------------------- --- ------------------------------------------------------
<S> <C> <C>
Robert H. Marks........... 44 President, MedView Services, Incorporated
Michael R. Webb........... 50 Vice President -- Sales, Prescription Management
Services, Inc.
</TABLE>
All the executive officers of the Company serve at the pleasure of its
Board of Directors. Background information is provided below regarding the
executive officers who are not directors of the Company.
BACKGROUND OF EXECUTIVE OFFICERS
Debra Cerre-Ruedisili has been Senior Vice President and Chief Operating
Officer of MedView Services, Incorporated ("MedView") since 1991. She has been
employed by MedView in various management capacities since 1987.
Michael W. Clark became President of Prescription Management Services, Inc.
in 1992. He served as the Company's Vice President of Operations from 1988 to
1992.
Alice T. Hall is the founder and President of Resource Opportunities, Inc.
She has been an executive officer of that company since 1977.
Michael J. Leep has been the Vice President of Operations for Resource
Opportunities, Inc. since July, 1990. He has been employed by that company in
various capacities since 1988.
Robert H. Marks was elected President of MedView in 1991, after serving as
a Vice President since 1989. He was President of Med-Save, Inc., the nation's
largest independent practice association, from 1987 to 1989.
David L. Redmond has been Treasurer, Senior Vice President and Chief
Financial Officer of the Company since 1991. He became Secretary of the Company
in 1992. He was a director and Chief Financial Officer of Bicoastal Corporation
(formerly known as The Singer Company) from 1989 to 1991 and served temporarily
as President of that corporation from 1990 to 1991. Bicoastal Corporation filed
for Chapter 11 bankruptcy protection in 1989. Its plan of reorganization has
been confirmed, and all its creditors have been paid 100% of their claims. Mr.
Redmond was a partner of KPMG Peat Marwick, an international independent
accounting firm, from 1983 to 1988.
Michael R. Webb joined the Company as Vice President of Sales for
Prescription Management Services, Inc. in October 1992. He previously was
employed as Vice President of Sales and Marketing for Prescription Health
Services, Inc. from 1989 to 1992 and as Director of Marketing/Prescription
Services Division for Baxter International during 1988 and 1989. Mr. Webb is a
registered pharmacist.
COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT
To the Company's knowledge, based solely on its review of copies of the
reports furnished to it and written representations by its directors and
officers that no other reports were required, all directors and executive
officers and beneficial owners of more than 10% of its common stock filed with
the Securities and Exchange Commission ("SEC") on a timely basis during fiscal
year 1994 all required statements of beneficial ownership and changes in
ownership of Company Common Stock, except as described below in this paragraph.
W. Seymour Holt failed to timely file a statement of change of beneficial
ownership with respect to a single purchase transaction. Peter T. Pruitt became
a director of the Company during fiscal year 1994 and failed to timely file an
initial statement of beneficial ownership. Additionally, David L. Redmond failed
to timely report a single purchase transaction and incorrectly reported the
wrong transaction date for the transactions that were timely reported.
Additionally, Mr. Redmond failed to timely file five statements of changes of
beneficial ownership with respect to a total of nine purchase transactions and
three option grants.
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<PAGE> 151
ITEM 11. EXECUTIVE COMPENSATION
ANNUAL COMPENSATION
The following table presents information concerning the compensation of the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company, for services in all capacities to the Company
and its subsidiaries:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
------------------------------------------ COMPENSATION--
OTHER ANNUAL SHARES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION OPTION AWARDS
- ------------------------------------------ ---- --------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Cecil S. Harrell.......................... 1994 180,000 100,000 * --
Chairman of the Board, 1993 175,000 100,000 * --
Chief Executive Officer, 1992 160,000 80,000 * --
and Director
Bertram T. Martin, Jr.**.................. 1994 190,000 100,000 * --
President, Chief Operating 1993 18,000 35,000 * 185,000
Officer, and Director 1992 -- -- * --
David L. Redmond.......................... 1994 150,000 60,000 -- --
Senior Vice President and 1993 100,000 50,000 * 63,000
Chief Financial Officer 1992 90,000 25,000 * 37,000
Robert H. Marks........................... 1994 113,300 50,000 * 5,000
President, MedView 1993 100,000 50,000 * 15,000
Services, Incorporated 1992 80,500 -- * 10,000
Debra Cerre-Ruedisili..................... 1994 112,000 50,000 * 5,000
Senior Vice President 1993 100,000 50,000 * 15,000
and Chief Operating Officer, 1992 80,750 -- * 10,000
MedView Services, Incorporated
</TABLE>
- ---------------
* Except for Mr. Marks, the compensation consists only of executive perquisites
and other personal benefits that in the aggregate are less than 10% of total
salary and bonus. The compensation for Mr. Marks also includes noncompete
payments of $2,500 per month for the period May 20, 1991, to May 20, 1994,
pursuant to the acquisition of MedView, Incorporated by the Company.
** Mr. Martin became President and Chief Operating Officer of the Company on
June 21, 1993.
COMPENSATION AGREEMENTS
The Company has employment agreements with all the executive officers
listed in the Summary Compensation Table. All the employment agreements are for
a term of one year ending on July 31, 1995, are renewable annually, provide for
annual salary, incentive bonus compensation, fringe benefits and
indemnification, and include a covenant not to compete and other restrictions on
post-employment activities intended to protect the Company's business interests.
The salaries and bonuses are based on the recommendation of the Compensation
Committee to the Company's Board of Directors and are as follows for fiscal year
1995:
<TABLE>
<CAPTION>
NAME SALARY MAXIMUM BONUS
-------------------------------------------------- -------- -------------
<S> <C> <C>
Cecil S. Harrell.................................. $180,000 $ 100,000
Bertram T. Martin, Jr............................. 200,000 115,000
David L. Redmond.................................. 170,000 70,000
Robert H. Marks................................... 118,300 70,000
Debra Cerre-Ruedisili............................. 117,000 70,000
</TABLE>
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<PAGE> 152
The incentive compensation of the Chief Executive Officer and Chief Financial
Officer are contingent on the Company earning targeted amounts of annual net
income. The incentive compensation of the other executive officers is contingent
on each individual's achievement of specified financial goals for his or her
business unit, including goals relating to revenues, cash flow, and net income.
The employment agreement of the Chief Operating Officer provides for severance
compensation equal to the salary due to that officer for the balance of the
contract year, plus a noncompete payment equal to $405,000 (payable in quarterly
installments over 12 months) for termination without cause and is coupled with a
Severance Agreement that provides a severance compensation benefit of
approximately two times his total compensation (payable in a lump sum). The
employment agreements of the other three executive officers (but not the Chief
Executive Officer) provide for severance compensation equal to one year's salary
for a termination of employment without cause and are coupled with a Severance
Agreement that provides a severance compensation benefit equal to two years of
total compensation for an involuntary or constructive termination of employment
following a "Change in Control." The Severance Agreements define a "Change in
Control" to include (subject to certain exceptions not stated here) any of the
following: (a) the shareholders of the Company approve (i) the liquidation of
all or substantially all the consolidated assets of the Company and its
subsidiaries, (ii) a sale, lease, exchange, or other transfer of all or
substantially all the consolidated assets of the Company and its subsidiaries,
or (iii) a merger, consolidation, reorganization, tender offer, exchange offer,
or share exchange in which the Company is not the surviving corporation or
becomes a majority-owned subsidiary; or (b) the occurrence of any event,
transaction, or arrangement that results in any person or group becoming a
beneficial owner of (i) a majority of the outstanding equity securities of the
Company or any subsidiary that contributed more than 50% of the Company's
consolidated revenues for its fiscal year, (ii) securities of the Company
representing 30% or more of the combined voting power of all the outstanding
securities of the Company that are entitled to vote generally in the election of
directors, or (iii) with respect to any subsidiary that contributed more than
50% of the Company's consolidated revenues for its last fiscal year, securities
of that subsidiary representing a majority of the combined voting power of all
the outstanding securities of that subsidiary that are entitled to vote
generally in the election of its directors, unless in each case the beneficial
owner is the Company, a subsidiary, an employee benefit plan sponsored by the
Company, a person or group who is a record or beneficial owner of 30% or more of
the Company's outstanding common stock on the effective date of the Severance
Agreement or a person who becomes a beneficial owner of 30% or more of the
Company's outstanding common stock on the effective date of the Severance
Agreement solely by becoming a trustee of an inter vivos trust created by a
person who is the record or beneficial owner of 30% or more of the Company's
outstanding common stock on the effective date of the Severance Agreement. The
Severance Agreement expires automatically, without further obligation, on the
earlier of (A) the second anniversary of the date of a Change in Control or (B)
if occurring before a Change in Control, when the executive officer attains age
62 or ceases for any reason to be employed by the Company. In addition, the
Company unilaterally may terminate the Severance Agreement without any
obligation to the executive officer upon the occurrence of certain events
specified in the Severance Agreement.
RETIREMENT PLAN
All of the executive officers are eligible to participate in the PMSI
Profit Sharing and Retirement Savings Plan, which is available to all employees
who have completed one year of service and are at least 21 years of age.
Employees may contribute at least 1%, but not more than 15%, of their
compensation. Company matching contributions are made at the discretion of the
Board of Directors, and may be made in either cash or common stock of the
Company. The Company did not make any matching contributions in fiscal years
1993 or 1992. Effective February 1, 1994, the Company began contributing an
amount equal to 25% of each employee's contribution, up to 4% of each employee's
pay.
DIRECTOR COMPENSATION
During fiscal year 1994, directors of the Company who were not officers or
employees were paid an annual retainer of $15,000, paid in equal quarterly
installments. The directors of the Company were not paid any additional fees for
service on committees of the Board of Directors. Additionally, on December 2,
1993, the Board of Directors adopted a Deferred Compensation Plan for
Non-Employees, which permits outside
15
<PAGE> 153
directors to defer all or a portion of their director compensation. The deferred
compensation is accounted for in "units" that track the value of the Company's
Common Stock. Additional units will be credited to each participant's account
each time the Company declares a cash or stock dividend on the Common Stock to
reflect the amount of the dividend the participant would have received if he had
owned an equivalent amount of shares of Common Stock. The deferred compensation
is payable only in cash in either a lump sum or in installments (with interest)
upon the occurrence of certain events (including death, disability, attainment
of age 70, and certain other fixed dates).
STOCK OPTION PLAN
The Company has a stock option plan (the "Option Plan") under which it may
grant options to purchase up to 800,000 shares of Common Stock at an exercise
price of not less than the fair market value of the Common Stock on the date of
grant. Options to purchase a total of 535,150 shares of Common Stock were
outstanding under the Option Plan as of November 25, 1994. Subject to
limitations contained in the Option Plan, a committee of the Board of Directors
administers the Option Plan and has the exclusive, discretionary power to
determine the participants and the number and nature of the stock options
granted under the plan. This administrative committee may designate the options
granted under the Option Plan as either "nonstatutory stock options" or
"incentive stock options" that qualify for favorable federal income tax
treatment.
Stock options granted under the Option Plan are not transferable, generally
vest and become exercisable at a rate of 20% per year over a five-year period,
and expire not later than ten years after the date granted or sooner in the
event of death, disability, retirement, or termination of employment. If a
"change in control" (as defined in the Option Plan) occurs, all outstanding
options become immediately exercisable.
The table below provides information regarding stock options that were
granted during fiscal year 1994 to the executive officers listed in the Summary
Compensation Table. The table also shows hypothetical values of the granted
options at the end of the option terms (ten years), assuming that the price of
the Company's Common Stock appreciates annually at the compounded rates of 5%
and 10%, using the exercise price of each option as the beginning price. The
real value of the options in this table depends on the actual appreciation of
the value of the Company's Common Stock. No assurance exists that the price of
the Company's Common Stock will appreciate at the rates assumed in the table.
OPTION GRANTS IN FISCAL YEAR 1994
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ------------------
NAME GRANTED* FISCAL YEAR PRICE($/SH) DATE 5%($) 10%($)
- --------------------------------- ---------- ------------- ------------ ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Cecil S. Harrell................. -- -- -- -- -- --
Bertram T. Martin, Jr............ -- -- -- -- -- --
David L. Redmond................. -- -- -- -- -- --
Robert H. Marks.................. 5,000 20.0 6.75 03/02/04 21,250 53,800
Debra Cerre-Ruedisili............ 5,000 20.0 6.75 03/02/04 21,250 53,800
</TABLE>
- ---------------
* All the options were granted at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant and are exercisable
ratably over a five-year period, beginning one year after the date of grant.
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<PAGE> 154
The following table presents information regarding the aggregate stock
options held at the end of fiscal year 1994 by the executive officers of the
Company who are listed in the Summary Compensation Table, none of whom exercised
any stock options during fiscal year 1994.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1994
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cecil S. Harrell............. -- -- -- -- -- --
Bertram T. Martin, Jr........ -- -- 47,600 151,400 142,200 477,800
David L. Redmond............. -- -- 27,800 72,200 38,950 153,550
Robert H. Marks.............. -- -- 10,000 20,000 15,000 37,500
Debra Cerre-Ruedisili........ -- -- 10,000 20,000 15,000 37,500
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
David N. Campbell and Bertram T. Martin, Jr. served as the Compensation
Committee of the Board of Directors during fiscal year 1994. Mr. Martin became
the Company's President and Chief Operating Officer on June 21, 1993. Mr. Martin
did not participate in the deliberations of the Board of Directors concerning
his compensation arrangement and does not participate in the deliberations of
the Board of Directors concerning his annual salary and bonus adjustments. The
report of the Compensation Committee follows.
COMPENSATION COMMITTEE REPORT
As members of the Compensation Committee, we review and recommend to the
Board of Directors for approval the compensation and fringe benefits for the
Company's senior officers, consisting of approximately 15 persons. We evaluate
the performance of senior management, including the Chief Executive Officer, and
administer the Company's compensation program for senior officers.
COMPENSATION PHILOSOPHY
The Company's compensation philosophy for executive officers conforms to
its compensation philosophy for all employees generally. The Company's
compensation is designed to:
- Provide compensation comparable to that offered by companies with similar
businesses, allowing the Company to successfully attract and retain the
employees necessary to its long-term success;
- Provide compensation that rewards individual achievement and
differentiates among employees based upon individual performance;
- Provide incentive compensation that varies according to both the
Company's success in achieving its performance goals and the employee's
contribution to that success; and
- Provide an appropriate linkage between employee compensation and the
creation of shareholder value through awards that are tied to the
Company's financial performance and by facilitating employee stock
ownership.
In furtherance of these goals, the compensation of the Company's executive
officers comprises salary, annual cash bonuses, long-term incentive compensation
in the form of stock options, and various fringe benefits, including medical
benefits and a 401(k) savings plan.
SALARIES
The Compensation Committee reviewed the salaries of all the executive
officers of the Company for fiscal year 1994. The Compensation Committee made
salary decisions concerning the executive officers based on a variety of
considerations in conformance with the compensation philosophy stated above.
First, salaries were competitively set relative to both other companies in the
health care industry and other comparable
17
<PAGE> 155
companies. Second, the Compensation Committee considered each executive
officer's level of responsibility and individual performance, including an
assessment of the person's overall value to the Company. Third, internal equity
among employees was factored into the decision. Finally, the Compensation
Committee considered the Company's financial performance and its ability to
absorb any increases in salaries.
BONUSES
Each executive officer is eligible to receive an annual cash bonus that is
generally paid pursuant to an incentive compensation formula established at the
beginning of a fiscal year in connection with the preparation of the Company's
operating budget for the year. A target bonus (expressed as a percentage of
salary) is established for each executive officer and consists of discretionary
and nondiscretionary components that are tied primarily to targeted levels of
Company financial performance for the fiscal year in relation to the Company's
operating budget, as well as any individual achievements by the executive in his
or her area of responsibility. In formulating recommendations to the Board of
Directors with respect to cash bonus awards, the Compensation Committee
evaluates each executive officer's role and responsibility in the Company and
other factors that the committee deems relevant to motivate each executive
officer to achieve strategic performance goals.
STOCK OPTIONS
The Company has a stock option plan that is designed to align the interests
of the shareholders and the Company's executive officers in the enhancement of
stockholder value. Stock options are granted under the plan by an administrative
committee comprising disinterested members of the Board of Directors. The Chief
Executive Officer, who also is the founder and principal shareholder of the
Company, does not participate in the Company's stock option plan. In general,
stock options are granted on an annual basis if warranted by the Company's
growth and profitability. All stock options are granted at an exercise price not
lower than the fair market value of the Company's Common Stock on the date of
grant. In formulating its recommendations to the administrative committee for
the stock option plan, the Compensation Committee evaluates the Company's
overall financial performance for the year, the desirability of long-term
service from an executive officer, and the number of stock options held by other
executives in the Company who have the same, more, or less responsibility. To
encourage long-term performance, the stock options granted in fiscal years 1993
and 1994 vest ratably over a five-year period and expire ten years after the
date of grant.
In addition, a substantial portion of the stock options granted in fiscal
year 1993 to the Company's President and Chief Operating Officer and to its
Chief Financial Officer are restricted stock options that vest and become
exercisable only if the Company achieves specified amounts of annual and
cumulative earnings per share for each of five fiscal years or the Company's
Common Stock attains certain targeted prices. The terms of these restricted
stock options are identical so the officers will have parallel incentives.
CHIEF EXECUTIVE OFFICER COMPENSATION
The total compensation of the Chief Executive Officer for fiscal year 1994
was based on his duties and responsibilities and determined after a review of
the total compensation paid to chief executive officers of comparable companies,
both in and outside the health care industry. His salary was set to account for
slightly less than two-thirds of his maximum potential compensation for the
year. The Chief Executive Officer's cash bonus for fiscal year 1994 was
contingent and based entirely on a formula tied to the Company's net income for
the year. The Company achieved 110% of the Chief Executive Officer's net income
target for fiscal year 1994.
COMPENSATION COMMITTEE
David N. Campbell, Chairman
Bertram T. Martin, Jr.
18
<PAGE> 156
PERFORMANCE GRAPH
The following graph shows a comparison of the four-year cumulative total
return for the Company's Common Stock, the Nasdaq Stock Market (U.S.) Index, and
the Nasdaq Health Services Stocks Index, assuming an investment of $100 on
August 1, 1990, the beginning of the first fiscal year following the Company's
initial public offering. The cumulative return of the Company was computed by
dividing the difference between the price of the Company's Common Stock at the
end and the beginning of the measurement period (August 1, 1990, to July 31,
1994) by the price of the Company's Common Stock at the beginning of the
measurement period.
(GRAPH)
<TABLE>
<CAPTION>
Pharmacy Nasdaq
Management Nasdaq Stock Health
Measurement Period Services, Market (U.S.) Services
(Fiscal Year Covered) Inc. Index Stocks Index
<S> <C> <C> <C>
8/1/90 100.00 100.00 100.00
7/31/91 72.22 118.07 170.28
7/31/92 57.41 138.61 200.28
7/31/93 51.85 168.56 224.66
7/31/94 81.25 172.49 250.66
</TABLE>
19
<PAGE> 157
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below shows as of November 25, 1994, the number of shares of the
Company's Common Stock beneficially owned by each director, by the Chief
Executive Officer, and by the other four most highly compensated executive
officers of the Company, by all directors and executive officers of the Company
as a group, and by each person who is known by the Company to beneficially own
more than 5% of the outstanding Common Stock:
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIAL OWNER(2)(3) BENEFICIALLY OWNED(1) CLASS(1)(3)
----------------------------------------------------- --------------------- ------------
<S> <C> <C>
David N. Campbell.................................... 3,500(4) *
Debra Cerre-Ruedisili................................ 11,000(5) *
Charles H. Guy, Jr................................... 650,100 7.3%
Cecil S. Harrell..................................... 3,775,863(6) 42.5%
James N. Harrell..................................... 770,050 8.7%
W. Seymour Holt...................................... 25,600 *
Robert H. Marks...................................... 10,000(7) *
Bertram T. Martin, Jr................................ 3,823,553(6) 43.0%
Peter T. Pruitt...................................... 100 *
David L. Redmond..................................... 43,900(8) *
Wellington Management Company........................ 664,100 7.5%
All directors and executive officers
as a group (12 persons)............................ 3,996,963(9) 45.0%
</TABLE>
- ---------------
NOTES:
(1) Except as discussed below, information regarding beneficial ownership was
furnished by the persons named in the table and is as of November 25, 1994.
The information for Wellington Management Company is as of December 31,
1993, and was derived from the Schedule 13G filed by it with the SEC. Except
as otherwise indicated below, each person reported in the table as a
beneficial owner of shares has sole voting and investment power over the
shares owned of record by him and only shared voting and investment power
over shares owned of record by, or jointly with, another person. Beneficial
ownership percentages of less than 1% are indicated by an asterisk.
(2) The business address for Cecil S. Harrell and Bertram T. Martin, Jr. is 3611
Queen Palm Drive, Tampa, Florida 33619. The business address for Charles H.
Guy, Jr. is 205 South Hoover, Tampa, Florida 33609, and the mailing address
for James N. Harrell is 15451 Plantation Oaks, No. 13, Tampa, Florida 33647.
The business address for Wellington Management Company is 75 State Street,
Boston, Massachusetts 02109.
(3) Two of the five beneficial owners of more than 5% of the outstanding Common
Stock are directors of the Company. James N. Harrell is the brother of Cecil
S. Harrell.
(4) Includes 3,000 shares issuable upon the exercise of stock options that are
currently exercisable.
(5) Includes 10,000 shares issuable upon the exercise of stock options that are
currently exercisable.
(6) Includes 3,774,953 shares owned of record by a revocable trust created by
Cecil S. Harrell under which he and Bertram T. Martin, Jr. are co-trustees,
so each of them is shown in the table as beneficially owning all the shares
owned by the trust. In addition, Mr. Martin's beneficial ownership includes
47,600 shares issuable upon the exercise of stock options that are currently
exercisable.
(7) Includes 10,000 shares that are issuable upon the exercise of stock options
that are currently exercisable.
(8) Includes 27,800 shares that are issuable upon the exercise of stock options
that are currently exercisable.
(9) Includes a total of 170,400 shares issuable upon the exercise of stock
options that are currently exercisable.
20
<PAGE> 158
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Some of the directors and executive officers of the Company were customers
or suppliers of the Company, or directors, officers, or shareholders of
corporations that were customers or suppliers of the Company, during fiscal year
1994 and engaged in transactions with the Company in the ordinary course of
business that were subject to usual trade terms. In addition, since the
beginning of the last fiscal year, the Company has periodically made advances to
its Chief Executive Officer and a revocable trust created by him under which he
is a co-trustee. The advances are repayable with interest at the prime rate. The
maximum aggregate amount outstanding since the beginning of the Company's last
fiscal year was $390,707, the amount outstanding as of July 31, 1994, was zero,
and the amount outstanding as of September 30, 1994, was $200,844.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
The following consolidated financial statements and supplementary financial
data of the Company are filed as part of this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Balance Sheets, July 31, 1994 and 1993........................... F-3
Consolidated Statements of Operations for fiscal years
ended July 31, 1994, 1993 and 1992.......................................... F-4
Consolidated Statements of Shareholders' Equity for
the fiscal years ended July 31, 1994, 1993 and 1992......................... F-5
Consolidated Statements of Cash Flows for the fiscal years
ended July 31, 1994, 1993 and 1992.......................................... F-6
Notes to Consolidated Financial Statements.................................... F-7
</TABLE>
FINANCIAL STATEMENT SCHEDULES
The following additional information pertaining to the consolidated
financial statements of the Company for fiscal years 1994, 1993 and 1992 is
filed as part of this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants -- Fiscal
years ended July 31, 1994, 1993 and 1992.................................... F-1
Consent of Independent Accountants -- Fiscal
years ended July 31, 1994, 1993 and 1992.................................... F-2
</TABLE>
All other schedules specified in the accounting regulations of the SEC have
been omitted because they are either inapplicable or not required. Individual
financial statements of the Company have been omitted because the Company is a
holding company and all subsidiaries included in the consolidated financial
statements filed with this report are wholly owned.
REPORTS ON FORM 8-K
The Company did not file a Current Report on Form 8-K during the fourth
quarter of fiscal year 1994.
21
<PAGE> 159
EXHIBITS
The following exhibits are filed as part of this report:
<TABLE>
<S> <C>
2-1 Stock Purchase Agreement dated December 20, 1990, for the purchase of Resource
Opportunities, Inc. common stock by a wholly owned subsidiary of the Company.
(Incorporated by reference from Exhibit C(a) to the Company's Form 8-K filed on
January 9, 1991, SEC File No. 0-18366)
2-2 Stock Purchase Agreement dated March 25, 1991, for the purchase of Insurance Software
Packages, Inc. common stock by a wholly owned subsidiary of the Company.
(Incorporated by reference from Exhibit C(1) to the Company's Form 8-K filed on April
1, 1991, SEC File No. 0-18366)
2-3 Acquisition and Merger Agreement dated March 28, 1991, for the purchase of Nancy Sapp
& Associates, Inc. common stock by a wholly owned subsidiary of the Company.
(Incorporated by reference from Exhibit C(4) to the Company's Form 8-K filed on April
1, 1991, SEC File No. 0-18366)
2-4 Acquisition and Merger Agreement dated May 20, 1991, for the purchase of MedView,
Incorporated common stock by a wholly owned subsidiary of the Company. (Incorporated
by reference from Exhibit C(1) to the Company's Form 8-K filed on June 4, 1991, SEC
File No. 0-18366)
3-1 Articles of Incorporation of the Company, as amended to date.*
3-2 By-laws of the Company. (Incorporated by reference from Exhibit 3-2 to the Company's
Form 10-K filed on July 31, 1991, SEC File No. 0-18366)
4-1 Credit Agreement dated May 26, 1994, between the Company and Barnett Bank of Tampa,
N.A. and NationsBank of Florida, N.A. (Incorporated by reference from Exhibit 4-1 to
the Company's Form 10-Q for the fiscal quarter ended April 30, 1994, SEC File No.
0-18366)
10-1 1990 Incentive and Non-Statutory Stock Option Plan of the Company, as amended to
date.**
10-2 Deferred Compensation Plan for Non-Employees effective December 2, 1993.
10-3 Asset Purchase Agreement dated November 6, 1992, between Staodyn, Inc. and Technical
Medical Devices, Inc. (with exhibits, except as noted).*
10-4 Executive Liability and Defense Coverage Section of Executive Protection Policy
effective October 1, 1993, issued by Federal Insurance Company and binder for renewal
of coverage effective October 1, 1994.
10-5 Form of Indemnity Agreement between the Company and its directors.**
10-6 Form of Indemnity Agreement between the Company and its executive officers.**
10-7 Form of Severance Agreement between the Company and its executive officers.**
10-8 Restricted Stock Option Agreement dated June 11, 1993, between the Company and
Bertram T. Martin, Jr.**
10-9 Restricted Stock Option Agreement dated June 11, 1993, between the Company and David
L. Redmond.**
10-10 Employment Agreement between the Company and Cecil S. Harrell, as currently in
effect.
10-11 Employment Agreement between the Company and Bertram T. Martin, Jr., as currently in
effect.
10-12 Employment Agreement between the Company and David L. Redmond, as currently in
effect.
10-13 Employment Agreement between Prescription Management Services, Inc. and Michael W.
Clark, as currently in effect.
10-14 Employment Agreement between MedView Services, Incorporated and Robert H. Marks, as
currently in effect.
10-15 Employment Agreement between MedView Services, Incorporated and Debra
Cerre-Ruedisili, as currently in effect.
</TABLE>
22
<PAGE> 160
<TABLE>
<S> <C>
10-16 Employment Agreement between Resource Opportunities, Inc. and Alice T. Hall, as
currently in effect.**
10-17 Employment Agreement between Resource Opportunities, Inc. and Michael J. Leep, as
currently in effect.
10-18 Third Amended and Restated Lease Agreement dated September 1, 1989, between the
Company and NCNB National Bank of Florida and Lease Agreement dated January 24, 1990,
between the Company and NCNB National Bank of Florida.**
10-19 Employment Agreement between Prescription Management Services, Inc. and Michael R.
Webb, as currently in effect.
11 Computation of Earnings Per Share.
22 Subsidiaries of the Company.**
</TABLE>
- ---------------
* Incorporated by reference from the same exhibit designation in the Company's
Annual Report on Form 10-K for the fiscal year ended July 31, 1992 (SEC File
No. 0-18366).
** Incorporated by reference from the same exhibit designation in the Company's
Annual Report on Form 10-K for the fiscal year ended July 31, 1993 (SEC File
No. 0-18366).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
PHARMACY MANAGEMENT SERVICES, INC.
Date: April 6, 1995 By: /s/ David L. Redmond
---------------------------
David L. Redmond
Senior Vice President and
Chief Financial Officer
23
<PAGE> 161
EXHIBIT INDEX
EXHIBIT REFERENCE
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
2-1 Stock Purchase Agreement dated December 20, 1990, for the purchase of Resource
Opportunities, Inc. common stock by a wholly owned subsidiary of the Company.... *
2-2 Stock Purchase Agreement dated March 25, 1991, for the purchase of Insurance
Software Packages, Inc. common stock by a wholly owned subsidiary of the
Company......................................................................... *
2-3 Acquisition and Merger Agreement dated March 28, 1991, for the purchase of Nancy
Sapp & Associates, Inc. common stock by a wholly owned subsidiary of the
Company......................................................................... *
2-4 Acquisition and Merger Agreement dated May 20, 1991, for the purchase of
MedView, Incorporated common stock by a wholly owned subsidiary of the
Company......................................................................... *
3-1 Articles of Incorporation of the Company, as amended to date.................... *
3-2 By-laws of the Company.......................................................... *
4-1 Credit Agreement dated May 26, 1994, between the Company and Barnett Bank of
Tampa, N.A. and NationsBank of Florida, N.A..................................... *
10-1 1990 Incentive and Non-Statutory Stock Option Plan of the Company, as amended to
date............................................................................ *
10-2 Deferred Compensation Plan for Non-Employees effective December 2, 1993......... 20
10-3 Asset Purchase Agreement dated November 6, 1992, between Staodyn, Inc. and
Technical Medical Devices, Inc. (with exhibits, except as noted)................ *
10-4 Executive Liability and Defense Coverage Section of Executive Protection Policy
effective October 1, 1993, issued by Federal Insurance Company and binder for
renewal of coverage effective October 1, 1994................................... 33
10-5 Form of Indemnity Agreement between the Company and its directors............... *
10-6 Form of Indemnity Agreement between the Company and its executive officers...... *
10-7 Form of Severance Agreement between the Company and its executive officers...... *
10-8 Restricted Stock Option Agreement dated June 11, 1993, between the Company and
Bertram T. Martin, Jr........................................................... *
10-9 Restricted Stock Option Agreement dated June 11, 1993, between the Company and
David L. Redmond................................................................ *
10-10 Employment Agreement between the Company and Cecil S. Harrell, as currently in
effect.......................................................................... 91
10-11 Employment Agreement between the Company and Bertram T. Martin, Jr., as
currently in effect............................................................. 108
10-12 Employment Agreement between the Company and David L. Redmond, as currently in
effect.......................................................................... 123
10-13 Employment Agreement between Prescription Management Services, Inc. and Michael
W. Clark, as currently in effect................................................ 140
10-14 Employment Agreement between MedView Services, Incorporated and Robert H. Marks,
as currently in effect.......................................................... 158
10-15 Employment Agreement between MedView Services, Incorporated and Debra Cerre-
Ruedisili, as currently in effect............................................... 178
10-16 Employment Agreement between Resource Opportunities, Inc. and Alice T. Hall, as
currently in effect............................................................. *
10-17 Employment Agreement between Resource Opportunities, Inc. and Michael J. Leep,
as currently in effect.......................................................... 196
</TABLE>
24
<PAGE> 162
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
10-18 Third Amended and Restated Lease Agreement dated September 1, 1989, between the
Company and NCNB National Bank of Florida and Lease Agreement dated January 24,
1990, between the Company and NCNB National Bank of Florida..................... *
10-19 Employment Agreement between Prescription Management Services, Inc. and Michael
R. Webb, as currently in effect................................................. 220
11 Computation of Earnings Per Share............................................... 237
22 Subsidiaries of the Company..................................................... *
</TABLE>
- ---------------
* Incorporated by reference.
** The page numbers listed in the Exhibits Index are the sequentially numbered
pages of the Company's Annual Report on Form 10-K for the fiscal year ended
July 31, 1994, in the form originally filed with the SEC.
25
<PAGE> 163
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders, Pharmacy Management Services, Inc.:
We have audited the accompanying consolidated balance sheets of Pharmacy
Management Services, Inc. and Subsidiaries as of July 31, 1994 and 1993, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended July 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Pharmacy Management Services, Inc. and Subsidiaries as of July 31, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended July 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
August 1, 1993, the Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes."
Coopers & Lybrand L.L.P.
Tampa, Florida
September 13, 1994
F-1
<PAGE> 164
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Annual Report on Form 10-K/A (Amendment
No. 3) of our report dated September 13, 1994, on our audits of the consolidated
financial statements of Pharmacy Management Services, Inc. and Subsidiaries as
of July 31, 1994 and 1993, and for each of the three years in the period ended
July 31, 1994. We also consent to the incorporation by reference in the
registration statements of Pharmacy Management Services, Inc. and Subsidiaries
on Form S-8 (File No. 33-37549) and Form S-8 (File No. 33-80078) of our report
dated September 13, 1994, on our audits of the consolidated financial statements
of Pharmacy Management Services, Inc. and Subsidiaries as of July 31, 1994 and
1993, and for the three years in the period ended July 31, 1994, which report is
included in the Annual Report on Form 10-K/A (Amendment No. 3).
Coopers & Lybrand L.L.P.
Tampa, Florida
April 6, 1995
F-2
<PAGE> 165
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, JULY 31, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
- ---------------------------------------------------------------------- -------- --------
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........................................... $ 1 $ 2,594
Trade receivables, net.............................................. 20,690 18,274
Inventories......................................................... 3,487 5,118
Income tax refunds receivable....................................... 584 --
Deferred income taxes............................................... 1,121 548
Prepaid expenses and other.......................................... 742 760
-------- --------
TOTAL CURRENT ASSETS........................................ 26,625 27,294
PROPERTY AND EQUIPMENT................................................ 8,679 8,924
GOODWILL AND OTHER INTANGIBLES........................................ 15,682 16,867
NOTES RECEIVABLE...................................................... 184 3,002
EQUITY SECURITIES..................................................... 1,240 1,400
OTHER ASSETS.......................................................... 1,552 2,213
-------- --------
TOTAL ASSETS................................................ $53,962 $59,700
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------
CURRENT LIABILITIES
Current maturities of long-term debt................................ $ 789 $ 4,258
Accounts payable.................................................... 6,132 6,947
Accrued compensation and benefits................................... 1,457 1,457
Accrued lease costs................................................. 1,086 874
Other current liabilities........................................... 414 789
-------- --------
TOTAL CURRENT LIABILITIES................................... 9,878 14,325
LONG-TERM DEBT........................................................ 5,793 11,695
REDEEMABLE CONVERTIBLE PREFERRED STOCK................................ 1,200 1,200
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Series B Convertible Preferred Stock................................ 1 1
Series C Convertible Preferred Stock................................ 1 1
Common Stock, $.01 par value: authorized 20,000,000 shares; issued
and outstanding 8,749,793 and 8,664,950 at July 31, 1994 and July
31, 1993, respectively........................................... 87 87
Additional paid-in capital.......................................... 26,559 25,943
Retained earnings................................................... 10,443 6,448
-------- --------
TOTAL SHAREHOLDERS' EQUITY.................................. 37,091 32,480
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $53,962 $59,700
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 166
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JULY 31, 1994,
1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net revenues........................................... $113,149 $109,934 $106,116
Cost of revenues....................................... 80,709 79,257 76,424
-------- -------- --------
Gross margin...................................... 32,440 30,677 29,692
Costs and expenses
Selling, general and administrative.................. 21,876 22,144 21,802
Depreciation and amortization........................ 3,427 2,967 2,169
Restructuring charges................................ -- -- 7,097
-------- -------- --------
Operating income (loss)........................... 7,137 5,566 (1,376)
Other income (expense)
Interest expense, net................................ (580) (1,034) (1,363)
Gain on sale of TMD.................................. -- 950 --
Write-off of goodwill................................ -- (620) --
Other................................................ 25 (16) (32)
-------- -------- --------
Income (loss) before income taxes................. 6,582 4,846 (2,771)
Provision (benefit) for income taxes................... 2,326 2,064 (760)
-------- -------- --------
Net income (loss)................................. $ 4,256 $ 2,782 $ (2,011)
======== ======== ========
Net income (loss) per common share..................... $ 0.47 $ 0.30 $ (0.25)
======== ======== ========
Weighted average number of common shares outstanding... 8,721 8,692 8,725
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 167
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE FISCAL YEARS ENDED JULY
31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
PREFERRED
STOCK COMMON STOCK
-------------- -------------- ADDITIONAL TREASURY NET
PAR PAR PAID-IN RETAINED STOCK, SHAREHOLDERS'
SHARES VALUE SHARES VALUE CAPITAL EARNINGS AT COST EQUITY
------ ----- ------ ----- ---------- --------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 31, 1991......... 117 $ 2 8,723 $87 $ 25,956 $ 6,349 $ (93 ) $32,301
Issuance of stock.............. 9 -- 4 -- 146 -- -- 146
Purchase of treasury shares.... -- -- -- -- -- -- (284 ) (284)
Net loss....................... -- -- -- -- -- (2,011) -- (2,011)
Preferred stock dividends...... -- -- -- -- -- (186) -- (186)
------ ----- ------ ----- ---------- --------- -------- -------------
Balance, July 31, 1992......... 126 2 8,727 87 26,102 4,152 (377 ) 29,966
Issuance of stock.............. 2 -- 1 -- 29 -- -- 29
Purchase of treasury shares.... -- -- -- -- -- -- (101 ) (101)
Cancellation of treasury
shares....................... -- -- (63 ) -- (188) (290) 478 --
Net income..................... -- -- -- -- -- 2,782 -- 2,782
Preferred stock dividends...... -- -- -- -- -- (196) -- (196)
------ ----- ------ ----- ---------- --------- -------- -------------
Balance, July 31, 1993......... 128 2 8,665 87 25,943 6,448 -- 32,480
Issuance of stock.............. -- -- 97 -- 651 -- -- 651
Purchase of treasury shares.... -- -- -- -- -- -- (99 ) (99)
Cancellation of treasury
shares....................... -- -- (12 ) -- (35) (64) 99 --
Net income..................... -- -- -- -- -- 4,256 -- 4,256
Preferred stock dividends...... -- -- -- -- -- (197) -- (197)
------ ----- ------ ----- ---------- --------- -------- -------------
Balance, July 31, 1994......... 128 $ 2 8,750 $87 $ 26,559 $10,443 $ -- $37,091
======= ====== ======= ====== ========== ========= ======== =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 168
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED JULY 31, 1994,
1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 4,256 $ 2,782 $(2,011)
-------- -------- -------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 3,427 2,967 2,169
Loss on sale of property and equipment................. 7 43 53
Decrease (increase) in trade receivables............... (2,416) 2,536 (304)
Decrease in inventories................................ 1,631 2,648 4,397
Decrease (increase) in income tax refund receivable.... (584) 2,740 (2,740)
Increase in prepaid expenses and other current
assets............................................... (648) (296) (196)
Decrease in goodwill and other intangibles............. -- 313 94
Decrease (increase) in notes receivable................ 2,818 (3,002) --
Decrease (increase) in other assets.................... 1,114 (453) (370)
Increase (decrease) in accounts payable................ (815) 2,167 288
Decrease in accrued compensation, accrued lease costs,
and other current liabilities........................ (163) (649) (476)
-------- -------- -------
Total adjustments................................. 4,371 9,014 2,915
-------- -------- -------
Net cash provided by operating activities......... 8,627 11,796 904
-------- -------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property and equipment....................... (2,364) (2,846) (4,672)
Proceeds from the sale of property and equipment.......... -- 109 28
Decrease in equity securities............................. 160 -- --
Additional consideration paid on acquisitions............. -- (1,679) --
-------- -------- -------
Net cash used in investing activities............. (2,204) (4,416) (4,644)
-------- -------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Increases in notes payable and long-term debt............. 4,783 8,378 9,608
Reductions in notes payable and long-term debt............ (14,154) (14,015) (5,037)
Issuance of common stock.................................. 651 5 145
Issuance of preferred stock............................... -- 24 --
Preferred stock dividends................................. (197) (196) (186)
Purchases of treasury stock............................... (99) (101) (284)
-------- -------- -------
Net cash provided by (used in) financing
activities...................................... (9,016) (5,905) 4,246
-------- -------- -------
Net increase (decrease) in cash and cash equivalents........ (2,593) 1,475 506
Cash and cash equivalents at beginning of year.............. 2,594 1,119 613
-------- -------- -------
Cash and cash equivalents at end of year.................... $ 1 $ 2,594 $ 1,119
======== ======== =======
Supplemental disclosures of cash flow information
Cash paid for:
Interest............................................... $ 663 $ 1,134 $ 1,416
======== ======== =======
Income taxes........................................... $ 3,090 $ 163 $ 1,947
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 169
PHARMACY MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements consist of the accounts of Pharmacy
Management Services, Inc. ("PMSI") and its wholly owned subsidiaries (the
"Company"). The Company is a leading independent nationwide provider of medical
cost containment and managed care services, providing professionally managed
solutions for controlling the escalating costs of workers' compensation. The
Company's operations do not meet the requirements of Statement of Financial
Accounting Standards No. 14 for segment reporting. All significant intercompany
balances and transactions have been eliminated in consolidation.
Revenue Recognition
Revenues are recognized based on shipment of products or performance of
services. Revenues from the sale of software are recognized when installed and
accepted by the customer. Revenue from maintenance contracts is recorded as
deferred revenue and recognized in earnings ratably over the contract periods.
No single customer accounts for more than 10% of the Company's revenues.
Cash Equivalents
Cash equivalents consist principally of short-term interest-bearing
investments that are carried at cost, which approximates market value. For
purposes of the statements of cash flows, the Company considers all short-term,
highly liquid investments with a maturity of three months or less to be cash
equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Inventories at July 31, 1994 and 1993 are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Drugs.............................................................. $2,474 $3,918
Electro-medical therapy products................................... 416 608
Medical equipment and supplies..................................... 597 592
------ ------
$3,487 $5,118
====== ======
</TABLE>
Property and Equipment
Property and equipment are stated at cost. Depreciation is charged against
results of operations over the estimated service lives of the related assets.
Improvements to leased property are amortized over the life of the lease or the
life of the improvement, whichever is shorter. For financial reporting purposes,
the Company principally uses the straight-line method of depreciation. For tax
purposes, the Company generally uses accelerated methods where permitted.
Expenditures for additions, major renewals and betterments are capitalized
and expenditures for repairs and maintenance are expensed as incurred. When
properties and equipment are retired or otherwise disposed of, the costs thereof
and the applicable accumulated depreciation are removed from the respective
accounts and the resulting gain or loss is reflected in earnings.
Goodwill and Other Intangibles
Goodwill recognized in business combinations (representing the excess of
cost over net assets of the companies acquired) that were accounted for as
purchases ($16,448,000 and $16,806,000 at July 31, 1994 and 1993, before
accumulated amortization of $1,359,000 and $1,027,000, respectively) is being
amortized on a straight-line basis over the expected lives of the related assets
over periods not exceeding 40 years. The Company monthly evaluates the existence
of goodwill impairment on the basis of whether the goodwill is fully recoverable
from projected nondiscounted cash flows of each business unit. If projected
nondiscounted cash flows for a particular business unit indicates that the value
of related goodwill or other intangible assets might
F-7
<PAGE> 170
not be recoverable over the expected amortization period, then the carrying
value of the related goodwill or other intangible assets and/or the amortization
period will be adjusted accordingly. As of July 31, 1994, the Company does not
believe there is any indication that the carrying value or the amortization
period of goodwill and other intangibles needs to be adjusted.
During fiscal year 1993, the Company wrote off approximately $620,000 of
goodwill, which had been allocated to the 1991 acquisition of the bill auditing
business of Insurance Software Packages, Inc. ("ISP"). The Company's preferred
provider organization (the "PPO"), which was acquired in May 1991, also had a
bill auditing business, and, when the bill auditing business of ISP was
integrated with the bill auditing business of the PPO in November 1992, the
Company determined that it was no longer appropriate to have the goodwill
allocated to the bill auditing service of ISP reflected in its records.
Other intangibles consist primarily of non-compete agreements related to
acquisitions consummated before July 25, 1991 ($1,891,000 and $2,169,000 at July
31, 1994 and 1993, before accumulated amortization of $1,298,000 and $1,081,000,
respectively) and are being amortized over the lives of the agreements,
primarily two to five years.
Software Development Costs
Certain software development costs are capitalized when incurred in
accordance with Financial Accounting Standards Board (FASB) Statement No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed." Capitalization of software development costs begins upon the
establishment of technological feasibility. Costs incurred prior to the
establishment of technological feasibility are expensed as incurred. The
establishment of technological feasibility and the ongoing assessment of
recoverability of capitalized software development costs requires considerable
judgment by management with respect to certain external factors, including, but
not limited to, technological feasibility, anticipated future gross revenues,
estimated economic life and changes in software and hardware technologies.
Amortization of capitalized software development costs is provided on a
product-by-product basis at the greater of the amount computed using (a) the
ratio of current gross revenues for a product to the total of current and
anticipated future gross revenues or (b) the straight-line method over the
remaining estimated economic life of the product. All software development costs
have been fully amortized as of July 31, 1994. As of July 31, 1993, the
unamortized portion of capitalized software development costs was $583,000 and
these costs were included in Other Assets on the consolidated balance sheets.
Amortization of software development costs was $583,000, $101,000, and $61,000
for the fiscal years ended July 31, 1994, 1993 and 1992, respectively.
Accrued Lease Costs
Rental expense is recorded in accordance with FASB Statement No. 13,
"Accounting for Leases," whereby rental expense is recognized on a straight-line
basis by totaling all rents due under the lease, including fixed increases, and
dividing by the total months of the leases.
Income Taxes
In February 1992, the FASB issued Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Statement 109 requires a
change from the deferred method of accounting for income taxes of APB Opinion 11
to the asset and liability method of accounting for income taxes. Under the
asset and liability method of Statement 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date.
Effective August 1, 1993, the Company adopted Statement 109 and there was
no cumulative effect of that change in the method of accounting for income
taxes.
Pursuant to the deferred method of accounting for income taxes under APB
Opinion 11, which was applicable for fiscal year 1993 and prior years, deferred
income taxes are recognized for income and expense items that are reported in
different years for financial reporting purposes and income tax purposes using
the tax
F-8
<PAGE> 171
rate applicable for the year of calculation. Under the deferred method, deferred
taxes are not adjusted for subsequent changes in tax rates.
Net Income (Loss) Per Common Share
Primary earnings (loss) per common share is based on net income, less
preferred stock dividend requirements, divided by the weighted average number of
common and dilutive common equivalent shares outstanding during the year. Fully
diluted earnings (loss) per common share has been omitted for all periods
presented because they are anti-dilutive. Dilutive common equivalent shares
consist of stock options and convertible preferred stock.
Consolidated Statements of Cash Flows
Significant non-cash financing and investing activities for each of the
three fiscal years in the period ended July 31, 1994 were as follows: fiscal
year 1994 -- there were no material non-cash financing and investing activities;
fiscal year 1993 -- the Company wrote off accounts receivable in the amount of
approximately $1.9 million, wrote off goodwill in the amount of $620,000 (see
"Goodwill and Other Intangibles" above) and recorded a net non-cash gain of
$950,000 in connection with the sale of its Technical Medical Devices, Inc.
subsidiary (see Note 11), which gain resulted from the receipt of 500,000 shares
of Staodyn, Inc. common stock valued at $1.4 million, offset by the accrual of
$450,000 in transaction expenses; and fiscal year 1992 -- as discussed in Note
12, the Company recorded pre-tax restructuring charges of $7,097,000 and wrote
off approximately $2.0 million in uncollectable accounts receivable.
Reclassifications
Certain amounts have been reclassified to conform to 1994 presentations.
2. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents and
trade receivables. The Company's cash equivalents are in high-quality,
short-term securities placed with major banks and financial institutions. The
Company's investment policy limits its exposure to concentrations of credit
risk.
The Company's trade receivables result primarily from sales to a broad base
of insurance companies and large employers throughout the United States. The
Company routinely assesses the financial strength of its customers to minimize
its risk of loss. Accordingly, concentrations of credit risk are limited.
Trade receivables on the consolidated balance sheets at July 31, 1994 and
1993 are net of allowances for doubtful accounts of $393,000 and $273,000,
respectively.
3. PROPERTY AND EQUIPMENT
Property and equipment at July 31, 1994 and 1993 consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Equipment...................................................... $11,317 $ 9,681
Furniture and fixtures......................................... 2,152 1,941
Leasehold improvements......................................... 1,683 1,210
------- -------
15,152 12,832
Less accumulated depreciation and amortization............ 6,473 3,908
------- -------
$ 8,679 $ 8,924
======= =======
</TABLE>
Depreciation and amortization expense for property and equipment was
$2,603,000, $1,942,000 and $1,279,000 for the fiscal years ended July 31, 1994,
1993 and 1992, respectively.
F-9
<PAGE> 172
Balances related to capitalized leases, included in property and equipment
at July 31, 1994 and 1993, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Equipment........................................................... $239 $239
Less accumulated amortization....................................... 172 99
---- ----
Net............................................................ $ 67 $140
==== ====
</TABLE>
The Company leases its office buildings and various equipment used in its
operations under leases expiring through January 2006. The future minimum annual
lease payments under all leases with initial or remaining noncancellable lease
terms in excess of one year at July 31, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Fiscal year ending July 31,
1995...................................................... $73 $ 4,573
1996...................................................... -- 3,204
1997...................................................... -- 2,493
1998...................................................... -- 2,322
1999...................................................... -- 2,193
Thereafter................................................ -- 12,780
------- ---------
Total minimum lease payments................................... 73 $27,565
=========
Less amount representing interest.............................. 2
-------
Present value of net minimum lease payments.................... $71
=======
</TABLE>
The Company subleases a portion of its office buildings to third parties.
The future minimum annual sublease payments to be received under all
noncancellable subleases as of July 31, 1994 are (in thousands):
<TABLE>
<S> <C>
Fiscal year ending July 31,
1995................................................................ $ 105
1996................................................................ 70
---------
Total minimum sublease payments.......................................... $ 175
=========
</TABLE>
Rent expense (under operating leases) was approximately $4,923,000,
$5,026,000 and $3,793,000 for the fiscal years ended July 31, 1994, 1993 and
1992, respectively. Rental payments received under subleases were approximately
$105,000 and $36,000 for the fiscal years ended July 31, 1994 and 1993,
respectively. There were no subleases for the fiscal year ended July 31, 1992.
4. LONG-TERM DEBT
Long-term debt at July 31, 1994 consisted of the following (in thousands):
<TABLE>
<S> <C>
$7,500 revolving bank line of credit, matures November 30, 1997............. $2,636
$7,500 revolving bank line of credit, matures November 30, 1997............. 2,003
$1,120 installment note, principal payable in four annual installments of
$280 commencing October 30, 1993, non-interest bearing.................... 840
$600 note, principal payable in three annual installments of $200 commencing
December 31, 1993, interest payable annually at 7%........................ 400
Note payable, installments payable monthly through December, 1997........... 126
Non-compete agreements, payable in varying amounts and frequencies,
non-interest bearing...................................................... 506
Capital lease obligations................................................... 71
------
6,582
Less current maturities..................................................... 789
------
$5,793
======
</TABLE>
F-10
<PAGE> 173
The revolving lines of credit above represent borrowings under a $15.0
million revolving credit agreement with two banks, under which the Company may
borrow up to 75% of its outstanding eligible consolidated accounts receivable
and up to 50% of its consolidated inventories. Trade receivables and inventories
are pledged as collateral under the revolving credit agreement. Interest is
payable monthly at rates varying from the lender's prime rate less 1/8 to 3/8
percent or LIBOR (London Interbank Offered Rate) plus 1 1/4 to 1 3/8 percent,
depending on the Company's ratio of liabilities to tangible net worth, as
defined in the credit agreement. At July 31, 1994, amounts available under the
credit agreement were approximately $10.4 million. Under the terms of the credit
agreement, the unused credit is subject to a 1/8 of one percent per annum
commitment fee that is payable quarterly.
Aggregate annual maturities of long-term debt for the five years subsequent
to July 31, 1994 are as follows (in thousands):
<TABLE>
<S> <C>
Fiscal year ending July 31,
1995........................................................... $ 789
1996........................................................... 699
1997........................................................... 436
1998........................................................... 4,658
1999........................................................... --
</TABLE>
Interest expense for the fiscal years ended July 31, 1994, 1993 and 1992
approximated $662,000, $1,192,000 and $1,403,000, respectively.
The Company's credit agreement contains certain loan covenants related to
tangible net worth, purchase of treasury shares, and the acquisition and
disposition of assets. The most restrictive of these covenants requires the
Company to maintain a cash flow coverage ratio of 1.2 to 1.0. The Company is in
compliance with all of its loan covenants.
The following information relates to lines of credit for the following
fiscal years (dollar amounts in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Outstanding balance at the end of the year............... $ 4,639 $ 6,778 $ 11,568
Weighted average interest rate at the end of the year.... 6.04% 6.20% 5.91%
Maximum amount outstanding during the year............... $ 8,823 $ 14,025 $ 12,343
Average amount outstanding during the year............... $ 6,891 $ 10,626 $ 10,408
Weighted average interest rate during the year........... 6.10% 6.09% 6.82%
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position of the Company.
6. INCOME TAXES
As discussed in Note 1, the Company adopted FASB Statement 109 as of August
1, 1993, and there was no cumulative effect of that change in the method of
accounting for income taxes. Accordingly, income tax expense has not been
affected and there was no cumulative income statement effect from adopting the
liability method of Statement 109. Prior years' financial statements have not
been restated to apply the provisions of Statement 109.
F-11
<PAGE> 174
Income tax expense attributable to income from continuing operations
consisted of the following (in thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- ------
<S> <C> <C> <C>
Fiscal year ended July 31, 1994:
U.S. federal........................................... $2,017 $ (259) $1,758
State and local........................................ 510 58 568
------- -------- ------
$2,527 $ (201) $2,326
======= ======== ======
Fiscal year ended July 31, 1993:
U.S. federal........................................... $1,786 $ 60 $1,846
State and local........................................ 213 5 218
------- -------- ------
$1,999 $ 65 $2,064
======= ======== ======
Fiscal year ended July 31, 1992:
U.S. federal........................................... $ (809 ) $ (18) $ (827)
State and local........................................ 70 (3) 67
------- -------- ------
$ (739 ) $ (21) $ (760)
======= ======== ======
</TABLE>
Income tax expense attributable to income from continuing operations was
$2,326,000, $2,064,000 and $(760,000) for the fiscal years ended July 31, 1994,
1993 and 1992, respectively, and differed from the amounts computed by applying
the U.S. federal income tax rate of 34 percent to pretax income from continuing
operations as a result of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Tax provision (benefit) at statutory rate..................... $2,238 $1,648 $(942)
State income tax, net of federal income tax benefit........... 375 195 7
Meals and entertainment exclusion............................. 30 33 37
Amortization of goodwill...................................... 144 135 130
Research and development tax (credit)......................... (380) -- --
Alternative minimum tax (credit).............................. (83) 83 --
Other......................................................... 2 (30) 8
------ ------ -----
$2,326 $2,064 $(760)
====== ====== =====
</TABLE>
For the fiscal years ended July 31, 1993 and 1992, deferred income tax
expense under APB Opinion 11 of $65,000 and $(21,000), respectively, resulted
from timing differences in the recognition of income and expense for income tax
and financial reporting purposes. These differences consist primarily of amounts
related to depreciation, to the capitalization of certain indirect costs to
inventory and to PPO network development costs.
F-12
<PAGE> 175
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at July 31,
1994 are presented below (in thousands).
<TABLE>
<S> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful
accounts...................................................... $ 151
Inventories, principally due to additional costs inventoried
for tax purposes pursuant to the Tax Reform Act of 1986....... 141
Accruals for financial reporting purposes...................... 37
Accrued lease costs............................................ 408
PPO network development costs.................................. 642
Net operating loss carryforwards............................... 217
Alternative minimum tax credit carryforwards................... 83
------
Total gross deferred tax assets........................... 1,679
------
Deferred tax liabilities:
Property and equipment, principally due to differences in
depreciation.................................................. (399)
Other.......................................................... (66)
------
Total gross deferred tax liabilities...................... (465)
------
Net deferred tax asset.................................... $1,214
======
</TABLE>
The net deferred tax asset of $1,214,000 is comprised of a current portion
of $1,121,000 classified as deferred income taxes and included in total current
assets, and a noncurrent portion of $93,000 included in other assets in the
consolidated balance sheets at July 31, 1994.
At July 31, 1994, the Company has net operating loss carryforwards for
federal income tax purposes of $637,000, which are available through fiscal year
2002 to offset future separate federal taxable income, if any, from its wholly
owned subsidiary, MedView Services, Incorporated. In addition, the Company has
alternative minimum tax credit carryforwards of $83,000 which are available to
reduce future federal regular income taxes, if any, over an indefinite period.
FASB Statement 109 requires the recognition of a valuation allowance for
deferred tax assets if it is more likely than not that all or some portion of
the deferred tax asset will not be realized. Management has considered the facts
and circumstances that could impact the realizability of deferred tax assets,
including taxes paid in the current year and prior years that could be recovered
by carryback, as well as projected future earnings of its wholly owned
subsidiary, MedView Services, Incorporated, and has determined that it is more
likely than not that all deferred tax assets will be realized.
7. STOCK OPTIONS
In December 1989, the Company adopted a stock option plan under which
options may be granted to officers, employees, directors and others. A total of
800,000 shares of common stock has been reserved for issuance under the plan.
Options granted under the plan are exercisable at the fair market value of the
shares
F-13
<PAGE> 176
at the date of grant. Options expire five to ten years from the date of grant.
The following is a summary of stock option activity:
<TABLE>
<CAPTION>
OPTION
AVAILABLE PRICE
OUTSTANDING EXERCISABLE FOR GRANT PER SHARE
----------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Balance, July 31, 1992..................... 465,200 224,000 298,700 $6.75-11.75
Granted.................................... 157,500 -- (157,500) $6.50- 7.50
Became exercisable......................... -- 112,000 -- $6.75-10.875
Exercised.................................. (550) (550) -- $6.75
Canceled................................... (57,000) (20,400) 57,000 $6.75-11.75
Expired.................................... -- -- -- --
----------- ----------- ---------
Balance, July 31, 1993..................... 565,150 315,050 198,200 $6.50-11.75
Granted.................................... 28,500 -- (28,500) $6.75
Became exercisable......................... -- 93,300 -- $6.75-10.875
Exercised.................................. (96,550) (96,550) -- $6.75
Canceled................................... (107,500) (61,500) 107,500 $6.75-10.875
Expired.................................... -- -- -- --
----------- ----------- ---------
Balance, July 31, 1994..................... 389,600 250,300 277,200 $6.50-11.75
========= ======== ========
</TABLE>
In addition, the Company has granted a total of 170,000 non-qualified stock
options at $6.50 per share to two executive officers. The options are
exercisable only if certain financial performance criteria are attained by the
Company during the next four years. As a result of the financial performance of
the Company during fiscal year 1994, 34,000 of these non-qualified stock options
are vested and exercisable.
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK
Each share of Redeemable Series A $.72 Cumulative Convertible Preferred
Stock ("Series A Preferred Stock") has a par value of $.01 and entitles its
holder to receive an annual cash dividend of $.72. At July 31, 1994 and 1993,
there were 100,000 shares of Series A Preferred Stock authorized, issued and
outstanding. Dividends are payable annually, or through the date of conversion,
commencing December 31, 1991, and continuing through December 31, 1995. Each
share is convertible at any time into one share of Common Stock, as adjusted in
the event of future dilution. Shares not converted by December 31, 1995 are
redeemable at the rate of $12 per share plus accrued dividends. Holders of the
Series A Preferred Stock are entitled to a liquidation preference of $12 per
share, but holders have no voting rights.
9. SHAREHOLDERS' EQUITY
Each share of Series B $.98 Cumulative Convertible Preferred Stock ("Series
B Preferred Stock") has a par value of $.01 and entitles its holder to receive
an annual cash dividend of $.98. At July 31, 1994 and 1993, there were 100,000
shares of Series B Preferred Stock authorized, of which 73,846 shares were
issued and outstanding. Dividends are payable annually, or through the date of
conversion, commencing April 1, 1992, and continuing through April 1, 1996. Each
share of Series B Preferred Stock is convertible at any time into one share of
Common Stock, as adjusted in the event of future dilution. Each share is
mandatorily convertible on the earlier of (i) the first date on or after April
1, 1994 on which the market price of the Common Stock is greater than or equal
to $16.25 or (ii) April 1, 1996. Holders of Series B Preferred Stock are
entitled to a liquidation preference of $16.25 per share, but holders have no
voting rights.
Each share of Series C $.98 Cumulative Convertible Preferred Stock ("Series
C Preferred Stock") has a par value of $.01 and entitles its holder to receive
an annual cash dividend of $.98. At July 31, 1994 and 1993, there were 100,000
shares of Series C Preferred Stock authorized, of which 53,748 shares were
issued and outstanding. Dividends are payable annually, or through the date of
conversion, commencing April 1, 1992, and continuing through April 1, 1996. Each
share is convertible at any time on or before April 1, 1996 at the following
conversion ratios, as adjusted in the event of future dilution: (i) one share of
Common Stock for each share of Series C Preferred Stock, if the market price of
Common Stock is greater than or equal to $16.25 per share, (ii) 1.3 shares of
Common Stock for each share of Series C Preferred Stock, if the market price of
Common Stock is $12.50 or less, or (iii) if the market price of Common Stock is
greater than $12.50 but less than $16.25, that number of shares which are equal
to $16.25 divided by the market price of the
F-14
<PAGE> 177
Common Stock on the conversion date. Shares of Series C Preferred Stock are
mandatorily convertible (i) into one share of Common Stock on the first day on
or after April 1, 1994 on which the market price of the Common Stock is $16.25
or greater, or (ii) on April 1, 1996 at the conversion ratios described above.
Holders of Series C Preferred Stock are entitled to a liquidation preference of
$16.25 per share, but holders have no voting rights.
In connection with the acquisition of MedView Services, Incorporated
("MSI") in May 1991, 318,750 shares of Series D Cumulative Convertible Preferred
Stock ("Series D Preferred Stock") were placed in escrow to be released based
upon earnings of MSI over the five-year period ending July 31, 1996. On October
28, 1992, the Company and the selling shareholders of MSI executed a settlement
agreement in which all escrowed shares of Series D Preferred Stock were returned
to the Company. Any contingent consideration based on future earnings of MSI was
also eliminated. In exchange, the selling shareholders of MSI received a cash
payment of $450,000 on October 30, 1992 and a non-interest bearing note for
$1,120,000 with annual payments of $280,000 due commencing on October 30, 1993,
and continuing through 1996. Two of the selling shareholders also executed
covenants not to compete in exchange for non-interest bearing notes in the
aggregate amount of $480,000 with annual payments of $120,000 due commencing on
October 30, 1993, and continuing through October 30, 1996.
10. BENEFIT PLAN
The Company has a defined contribution 401(k) benefit plan covering
substantially all of the Company's employees who have completed one year of
service and are at least 21 years of age. Employees may contribute at least 1%
but not more than 15% of their salary. Effective February 1, 1994, the Company
began contributing an amount equal to 25% of each employee's contribution up to
4% of each employee's salary. Company matching contributions are made at the
discretion of the Board of Directors and, at the Company's election, can be made
in cash or in shares of Common Stock. There were no Company contributions prior
to February 1, 1994.
11. SALE OF TECHNICAL MEDICAL DEVICES, INC.
On November 15, 1992, the Company sold to Staodyn, Inc. ("Staodyn") the
electro-medical therapy products business operated by its subsidiary, Technical
Medical Devices, Inc. ("TMD"), in a transaction valued at approximately $7
million. The total consideration for the sale consisted of $500,000 in cash, a
$2.7 million two-year note secured by accounts receivable and inventory, 500,000
shares of Staodyn common stock (NASDAQ:SDYN), and the retention of TMD's
receivables having a net realizable value of approximately $2.5 million.
Resale of the 500,000 shares of Staodyn common stock is restricted by state
and federal securities laws. In connection with the issuance of the Staodyn
common stock to the Company, Staodyn and the Company entered into a shareholder
agreement which grants the Company registration rights with respect to all the
shares and price protection with respect to 400,000 of the shares to the extent
that their per share market value is below $5.00 per share as of November 15,
1994. If the market value is less than $5.00 per share as calculated, Staodyn
must issue additional shares of common stock to the Company to make up the
aggregate deficiency in the market value of the 400,000 shares of Staodyn common
stock then held by the Company. The market value at that time will be determined
by averaging the closing sale prices of the common stock for the 30 consecutive
trading days preceding November 15, 1994. The Company sold 57,000 shares of
Staodyn common stock pursuant to an effective registration statement of 100,000
Staodyn shares on Form S-3 during the fiscal year ended July 31, 1994 at an
average price of $2.80 per share, which was equal to the carrying cost of the
securities. Due to the restrictions on the resale of the shares as of the
balance sheet date, and the likelihood that this asset will not be converted to
cash within the Company's operating cycle, the Staodyn common stock has been
recorded as a non-current asset and reflected in the consolidated balance sheets
as "Equity Securities." At July 31, 1994, the closing price of Staodyn common
stock was $2.50 per share. No unrealized loss has been recorded to reflect this
price being less than $2.80 per share (the carrying value of the Staodyn stock
on the Company's records) because the decline is considered to be temporary and
the Company has price protection for potential declines in the market value
between November 15, 1992 and November 15, 1994.
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12. RESTRUCTURING CHARGES
During the fourth quarter of fiscal year 1992, the Company recorded pre-tax
restructuring charges of approximately $7,097,000 ($4.4 million after tax or
$.50 per share) primarily related to the revaluation of certain assets of TMD to
their estimated liquidation value in anticipation of the liquidation or sale of
TMD (See Note 11) and, to a minor extent, charges associated with changes in
senior management, increased allowances for warranty claims on software
installation and write-offs of certain software development costs.
13. RETIREE HEALTH BENEFITS
Effective August 1, 1993, the Company adopted FASB Statement No. 106, which
requires the Company to accrue retiree health benefits. The adoption had no
effect on the Company's consolidated financial statements because the Company
does not provide any retiree health benefits.
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET INCOME
NET GROSS NET INCOME (LOSS) PER
QUARTERS ENDED REVENUES MARGIN (LOSS) COMMON SHARE
---------------------------------- -------- ------ ---------- ------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Fiscal year 1994
First quarter................... $27,388 $7,644 $ 746 $ .08
Second quarter.................. 28,079 7,865 838 .09
Third quarter................... 28,670 8,385 1,059 .12
Fourth quarter.................. 29,012 8,546 1,613 .18
Fiscal year 1993
First quarter................... $28,172 $7,795 $ 502 $ .05
Second quarter.................. 26,067 7,303 574 .06
Third quarter................... 27,483 7,722 740 .08
Fourth quarter.................. 28,212 7,857 966 .11
Fiscal year 1992
First quarter................... $24,890 $6,899 $ 419 $ .04
Second quarter.................. 25,861 7,223 637 .07
Third quarter................... 27,422 7,686 804 .09
Fourth quarter.................. 27,943 7,884 (3,871) (.45)
</TABLE>
Net revenues for fiscal years 1993 and 1992 were favorably affected by
revenues of TMD, a subsidiary that was sold on November 15, 1992. The first and
second quarters of fiscal year 1993 (which ended October 31, 1992, and January
31, 1993, respectively) include TMD revenues of $2.5 million and $0.3 million,
respectively. Revenues of TMD were $10.3 million in fiscal year 1992.
F-16
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APPENDIX H
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM 10-Q/A
(AMENDMENT NO. 1)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant To Section 13 Or 15(D)
Of The Securities Exchange Act Of 1934
For the quarterly period ended January 31, 1995
Commission File Number 0-18366
PHARMACY MANAGEMENT SERVICES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
FLORIDA 59-1482767
(State of Incorporation) (I.R.S. Employer Identification No.)
</TABLE>
3611 QUEEN PALM DRIVE, TAMPA, FLORIDA 33619
(Address of Principal Executive Offices)
813/626-7788
(Registrant's Telephone Number)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES /X/ NO / /
Number of outstanding shares of each class of Registrant's common stock as
of March 13, 1995:
<TABLE>
<S> <C>
Common Stock, par value $.01.......................... 9,120,107 shares
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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The registrant amends the following items, exhibits, financial statements
or other portions of its Quarterly Report on Form 10-Q for the quarterly period
ended January 31, 1995:
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
The Company is a leading independent national provider of medical cost
containment and managed care services, providing professionally managed
solutions for containing the escalating costs of workers' compensation. The
following table presents the ratios of certain financial items to net revenues
for the three and six months ended January 31, 1995 and 1994:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
--------------- ---------------
JANUARY 31, JANUARY 31,
--------------- ---------------
1995 1994 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net revenues........................................ 100.0% 100.0% 100.0% 100.0%
Cost of revenues.................................... 69.6 72.0 69.3 72.0
----- ----- ----- -----
Gross margin........................................ 30.4 28.0 30.7 28.0
Costs and expenses:
Selling, general & administrative................... 17.7 19.5 17.6 19.6
Exercise of non-qualified stock options............. 2.8 -- 1.4 --
Acquisition expenses................................ 2.8 -- 1.4 --
Depreciation and amortization....................... 3.2 2.9 3.1 2.9
----- ----- ----- -----
Operating income.................................... 3.9 5.6 7.2 5.5
Interest expense, net............................... (0.1) (0.6) (0.1) (0.6)
Additional consideration -- sale of TMD............. 1.1 -- 0.5 --
----- ----- ----- -----
Income before income taxes.......................... 4.9 5.0 7.6 4.9
Provision for income taxes.......................... 3.1 2.0 3.6 2.0
----- ----- ----- -----
net income.......................................... 1.8% 3.0% 4.0% 2.9%
===== ===== ===== =====
</TABLE>
The ensuing discussion and analysis of the Company's results of operations
and financial condition does not address the effect on the Company's liquidity,
capital resources, or results of operations of the consummation of the
acquisition of the Company by Beverly or Beverly's plans for the Company
following the acquisition.
RESULTS OF OPERATIONS
NET REVENUES
Net revenues for the second quarter of fiscal year 1995 were approximately
$30.0 million compared to $28.1 million for the comparable period in fiscal year
1994. The increase in revenues for the period was primarily attributable to
increased revenues from the Company's preferred provider organization ("PPO")
and case management services, resulting primarily from more customers and
greater market penetration. The pricing for PPO and case management services
changed only slightly during the comparative periods. Net revenues for the six
months ended January 31, 1995 were approximately $60.5 million compared to
approximately $55.5 million in the comparable period in fiscal year 1994.
Substantially all of the increase in revenues for the period was attributable to
increased revenues from the Company's preferred provider organization ("PPO")
and case management services, resulting primarily from more customers and
greater
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market penetration. The pricing for PPO and case management services changed
only slightly during the comparative periods. During the second quarter and
first six months of fiscal year 1995, the net revenues of the PPO were
approximately 16% of consolidated revenues, compared to approximately 11% of
consolidated revenues in the comparable periods in fiscal year 1994. Net
revenues for the second quarter and first six months of fiscal year 1995 from
the home delivery of prescription drugs and medical equipment and supplies were
approximately the same as in the comparable period in fiscal year 1994 because
the percentage of generic drugs dispensed has doubled during the second quarter
and first six months of fiscal year 1995 when compared to the comparable periods
in fiscal year 1994. The percentage of generic drug prescriptions dispensed
relative to all drug prescriptions dispensed is expected to continue to increase
during the next two years. This trend is likely to slow revenue growth, but
should not have a material effect on the Company's operating income from the
sale of prescription drugs. Although generic prescription drugs sell at lower
prices than brand-name prescription drugs, the gross margins for generic
prescription drugs are substantially higher than they are for brand-name
prescription drugs.
COST OF REVENUES
Cost of revenues as a percentage of net revenues was approximately 2.4%
lower for the second quarter of fiscal year 1995 than it was for the second
quarter of fiscal year 1994. Cost of revenues as a percentage of net revenues
was approximately 2.7% lower for the six months ended January 31, 1995 than it
was for the comparable period in fiscal year 1994. The improvement in gross
margin is attributable to dispensing a greater percentage of generic drugs in
the home delivery business and the increased volume of revenue provided by the
Company's PPO and case management services, which have higher gross margins than
the home delivery business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses as a percentage of revenues
decreased approximately 1.8% to 17.7% for the three months ended January 31,
1995, compared to 19.5% for the three months ended January 31, 1994. Selling,
general and administrative expenses as a percentage of revenue decreased
approximately 2.0% to 17.6% for the six months ended January 31, 1995, compared
to 19.6% for the six months ended January 31, 1994. The decreases are
attributable to improved control over expenses while revenues increased 6.9% for
the quarter and 9.1% for the six months ended January 31, 1995.
EXERCISE OF NON-QUALIFIED STOCK OPTIONS
In December 1994, two executive officers exercised non-qualified stock
options for a total of 95,000 shares of common stock at an average exercise
price of $6.50 per share. The financial statement effect of these exercises was
approximately $855,000 of compensation expense.
ACQUISITION EXPENSES
As previously reported in the Company's Current Report on Form 8-K dated
December 26, 1994, the Company entered into an Agreement and Plan of Merger with
Beverly Enterprises, Inc. ("Beverly") on December 26, 1994 (The "Merger
Agreement") pursuant to which the Company agreed to be merged with and into
Beverly Acquisition Company, a wholly owned subsidiary of Beverly (the
"Merger"). (See Note 6 to Notes to Condensed Consolidated Financial Statements
(Unaudited) included elsewhere in this Report.) The Merger is expected to be
consummated in the spring of 1995. During the second quarter of fiscal year
1995, the Company incurred approximately $835,000 of expenses associated with
this acquisition transaction, consisting primarily of legal and investment
banking fees. Most of these costs are not deductible expenses for income tax
purposes. The Company funded the payment of these expenses from cash flow from
operating activities. The Company expects to incur additional expenses
associated with the acquisition transaction, and the total amount is expected to
be significant (see "Acquisition Transaction" below).
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<PAGE> 182
DEPRECIATION AND AMORTIZATION
Depreciation and amortization was approximately $141,000 (or approximately
17%) more for the three months ended January 31, 1995, than it was for the three
months ended January 31, 1994, and was approximately $248,000 (or approximately
15%) more for the six months ended January 31, 1995, than it was for the six
months ended January 31, 1994. The increase is attributable to capital
expenditures for computer equipment and software during fiscal years 1995 and
1994.
INTEREST EXPENSE
Net interest expense for the three months ended January 31, 1995 decreased
approximately $121,000, or approximately 78%, compared to the comparable period
in fiscal year 1994. Net interest expense for the six months ended January 31,
1995 was approximately $236,000, or approximately 73% less than in the
comparable period in fiscal year 1994. These significant decreases are primarily
attributable to the reduction in bank debt during the relevant periods.
ADDITIONAL CONSIDERATION -- SALE OF TMD
The Company recorded additional income of approximately $326,000 on
November 15, 1994 when it received the final adjusted number of shares of
Staodyn, Inc. ("Staodyn") common stock as final consideration for the sale of
TMD to Staodyn, which occurred on November 15, 1992. The purchase agreement
between Staodyn and TMD provided that TMD could receive additional shares of
Staodyn common stock based upon the trading range of the common stock two years
after the date of the original transaction. The amount of income recorded on
November 15, 1994 represents the amount necessary to record the total shares of
Staodyn common stock received at its fair value on November 15, 1994.
PROVISION FOR INCOME TAXES
The combined effective federal and state income tax rate for the three
months ended January 31, 1995 was 62.5%, compared to 40.1% for the comparable
period in fiscal year 1994. The combined rate for the six months ended January
31, 1995 was 47.3%, compared to 40.9% for the six months ended January 31, 1994.
The increase in the effective rate is primarily attributable to non-deductible
acquisition related expenses.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased to approximately $15.9 million at
January 31, 1995 compared to approximately $16.7 million at July 31, 1994. The
decrease is primarily due to a higher level of accounts payable at January 31,
1995.
The Company had positive cash flow from operations of approximately $3.2
million for the three months ended January 31, 1995, compared to approximately
$5.0 million for the comparable period in fiscal year 1994. The primary
difference was the receipt of notes receivable payments of approximately $2.7
million during the three months ended January 31, 1994. For the six months ended
January 31, 1995, the Company had positive cash flow from operations of
approximately $5.7 million, compared to approximately $3.6 million for the six
months ended January 31, 1994. The primary differences were improved net income
and favorable changes in cash flows from accounts receivable and accounts
payable, offset by the effect of the notes receivable payments received during
the three months ended January 31, 1994.
Net trade receivables decreased approximately $800,000 and approximately
$300,000 for the three and six month periods ended January 31, 1995 and 1994
respectively. These decreases are primarily attributable to improved collection
of accounts receivable.
H-4
<PAGE> 183
Inventories at January 31, 1995 approximated $4.1 million, compared to
approximately $3.5 million at July 31, 1994. The increase is attributable to
special purchases of prescription drugs at favorable prices and terms.
Capital expenditures for the six months ended January 31, 1995 were
approximately $1.1 million. These expenditures were financed by cash flow from
operations. The Company further reduced its bank debt by approximately $3.0
million for the quarter and approximately $4.8 million for the six months ended
January 31, 1995.
The Company has revolving lines of credit with two banks that allow it to
borrow up to $15 million at variable rates that currently approximate the bank's
prime rates. The amount available for borrowing at January 31, 1995 was $13.3
million. The Company believes that cash generated from future operations (in
excess of $8 million in each of the last two fiscal years), together with the
funds available under its lines of credit (approximately $13.3 million at
January 31, 1995), will be sufficient to finance the Company's operations and
its anticipated capital requirements for at least the next 12 to 18 months. The
Company's $15 million revolving credit lines expire on November 30, 1997.
Healthcare Reform is a major national priority, but the impact of the
reforms is not presently determinable. The Company's future liquidity will
continue to depend on its operating cash flow and management of trade
receivables and inventories.
ACQUISITION TRANSACTION
The Merger Agreement includes covenants that, on an interim basis pending
consummation of the Merger, restrict the Company from doing the following: (a)
granting or permitting a lien on, selling, leasing, exchanging, transferring or
otherwise disposing of, or granting to any person a right or option to lease,
purchase, or otherwise acquire, any material amount of its assets or properties,
including the capital stock of its subsidiaries, any indebtedness owed to it and
any rights of value to it (except in the ordinary course of business consistent
with past practices and except for inter-company transfers); (b) selling,
issuing, awarding, granting, pledging, redeeming, purchasing or otherwise
acquiring, transferring or encumbering any of its capital stock or other
securities or any rights, options or warrants to acquire any of its capital
stock or other securities; (c) reclassifying any outstanding common stock into a
different class or number of shares or otherwise changing its authorized
capitalization, or paying, declaring or setting aside for payment a dividend or
other distribution in respect of any of its capital stock, whether payable in
cash, stock or other property; (d) borrowing any money, issuing any debt
securities or assuming, endorsing or guaranteeing, or becoming a surety,
accommodation party or otherwise responsible for an obligation or indebtedness
of a person other than itself and any of its subsidiaries (except for borrowings
under its existing credit agreements in the usual and ordinary course of
business); (e) amending, renewing, waiving, breaching, extending, modifying,
entering into, releasing in any respect or relinquishing any right or benefit
under any mortgage, agreement, instrument, obligation or other commitment that
would be material to the Company; (f) settling or compromising any material
claim, liability, tax assessment or financial contingency; (g) entering into any
transaction with any of its officers, directors, affiliates or shareholders
(except in the usual and ordinary course of business and on an arms' length
basis); and (h) authorizing, recommending, consummating or otherwise entering
into any agreement providing for a merger, dissolution, consolidation,
restructuring, recapitalization, reorganization, partial or complete liquidation
or the acquisition or disposition of a material amount of assets or securities
owned by the Company. Management does not expect that any of these interim
restrictions will materially adversely affect the Company's liquidity,
operations, capital resources or ability to proceed with planned capital
expenditures, if the Merger is consummated this Spring as contemplated. The
Merger Agreement also requires the Company to pay Beverly a "termination fee" of
$5,000,000 if Beverly or the Company terminates the Merger Agreement under
certain circumstances.
The Company incurred during the six months ended January 31, 1995
approximately $835,000 of acquisition expenses associated with its consideration
of acquisition overtures and the pending Merger with Beverly, and it expects
that the total acquisition expenses for fiscal year 1995 will be approximately
$3 million. The expenses will consist primarily of professional fees and
financial advisory fees payable to an investment
H-5
<PAGE> 184
banking firm. Management expects to fund the payment of these expenses and the
termination fee (if payable) from cash flow from operating activities and, to
the extent necessary, its bank credit lines. Management believes that it has
access to adequate sources of borrowing to fund the payment of these expenses
and the termination fee (if it becomes payable), although payment of the
expenses and the termination fee would diminish available credit facilities,
reduce shareholders' equity and increase future interest expense.
H-6
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
PHARMACY MANAGEMENT SERVICES, INC.
By: /s/ DAVID L. REDMOND
David L. Redmond
Senior Vice President and Chief
Financial Officer
(Its Duly Authorized Officer)
Date: March 31, 1995
H-7
<PAGE> 186
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Restated Certificate of Incorporation and Amended Bylaws
and indemnification agreements between the Registrant and its officers and
directors contain provisions regarding the indemnification of officers and
directors. The Registrant's Restated Certificate and Amended Bylaws provide that
the Registrant, to the full extent permitted, and in the manner required by the
laws of the State of Delaware as in effect at the time of the adoption of the
certificate and bylaw provision regarding indemnification or as the same may be
amended from time to time, shall (i) indemnify any person (and the heirs and
legal representatives of such person) who is made or is threatened to be made a
party to any threatened, pending, or completed action, suit or proceeding,
whether in nature civil, criminal, administrative or investigative, by reason of
the fact that he or she is or was a director, officer, employee or agent of the
Registrant or of any constituent corporation absorbed into the Registrant by
consolidation or merger or serves or served with another corporation,
partnership, joint venture, trust or enterprise, or non-profit entity, including
service with respect to employee benefit plans, at the request of the Registrant
or of any such constituent corporation against all liability and (ii) provide to
any such person (and the heirs and legal representatives of such person)
advances for expenses incurred in defending any such action, suit or proceeding,
upon receipt of an undertaking by or on behalf of such person (and the heirs and
legal representatives of such person) to repay such advances unless it is
ultimately determined that he or she is not entitled to indemnification by the
Registrant.
Section 145 of the Delaware General Corporation Law provides the following:
(a) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
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<PAGE> 187
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b), or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered
by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in subsections (a) and
(b). Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it is ultimately determined that he is not entitled to be
indemnified by the corporation as authorized in this Section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement,
vote of stockholder or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under the provisions of this Section.
(h) For purposes of this Section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
the provisions of this Section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation
if its separate existence had continued.
(i) For purposes of this Section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to any employee benefit
plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of any employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section.
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<PAGE> 188
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS
(a) EXHIBITS
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2.1 Agreement and Plan of Merger dated December 26, 1994, as amended by
Amendment No. 1 to the Merger Agreement dated as of , 1995
by and among Beverly Enterprises, Inc., Beverly Acquisition, Inc. and
Pharmacy Management Services, Inc. ("PMSI") included in Appendix A of the
Prospectus/Consent Solicitation Statement.
2.2 Stock Purchase Agreement, dated as of August 9, 1994, between Synetic,
Inc. and Pharmacy Corporation of America (incorporated by reference to
Exhibit 2.1 to Beverly Enterprises, Inc.'s Current Report on Form 8-K
dated December 14, 1994).
2.3 Stock Purchase Agreement, dated as of September 12, 1994, between Eckerd
Corporation and Pharmacy Corporation of America (incorporated by
reference to Exhibit 2.2 to Beverly Enterprises, Inc.'s Current Report on
Form 8-K dated December 14, 1994).
3.1 Restated Certificate of Incorporation of Beverly Enterprises, Inc.
(incorporated by reference to Exhibit 4.1 to Beverly Enterprises, Inc.'s
Current Report on Form 8-K dated July 31, 1987).
3.2 Bylaws of Beverly Enterprises, Inc. (incorporated by reference to Exhibit
3 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992).
4.1 Indenture dated as of December 27, 1990 (the "Senior Secured Note
Indenture"), among Beverly California Corporation, Beverly Enterprises,
Inc. and Yasuda Bank and Trust Company (U.S.A.) with respect to Senior
Secured Floating Rate Notes due 1995 and 14 1/4% Senior Secured Fixed
Rate Notes due 1997 (incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 of Beverly California Corporation,
Beverly Enterprises, Inc. and the Registrants set forth on the Table of
Additional Co-Registrants filed on February 8, 1991 (File No. 33-38954)).
4.2 Supplemental Indenture No. 1, dated as of September 20, 1991, to the
Senior Secured Note Indenture (incorporated by reference to Exhibit 4.1
to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991).
4.3 Supplemental Indenture No. 2, dated as of September 26, 1991, to the
Senior Secured Note Indenture (incorporated by reference to Exhibit 4.2
to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991).
4.4 Supplemental Indenture No. 3, dated as of March 11, 1992, to the Senior
Secured Note Indenture (incorporated by reference to Exhibit 4 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1992).
4.5 Supplemental Indenture No. 4, dated as of July 21, 1993, to the Senior
Secured Note Indenture (incorporated by reference to Exhibit 4 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993).
4.6 Supplemental Indenture No. 5, dated as of November 1, 1994, to the Senior
Secured Note Indenture (incorporated by reference to Exhibit 4.6 to
Beverly Enterprises' Registration Statement on Form S-4 filed on February
13, 1995 (File No. 33-57663)).
</TABLE>
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4.7 Supplemental Indenture No. 6, dated as of December 30, 1994, to the
Senior Secured Note Indenture (incorporated by reference to Exhibit 4.7
to Beverly Enterprises' Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663)).
4.8 Subsidiary Guaranty dated as of December 27, 1990 by Beverly Enterprises,
Inc., Beverly California Corporation and the Subsidiary Guarantors listed
therein (incorporated by reference to Exhibit 4.3 to the Registration
Statement on Form S-4 of Beverly California Corporation, Beverly
Enterprises, Inc. and the Registrants set forth on the Table of
Additional Co-Registrants filed on February 8, 1991 (File No. 33-38954)).
4.9 Subsidiary Guaranty dated as of April 1, 1991 by Beverly Enterprises,
Inc., Beverly California Corporation and the Subsidiary Guarantors listed
therein (incorporated by reference to Exhibit 4.5 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1991).
4.10 Subsidiary Guaranty dated as of October 31, 1991 by Beverly Enterprises,
Inc., Beverly California Corporation and the Subsidiary Guarantors listed
therein (incorporated by reference to Exhibit 4.6 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1991).
4.11 Subsidiary Guaranty dated as of December 30, 1991 by Beverly Enterprises,
Inc., Beverly California Corporation and Beverly Indemnity, Inc. as
Subsidiary Guarantor (incorporated by reference to Exhibit 4.7 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1991).
4.12 Indenture dated as of August 1, 1993 between Beverly Enterprises, Inc.
and Chemical Bank, as Trustee with respect to Beverly Enterprises, Inc.'s
5 1/2% Convertible Subordinated Debentures due August 1, 2018, issuable
upon exchange of Beverly Enterprises, Inc.'s $2.75 Cumulative Convertible
Exchangeable Preferred Stock (the "Subordinated Debenture Indenture")
(incorporated by reference to Exhibit 4.10 to Beverly Enterprises, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993).
4.13 Certificate of Designation, Powers, Preferences and Rights, and the
Qualifications, Limitations or Restrictions Thereof, of the Series of
Preferred Stock to be designated $2.75 Cumulative Convertible
Exchangeable Preferred Stock of Beverly Enterprises, Inc. (the "$2.75
Certificate of Designation") (incorporated by reference to Exhibit 4.12
to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993).
4.14 Indenture dated as of April 1, 1993 (the "First Mortgage Bond
Indenture"), among Beverly Enterprises, Inc., Delaware Trust Company, as
Corporate Trustee, and Richard N. Smith, as Individual Trustee, with
respect to First Mortgage Bonds (incorporated by reference to Exhibit 4.1
to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993).
4.15 First Supplemental Indenture dated as of April 1, 1993 to the First
Mortgage Bond Indenture, with respect to 8 3/4% First Mortgage Bonds
(Series A) due 2008 (incorporated by reference to Exhibit 4.2 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1993).
4.16 Second Supplemental Indenture dated as of July 1, 1993 to the First
Mortgage Bond Indenture, with respect to 8 5/8% First Mortgage Bonds
(Series B) due 2008 (replaces Exhibit 4.1 to Beverly Enterprises, Inc.'s
Current Report on Form 8-K dated July 15, 1993) (incorporated by
reference to Exhibit 4.15 to Beverly Enterprises, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended March 31, 1993).
</TABLE>
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4.17 Indenture dated as of December 30, 1993 (the "Notes Indenture"), between
Beverly Enterprises, Inc. and Boatmen's Trust Company, as Trustee, with
respect to the Notes (incorporated by reference to Exhibit 4.2 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-3 filed on November
9, 1993 (File No. 33-50965)).
4.18 First Supplemental Indenture dated as of December 30, 1993 to the Notes
Indenture, with respect to 8.75% Notes due 2003 (incorporated by
reference to Exhibit 4.4 to Beverly Enterprises, Inc.'s Current Report on
Form 8-K dated January 4, 1994).
4.19 Rights Agreement Dated as of September 29, 1994, between Beverly
Enterprises, Inc. and the Bank of New York, as Rights Agent (incorporate
by reference to Exhibit 1 to Beverly Enterprises' Registration Statement
on Form 8-A filed on October 18,1994). *In accordance with item
601(b)(4)(iii) of Regulation S-K, certain instruments pertaining to
Beverly Enterprises, Inc.'s long-term obligations have not been filed;
copies thereof will be furnished to the Securities and Exchange
Commission upon request.
5.1** Opinion of Giroir & Gregory, Professional Association, Little Rock,
Arkansas as to the legality of the securities being registered.
8.1** Opinion of Giroir & Gregory, Professional Association, Little Rock,
Arkansas as to certain federal income tax consequences.
10.1 Amended and Restated 1981 Beverly Stock Incentive Plan (incorporated by
reference to Post-Effective Amendment No. 2 on Form S-8 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on July 31,
1987 (File No. 33-13243)).
10.2 1985 Beverly Nonqualified Stock Option Plan (incorporated by reference to
Post-Effective Amendment No. 2 on Form S-8 to Beverly Enterprises, Inc.'s
Registration Statement on Form S-4 filed on July 31, 1987 (File No.
33-13243)).
10.3 Amended and Restated Beverly Enterprises, Inc. 1993 Long-Term Incentive
Stock Plan (the "1993 Plan")(incorporated by reference to Beverly
Enterprises, Inc.'s Registration Statement on Form S-8 filed on June 30,
1993 (File No. 33-65242)).
10.4 Beverly Enterprises, Inc. Annual Incentive Plan (incorporated by
reference to Exhibit 10.4 to Beverly Enterprises' Registration Statement
on Form S-4 filed on February 13, 1995 (File No. 33-57663)).
10.5 Form of Other Stock Unit Agreement under the 1993 Plan (incorporated by
reference to Exhibit 10.5 to Beverly Enterprises' Registration Statement
on Form S-4 filed on February 13, 1995 (File No. 33-57663)).
10.6 Retirement Plan for Outside Directors (incorporated by reference to
Exhibit 10.5 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993).
10.7 Beverly Enterprises, Inc. Non-Employee Directors' Stock Option Plan
(incorporated by reference to Exhibit 4.1 to Beverly Enterprises'
Registration Statement on Form S-8 filed on September 21, 1994 (File No.
33-55571)).
10.8 Executive Medical Reimbursement Plan (incorporated by reference to
Exhibit 10.5 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1987).
10.9 Amended and Restated Beverly Enterprises, Inc. Executive Life Insurance
Plan and Summary Plan Description (the "Executive Life Plan")
(incorporated by reference to Exhibit 10.7 to Beverly Enterprises' Annual
Report on Form 10-K for the year ended December 31, 1993).
</TABLE>
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10.10 Amendment No. 1, effective September 29, 1994, to the Executive Life Plan
(incorporated by reference to Exhibit 10.10 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663)).
10.11 Executive Physicals Policy (incorporated by reference to Exhibit 10.8 to
Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).
10.12 Amended and Restated Deferred Compensation Plan effective July 18, 1991
(the "Deferred Comp Plan") (incorporated by reference to Exhibit 10.6 to
Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1991).
10.13 Amendment No. 1, effective September 29, 1994, to the Deferred Comp Plan
(incorporated by reference to Exhibit 10.13 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663)).
10.14 Executive Retirement Plan (incorporated by reference to Exhibit 10.8 to
Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1987).
10.15 Amendment No. 1, effective as of July 1, 1991, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.8 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1991).
10.16 Amendment No. 2, effective as of December 12, 1991, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.9 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1991).
10.17 Amendment No. 3, effective as of July 31, 1992, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.10 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1992).
10.18 Amendment No. 4, effective as of January 1, 1993, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.18 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1994).
10.19 Amendment No. 5, effective as of September 29, 1994, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.19 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1994).
10.20 Form of Indemnification Agreement between Beverly Enterprises, Inc. and
its officers, directors and certain of its employees (incorporated by
reference to Exhibit 19.14 to Beverly Enterprises, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1987).
10.21 Form of request by Beverly Enterprises, Inc. to certain of its officers
or directors relating to indemnification rights (incorporated by
reference to Exhibit 19.5 to Beverly Enterprises, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended September 30, 1987).
10.22 Form of request by Beverly Enterprises, Inc. to certain of its officers
or employees relating to indemnification rights (incorporated by
reference to Exhibit 19.6 to Beverly Enterprises, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended September 30, 1987).
10.23 Agreement dated December 29, 1986 between Beverly Enterprises, Inc. and
Stephens Inc. (incorporated by reference to Exhibit 10.20 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-1 filed on January
18, 1990 (File No. 33-33052)).
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10.24 Severance Plan for Corporate and Regional Employees effective December 1,
1989 (incorporated by reference to Exhibit 10.21 to Amendment No. 1 to
Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed on
February 26, 1990 (File No. 33-33052)).
10.25 Form of Restricted Stock Performance Agreement dated June 28, 1990 under
the 1985 Beverly Nonqualified Stock Option Plan (incorporated by
reference to Exhibit 10.22 to Beverly Enterprises, Inc.'s Registration
Statement on Form S-1 filed on July 30, 1990 (File No. 33-36109)).
10.26 Form of Agreement Concerning Benefits Upon Severance dated as of
September 1, 1990 between Beverly Enterprises, Inc. and certain officers
of Beverly Enterprises, Inc. (incorporated by reference to Exhibit 10.23
to Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed
on July 30, 1990 (File No. 33-36109)).
10.27 First Amendment to Agreement Concerning Benefits Upon Severance dated as
of April 25, 1993 between Beverly Enterprises, Inc. and Ronald C. Kayne
(Incorporated by reference to Exhibit 10.22 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1993).
10.28 Form of Employment Agreement, made as of September 29, 1994, between
Beverly Enterprises, Inc. and David R. Banks (incorporated by reference
to Exhibit 10.28 to Beverly Enterprises, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1994).
10.29 Form of Change In Control Severance Agreement, made as of September 29,
1994, between Beverly Enterprises, Inc. and its Executive Vice Presidents
(incorporated by reference to Exhibit 10.29 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663)).
10.30 Form of Change In Control Severance Agreement, made as of September 29,
1994, between Beverly Enterprises, Inc. and certain other of its officers
(incorporated by reference to Exhibit 10.30 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663)).
10.31 Beverly Enterprises Company Car Policy effective May 1, 1988
(incorporated by reference to Exhibit 10.18 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1992).
10.32 American Transitional Hospitals, Inc. 1993 Nonqualified Stock Option Plan
assumed by Beverly Enterprises, Inc. (incorporated by reference to
Exhibit 10.39 to Beverly Enterprises' Registration Statement on Form S-4
(Amendment No. 1) filed on August 5, 1994 (File No. 33-54501)).
10.33 Stock Option Agreement between Beverly, Inc. and Robert C. Crosby dated
September 2, 1994 (incorporated by reference to Exhibit 4.4 to Beverly
Enterprises' Registration Statement on Form S-8 filed on September 21,
1994 (File No. 33-55571)).
10.34 Master Lease Document -- General Terms and Conditions dated December 30,
1985 for Leases between Beverly California Corporation and various
subsidiaries thereof as lessees and Beverly Investment Properties, Inc.,
as lessor (incorporated by reference to Exhibit 10.12 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1985).
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10.35 Agreement dated as of December 29, 1986 among Beverly California
Corporation, Beverly Enterprises-Texas, Inc., Stephens Inc. and Real
Properties, Inc. (incorporated by reference to Exhibit 28 to Beverly
California Corporation's Current Report on Form 8-K dated December 30,
1986) and letter agreement dated as of July 31, 1987 among Beverly
Enterprises, Inc., Beverly California Corporation, Beverly
Enterprises-Texas, Inc. and Stephens Inc. with reference thereto
(incorporated by reference to Exhibit 19.13 to Beverly Enterprises,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1987).
10.36 Credit Agreement, dated as of March 24, 1992, among Beverly Enterprises,
Inc., Beverly California Corporation, the Lenders listed therein, Bank of
Montreal as Co-Agent, and The Long Term Credit Bank of Japan, Ltd. Los
Angeles Agency as Agent (the "LTCB Credit Agreement") (incorporated by
reference to Exhibit 10.2 to Beverly Enterprises, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended March 31, 1992).
10.37 Amendment No. 1 dated as of April 7, 1992 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.3 to Beverly Enterprises, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended March 31, 1992).
10.38 Second Amendment dated as of May 11, 1992 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.23 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1992).
10.39 Third Amendment dated as of March 1, 1993 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.24 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the quarter ended December 31,
1992).
10.40 Seventh Amendment dated as of May 2, 1994 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.31 to Beverly Enterprises'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994).
10.41 Eighth Amendment dated as of November 1, 1994 to the LTCB Credit
Agreement (incorporated by reference to Exhibit 10.41 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663)).
10.42 Ninth Amendment dated as of November 9, 1994 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.42 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663)).
10.43 Tenth Amendment dated as of December 6, 1994 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.43 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663)).
10.44 First Amendment and Restatement dated as of December 1, 1994 to Master
Sale and Servicing Agreement dated as of December 1, 1990 among Beverly
Funding Corporation, Beverly California Corporation, the wholly owned
subsidiaries of Beverly Enterprises, Inc. listed therein, Beverly
Enterprises, Inc., and certain wholly owned subsidiaries of Beverly
Enterprises, inc., which may become parties thereto (incorporated by
reference to Exhibit 10.44 to Beverly Enterprises' Registration Statement
on Form S-4 filed on February 13, 1995 (File No. 33-57663)).
10.45 Trust Indenture dated as of December 1, 1994 from Beverly Funding
Corporation, as Issuer, to Chemical Bank, as Trustee (the "Chemical
Indenture") (incorporated by reference to Exhibit 10.45 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663)).
10.46 Series Supplement dated as of December 1, 1994 to the Chemical Indenture
(incorporated by reference to Exhibit 10.46 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663)).
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10.47 Credit Agreement dated as of March 2, 1993 among Beverly Enterprises,
Inc., Beverly California Corporation, the Lenders listed therein, and the
Nippon Credit Bank, Ltd. Los Angeles Agency as Agent (the "Nippon Credit
Agreement") (incorporated by reference to Exhibit 10.29 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1992).
10.48 Second Amendment dated as of May 19, 1994 to the Nippon Credit Agreement
(incorporated by reference to Exhibit 10.37 to Beverly Enterprises'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994).
10.49 Third Amendment dated as of November 1, 1994 to the Nippon Credit
Agreement (incorporated by reference to Exhibit 10.49 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663)).
10.50 Fourth Amendment dated as of November 9, 1994 to the Nippon Credit
Agreement (incorporated by reference to Exhibit 10.50 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663)).
10.51 Credit Agreement dated as of November 1, 1994 among Beverly California
Corporation, Beverly Enterprises, Inc., the Banks listed therein, Morgan
Guaranty Trust Company of New York as Issuing Bank and as Agent (the
"Morgan Credit Agreement") (incorporated by reference to Exhibit 10.51 to
Beverly Enterprises' Registration Statement on Form S-4 filed on February
13, 1995 (File No. 33-57663)).
10.52 First Amendment dated as of December 30, 1994 to the Morgan Credit
Agreement (incorporated by reference to Exhibit 10.52 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663)).
10.53 Data Processing Agreement, dated as of August 1, 1992, by and between
Systematics Telecommunications Services, Inc. and Beverly California
Corporation (incorporated by reference to Exhibit 10 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, 1992).
10.54 Form of Employment Agreement to be executed by Robert C. Crosby and ATH
the time ATH became a wholly-owned subsidiary of Beverly Enterprises,
Inc. (incorporated by reference to Exhibit 10.38 to Beverly Enterprises'
Registration Statement on Form S-4 filed on July 8, 1994 (File No.
33-54501)).
10.55 Form of Irrevocable Trust Agreement for the Beverly Enterprises, Inc.
Executive Benefit Plans (incorporated by reference to Exhibit 10.55 to
Beverly Enterprises' Registration Statement on Form S-4 filed on February
13, 1995 (File No. 33-57663)).
10.56** Form of Assumption Agreement to be executed between Beverly Enterprises,
Inc and Beverly Acquisition after the Effective Time of the PMSI Merger
relating to the PMSI 1990 Incentive and Non-Statutory Stock Option Plan
to be assumed by Beverly Enterprises, Inc. at the time PMSI is merged
with and into Beverly Acquisition.
10.57** Form of Restricted Option Agreement to be executed between Beverly
Enterprises, Inc. and Bertram T. Martin, Jr.
10.58** Form of Restricted Option Agreement to be executed between Beverly
Enterprises, Inc. and David L. Redmond.
10.59 Form of Registration Rights Agreement to be executed by Beverly
Enterprises, Inc. and certain shareholders of PMSI as of the effective
time of the PMSI Merger, included in the Prospectus/Proxy Statement as
Appendix D (incorporated by reference to Exhibit 10.59 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663)).
</TABLE>
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11.1 Computation of Net Income (Loss) Per Share (incorporated by reference to
Exhibit 11.1 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1994).
21.1 Subsidiaries of Beverly Enterprises, Inc. (incorporated by reference to
Exhibit 21.1 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1994).
23.1** Consent of Giroir & Gregory, Professional Association, contained in
Exhibit 5.1.
23.2** Consent of Giroir & Gregory, Professional Association, contained in
Exhibit 8.1.
23.3* Consent of Ernst & Young LLP, Independent Auditors.
23.4* Consent of Coopers & Lybrand L.L.P., Independent Accountants.
24.1 Power of Attorney (incorporated by reference from the signature page of
Beverly Enterprises' Registration Statement on Form S-4 filed on February
13, 1995 (File No. 33-57663)).
99.1 Form of Consent for the PMSI shareholders (incorporated by reference to
Exhibit 99.1 to Beverly Enterprises' Registration Statement on Form S-4
filed on February 13, 1995 (File No. 33-57663)).
</TABLE>
(b) Financial Statement Schedule: [Incorporated by Reference to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K dated December 31, 1994]
II. Valuation and Qualifying Accounts
All other schedules have been omitted because they are either not required,
not applicable or the information has otherwise been supplied.
- ---------------
* Filed herewith.
** To be filed by amendment.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement; provided, however, that paragraphs (i) and (ii) do not apply
if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-10
<PAGE> 196
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the Registrant undertakes
that such reoffering prospectus will contain the information called for by
Form S-4 with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of Form S-4.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirement of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in conjunction with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the questions whether such indemnification by it
is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.
II-11
<PAGE> 197
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Fort Smith, State of
Arkansas, on April 18, 1995.
BEVERLY ENTERPRISES, INC.
By: /s/ DAVID R. BANKS*
------------------------------------
David R. Banks
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------- ---------------
<S> <C> <C>
/s/ DAVID R. BANKS* Chairman of the Board, April 18, 1995
- --------------------------------------------- President, Chief Executive
David R. Banks Officer and Director
/s/ ROBERT D. WOLTIL* Executive Vice President, April 18, 1995
- --------------------------------------------- Finance and Chief Financial
Robert D. Woltil Officer
/s/ SCOTT M. TABAKIN* Vice President, Controller and April 18, 1995
- --------------------------------------------- Chief Accounting Officer
Scott M. Tabakin
/s/ BERYL F. ANTHONY, JR.* Director April 18, 1995
- ---------------------------------------------
Beryl F. Anthony, Jr.
/s/ CURT F. BRADBURY* Director April 18, 1995
- ---------------------------------------------
Curt F. Bradbury
Director April , 1995
- ---------------------------------------------
James R. Greene
Director April , 1995
- ---------------------------------------------
Edith E. Holiday
/s/ JON E. M. JACOBY* Director April 18, 1995
- ---------------------------------------------
Jon E. M. Jacoby
Director April , 1995
- ---------------------------------------------
Risa J. Lavizzo-Mourey
/s/ LOUIS W. MENK* Director April 18, 1995
- ---------------------------------------------
Louis W. Menk
Director April , 1995
- ---------------------------------------------
Marilyn R. Seymann
/s/ WILL K. WEINSTEIN* Director April 18, 1995
- ---------------------------------------------
Will K. Weinstein
*By: /s/ JOHN W. MacKENZIE
John W. MacKenzie
Attorney-in-Fact
</TABLE>
II-12
<PAGE> 198
INDEX TO EXHIBITS
(a) EXHIBITS
<TABLE>
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EXHIBIT DESCRIPTION PAGE
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2.1 Agreement and Plan of Merger dated December 26, 1994, as amended by
Amendment No. 1 to the Merger Agreement dated as of , 1995
by and among Beverly Enterprises, Inc., Beverly Acquisition, Inc. and
Pharmacy Management Services, Inc. ("PMSI") included in Appendix A of the
Prospectus/Consent Solicitation Statement................................
2.2 Stock Purchase Agreement, dated as of August 9, 1994, between Synetic,
Inc. and Pharmacy Corporation of America (incorporated by reference to
Exhibit 2.1 to Beverly Enterprises, Inc.'s Current Report on Form 8-K
dated December 14, 1994).................................................
2.3 Stock Purchase Agreement, dated as of September 12, 1994, between Eckerd
Corporation and Pharmacy Corporation of America (incorporated by
reference to Exhibit 2.2 to Beverly Enterprises, Inc.'s Current Report on
Form 8-K dated December 14, 1994)........................................
3.1 Restated Certificate of Incorporation of Beverly Enterprises, Inc.
(incorporated by reference to Exhibit 4.1 to Beverly Enterprises, Inc.'s
Current Report on Form 8-K dated July 31, 1987)..........................
3.2 Bylaws of Beverly Enterprises, Inc. (incorporated by reference to Exhibit
3 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992).............................................
4.1 Indenture dated as of December 27, 1990 (the "Senior Secured Note
Indenture"), among Beverly California Corporation, Beverly Enterprises,
Inc. and Yasuda Bank and Trust Company (U.S.A.) with respect to Senior
Secured Floating Rate Notes due 1995 and 14 1/4% Senior Secured Fixed
Rate Notes due 1997 (incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 of Beverly California Corporation,
Beverly Enterprises, Inc. and the Registrants set forth on the Table of
Additional Co-Registrants filed on February 8, 1991 (File No.
33-38954))...............................................................
4.2 Supplemental Indenture No. 1, dated as of September 20, 1991, to the
Senior Secured Note Indenture (incorporated by reference to Exhibit 4.1
to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991)........................................
4.3 Supplemental Indenture No. 2, dated as of September 26, 1991, to the
Senior Secured Note Indenture (incorporated by reference to Exhibit 4.2
to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991)........................................
4.4 Supplemental Indenture No. 3, dated as of March 11, 1992, to the Senior
Secured Note Indenture (incorporated by reference to Exhibit 4 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1992)..........................................................
4.5 Supplemental Indenture No. 4, dated as of July 21, 1993, to the Senior
Secured Note Indenture (incorporated by reference to Exhibit 4 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993)...........................................................
4.6 Supplemental Indenture No. 5, dated as of November 1, 1994, to the Senior
Secured Note Indenture (incorporated by reference to Exhibit 4.6 to
Beverly Enterprises' Registration Statement on Form S-4 filed on February
13, 1995 (File No. 33-57663))............................................
4.7 Supplemental Indenture No. 6, dated as of December 30, 1994, to the
Senior Secured Note Indenture (incorporated by reference to Exhibit 4.7
to Beverly Enterprises' Registration Statement on Form S-4 filed on
February 13, 1995 (File No. 33-57663))...................................
4.8 Subsidiary Guaranty dated as of December 27, 1990 by Beverly Enterprises,
Inc., Beverly California Corporation and the Subsidiary Guarantors listed
therein (incorporated by reference to Exhibit 4.3 to the Registration
Statement on Form S-4 of Beverly California Corporation, Beverly
Enterprises, Inc. and the Registrants set forth on the Table of
Additional Co-Registrants filed on February 8, 1991 (File No.
33-38954))...............................................................
</TABLE>
<PAGE> 199
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4.9 Subsidiary Guaranty dated as of April 1, 1991 by Beverly Enterprises,
Inc., Beverly California Corporation and the Subsidiary Guarantors listed
therein (incorporated by reference to Exhibit 4.5 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the year ended December 31,
1991)....................................................................
4.10 Subsidiary Guaranty dated as of October 31, 1991 by Beverly Enterprises,
Inc., Beverly California Corporation and the Subsidiary Guarantors listed
therein (incorporated by reference to Exhibit 4.6 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the year ended December 31,
1991)....................................................................
4.11 Subsidiary Guaranty dated as of December 30, 1991 by Beverly Enterprises,
Inc., Beverly California Corporation and Beverly Indemnity, Inc. as
Subsidiary Guarantor (incorporated by reference to Exhibit 4.7 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1991).......................................................
4.12 Indenture dated as of August 1, 1993 between Beverly Enterprises, Inc.
and Chemical Bank, as Trustee with respect to Beverly Enterprises, Inc.'s
5 1/2% Convertible Subordinated Debentures due August 1, 2018, issuable
upon exchange of Beverly Enterprises, Inc.'s $2.75 Cumulative Convertible
Exchangeable Preferred Stock (the "Subordinated Debenture Indenture")
(incorporated by reference to Exhibit 4.10 to Beverly Enterprises, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993).......
4.13 Certificate of Designation, Powers, Preferences and Rights, and the
Qualifications, Limitations or Restrictions Thereof, of the Series of
Preferred Stock to be designated $2.75 Cumulative Convertible
Exchangeable Preferred Stock of Beverly Enterprises, Inc. (the "$2.75
Certificate of Designation") (incorporated by reference to Exhibit 4.12
to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993).............................................
4.14 Indenture dated as of April 1, 1993 (the "First Mortgage Bond
Indenture"), among Beverly Enterprises, Inc., Delaware Trust Company, as
Corporate Trustee, and Richard N. Smith, as Individual Trustee, with
respect to First Mortgage Bonds (incorporated by reference to Exhibit 4.1
to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993)............................................
4.15 First Supplemental Indenture dated as of April 1, 1993 to the First
Mortgage Bond Indenture, with respect to 8 3/4% First Mortgage Bonds
(Series A) due 2008 (incorporated by reference to Exhibit 4.2 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1993)..........................................................
4.16 Second Supplemental Indenture dated as of July 1, 1993 to the First
Mortgage Bond Indenture, with respect to 8 5/8% First Mortgage Bonds
(Series B) due 2008 (replaces Exhibit 4.1 to Beverly Enterprises, Inc.'s
Current Report on Form 8-K dated July 15, 1993) (incorporated by
reference to Exhibit 4.15 to Beverly Enterprises, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended March 31, 1993).......................
4.17 Indenture dated as of December 30, 1993 (the "Notes Indenture"), between
Beverly Enterprises, Inc. and Boatmen's Trust Company, as Trustee, with
respect to the Notes (incorporated by reference to Exhibit 4.2 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-3 filed on November
9, 1993 (File No. 33-50965)).............................................
4.18 First Supplemental Indenture dated as of December 30, 1993 to the Notes
Indenture, with respect to 8.75% Notes due 2003 (incorporated by
reference to Exhibit 4.4 to Beverly Enterprises, Inc.'s Current Report on
Form 8-K dated January 4, 1994)..........................................
4.19 Rights Agreement Dated as of September 29, 1994, between Beverly
Enterprises, Inc. and the Bank of New York, as Rights Agent (incorporate
by reference to Exhibit 1 to Beverly Enterprises' Registration Statement
on Form 8-A filed on October 18,1994). *In accordance with item
601(b)(4)(iii) of Regulation S-K, certain instruments pertaining to
Beverly Enterprises, Inc.'s long-term obligations have not been filed;
copies thereof will be furnished to the Securities and Exchange
Commission upon request..................................................
</TABLE>
<PAGE> 200
<TABLE>
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5.1** Opinion of Giroir & Gregory, Professional Association, Little Rock,
Arkansas as to the legality of the securities being registered.
8.1** Opinion of Giroir & Gregory, Professional Association, Little Rock,
Arkansas as to certain federal income tax consequences...................
10.1 Amended and Restated 1981 Beverly Stock Incentive Plan (incorporated by
reference to Post-Effective Amendment No. 2 on Form S-8 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-4 filed on July 31,
1987 (File No. 33-13243))................................................
10.2 1985 Beverly Nonqualified Stock Option Plan (incorporated by reference to
Post-Effective Amendment No. 2 on Form S-8 to Beverly Enterprises, Inc.'s
Registration Statement on Form S-4 filed on July 31, 1987 (File No.
33-13243))...............................................................
10.3 Amended and Restated Beverly Enterprises, Inc. 1993 Long-Term Incentive
Stock Plan (the "1993 Plan")(incorporated by reference to Beverly
Enterprises, Inc.'s Registration Statement on Form S-8 filed on June 30,
1993 (File No. 33-65242))................................................
10.4 Beverly Enterprises, Inc. Annual Incentive Plan (incorporated by
reference to Exhibit 10.4 to Beverly Enterprises' Registration Statement
on Form S-4 filed on February 13, 1995 (File No. 33-57663))..............
10.5 Form of Other Stock Unit Agreement under the 1993 Plan (incorporated by
reference to Exhibit 10.5 to Beverly Enterprises' Registration Statement
on Form S-4 filed on February 13, 1995 (File No. 33-57663))..............
10.6 Retirement Plan for Outside Directors (incorporated by reference to
Exhibit 10.5 to Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993).....................................
10.7 Beverly Enterprises, Inc. Non-Employee Directors' Stock Option Plan
(incorporated by reference to Exhibit 4.1 to Beverly Enterprises'
Registration Statement on Form S-8 filed on September 21, 1994 (File No.
33-55571))...............................................................
10.8 Executive Medical Reimbursement Plan (incorporated by reference to
Exhibit 10.5 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1987)....................................
10.9 Amended and Restated Beverly Enterprises, Inc. Executive Life Insurance
Plan and Summary Plan Description (the "Executive Life Plan")
(incorporated by reference to Exhibit 10.7 to Beverly Enterprises' Annual
Report on Form 10-K for the year ended December 31, 1993)................
10.10 Amendment No. 1, effective September 29, 1994, to the Executive Life Plan
(incorporated by reference to Exhibit 10.10 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))...............................................................
10.11 Executive Physicals Policy (incorporated by reference to Exhibit 10.8 to
Beverly Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993).....................................................
10.12 Amended and Restated Deferred Compensation Plan effective July 18, 1991
(the "Deferred Comp Plan") (incorporated by reference to Exhibit 10.6 to
Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1991).......................................................
10.13 Amendment No. 1, effective September 29, 1994, to the Deferred Comp Plan
(incorporated by reference to Exhibit 10.13 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))...............................................................
10.14 Executive Retirement Plan (incorporated by reference to Exhibit 10.8 to
Beverly Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1987).......................................................
10.15 Amendment No. 1, effective as of July 1, 1991, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.8 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1991).......................................................
</TABLE>
<PAGE> 201
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10.16 Amendment No. 2, effective as of December 12, 1991, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.9 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1991).......................................................
10.17 Amendment No. 3, effective as of July 31, 1992, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.10 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1992).......................................................
10.18 Amendment No. 4, effective as of January 1, 1993, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.18 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1994).......................................................
10.19 Amendment No. 5, effective as of September 29, 1994, to the Executive
Retirement Plan (incorporated by reference to Exhibit 10.19 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1994).......................................................
10.20 Form of Indemnification Agreement between Beverly Enterprises, Inc. and
its officers, directors and certain of its employees (incorporated by
reference to Exhibit 19.14 to Beverly Enterprises, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1987).................
10.21 Form of request by Beverly Enterprises, Inc. to certain of its officers
or directors relating to indemnification rights (incorporated by
reference to Exhibit 19.5 to Beverly Enterprises, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended September 30, 1987)...................
10.22 Form of request by Beverly Enterprises, Inc. to certain of its officers
or employees relating to indemnification rights (incorporated by
reference to Exhibit 19.6 to Beverly Enterprises, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended September 30, 1987)...................
10.23 Agreement dated December 29, 1986 between Beverly Enterprises, Inc. and
Stephens Inc. (incorporated by reference to Exhibit 10.20 to Beverly
Enterprises, Inc.'s Registration Statement on Form S-1 filed on January
18, 1990 (File No. 33-33052))............................................
10.24 Severance Plan for Corporate and Regional Employees effective December 1,
1989 (incorporated by reference to Exhibit 10.21 to Amendment No. 1 to
Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed on
February 26, 1990 (File No. 33-33052))...................................
10.25 Form of Restricted Stock Performance Agreement dated June 28, 1990 under
the 1985 Beverly Nonqualified Stock Option Plan (incorporated by
reference to Exhibit 10.22 to Beverly Enterprises, Inc.'s Registration
Statement on Form S-1 filed on July 30, 1990 (File No. 33-36109))........
10.26 Form of Agreement Concerning Benefits Upon Severance dated as of
September 1, 1990 between Beverly Enterprises, Inc. and certain officers
of Beverly Enterprises, Inc. (incorporated by reference to Exhibit 10.23
to Beverly Enterprises, Inc.'s Registration Statement on Form S-1 filed
on July 30, 1990 (File No. 33-36109))....................................
10.27 First Amendment to Agreement Concerning Benefits Upon Severance dated as
of April 25, 1993 between Beverly Enterprises, Inc. and Ronald C. Kayne
(Incorporated by reference to Exhibit 10.22 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the year ended December 31,
1993)....................................................................
10.28 Form of Employment Agreement, made as of September 29, 1994, between
Beverly Enterprises, Inc. and David R. Banks (incorporated by reference
to Exhibit 10.28 to Beverly Enterprises, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1994)...............................
10.29 Form of Change In Control Severance Agreement, made as of September 29,
1994, between Beverly Enterprises, Inc. and its Executive Vice Presidents
(incorporated by reference to Exhibit 10.29 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))...............................................................
</TABLE>
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10.30 Form of Change In Control Severance Agreement, made as of September 29,
1994, between Beverly Enterprises, Inc. and certain other of its officers
(incorporated by reference to Exhibit 10.30 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))...............................................................
10.31 Beverly Enterprises Company Car Policy effective May 1, 1988
(incorporated by reference to Exhibit 10.18 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the year ended December 31,
1992)....................................................................
10.32 American Transitional Hospitals, Inc. 1993 Nonqualified Stock Option Plan
assumed by Beverly Enterprises, Inc. (incorporated by reference to
Exhibit 10.39 to Beverly Enterprises' Registration Statement on Form S-4
(Amendment No. 1) filed on August 5, 1994 (File No. 33-54501))...........
10.33 Stock Option Agreement between Beverly, Inc. and Robert C. Crosby dated
September 2, 1994 (incorporated by reference to Exhibit 4.4 to Beverly
Enterprises' Registration Statement on Form S-8 filed on September 21,
1994 (File No. 33-55571))................................................
10.34 Master Lease Document -- General Terms and Conditions dated December 30,
1985 for Leases between Beverly California Corporation and various
subsidiaries thereof as lessees and Beverly Investment Properties, Inc.,
as lessor (incorporated by reference to Exhibit 10.12 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1985).......................................................
10.35 Agreement dated as of December 29, 1986 among Beverly California
Corporation, Beverly Enterprises-Texas, Inc., Stephens Inc. and Real
Properties, Inc. (incorporated by reference to Exhibit 28 to Beverly
California Corporation's Current Report on Form 8-K dated December 30,
1986) and letter agreement dated as of July 31, 1987 among Beverly
Enterprises, Inc., Beverly California Corporation, Beverly
Enterprises-Texas, Inc. and Stephens Inc. with reference thereto
(incorporated by reference to Exhibit 19.13 to Beverly Enterprises,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
1987)....................................................................
10.36 Credit Agreement, dated as of March 24, 1992, among Beverly Enterprises,
Inc., Beverly California Corporation, the Lenders listed therein, Bank of
Montreal as Co-Agent, and The Long Term Credit Bank of Japan, Ltd. Los
Angeles Agency as Agent (the "LTCB Credit Agreement") (incorporated by
reference to Exhibit 10.2 to Beverly Enterprises, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended March 31, 1992).......................
10.37 Amendment No. 1 dated as of April 7, 1992 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.3 to Beverly Enterprises, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended March 31, 1992).
10.38 Second Amendment dated as of May 11, 1992 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.23 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1992).
10.39 Third Amendment dated as of March 1, 1993 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.24 to Beverly Enterprises,
Inc.'s Annual Report on Form 10-K for the quarter ended December 31,
1992)....................................................................
10.40 Seventh Amendment dated as of May 2, 1994 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.31 to Beverly Enterprises'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994).......
10.41 Eighth Amendment dated as of November 1, 1994 to the LTCB Credit
Agreement (incorporated by reference to Exhibit 10.41 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663))................................................
10.42 Ninth Amendment dated as of November 9, 1994 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.42 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))...............................................................
</TABLE>
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10.43 Tenth Amendment dated as of December 6, 1994 to the LTCB Credit Agreement
(incorporated by reference to Exhibit 10.43 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))...............................................................
10.44 First Amendment and Restatement dated as of December 1, 1994 to Master
Sale and Servicing Agreement dated as of December 1, 1990 among Beverly
Funding Corporation, Beverly California Corporation, the wholly owned
subsidiaries of Beverly Enterprises, Inc. listed therein, Beverly
Enterprises, Inc., and certain wholly owned subsidiaries of Beverly
Enterprises, inc., which may become parties thereto (incorporated by
reference to Exhibit 10.44 to Beverly Enterprises' Registration Statement
on Form S-4 filed on February 13, 1995 (File No. 33-57663))..............
10.45 Trust Indenture dated as of December 1, 1994 from Beverly Funding
Corporation, as Issuer, to Chemical Bank, as Trustee (the "Chemical
Indenture") (incorporated by reference to Exhibit 10.45 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663))................................................
10.46 Series Supplement dated as of December 1, 1994 to the Chemical Indenture
(incorporated by reference to Exhibit 10.46 to Beverly Enterprises'
Registration Statement on Form S-4 filed on February 13, 1995 (File No.
33-57663))...............................................................
10.47 Credit Agreement dated as of March 2, 1993 among Beverly Enterprises,
Inc., Beverly California Corporation, the Lenders listed therein, and the
Nippon Credit Bank, Ltd. Los Angeles Agency as Agent (the "Nippon Credit
Agreement") (incorporated by reference to Exhibit 10.29 to Beverly
Enterprises, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1992).......................................................
10.48 Second Amendment dated as of May 19, 1994 to the Nippon Credit Agreement
(incorporated by reference to Exhibit 10.37 to Beverly Enterprises'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994).......
10.49 Third Amendment dated as of November 1, 1994 to the Nippon Credit
Agreement (incorporated by reference to Exhibit 10.49 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663))................................................
10.50 Fourth Amendment dated as of November 9, 1994 to the Nippon Credit
Agreement (incorporated by reference to Exhibit 10.50 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663))................................................
10.51 Credit Agreement dated as of November 1, 1994 among Beverly California
Corporation, Beverly Enterprises, Inc., the Banks listed therein, Morgan
Guaranty Trust Company of New York as Issuing Bank and as Agent (the
"Morgan Credit Agreement") (incorporated by reference to Exhibit 10.51 to
Beverly Enterprises' Registration Statement on Form S-4 filed on February
13, 1995 (File No. 33-57663))............................................
10.52 First Amendment dated as of December 30, 1994 to the Morgan Credit
Agreement (incorporated by reference to Exhibit 10.52 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663))................................................
10.53 Data Processing Agreement, dated as of August 1, 1992, by and between
Systematics Telecommunications Services, Inc. and Beverly California
Corporation (incorporated by reference to Exhibit 10 to Beverly
Enterprises, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, 1992)...........................................................
10.54 Form of Employment Agreement to be executed by Robert C. Crosby and ATH
the time ATH became a wholly-owned subsidiary of Beverly Enterprises,
Inc. (incorporated by reference to Exhibit 10.38 to Beverly Enterprises'
Registration Statement on Form S-4 filed on July 8, 1994 (File No.
33-54501))...............................................................
</TABLE>
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10.55 Form of Irrevocable Trust Agreement for the Beverly Enterprises, Inc.
Executive Benefit Plans (incorporated by reference to Exhibit 10.55 to
Beverly Enterprises' Registration Statement on Form S-4 filed on February
13, 1995 (File No. 33-57663))............................................
10.56** Form of Assumption Agreement to be executed between Beverly Enterprises,
Inc and Beverly Acquisition after the Effective Time of the PMSI Merger
relating to the PMSI 1990 Incentive and Non-Statutory Stock Option Plan
to be assumed by Beverly Enterprises, Inc. at the time PMSI is merged
with and into Beverly Acquisition........................................
10.57** Form of Restricted Option Agreement to be executed between Beverly
Enterprises, Inc. and Bertram T. Martin, Jr..............................
10.58** Form of Restricted Option Agreement to be executed between Beverly
Enterprises, Inc. and David L. Redmond...................................
10.59 Form of Registration Rights Agreement to be executed by Beverly
Enterprises, Inc. and certain shareholders of PMSI as of the effective
time of the PMSI Merger, included in the Prospectus/Proxy Statement as
Appendix D (incorporated by reference to Exhibit 10.59 to Beverly
Enterprises' Registration Statement on Form S-4 filed on February 13,
1995 (File No. 33-57663))................................................
11.1 Computation of Net Income (Loss) Per Share (incorporated by reference to
Exhibit 11.1 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1994)....................................
21.1 Subsidiaries of Beverly Enterprises, Inc. (incorporated by reference to
Exhibit 21.1 to Beverly Enterprises, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1994)....................................
23.1** Consent of Giroir & Gregory, Professional Association, contained in
Exhibit 5.1..............................................................
23.2** Consent of Giroir & Gregory, Professional Association, contained in
Exhibit 8.1..............................................................
23.3* Consent of Ernst & Young LLP, Independent Auditors.......................
23.4* Consent of Coopers & Lybrand L.L.P., Independent Accountants.............
24.1 Power of Attorney (incorporated by reference to the signature page of
Beverly Enterprises' Registration Statement on Form S-4 filed on February
13, 1995 (File No. 33-57663))............................................
99.1 Form of Consent for the PMSI shareholders (incorporated by reference to
Exhibit 99.1 to Beverly Enterprises' Registration Statement on Form S-4
filed on February 13, 1995 (File No. 33-57663))..........................
</TABLE>
- ---------------
* Filed herewith.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-4 No. 33-57663) and
related Prospectus of Beverly Enterprises, Inc. for the registration of
14,959,209 shares of its common stock and to the incorporation by reference
therein of our report dated February 3, 1995, with respect to the consolidated
financial statements and schedule of Beverly Enterprises, Inc. included in its
Annual Report (Form 10-K) for the year ended December 31, 1994, filed with the
Securities and Exchange Commission.
Little Rock, Arkansas
April 14, 1995
<PAGE> 1
EXHIBIT 23.4
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Amendment No. 1 of the
registration statement of Beverly Enterprises, Inc. on Form S-4 (File No.
33-57663) of our report dated September 13, 1994, on our audits of the
consolidated financial statements of Pharmacy Management Services, Inc. and
Subsidiaries as of July 31, 1994 and 1993, and for the three years in the period
ended July 31, 1994, which report is included in the Annual Report on Form
10-K/A (Amendment No. 3) of Pharmacy Management Services, Inc. We also consent
to the reference to our Firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Tampa, Florida
April 17, 1995
